CHAPTER -1 INTRODUCTION

1. INTRODUCTION:1.1 INTRODUCTION TO ORIENTAL BANKOF COMMERCE (OBC):Oriental Bank of Commerce was established in Lahore on 19th February, 1943 and made a modest beginning under its Founding Father, Late Rai Bahadur Lala Sohan Lal, First chairman of the Bank. In 1945, Oriental Bank of Commerce was acquired by the Thapar Group a leading business group of the country. The Bank had to face the holocaust of partition and branches in the newly formed Pakistan had to be closed down. Late Lala Karam Thapar, the then Chairman of the Bank, in a unique gesture honoured the commitments made to the depositors from the Pakistan and paid every rupee to its departing customers. The foundation of customer service thus laid has ever since remained Oriental Banks prime philosophy and has been nurtured well as a legacy by all its successors, year after year. After the partition of the country, its Registered Office was shifted, first to Amritsar and subsequently to Delhi in 1951. The Bank was nationalized on April15, 1980 when it had a network of 307 branches with total business of around Rs 435 crore comprising deposits and advances of Rs 282.61 crore and Rs 152.69 crore, respectively. As at end-December 2006, total business has crossed Rs 1,00,000 crore with a network of 1233 branches. The Bank has not only made phenomenal progress in terms of its reach and business levels, but also created a niche in domestic as well as on international scene. Since its nationalization, the Bank has an impeccable track record of declaring profit. The core strength of the Bank, however, lies in its human-ware; Banks punch line where every individual is committed says it all.

1.1.1 OPERATIONS & FINANCIAL PERFORMANCE:Total business of the bank stood at Rs 1,02,195 crore (growth of 24%) as on 31.12.2006, with a CD Ration of 68.9% .Total deposits were of the order of Rs 60,706 crore (growth of 23%) and advances amounted to Rs 41,490 crore(growth of 25%). For the period ended December 31, 2006, total income of the Bank increased to Rs. 4,191 crore , a growth of 21.9% . Net Profit stood at Rs 710 crore (growth of 32.4%) and ranked fifth among the comity of nationalized banks. CRAR of the bank stood at a comfortable level of 13.08%. Banks productivity per employee at Rs 6.95 crore, business per branch at Rs 82.88 crore, and profit per employee at Rs 4.83 lakh are one of the highest among Public Sector Banks.

1.1.2 TECHNOLOGY:Oriental Bank of Commerce offers an array of delivery channels like CBS, ATM, Telebanking, Anywhere Branch Banking, Internet banking (through select branches) etc. Customers of the bank have the access to over 600 ATMs of the bank and over 8000 ATMs of member banks under sharing basis which operate in a networked arrangement. As at end-December 2006, more than 93% of banks total business is being routed through its 1017 CBS branches. All these branches are enabled for various value added services like RTGS, CMS, anywhere Branch Banking etc.

1.1.3 PRIORTY SECTOR LENDING:In its endeavor to work for upliftment of rural & weaker sections, the Bank has designed various credit schemes whereby a sizeable amount has been disbursed to Agriculture sector , Agro and Food Processing industry etc. On the auspicious day of Baisakhi, the 13th of April 1997, Oriental Bank of Commerce launched a unique scheme christened the Comprehensive Village Development Programme in three villages of Punjab and two villages of Haryana. The pilot launch was a great success and the Scheme was extended to more villages. Further, the Bank has successfully pioneered and implemented Micro Credit

project christened Oriental Grameen Project, in the states of Uttaranchal, Uttar Pradesh , Rajasthan, Haryana and Jharkhand. For the nine months ending December 2006 , advances under priority sector increased by 22.1% to reach a level of Rs 15,044 crore. Out of this, Credit to SSI and SME segments were of the order of Rs 3,233 crore and Rs 4,838 crore, respectively.

1.1.4 BANCASSURANCE & MUTUAL FUNDS:With a view to diversifying business, the bank has tied-up with Life Insurance Corporation of India and Oriental Insurance Company for distribution of life and non-life products, respectively. Besides, the bank has entered into an agreement with Franklin Templeton Mutual Fund for distribution of Mutual Fund products, as well.

1.1.5 ACCOLADES/ RECOGNITION:The Bank has been awarded the Amity Corporate Excellence Award for the year 2006 by Amity International Business School. During 2005-06 , the Bank was: a. Included in the list of successful 300 mid-sized publicly traded companies of S&P Global Challengers. b. Ranked 12th as per total income in Banking sector in Dun & Bradstreets Indias top 500 companies and c. Ranked 6th amongst Indian Banks from top 200 Asian Banks by the banker. During 2003-04, OBC was the first bank to declare zero net NPA and was ranked amongst Best Under a Billion, 200 Best Small Companies for 2003 by Forbes Global and also rates as Best Bank by Business India Group for the year 2003. In the year 2004, it entered the list / ranking under the Forbes 2000 Worlds Biggest Companies. Further, NIBM, Pune had adjudged OBC as Customer Friendly Bank.

1.2 PRODUCTS & SERVICES OFFERED BY OBC:The banking services and products offered by OBC are unmatched as it enjoys the faith of its customers. These banking solutions include:

1.2.1 DEPOSIT: Fixed Deposits Flexi Deposits Savings Accounts Current Accounts Term Deposits Tax Saving Deposit Variable progressive Deposits Progressive Deposits

1.2.2 LOANS: Housing Loan Car/Auto Loan Commercial Vehicle Loan Educational Loan Personal Loan Loans to Professional like Doctors, Teachers etc. Finance for traders Loans for women Agricultural loan Loan against Govt. securities Loan against property

1.2.3 \NRI SERVICES: NRI savings accounts Foreign remittances with Western Union Money Transfer Forex Speed Credit Services

1.2.4 OTHER SERVICES: Demat account Credit cards Foreign exchange Internet banking RTGS(Real Time Gross Settlement) NEFT(National Electronic Funds Transfer) Online Tax and Bill payment Bancassurance Special finance schemes for Small-Scale Industries(SSIs) Credit for small and medium enterprises(SME) Merchant banking

1.3 BANKS VISION & MISSION:1.3.1 VISION:To be a sound all India, customer centric, efficient retail bank with contemporary size, technology and human capital; endeavouring to enrich lives across all sections of society; and committed to upholding the highest standards of corporate governance.

1.3.2 MISSION: To provide the finest banking services by upgrading human capital and infusing

advanced technology, thereby achieving total customer satisfaction; and being reckoned as the Best Bank in the industry an all efficiency parameters. To enhance shareholders wealth by ensuring sound growth of business and make

valuable contributions to national economic growth.

CHAPTER-II LITERATURE REVIEW

2. LITERATURE REVIEW:2.1. NON-PERFORMING ASSETS(NPA):-

An asset, including a leased asset, becomes non-performing asset when it ceases to generate income for the bank. A non-performing asset is a loan or an advance where; 1. Interest and/or installment of principal remain overdue for a period of more than 90 days in respect of term loan. 2. The account remains out of order as indicated at paragraph 1.2 below, in respect of an overdue/ cash credit (OD/CC). 3. The bill remains overdue for a period of more than 90 days in the case of bills purchased and discounted. 4. The installment of principal or interest thereon remains overdue for two crop season for short duration crops. 5. The installment of principal or interest thereon remains overdue for one crop season for long duration crops.

