S.

Yasodhai
Cauvery Research Journal, Volume 3, Issue 1 & 2, Jul. 2009 Jan. 2010 42
MANAGEMENT OF NON PERFORMING ASSESTS IN
TIRUCHIRAPALLI DISTRICT CENTRAL CO-OPERATIVE BANK Ltd.


Dr.T.Unnamalai Abstract
A strong rural (cooperative banks) banking sector is
important for flourishing ecoomy. The failure of the rural
(cooperative banks) banking sector may have an adverse impact on
other sectors. The present paper focus on.
(1) To understand the meanings and nature of NPAS.
(2) To examine the reasons for building of NPAS in TDCC Bank.
(3) To examine the causes of NPAS in TDCC Bank
(4) Management of NPAS in TDCC Bank
Assistant Professor,
Dept.of. Commerce,
Bharathidasan University
College, Perambalur.

INTRODUCTION
Tiruchirapalli District Central Co-
operative Bank (TDCC) is the most
important component of rural development
of Tiruchy; Karur and Perambalur
districts, because TDCC Bank covers three
districts. TDCC Bank provides banking
facilities and services to both rural and
urban people to develop the economy of
the three districts. Hence their financial
health is a prime concern. Nowadays non-
performing assets (NPAs) are one of the
major problematic areas, which require
attention. TDCC Bank is facings the
problem of mountings of NPAs, which
will yield lower income to the bank.
TDCC Bank is in a position to provide
more reserves against NPAs. Non
performing assets means, credit facilities
in respect of which interest or instalment
of principal is in arrear for two quarters or
more.(Prudential Norms- Application to
SCB and DCCBs p2).Non performing
assets also mean an assets which ceases to
generate income for a bank.

Objective of the study
A strong rural (Cooperative Banks)
banking sector is important for flourishing
economy. The failure of the rural
(Cooperative Banks) banking sector may
have an adverse impact on other sectors.
Non-performing assets are one of the
major concerns for (Cooperative Banks)
banks in India. NPAs reflect the
performance of banks. A high level of
NPAs suggests high probability of a large
number of credit defaults that affect the
profitability of the banking sector. The
NPA growth involves the necessity of
provisions, which reduces the over all
profitability position of the banks. The
paper deals with understanding the
concept of NPAs, its magnitude and major
causes of NPAs, NPAs of Cooperative
banks in Tamilnadu, the NPAs of TDCC
Bank, % of NPAs in total loans and
advances, provisions for NPAs made by
TDCC Bank, and the profitability position
of the Bank.

1. To understand the meaning & nature
of NPAs.
2. To examine the reasons for bulging of
NPAs in TDCC Bank
3. To examine the causes of NPAs in
TDCC Bank.
4. Management of NPAs in TDCC Bank
Forfaiting as a source of Finance for Global Trade
Cauvery Research Journal, Volume 3, Issue 1 & 2, Jul. 2009 Jan. 2010 43
Methodology
Only secondary data have been
collected for this purpose of the study. The
simple percentage and average are
calculated for this study.

Meaning of NPAs
An asset is classified as Non-
performing Asset (NPA) if due in the form
of principal and interest are not paid by the
borrower for a period of 180 (3 months)
days. However with effect from March
2004, default status would be given to a
borrower if dues are not paid for 90 days.
If any advance or credit facility granted by
banks to a borrower becomes non-
performing, then the bank will have to
treat all the advances/credit facilities
granted to that borrower as non-
performing without having any regard to
the fact that there may still exist certain
advances / credit facilities having
performing status.

Assets classification and provisioning
norms
Assets are classified as
Standard Assets
Sub-standard Assets
Doubtful assets
Loss assets

Standard Assets
Standard asset is one, which does not
disclose any problem and which does not
carry more than normal risk attached to
business. Loans and advances which are
not, classified under the category of sub-
standard, doubtful, loss assets are
classified as standard assets. Provision is
required for standard assets 0.25 percent.

Sub-Standard Assets (over due up to 3
years)
Staff loan over due less than 3 years.
Short term loans whether it is
agricultural loan or non- agricultural
loan over due from 12 months to 3
years.
Instalments for medium term loan and
long term loans over due from 6
months to 3 years.
Agricultural cash credit out of order
from 6 months to 3 years.
All other cash credits out of order
from 6 months to 3 years.
Provision is required for sub-
standard assets 10 per cent.

Doubtful Assets
Secured loan
All agricultural loans, loans cash
credits sanctioned against the mortgage of
immovable properties and other loans and
cash credits covered by reasonable value
of securities are classified as secured
loans.

