1. A
Winter project
On
“Credit Risk Management”
For the partial completion of graduation degree in BBA
From
Shri S V Patel College of Computer Science and Business
Management,
Veer Narmad South Gujarat University
Submitted by: (Gohil Priti Ramji Bhai)
Submitted to: In charge principal
Nisha Khurana Mr. Chintu Thakkar
DECLARATION
I, Gohil Priti R. hereby declare that the project work entitled “ Analysis
of Credit Risk Management of Varachha Co-Operative Bank submitted
to Shri S. V. Patel College of Computer Science and Business
Management affiliated to Veer Narmad South Gujarat Universit y , is a
record of an original work done by me under the guidance of Nisha
1

2. Khurana. This project work has been performed for the partial
completion of graduation degree in BBA.
Sign: ______________
Gohil Priti R.
EXECUTIVE SUMMARY
th
The Varachha co-operative bank registered with registration no.2914 on date 27
st
January, 1995 and established with license no. UDB GUJ.1153-P on date 1
th
July ,1995 and after three and half month on date 16 October , 1995 the bank
was started its work at the starting time it has share capital of RS.3.64 crore and
4484 members. When this bank started it was having thirteen directors in the
first year
Credit Risk Management is the Regain confidence through better optimization of
risk-adjusted pricing and returns.
The flow of credit in global financial markets slowed from a glacial pace to a virtual
standstill. And credit markets have threatened to stay that way despite immense
amounts of cash being pumped in by governments and central banks around the
world.
The researcher wants to know the Credit Risk Management of the
Varachha Bank. The researcher wants to know what is the risk, credit
risk, various types of risk for the financial institution and what are the
credit risk for the Varachha Bank.
2

3. The Researcher also wants to know that how Varachha Bank manage
their risk by issuing the loan, cash credit, over draft, bill purchase &
discount, and how to recover that from the customer. The researcher
wants to know the measurement of the non performing assets of the
varachha bank.
ACNOWLEGEMENT
This is great occasion for me to express to my deepest feeling of thanks to all those
who have guided, advice, and supported me during my project in the Varachha Co-
operative Bank.
I take this opportunity to thank Veer Narmad South Gujarat University, Surat
for keeping such practical training for making the project report as a part of B.B.A.
programmed.
I am highly indebted and grateful to our co-ordinator of Shri Shambhu bhai
V.Patel College of Computer Scince & Business Management for his
construct in taking training.
I am also heartily thankful to project guide Prof. Nisha Khurana who gives me a
valuable guidelines.
I am also thanking to Mr.kanjibhai r. Bhalala (Chairman), Mr. A.D.Bhalani
(General Manager) and Mr.Sureshbhai Kakadiya (manager of Varachha Branch)
and all the staff member (Kunalbhai, Prakashbhai, Ravibhai, Tusharbhai,
Mukundbhai, Viarndrabhai, Yagneshbhai) of the Varachha Co-operative
Bank Ltd. for their kind co-operation and constant encouragement during the
3

4. period of training with their past experience & for their valuable & excellent co-
operation in taking this training in various banking product & services.
Finally, I would like to thank to my parents, friends and all those who have directly or
indirectly contributed during my training.
INDEX
Seri Pag
al e
Particulars
No. No.
a) Company Certificate
b) College Certificate
c) Declaration
d) Acknowledgement
e) Executive Summery
1) INDUSTRY PROFILE
1.1) Introduction of Banking system
1.2) What is Bank?
4

5. 1.3) Definition of Bank
1.4) Characteristics of bank
1.5) Definition of Banking
1.6) Structure of Co. operative bank
2) COMPANY PROFILE
2.1) history
2.2) vital factor of varachha bank
2.3) objective
2.4) Mission
2.5) Structure of Varachha Bank
2.6) Financial Strength
3) Theoretical aspects of concept
3.1) What is Risk?
3.2) What is Risk Management?
3.3) Types of Risk in Financial Institution
4) Credit Risk Management
4.1) What is Credit Risk?
4.2) What is Credit Risk Management?
5

6. 4.3) Management towards provision for
profit distribution
5) Credit Risk Management in Loan
5.1) Meaning of Loan
5.2) Classification of Loan
5.3) Various types of Loan
5.4) Details of Loan
6) Recovery of Loans & Advances
6.1) Introduction
6.2) Performing & Non Performing Assets
6.3) Signals of Recovery
6.4) Performance of Recovery
6.5) Loan Recovery Management
7) Credit Risk Management In Investment
7.1) Investment in National Banks
7.2) Investment in Government Securities
6

7. 8) Credit Risk Measurement
8.1) Non Performing Assets (NPA)
8.2) Credit Risk Assets Ratio (CRAR)
9) Research Methodology
9.1) Problem Identification
9.2) Research Design
9.3) Data Collection
10) Benefits of the study
11) Limitation of the study
12) SWOT Analysis
13) Findings
14) Conclusion
15) Bibliography
7

8. CHAPTER – 1
INDUSTRY PROFILE
1.1) Introduction of Banking system
1.2) What is Bank?
1.3) Definition of Bank
1.4) Characteristics of bank
1.5) Definition of Banking
1.6) Structure of Co. operative bank
8

9. 1.1) Introduction of Banking System:
Banking system occupies an important place in a nation’s economy. In other words
the development is an inevitable precondition for the healthy rapid development of
national economic structure. Banking institutions have contributed much in the
development of the developed countries of the world and hence a banking institution
is indispensable in a modern society. It plays a pivotal role in the economic
development of a country and forms the core of the money market in an advanced
country.
In a society banking is an important as blood in human body. Banks, as social
organization, have to go out to the people and assist weaker sections in achieving
their aspirations; they are, thus, to act as catalytic agents for the development of the
country. Mobilizing resources wherever these be a channeling them towards
productive purposes. New strategies have to be involved for industrial development,
both in the small-scale and large-scale sectors and rather than confiding to the
traditional way of storage and distribution finance of a short term nature,
developmental finance and term lending have to be taken up by commercial banks,
similarly, opening of branches in rural and urban areas and efficient customer
services have assumed great importance.
After independence the Indian Government also has takes a series of steps to
develop banking sector, because of considerable efforts of the government today we
9