2.1.1 Out of Order:-

An account should be treated as out of order if the outstanding balance remains continuously in excess of the sanctioned limit/drawing power. In cases where the outstanding balance in the principal account is less then the sanctioned limit/drawing power, but there are no credits continuously for 90 days as on the date of balance sheet or credits are no enough to cover the interest debited during the same period, these accounts should be treated as out of order.

2.1.2 Overdue:Any amount due to the bank under any credit facility is overdue if it is not paid on the due date fixed by the bank.

A/C Term loan

CRITERIA
Interest and/ or installment of principal remain overdue for a period of more than 90 days. The bill remains overdue for a period of more than 90 days. And any amount to be received remains overdue for a period of more than 90 days. The account remains out of order for a period of more than 90 days.(out of order means an account where the balance is more than sanctioned limit or drawing power. OR where as on the date of balance sheet, there is not credit in the account of 90 days or credit is less than interest debited or where stock report has not been received for three months or more. A loan granted for short duration crops will be treated as an NPA if the installment of the principal or interest thereon remains unpaid for two crop season beyond the due date. For a loan for long duration crops the above period would be one crop season beyond the due date. Table no.- 2.1

Bills Other loans Cash Credit/ overdraft

Agricultural a/cs

2.2 ASSET CLASSIFICATION:-

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CATEGORIES OF NPAs
Banks are required to classify non-performing assets further into the following three categories based on the period for which the asset has remained non-performing and the reliability of dues: 1. 2. 3. Sub-standard assets Doubtful assets Loss assets

2.2.1 Sub-standard assets:-

With effect from 31st march 2005, a sub-standard asset would be one, which has remained NPA for a period less than or equal to 12 months. In such cases, the current net worth of the borrower/guarantor or the current market value of the security charged is not enough to ensure recovery of the dues to the banks in full. In other words, such an asset will have well defined credit weaknesses that jeopardize the liquidation of the debt and are characterized by the distinct possibility that the bank will sustain some loss, if deficiencies are not corrected.

2.2.2 Doubtful assets:-

With effect from 31st march 2005, an asset would be classified as doubtful if it has remained in the sub-standard category for a period of 12 months. A loan classified as doubtful has all the weaknesses inherent in assets that were classified as sub-standard, with the added characteristic that the weaknesses make collection or liquidation in full, - on the basis of currently known facts, conditions and values- highly questionable and improbable.

2.2.3 Loss assets:-

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A loss asset is one where loss has been identified by the bank or internal or external auditors or the RBI inspection but the amount has not been written off wholly. In other words, such an asset is considered uncollectible and of such little value that its continuance as a bankable asset is not warranted although there may be some salvage or recovery value.

CLASSIFICATION
Standard-Regular Standard Irregular (called Special Mention Account) (wef March 31,2004) Sub-Standard (wef March 31,2005) Doubtful upto one year Doubtful above one year but upto 3 years Doubtful above three years Loss

PERIOD
Any period 90 days

12 months 12 months 24 months Uncertain Uncertain

Table no.- 2.2 PERIOD OF NPA A/Cs

2.3 IMPLICATIONS OF NPA ACCOUNTS:-

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1. Banks cannot credit income to their profit and loss account to the debit of loan account unless Recovery thereof takes place. 2. Interest or other charges already debited but recovered have to be provided for and provision on the amount of gross NPAs also to be made. 3. All loan accounts of the borrower would be treated as NPA, if one account is NPA.

GROSS NPAs
Gross NPAs is the amount outstanding in the borrowal account, in books of the bank other than the interest which has been recorded and not debited to borrowal account.

NET NPAs
Net NPAs is the amount of Gross NPA less: 1. Interest debited to borrowal and not recovered and not recognized as income and kept in interest suspense. 2. Amount of provision held in respect of NPAs and 3. Amount of claim received and not appropriated.

2.4 - WILLFUL LOAN DEFAULTERS:-

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RBI implemented the recommendations of Working Group on Willful Defaulters which are as under:

2.4.1 What is a Willful Default?

A willful default would be deemed to have occurred if any of the following events is noted:1. The unit has defaulted in meeting its payment/ repayment obligations to the lender and has not utilized the finance from the lender for the specific purpose for which the finance was availed of but has diverted the funds for other purposes. 2. The unit has defaulted in meeting its payment/ repayment obligations to the lender even when it has the capacity to honour the said obligations. 3. The unit has defaulted in meeting its payment/repayment obligations to the lender and has siphoned off the funds so that the funds have not been utilized for the specific purpose for which finance was availed of, nor are the funds available with the unit in the form of other assets.

2.4.2 Cut-off Limits:Any willful defaulter with an outstanding balance of Rs.25 Lac or more would attract the penal measures stipulated. This limit of Rs.25 Lac may also be applied for the purpose of taking cognizance of the instance of siphoning/ diversion of funds.

2.4.3 Penal Measures:-

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1. In order to prevent the access to the capital markets by the willful defaulters, a copy of the list of willful defaulters would henceforth be forwarded by RBI to SEBI as well. 2. No additional facilities should be granted by any bank / FI to the listed willful defaulters. In addition, the entrepreneurs/ promoters of companies for floating new ventures for a period of 5 years from the date the name of the willful defaulter is published in the list of willful defaulters by the RBI. 3. The legal process, wherever warranted, against the borrowers/ guarantors and foreclosure of recovery of dues should be initiated expeditiously. The lenders may initiate criminal proceedings against willful defaulters.

2.4.4 Reporting to CIBIL:Consequent to the change in the definition of willful defaulters the banks and the notified FIs have been advised to compile the list of willful defaulters, to be submitted to Credit Information Bureau India Ltd.

2.4.5 Grievance Redressal Mechanism:With a view to imparting more objectivity in identifying cases of willful default, decisions to classify the borrower as willful defaulter, in future may be entrusted to a Committee of higher functionaries headed by the Executive Director and consisting of two GMs/ DGMs as decided by the concerned bank/ FI (instead of committee of GMs/ DGMs previously).

2.5 - CLASSIFICATION PROCEDURE:-

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The classification of the defaulter as willful and the mechanism for redressal of the grievance of the borrower concerned are to be carried out thoroughly through two distinct processes, viz. 1. The first stage would be the identification of default as willful based on the prescribed norms through a Committee approach. 2. The borrower should thereafter be suitably advised about the proposal to classify him as willful defaulter along with the reasons therefore. The concerned borrower should be provided reasonable time for making representation against such decision, if he so desires, to the Committee headed by the Chairman and Managing Director. A final declaration as willful defaulter should be made after a view is taken by the Committee on the representation.

