N pa finance project

APGB, KADAPA

ABOUT BANKING INDUSTRY
1.1 THE BANK:
The word bank means an organization where people and business can invest
or borrow money; change it to foreign currency etc. According to Hals bury “A
Banker is an individual, Partnership or Corporation whose sole pre-dominant
business is banking, that is the receipt of money on current or deposit account, and
the payment of cheque drawn and the collection of cheque paid in by a customer.’’

1.2 THE ORIGIN AND USE OF BANKS:
The Word ‘Bank’ is derived from the Italian word ‘Banko’ signifying a
bench, which was erected in the market-place, where it was customary to exchange
money. The Lombard Jews were the first to practice this exchange business, the first
bench having been established in Italy A.D. 808. Some authorities assert that the
Lombard merchants commenced the business of money-dealing, employing bills of
exchange as remittances, about the beginning of the thirteenth century. About the
middle of the twelfth century it became evident, as the advantage of coined money
was gradually acknowledged, that there must be some controlling power, some
corporation which would undertake to keep the coins that were to bear the royal
stamp up to a certain standard of value; as, independently of the ‘sweating’ which
invention may place to the credit of the ingenuity of the Lombard merchants- all
coins will, by wear or abrasion, become thinner, and consequently less valuable; and
it is of the last importance, not only for the credit of a country, but for the easier
regulation of commercial transactions, that the metallic currency be kept as nearly as
possible up to the legal standard. Much unnecessary trouble and annoyance has been
caused formerly by negligence in this respect. The gradual merging of the business
of a goldsmith into a bank appears to have been the way in which banking, as we
now understand the term, was introduced into England; and it was not until long
after the establishment of banks in other countries-for state purposes, the regulation
of the coinage, etc. that any large or similar institution was introduced into England.
It is only within the last twenty years that printed cheques have been in use in that
establishment. First commercial bank was Bank of Venice which was established in
1157 in Italy.

MANAGEMENT OF NON-PERFORMING ASSETS 1 S.V PG COLLEGE: KADAPA

APGB, KADAPA

1.3 HISTORY OF BANKING IN INDIA:
Banking in India originated in the last decades of the 18th century. The first
banks were The General Bank of India which started in 1786, and the Bank of
Hindustan, both of which are now defunct. The oldest bank in existence in India is
the State Bank of India, which originated in the Bank of Calcutta in June 1806,
which almost immediately became the Bank of Bengal. This was one of the three
presidency banks, the other two being the Bank of Bombay and the Bank of Madras,
all three of which were established under charters from the British East India
Company. For many years the Presidency banks acted as quasi-central banks, as did
their successors. The three banks merged in 1921 to form the Imperial Bank of India,
which, upon India's independence, became the State Bank of India.
Indian merchants in Calcutta established the Union Bank in 1839, but it failed
in 1848 as a Consequence of the economic crisis of 1848-49. The Allahabad Bank,
established in 1865 and still functioning today, is the oldest Joint Stock bank in
India.(Joint Stock Bank: A company that issues stock and requires shareholders to be
held liable for the company's debt) It was not the first though. That honor belongs to
the Bank of Upper India, which was established in 1863, and which survived until
1913, when it failed, with some of its assets and liabilities being transferred to the
Alliance Bank of Simla. Foreign banks too started to arrive, particularly in Calcutta,
in the 1860s. The Comptoire d'Escompte de Paris opened a branch in Calcutta in
1860, and another in Bombay in 1862; branches in Madras and Puducherry, then a
French colony, followed. HSBC established itself in Bengal in 1869. Calcutta was
the most active trading port in India, mainly due to the trade of the British Empire,
and so became a banking center.
The first entirely Indian joint stock bank was the Oudh Commercial Bank,
established in 1881 in Faizabad. It failed in 1958. The next was the Punjab National
Bank, established in Lahore in 1895, which has survived to the present and is now
one of the largest banks in India. The period between 1906 and 1911, saw the
establishment of banks inspired by the Swadeshi movement. The Swadeshi
movement inspired local businessmen and political figures to found banks of and for
the Indian community.


APGB, KADAPA

A number of banks established then have survived to the present such as
Bank of India, Corporation Bank, Indian Bank, Bank of Baroda, Canara Bank and
Central Bank of India. The fervour of Swadeshi movement lead to establishing of
many private banks in Dakshina Kannada and Udupi district which were unified
earlier and known by the name South Canara ( South Canara ) district. Four
nationalized banks started in this district and also a leading private sector bank.
Hence undivided Dakshina Kannada district is known as "Cradle of Indian
Banking". · The Reserve Bank of India, India's central banking authority, was
nationalized on January 1, 1949 under the terms of the Reserve Bank of India
(Transfer to Public Ownership) Act, 1948 (RBI, 2005b). In 1949, the Banking
Regulation Act was enacted which empowered the Reserve Bank of India (RBI) "to
regulate, control, and inspect the banks in India." · The Banking Regulation Act also
provided that no new bank or branch of an existing bank could be opened without a
license from the RBI, and no two banks could have common directors.

1.4 NATIONALIZATION OF BANKS:
Banks Nationalization in India: Newspaper Clipping, Times of India, July,
20, 1969 Despite the provisions, control and regulations of Reserve Bank of India,
banks in India except the State Bank of India or SBI, continued to be owned and
operated by private persons. By the 1960s, the Indian banking industry had become
an important tool to facilitate the development of the Indian economy. At the same
time, it had emerged as a large employer, and a debate had ensued about the
nationalization of the banking industry. Indira Gandhi, then Prime Minister of India,
expressed the intention of the Government of India in the annual conference of the
All India Congress Meeting in a paper entitled "Stray thoughts on Bank
Nationalization.
"The meeting received the paper with enthusiasm. Thereafter, her move was
swift and sudden. The Government of India issued an ordinance and nationalized the
14 largest commercial banks with effect from the midnight of July 19, 1969.
Jayaprakash Narayan, a national leader of India, described the step as a
"masterstroke of political sagacity." Within two weeks of the issue of the ordinance,


APGB, KADAPA

the Parliament passed the Banking Companies (Acquisition and Transfer of
Undertaking) Bill, and it received the presidential approval on 9 August 1969.
A second dose of nationalization of 6 more commercial banks followed in
1980. The stated reason for the nationalization was to give the government more
control of credit delivery. With the second dose of nationalization, the Government
of India controlled around 91% of the banking business of India. Later on, in the
year 1993, the government merged New Bank of India with Punjab National Bank. It
was the only merger between nationalized banks and resulted in the reduction of the
number of nationalized banks from 20 to 19. After this, until the 1990s, the
nationalized banks grew at a pace of around 4%, closer to the average growth rate of
the Indian economy.

1.5 LIBERALIZATION OF BANKING IN INDIA:
In the early 1990s, the then Narsimha Rao government embarked on a policy
of liberalization, licensing a small number of private banks. These came to be known
as New Generation tech-savvy banks, and included Global Trust Bank (the first of
such new generation banks to be set up), which later amalgamated with Oriental
Bank of Commerce, Axis Bank(earlier as UTI Bank), ICICI Bank and HDFC Bank.
This move, along with the rapid growth in the economy of India, revitalized the
banking sector in India, which has seen rapid growth with strong contribution from
all the three sectors of banks, namely, government banks, private banks and foreign
banks. The next stage for the Indian banking has been set up with the proposed
relaxation in the norms for Foreign Direct Investment, where all Foreign Investors in
banks may be given voting rights which could exceed the present cap of 10%,at
present it has gone up to 74% with some restrictions.
The new policy shook the Banking sector in India completely. Bankers, till
this time, were used to the 4-6-4 method (Borrow at 4%; Lend at 6%; Go home at 4)
of functioning. The new wave ushered in a modern outlook and tech-savvy methods
of working for traditional banks. All this led to the retail boom in India. People not
just demanded more from their banks but also received more. Currently (2007),
banking in India is generally fairly mature in terms of supply, product range and
reach-even though reach in rural India still remains a challenge for the private sector


APGB, KADAPA

and foreign banks. In terms of quality of assets and capital adequacy, Indian banks
are considered to have clean, strong and transparent balance sheets relative to other
banks in comparable economies in its region.
The Reserve Bank of India is an autonomous body, with minimal pressure
from the government. The stated policy of the Bank on the Indian rupee is to manage
volatility but without any fixed exchange rate-and this has mostly been true. With
the growth in the Indian economy expected to be strong for quite some time-
especially in its services sector-the demand for banking services, especially retail
banking, mortgages and investment services are expected to be strong. One may also
expect M&As, takeovers, and asset sales. In March 2006, the Reserve Bank of India
allowed Warburg Pincus to increase its stake in Kotak Mahindra Bank (a private
sector bank) to 10%. This is the first time an investor has been allowed to hold more
than 5% in a private sector bank since the RBI announced norms in 2005 that any
stake exceeding 5% in the private sector banks would need to be vetted by them.
1.6 LIST OF BANKS IN INDIA:
• CENTRAL BANK (RESERVE BANK OF INDIA)

• NABARD

• NATIONALIZED BANKS
Allahabad Bank , Andhra Bank , Bank of Baroda · Bank of India · Bank of
Maharashtra · Canara Bank · Central Bank of India · Corporation Bank · Dena Bank ·
IDBI Bank · Indian Bank · Indian Overseas Bank · Oriental Bank of Commerce ·
Punjab & Sind Bank · Punjab National Bank · Syndicate Bank · UCO Bank · Union
Bank of India · United Bank of India · Vijaya Bank.