10. have number of banks in India. Indian banks contribute a lot in the development of
agriculture, trade and industries.
1.2) What is BANK?
There is no clear-cut definition of Bank, Banking, and Banker. A Bank or Banker or
Banking business is one which is engaged in trading in money depositing and
lending and serving the society at large in achieving its objectives of economic
progress and social well being.
The Indian Banking Regulation Act, 1949 defines the Banking “As accepting for the
purpose of lending or investment of deposits of money from the public repayable on
demand and withdraw able by cheque, draft”
1.3) DEFINITIONS OF A BANK:
“Bank is an establishment which makes an individual, such advance of money as
may be required and safely made to which individuals entrust money when not
needed by them for use.”
- WALTER
LEAF
“A Bank is an institution which collect money from those who have it to spare, who
are saving it out of their income and lend this money who require it”
G.CROWTH
ER
1.4) According to above definition these are three important
characteristics .
i. Bank is doing money trading.
10

11. ii. Bank collects deposits and provides interest on the deposits to people.
iii. Bank provides money or loan to people and collects interest on that.
1.5) DEFINITION OF BANKING:
“The business of banking may be defined as dealing in money and instrument of
credit.”
- KENNETH MACKENZIN
“Banking means the accepting for the purpose or lending or investment of
deposits of money from the public, repayable on demand and withdrawal by cheque,
draft or order.”
1.6) Structure of Co-operative Bank
STATE CO-OPERATIVE BANK
CENTRAL CO-OPERATIVE BANK
PRIMARY CO-OPERATIVE BANK
h Co-Operative Banks:-
Farmers in India are scattered all over the country and need short-term small
borrowing for agricultural purposes. This need is not fulfilled by commercial banks
which are unsuited for financing agriculture land which these farmers can offer to
11

12. cover bank advances is not generally accepted as security by commercial banks.
Therefore, special types of banks are necessary for the financing of agriculture. Co-
Operative banks are best suitable for this purpose. The object of co-operative banks
is to offer banking facilities to persons of limited means requiring credit for productive
purpose in the use of the land and labor at their disposal.
 The co-operative banking structure in India may be divided into
three component part.
1. Primary Co-Operative banks “or” Credit societies:-
The Primary co-operative credit society is an association of borrowers and non-
borrowers residing in a particular locality. The funds of the society are derived from
the share capital & deposits of members and loans from central co-operative banks.
The borrowing power of the members as well as of the society is fixed. The loans
are given to members for the purpose of cattle, fodder, fertilizers, pesticides,
implements, etc.
2. Central Co-Operative Banks:-
These are the federations of primary credit societies in a district, and are of two
types – those having a membership of primary societies only and those having a
membership of societies as well as individuals. The funds of the bank consist of
share capital, deposits, loan & overdrafts from state co-operative banks and joint
stocks. These banks finance member societies within the limits of the borrowing
capacity of societies. They also conduct all the business of a joint - stock bank.
12

13. 3. State C0-Operative Banks:-
The state co-operative bank is a federation of central co-operative banks and acts as
a watchdog of the co-operative banking structure in the state. Its funds are obtained
from share capital from the Reserve Bank of India. The state co-operative banks
lend money to central co-operative banks and primary societies and not directly to
farmers. The principle one being the institution of provincial co-operative banks to
serve as apex banks in the hierarchy of the co-operative pyramid.
13

14. 2) COMPANY PROFILE
2.1) HISTORY
The people in Saurastra, located in western part of Gujarat, are always depending
upon the rain-fed cultivation. As a search for income generation in an alternate way
for their survival, they have chosen Surat city, where there is a good scope for trade
in Diamond and Textile sector. Well off people have entered into the trading sector
and the others on labors front. In a phased manner, the population of the people,
involved in diamond trade, belonging to Saurastra increased to a sizeable extent in
Surat and in particular in the area of Varachha. It was become obvious for a
necessity of a Bank for their own people; the efforts were taken by a well known
philanthropist, story writer and columnist in local dailies, Mr. P. B. Dhakecha,
founder chairman of the Bank. As such, The Varachha Cooperative Bank Ltd. came
into existence on 16th October 1995 and Inauguration ceremony was done by on the
hand of Shree Swami Sacchidanand. Some of their directors are belonging to
diamond trade, who are official site holders of getting rough block diamonds from
foreign countries. At the end of the first financial year the number of shareholders
was 4484, Share Capital 57.44 lacks, Deposits Rs.2.70 crores, Advance Rs.2.07
crores and profit stood at 4.77 lacks
14

15. Our Bank has gradually developed the Banking activities and at the end of 5th year,
with a network of 5 branches, the share capital and reserves raised to more than 8
crores and the deposits have crossed 100 crore mark, which is a rare phenomenon
in Cooperative Banking Sector in all over India and the number of depositors have
increased 58222. The Bank has been awarded with First Prize for the best
performance among all Cooperative banks in Surat District during the FY.2000 - 01.
At present the share capital and reserves raised to nearly 40 crores. The deposit is
Rs.160.70 crores Advances 78.21 crores. Total 7 branches and 130 staff members.
In spite of run in a cooperative sector in the year 2001, due to Madhavpura episode,
the Bank has not only survived but also developed the base without any difficulty
due to confidence reposed upon by the public with our Bank.
We have introduced the system of quick delivery of vehicle loans, with minimum
papers and documents, without any hidden charges. Other advances of our Bank
have been spread over on the following categories:
• Vehicle Loan
• Loan against gold ornaments
• Loan on personal guarantees (Surety Loan)
• Retail trade business
• Professional and Self employed
• Loan against Bank’s own deposits/NSC
• Cash credit – hypothecation on stocks on trade
• Technology Upgradation Finance (TUF) loan with subsidy
Besides the banking activity, the Bank has entered into the insurance business
arrangement with IFFCO-TOKIO. We are also having tie-up arrangements with
insurance companies on referral basis, as per RBI guidelines. We have covered with
accident insurance cover for the shareholders, depositors and borrowers of the Bank
and we have received settlement to the tune of Rs.1 crore from the insurance
15

16. companies. The data pertaining to our Bank is being sent to Reserve Bank of India,
banking regulator of the country, through e-Mail under offsite surveillance system
(OSS) for the past 3 years.
Our Bank has been fully computerized banking system, right from inception and
present programmed, front end Visual Basic and the back end (database) Oracle
10G Platform. We are having the staff members, most of them belonging to younger
generation, with energetic and enthusiastic approach in Customer Service. The staff
attendance is being controlled under Biometric device system. CCTV system is
being installed to monitor the alertness of the entire banking activity, fitted with
cameras at the vital points. Our Bank has introduced Mobile Banking and Any
Branch Banking (ABB) in the year 2007. Our future plan is the introduction of on and
off site ATMs and Core Banking System.
2.2) other vital factors of our Bank are as follows:
• One of the leading cooperative Banks in South Gujarat
• Audit grade, continuously at ‘A’, from the beginning
• Any Branch Banking (ABB)
• CCTV system is being installed to monitor the alertness of the entire banking
activity, fitted with cameras at the vital points.
• Bank has started E-payment facility for the customers of the Bank for the
purpose of payment of Income-Tax.
• Personalized Cheque Book are being issued to all the customers of the Bank.
- RTGS/NEFT facility is also available.
2.3) OBJECTIVE OF BANK:
a) To encourage thrift and mutual Co-operating among its members.
16