2.6 - PROVISIONING NORMS FOR LOAN ASSETS:-

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2.6.1 NPAs under Sub-Standard category:The reserve bank of India has decided that w.e.f march 31, 2005, a general provision of percent on total outstanding should be made without making any allowance for ECGC 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. Unsecured exposure is defined as an exposure where the realizable value of the security, as assessed by the bank /approved valuers /Reserve banks inspecting officers, is not more than 10%, ab-initio, of the outstanding exposure.

2.6.2 NPAs under Doubtful category:In respect of all advances classified as doubtful for more than 3 years on or after 1st April 2004, the provisioning requirement would be 100%. Accordingly the provisioning norm for advances identified as doubtful for more than 3 years would be as indicated below as on march 31,2007 & onwards: I. Unsecured portion The portion of the advance which is not covered by the reliasable value of tangible security to which the bank has a valid recourse and the reliasable value is estimated on a realistic basis, provision would be to the extent of 100% as hitherto.

II. Secured portion

Upto 1 year 1 to 3 years More than 3 years 20% 30% (D1 category) (D2 category)

100% (D3 category)

2.6.3 NPAs under Loss category:Provisioning at 100% for loss category would continue as hitherto.

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CLASSIFICATION
Standard (on global portfolio) (not applicable for agriculture & SME a/cs) Sub-standard Secured Sub-standard Unsecured Doubtful upto 12 months Doubtful - more than 12 months but upto 3 years Doubtful more than 3 years Accounts becoming > 3 years doubtful after 31.03.04

PROVISION
0.40%

10% 20% 20% 30%

100%

Accounts already > 3 years doubtful as on 31.03.04 March 31, 2004 March 31, 2005 March 31, 2006 March 31, 2007 For unsecured portion of doubtful accounts 50% 60% 75% 100% 100%

Loss account

100%

Table no.- 2.3 SUMMARY OF PROVISIONS %AGES FOR LOAN ACCOUNTS ON THE AMOUNT OF GROSS BALANCE 2.7 - GUIDELINES FOR THE RECOVERY OF DUES RELATING TO NPA OF PUBLIC SECTOR BANKS:-

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1. A review of compromise settlements of NPAs through Settlement Advisory Committee (SACs) made by us has revealed that the progress of recovery of NPAs through this mechanism has not been encouraging. The recovery position in respect of categories of borrowers other than small sector has also not been satisfactory. Banks have represented to us that on account of the relative inflexibility of the parameters given in the aforesaid guidelines, much progress could not be made in the recovery of NPAs. While banks should take effective measures to strengthen the credit appraisal and post-credit monitoring to arrest the incidence of fresh NPAs, a more realistic approach is needed to reduce the stock of existing and chronic NPAs in all categories. It has therefore, been decided to modify the guidelines, which will provide a simplified, non-discretionary and non-discriminatory mechanism for recovery of the stock of NPAs. All public sector banks should uniformly implement these guidelines, so that maximum realisation of dues is achieved from the stock of NPAs within the stipulated time. 2. The revised guidelines will cover NPAs relating to all sectors including the small sector. The guidelines will not, however, cover cases of wilful default, fraud and malfeasance. The banks should identify cases of wilful default, fraud and malfeasance and initiate prompt action against them. Accordingly, in modification of guidelines set out in our Circular of 27th May, 2008, revised guidelines for recovery of dues relating to NPAs of public sector banks in all sectors are given below :

2.7.1 Guidelines for the recovery of NPAs upto Rs.5.00 Crore:I. Coverage
a. The revised guidelines will cover all NPAs in all sectors irrespective of the nature of business, which have become doubtful or loss as on 31st March, 2008 with outstanding balance of Rs. 5.00 crore and below on the cut off date. b. The guidelines will also cover NPAs classified as sub- standard as on 31st March, 2008, which have subsequently become doubtful or loss category. c. These guidelines will also cover cases pending before Courts / DRTs / BIFR, subject to consent decree being obtained from the Courts/ DRTs/BIFR. d. Cases of wilful default, fraud and malfeasance will not be covered.

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II. Settlement Formula A Amount and off date a. NPAs classified as Doubtful or Loss as on 31st March, 2008

The minimum amount that should be recovered under the revised guidelines in respect of compromise settlement of NPAs classified as doubtful or loss as on 31st March, 2008 would be 100% of the outstanding balance in the account as on the date of transfer to the protested bills account or the amount outstanding as on the date on which the account was categorised as doubtful NPAs, whichever happened earlier, as the case may be.

b.

NPAs classified as Sub-Standard as on 31st March 2008, which become doubtful or loss subsequently

The minimum amount that should be recovered in respect of NPAs classified as Substandard as on 31st March, 2008 which became doubtful or loss subsequently would be 100% of the outstanding balance in the account as on the date of transfer to the protested bills account or the amount as on the date on which the account was categorized as doubtful NPAs, whichever happened earlier, as the case may be, plus interest at existing Prime Lending Rate from 1st April, 2008 till the date of final payment.

III. Payment
The amount of settlement arrived at in both the above cases, should preferably be paid in one lump sum. In cases where the borrowers are unable to pay the entire amount in one lump sum, at least 25% of the amount of settlement should be paid upfront and the balance amount of 75% should be recovered in instalments within a period of one year together with interest at the existing Prime Lending Rate from the date of settlement upto the date of final payment.

IV. Sanctioning Authority

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The decision on the compromise settlement and consequent sanction of waiver or remission or write-off should be taken by the competent authority under the delegated powers.

V. Non-Discretionary Treatment
The banks should follow the above guidelines for compromise settlement of all NPAs covered under the revised scheme, without discrimination and a monthly report on the progress and details of settlements should be submitted by the concerned authority to the next higher authority and their Central Office. Banks should give notice by 31st August, 2000 to the eligible defaulting borrowers to avail of the opportunity for one time settlement of their outstanding dues in terms of these guidelines. Adequate publicity through various means to these guidelines must be ensured.

VI. Reporting to the Board

The banks should submit a report on the progress in the recovery of NPAs under the revised guidelines every quarter to the Board of Directors. A copy of the quarterly progress report should also be sent to us.

2.7.2 Guidelines for recovery of NPAs over Rs.5.00 Crore I. CMDs should personally supervise the NPAs of Rs.5.00 Crore and above on case to
case basis. A list of such NPAs should be prepared and all cases reviewed by CMD personally and the course of action decided in terms of rehabilitation / restructuring, one time settlement or filing of suits, by 31st August, 2008. The matter should be placed before the Board of Directors, finalising the course of action by 30th September, 2008 in each such case.

II. The Board of Directors may evolve policy guidelines regarding one time settlement of
NPAs over Rs.5.00 crore covering the computation formula, realisable amount, cut off date and payment conditions with reference to factors of security and disposability, etc. as part of its loan recovery policy including setting up of Settlement Advisory

21

Committee, staff accountability and other relevant aspects and decide individual cases in accordance with such policy. A copy of such policy should also be sent to us.