• STATE BANK GROUP
State Bank of India · State Bank of Bikaner & Jaipur · State Bank of Hyderabad ·
State Bank of Indore · State Bank of Mysore · State Bank of Patiala, State Bank of
Travancore

• PRIVATE BANKS
Axis Bank · Bank of Rajasthan · Bharat Overseas Bank · Catholic Syrian Bank ·
Dhanalakshmi Bank · South Indian Bank · City Union Bank · Federal Bank · HDFC


APGB, KADAPA

Bank · ICICI Bank · IndusInd Bank · ING Vysya Bank · Jammu & Kashmir Bank ·
Karnataka Bank Limited · Karur Vysya Bank · Kotak Mahindra Bank · Lakshmi
Vilas Bank · Nainital Bank · Ratnakar Bank ·Saraswat Bank · Tamilnad Mercantile
Bank Limited · Yes Bank

• FOREIGN BANKS
ABN AMRO · Abu Dhabi Commercial Bank · Antwerp Diamond Bank · Arab
Bangladesh Bank ·Bank International Indonesia · Bank of America · Bank of
Bahrain & Kuwait · Bank of Ceylon · Bank of Nova Scotia · Bank of Tokyo
Mitsubishi UFJ ·Barclays Bank · Citibank India · HSBC · Standard Chartered ·
Deutsche Bank · Royal Bank of Scotland.

• REGIONAL RURAL BANKS
North Malabar Gramin Bank · South Malabar Gramin Bank · Pragathi Gramin Bank
· Shreyas Gamin Bank

• FINANCIAL SERVICES
Real Time Gross Settlement (RTGS) · National Electronic Fund Transfer (NEFT) ·
Structured Financial Messaging System (SFMS) · Cash Tree · Cash net · Automated
Teller Machine (ATM)

• BANKS IN ASIA
Sovereign states Afghanistan · Armenia1 · Azerbaijan1 · Bahrain · Bangladesh ·
Bhutan · Brunei ·Burma2 · Cambodia · People's Republic of China · Cyprus1 · East
Timor3 · Egypt4 ·Georgia4 ·India · Indonesia · Iran · Iraq · Israel · Japan · Jordan ·
Kazakhstan4 · North Korea · South Korea ·Kuwait · Kyrgyzstan · Laos · Lebanon ·
Malaysia · Maldives · Mongolia · Nepal · Oman ·Pakistan · Philippines · Qatar ·
Russia4 · Saudi Arabia · Singapore · Sri Lanka · Syria · Tajikistan · Thailand ·
Turkey4 · Turkmenistan · United Arab Emirates · Uzbekistan · Vietnam · Yemen

• STATES WITH LIMITED RECOGNITION
Abkhazia1 · Nagorno-Karabakh · Northern Cyprus · Palestine · Republic of China5 ·
South Ossetia1


APGB, KADAPA

• DEPENDENCIES, AUTONOMIES OTHER TERRITORIES
Ache · Adjara1 · Akrotiri and Dhekelia · Altai · British Indian Ocean Territory ·
Buryatia ·Christmas Island · Cocas (Keeling) Islands · Guangxi · Hong Kong · Inner
Mongolia · Iraqi Kurdistan · Khakassia · Macau · Nakhchivan · Ningxia · Papua ·
Sakha Republic · Tibet · Tuva · West Papua · Xinjiang

ABOUT APGB

2.1 HISTORY

Andhra Pragathi Grameena Bank was established on 1st June, 2006 after
amalgamation of 3 RRBs namely Rayalaseema Grameena Bank (established on
06.08.1976), Sree Anantha Grameena Bank (established on 01.11.1979) and Pinakini
Grameena Bank (established on 11.6.1982). These Regional Rural Banks were
established under the provisions of RRB Act, 1976 and consequent to the
Government of India Notification dt.1.6.06, were amalgamated and formed as a new
entity called Andhra Pragathi Grameena Bank with its Head Office at Kadapa.

The bank is operating in Kadapa, Anantapur, Kurnool, Nellore and Prakasam
districts of Andhra Pradesh and having Regional Offices in each District Head
Quarters. The bank is catering to the needs of rural poor covering Agriculture, Small
Industries, Village Artisans, Small business besides catering to the needs of Non
Priority sector also. The Bank is having a total business of 7493.46 cores as on
30.09.2010. The bank is assisting the SHGs in a massive way and financed to more
than 105587 SHGs with outstanding SHG advances of 792.88 crores.

The bank is progressing with all-round development and introducing new
products to cater the needs of the people in its service area. The Bank is improving
customer service by computerizing all its branches. The bank has been propagating
innovations in Rural Banking and also has been receptive to new ideas.

2.2 BUSINESS HIGHLIGHTS OF APGB AS ON 30.09.2010
1. Andhra Pragathi Grameena Bank occupied No.1 position in Net worth among all
the RRBs in the country. The Bank has 372 branches in 5 districts. VIZ., Kadapa,


APGB, KADAPA

Anantapur, Kurnool, Nellore and Prakasam districts. The operating profit of the
Bank for the year Half year ended 30.09.2010 touched 106.53 crores.
2. Total business crossed 7493.46 crores.
3. Deposits crossed 3656.04 crores with a Y-O-Y growth rate of 14.12%.
4. Advances crossed 3837.42 crores, with a growth rate of 17.03% over the
September-2009.
5. The Bank has customer base with 30.91 lakhs deposit accounts and 9.12 lakhs
borrower accounts.
6. Priority sector advances reached a level of 3386.38 crores, constituting
88.25% of total advances. Agriculture advances touched a level of 2984.56 crore,
constituting 77.78% of total advances. The Y-O-Y growth under Priority sector
advances is 20.46% and Agl. Advances is 25.93% .
7. 406102 Kisan Credit Card accounts are outstanding with a loan amount of
1468.56 crore.
8. Actively participated in the scheme of achieving 100% Financial Inclusion in all
the 5 districts–Kadapa, Kurnool Anantapur, Nellore and Prakasam.
9. The Bank has computerized all its 372 branches and 3 ECs with Total Branch
Mechanization and 100% of its business is computerized.
10. The highest number of 7.99 lakhs Pragathi Janatha No-Frill accounts SB
accounts, are opened under total Financial Inclusion.
11. 105587 SHGs loan accounts are outstanding with loan amount of 792.88
crores. Provided additional financial assistance to the SHGs under the special Dairy
Development Project.
12. Per branch business and Per-employee business stood at 19.67 crores and
3.65 crores respectively.
13. Opened 12 new branches during the first half of the current financial year.

2.3 FUTURE PLANS OF APGB:
The Bank is aiming to cross the following mile-stones in the year (2010-11).
1. Achieve a business level of 8600 crores.
2. Planning to open 28 more branches during the current year in the in the area of
operation of the bank in tune with the policy of Govt. of India.


APGB, KADAPA

3. CBS: The Bank has finalized C-Edge software for implementation of Core
Banking Solution in its branches. The bank is planning to implement Core Banking
Solution in 5 Pilot branches before 31.12.2010 and in 150 branches by 31.03.2011.
4. Planning to engage Business Correspondents under Total Financial Inclusion.
We are hopeful of achieving the set goals in the present year (2010-11) with
the cooperation of one and all, more particularly the clientele of the Bank and
Government Agencies. We thank the media both print and electronic for their
cooperation in projecting the image of our Bank in good stead.