17. b) To create funds to be lend at moderate of interest to the members of the bank in
accordance with the processor specified in these byelaws
c) To give possible help and necessary guidance to members of the bank in the
conduct of business.
To do every kind of trust and agency business and particularly do the work
investment funds, sale of properties and of recovery or acceptance of money.
D) To accept money document, security calculate article and goods every
description for keeping them in safe custody or for sending them from one place to
other.
e) To act as a balancing center for surplus funds of co-operative societies.
f) To organize and develop co-operative societies within the district.
g) To redeem old debts
2.4) MISSION
Varachha co-operative bank is committed to satisfy its banking customers, share
holders, employees and regulators through continually improving banking services,
innovation in products, technology up gradation, knowledge of team work and
strengthening customer relationship.
2.5) VISION
o Banking customer through faster services and invocative products.
o Share holder through regular dividend.
o Regulators through higher rating during inspection audits.
o Technically qualified staff to meet challenges of high-tech banking.
o Inter branch connectivity.
o Banker’s presence in metros.
o Introduction of full-fledged specialized branch.
17

18. 2.6) Financial Strength
18

19. SRN YEA SHARE CAPITA DEPOSIT ADVANCE NET WORKIN No. of AUDI DIV.RAT
O R HOLDER L S S PROFI G A/Cs. T E
S T CAPITAL CLAS
S
31-
1 MAR- 6887 2.51 101.03 55.21 3.67 115.83 63320 A 15.00%
01
31-
2 MAR- 7342 3.11 123.04 67.32 4.70 146.41 71836 A 15.00%
02
31-
3 MAR- 8148 3.44 129.79 67.25 4.73 159.35 80490 A 15.00%
03
31-
4 MAR- 8348 3.64 139.19 61.64 5.67 175.50 90940 A 15.00%
04
31-
5 MAR- 9170 3.95 136.27 64.55 3.24 175.07 95512 A 12.00%
05
31-
6 MAR- 9569 4.04 158.24 59.67 2.38 197.49 98501 A 12.00%
06
31-
7 MAR- 10717 4.31 162.97 73.26 1.51 208.38 102317 A 12.00%
07
31-
8 MAR- 11569 4.63 168.27 80.23 2.81 221.15 108906 A 12.00%
08
31-
9 MAR- 12669 5.24 171.57 92.03 3.02 226.96 105674 A 12.00%
09
31- A
19
10 MAR- 13566 5.91 224.16 94.89 3.15 279.11 123260 12.00%
10

20. 2.7) Structure of Varachha Bank
20

21. 3) Theoretical Concept
21

22. 3.1) WHAT IS RISK ?
For the purpose of these guidelines financial risk in a banking organization is
possibility that the outcome of an action or event could bring up adverse impacts.
Such outcomes could either result in a direct loss of earnings / capital or may result
in imposition of constraints on bank’s ability to meet its business objectives. Such
constraints pose a risk as these could hinder a bank's ability to conduct its ongoing
business or to take benefit of opportunities to enhance its business.
Regardless of the sophistication of the measures, banks often distinguish between
expected and unexpected losses.
1) Expected losses are those that the bank knows with reasonable certainty will
occur (e.g., the expected default rate of corporate loan portfolio or credit card
portfolio) and are typically reserved for in some manner.
2) Unexpected losses are those associated with unforeseen events (e.g. losses
experienced by banks in the aftermath of nuclear tests, Losses due to a sudden
down turn in economy or falling interest rates). Bank surely on their capital as a
buffer to absorb such losses.
3.2) WHAT IS RISK MANAGEMENT ?
Risk Management is a discipline at the core of every financial institution and
encompasses all the activities that affect its risk profile. It involves identification,
measurement, monitoring and controlling risks to ensure that
a) The individuals who take or manage risks clearly understand it.
b) The organization’s Risk exposure is within the limits established by Board of
Directors.
c) Risk taking Decisions are in line with the business strategy and objectives set by
BOD.
d) The expected payoffs compensate for the risks taken
e) Risk taking decisions are explicit and clear.
f) Sufficient capital as a buffer is available to take risk
22

23. The acceptance and management of financial risk is inherent to the business of
banking and banks’ roles as financial intermediaries. Risk management as
commonly perceived does not mean minimizing risk; rather the goal of risk
management is to optimize risk-reward trade -off. Notwithstanding the fact that
banks are in the business of taking risk, it should be recognized that an institution
need not engage in business in a manner that unnecessarily imposes risk upon it:
nor it should absorb risk that can be transferred to other participants. Rather it
should accept those risks that are uniquely part of the array of bank’s services.
3.3) Types of Risk in Financial Institution.
a. Credit risk
b. Market risk
c. Operational risk
d. Liquidity risk
e. Reputation risk
f. Volatility risk
g. Settlement risk
h. Profit risk
i. Systematic risk
1) Credit risk
It is an investor's risk of loss arising from a borrower who does not make payments
as promised. Such an event is called a default. Another term for credit risk is
default risk.
2) Market risk
It is the risk that the value of a portfolio, either an investment portfolio or a trading
portfolio, will decrease due to the change in value of the market risk factors. The four
standard market risk factors are stock prices, interest rates, foreign exchange rates,
and commodity prices
23

24. 3) Operation risk
As the name implies, a risk arising from execution of a company's business
functions. It is a very broad concept which focuses on the risks arising from the
people, systems and processes through which a company operates. It also includes
other categories such as fraud risks, legal risks, physical or environmental risks.
4) Liquidity risk
It is the risk that a given security or asset cannot be traded quickly enough in the
market to prevent a loss (or make the required profit).
5) Reputation risk
It is often called reputation risk, is a type of risk related to the trustworthiness of
business. Damage to a firm's reputation can result in lost revenue or destruction of
shareholder value, even if the company is not found guilty of a crime. Reputational
risk can be a matter of corporate trust, but serves also as a tool in crisis prevention.
6) Volatility risk
Volatility risk in financial markets is the likelihood of fluctuations in the exchange rate
of currencies. Therefore, it is a probability measure of the threat that an exchange
rate movement poses to an investor's portfolio in a foreign currency. The volatility of
the exchange rate is measured as standard deviation over a dataset of exchange
rate movements.
7) Settlement risk
It is the risk that a counterparty does not deliver a security or its value in cash per
agreement when the security was traded after the other counterparty or
counterparties have already delivered security or cash value per the trade
agreement.
8) Profit risk
It is a risk management tool that focuses on understanding concentrations within the
income statement and assessing the risk associated with those concentrations from
a net income perspective.
24