III. Wherever a suit is required to be filed against the defaulters, who have not come up for
one time settlement, or where restructuring is not feasible, suits must be filed in all such cases by 31st October, 2000. Banks should follow up suit filed cases vigorously and effectively in the Courts to enable DRTs to decide the cases within 6 months as laid down in the DRT Act and realisation of dues completed at the earliest. A quarterly report in regard to outstanding of above Rs.5.00 crore should also be sent to us.

2.7.3- CLASSIFICATION OF NPAs WHERE THERE IS A THREAT TO RECOVERY:The RBI guidelines are clear that in respect of a NPA accounts where there are potential threats for recovery on account of erosion in the value of security or non availability of security and existence of other factors such as frauds committed by borrowers, it will not be prudent that such accounts should go through various stages of assets classification. In case of such serious credit impairment, the assets should be straightway classified as doubtful or loss. Erosion in the value of security can be reckoned as significant when the realizable value of security is less than 50% of the value assessed by the bank or accepted by RBI at the time of last inspection, as the case may be. Such NPAs may be straightway classified under doubtful category and provisioning should be made as applicable to doubtful assets.

2.8 - WRITING-OFF OF NPAs:2.8.1 In terms of section 43(D) of the income tax act 1961,income by way of interest in relation to such categories of bad and doubtful debts as may be prescribed having regard to the guidelines issued by the RBI in relation to such debts, shall be

22

chargeable to tax in the previous year in which it is credited to the banks profit and loss account or received, whichever is earlier. 2.8.2 This stipulation is not applicable to provisioning required to be made as indicated above. In other words, amounts set aside for making provision for NPAs as above are not eligible for tax deductions. 2.8.3 Therefore, the banks should either make full provision as per the guidelines or writeoff such advances and claim such tax benefits as are applicable, by evolving appropriate methodology in consultation with their auditors/tax consultants. Recoveries made in such accounts should be offered for tax purposes as per the rules

NPA CERTIFICATE FOR 30/06/09

Position as on 31/03/09
Substandard 1592 Doubtful Loss Total NPA Substandard 877

Position as on 30/06/09
Doubtful Loss Total NPA

402

2359

4353

417

2397

3691

Table no.- 2.4

STATEMENT FOR THE MONTH OF JUNE 2009 S.No. PARTICULARS AMOUNT (in thousand)

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Part A 1. 2. 3. 3.1. NPA at the beginning of the month (opening balance) Addition of NPA (only on quarterly basis) Reduction in NPA during the month Due to upgradation (through restructuring/ rehabilitation/ rephasement) 3.2. Due to settlement (recovery in case settled under BO/ RO/ HO power) 3.3. Due to actual recoveries effected in NPA accounts (other than 3.1, 3.2 & 3.4 general recovery in ordinary course) 3.4. Due to w/o / scalling down of debt(amount technically w/o in any account after approval by board/ competent authority) 3.5. 4. Total reduction in NPA (3.1+3.2+3.3+3.4) NPA at the end of the month (1+2-3.5) 51 4254 _ 51 _ 4305 _ 51 _

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5. Less:- Amount which has been taken into slippages during the current fiscal 2006-07 but is upgraded during the same current fiscal to the extent of upgradation 6. NPA at the end (4-5) Part B 1. Recovery in w/o amount(to be credited to commission received account (Bad debts w/o) 2. Recovery in recorded interest(to be credited to interest received account (recovered interest) 3. Total recovery (3.1+3.2+3.3 of part-A + 1+2 of part-B) 53 2 _ 4254 _

Table no.- 2.5

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STATEMENT FOR THE MONTH OF JULY 2009 S.No.

Part A 1. 2. 3. 3.1. NPA at the beginning of the month (opening balance) Addition of NPA (only on quarterly basis) Reduction in NPA during the month Due to upgradation (through restructuring/ rehabilitation/ rephasement) 3.2. Due to settlement (recovery in case settled under BO/ RO/ HO power) 3.3. Due to actual recoveries effected in NPA accounts (other than 3.1, 3.2 & 3.4 general recovery in ordinary course) Due to w/o / scalling down of debt(amount technically 3.4. w/o in any account after approval by board/ competent authority) Total reduction in NPA (3.1+3.2+3.3+3.4) 3.5. NPA at the end of the month (1+2-3.5) 4. 3691 732 0 480 0 253 4254 160 732

PARTICULARS

AMOUNT (in thousand)

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Part B 1. Recovery in w/o amount(to be credited to commission received account (Bad debts w/o) Recovery in recorded interest(to be credited to interest received account (recovered interest) Total recovery (3.1+3.2+3.3 of part-A + 1+2 of part-B) 754 31 0

2.

3.

Table no.- 2.6

2.9 RETAIL LOAN SCHEME:-

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2.9.1 PERSONAL LOAN:Purpose :

1. To meet personal/family expenses like marriage/ education/ family functions. 2. For purchases of consumer durables, gold/ gold ornaments. 3. To meet expenditure on medical treatment of self and/ or dependent at hospitals/ nursing homes registered with local govt. bodies.

Eligibility :
1. Permanent and regular employee in Centre/ State Govt. Deptt. and other institutions like Universities, Schools/Colleges, PSUs, reputed hospitals, and well established corporate, Professionals and Doctors shall also be eligible for loan. 2. Minimum 3 years of service, including services with the previous employer(s), if any. 3. The net monthly salary should not be less then Rs 6000/-. 4. The net take home salary should not be less than 30% of gross salary after deducting the EMI of the proposed loan.

Amount of loan :
Upto 20 months net take home salary, subject to maximum of Rs 3.00 Lac. Income of spouse can be included, provided he/she guarantees the loan or loan is availed of jointly.

Margin :
Nil

Rate of Interest :
PLR + 1% i.e. 15% p.a* at present with monthly rest.

Security :

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1. Charge over tangible assets, if created out of loan. 2. One personal guarantee preferably of fellow employee, subject to the condition that one employee will not stand as guarantor in more than two accounts.

Repayment :
60 EMI (subject to remaining period of services)

Nature of facility :
Term loan, overdraft limit (on liquidation basis in exceptional cases to Senior bureaucrats/ Administrators/ Judges & customers of high net worth)

Process Fee :
0.50% of loan amount with minimum of Rs.500/-

2.9.2 EDUCATIONAL LOAN:Purpose :

For higher studies in India and abroad.

Eligibilty :
Student who is an Indian national, Upto 45 years of age and has secured admission in an institute recognized by a statutory body.

Amount of loan :
For studies in India : Upto Rs.10.00 lac. For studies in abroad : Upto Rs.20.00 lac.

Margin :

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Upto Rs.4.00 lacs.- Nil Above Rs. 4.00 lac- For studies in India : 5%

Rate of interest :
For loan upto Rs.4.00 lacs PLR-2.00% = 11.75% p.a. For loan above Rs.4.00 lacs PLR-1.25% = 12.50% p.a.

Security :
Co-obligation of parents/guardian. In case of married women, Co-obligation of husband/ in-laws. In addition to security mentioned at above one third party guarantee.

Repayment period :
In 84 EMI commencing 12 months after completion of the course or 6 months after getting the job, whichever is earlier.