2.4 SOCIAL RESPONSIBILITIES OF APGB:
The Bank is catering to the needs of the Rural Community and actively
associated with Rural Development. Apart from the business development, the Bank
is undertaking Social Responsibilities for bringing desired change in the rural
community and moving them towards improving the living standards of the rural
community. The Bank has initiated the following steps in this direction.
1. Establishment of Farmers’ Clubs: The Bank has established 321
Farmers Clubs through which the Bank is undertaking activities for enriching the
Farmers with latest Technology and improving the cultivation methods by way of
expert lectures, study tours and demonstrations. The progressive Farmers of the
village are the members of the club and they play active role in dissemination of the
farming techniques to the other farmers in the village. One of our clubs has secured
the Best Club Award from the NABARD. These clubs will play major role in
transforming the traditional farmers to progressive farmers.
2. Establishment of Training Institutes: The Sponsor Bank i.e. Syndicate
Bank has established training institutes (SIRD) at Kadapa and Kurnool for training
the Rural Youth. The Bank is actively associated with providing of training and
imparting the skills to the unemployed rural youth. Further, the SIRDs are also
extending help to the trained candidates to establish the business activity by
coordinating with the banks for extending loans to them. The trainings are provided
in the fields of photography, tailoring, Mobile phone repairing, Embroidery,
Computer courses like graphics, DTP, MS-Office etc. The practical training is
provided in the above fields by the institute, which enables the trained youth to
establish their own businesses.


APGB, KADAPA

3. Conducting of extension activities: The Bank is conducting extension
programmers through its branches for educating the farmers in various fields like,
post harvest technologies, improved agricultural practices, insect and pest
management in prominent crops, techniques in water & soil conservation methods,
integrated pest management and dairying. These programmer are most useful to the
farmers to equip themselves with latest technologies in the field of Agriculture and
help them to improve the productivity of the crops.
4. Improving the water resources: As a part of Social Responsibility, the
Bank has undertaking the clearing/ cleaning of village ponds to improve the water
retention capacity of the village tanks. The supply channels are also cleaned with the
assistance of the Bank which will help for free flow of water. The Bank is
contributing some amount and involving all the villagers for undertaking the above
works. The villagers are voluntarily participating in the above programmer and
making the programme successful. The Bank has extended assistance for cleaning/
clearing of 123 village ponds so far and the same is being continued.
5. Contribution to Renewable Energy: The Bank has entered MoU with
the suppliers of Solar Energy Systems and extending financial assistance for
installation of Solar Energy Systems. Further, the Bank has established renewable
energy Systems in 30 branches for un-interrupted power supply. Thus the Bank is
promoting the renewable energy sources there by contributing its might to maintain
the ecological balance.

2.5 SECURITY MEASURES & OTHER DEVELOPMENTS OF
APGB:

1. Security Measures: The Bank has provided fire extinguishers and security
alarms to all the branches. During the financial year, the Bank has provided Strong
Room facility to 8 branches taking the total number of branches having strong room
facility to 77. The Bank has also provided 115 BB class safes to the branches, where
the jewel loan port folio has crossed 100 lakhs and another 50 BB class safes will
be provided during the current fiscal.

MANAGEMENT OF NON-PERFORMING ASSETS 10 S.V PG COLLEGE:
KADAPA

APGB, KADAPA

2. Safe Deposit Lockers: In order to improve the customer service, the Bank is
providing Safe deposit lockers facility in all urban and Semi-urban branches and also
in some rural branches, where business potential is available. During the financial
year, the Bank has provided 16 Safe Deposit Lockers, thus taking the total available
lockers at the branches to 106.
3. Cash counting Machines: The bank has provided 289 cash counting
machines to branches so far and taken steps to supply another 75 machines during
the current year.
4. Co-financing: NABARD, Andhra Pradesh Regional Office has entered into
Memorandum of Understanding (MoU) with Andhra Pragathi Grameena Bank
(APGB) on Co-financing at YSR (Kadapa) today with an objective to increase the
flow of ground level credit to agriculture and allied activities in the State. Under this
agreement, while NABARD will leverage its technical appraisal and financial
resources, APGB would utilize its domain knowledge of the local area. Under Co-
financing, NABARD and APGB jointly finance new projects or even projects for
modernization & expansion. Projects involving sunrise technology and large
financial outlays and long gestation period, would merit consideration. The thrust
areas under co-financing would cover projects in Agro Processing, Post Harvest
Management, Contract Farming, Organic Farming, Bio Fertilizers/Organic Manures,
Plantation & Horticulture, Dairy, Poultry, Fisheries, Eco-tourism, Non-farm Sector
& Allied activities, Carbon Trading & Allied activities etc.
Andhra Pragathi Grameena Bank has responded to the initiative of NABARD
to join it for co-financing innovative projects in agriculture and rural development
sector so as to increase its business further. Andhra Pragathi Grameena Bank has its
presence in 5 districts of the State viz. YSR, Kurnool, Prakasam, Nellore and
Ananthapur and operates through 372 branches among which 36 branches are in
urban, 84 in semi-urban and 252 in rural areas. The Memorandum of Understanding
between NABARD and APGB was signed on 30th September 2010 with a common
objective of financing agri/ agro–industrial projects in the state.

While Shri P. Maharajah, CGM signed the MoU on behalf of
NABARD, Shri K. Preetam Lal, Chairman signed the MoU on behalf of Andhra

KADAPA

APGB, KADAPA

Pragathi Grameena Bank. This MoU between NABARD and Andhra Pragathi
Grameena Bank would facilitate accelerated flow of institutional credit to larger
units in agriculture and agro processing, agri marketing and allied sectors.

2.6 APGB VISION:
“ Placing our Organization at the Highest Altitude among the RRB's in the country
and making it financially strong, viable, vibrant and an effective proactive
instrument of social change, with an eye to work for overall development of the
people and the economy of the operational area, through aggressive banking.”

2.7 OUR MISSION:
• To increase the business on a sustainable manner with consistent efforts and
bring all the house holds in the operational area into banking folds.
• To fine tune the existing products and design new products and services to match
the competition prevailing in the market.
• To mould the staff of the bank as computer literate and technologically savvy and
to achieve hundred percent computerization of branches.

To continue to be a true friend, philosopher and guide to customers with
dedicated service and accelerate the pace of development of the operational area for
accomplishing the Bank's Object.

2.8 BOARD OF DIRECTORS

Sl. Name Occupation Nominee Director
No. of
1. Sri K.Preetam Lal Chairman --
2. Sri A.Sreerami Reddy, Deputy General Manager,Sponsor Bank
Syndicate Bank,
Regional Office,
Ritwik Enclave,A.K. Nagar,

KADAPA

APGB, KADAPA

NELLORE – 524 004.

3. Sri C.SambashivaAsst. General Manager,Sponsor Bank
Reddy, Syndicate Bank,
Regional Office,
ANANTAPUR – 515 001.
4. Sri Artatran Sethy, Asst. General Manager,Reserve Bank of
Rural Planning & CreditIndia
Dept.,
Reserve Bank of India,
6-1-56, Secretariat Road,
Saifabad,Hyderabad – 500
004.
5. Sri M.Prem Kumar, Deputy General Manager,NABARD
NABARD,Regional Office,
1-1-61 RTC “X” Roads,
Musheerabad,
HYDERABAD 500020.
6. Smt. Vasudha Mishra,Principal Secretary toState Government
IAS., Government (IF)
Finance Department,
Government of Andhra
Pradesh, HYDERABAD -
500 001.

7. Sri V.Anil Kumar, IAS., District Collector,State Government
KADAPA

KADAPA

APGB, KADAPA

8. Smt.K.Padmaja Prasad 37-1-307 (144), Non-official
Opp. to Srinivasa PublicDirector from
School, Govt. of India
Near Dist. Registrar Office,
Bhagya Nagar, II line,
ONGOLE - 523 001.