25. 9) Systematic risk
It is the risk of collapse of an entire financial system or entire market, as opposed to
risk associated with any one individual entity, group or component of a system. It
can be defined as "financial system instability, potentially catastrophic, caused or
exacerbated by idiosyncratic events or conditions in financial intermediaries". It
refers to the risks imposed by interlink ages and interdependencies in a system or
market, where the failure of a single entity or cluster of entities can cause a
cascading failure, which could potentially bankrupt or bring down the entire system
or market. It is also sometimes erroneously referred to as "systematic risk".
4) Credit Risk Management
4.1) What is Credit Risk?
As observed by RBI, Credit Risk is the major component of risk management system
and this should receive special attention of the Top Management of a bank. Credit
risk is the important dimension of various risks inherent in a credit proposal, as it
involves default of the principal itself. Credit risk may arise due to internal -meaning
faulty appraisal, inadequate monitoring, unwillingness on the part of borrower to
honor commitments despite being capable or external factors such as government
policies, industry related changes.
Credit Risk is the potential that a bank borrower/counter party fails to meet the
obligations on agreed terms. There is always a scope for the borrower to default
from commitments for one or the other reason resulting in crystallization of credit risk
to the bank. These losses could take the form of outright default or alternatively,
25

26. losses from changes in portfolio value arising from actual or perceived deterioration
in credit quality that is short of default.
Credit risk is inherent to the business of lending funds to the operations linked
closely to market risk variables. The objective of credit risk management is to
minimize the risk and maximize bank’s risk adjusted return by assuming and
maintaining credit exposure within the acceptable parameters. Measurement of
credit risk is crucial if the banks have to appropriately price their loan products, set
suitable limits on amount of credit to be extended as well as the loss exposure it
accepts from any particular counter party.
4.2) What is Credit Risk Management?
Regain confidence through better optimization of risk-adjusted pricing
and returns.
The flow of credit in global financial markets slowed from a glacial pace to a virtual
standstill. And credit markets have threatened to stay that way despite immense
amounts of cash being pumped in by governments and central banks around the
world.
But today, there are signs that the worst may be over and that a recovery may be
imminent. What will it take for banks to regain enough confidence in the financial
system to get credit markets moving smoothly – without risking another financial
breakdown? Better credit risk management practices are essential.
4.3) MANAGEMENT TOWARDS PROVISION FOR PROFIT
DISTRIBUTION:-
h Net Profit :- …………………
26

27. h Deducted Provision:-
E Reserve Fund 25%
E Share Dividend 12%
E Dividend Equalization Fund 2%
E Education Fund 2 Lac
E Building Fund 1.50 cr.
Total
Distribution Profit = DP
Rest Profit = Net Profit – (DP)
h Rest Profit:- Deduction as per Sub-Rule:-
E Accident Annual Fund 5%
E Other Activity Fund 20%
E Donation Fund 10%
E Rebate Interest Fund 20%
E Jubilee Festival Fund 10%
E Staff Benefit Fund
10%
E Member Welfare Fund 20%
E C0-Operative Propaganda Fund
05%
100%
27

28. 5) Credit Risk Management in Loan
5.1) Meaning of Loan:-
Loan are promises for future payment, they have to be repaid in periods beyond a
year and are, therefore long-term liabilities. In other wards “When a banker
makes an advance in a lump-sum which cannot be paid wholly or partly and which
the customer has permission to withdraw subsequently, it is called a loan”
28

29. Loan is a method of lending under which bank gives credit to a borrower for a fixed
period and for a specific purpose. Many a time a borrower needs funds for fixed
assets or non respective type of activities and thus seeks money from the bank
which is withdrawn in one lump-sum. If the borrower need again funds for such
purpose, he has to negotiate with the bank for a loan again or to get his existing loan
renewed. The loan amount is normally repaid in installments. Loan may be short-
term, medium-term, or long-term.
The Varachha Co-Operative Bank also sanctioned advances with different type of
loan. The granting of advances is one of the most important functions of the bank;
and the test of a banker’s strength depends considerably on the quality of its
advances & the promotion they bear to the total deposits.
5.2) Loans & advances are classified in to secured & unsecured.
h Secured Loan or Advance:-
Secured loan or advance means a “Loan or advance made on the security of assets
the market value of which is not at any time less than the amount of such loan or
advance”
h Unsecured Loan or Advance:-
An unsecured loan or advance means a “Loan or advance not so secured. A partly
covered loan or advance is partly covered by the security of assets, the market value
of such securities being less than the amount that has been lend or outstanding at
any time.
5.3) Kind of Loans
Generally Banks grant loans for different periods like shorts, medium and long and
for different purpose. Broadly the loans granted by banks are classified follows;
29

30. 1. Short Term Loans:-
Short term loans are granted to meet the working capital needs of the borrowers.
These loans are granted against the security of tangible assets, mainly the movable
assets like goods and commodities, share, debenture, etc.
2. Term Loans (Medium Loans):- Medium and long term loans are usually
called term loans. These loans are granted for more than a year and meant for
purchase of capital assets for the establishment of new units and for expansion or
diversification of an existing unit. Such loans constitute a part of the project finance
which Industrial enterprises are required to raises from different sources. These
loans are usually secured by the tangible assets like land, building, plant &
machinery, etc.
3. Composite Loans:-
When a loan is granted both for buying capital assets and for working capital
purposes, it is called a composite loan. Such loans are usually granted to small
borrowers, such as artisans, farmers industries, etc.
4. Consumption Loans:-
Though normally banks provide loans for productive purposes only, but as an
exception loans are also granted on a limited scale to meet the medical needs or the
educational expenses or expenses related to social ceremonies etc. of the needy
persons. Such loans are called consumption loans.
30

31. 5.4) Various types of loans
31

32. From
Loan Type To Amount Rate (in %)
Amount
Mortgage Loan 1 200000 14.00
Mortgage Loan 200001 999999999 15.00
Surety Loan for Members 1 100000 14.00
Two Wheeler 1 100000 13.00
For New Car 100001 999999999 12.00
Cash Credit / OD 1 500000 13.00
Cash Credit / OD 500001 999999999 12.00
Machinery Term Loan 1 999999999 13.00
Machinery TUF Loan 1 999999999 13.00
Loan Against Gold
1 100000 11.00
Ornaments
FD Loan - - + 2%
Self Employed Loan 1 999999999 11.00
NSC Loan 1 999999999 13.00
Consumer Durable Loan 1 999999999 14.00
Term Loan 1 200000 13.00
Term Loan 200001 999999999 14.00
Housing Loan 1 2000000 12.00
Education Loan 1 1500000 11.00
32

