NPA Report Final

INSTITUTE OF MARKETING AND MANAGEMENT, NEW DELHI Page 1
ACKNOWLEDGEMENT
It is a genuine pleasure to express my deep sense of thanks and gratitude to my
mentor, philosopher and guide Mr. Akash Mohanty, Manager of Recovery Department,
UCO Bank Head Office, Kolkata. His dedication and keen interest and above all his over
whelming attitude to help me have been solely and mainly responsible for completing
my work. His timely advice, meticulous scrutiny, scholarly advice has helped me to a
very great extent to accomplish this task.
I owe a deep sense of gratitude to Mr. T.K.Kabiraj, AGM of Recovery Department, UCO
Bank Head Office, Kolkata, for his support from the beginning of my project. His
prompt inspirations, timely suggestion with kindness & advice to all staff of this
department to help me if I am facing any problem in this project has enabled me to
complete my internship.
I thank all the staff of Recovery Department, UCO Bank, Head Office Kolkata, especially
A.M Das(Chief Manager), Umesh Lal Das(Senior Manager), Raju Saw(Manager), Joy Das
(Manager, Law) and Debasis Poddar (Chief Manager) for their kind help and co-
operation throughout my internship period.
It is my privilege to thank my parents for their continuous support and I would like to
thank Ramendra Kumar Pait who gave me the suggestion to doing internship at UCO
Bank.
I hope that I can build upon the experience and knowledge that I have gained and
make a valuable contribution towards my future career.

EXECUTIVE SUMMARY
Financial Sector basically Banking sector plays a vital role in the capital formation of the
county but there are various hurdles/barriers like Risk Management, Efficiency and
Productivity in the functioning of bank, Political issue etc but apart from these there is a
big challenge for the better functioning of commercial bank that is about Non-
Performing Assets of the bank.
To create a loan is not a big deal for the bank but the recovery of these loans is an
important concern for the commercial bank.
The paper deals with the Non-Performing Assets of the UCO Bank, types of Loan,
process of issue of a loan, how UCO Bank manage their NPA, what kind of process
followed by the bank, NPA level of UCO Bank, how UCO Bank sale their NPA,
comparative study of Gross and net NPA for last four year and suggestion to reduce
the NPA’s of that particular bank.

ABOUT THE AUTHOR
Atanu Biswas is pursuing Post Graduate Diploma in Management at Institute of
Marketing and Management, New Delhi. He has an undergraduate degree in B.Com (H)
from Burdwan University, West Bengal. He underwent summer training at UCO Bank
head office, Kolkata. He is interested to take Finance as career option. He has already
opened a business with his brother and wants to support his business along with his
job and also have another interest to open the manufacturing industries.

TABLE OF CONTENTS
INTRODUCTION............................................................................................................................ 7
OBJECTIVE OF THE STUDY ......................................................................................................... 8
ABOUT UCO BANK....................................................................................................................... 9
Profile.............................................................................................................................................. 9
Vision Statement .............................................................................................................................. 9
Mission Statement ............................................................................................................................ 9
Brief History .................................................................................................................................. 10
Current Market Position.................................................................................................................. 10
LOAN AND ADVANCE OF UCO BANK...................................................................................... 11
Priority Sector................................................................................................................................ 11
Non-Priority (Including Retail)........................................................................................................ 11
LOAN PROCESS........................................................................................................................... 12
Pre-sanction Process....................................................................................................................... 12
IN-PRINCIPLE SANCTION:.......................................................................................................... 12
If THE LOAN PROPOSAL IS found satisfactory, then disbursement will be subject to fulfilment and
compliance of disbursement conDItions. However,THE BANK MAY CANCEL THE SANCTION
EVEN AFTER EXECUTION OF LOAN DOCUMENTS AND EVEN AFTER DISBURSMEENT BY
RECALL OF LOANS AT ITS DISCRETION.................................................................................. 13
Post-sanction Process...................................................................................................................... 13
Disbursement of Loan: LOAN IS DISBURSED AS PER TERMS OF SANCTION,IN MOST CASES
IN COMBINATION OF PROMOTER’S MARGIN MONEY AND BANK”S SANCTION MONEY. 13
Post Disbursement Monitoring of Advances/Loans........................................................................... 13
CLASSIFICATION OF LOANS & ADVANCES............................................................................ 13
NON PERFORMING ASSETS....................................................................................................... 14
SUBSTANDARD ASSETS............................................................................................................ 15
DOUBTFUL ASSETS.................................................................................................................... 15