9. Sri P.Pitchi Reddy D.No.7/468-1, Non-official
N.G.O. Colony,Director from
Sabhapathi Road,Govt. of India
KADAPA.

2.9 INTEREST RATES ON LOANS & ADVANCES WITH
EFFECT FROM 22.09.2011

INTEREST
PURPOSE
RATE (% p.a.)
A. FARM SECTOR
I. Short Term Loans xxx
1.Crop/Pragathi KCC/Rythu Mitra Groups / Joint Liabilityxxx
Groups / JL Agriculture
i. During Interest Subvention Period
a) Upto & inclusive of 3.00 lakhs 7.00
b) Above 3.00 lakhs 14.50
ii. Beyond Interest Subvention Period
a) Upto & inclusive of 25.000/- 11.50
b) Above 25,000/- &upto & inclusive of11.50+2.00% OD
50,000/- interest
c) Above 50000/- & upto & inclusive of 12.50+2.00% OD
1.00 lakh interest

KADAPA

APGB, KADAPA

d) Above 1.00 lakh & upto & inclusive of 13.50+ 2.00% OD
3.00 lakhs interest
e) Above 3.00 lakhs 14.50+2.00% OD
interest
2. Produce Loans xxx
a) Upto & inclusive of 2 lakhs 10.50
b) Above 2.00 lakhs 11.00
II. Agricultural Term Loans Xxx
1. Agriculture Term Loans & Allied Activities
a) Upto & inclusive of 50000/- 13.00
b) Above 50000/- 13.50
2. APMIP 13.00
3. Pragathi Capital Investment Scheme for Organic Farming 13.00
4. Pragathi Agri Business & Clinic Centres 14.00
5. Pragathi Land Purchase Scheme As applicable to
Agl. term loans
6.Rescheduled Loans As applicable to
Agl. Term loans
The above rates under Agriculture Term Loans are applicable to all Agriculture Term
Loans other than those specifically mentioned.
B. INDIRECT FINANCE TO AGRICULTURE
a) Finance to APFSCS i) ST/MT/LT 10.50
ii) ODC/ODj/ODH 13.00

b) Loans/Working Capital limits to Dealers of inputs toAs under C (for
Agriculture (fertilizers, pesticides, seeds, minor and microNon Farm sector
irrigation equipment, etc.) advances)

C. NON FARM SECTOR
1. Retail Trade, Small Business, Small Scale Industries, SME
Sector, Road Transport Operators, GCC etc. (Working Capital
& Term Loans)
A) Upto & inclusive of 50000/- 13.00

KADAPA

APGB, KADAPA

B) Above 50000/- & Upto & inclusive of 1.00 lakh 13.50
C) Above 1 lakh & Upto & inclusive of 2.00 lakhs 14.00
D) Above 2.00 lakhs 15.00
The above rates under Non Farm Sector are applicable to both Priority and Non
Priority Sector advances other than those specifically mentioned.
D. OTHER PRIORITY SECTOR LOANS xxx
1. Self Help Group Loans [SHGs] (irrespective of any amount) 14.00
2. Education Loans xxx
A) Upto & inclusive of 4.00 lakhs 13.00
B) Above 4.00 lakhs 14.50
3. Housing Loans to public (incl. under Gruhini, Rajivxxx
Gruhakalpa, Pragathi Farm House, Individual Housing
Loans under Indiramma Schemes)
A) Upto repayment period of 5 years 10.50
B) Above 5 years & upto 10 years 11.00
C) Above 10 years 11.50
4. Vehicle Loans (2/3/4 wheelers) to Professional & Self xxx
Employed persons/Business people, Salaried persons
A) Upto 3.00 lakhs 14.00
B) Above 3.00 lakhs 15.00
5) Pragathi Doctors’ Plus 11.00
6) Pragathi Solar Home Lighting/Heating System
• Normal Scheme 11.00
• Under JNNSM 5.00
7) Pragathi Swarojgar Credit Card Scheme 13.00
8) SGSY/ Rajiv Yuvasakthi/Other Govt sponsered schemes As applicable to
purpose of loan &
quantum
9) Loans under DRI 4.00
E. NON PRIORITY SECTOR LOANS xxx
1) Loans/OD against approved securities like NSCs, LIC14.00
policies

KADAPA

APGB, KADAPA

2) Personal Banking Loans to employees xxx

a)Employees drawing their salaries through our Bank 15.00

b) Employees drawing their salaries through other Banks 18.00

3) Branch Premises loans 14.00

4) Jewel Loans (non agrl) 14.00

5) BGs paid (incl. OD interest) 18.00

6) Commercial complexes/School or College buildings, etc. 18.00

7) Multi Purpose Mortgage Loans 16.00

8) Pragathi Rent Plus 16.00

8) CDD – Discount to be collected by way of interest Xxx
(both priority & non priority)

a) for a minimum period of 10 days @ 16.00

b) From 11th day (quarterly compounded) @ 18.00

9) Debit Balances in SB/Current A/cs 18.00

10) Loans on Deposits / ODDs Xxx

KADAPA

APGB, KADAPA

a) Against Nitya Nidhi Deposit 11.00

b) Against other term deposits 2.00 above the
deposit rate without
any ceiling

c) Against term deposits prematurely withdrawn within 1515.00
days

OVERDUE/PENAL RATES OF INTEREST

A. Overdue interest rate over the applicable normal rate

i) DRI Advances Nil

ii) Aggregate Credit Limits not exceeding 5000/- in theNil
case of Non Priority Sector advances and 25000/- in the case
of Priority Sector advances

iii) Aggregate Credit Limits exceeding 5000/- in the case2.00
of Non Priority Sector advances and 25000/- in the case of
Priority Sector advances

B. Penal interest over the applicable normal rate

i) For non-submission/delayed submission of monthly stock 1.00
statements to be charged for delayed period

KADAPA

APGB, KADAPA

ii) For diversion of funds 2.00

iii) For non-submission of renewal proposal/ additional
information/requirements on the renewal proposal for the
delayed period

a) up to 3 months from the date of expiry of credit limit till the 2.00
date of receipt of renewal proposal

b) beyond 3 months from the date of expiry of credit limit till 2.00
the date of receipt of renewal proposal

c) beyond 30 days from the date of calling for additional 2.00
information/requirements on the renewal proposal

C. Loans pre-closed by taking over by other banks/2.0% of loan
institutions balance
D. The total Overdue interest / penal interest to be charged 2.00
on account of any of the above reasons should not exceed

KADAPA

APGB, KADAPA

MANAGEMENT OF NON–PERFORMING ASSETS

3.1 INTRODUCTION:

1. There is a general concept commonly accepted “A Man or Woman with no
money is equal to a dead.” Here it is suitable to insist the importance of
money.
2. A Rumanian proverb says that “A man without money is like a bird with no
wings.”
3. The basic functions of banks are accepting all kinds of deposits and supply
money. “The life blood of business concerns”. By lending process.
4. The banks supply the money for all activities. To concentrate on the
development of rural economy, the govt of India extended help for the rural
Farmers, artesians, entrepreneurs by opening region rural banks, in addition
to commercial banks and co-operative banks.
5. In the present Indian economical arena, the regional rural banks are supposed
to play a vital role in achieving the objective of economic development by
providing effective credit support to various regions, sectors and sections.

3.2 CONCEPTS AND TYPES:

1. Non-Performing assets are those assets of the banks that do not generate
income.
2. It has been well defined by “Securization and Reconstruction of Financial
Assets are Enforcement of Security Interest”.(SARFAESI)
3. An asset or account of borrower, which has been classified by a bank or
financial institution as sub-standard, doubtful and loss assets in accordance
with the direction issued by the RBI.
4. The asset of the banks are classified as performing and Non-Performing
assets .which generate income for the bank. A Non-Performing assets is an
asset which fails to generate income for the bank.

KADAPA

APGB, KADAPA

5. As per the regulation, an asset is considered to have gone due, the past due
amount remaining uncovered where the borrower has defaulted as principal
and interest repayment for more than one quarter or 90 days is called as Non-
Performing asset. According to guide lines of RBI.
6. NPAs consist of Sub-Standard, Doubtful and Loss assets. It is said that any
asset of the bank generally turn into NPAs when they fail to yield income
during a certain period.
7. As a result a doubtful asset finds its ways from Sub-standard assets after 18
months in Indian context against one year under the international norms and
finally. When it is found one year under the it moves to loss assets category.

3.3 PROVISIONING FOR NPAS:

In the light of the Narasimhan committee recommendations, from time
to time, the Reserve bank of India has issued the guidelines in respect of recognition
of NPAs, and their classification and provisioning. The following are the RBI
guidelines for the provisions for NPAs.

3.3.1 STANDARD ASSETS:

The regional rural banks advised to make a general provision for
standard assets at the following rates:

a) Direct advances to agricultural and SME sectors at 0.25%

b) All other advances at 0.40%

3.3.2 SUB-STANDARD ASSETS:

A general provision of 10% of net outstanding should be made
without making any allowances for export credit guarantee corporation guarantee
cover and securities available .The ‘unsecured exposures’ which are identified as
sub-standard would attract additional provision of 10%, i.e. a total of 20% on the
outstanding balance.

KADAPA

APGB, KADAPA

3.3.3 DOUBTFUL ASSETS:

Provision should be made made for 100% of the extent to which the
advance is not covered by the realizable value of the security to which the bank has a
valid resource and the realizable value is estimated on a realistic basis with regard to
the secured portion, the provision is to be made as specified below.

NON-PERFORMING ASSETS PROVISIONING:

Doubtful status Percentage of provisioning as secured
portion

Up to One year 20%

>1<=3 years 30%

>3years 100%

3.3.4 LOSS-MAKING ASSETS:

It is advised by RBI to the banks that in cases where loss assets
are more than two years old, the banks submit a review note to their management
committee/boards of directors giving specific reasons as to why steps have not been
taken for recovery.