33. 5.5) Details of Loans
1. Mortgage Loan and Housing Loan:-
The transfer of an interest in specific immovable property for the purpose of securing
the payment of money advanced or to be advances by way of loan an existing or
future debt or the performance of engagement which may give rise to a pecuniary
liability.
The first mortgage by way of deposit of title deeds of immovable properties and
hypothecation of movable properties. As the creation of mortgage then The
33

34. Varachha Co-Operative Bank gives loan on this type of mortgage. Bank sanction
loan up to 70% to 75% of whole mortgage. This loan is based on installment when
ever any installment is not paid regularly. So bank notice them and covered some
charges from that transaction. This loan is repayment within 2 to 3 years.
In other, Bank also provide housing loan in previous year. This is given residential
purpose and the loan is based on installment and its repayment within the maximum
5 year so that this is known as long term loan. Under this loan big/huge proportion
amount are sanctioned by The Varachha Co-Operative Bank.
Loan Particular Component Margi Stamp Rebat
n Duty e
Mortgage Loan (Up to 2 14% 35% 0.25% 1%
Lac)
(Above 2 15% 0.25% 2%
Lac)
Housing Loan 12% 0.25% 1%
h Requirement of the Loan:-
h Basic Document Are:-
 Housing tax bill Xerox
 Light bill Xerox
 Xerox of driving license
 Two photo of loan applicant
34

35.  Income proof / Evident
 Xerox for rationing card
h Basic Document for grantors:-
 Above document are applicable for both grantors
h Other Documents:-
 Original copy of housing documents are submitted to bank
 Any one grantor’s housing document is need
h Housing Loan available for following purpose;
1) Purchase of residential & non-residential properties.
2) Self construction.
3) Improvement /extension of existing property.
4) Loan against property.
h Target Customers:
1) Salaried
2) Traders /Shop Owners
3) Businessmen
2. Machinery Loan:-
Generally this type of loan is lending to applicant who want to adopt new technology,
for expanding his business. So The Varachha Co-Operative Bank sanctioned of this
35

36. loan. Firstly bank need quotation of any dealer who furnish the new technology to
them and loan applicant need to collect require document and fill the form. At last
bank sanctioned loan up to 75% to 80% and Bank gives pay order of total quotation
amount and remain margin also paid by applicant in this bank.
h Rate of Interest:-
Machinery Loan Compone Rebat Stamp Duty
nt e
(Up to 5 13% 1% 200
lacks)
(Above 5 14% 2% 200
lacks)
h Requirement for Machinery Loan:-
 Each basic document is needed for loan applicant as well as both grantors.
 Evident of share holder
 Photo copy of permit
 Invoice of purchasing new machinery
 Evident of place
 Machinery list & Xerox of bills
 Statement of sales – purchase of last three months
3. Vehicle Loan:-
The Varachha Co-Operative Bank provide vehicle loan for helping those people who
are interested to his repayment with installment under term & condition of The
36

37. Varachha Co-Operative Bank and, The Earache Co-Operative Bank also gives
rebate to his loan applicant. The vehicle loan should be completed within 24
installment i.e.2 years.
Generally loan of vehicle is completed within the 2 years but above one lace loan or
generally four wheeler loan is completing within the 3 years with monthly installment.
h Rate of Interest:-
Particular Compone Rebat Stamp
nt e Duty
Vehicle Loan (Up to 13% 1% 200
1 lace)
(Above 1 lace) 14% 1% 200
h Rebate:-
Rebate is deducted from the interest of total sanction loan, its sophisticated facility is
provided by The Varachha Co-Operative Bank to them. Who borrowed loan from
The Earache Co-Operative Bank.
h Requirement For Vehicle loan :-
 All Basic Document are needed
 For loan applicant as well as two grantors
 Director Signature is require for recommendation
 Photo copy of property file is submitted to bank
 Duplicate copy of city survey
 R.C. (Register Certificate) Book of vehicle is kept by particular
banks. When totally installment of vehicle loan is closed at that time
37

38. R.C. Book and other original documents are given to them.
Whenever any loan holder essential of that book so banks can
gives Xerox of that book at any time.
4. Cash Credit & Over Draft:-
A cash credit is an arrangement by which a banker allows his customer to borrow
money up to a certain limit against either a bond of credit by one or more sureties or
against securities. This is the most common mode of borrowing by large commercial
and industrial. Because of advantage that a customer need not borrow the whole
amount at one time but may draw such amounts as he requires at different times. He
may deposit in the bank such surplus amount as may be with him for the time being.
The banker, while granting cash credit. These types of advances are based on
renewal because after one year, cash credit has to be renewed and pay interest
regularly of each three month.
In others, when a customer require temporary accommodation, he may be allowed
to overdrew o his current account, usually against collateral securities, and pay
interest on the amount actually used by him. These facilities are provided by the
bank because it helps in any contingency situation and to solve other problem which
related to short term capital.
h Rate of Interest:-
Particular Compone Stamp
nt Duty
Cash Credit (Up to 5 13% 0.25%
laces)
(Above 5 12% 0.25%
laces)
Over Draft (Up to 2 14% 0.25%
laces)
38

39. (Above 2 15% 0.25%
laces)
h Requirement for Cash Credit & Over Draft:-
 All Basic documents are needed for loan applicant as well as both grantors.
 Evident of Share holder
 Evident of other income of proprietor or partner
 Firms last three years balance sheet or Income tax return copy
 Provision sheet last of firm
 Partner document if firm occur partnership firm
 Statement of last six months of form’s account in the bank or other banks
 To include certificate of company registration & Articles of Association if applicant
is private Ltd. Company
5. Bill Purchase or Bill Discount:-
Another important method of lending by The Varachha Co-Operative Bank is
purchasing and discounting of bills. There is a difference between collection of bills
and purchase and discount of bills. In collection of bills, the bank collects the amount
of the bills from the drawer and credits the amount of the bill to the drawer’s account
before the realization of the bill and, thus, lends money to the customer. All the bill
purchase and discounted by bank are, therefore, Shows in its Balance sheet as part
of loans and advances.
Purchase and discounting of bills is an important method of lending and has certain
distinct advantages such as safety of funds, facility of refinance from Reserve Bank,
certainty of payment, no risk of fluctuations in the value of the bill and profit to the
39