Category
Overdue for 3 years to 4 years.
Provision for this category is 20
percent.
Overdue for 4years to 6 years.
Provision for this category is 30
percent.
Overdue for above 6 years. Provision
for this category is required 50
percent.

Unsecured overdue
100 percent provision is required for
unsecured loans.



S. Yasodhai
Cauvery Research Journal, Volume 3, Issue 1 & 2, Jul. 2009 Jan. 2010 44
Loss Assets
Overdue more than 6 years and 100
percent provision are required for loss
assets. This can be explained with the tree
diagram.

Table 1 shows that the non
performing assets of Co-operative Bank.

Table 1
NON-PERFORMING ASSETS OF CO-OPERATIVE BANKS

Year (end-
March)
Urban co-
operative banks
(UCBs)
Rural co-operative banks
Short term structure Long term structure
StCB CCBs PACS* SCARDBs PCARDBs
1 2 3 4 5 6 7
1994-95 13.9 33.9 N.A N.A N.A N.A
95-96 13.0 34.7 N.A N.A N.A N.A
96-97 13.2 34.9 N.A N.A N.A N.A
97-98 11.7 12.5 17.8 35.3 18.6 16.5
98-99 11.7 12.6 17.8 35 19.2 16.1
99-2000 12.2 10.7 17.2 35.4 18.7 20.0
2000-01 16.1 13.0 17.9 34.9 20.5 24.3
01-02 21.9 13.4 19.9 32.5 18.5 30.2
02-03 19.0 18.2 21.2 37.9 20.9 33.8
03-04 22.7 18.7 24.0 36.8 26.7 35.8
04-05 23.0 16.3 19.9 33.6 31.3 31.9
* Percentages of overdue to demand.
StCBs State Co-operative Banks.
CCBs Central Co-operative Banks.
PACS Primary Agricultural Credit Societies.
SCARDBs State Co-operative Agriculture and Rural Development Banks.
PCARDBs Primary Co-operative Agriculture and Rural Development Banks.
Note : Prudential norms were made applicable to the UCBs since 1992-93, the StCBs and
CCBs since 1996-97 and SCARDBs and PCARDBs since 1997-98.
Source : Reserve Bank for UCBs and NABARD for Rural Co-operative Banks (excluding
PACS for which the source is NAFSCOB).

Forfaiting as a source of Finance for Global Trade
Cauvery Research Journal, Volume 3, Issue 1 & 2, Jul. 2009 Jan. 2010 45
Table 2 explains that the Non performing
assets of TDCC Bank.

Table 2
Non-Performing Assets of TDCC Bank
Rs. in Lakhs
Year
Amount of
NPAs
% of
increase
or
decrease
1999-2000 6060.20 -
2000-2001 7193.94 18.71
2001-2002 8450.50 17.47
2002-2003 9197.21 8.84
Source: SODONR TDCC bank

The above analysis shows that each
and every year the non- performing assets
of TDCC Bank have been increased.
During 1999-2000 the non-performing
assets amounted to Rs.6060.20 lakhs and it
has increased by 18.71 percent during
2000-2001. During 2001-2002 the non
performing assets of the bank was
amounted to Rs. 8450.50 lakhs and it has
increased by 8.84 percent and amounted to
Rs.9197.21 lakhs.With the above analysis,
it is observed that each and every year the
percentage of increasing rate has
decreased. Table 3 shows that the
percentage of NPAs in the total loans and
advances.











Table 3
Percentage of NPAs in the Total Loans
and Advances Rs.in lakhs
Year
Amount
of
NPAs
Total
loans
and
advances
% of
NPAs in
Total
Loans
and
Advances
1999-
2000
6060.20 30296.91 20
2000-
2001
7193.94 38507.21 18.68
2001-
2002
8450.50 41639.92 20.29
2002-
2003
9197.21 44015.87 18.20
Source: SODONR TDCC bank of TDCC
bank

The above table reveals, the
percentage of non-performing assets
during 1999-2000 in the total loans and
advances was 20 percent, it was 18.68
percent during 2000-2001, it was 20.29
percent during 2001-2002 and the
percentage was decreased to 18.20 percent
during 2002-2003. The above analysis
shows that the percentage of NPAs in the
total loans and advances during the study
period almost varies between 18 percent to
20 percent. With the help of the above
tables 2 & 3 more over the % of NPAs in
TDCC Bank is not more than that of over
all percentage of NPAs in Cooperative
sectors. . Table 4 shows that the provision
made by TDCC Bank for NPAs

S. Yasodhai
Cauvery Research Journal, Volume 3, Issue 1 & 2, Jul. 2009 Jan. 2010 46
Table 4
Provision for NPAs
Year Provision
Rs.in
lakhs
% of
increase
or
decrease
1999-2000 3528.92 -
2000-2001 4128.09 16.98
2001-2002 5234.09 26.79
2002-2003 5612.79 7.24
Source: SODONR TDCC bank of TDCC bank