3.3.5 OTHER PURPOSES:

Usually, banks have retirement benefits namely provident fund, gratuity.
Now banks have pension’s schemes also. Most of banks have set up recognized
gratuity or pension fund to fund the relative liability.

Technically the standard assets are performing assets. The remaining
categories of Sub-standard, doubtful and less assets are NPAs. According to RBI
direction, all the banks are required to maintain NPAs-both on gross and net basis.

KADAPA

APGB, KADAPA

3.4 RBI’S GUIDELINE FOR NPAS RECOGNITION:

Loans& Advances Guideline applicable Guideline applicable
from 31.03.2001 from 31.03.2004

Term loan interest and/or
installment remain over
180 days 90 days
due for more than

Overdraft/credit A/C. Remains out of order Remains out of order

Bill purchased and
discounted remains over
180 days 90 days
due for more than

Agricultural loan interest Two harvest seasons but Two harvest seasons but
and or installments remain not exceeding two and half not exceeding two and half
over due for years. years

Other accounts any amount
to be received remains
180 days 90 days
over due for more than

3.5 CAPITAL ADEQUACY:

Non-performing assets do not earn any income. They adversely affect
the capital adequacy ratio that reveals the financial health condition of a bank.

The capital adequacy ratio is defined as the ratio between a bank’s
capital and its risk-weighted assets. Capital signifies the strength of an organization.
This is truer in case of banks, because adequate capital not only infuses depositors
‘and regulators’ confidence, but also acts as a cushion against possible losses arising
out of normal risks inherent in banking. Like all other businesses, banks hold capital
as a buffer against unforeseen losses. Unlike other enterprises, however, one of the

KADAPA

APGB, KADAPA

main functions of banks is to perform financial intermediation between other
participants in the economy.

To ensure confidence and to protect the interest of depositors, banking
activities are subject to licensing, to specific regulations and to supervisions. it is the
supervision of banks that has been on a rise due to regulatory capital requirement.
Regulatory capital is the minimum capital that the supervisory authorities require
banks to set aside in order to meet potential losses. This is meant to ensure that the
banks can absorb losses arising from their activities on an ongoing basis. A
minimum capital adequacy ratio (ratio of capital to risk-weighted assets-CRAR) of
9% has been prescribed for all scheduled commercial banks and also primary(urban)
co-operative banks in the country under the ‘Basel1’ framework.

Commercial banks are also set to over to the more sophisticated
requirements under the new capital adequacy requirements (‘Basel2’). However, no
such norms have been specified for regional rural banks so far. Regional rural banks
should disclose the level of CRAR as on march 31, 2008 in their balance sheet as
“Notes on accounts”. “Regional rural banks may be advised to maintain a minimum
level of capital to risk-weighted assets ratio (CRAR) which would be progressively
raised to the current level of CRAR as per the Basel 1 norms”.

Dr. D. Subbarao, Governor, RBI has said at the time of meeting to
announce the Annual policy 2009-2010 that the phased introduction of capital to
risk-weighted assets ratio(CRAR) to the regional rural banks has to be done by 2012.
Honourable union Finance Minister Sri. Pranab Mukherji, in the meeting to review
the performance of regional rural banks held on 18th August, 2009 said that, “Having
recapitalized the regional rural banks by over 1700crore,the central government
is decided to setup a committee to assess the need further capital infusion.

3.6 REASONS FOR ASSETS BECOMING NPAS:

KADAPA

APGB, KADAPA

Multiple factors are responsible for the increasing size of NPAs in
banks. A few prominent reasons are:

• Poor credit appraisal system.
• Lack of proper monitoring.
• Reckless advances to achieve the target.
• No or lack of corporate culture.
• Inadequate legal provisions on for closure and bankruptcy.
• Change in economic policy and poor auditing practices.
• Lack of co-ordination between banks.
• Directed lending to certain sectors.

3.7 BASIC METHODS OF MANAGEMENT OF NPAS:

Management of NPAs is a difficult task in practice.
Management of NPAs means how to settle NPAs account in the books. In simple
terms, it focuses on the method of settlement of NPAs account. The methods may
differ from bank to bank. The following facts are some of the basic methods of
management of NPAs.

• Compromise
• Legal remedies
• Regular training program
• Recovery camps
• Write off
• Spot visits
• Rehabilitation of potentiality viable units
• Other methods

KADAPA

APGB, KADAPA

3.7.1 COMPROMISE:
One of the basic methods of management of NPAs is compromise. The
term compromise stands with the meaning of “Settlement of dispute reached by
mutual concessions.” The following are the ways for bringing about a compromise
in settlements of NPAs.

• It is negotiated settlement under which the bank should ensure recovery of its
dues at maximum with a minimum expense.
• An advantage in settlement cases is that banks can promptly recycle the
funds instead of restoring to expensive recovery proceedings spread over a
long period.
• All compromise proposals approved by any functionary should be promptly
reported to the next higher authority for post facto scrutiny.
• Proposal for writing off/compromise should be first by a committee of senior
executives of the bank.
• Special recovery cells should be setup at all regional levels.

3.7.2 LEAGAL REMEDIES:
One of the methods of management of NPAs is legal remedies. When the
banks observe that the borrower is making willful default, no more time should be
lost instituting appropriate recovery proceedings. The legal remedies are filing of
civil suits.

3.7.3 REGULAR TRAINING PROGRAM:
It should be made mandatory that all levels of executives are required to
undergo the regular training program on credit and NPA management. It is very
useful and helpful to the executives for dealing with the NPAs properly.

3.7.4 RECOVERY CAMPS:
The banks should conduct regular or periodical recovery camps in the
bank premises or some other common places; such type of recovery camps reduces
the level of NPAs in the banks.

KADAPA

APGB, KADAPA

3.7.5 WRITE OFFS:
Write offs are also one of the common management techniques of NPAs.
The assets are treated as loss assets, when the bank writes off the balances. The
ultimate aim of the write off is to clean the balance sheet.

3.7.6 SPOT VISITS:
The bank officials should visit the borrowers’ business place or borrowers
field regularly or periodically. It is also helpful for the bank to control or reduce the
NPAs limit.

3.7.7 REHABILITATION OF POTENTIALLY VIABLE UNITS:
The unit is sick due to technical obsolescence of inefficient management
or financial irregularities. When the Bank settles the dues of such companies through
the compromise or through the legal actions, the better is to be followed.

3.7.8 OTHER METHODS:
• Continuous phone calls to defaulters and borrowers.
• Media announcement regarding the non-payment of loans
.
3.8 CAUSES AND CONSEQUENCES OF NPAS:

One of the reasons for the accumulators of large portfolio of NPAs with
banks is that offered lending is not linked to productive investment and recovery of
credit is not linked with to product sale. The borrowers are mainly farmers and small
scale industries owners whose financial conditions are generally bad. The volume of
bank credit stacked in sick industries is the evidence of this problem.

Many of these causes are related to faulty credit management like defective
credit recovery mechanism, lack of efficiency in the work force, longtime lag
between sanctions and disbursements, unscientific repayment schedule, ones
utilization of loans by the borrowers.

KADAPA

APGB, KADAPA

Untimely communication to the borrower regarding their due date, lack
of legal mechanism, political intervention at all levels etc., have also been
contributing for mounting NPAs. If the level of NPAs is not controlled timely, they
will:

• Reduce the earning capacity of assets and badly affects Return On Assets
(ROA).
• Higher provisioning requirement on mounting NPAs adversely affects the
capital adequacy and also the profitability.
• Cost of capital will increase due to NPAs require economic value added.
• NPAs cause a decrease in the value of shares.
• NPAs affect the market competitiveness.
• NPA becomes a cause for the reduction in availability of funds for further
credits expansion due to the unproductiveness of the existing portfolio.
• NPAs affect the risk taking ability.
• On the whole, it affects the credibility of the bank and bank will be in a
difficult position in raising fresh capital.

KADAPA

APGB, KADAPA

RESEARCH METHODOLOGY

4.1 RESEARCH:
Research refers to search for knowledge. Research is an art of scientific
investigation. A careful investigation or inquiry especially through search for new
facts in any branch of knowledge. One can visualize the fact that a detailed study is
required in each practical situation for better results. Any effort which is directed to
study for better results is known as research. In other words a research is an
organized set of activities to study and develop a model or procedure/technique to
find the results of a realistic problem supported by literature and data such that its
objectives are optimized and further make recommendations interferences for
implementations.