2.9.3 HOME LOAN:Purpose :

For construction/purchase of residential house/ Flat/ reconstruction/ modification/ furnishing.

Eligibility :
Individual having an assured source of income viz. salaried employees, self employed professionals, businessmen, farmers, HUF etc.

Amount of loan :
40 times gross monthly income with a condition that the net take home after all deductions should not be less than 30% of Gross Income.

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For salaried person :

60 times gross monthly income with a condition that the net take home after all deductions should not less than 30% of gross income.

Margin :
Loan amount upto Rs.20 lacs 15% Loan amount above Rs.20 lacs 25%

Rate of interest :
Tenure Loan amount upto Rs.20 lacs Floating PLR-3.50% = Repayment above 10.25% 10.75%p.a* Fixed 10.50% p.a* Loan amount above Rs.20 lacs Floating PLR-2.50% = 11.25% 11.75%p.a* p.a* PLR-2.25% = 11.50%p.a* Fixed 11.50% p.a*

Repayment upto 10 years

p.a* 10 PLR-3.25% = 10.50%p.a*

years and upto 20 years

Table no.- 2.7 Security :

Mortgage of property

Repayment :
Maximum within 20 years or till the borrower attains 70 years of age or repayment shall not extend beyond the age of retirement, whichever is earlier.

2.9.4 AGRICULTURE LOAN:-

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Kisan Credit Card Oriental Green Card(OGC) Purpose:

Crop production needs/ Working Capital needs for other farm and non-farm activities (allied activities), for repair of machinery, consumption needs etc.

Eligibility :
Farmers/ Cultivators/ Artisans engaged in farm and non-farm activities.

Amount of loan :
Need Based. There is no ceiling.

Security :
Upto Rs.50000/Above Rs.50000/: Hypothecation of crops/goods. : Hypothecation of crops/goods and mortgage Agriculture

land/property or third party guarantee.

Margin :
Nil

Condition :
Borrower should route sale proceeds through this account.

Validity :
3 years

2.9.5 LOAN TO TRADERS:-

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Purpose :
For meeting working capital and acquiring assets for business needs.

Eligibility :
1. Traders who are individuals, firms, companies, co-operative societies, dealing in those goods, which are not prohibited by RBI/Govt. 2. Small business concerns/agencies providing services such as Xeroxing, dry Cleaning, licence to deal in petroleum products/LPG, drug licence for the applicable business, petrol pump dealers, auto services centres,ISD/STD/PCO booths and others.

Amount of loan :
Maximum composite loan of Rs.25.00 lacs.

Margin : 20% Rate of Interest :

Upto 0.50 lacs Above 0.50 lacs and Upto Rs.2 lacs Above Rs.2 lacs and Upto Rs.10.0 lacs Above Rs.10.0 lacs to Rs.25.0 lacs at PLR (-)2.0% = 11.75% p.a* at PLR (-)1.50% = 12.25% p.a* at PLR (-)1.00% = 12.75% p.a* at PLR = 13.75% p.a*

Repayment :
Working capital limit to be reviewed every year. However, upto Rs.2.00 lac shall be renewed every three years. Term loan : 3 to 7 years.

Process Fee :
0.50% of loan amount with minimum of Rs.500/-

Security:-

33

Cash credit/ Term loan upto Rs.2.00 Lac

In case of cash credit limit hypothecation of stocks(Stock Statement to be obtained on yearly basis & insurance to be done invariably). Hypothecation of assets purchased out of loan amount. Personal guarantee of adequate net worth acceptable to the bank. NIL collateral. No financial statements are required except statements of sales, purchases,

gross profits, overheads and net profit. TL/Cash credit above Rs.2.00 lac and In case of term loan hypothecation of loan upto Rs. 5.00 lac purchased out of loan amount. Collateral security in the shape of NSCs, LIC policy (surrender value) etc. with realizable value of atleast 25% along with one third party guarantee of adequate net worth or mortgage of immovable property having realizable value equivalent to 75% of the loan amount sanctioned along with the third Term loan/ Cash Credit above Rs.5.00 lac party guarantee. Collateral security in the shape of NSCs, LIC policy(surrender value) etc. with realizable value of atleast 50% alongwith one third party gurantee of adequate net worth or mortgage of immovable property having realizable value at least equivalent to 100%.

Table no.- 2.8 2.9.6 LOAN TO DEFENCE PERSONAL:Purpose :

34

To meet personal/ family expenses like marriage/ education/ family functions etc. expect of speculative/ prohibited nature.

Eligibility :
All working defence personnel with minimum one year of service. Personnel of para military forces like BSF, ITBP, CRPF, Coastal Guards, CISF, Assam/ J&k are also eligible.

Amount of loan :
15 times of net take home monthly salary subject to following ceilings : Commissioned Officers : Maximum upto 3.00 lac. Junior Commissioned Officers : Maximum upto 2.50 lac. Non- commissioned Officers : Maximum upto 1.50 lac.

Margin :
NIL

Rate of Interest :
PLR+1% = 15% p.a*

Security :
Charge over assets acquired out of loan.

Repayment :
Equal to the period of stay not exceeding 60 months.

Process Fee :
0.50% of loan amount with minimum of Rs.500/-

2.9.7 BON VOYAGE LOAN:Purpose :

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1. Loan to legitimate traveler, should be resident Indian, for himself & family members, to
cover travel cost, hotel stay as well as foreign travel related expenses like visa, airport tax, purchased of basic travel quota.(domestic or international).

2. Expenses charged by Travel Agents/ Tour Operators for conducted tours. Eligibility :
1. Confirmed permanent employees of Government, PSUs, reputed public Limited companies and institutions, with a minimum service of 3 years.

2. Self employed like engineers, Doctors, Architects, Chartered Accountants, IT

professionals &MBAs, with a minimum of 2 years of standing. 3. Pensioners of PSUs/ Govt.(State/Central) Public sector banks who have taken voluntary retirement, including pensioner of OBC. 4. Businessman, who have regular and adequate cash flows to repay the loan, are also eligible to avail of the loan facility under this scheme. 5. Maximum age limit for all category of borrowers will be 65 years at the time of availing loan.

Income criteria :
1. For employees/ pensioners, the minimum net income should be Rs.10000. 2. For self employed professionals & traders, minimum net annual income should be Rs.1,00,000/-

Loan Amount :
Upto 20 months net salary/income, subject to a maximum of Rs.5 lac. The minimum loan amount shall be Rs.25000/-

Margin :
25% of total expenses for loan as mentioned under the purpose clause.

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Rate of interest :
PLR + 1% i.e.14.75%* p.a. at present (with monthly rests) In case the borrower, after return or within a period of maximum 3 months of loan, does not submit the proof of having performed journey, commercial rate of interest @PLR+3%* shall be charged from the date of advance.

Repayment :
In 48 equated monthly installments by obtaining post-dated cheques. Moratorium upto 3 months may be granted which shall be inclusive of total repayment period of 48 months.