40. bank. This loan is not based on installment but it has to be repaid up to 90 day with
otherwise applicant pay 2% more on that loan as a penalty.
h Rate of Interest:-
Particular Compone Stamp
nt Duty
Bill purchase & Discount
(Up to 90 14% 0.25%
days)
(Above 90 16% 0.25%
days)
h Requirement for Bill Purchase & Discount:-
 All Basic documents are needed for loan applicant as well as both grantors.
 Same document used in this loan like case credit and over draft loan.
 In some cases applicant Present it PAN Number as document for residential
purpose and to Measure his credit grade.
6. Term Loan:-
In the last few years, The Earache Co-Operative Bank has started giving medium &
long term advances. Popularly known as term loans so far, the only source of term
loans to business and industry were the specialized financial institutions set up for
this purpose.
The basic point in term lending is that the borrower should utilize the amount in such
a way as to repay the loan as well as the interest accruing thereon from the
anticipated income earned by the use of that loan itself. This is the reason why
40

41. banker evaluates the technical and economic viability of the project for which the
loan is sought and also the repaying capacity of the borrowing concern.
h Rate of Interest:-
Particular Compone Stamp
nt Duty
Term Loan (Up to 2 13% 0.25%
laces)
(Above 2 14% 0.25%
laces)
hRequirement for Term Loan:-
 All Basic documents are needed for loan applicant as well as both grantors.
Same documents used in term loan like Cash Credit Loan and Overdraft Loan
7. Gold Loan:-
The Earache Co-Operative Bank gives loan on gold. It main motive behind this only
to accomplish satisfaction of loan applicant, when any applicant need money in short
time & with short procedure type of loan is fulfilled short & loan time objective.
Because this loans payment on reward basis, it means loan applicant should pay
only interest in every three month. Gold Loan is sanctioned of Rs.2000/- on each
10gm gold so gold loan is crucial part of the loan system. The Earache Co-Operative
Bank issued more part of loan on gold because Gold Loan is safety one. This loan is
based on renewed so while repayment of this loan no need to pay regularly but
applicant have to renew at end of year and pay only its total interest & renew charge
i.e. stamp duty.
41

42. h Rate of Interest :- Gold Loan = 11% per annum
h Stamp Duty :- 0.25% Gold Loan
h Requirement for Gold Loan:-
 All basic document are needed for loan applicant as well as both grantors
 Checking certificate by Authorized Goldsmith
8. Fixed Deposit Loan & NSC – KVP Loan:-
The Bank provide loan like against Fixed Deposit & National Saving Certificate
Loans purpose it. In fixed deposit loan, applicant take loan on his fixed deposit
certificate during this time certificate lien under the Bank. Therefore applicants have
to paid duty for lien procedure and no need for more documentation in this loan.
This loan is based on renewal and any applicants invest his money in Fixed Deposit
scheme with different rate. Then Bank can gives loan to applicant by increasing 2%
more on Fixed Deposit Loan.
In other National Saving Certificate & Kinas Visas Patra loans are also issued by the
bank because customers often approach banks for small advances against NSC &
KVP.
Before making an advance on the security of the National Saving Certificate & Kinas
Visas Patra. The Banker should take an applicant in the prescribed form from the
borrower in whose name the certificate stand. These certificates should then be sent
to the concerned post office or the issuing authority for transfer to the lending bank’s
name. The banker should grant the advance only after made on the certificate or
after new certificates are issued in the name of the bank.
h Rate of Interest:-
Particular Component Stamp
42

43. Duty
Fixed Deposit F.D. scheme + 100
2%
NSC – KVP 13% 100
Loan
h Requirement for F.D. Loan and NSC – KVP Loan:-
 All basic documents are needed for loan applicant as well as two
grantors.
 Certificate of F.D. & NSC - KVP
9. Surety Loan Staff loan & Self employed loan:-
The Earache Co-Operative Bank is issued this type of short term loan. It gives only
governmental clerk Bank issuing loan up to Rs. 30,000/- with – few document
requirement for them, and also provide Down – Payment facilities.
In others requirement of staff – loan , self – employed loan & as same as surety
loan , Bank’s urge is internally help to his staff , by giving staff loan with 0% per
annum.
Whereas self – employed loan is given to salary employee (Blue collar job) it is differ
from staff loan and surely loan as compare to percentage.
Whereas self employed loan is given to salary employed. Loan procedure &
requirement are same but its percentage from is different with each other’s i.e. given
below
43

44. h Rate of Interest:-
Particular Component Stamp
Duty
Self – Employed Loan
(Up to 2 15% 220
laces)
(Above 2 16% 500
laces)
Surety Loan (Up to 2 15% 220
laces)
(Above 2 16% 500
laces)
Staff Loan 6% 220
h Requirement for Salary employer (Blue Collar’s Job):-
 Salary employer must present salary certificate which is approved by appointing
organization. Who are appointing to employee or cut off installment into salary i.e.
44

45. called cut off certificate it is presented by organization as per the bank’s specimen
cut off certificate or certificate of other family earning members
 Salary employer ought to two grantors who are work in same organization or
working under that organization and also necessary certificate of salary of two
grantors.
 Salary employer should attach Xerox copy of light bills and ration card for address
proof.
6) Recovery of Loans & Advances
6.1) Introduction
One of the most important problems faced by banks in recent years is the problem of
recovery of loans. The rate of recovery in some areas of the country and some types
of loans have ranged between forty and fifty percent which is not a good sign of
banking development. Naturally this curtails then recycling or funds and affects the
profitability of banks. It does not mean that Banks should become indifferent to the
needs of priority sectors or weaker sections of society, but any laxity in recovery
would be self-defeating. It is necessary to take a fresh look at the existing legal
provisions and introduce penal action against willful defaulters. Some suggestions
like recovery of term loans under the public demands Recovery Act, appointment of
special officers exclusively to look after the recovery.
Increase industrial & firm sickness of bank financed units and distributing trends in
recovery of term sector loans threaten to further setup the already eroded
profitability of banks.
The Reserve Bank of India has advised banks, which provide “loan tonic” to the
economy, to adopt a three pronged strategy to remain financial health:
 Efficient recycling of resources;
 Improvement of productivity: and
45

