Non Performing Assets

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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
S.V PG COLLEGE: KADAPA
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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.
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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, the Parliament passed the Banking Companies (Acquisition and Transfer of Undertaking) Bill, and it received the presidential approval on 9 August 1969.
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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 and foreign banks. In terms of quality of assets and capital adequacy, Indian banks are
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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 Bank ICICI Bank IndusInd Bank ING Vysya Bank Jammu & Kashmir Bank
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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
DEPENDENCIES, AUTONOMIES OTHER TERRITORIES

MANAGEMENT OF NON-PERFORMING ASSETS 6 S.V PG COLLEGE: KADAPA
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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 than 105587 SHGs with outstanding SHG advances of 7493.46 cores as on 30.09.2010. The bank is assisting the SHGs in a massive way and financed to more 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,
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Anantapur, Kurnool, Nellore and Prakasam districts. The operating profit of the Bank for the year Half year ended 30.09.2010 touched 2. Total business crossed 3. Deposits crossed 4. Advances crossed 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 2984.56 crore, constituting total advances. Agriculture advances touched a level of 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 districtsKadapa, 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 Development Project. 12. Per branch business and Per-employee business stood at 3.65 crores respectively. 13. Opened 12 new branches during the first half of the current financial year. 19.67 crores and 792.88 crores. Provided additional financial assistance to the SHGs under the special Dairy 7493.46 crores. 106.53 crores.
3656.04 crores with a Y-O-Y growth rate of 14.12%. 3837.42 crores, with a growth rate of 17.03% over the
77.78% of total advances. The Y-O-Y growth under Priority sector advances is
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.
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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
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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.
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
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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 provided during the current fiscal. 100 lakhs and another 50 BB class safes will be
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 Cofinancing, 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
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between NABARD and APGB was signed on 30th September 2010 with a common objective of financing agri/ agroindustrial 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 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. No. Name Occupation Nominee of Director
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1. 2.
Sri K.Preetam Lal Sri A.Sreerami Reddy,
Chairman -Deputy General Manager,Sponsor Bank Syndicate Regional Bank, Office,
Ritwik Enclave,A.K. Nagar, NELLORE 524 004. C.SambashivaAsst. General Manager,Sponsor Bank Syndicate Regional 4. Sri Artatran Sethy, Bank, Office, Bank of
3.
Sri Reddy,
ANANTAPUR 515 001. Asst. General Manager,Reserve Rural Planning & CreditIndia Dept., Reserve Bank of India, 6-1-56, Secretariat Road, Saifabad,Hyderabad 500 004. Deputy General Manager,NABARD NABARD,Regional Office, 1-1-61 RTC X Roads, Musheerabad,
5.
Sri M.Prem Kumar,
6.
HYDERABAD 500020. Smt. Vasudha Mishra,Principal Secretary IAS., Government Finance Government 500 001. of
toState Government (IF)
Department, Andhra
Pradesh, HYDERABAD -
7.
Sri V.Anil Kumar, IAS., District KADAPA
Collector,State Government
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8.
Smt.K.Padmaja Prasad 37-1-307 School,
(144),
Non-official of India
Opp. to Srinivasa PublicDirector from Govt. Near Dist. Registrar Office, Bhagya Nagar, II line, ONGOLE - 523 001. 9. Sri P.Pitchi Reddy D.No.7/468-1, N.G.O. Sabhapathi KADAPA. Non-official Colony,Director from Govt. Road,of India
2.9 INTEREST RATES ON LOANS & ADVANCES WITH EFFECT FROM 22.09.2011
INTEREST RATE (% p.a.) xxx JL Agriculture 7.00 14.50
PURPOSE A. FARM SECTOR I. Short Term Loans Groups /
1.Crop/Pragathi KCC/Rythu Mitra Groups / Joint Liabilityxxx i. During Interest Subvention Period a) Upto & inclusive of 3.00 lakhs b) Above 3.00 lakhs
ii. Beyond Interest Subvention Period a) Upto & inclusive of b) Above 25.000/&upto & inclusive 11.50 of11.50+2.00% OD OD
25,000/-
50,000/interest c) Above 50000/- & upto & inclusive of 12.50+2.00% 1.00 lakh interest
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d) Above
1.00 lakh & upto & inclusive of 13.50+ 2.00% OD interest 14.50+2.00% interest xxx 2 lakhs 10.50 11.00 Xxx OD
3.00 lakhs e) Above 3.00 lakhs 2. Produce Loans a) Upto & inclusive of b) Above 2.00 lakhs
II. Agricultural Term Loans 1. Agriculture Term Loans & Allied Activities a) Upto & inclusive of b) Above 2. APMIP 3. Pragathi Capital Investment Scheme for Organic Farming 4. Pragathi Agri Business & Clinic Centres 5. Pragathi Land Purchase Scheme 6.Rescheduled Loans 50000/50000/-
13.00 13.50 13.00 13.00 14.00 As applicable to to Agl. term loans As applicable
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 ii) ODC/ODj/ODH 10.50 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.) 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 advances)
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B) Above C) Above D) Above
50000/- & Upto & inclusive of 1 lakh & Upto & inclusive of 2.00 lakhs
1.00 lakh 2.00 lakhs
13.50 14.00 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 A) Upto & inclusive of B) Above 4.00 lakhs 4.00 lakhs xxx 13.00 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 B) Above 5 years & upto 10 years C) Above 10 years Employed persons/Business people, Salaried persons A) Upto 3.00 lakhs B) Above 3.00 lakhs 10.50 11.00 11.50
4. Vehicle Loans (2/3/4 wheelers) to Professional & Selfxxx 14.00 15.00 11.00
5) Pragathi Doctors Plus 6) Pragathi Solar Home Lighting/Heating System