Process fee :
0.50% of loan amount with minimum of Rs.500/-

2.9.8 CAR/ VEHICLE LOAN:Purpose :

Two wheeler/ Car/ Jeep ( Non- commercial use)

Eligibility :
Three years service in case of salaried employees and two years business in case of business entities. Agriculturists may also be provided loan on the basis of their land holding. Two wheelers: Minimum Income- Rs.6000/- p.m.(Gross) For Cars : Minimum Income- Rs.10000/-p.m. (Gross)

Amount of loan :
90% of the cost of two wheelers including taxes and insurance. 85% of the cost of new cars. Maximum- Rs.10.00 lacs for new cars

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Second hand cars: Rs.7.50 lac.

Security :
Hyp. of vehicle & one third party guarantee for loans upto Rs.5.00 lac. Hyp. of vehicle & two personal guarantees out of which one guarantee should be spouse for loans above Rs.5.00 lac

Margin :
Two wheelers New cars Second hand cars : 10% : 15% : 20%

Process fee :
0.50% of the loan amount with min. Rs.500/-

Repayment :
Two Wheelers New Cars : 60 EMI (maximum) : 84 EMI (maximum)

GOVERNMENT SPONSORED LOAN SCHEMES

Name of the Purpose scheme Eligibility Amount of loan Security Margin Repay ment Interest rate

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Prime Ministers Rozgar Yojana (PMRY)

Providing Employment opportunities to educated unemployed youth.

Swarna Jayanti Shahri Rozgar Yojana(SJS RY)

Hyp. of assets purchase d with the bank assistanc e. No collateral security required for projects upto Rs.2.00 lac for Business/ Service sector Rs.5.00 lac for industries . Gainful Educated 95% of Hyp. of employment upto IXth. the assets to Family project purchase unemployed income cost max. d with urban poor, below Rs. the bank residing in Rs.11850 47500/assistanc town for last as per e. 3 years. 1991-92 census. Persons engaged in removing night soil and filth. Project cost based, max. Rs.50,00 0/Hyp. of assets purchase d with the bank assistanc e.

Educated unemploye d youth (VIIth pass in the age* group of 18-35 year and family income upto Rs.1 lac pa

loan for project costupto Rs.2 lac for business/ service sector & Rs.5.00 lac for industry per beneficia ry.(i.e. project costapplicabl e margin)

5 to 16.25% of the project cost Margin + eligible subsidy should not be less than 20% of the project cost.

3 to 7 years with a morator ium period of 6-18 months.

As per activity of the borrower

5%

3 to 7 years with initial morator ium of 6-18 months. 3 to 7 years inclusiv e of grace period not exceedi ng six months.

As per activity of the borrower .

National Rehabilitation scheme of of liberation Scavengers. and Rehabilitati on of scavengers (SLRS)

15% of the project cost by the schedule d castes Dev. Corp. @4% Int.

As per activity of the borrower .

Table no.- 2.9

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CHAPTER III PROBLEM IDENTIFICATION

3. PROBLEM IDENTIFICATION:3.1 HYPOTHESIS:-

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In this project to fulfill my objective the hypothesis which I have framed is that Agriculture loan contributing more to NPAs as null hypothesis (H0) and Agriculture loan not contributing more to NPAs as alternate hypothesis (H1).

3.2- OBJECTIVE: To analyze the rate of willful defaulters in refunding of loan. To find the rate of defaulters in retail loan schemes. To know the criteria to repay the loans under retail loan schemes. To analyze the NPAs in all categories.

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CHAPTER- IV METHODOLOGY

4.1 REASEARCH METHODOLOGY:Research methodology is a scientific and systematic search for pertinent information on a specific topic. It is also known as a scientific investigation. Research is an academic activity

42

and such the term should be used in a technical sense. According to Clifford woody research comprises defining and redefining problems, formulating hypothesis or suggested solutions, collecting, organizing and evaluating data, making deduction and reaching conclusion, and at last testing the conclusions to determine whether they fit the formulating hypothesis. SIGNIFICANCE OF RESEARCH: Research provide basis for nearly all government policies. It helps in solving various operational and planning problems of business and industry. It is helpful in sales forecasting. It is useful in studying social relationship and in seeking answers to various problems.

The process of research involves 5 steps:Defining the research problem

Developing the research plan or design

Collection of information

Analysis of information

Presenting the findings Fig :-4.1

Fig :-4.1 4.2 RESEARCH DESIGN:The formidable problem that follows the task of defining the research problem is the preparation of the design of the research project, known as the research design. Decision

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regarding what, were, when, how much, by what means concerning an enquiry or the research study constitute a research design. A research design is the arrangement of conditions for the collection and analysis of data in a manner that aim to combine relevance to the research purpose with economy in procedure. The research design is a conceptual structure within which research is conducted; it constitutes the blueprint for the collection, measurement and analysis of data. As such the design includes an outline of what the researcher will do from writing the hypothesis and its operational implication to the final analysis of data. Research design is needed because it facilitates the smooth sailing of the various research operations, there by making research as efficient as possible yielding maximal information with minimum expenditure of effort, time and money. Scientific research is objective, systematic, relevant, controlled, reproducible, exhaustive and critical investigation of hypothetical proposition about the presumed relation among natural phenomenon. It answers some of the questions related with the report like what is the study about, why the study is being made, where and how the study is to be carried out, what type of data is required and where it can be found, what will be the sample design, what technique is to be adopted while carrying the study etc. Features of a good design: It must be flexible enough. Appropriate and efficiency must lie in the report. It should minimize bias and maximize the reliability of the data collected. The design must be suitable as per the requirement of the case.

Important concept relating to research design: Dependent and independent variables. Extraneous variables. Control

44

Confounded relationship. Research hypothesis Experimental and non-experimental hypothesis-testing research. Experimental and control groups. Treatment Experiments.

This is the plan, the structure and the strategy of the investigative process, which set out to obtain answer to research questions. The research design is generally considered fewer than four sub headings.

1. Sampling design:This deals with method of selecting samples to be surveyed for a given study.

2. Observation design:This relate to the condition under which the observation or survey is conducted.

3. Statistical design:This decides the size of the sample to be surveyed and the tools of be used in the analysis of collecting data.

4. Operational design:This decides the techniques by which the above design is to be administrated.

4.3 TYPES OF RESEARCH DESIGN USED IN THIS REPORT:-

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Among various types of research design the Descriptive research design was found most suitable for conducting the study. Descriptive research study includes the state of affairs as it exists at present. The steps under the descriptive research design follows The first step is related with the specification of the objective with sufficient precision to ensure that data collected are relevant. If this is not done carefully, the study may not provide the desired information. Second step deals with the question of selecting the methods by which the data are to be obtained. In other words, techniques for collecting the information must be devised for which use of questionnaires, interviewing, examination of the records can be made. The data for this study was collected with the help of survey method conducted in different areas and random sampling with the help of questionnaires filled by various respondents. The third step consists of selection of the research technique which tells about how the data is to be analyzed so that proper results can be achieved which should be unbiased. The data collected must be processed and analyzed. This includes the steps like coding the answers received from the people interviewed, observation tabulating the data performing several statistical computations etc. Last of all comes the question of reporting the findings. This is the task of communicating the findings to others and the researchers must do it in an efficient manner.