Doubtful Classification as per new RBI norms.................................................................................. 15
Doubtful Classification ................................................................................................................... 16
LOSS ASSETS .............................................................................................................................. 16
Provision on types of assets............................................................................................................. 16
IMPACT OF NPA IN BALANCE SHEET OF THE BANK.............................................................. 17
CHECKPOINTS FOR NPA MANAGEMENT................................................................................. 18
MANAGEMENT OF NPA ............................................................................................................. 19
UPGRADATION OF ACCOUNTS :............................................................................................... 20
CASH RECOVERY :..................................................................................................................... 20
FOLLOW UP :............................................................................................................................... 21
RECOVERY AGENTS :................................................................................................................. 21
RBI GUIDELINES REGARDING ENGAGEMENT OF RECOVERY AGENTS : ............................ 21
LOK ADALAT.............................................................................................................................. 23
SALE OF ASSETS......................................................................................................................... 23
ASSET RECONSTRUCTION COMPANY : ................................................................................... 24
PROCESS OF SALE...................................................................................................................... 24
ACCOUNTING PROCEDURE....................................................................................................... 25
ACTION POINTS FOR CASH RECOVERY :................................................................................. 25
The Securitization & Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002
...................................................................................................................................................... 26
Object Clause of the Act:................................................................................................................ 26
Important Definitions under the Act:................................................................................................ 26
ENFORCEMENT OF SARFAESI ACTION BY UCO BANK.......................................................... 27
DEBT RECOVERY TRIBUNAL.................................................................................................... 34
EMPIRICAL ANALYSIS OF NPA FOR LAST 5 YEARS............................................................... 38
SECTOR WISE ANALYSIS........................................................................................................... 40
IN DEPTH ANALYSIS OF PRIORITY SECTOR............................................................................ 40
IMPACT ON INCOME IN INDIA.................................................................................................. 41
NABARD...................................................................................................................................... 41
OBJETIVES .................................................................................................................................. 42
CAUSES OF NPA IN PRIORITY SECTOR.................................................................................... 42
AREAS UNDER PRIORITY SECTOR........................................................................................... 43

AGRICULTURE SECTOR............................................................................................................. 45
OBSERVATION............................................................................................................................ 47
MEDIUM SCALE ENTERPRISE SECTOR.................................................................................... 47
OBSERVATION............................................................................................................................ 50
EDUCATION SECTOR................................................................................................................. 50
OBSERVATION............................................................................................................................ 51
HOUSING SECTOR...................................................................................................................... 52
OBSERVATION............................................................................................................................ 53
OTHERS SECTOR........................................................................................................................ 54
OBSERVATION............................................................................................................................ 55
YEAR WISE ANALYSE................................................................................................................ 56
2011-2012...................................................................................................................................... 56
2012-2013...................................................................................................................................... 56
2013-2014...................................................................................................................................... 57
OBSERVATION............................................................................................................................ 57
WILFUL DEFAULTER................................................................................................................. 58
FRAUD......................................................................................................................................... 59
CLASSIFICATION OF FRAUDS................................................................................................... 59
REPORTING OF FRAUDS TO RESERVE BANK OF INDIA......................................................... 60
CAUSES OF NPA.......................................................................................................................... 61
MEASURES.................................................................................................................................. 62
CONCLUSION.............................................................................................................................. 63
APPENDIX ................................................................................................................................... 64
BIBLIOGRAPHY .......................................................................................................................... 67