Normal Scheme Under JNNSM
11.00 5.00 13.00 As applicable to purpose of loan &
7) Pragathi Swarojgar Credit Card Scheme 8) SGSY/ Rajiv Yuvasakthi/Other Govt sponsered schemes
9) Loans under DRI E. NON PRIORITY SECTOR LOANS policies
quantum 4.00 xxx
1) Loans/OD against approved securities like NSCs, LIC14.00
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2) Personal Banking Loans to employees a)Employees drawing their salaries through our Bank b) Employees drawing their salaries through other Banks 3) Branch Premises loans 4) Jewel Loans (non agrl) 5) BGs paid (incl. OD interest) 6) Commercial complexes/School or College buildings, etc. 7) Multi Purpose Mortgage Loans 8) Pragathi Rent Plus
xxx 15.00 18.00 14.00 14.00 18.00 18.00 16.00 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 @ b) From 11th day (quarterly compounded) @ 9) Debit Balances in SB/Current A/cs 10) Loans on Deposits / ODDs
16.00 18.00 18.00 Xxx
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a) Against Nitya Nidhi Deposit b) Against other term deposits
11.00 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 ii) Aggregate Credit Limits not exceeding case of Non Priority Sector advances and of Priority Sector advances Nil 5000/- in theNil
25000/- in the case
iii) Aggregate Credit Limits exceeding Non Priority Sector advances and Priority Sector advances
5000/- in the case of2.00
25000/- in the case of
B. Penal interest over the applicable normal rate i) For non-submission/delayed submission of monthly stock1.00 statements to be charged for delayed period
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ii) For diversion of funds iii) For non-submission of renewal proposal/ additional information/requirements on the renewal proposal for the delayed period
2.00
a) up to 3 months from the date of expiry of credit limit till the2.00 date of receipt of renewal proposal
b) beyond 3 months from the date of expiry of credit limit till2.00 the date of receipt of renewal proposal
c) beyond 30 days from the date of calling for additional2.00 information/requirements on the renewal proposal
C. Loans pre-closed by taking over by other banks/2.0% institutions on account of any of the above reasons should not exceed balance D. The total Overdue interest / penal interest to be charged2.00
of
loan
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MANAGEMENT OF NONPERFORMING 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.
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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 NonPerforming 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 substandard would attract additional provision of 10%, i.e. a total of 20% on the outstanding balance.
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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 >1<=3 years >3years 20% 30% 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 pensions 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.
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3.4 RBIS GUIDELINE FOR NPAS RECOGNITION:

Loans& Advances Guideline applicable Guideline applicable
from 31.03.2001 Term loan interest and/or installment remain over due for more than 180 days
from 31.03.2004
90 days
Overdraft/credit A/C. Bill purchased and
Remains out of order
Remains out of order
discounted remains over due for more than
180 days
90 days
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 Other accounts any amount to be received remains over due for more than 180 days 90 days years. years
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 banks 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
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APGB, KADAPA
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 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 riskweighted 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 18 th 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.
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APGB, KADAPA
3.6 REASONS FOR ASSETS BECOMING NPAS:

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
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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:
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APGB, KADAPA
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.
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
27
APGB, KADAPA
sanctions and disbursements, unscientific repayment schedule, ones utilization of loans by the borrowers. 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.
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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:

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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.
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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:
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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:
to 2010-11.
The period for evaluating MANAGEMENT OF NON-
PERFORMING ASSETS in this study is five years, i.e. from financial year 2006-07
Sources of Data: The data is collected from various sources as follows.