4.4 SAMPLE DESIGN:A sample design is a definite plan for obtaining a sample from a given population. It refers to the technique or the procedure the researcher would adopt in

46

selecting items for the sample. A sample design may as well lay down the number of items to be determined before the data are collected. The main aspects of a sample design are as follows Elements- These are the specific characteristics of a sample; like in this study the sample elements of the persons of different groups i.e., student, managers etc. Sampling units-The sampling units or the location in this report from where the above mentioned elements were surveyed Extent-The region covered to get the valid information and for collecting the data was Durg and Bhilai.

4.5 METHODS OF DATA COLLECTIONS:The task of data collection begins after a research problem has been defined and research design/plan chalked out. While deciding about the method of data collection to

47

be used for the study, we should keep in two types of data via, primary and secondary data. The primary data are, those which are collected a fresh and for the first time and thus happen to be original in character. The secondary data, on the other hand, are those which have already been collected by someone else and which have been passed through the statistical process. Collection of primary data:We would collect primary data during the course of doing experiments In the experimental research but in case we do research of the descriptive type and perform surveys, whether sample survey or census surveys, then we can obtain primary data either through observation or through direct communication with the respondents in one form or another or through personal interviews. Sources of primary data:1. Through interview method: (a). personal interview (b). telephone interview 2. Through Questionnaires 3. Through Observation method Collection of secondary data:Secondary data means data that are already available i.e., they refer to the data which have already been collected and analyzed by some one else. These data may either be published or unpublished data. Sources of public data are available in: Various publications of the central, state are local govt. Various publication of foreign govt. Technical and trade journal.

48

Books magazines and newspapers. Report and publication of the various associations connect with business and industry, bank stock exchange etc.

The sources of unpublished data are:They may be found in diaries, letter unpublished biographies and autobiographies and also may be available with scholars and research workers, trade association, labour bureaus and other public/private individuals and organization.

RESEARCH DESIGN ADOPTED:Descriptive Research Design DATA COLLECTION TOOL USED:Secondary data SAMPLE DESIGN ADOPTED:Non-Probability Sampling SAMPLE SIZE:100 samples SAMPLE UNIT:Bhilai.

STATISTICAL TOOL USED:Chi-square test

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CHAPTER V RESULTS & DISCUSSION

5.1 - ANALYSIS OF SECONDARY DATA:1. According to amount of loan

50

Amount (in Rs.) Standard Asset 0-50,000 50,000-1 Lac 1 Lac 2 Lac 2 Lac & above 8 5 3 1

Substandard Asset 12 19 4 1 Table no. - 5.1

Doubtful Asset 7 20 8 -

Loss Asset 1 1 -

Amount of loan (in Rs.)

25 20 15 10 5 0 0-50000 50000-1 lac 1 lac-2 lac 2 lac & above Standard Sub-Standard Doubtful Loss

Fig:-5.1 INTERPRETATION:From the above data we find that loan amount ranging from 50000- 1lac has more NPAs.

2. According to scheme

51

Scheme Govt. Sponsored Non-Govt. Sponsored

Standard Asset 13 6

Sub-standard Asset 21 10 Table no.- 5.2

Doubtful Asset 14 6

Loss Asset 19 11

Scheme
25

20

15 Govt. Sponsored Non-Govt. Sponsored 10

0 Standard SubStandard Doubtful Loss

Fig: - 5.2 INTERPRETATION:In the chart we can see that government Sponsored Schemes are contributing more to the Non-Performing Asset rather than retail loan schemes.

3. According to source of income

52

Type

Standard Asset 12 11

Salaried Selfemployed

SubStandard Asset 8 29 Table no.- 5.3

Doubtful Asset 7 17

Loss Asset

3 13

S o u rce o f in co m e
35 30 25 20 15 10 5 0 S tandard S ub-S tandard Doubtful Los s S alaried S elf-em ploy ed

Fig:- 5.3 INTERPRETATION:From the above chart we can conclude that self-employed persons are contributing more to NPAs rather than salaried persons.

4. According to profile

53

Category Executive NonExecutive Worker

Standard Asset 8 19 54

Substandard Asset 1 2 1 Table no.- 5.4

Doubtful Asset 2 7

Loss Asset 3 3

P ro file W is e
60 50 40 30 20 10 0 S tandard S ub-S tandard D oubtful Los s E x ec utive N on-E x ec utive W ork er

Fig:- 5.4 INTERPRETATION:From the above chart it is clear that persons who are at worker group have more NPAs.

5. According to gender

54

Gender Male Female

Standard Asset 48 12

SubStandard Asset 9 4 Table no.-5.5

Doubtful Asset 10 4

Loss Asset 13 -

G e n d e r w is e
60 50 40 30 20 10 0 S tandard S ub-S tandard Doubtful Los s M ale F em ale

Fig:- 5.5 INTERPRETATION:From the above chart it is clear that male persons are contributing more to NPAs rather than female in all categories.

6. According to Educational Qualification

55

Category Professionals Graduate

Standard Asset 8 7

SubStandard Asset 1 6 13 6 Table no.-5.6

Doubtful Asset 1 7 5 7

Loss Asset 5 5 17

Non-graduate 7 Illiterate 5

Q u a lific a tio n w is e
18 16 14 12 10 8 6 4 2 0 P ro fes s io n a ls G ra d u a te N o n -G ra d u a te Illite ra te S ta n d a rd S u b -S ta n d a rd D o u b tful Los s

Fig:-5.6 INTERPRETATION:From the above chart it is clear that Illiterate persons are more involved in loss category of NPAs.

7. According to salary

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Salary (in Rs.) 0-5000 5000-10000 10000-15000 Above 15000

Standard Asset 7 5 3 4

Substandard Asset 10 5 2 1 Table no.-5.7

Doubtful Asset 15 6 8 -

Loss Asset 18 9 7 -

S a la ry
20 18 16 14 12 10 8 6 4 2 0 0-5000 5000-10000 10000-15000 A bove 15000 S tandard S ub-S tandard D oubtful Los s

Fig :- 5.7 INTERPRETATION:From the above chart it is clear that persons having salary up to 5000 are contributing much to NPAs in all categories.

8. According to location

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Location Outer Area Bhilai

Standard Asset 59 22

Sub-Standard Asset 2 1 Table no.-5.8

Doubtful Asset 7 1

Loss Asset 6 1

L o c a tio n W is e
70 60 50 40 30 20 10 0 S tandard S ub-S tandard D oubtful Los s O ut er A rea B hilai

Fig:- 5.8 INTERPRETATION:From the above chart we can conclude that persons living outside Bhilai are more in default and they are more contributing to Non-performing Assets.

5.2 - HYPOTHESIS TESTING:-

58

Out of 100 samples 77 are belong to NPA according to their purpose of taking loan. Either these are having the intention to repay the loan amount or not to repay it. We calculate it by applying chi-square test.