INTRODUCTION
Non-performing Assets are threatening the stability and demolishing bank’s
profitability through a loss of interest income, write-off of the principal loan amount
itself. RBI issued guidelines in 1993 based on recommendations of the Narasimham
Committee that mandated identification and reduction of NPAs be treated as a national
priority because the level of NPA act as an indicator showing the bankers credit risks
and efficiency of allocation of resource. The financial reforms helped largely to clean
NPA in the Indian banking industry. The earning capacity and profitability of the bank
are highly affected due to this NPA.
Reserve Bank of India constantly endeavors to ensure that prescriptions in this regard
are close to international norms. The efficiency of a bank is not always reflected only by
the size of its balance sheet but by the level of return on its assets. NPAs do not
generate interest income for the banks, but at the same time banks are required to
make provision for such NPAs from their current output.
The banks are commercial organization and the main business of banking is to collect
the deposits from the public and lend it to the individuals, business concerns,
institution etc. The lending business is associated with risk. One of the risks in lending is
the possibility of account becoming Non-Performing Assets.
Classification of what an NPA is has changed with tightening of prudential norms.
Currently an asset is become non-performing if interest or installments of principal due
remain unpaid for more than 90 days.

Non-performing assets (NPAs) do not earn interest income and repayment of loan to
bank does not take place according to repayment schedule affecting income of the
bank and their by profitability. The nonperforming assets do not generate interest but
at the same time require banks to make provision for such nonperforming assets out
of their current profit.
After nationalization the amount of nonperforming assets was around 15% which can
be considered as one of the biggest limitations for the commercial bank. Therefore RBI
issued guidelines based on recommendations of Narashimham committee that every
commercial bank has to be very punctual in granting loan and more importantly to
collect the amount of loan that is recovery of loan.
Though the problem of NPAs has not been solved all together, here the study of UCO
Bank is presented in the reference of NPAs for a particular period of time
NPAs have an adverse effect on the return on assets in several ways-
· They erode current profits through provisioning requirements.
· They result in reduced income.
· They require higher provisioning requirements affecting profits and accretion to
capital funds and capacity to increase good quality risk assets in future.
· They limit recycling of funds, set in asset liability mismatch.
OBJECTIVE OF THE STUDY
NPA is a big threat to banks profitability. This paper focuses on one particularly
important aspect of the cause of bank insolvency. This report will consider both the
prevention and control of NPAs. The main aim of the report is to provide some
glimpses on the menace of NPA and how the UCO Bank tackling the same. To address
the problem two distinct aspects are considered.
Firstly, how can NPAs be prevented or how can be NPAs managed?
Secondly, when the assets slip to NPA category despite all preventive efforts by the
banks how can these be dealt with? Other objectives are:
1. To understand the NPAs sector wise.
2. To understand the assets of the bank.

3. What is NPA
4. Causes and measures of NPA
5. Impact of NPA in banking operation
6. How UCO Bank Manage the NPA
7. What is SARFAESI Act, 2002
8. To understand the DRT
9. Observation of UCO Banks last five year NPA
10. Sector wise analysis (Priority Sector)
11. To understand the recovery of NPAs through various channels.
ABOUT UCO BANK
PROFILE
Founded in 1943, UCO Bank is a commercial bank and a Government of India under
taking. Its board of directors consists of Government representative from the
Government of India and Reserve Bank of India as well as eminent professionals like
accountants, management experts, economists, businessmen etc.
VISION STATEMENT
To emerge as the most trusted, admired and sought-after world class financial
institution and to be the most preferred destination for every customer and investor
and a place of pride for its employees.
MISSION STATEMENT
To be a top class bank to achieve sustained growth of business and profitability,
fulfilling socio-economic obligations, excellence in customer service; through up-
gradation of skills of staff and their effective participation making use of state-of-the-
art technology.
Global banking has changed rapidly and UCO Bank has worked hard to adapt to
these changes. The bank looks forward to the future with excitement and a
commitment to bring greater benefits to you.