During 1999-2000 the bank made a
provision of Rs. 3528.92 lakhs, and it has
increased by 16.98 percent, 26.79 percent
and 7.24 percent, 2000-2001, 2001-2002,
2002-2003 respectively. Each and every
year the bank provides a huge amount for
provision against non performing assets.
Due to monsoon failure for the past three
years, there was a poor recovery from
agricultural sector during 2001-2002.
There is nil recovery from weavers
societies, spinning mills and whole stores.
Their financial strength is poor. There is
poor recovery from government sponsored
schemes like gas loan, etc. So, there is a
need to make a huge provision against
NPAs. The bankers are in a position to
create a reserve for NPAs even though the
credit generates income.Table -5 shows
that the profitability position of TDCC
Bank.

Table 5
Profitability Position of TDCC bank
Year Profit
Rs.in
lakhs
Loss
Rs.in
lakhs
1999-2000 830.90
2000-2001 9.89
2001-2002 625.18
2002-2003 778.88
Source: Annual Reports of TDCC bank
TDCC Bank incurred loss for the
year 1999-2000amounted to Rs.830.90
lakhs. TDCC Bank has performed almost
a miracle during the financial year 2000-
2001, earning a profit of Rs.9.89 lakhs as
against a loss of Rs.830.90 lakhs during
1999-2000. From 2001-2002 and 2002-
2003 the bank sustained loss amounted to
Rs.625.18 and Rs. 778.88 lakhs
respectively. TDCC Bank sustained losses
for the past years due to nil recovery from
weavers societies, spinning mills and
wholesale stores and poor recovery from
agricultural sector, government sponsored
schemes like gas loan etc. Weavers
societies, spinning mills and wholesale
stores are not able to repay their debts
because their financial health is not good.
Due to monsoon failure for the past three
years the due from agricultural sector are
also low.

Reasons for an account becoming NPA
There are several reasons for an
account becoming NPA.
Internal factors
External factors

Internal factors
(1) Loan borrowed for a particular
purpose but not use for the said
purpose.
(2) Willful defaults

External factors
(a) Scarcity of raw material, power and
other resources for rural industries
(b) Monsoon failures

Causes for Non Performing Assets
A lot of practical problems have been
found in Indian banks, especially in
cooperative sector banks. A Cooperative
sector is important for a flourishing rural
Forfaiting as a source of Finance for Global Trade
Cauvery Research Journal, Volume 3, Issue 1 & 2, Jul. 2009 Jan. 2010 47
economy. Now the cooperative banks are
facing the challenges of an open economy
due to liberalization policy of our
government. Out of 22 DCCBs in
Tamilnadu 17 banks termed as red. This is
mainly due to agricultural sector advances.
The Tamilnadu government waivers the
loans and advances borrowed by
agricultural sector.

Management of NPA
Various steps have been taken by the
government to recover and reduce NPAs.
Some of them are.

1. One time settlement / compromise
scheme
2. Lok adalats
3. Debt Recovery Tribunals
4. Securitization and reconstruction of
financial assets and enforcement of
Security Interest Act 2002.
5. Corporate Reconstruction Companies
6. Credit information on defaulters and
role of credit information bureaus

CONCLUSION
With the above analysis, it is
observed that the TDCC Bank is faced
with bulging of NPAs resulting in lower
income higher provisioning making a dent
in their profit figures. Since NPA affects
the profitability and financial strength of
the bank. The NPAs of TDCC Bank has
been increased for the past years due to nil
recovery from weavers societies, spinning
mills and wholesale stores and poor
recovery from agricultural sector,
government sponsored schemes like gas
loan etc. Weavers societies, spinning
mills and wholesale stores are not able to
repay their debts because their financial
health is not good. Due to monsoon failure
for the past few years the due from
agricultural sector are also low.
Government should help the bank because
the financial strength of the weavers
societies, spinning mills and wholesale
stores is not good. The TDCC Bank would
have been still in a better position; if the
Government should help the bank to
reduce their Non- Performing Assets.

REFERENCE
1. Annual Reports of TDCC Bank
2. Bhabatosh Banerjee and Anish Kumar
Dan, Management of NPA in Public
Sector Banks in India, The Journal of
Banking, Volume I, No.I, Jan. - June
2004, P35.
3. Himedu, P.Mathur, Indian Banking
Challenges Ahead, Yojana Feb. 2001,
P28.
4. Prudential Norms-Applicable to SCBs
and DCCBs.