Descriptive Vs Analytical:
Descriptive research includes surveys and fact finding enquiries of different
kinds. The major purpose of descriptive research is description of the state of affairs
as it exists at present. In analytical research, on the other hand the researcher has to
use facts or information already available, and analyze these to make a critical
evaluation of the material.

Fundamental research:
It is also called as basic or pure research. “Gathering knowledge for
knowledge” sake is termed as pure research. Fundamental research is concerned with
generalizations and with the formulation of theory.

Quantitative Vs Qualitative research:

KADAPA

APGB, KADAPA

Quantitative research is based on the measurement of quantity or amount. It
is applicable to phenomenon that can be expressed
in terms of quantity. Qualitative research is concerned with qualitative phenomenon
relating to or involving quality or kind.

Exploratory research:
Exploratory research is an initial research which analyses the data and
explores the possibility of obtaining as many relationships as possible between
Different variables without knowing their end-applications this means that a general
study will be conducted without having any specific end-objective except to
establish as many relationships as possible between variables of the study.

4.2 LITERATURE REVIEW
Keeton and Morris (1987) present one of the earliest studies to examine the
causes of loan losses. In the latter paper the authors examined the losses by 2,470
insured commercial banks in the United States (US) over the 1979-85. Using NPLs
net of charge-offs as the primary measure of loan losses Keeton and Morris (1987)
shows that local economic conditions along with the poor performance of certain
sectors explain the variation in loan losses recorded by the banks. The study also
reports that commercial banks with greater risk appetite tend to record higher losses.

Meanwhile, Rajan and Dhal (2003) utilise panel regression analysis to report
that favourable macroeconomic conditions (measured by GDP growth) and financial
factors such as maturity, cost and terms of credit, banks size, and credit orientation
impact significantly on the NPLs of commercial banks in India.

Using a pseudo panel-based model for several Sub-Saharan African
countries, Fofack (2005) finds evidence that economic growth, real exchange rate
appreciation, the real interest rate, net interest margins, and inter-bank loans are
significant determinants of NPLs in these countries. The author attributes the strong
association between the macroeconomic factors and non-performing loans to the
undiversified nature of some African economies.

KADAPA

APGB, KADAPA

More recently Huetal (2006) analyse the relationship between NPLs and
ownership structure of commercial banks in Taiwan with a panel dataset covering
the period 1996-1999. The study shows that banks with higher government
ownership recorded lower non-performing loans. Huetal (2006) also show that bank
size is negatively related to NPLs while diversification may not be a determinant.

4.3 NEED FOR THE STUDY:

India is an agriculture based country. Money is essential for the development of
agriculture sector. The requirement of long term and short term funds are supplying
by Regional rural banks. In the present Indian economical arena, the regional rural
banks are supposed to play a vital role for flourishing economic development by
providing effective credit support to various regions, sectors and sections. The
failure of the banking sector may have an adverse impact on other sectors. Non-
performing Assets are one of the major concerns for banks in India. Non- performing
assets are those assets of the bank that do not generate income. The purpose of the
study is to know how effectively banks are recollecting loans from the customers.

4.4 OBJECTIVES OF THE STUDY:

The objectives of the present study are to examine the performance of loan
portfolios and procedures of decision making in the area of management of NPAs in
Regional Rural Banks. For an-depth examination of management of NPAs, APG
Bank, Kadapa is chosen as a case study. The objectives are:

1. To point out the amount of Non-Performing Assets of APG Bank, Kadapa.

2. To find out the problems of bank due to NPAs.

3. To highlight Loans and Advances trend of APG Bank, Kadapa.

4. To offer suggestions to overcome the problems regarding NPAs

4.5 HYPOTHESES OF THE STUDY:

KADAPA

APGB, KADAPA

H01 : There is no significant difference between performing and non-performing
assets.

H02: There is no significance difference in the means of sub-standard assets, doubtful
assets and loss assets in recovery of mounting of NPAs.

H03: The priority and Non-priority sectors are independent.

4.6 SURVEY DESIGN:

The study was undertaken to analyze the non-performing assets of the ANDHRA
PRAGATHI GRAMEENA BANK, KADAPA. The analysis purely depends on the
secondary data. It was collected from the annual reports of APG Bank, Kadapa, the
facts published in the annual reports and bulletin of RBI, referred books, journals,
newspapers and magazines.

4.7 RESEARCH DESIGN:

Research Approach: Analytical in nature. The calculated ratios have been
analyzed to interpret the results of the study.

Research period: The period for evaluating MANAGEMENT OF NON-
PERFORMING ASSETS in this study is five years, i.e. from financial year 2006-07
to 2010-11.

Sources of Data: The data is collected from various sources as follows.

Primary Data: Primary data collected from the Bank’s Balance Sheets, NPA’s, and
statements and also by taking personal visit to the employees of the banks.

Secondary Data: Secondary data was collected from journals, bank’s prospectus,
bank’s annual reports and internet.

KADAPA

APGB, KADAPA

Tools and Techniques of analysis: To measure the management of non-
performing assets for some statistical tools has been used.

4.8 STATISTICAL TOOLS:

. The statistical tools used for data analysis are percentages analysis; Chi-
square test, ANOVAs test and co-efficient of correlation are used to understand the
impact of NPAs on profitability, liquidity and solvency of the selected Bank.

4.8.1 Pearson's product-moment coefficient:

The most familiar measure of dependence between two quantities is the
Pearson product-moment correlation coefficient, or "Pearson's correlation." It is
obtained by dividing the covariance of the two variables by the product of their
standard deviations. Karl Pearson developed the coefficient from a similar but
slightly different idea by Francis Galton.

The population correlation coefficient ρX,Y between two random variables X and Y
with expected values μX and μY and standard deviations σX and σY is defined as:

Where E is the expected value operator, cov means co-variance, and, corr a
widely used alternative notation for Pearson's correlation.

The Pearson correlation is defined only if both of the standard deviations are
finite and both of them are nonzero. It is a corollary of the Cauchy–Schwarz
inequality that the correlation cannot exceed 1 in absolute value. The correlation
coefficient is symmetric: corr(X,Y) = corr(Y,X).

The Pearson correlation is +1 in the case of a perfect positive (increasing)
linear relationship (correlation), −1 in the case of a perfect decreasing (negative)
linear relationship (anti correlation), and some value between −1 and 1 in all other

KADAPA

APGB, KADAPA

cases, indicating the degree of linear dependence between the variables. As it
approaches zero there is less of a relationship (closer to uncorrelated). The closer the
coefficient is to either −1 or 1, the stronger the correlation between the variables.

If the variables are independent, Pearson's correlation coefficient is 0, but the
converse is not true because the correlation coefficient detects only linear
dependencies between two variables. For example, suppose the random variable X is
symmetrically distributed about zero, and Y = X2. Then Y is completely determined
by X, so that X and Y are perfectly dependent, but their correlation is zero; they are
uncorrelated. However, in the special case when X and Y are jointly normal,
uncorrelatedness is equivalent to independence.

If we have a series of n measurements of X and Y written as xi and yi where i =
1, 2, ..., n, then the sample correlation coefficient can be used to estimate the
population Pearson correlation r between X and Y. The sample correlation coefficient
is written

Where x and y are the sample means of X and Y, and sx and sy are the sample
standard deviations of X and Y.

This can also be written as:

If x and y are measurements that contain measurement error, as commonly happens
in biological systems, the realistic limits on the correlation coefficient are not -1 to
+1 but a smaller range.

4.8.2 ANOVA

KADAPA

APGB, KADAPA

The analysis of variance has been studied from several approaches, the most
common of which use a linear model that relates the response to the treatments and
blocks. Even when the statistical model is nonlinear, it can be approximated by a
linear model for which an analysis of variance may be appropriate.

Partitioning of the sum of squares

The fundamental technique is a partitioning of the total sum of squares S into
components related to the effects used in the model. For example, we show the
model for a simplified ANOVA with one type of treatment at different levels.

So, the number of degrees of freedom f can be partitioned in a similar way
and specifies the chi-squared distribution which describes the associated sums of
squares.

See also Lack-of-fit sum of squares.

4.8.3 CHI-SQUARE TEST

Adapted by Anne F. Maben from "Statistics for the Social Sciences" by Vicki
Sharp
The chi-square (I) test is used to determine whether there is a significant difference
between the expected frequencies and the observed frequencies in one or more
categories. Do the numbers of individuals or objects that fall in each category differ
significantly from the number you would expect? Is this difference between the
expected and observed due to sampling error, or is it a real difference?

Chi-Square Test Requirements

1. Quantitative data.

KADAPA

APGB, KADAPA

2. One or more categories.
3. Independent observations.
4. Adequate sample size (at least 10).
5. Simple random sample.
6. Data in frequency form.
7. All observations must be used.