46.  Streamlining of overseas branch operation
6.2) Performing & Non Performing Assets:-
Any amount of loan given by the bank is termed as performing asset if the interest
and loan installments are being repaid regularly to the bank by the borrower.
In case interest and installment of principle are in default for two quarters then this is
termed as non performing assets.
Note:-The Varachha Co-Operative Bank had introduced new improvement change
for Non Performing Assets system. In current time when loan applicants are not pay
regular installment & interest during 180 days i.e. 6 months, so that type of account
is transferred to Non Performing Assets Account. The Varachha obliging Bank had
st
implemented on 1 April, 2002. Which is curtailed of transferred to Non Performing
Assets Account i.e. 90 days.
6.3) Signal of Recovery
As per The Varachha Co-Operative Bank it having signal of recovery are mentioned
below. The Varachha Co-Operative Bank depend three signals for recovery of any
kind of Loan & Advances.
 If the loan applicants are paid its installment late or out dated i.e. installment
th
should be paid within at last date of 10 of every month by loan applicants
 When amount of over dues 500 or more are indicated signal of recovery
 In the case of interest & credit type of loan in this situation loan applicant have to
paid interest at end of three month. If applicants become late i.e. so another signal of
recovery at a time he will have to pay 3% more on the rest of interest amount.
6.4)Performance of Recovery
1. ORAL REMAINDER:-
46

47. If any loan & advances applicants are come under recovery stages, so first of all
orally reminder them because many applicants are comes into this stage from
misunderstanding and to forget date of last installment.
2. WRITTEN OVER DUE REMAINDER:-
After orally reminder applicants are not pay his installment or interest regularly, so at
a time bank delivered statement of his account with overdue amount that is known
as written overdue reminder for this procedure bank impose charge i.e. Notice
Charge and Bank debited of 10/- to particular loan applicant account.
3. TELEPHONIC REMINDER:-
The telephonic reminder just like oral reminder but this reminder gives to them, after
writing overdue reminder. For the telephonic reminder bank get latest contact
number of loan applicant consequently easily communicate any where & any time.
4. PERSONAL REQUEST:-
After telephonic reminder applicant are not pay regularly. Personal request is done
and directly contact to them and understand his personal problem and make easy
way to them for installment. Banks also gives more due date and extend it, for
submitting his loan.
5. REQUEST TO GUARANTORS:-
If applicant is not pay after doing personal request, then bank request to guarantor of
loan applicant. This is good way to recover of any kind of loan. While this time
grantors also compel to them for repayment of loan and advances.
6. NOTICE BY BANK:-
After requesting to grantor loan borrower not pay any installment or interest at a time
bank transferred to his account in Non- performing Assets and Bank assume that
applicant has been cheating to bank. While this time bank notice to them and to take
charge 100/- for this procedure.
47

48. 7. ADVOCATE NOTICE:-
Finally loan applicant not gives response to above recovery’s performance. At last
bank gives final notice i.e. advocate notice. In this notice advocate give last warning
to them for repayment of loan. Otherwise advocate enter case against loan applicant
in to court. For this procedure advocate takes some charge as minimum of Rs.300/-.
8. COURT MATTER:-
When any case entered in to court according to Indian Panel Code IPC 138, Bank
can clearance its loan like after sanctioning the loan. Bank takes three bank and
signed cheque from loan & advances applicant as per the court rule. Bank with draw
amount by filling amount in bank & signed cheque and that particular cheque is
credited to their account at last that type of account closed with this procedure.
So above performance for recovery is important to reduce over dues and Non
Performing Assets of particular bank. And to establish of good image for bank, every
banks should follow above performance and role for recovery of Loans & Advances.
6.5) Loan Recovery Management
Gross Provisio Net
NPA ns
N.P.
against
Year No. Total No. Amoun Percenta A.
N.P.A.
of Loan of A/c t ge
Loan
A/c
31-03-06 5153 5966.51 52 284.65 4.77 401.25 0%
31-03-07 6534 9325.57 41 245.84 3.36 421.70 0%
31-03-08 8999 8022.86 37 221.02 2.75 454.88 0%
48

49. 31-03-09 9215 9203.17 31 212.93 2.31 498.54 0%
31- 9939 9488.67 23 222.63 2.35 587.00 0%
03-‘10
Interpretation
In loan recovery management there is the number of loan accounts & total loan is
increasing in comparison with the past data there is also increase in the provisions
against NPA of the bank & decrease in the number of accounts that convert in to
NPA and also decrease the gross NPA of the bank and bank’s net NPA is zero from
the year of 2006 to 2010. It shows the good performance of the bank in loan
recovery & bank had improved in managing its risk.
49

50. 7) Credit Risk Management in INVESTMENT
7.1) Investment of Varachha Bank in other National Banks
50

51. N Current Amount Amount Fixed Amount of Amount of
o Account of 2009 of 2010 in Deposits 2009 in 2010 in Rs.
in other in Rs. Rs. in other Rs.
bank banks
1 Indus 1,96,381 MMC Bank 32,25,798 32,25,798
India Ltd.
Bank Ltd.
2 HDFC 5,00,987 38,57,022 IDBI Bank 2,00,00,000 1,00,00,000
Bank Ltd. Ltd.
3 ICICI 73,566 1,12,54,86 State Bank 3,12,57,022 2,10,95,049
Bank Ltd. 2 Of Maisur.
4 IDBI 57,69,091 1,07,43,76 SBI & 15,86,84,026 12,55,040,334
Bank Ltd 3 Subsidiary
5 AXIS 56,48,318 1,05,51,61 Nationalize 17,82,68,503
Bank Ltd 0 Bank
6 BOB Bank 5,09,227 26,737 Surat 8,00,00,000 8,00,00,000
Ltd District Co-
Ope. Bank
Ltd.
7 Tamilnadu 11,35,568 BOB Bank 95,00,000
Mark.Ltd. 22,58,128 Ltd
8 Kotak 28,59,861 45,79,163
Mahindra
Bank Ltd.
9 YES Bank 50,00,000 2,81,10,03 51
Ltd

52. 7.2) Investment in Government Securities
52

53. N Investment in Amount Amount
o Government Securities (2009) (2010)
1 Central & State Government 77,50,00,000 117,94,47,922-
Surety 00
2 Other acceptable Trust _ _
Surety
3 Investment in Share of Co- 55,100 55,100-00
operative Institutions
Total 775,055,10 1,179,503,0
0 22
Interpretation
In Credit Risk in Investment, there is investment in terms of Current & Fixed Deposit
accounts of the Varachha Bank in many Nationalize Banks and there is also
investment in Government and also the investment is increasing with the past year
so we can say that bank is in safer side & it can manage its risk.
53

54. 8) Credit Risk Measurement
The measurement of credit risk is of vital importance in credit risk management. A
number of qualitative and quantitative techniques to measure risk inherent in credit
portfolio are evolving. To start with, banks should establish a credit risk rating
framework across all type of credit activities.
8.1) NPA
Action for enforcement of security interest can be initiated only if the secured asset
is classified as Non Performing Asset.
Non Performing Asset means an asset or account of borrower, which has been
classified by a bank or financial institution as sub-standard, doubtful or loss asset, in
accordance with the directions or guidelines relating to asset classification issued by
RBI.
Provisions against Non Performing Assets in 2010
54