UCO Bank, with years of dedicated service to the nation through active financial
participation in all segments of the economy – Agriculture, Industry, Trade and
Commerce, Service Sector, Infrastructure Sector etc., is keeping pace with the changing
environment. With a countrywide network of more than 2500 service units which
includes specialized and computerized branches in India and Overseas, UCO Bank has
marched in to the 21st
century matched with dynamism and growth.
BRIEF HISTORY
UCO Bank formerly United Commercial Bank, established into 1943 in Kolkata is one
of the oldest and major commercial banks of India. Ghanshyam Das Birla, an eminent
Indian industrialist, during the Quit India movement of 1942, had conceived the idea of
organizing a commercial bank with Indian capital and management, and the United
Commercial Bank Limited was incorporated to give shape to that idea. The bank was
started with Kolkata as its Head Office with an issued capital of Rs. 2 Crores and a paid
up capital of Rs. 1 crore. The bank, along with 13 major commercial banks of India, was
nationalized on 19 July, 1969 by the Government of India. Its name was changed to
UCO Bank, in 1985, by an act of Parliament a bank in Bangladesh existed with the name
“United Commercial bank”, which caused confusion in the International banking arena.
CURRENT MARKET POSITION
As on 31st
March 2014, its total business was Rs. 3526 billion. As 31st
March 2014,
Government share holding in the bank was 77.20%. Branch expansion started at a fast
pace, particularly in rural areas, and the bank achieved several unique distinctions in
priority sector lending and other social uplift activities.
Besides providing inland banking services through its vast network of branches in India,
UCO Bank has a vital presence in the financial markets outside India. UCO Bank
presently has four overseas branches in two important international financial centers in

Singapore and Hong Kong and is considering proposals to open further branches in
major financial centers across the globe.
LOAN AND ADVANCE OF UCO BANK
The banks has the following schemes
PRIORITY SECTOR
1. UCO Home Loan
2. Education Loan
3. UCO Pensioner
4. UCO Two Wheeler Scheme
5. UCO Education Loan Scheme for Vocational Education and Training
6. KCC
7. UCO Commercial Vehicle
8. PMEGP(PMRY)
9. DRI
10. JLG/SHG
11. KVIP
12. Other Govt. Sponsored Schemes, NABARD Sponsored Schemes, etc
NON-PRIORITY (INCLUDING RETAIL)
1. UCO Car Loan
2. UCO Shopper Loan Scheme
3. UCO Swabhiman-Reverse Mortgage Loan Scheme for senior citizen

4. UCO CA Loan Scheme
5. UCO Trader
6. UCO Premier Education Loan Scheme
7. UCO Cash
8. UCO Rent
9. UCO Securities
10. UCO Property Loan Scheme
11. UCO Yatra
LOAN PROCESS
The following mechanism is in place for processing of loan proposal, disbursement &
monitoring by the UCO Bank
PRE-SANCTION PROCESS-LOAN APPRAISAL:
 Pulling of CIBIL Report
 Pre-Sanction Visit Report (PSVR) on Visit to:
 Residence
 Business Unit
 Moveable / Immoveable Securities
 Analysis and Appraisal of IT Return (Min 2 Years – 3 years ideal)
 Audited Balance Sheet (Min 2 Years – 3 years ideal)
 SMA – Projection (5years for new projects)
 Valuation/Encumbrance Certificate/Legal Opinion (Chargeable)
 Credit Rating
IN-PRINCIPLE SANCTION:

If the loan proposal is found satisfactory, then disbursement will be subject to
fulfillment and compliance of pre-disbursement conditions. However, the bank may
cancel the sanction even after execution of loan documents and even after
disbursement by recall of loans at its discretion, in case of any deviation.
POST-SANCTION PROCESS:
 Creation of Equitable/Registered Mortgage (REGISTRATION WITH CERSAI)
 Creation of Charge (ROC-MCA)
 Hypothecation of present & future assets in Banks name
 Creation of Charge/Lien
 Infusion of Margin Money by Borrower/Promoter
 Collection of Post dated cheque.
 Securities – NSC, KVP, FD, Shares, LIC etc.
 Payment of Processing Charge, Stamp Duty, Documentation Charges, Other
Charges
 Satisfactory Pre-disbursement Inspection Report (PDIR)
ISSUANCE OF SANCTION LETTER:
The concerned branch issues the final sanction letter and the acceptance of sanction
terms & conditions by borrower(s) & guarantor(s) is mandatory before disbursement
and subject to compliance thereof.
DISBURSEMENT OF LOAN:
Loan is disbursed as per terms of sanction. In most cases in the combination of
promoter’s margin money and bank’s sanction money.
POST DISBURSEMENT MONITORING OF ADVANCES/LOANS:
Through regular follow-up, review, renewal, periodic inspection, study of reports,
drawing power calculation, collection of fresh loan documents as per Limitation Act,
extension of mortgage, etc
CLASSIFICATION OF LOANS & ADVANCES