Chi-Square Test : In order to evaluate the statistical significance of association among

variables involved in the cross tabulation researchers used statistical technique called ChiSquare test. It can be used in two ways i.e., as a Test of Independence and as a Test of Goodness of Fit. 1. As a Test of Independence it is used to test whether there is any association between two variables. 2. As a Goodness of fit it is used to identify whether there is any significant difference between the observed frequencies and the expected frequencies. Chi-Square test works only when the sample size holds to be more than 50.

= (Oi-Ei) Ei
Where as Oi = Observed Frequency Ei = Expected Frequency

Degree of Freedom = (n-1) or (p-1)(q-1)

Degree of freedom is the number of ways in which values could be assigned within a system. In case of contingency table (i.e. a table with p rows and q columns) has degree of freedom is (p-1) (q-1) or in a sample of size n there will be always Degree of Freedom = (n1).

Observed Frequency:-

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Standard Asset

Sub-standard Asset

Doubtful Asset C G 13 6

Loss Asset

Agriculture loan Other loans

A E

5 2

B F

7 2

D H

35 7

Table no.- 5.9 Graph showing Observed Frequency:-

40 35 30 25 20 15 10 5 0 Standard Sub-Standard Doubtful Loss Agriculture Other

Fig:- 5.9

Calculation of Expected Frequency: A1 = (A+B+C+D) (A+E)

60

A+B+C+D+E+F+G+H = = = = B1 = = = = = C1 = = = = = D1 = = (5+7+13+35) (5+2) 5+7+13+35+2+2+6+7 (60) (7) 77 420 77 5.45 (B+A+C+D) (B+F) A+B+C+D+E+F+G+H (7+5+13+35) (7+2) 5+7+13+35+2+2+6+7 (60) (9) 77 540 77 7.01 (C+D+A+B) (C+G) A+B+C+D+E+F+G+H (13+35+5+7) (13+6) 5+7+13+35+2+2+6+7 (60) (19) 77 1140 77 14.81 (D+A+B+C) (D+H) A+B+C+D+E+F+G+H (35+5+7+13) (35+7)

61

5+7+13+35+2+2+6+7 = = = E1 = = = = = F1 = = = = = G1 = = (60) (42) 77 2520 77 32.73 (E+F+G+H) (A+E) A+B+C+D+E+F+G+H (2+2+6+7) (5+2) 5+7+13+35+2+2+6+7 (17) (7) 77 119 77 1.55 (F+G+H+E) (F+B) A+B+C+D+E+F+G+H (2+6+7+2) (2+7) 5+7+13+35+2+2+6+7 (17) (9) 77 153 77 1.99 (G+H+E+F) (G+C) A+B+C+D+E+F+G+H (6+7+2+2) (6+13) 5+7+13+35+2+2+6+7

62

= = = H1 = = = = =

(17) (19) 77 323 77 4.19 (H+E+F+G) (H+D) A+B+C+D+E+F+G+H (7+2+2+6) (7+35) 5+7+13+35+2+2+6+7 (17) (42) 77 714 77 9.27

Expected Frequency:Standard Asset Sub-standard Asset Agriculture loan Other loans A1 E1 5.45 1.55 B1 F1 7.01 1.99 C1 G1 14.81 4.19 D1 H1 32.73 9.27 Doubtful Asset Loss Asset

Table no.- 5.10 Graph showing Expected Frequency:-

63

35 30 25 20 15 10 5 0 Standard Sub-Standard Doubtful Loss Agriculture l Other

Fig:- 5.10 Application of Chi-Square Test:Number 1 2 3 4 5 6 7 8 Observed Frequency (Oi) 5 7 13 35 2 2 6 7 Expected Frequency (Ei) 5.45 7.01 14.81 32.73 1.55 1.99 4.19 9.27 Oi-Ei -0.45 -.01 1.81 2.27 0.45 0.01 1.81 -2.27 (Oi-Ei) 0.2025 0.0001 3.2761 5.1529 0.2025 0.0001 3.2761 5.1529 (Oi-Ei)/Ei 0.037 0.000 0.221 0.157 0.131 0.000 0.782 0.556 =1.884 Table no.- 5.11 = (Oi-Ei) Ei

64

 = 1.884 Degree of freedom = (p-1) (q-1) = (2-1) (4-1) =1*3 =3

The table value of chi-square at 5% level of significance with 3 degree of freedom is 5.991 whereas the calculated value is 1.884 which is less than the table value. Thus, the null hypothesis is accepted.

Null hypothesis(H0)

= Agriculture loan contributing more to NPAs

Alternate hypothesis (H1) Agriculture loan not contributing more to NPAs

5.3 FINDINGS:-

65

In Oriental Bank of Commerce, Bhilai during the month of June & July there were about 797 defaulters or Non-Performing Assets. Out of those 797 I had taken a sample of 100 NPAs and after analyzing those samples I had the following findings: Customers who are taken loan upto 1lac are more in default in all categories. Those customers who had taken loan on the basis of Government Sponsored

Schemes are contributing more to the Non-Performing Asset rather than retail loan schemes. Customers belong to self-employed are more in default. Customers who had taken loan for agricultural purpose are contributing more to the

Non-Performing Asset. . Persons having salary up to 5000 are contributing much to NPAs in all categories. Personal loan, educational loan & home loan are mainly given by the bank in June & July 2009. Employees of B.S.P those who are at worker level are largely in default. Male persons are contributing more to NPAs rather than female in all categories. Illiterate persons are more involved in loss category of NPAs rather than graduate persons.

66

CHAPTER-VI CONCLUSION & SUGGESTIONS

67

6.1 CONCLUSION:-

The conclusion drawn from this project is that there are number of borrowers who are under the Sub-Standard, Doubtful, Loss category of Non-Performing Asset in retail loan schemes. Thus, we have to take suggestive measures to recover the loan amount to enhance the quality of loan portfolio. The limitation of my project are:-

Borrowers have to pay 2% over bank rate as a penalty on the non-repayment of loan which he is not aware.

His/her property shall be seized if their account has been declared as NonPerforming Asset.

All charges which are applied for recovery are to be borne by the customer whether

they are court charges or any sort of legal charges. Hence, bank should be directed to softened this approach and these charges should not be levied on to the borrower/s.

6.2 SUGGESTIONS & RECOMMENDATIONS

68

While sanctioning the loan for technical purpose bank should make certain technical

guidance and know-how should be shared with the customer and efforts be made to revitalize the NPA customers.

Bank must implement cash receipt and cheque receipt through ATMs so that the

persons who earn on daily wages basis can deposit money at any time.

Timely delivery of the reminders to the borrowers.

Reference from at least two people should be taken.

If customer had continuing the default counseling should be undertaken.

Maintaining cordial relationship with the customers.

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BIBLIOGRAPHY

70

BIBLOGRAPHY:-

BOOKS:C.R.Kothari ,Research Methodology, New Age International Publishers, New Delhi Second Edition, 2004, Chapter-4, Pg 55-60

INTERNET:www.obcindia.com www.rbi.com

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