55. Amoun
t in
Lakh.
Overdue Loans
classification No. Amount
of a/c
(A) Total Loan 7739 9488.6 237.3 587.00
7 6
1)Standard 7716 9266.0 37.06
assets 4
2)N.P.A. 23 222.63 200.3
0
a)Sub Standard 02 24.81 2.48
Assets
b)Doubtful up
to 1 year
1 to 3 year
Mo
re than 3 year
c)Loss Assets 21 197.82 197.8
2
B) Provisions
1)Provision 41.51
against standard
assets
2)Bad & doubtful 179.76
debt reserve 55
3)provision 365.73

56. N.P.A. against total loan =2.35%
Net N.P.A. against total loan = 0.00%
9) Research Methodology
9.1) Problem Identification:-
56

57.  It is an investor's risk of loss arising from a borrower who does not make
payments as promised. Such an event is called a default. Another term for
credit risk is default risk.
 To understand the nature & the effect of the Credit Risk in the bank.
 To study when why where & which result Credit Risk is formulation &
criteria for the Credit Risk.
9.2) Research Design
There are three types of research design.
Research Design
Exploratory Descriptive Causal
 Focus on idea Focus on Focus on
Delivery Characteristics Knowing
 Base on secondary Well- Cause &
effect
Data Structured relation
 Not rigid Rigid in nature Base on
Reasoning
The Researcher used Exploratory Research Design.
9.3) Data Collection
There are two sources of data collection
1. primary source of data collection
2. secondary source of data collection
Here researcher uses the secondary source of data for the study of the Credit Risk
Management of the Varachha Bank. The annual report of the VCB for the two years
57

58. provides the financial information regarding the performance of the bank. The data
of the bank related to the Credit Risk Management of the bank provided useful
information regarding the nature of Credit Risk Management of the bank.
9.4) Data collection forms:-
a) Observation Method
 Data collected three observations.
 A keep researcher with integrity would in position to observe & record data
accurately.
 Attitude, Opinion, motivation, can be observed.
 Without knowledge of sample data are gathered.
b) Survey Method
 Personal
 Telephonic
 Mail
 The Researcher used Observation Method for data collection.
10) BENEFIT OF THE STUDY
 It gives the knowledge about the reasons for the rising Credit Risk in co-
operative sector bank.
 It provides the knowledge how these banks manage its Credit Risk and keeps
them within tolerance level as per the RBI norms.
 It helped to know what strategies these banks adopt to reduce its risk when
the bank feels that recovery is impossible.
58

59. 11) Limitation of the study
 Lack of experience of researcher.
 There is inadequacy of some data for the preparation of the project.
12) SWOT Analysis
During the project work two months at Earache co-operative bank, I find out some
strength, weaknesses, opportunities and threats by SWOT analysis are as under:
Strength:-
a) Customer segmented well staff and effective implementation of Customer
Relationship Management and Quality Management System.
b) In the area of Varachha bank is the boon for uneducated people by friendly
advice and better services and really it yield lump sum amount of profit and
deposits.
c) Varachha bank got “award of excellence” of the best co-operative bank in Surat
city it shows the best banking operation.
Weakness:-
a) Intent for show the growth of bank.
b) There are lack of linking performance and reward.
Opportunities:-
a) In coming soon varachha co-operative bank is having proposal for three
branches at citilight, adajan. It’s great opportunity to cover most area of Surat.
59

60. b) Because of continued growth strategy, it build good image among the customers
and public and reliance on varachha co-operative bank, so it has opportunity to
prove the proved “growth pulls growth”
Threats:-
a) There are strict rules and deposit for opening saving or current account is high in
compare to other co-operative banks, so it can create bed image among customers
and public and it can be limitation for slow inflow of opening account.
b) In the modern era, varachha bank is not providing ATM facility and also credit
and debit card, so it can be threats for varachha bank.
13) FINDINGS:-
 Provide better & fast service to customer.
 Bank continuously gets audit class “A” in every year.
 The Varachha Co-operative bank gets awards of best activity in Surat district.
 The staff members of bank are very well experience and trained.
 The customer can know their balance & other transaction related his a/c
through Visual Account terminal Machine.
 The profit of the bank is at increasing rate.
 The bank has fully computerized system.
 There is lack of importance on marketing management.
 Bank has a good image of its main branch as well as service provide that
image can also be build up by providing that kind of service at all other
branches.
60

61.  The bank can attract more customers through their well services.
 It has not more than 7 branches in Surat so far the Varachha Co-operative
Bank has to face the competition with other bank because bank provides
other policies & other facility.
14) CONCLUSION:-
 Credit Risk is an investor's risk of loss arising from a borrower who does
not make payments as promised. Such an event is called a default.
Another term for credit risk is default risk.
 The Varachha Co-operative Bank provides the money on credit base to
their customers by various ways.
 In case of credit risk management of the bank get the various documents
from the customers as a legal proof of their credit.
 In case of loan recovery management there is the number of loan
accounts & total loan is increasing in comparison with the past data there
is also increase in the provisions against NPA of the bank & decrease in
the number of accounts that convert in to NPA and also decrease the
gross NPA of the bank and bank’s net NPA is zero from the year of 2006
to 2010. It shows the good performance of the bank in loan recovery &
bank had improved in managing its risk.
 In case of Credit Risk in Investment, there is investment in terms of
Current & Fixed Deposit accounts of the Varachha Bank in many
Nationalize Banks like Indus India bank, HDFC, ICICI, BOB, AXIS,
Tamilnadu Mark Ltd., Kotak Mahindra , YES bank, SBI, MMC,IDBI etc.
61

62. and there is also investment in Government Securities Central & State
Government Surety, Other acceptable Trust Surety, Investment in Share
of Co-operative Institutions etc. and also the investment is increasing with
the past year so we can say that bank is in safer side &it can manage its
risk.
 In case of Credit Risk Measurement bank’s condition of provisions against
non performing assets there is decrease in the accounts of overdue loans
& in amount of overdue loans in comparison of year 2009 with 2010. And
in movements of Credit Risk to Assets Ratio (CRAR) is increasing. In
2009 is 31.23% & in 2010 it is 32.08% which indicate the good signal for
the bank.
15) BIBLIOGRAPHY
• Books
1) Research methodology
- G.C.berri
2) Banking system
- B.S.shah
62

63. • Website
www.varachhabank.com
• Annual Report Of Bank
1) Annual Report of Bank (2008-09)
2) Annual Report of Bank (2009-10)
63

64. 64