Primary Data: Primary data collected from the Banks Balance Sheets, NPAs, and statements and also by taking personal visit to the employees of the banks. Secondary Data: Secondary data was collected from journals, banks prospectus, banks annual reports and internet.
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Tools and Techniques of analysis: To measure the management of nonperforming 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 X,Y between two random variables X and Y with expected values X and Y and standard deviations X and Y 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 CauchySchwarz 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 cases,
33
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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
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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. 2. One or more categories.
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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 banks viability. This not only eats into the banks 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 banks management aims to keep the losses at low level. In fact, it is the level of nonperforming 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, conclusion and recommendations were made accordingly. The statistical tools used
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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 ( Year Gross Assets 2006-07 2007-08 2008-09 2009-10 2010-11 4700.53 7650.74 6356.11 5827.16 8252.91 % 1.31 1.74 1.38 1.04 1.20 1621.20 4165.02 2526.78 0.00 1927.03 % 0.45 0.94 0.54 0.00 0.28 NPAs to Total Net NPAs to Total Assets
in Lakhs) Total Assets
356484.50 439238.86 460294.70 558031.39 683028.18
Source: Compiled from the Annual reports of APG Bank, Kadapa.
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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 ( Year Gross NPAs to Total Net Advances % 2006-07 2007-08 2008-09 2009-10 2010-11 4700.53 7650.74 6356.11 5827.16 8252.91 1.98 2.57 2.06 1.63 1.92 1621.20 4165.02 2526.78 0.00 1927.03 NPAs to % 0.68 1.40 0.81 0.00 0.44 Total
in Lakhs) Total
Advances
Advances 237793.87 297217.49 308232.68 356355.07 429101.49
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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 banks 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 (
Standard assets Year (Performing assets) Non-Performing assets Sub-standard assets Doubtful assets Loss assets Gross Advances
in Lakhs)
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As% of gross advances
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
40
Total (%)
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41
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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 201011.It shows that APGB is decreasing the loss assets year by year.
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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 variation Between Within Total degree of freedom 2 12
14
Sum of squares 14235243.3 5 9843472.35
mean square 7117621.6 7 820289.36
Fvalue 8.6
Table value
3.88 at 5% level 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.
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Table5: Priority and Non- priority sectors wise Over dues of APGB Kadapa ( in Lakhs)
Year
Farm sector(a)
NonFarm sector(b )
S.H.G (c)
Indirec t finance (d)
Priority sector(a+b+c+d) %
Non-Priority sector %
Total
2006
20298.6 4
2198.38
332.60
42.68
22872.3 0
93.3 1 92.7 1 93.3 0 96.6 0 95.1 0
1639.8 5 2341.9 5 2688.5 5 2021.2 0 3176.6 8
6.6 9 7.2 9 4.7 0 3.4 0 4.9 0
24512.1 5 32168.6 3 57168.9 8 59313.3 2 64918.7 8
100
2007
26651.1 2
2606.01
469.40
100.15
29826.6 8
100
2008
49831.4 6
3353.63
971.95
323.38
54480.4 3
100
2009 2010 Chisquar e Table value
51513.6 5 54442.3 5
3099.04
2482.6 2
196.80
57292.1 2
100
4510.11
2789.3 0
0.34
61742.1 0
100
830.41
9.49% at 5% level of significance
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The total NPAs of the bank can also be classified as priority sector and nonpriority 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)
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Year 2006 2007 2008 2009 2010
Farm-Sector % 20298.64 26651.12 49831.46 51513.65 54442.35 90.2 91.1 93.7 94.3 92.3
Non-Farm sector % 2198.38 2606.01 3353.63 3099.05 4510.11 9.8 8.9 6.3 5.7 7.7
Total % 22497.02 29257.13 53185.09 54612.70 58952.46 100 100 100 100 100
Table7: Farm sector over dues of APGB Kadapa (
in Lakhs)
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Crop Loans Year %
Minor irrigation %
Agrl.Tractors
Agrl.allied
Other Agrl.
Total
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 2009 2010
43535.59 43775.41 45967.79
87.37 84.97 84.43
159.14 183.61 350.53
0.32 0.35 0.64
152.40 159.94 260.52
0.30 0.32 0.48
311.14 418.96 797.96
0.63 0.82 1.47
5673.19 6979.73 7065.55
11.38 13.54 12.98
49831.46 51513.65 54442.35
100 100 100
Table8: Non- Farm sector over dues of APGB Kadapa (
in Lakhs)
Rural artisian Year % 467.33 21.26
Service&PSE % 152.24 6.92
Retail Trade % 1345.02 61.18
Other NFS % 233.79 10.64
Total NFS % 2198.38 100
2006
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 2010
535.63
17.29
240.11
7.74
1797.91
58.01
525.40
16.96
3099.05
100
578.26
12.82
231.38
5.13
2401.70
53.25
1298.77
28.80
4510.11
100
INTERPRETATION:
47
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 NonFarm 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:
48
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).
SUGGESTIONS:
49
APGB, KADAPA
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.
50
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.
51
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. 2. R. Suresh, Management of NPAs of Pandyan Grama Bank, Virudhunagar, Tamil Nadu Indian Journal of Finance, oct 2010, p 37-47. 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). 3. Prudential guidelines on restructuring of advances, Prashant Saran, Chief
General Manager-in-Charge, RBI, 2008-09.
52
APGB, KADAPA
4. Annual reports of APGB, KADAPA, from 2006-07 to 2010-11.
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APGB, KADAPA