The chi-square formula used on these data is

X2 = (O - E)2 where O is the Observed Frequency in each category. E E is
the Expected Frequency in the corresponding category _ is _sum of_ df is the
"degree of freedom" (n-1) X2 is Chi Square.

DATA ANALYSIS AND INTERPRETATION

Analysis of Management of NPAs in APG Bank, Kadapa:

For the banking system, the quality of loan assets is the most essential
factor for the basic viability. Excess of overdue advances of rural banks in India are
mounting and in consequences, the Non-Performing Assets in their portfolio are on
the rise, impinging on the bank’s viability. This not only eats into the bank’s
profitability, but also hampers their ability to recycle the funds in an effective
manner. Avoidance of losses due to loan is one of the pre occupations of the
management of all banks. Complete elimination of such losses in not possible. The
bank’s management aims to keep the losses at low level. In fact, it is the level of
non-performing assets.

Which to great extent, differentiates between a good and worse bank? For
clear understanding of the effective management of NPAs in APG Bank, Kadapa,
data is presented in the heads of NPAs per cent to total assets and advances, Sector-
wise NPAs, asset-wise NPAs, etc. as shown in the table1 to table3, and table 5 to 8
in shows analysis of sector wise overdues. Hence, for all data, interpretations were
made and tables have been used to support the discussion related to findings. Finally,

KADAPA

APGB, KADAPA

conclusion and recommendations were made accordingly. The statistical tools used
for data analysis are correlation with t-test, Chi-squre test, ANOVA test and
percentage analysis are used to understand the impact of NPAs on profitability,
liquidity and solvency of the selected bank.

Table1: NPAs percentage to Total Assets of APG Bank, Kadapa ( in Lakhs)

Year Gross NPAs to Total Net NPAs to Total Assets Total Assets
Assets
% %
2006-07 4700.53 1.31 1621.20 0.45 356484.50
2007-08 7650.74 1.74 4165.02 0.94 439238.86
2008-09 6356.11 1.38 2526.78 0.54 460294.70
2009-10 5827.16 1.04 0.00 0.00 558031.39
2010-11 8252.91 1.20 1927.03 0.28 683028.18
Source: Compiled from the Annual reports of APG Bank, Kadapa.

KADAPA

APGB, KADAPA

INTERPRETATION:

Table1 shows the Gross and Net NPAs to total assets of APG Bank,
Kadapa. From the period 2006-07 to 2010-11. The ratio of gross NPAs to total assets
of APGB in the year 2006-07 is 1.31% and Net NPAs is 0.45% in the year. Gross
NPAs slightly increasing to 1.74% in 2007-08 and net NPAs slightly increasing to
0.94% in 2007-08. Then the gross NPAs gradually come down to 1.04% in 2009-10
and net NPAs totally fall down to 0.00% in 2009-10. Showing a decreasing trend
and having slight increase in the year 2010-11. On seeing this it can be concluded
that bank is Performing is better way in NPAs recovery.

Table2: NPAs percentage to Total Advances of APG Bank, Kadapa ( in
Lakhs)

Year Gross NPAs to Total Net NPAs to Total Total
Advances Advances Advances
% %
2006-07 4700.53 1.98 1621.20 0.68 237793.87
2007-08 7650.74 2.57 4165.02 1.40 297217.49
2008-09 6356.11 2.06 2526.78 0.81 308232.68
2009-10 5827.16 1.63 0.00 0.00 356355.07
2010-11 8252.91 1.92 1927.03 0.44 429101.49

KADAPA

APGB, KADAPA

INTERPRETATION:

Table2 shows the Gross and net NPAs to total Advances of APG Bank kadapa.
From the period 2006-07 to2010-11.The ratio of gross NPAs to total advances of
APGB in the year 2006-07 is 1.98% and net NPAs is 0.68%. the Gross NPAs
increasing in the year 2007-08 is 2.57% and net NPAs is increasing to 1.40%. Then
the gross NPAs gradually comes down to 1.63% in the year 2009-10 and net NPAs
totally fall down to 0.00% in the year 2009-10. Showing a decreasing trend having
slight increase in the year 2010-11. This shows norms are followed effectively by the
recovery, the bank’s net NPAs to Advances ratio has been reached below the
international standard level of two to three percent. This is evident for best
performance in reducing of mounting NPAs.

Table3: Asset classification of Performing and Non- Performing assets of NPAs
in APG Bank Kadapa ( in Lakhs)

Standard assets
Year Gross Advances
(Performing assets) Non-Performing assets

Sub-standard Doubtful assets Loss assets
assets

KADAPA

APGB, KADAPA

As% of gross advances




Total (%)
2006-07
233093.40 98.02 1222.59 0.51 2585.26 1.09 892.68 0.38 237793.87 100

2007-08
289566.75 97.42 4028.58 1.36 2676.42 0.90 945.74 0.32 297217.49 100

2008-09
301876.57 97.94 1570.94 0.51 3826.42 1.24 958.75 0.31 308232.68 100

2009-10
350527.91 98.37 1158.15 0.32 3735.54 1.04 933.47 0.27 356355.07 100

2010-11
420848.58 98.07 3861.77 0.90 3562.03 0.84 829.11 0.19 429101.49 100

KADAPA

APGB, KADAPA

KADAPA

APGB, KADAPA

INTERPRETATION:

In The Table3 Asset Classification Of Performing And Non-Performing
Assets Of APGB Kadapa From The Period 2006-07 To 2010-11. In The Table
Showing The Standard Assets Are As percentage of Gross Advances Is 98.02% In
The Year 2006-07.Then The Slightly Decreasing To 97.42% In The 2007-08. After
Standard Assets Increasing To 98.37% In The 2009-10. After Slightly decreasing to
98.07% in the year 2010-11. In the table sub-standard assets are as percentage of
gross advances is 0.5% in the year 2006-07. After slightly increasing to 1.36% in the
Year 2007-08.then the gradually decreasing to 0.90% in the year 2010-11. In the
table doubtful assets are as on percentage of gross advances is 1.09% in the 2006-07.
After doubtful assets slightly increasing to 1.24% in the year 2008-09. After
decreasing to 0.84%in the year 2010-11. In the table loss assets as on percentage of
gross advances is 0.38% in the year 2006-07. After gradually decreasing to 0.19% in
the year 2010-11.It shows that APGB is decreasing the loss assets year by year.

KADAPA

APGB, KADAPA

t- test for the significance of Correlation Coefficient between the performing
and Non- performing assets:

t table for 3 d.f at 5% level of significance= 2.35

t Cal < t table value, H01 is accepted.

The co-efficient of correlation(r) between the performing and non-
performing assets. It shows a moderate degree of positive correlation of 0.69. And
T-test is applied. H01 is accepted. Hence we conclude that there is no significant
difference between performing and Non-performing assets.

TABLE4: ANOVA TABLE

source of degree of Sum of mean F-
Table value
variation freedom squares square value
14235243.3 7117621.6
Between 2
5 7 8.6 3.88 at 5% level
Within 12 9843472.35 820289.36
Total 14 significance

To sum up, the null hypothesis that there is no significance difference in the
asset-wise recovery of mounting of NPAs of the APGB over the study period, for
which ANOVA test is employed and the results are presented in table4. The
calculated value of F is greater than the table value, the hypothesis H02 is rejected.
Hence, there is a significance difference in the means of sub-standard assets,
doubtful assets and loss assets in recovery of mounting of NPAs.

KADAPA

APGB, KADAPA

Table5: Priority and Non- priority sectors wise Over dues of APGB Kadapa (
in Lakhs)

Year Farm Non- S.H.G Indirec Priority Non-Priority Total
sector(a) Farm t sector(a+b+c+d) sector
(c)
sector(b finance
% % %
)
(d)

20298.6 2198.38 332.60 42.68 22872.3 93.3 1639.8 6.6 24512.1 100
2006
4 0 1 5 9 5

26651.1 2606.01 469.40 100.15 29826.6 92.7 2341.9 7.2 32168.6 100
2007
2 8 1 5 9 3

49831.4 3353.63 971.95 323.38 54480.4 93.3 2688.5 4.7 57168.9 100
2008
6 3 0 5 0 8

51513.6 3099.04 2482.6 196.80 57292.1 96.6 2021.2 3.4 59313.3 100
2009
5 2 2 0 0 0 2

2010 54442.3 4510.11 2789.3 0.34 61742.1 95.1 3176.6 4.9 64918.7 100
5 0 0 0 8 0 8
Chi-
squar 830.41
e
Table
value 9.49% at 5% level of significance

KADAPA

APGB, KADAPA

The total NPAs of the bank can also be classified as priority sector and non-
priority sector. The position of NPAs of these sectors is shown given table5. In
table5, the sector-wise analysis of NPAs of APGB shows that the proportion of
NPAs in priority sector is in fluctuating manner over the study period from 2006 to
2010. The proportion of NPAs in the non-priority sector is also in a fluctuating
manner over the study period from 2006 to 2010.