Assets for a bank are the loans and Advance given to the borrower. Loan can be
classified as follows –
NON PERFORMING ASSETS
The business of banking essentially involves intermediation-acceptance of deposits and
channeling these deposits in to lending activities. Since the deposits received from the
depositors have to be repaid to them by the bank, they are known as banks’ ‘Liabilities’
and as the loan given to the borrowers are to be received back from them, they are
termed as banks’ ‘Assets’ so assets are banks’ loans and advances.
In the traditional banking business of lending financed by deposits from customers,
Commercial Banks are faced with the risk of default by the borrower in the payment of
either principal or interest. This risk in banking parlance is termed as ‘Credit Risk’ and
accounts where payment of interest and /or repayment of principal is not forthcoming
are treated as Non-Performing Assets, as per the Reserve Bank of India, an asset,
including a leased asset, becomes non-Performing when it ceases to generate income
for the bank. Existence of Non-Performing Asset is an integral part of banking and
ASSET
STANDARD
OR
PERFORMING
STANDARD
BUT
POTENTIAL
NON
PERFORMING
ASSETS
SUB-
STANDARD
DOUBTFUL LOSS

every bank has some Non-Performing Assets in its advance portfolio. However, the
high level of NPA is a cause of worry to any financial institution.
SUBSTANDARD ASSETS
With effect from 31 March 2005, a substandard 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 banks
will sustain some loss, if deficiencies are not corrected.
DOUBTFUL ASSETS
With effect from March 31, 2005, an asset would be classified as doubtful if it has
remained in the substandard 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.
Doubtful Classification as per new RBI norms
A loan classified as doubtful has all the weaknesses of loans classified as sub-standard
with the added characteristics of weakness making collection or liquidation in full,
highly questionable on the basis of currently known facts, conditions and value of
security, classify as doubtful assets, value of securities (both primary and collateral)
validity charged to the bank should be more than 10% of the outstanding balance
shown in the ledger section of NPA ledger.
An NPA need not go through various stages of classification in cases of serious credit
impairment and such asset should be straightaway classified as doubtful or loss asset
as appropriate. Erosion in the value of security can be reckoned as significant when the
value of security is less than 50% of the value assessed by the bank or accepted by the

RBI at the time of last inspection as the case may be. Such NPAs may be straightaway
classified under doubtful category and provisioning should be made as applicable to
doubtful assets. If the realizable value of the security as assessed by the Bank or RBI is
less than 10% of the outstanding in the borrower accounts, the existence of security
should be ignored and the asset should be straightaway classified as loss asset.
Doubtful Classification
DOUBTFUL
CATAGORY
PERIOD
D-1 Account remains doubtful for up to one year.
D-2 Account remains doubtful for more than one year and up to
three years.
D-3 Account remains doubtful for more than three years.
LOSS ASSETS
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.
Accounts, where guarantee from ECGC/CGTSI are available, should not be classified as
loss assets, unless the claims are not enforceable. Such NPA accounts should be
classified as sub-standard or doubtful depending upon the period/age of NPA.
PROVISION ON TYPES OF ASSETS
Sl Types of assets Provisions
1 Standard Assets 0.25% for all types of standard assets*
2 Sub-standard Assets 10% for all types of standard assets
3 Doubtful Assets
Up to one year 100% of unsecured advance and 25% of secured
advance
One to three year 100% of unsecured advance and 40% of secured