ABOUT BANKING INDUSTRY

1.2 THE ORIGIN AND USE OF BANKS:

MANAGEMENT OF NON-PERFORMING ASSETS

S.V PG COLLEGE: KADAPA

MANAGEMENT OF NON-PERFORMING ASSETS

S.V PG COLLEGE: KADAPA

1.4 NATIONALIZATION OF BANKS:

MANAGEMENT OF NON-PERFORMING ASSETS

S.V PG COLLEGE: KADAPA

1.5 LIBERALIZATION OF BANKING IN INDIA:

MANAGEMENT OF NON-PERFORMING ASSETS

S.V PG COLLEGE: KADAPA

1.6 LIST OF BANKS IN INDIA:

CENTRAL BANK (RESERVE BANK OF INDIA) NABARD

STATE BANK GROUP

MANAGEMENT OF NON-PERFORMING ASSETS

S.V PG COLLEGE: KADAPA

REGIONAL RURAL BANKS

STATES WITH LIMITED RECOGNITION

DEPENDENCIES, AUTONOMIES OTHER TERRITORIES

2.2 BUSINESS HIGHLIGHTS OF APGB AS ON 30.09.2010

MANAGEMENT OF NON-PERFORMING ASSETS

S.V PG COLLEGE: KADAPA

2.3 FUTURE PLANS OF APGB:

MANAGEMENT OF NON-PERFORMING ASSETS

S.V PG COLLEGE: KADAPA

2.4 SOCIAL RESPONSIBILITIES OF APGB:

Establishment of Farmers Clubs: The Bank has established 321

Establishment of Training Institutes: The Sponsor Bank i.e.

MANAGEMENT OF NON-PERFORMING ASSETS

S.V PG COLLEGE: KADAPA

Conducting of extension activities: The Bank is conducting

Improving the water resources: As a part of Social Responsibility,

Contribution to Renewable Energy: The Bank has entered MoU

MANAGEMENT OF NON-PERFORMING ASSETS

S.V PG COLLEGE: KADAPA

4. Co-financing: NABARD, Andhra Pradesh Regional Office has entered into

MANAGEMENT OF NON-PERFORMING ASSETS

S.V PG COLLEGE: KADAPA

2.6 APGB VISION:

2.7 OUR MISSION:

2.8 BOARD OF DIRECTORS Sl. No. Name Occupation Nominee of Director

MANAGEMENT OF NON-PERFORMING ASSETS

S.V PG COLLEGE: KADAPA

Sri K.Preetam Lal Sri A.Sreerami Reddy,

Chairman -Deputy General Manager,Sponsor Bank Syndicate Regional Bank, Office,

Sri M.Prem Kumar,

toState Government (IF)

Sri V.Anil Kumar, IAS., District KADAPA

MANAGEMENT OF NON-PERFORMING ASSETS

S.V PG COLLEGE: KADAPA

Smt.K.Padmaja Prasad 37-1-307 School,

PURPOSE A. FARM SECTOR I. Short Term Loans Groups /

MANAGEMENT OF NON-PERFORMING ASSETS

S.V PG COLLEGE: KADAPA

MANAGEMENT OF NON-PERFORMING ASSETS

S.V PG COLLEGE: KADAPA

B) Above C) Above D) Above

1.00 lakh 2.00 lakhs

13.50 14.00 15.00

5) Pragathi Doctors Plus 6) Pragathi Solar Home Lighting/Heating System

Normal Scheme Under JNNSM

11.00 5.00 13.00 As applicable to purpose of loan &