To sum up, the null hypothesis was set up is to measure the significant
difference among the priority sector and non-priority sector for which chi-square test
is employed, The calculated vale of Chi-Square test is 830.41, which is more than 9.
49 at 5% level of significance, the hypothesis H03 was rejected. Hence, the priority
and non priority sectors are not independent (or dependent).

Table6: Sector wise over dues of APGB Kadapa ( in Lakhs)

KADAPA

APGB, KADAPA

Farm-Sector Non-Farm sector Total
Year
% % %
2006 20298.64 90.2 2198.38 9.8 22497.02 100
2007 26651.12 91.1 2606.01 8.9 29257.13 100
2008 49831.46 93.7 3353.63 6.3 53185.09 100
2009 51513.65 94.3 3099.05 5.7 54612.70 100

2010 54442.35 92.3 4510.11 7.7 58952.46 100


Table7: Farm sector over dues of APGB Kadapa ( in Lakhs)

KADAPA

APGB, KADAPA

Minor
Crop Loans Agrl.Tractors Agrl.allied Other Agrl. Total
irrigation
Year

% % % % % %

2006 19256.45 94.86 229.37 1.13 223.83 1.11 344.05 1.69 244.94 1.21 20298.64 100

2007 23136.55 86.82 122.44 0.45 120.83 0.45 305.71 1.15 2965.59 11.13 26651.12 100

2008 43535.59 87.37 159.14 0.32 152.40 0.30 311.14 0.63 5673.19 11.38 49831.46 100

2009 43775.41 84.97 183.61 0.35 159.94 0.32 418.96 0.82 6979.73 13.54 51513.65 100

2010 45967.79 84.43 350.53 0.64 260.52 0.48 797.96 1.47 7065.55 12.98 54442.35 100

Table8: Non- Farm sector over dues of APGB Kadapa ( in Lakhs)

Rural artisian Service&PSE Retail Trade Other NFS Total NFS
Year

% % % % %

2006 467.33 21.26 152.24 6.92 1345.02 61.18 233.79 10.64 2198.38 100

2007 571.98 21.95 129.47 4.97 1566.12 60.09 338.44 12.99 2606.01 100

2008 552.27 16.47 248.98 7.42 1954.86 58.30 597.52 17.81 3353.63 100

2009 535.63 17.29 240.11 7.74 1797.91 58.01 525.40 16.96 3099.05 100

2010 578.26 12.82 231.38 5.13 2401.70 53.25 1298.77 28.80 4510.11 100

INTERPRETATION:

KADAPA

APGB, KADAPA

In the above tables in the shows sector wise over dues of APGB, Kadapa. The
farm sector over dues is 90.20% in the year 2006-07. And Non-Farm sector over
dues is 9.8%. The farm sector gradually increased to 94.3% in the year 2009-10. And
Non-Farm sector over dues are gradually decreased to5.7% in the year 2009-10.
Then the farm sector over dues is decreased to 92.3% in the year 2010-11. And Non-
Farm sector over dues are increased to 7.7% in the year 2010-11.

FINDINGS:

KADAPA

APGB, KADAPA

• From the year 2006-07 to 2010-11 the percentage of Gross NPAs to Total assets
is 1.31, 1.74, 1.38, 1.04 and 1.20 respectively and the percentage of Net NPAs to
Total assets is 0.45, 0.94, 0.54, 0.00 and 0.20 respectively. This is evident for the
better way in reduction of mounting NPAs.
• From the year 2006-07 to 2010-11 the percentage of Gross NPAs to Total
advances is 1.98, 2.57, 2.06, 1.63 and 1.92 respectively. And the percentage of
Net NPAs to Total advances is 0.68, 1.40, 0.81, 0.00 and 0.44 respectively. This
is evident for the better way in reduction of mounting NPAs.

• It is observed that there is moderate degree of positive correlation r=0.69,
between performing and non-performing assets. And t-test is applied. H01 is
accepted. Hence we conclude that there is no significant difference between
performing and non-performing assets.

• The null hypothesis was set up to know whether there is significance in the
means of non-performing assets, for which ANOVAs test is employed, the
hypothesis H02 is rejected. it is observed that there is a significant difference in
the means of non-performing assets. i.e. sub-standard assets, doubtful assets and
loss assets over the study period in recovery of mounting NPAs.

• The hypothesis was set up to measure the significant difference among the
priority sector and non-priority sector, for which chi-square test is employed, the
hypothesis H03 was rejected. It is observed that priority sector and non-priority
sector are not independent.(i.e. they are dependant).

KADAPA

APGB, KADAPA

SUGGESTIONS:

After going through the summary of findings and the results of hypotheses
testing, the following are suggestions offered to improve the effective management
of mounting NPAs of the APGB.

1. The bank may consider that the NPAs should be avoided in initial stages of credit
consideration by putting in place appropriate credit appraisal system.

2. The percentage of Doubtful Assets are more by comparing to the percentage of
Sub-standard assets, so bank need to take necessary steps to reduce the percentage
of Doubtful assets, which makes to reduce Loss assets to 0%.

3. The bank may send circulation of informant and defaulters, which will serve as a
caution list which considers request for new additional credit limits from defaulting
borrowers and also file criminal cases in regard to willful defaulters.

4. The bank may take steps to constitute more legal cells and tribunals, recovery
branches, Lok Adalts etc., for speedy recovery of NPAs.

5. The bank should adopt the technological changes by converting their banks to
computerized banks, which may lead to a prompt and easy service for their
customers.

KADAPA

APGB, KADAPA

CONCLUSION:

In the liberalized banking scenario, APGB, Kadapa is one of the leading
Regional Rural Banks, which welcomes the radical changes and makes the
organization fit for the changes without much difficulty. The performance highlights
of the bank exposed that it has achieved the tasks and targets from time to time and
has continuously retained a good position in financial strength. It is time when the
bank should go for the use of information technology and other electronic methods
for banking in this changing scenario of the banking sector, by fully computerizing
its bank branches to provide prompt service to the customers. The bank should frame
new policies and procedures, which should not go out of the regulation framed by
the RBI for regional rural banks. The management should also design a roadmap to
raise the bar of the bank equal to international standard. If it is done, it is sure that
“Andhra Pragathi Grameena bank, Kadapa” will be the number one bank among
the Regional Rual banks in India.

KADAPA

APGB, KADAPA

BIBLIOGRAPHY:

Books:

1. C.R. Kothari, “Research Methodology Methods & Techniques”, New Age
International Publishers, Hyderabad, 2re 2004.
2. Anand Sharm, “Statistics for Management”, Himalaya Publishing House,
Mumbai, 2re 2008.

3. R.M Srivastava & Divya Nigam, Management of Indian financial
Institutions, Himalaya Publishing House, Mumbai, 10e 2010.

4. Anderson, Sweeney & Williams “Quantitative methods for Business”
Thomson India Edition, Haryana, 10e 2007.

5. Parameswaran.R and Natarajan.S, “Indian Banking” Sulthan chand and sons,
New Delhi,2002.

Journals:

1. R. Suresh, “ Management of NPAs of Pandyan Grama Bank, Virudhunagar,
Tamil Nadu” Indian Journal of Finance, oct 2010, p 37-47.
2. Dr. K. Rajender & S. Suresh, “Management of NPAs in Indian Banking a
case study of State Bank of Hyderabad” The Mnagement of Account, Sept
2007, p. 740-749

Reports:

1. MASTER CIRCULAR On Income Recognition, Asset Classification,
Provisioning & Other Related Matters, RESERVE BANK OF INDIA,
June 30, 2008.
2. Shri M. Narashimhan Working Group Recommendations (1975).

KADAPA

APGB, KADAPA

3. Prudential guidelines on restructuring of advances, Prashant Saran, Chief
General Manager-in-Charge, RBI, 2008-09.

4. Annual reports of APGB, KADAPA, from 2006-07 to 2010-11.

KADAPA

N pa finance project

Recomendados

Recomendados

Mais conteúdo relacionado

Mais procurados

Mais procurados (20)

Destaque

Destaque (6)

Semelhante a N pa finance project

Semelhante a N pa finance project (20)

Último

Último (20)

N pa finance project