advance
More than three year 100% of unsecured advance and 100% of secured
advance
4 Loss Assets 100% of unsecured advance and 100% of secured
advance
*0.25%, 0.40%, 0.75% depends on the segments and sector.
IMPACT OF NPA IN BALANCE SHEET OF THE BANK
As per RBI regulations, banks are supposed to book costs (provisions) in the head of
"Credit-costs" for all such loans. A minimum percentage is specified by RBI guidelines.
For e.g., the guideline may state that for all personal loans unpaid for 90 days or more,
a minimum 10% of outstanding to be earmarked as Provisions.
The problem of NPAs in the Indian banking system is one of the foremost and the most
formidable problems that had impact the entire banking system. Higher NPA ratio
trembles the confidence of investors, depositors, lenders etc. It also causes poor
recycling of funds, which in turn will have deleterious effect on the deployment of
credit. The non-recovery of loans effects not only further availability of credit but also
financial soundness of the banks.
Profitability: NPAs put detrimental impact on the profitability as banks stop to earn
income on one hand and attract higher provisioning compared to standard assets on
the other hand. On an average, banks are providing around 25% to 30% additional
provision on incremental NPAs which has direct bearing on the profitability of the
banks.
Asset (Credit) contraction: The increased NPAs put pressure on recycling of funds and
reduces the ability of banks for lending more and thus results in lesser interest income.
It contracts the money stock which may lead to economic slowdown.
Liability Management: In the light of high NPAs, Banks tend to lower the interest rates
on deposits on one hand and likely to levy higher interest rates on advances to sustain
NIM. This may become hurdle in smooth financial intermediation process and hampers
banks’ business as well as economic growth.

Capital Adequacy: As per Basel norms, banks are required to maintain adequate
capital on risk-weighted assets on an ongoing basis. Every increase in NPA level adds to
risk weighted assets which warrant the banks to shore up their capital base further.
Capital has a price tag ranging from 12% to 18% since it is a scarce resource.
Shareholders’ confidence: Normally, shareholders are interested to enhance value of
their investments through higher dividends and market capitalization which is possible
only when the bank posts significant profits through improved business. The increased
NPA level is likely to have adverse impact on the bank business as well as profitability
thereby the shareholders do not receive a market return on their capital and sometimes
it may erode their value of investments. As per extant guidelines, banks whose Net NPA
level is 5% & above are required to take prior permission from RBI to declare dividend
and also stipulate cap on dividend payout.
Public confidence: Credibility of banking system is also affected greatly due to higher
level NPAs because it shakes the confidence of general public in the soundness of the
banking system. The increased NPAs may pose liquidity issues which is likely to lead
run on bank by depositors. Thus, the increased incidence of NPAs not only affects the
performance of the banks but also affect the economy as a whole.
In a simple words, the high incidence of NPA has cascading impact on all important
financial ratios of the banks viz., Net Interest Margin, Return on Assets, Profitability,
Dividend Payout, Provision coverage ratio, Credit contraction etc., which may likely to
erode the value of all stakeholders including Shareholders, Depositors, Borrowers,
Employees and public at large.
CHECKPOINTS FOR NPA MANAGEMENT
1. Ensure that account is classified as NPA as per RBI guidelines.
2. Ensure Adequate Provisioning as per RBI guidelines.
3. Check the availability of Security either in the form of Immovable property or
Movable Property.
4. Ensure that debts security/loan documents are not time barred as per Limitation
Act, 1963.

5. Ensure valuation of the property from a qualified valuer.
6. Ensure updating of Customer Profile with addresses, contact points, etc so that
all correspondence reaches the borrowers.
MANAGEMENT OF NPA
Studies have shown that management of NPAs rather than elimination is prudent. The
management of impaired assets is both a complicated and important aspect of the
bank insolvency process, especially where the problem is systematic. Effective
management of these assets may create far greater value over the longer term than
would be achieve by an immediate sell off, but of course poor management could have
the opposite effect. Indeed, in many systematic banking crises in recent years it is not
an exaggeration to say that the amount and scale of impaired assets and especially
NPAs has meant that liquidators have been unable to deal with them effectively.
Because of the nature of NPAs the normal liquidation approach under the corporate
insolvency laws of the country concerned will often be insufficient to provide an
effective collection and disposal mechanism. This is because it will usually be a
complex, time-consuming and resource-intensive process, to collect what is owed from
these borrowers and the immediate disposal of impaired loans will often not be
possible due to a lack of potential purchasers.
To manage NPAs UCO Banks have to apply the following approaches –
DIRECT METHODS
 Up gradation of accounts
 Rescheduling and restructuring of accounts
 Cash Recovery
 Follow up-TELEPHONE/LETTERS
 Compromise/One Time Settlement
 Recovery Agents/Enforcement Agents
 Lokdalat
 Filing of Suit
 Recovery through selling securities, SARFAESI Act 2002
 Sale to Asset reconstruction Company (ARC)

 Write off
INDIRECT METHODS:
 Liquidation of Company/Declaration of Bankruptcy
 BIFR-Declaration of Sick Industries by Hearing before Board-Sale
 Claim from CGTSME
 Claim from ECGC
 Adjustment of Govt. Subsidy
 Adjustment of Insurance Claim(Vehicle, Fire, Stock, Theft,Housing,Life,etc)
 Adjustment of Liquid Securities-FDR/RD/Savings /NSC/KVP-Cash Recovery
UPGRADATION OF ACCOUNTS :
The sub-standard accounts which have been subjected to restructuring etc, whether in
respect of principal installment or interest amount, by whatever modality would be
eligible to be upgraded to the standard category only after the specified period that is,
a period of one year after the date when first payment of interest or of principal,
whichever is earlier falls due, subject to satisfactory performance during the period. The
amount of provision made earlier, net of the amount provided for the sacrifice in the
interest amount in present value terms as aforesaid, could also be reversed after the
one year period. During this one year period, the sub-standard asset will not
deteriorate in its classification if satisfactory performance of the account is
demonstrated during the period.
In case, however, the satisfactory performance during the one year period is not
evidenced; the asset classification of the restructured account would be governed as
per the applicable prudential norms with reference to the pre-structuring payment
schedule.
CASH RECOVERY :
Recovery of overdue amount excepting the same through compromise settlement is
considered under this category. Such process is normally considered only when up-
gradation is not possible and restructuring is also not feasible and the borrower is

agreed to pay in installments or in one stroke (even through disposal of secured
assets/properties).
Personal visit to the borrower and persuasion for recovery of dues is the approach that
the branches have to make regularly. List of defaulter borrowers is to be prepared and
recovery notices are to be served at regular interval.
Recovery camps are also organized and for the said purpose, local agencies like
Panchayats/Municipalities, Block Offices etc are involved and wide publicity for
recovery of dues is made.
With the introduction of the SARFAESI Act, 2002, the bank is taking possession of
securities and the same is being disposed of for recovery of dues. The sale proceeds are
deposited in the borrower account and the amount thus recovered is considered as
cash recovery.
FOLLOW UP :
When a new account enters in the NPA classification (fresh NPA account), first thing
Bank has do is to follow up with the borrower (Letters are send to the borrower,
Telephone calls are made and Personal visits are also done).
RECOVERY AGENTS :
Recovery agents are those who are engaged to recover the bad debt or the dues from
the borrower.
RBI GUIDELINES REGARDING ENGAGEMENT OF RECOVERY AGENTS :
According to the RBI, banks should have a due diligence process in place for
engagement of agents, which should be show structured to cover individuals involved
in the recovery process.
“While forwarding default cases to agents, bank should inform the borrower the details
of agents engaged for the purpose. The details should include their telephone number
etc. The agents should call the borrowers only from notified telephone numbers,” the

RBI said, while inviting public comments on the draft norms. It will announce the final
norms within a short while.
It also said each bank should have a mechanism whereby the borrowers’ grievances,
with regard to the recovery process, can be addressed.
Details of the mechanism should also be furnished to the borrower. “Banks are advised
to ensure that contracts with agents don’t induce adoption of uncivilized, unlawful
questionable behavior or recovery process”.
“Agents should not resort to intimidation or harassment, including acts intended to
humiliate or intrude in to the privacy of the borrowers’/credit card holders’ family
members, referees and friends, making threatening and anonymous calls or making
false and misleading representation”, the RBI said.
On repossession of property mortgage or hypothecated to banks, the RBI said banks
should rely only on legal remedies (SARFAESI Act, 2002) available under the relevant
statues which allows banks to enforce the security interest without the court’s
intervention.
If banks have to incorporate repossession clause in the contract with the borrower, they
should ensure that this clause is legally valid, and the procedure of repossession, sale or
auction, terms and conditions are clearly brought to the notice of the borrower at the
time of execution of the contract.
The RBI has asked the Indian Banks’ Association to formulate, in consultation with
Indian Institute of Banking and Finance (IIBF), a certificate course for direct sales agents,
direct marketing agents and recovery agents with minimum 100 hours of training.
“Once the course is introduced, banks should ensure that over a period of one year all
their recovery agents undergo training. The service providers engaged by banks should
employ only such personnel who have undergone the training and obtained the
certificate from the IIBF”, the RBI said.
Banks should preferably use the forum of LOK ADALAT for recovery of personal loans,
credit card loans or housing loans with less than Rs 10 Lakh as suggested by the
Supreme Court, the RBI said. In the case of violation of rules, the RBI may consider

imposing a bank from engaging recovery agents in a particular area for a limited
period.
In case of persistent breach of guidelines, the RBI may consider extending the period or
the area of bank. Similar supervisory action could be attracted when the High Courts or
the Supreme Court pass structures or impose penalties against any bank or its
directors, officers or agents with regard to policy, practice and procedure related to the
recovery process.
LOK ADALAT
It is a recovery process. The Indian Banks Association (IBA) has been issuing guidelines
to member institutions for taking up of cases for settlement through Lok Adalats for
upto 20 lakh of loan amount. There are certain advantages in using the forum of Lok
Adalats by banks and financial institutions in compromise settlement of their NPAs.
There is no court fees involved when fresh disputes are referred to it. It can take
cognizance of any existing suit in the court as well as look into and adjudicate upon
fresh disputes. If no settlement is arrived at, the parties can continue with court
proceedings. Its decrees have legal status and are binding. According to Reserve Bank
of India data, in 2011-12, scheduled commercial banks referred 4,76,073 loan recovery
cases aggregating Rs. 1,700 crore to Lok Adalats. They recovered Rs. 200 crore via this
channel. The ratio of the amount recovered to the amount referred to works out to 11.8
per cent.
SALE OF ASSETS:
Since, the bank is has a business model with numerous core-banking & non-core
banking activities, it becomes difficult for banks to given special attention towards NPA
management or have a Recovery driven business process.
Thus, the bank may undertake sale of assets(loans & advances) to specialized
companies with expertise in NPA management/stressed asset management. These
specialized companies are known as Asset Reconstruction Companies/Asset Sale

Companies. The whole process is as per RBI guidelines in the matter and covers large
borrowers with security values Rs. 1 Crore & Above.
ASSET RECONSTRUCTION COMPANY :
The securities (bonds and debentures) offered by ASC/ARC should satisfy the following
conditions :
 The securities must not have a term in excess of six years,
 The securities must carry a rate of interest, which is not lower than 1.50% above the
bank rate in force at the time of issue.
 The securities must be secured by appropriate charge on the asset transferred.
 The securities must provide for part or full pre-payment in the event the ASC/ARC
sells the assets securing the security before the maturity date of the security.
 The commitment of the ASC/ARC to redeem the securities must be unconditional
and not linked to the realization of the assets.
 Whenever the securities are transferred to any other party, notice of transfer should
be issued to the ASCs/ARCs.
PROCESS OF SALE:
 Identify the account for sale
 Call for expression of interest from ARCs
 Conducting due diligence (Conduct by ARC)
 Reserve price fixation by recovery department.
 ARC to submit financial bid to the bank.
 Bid opening and assignment of account to highest bidder.
 If highest bid is below reserve price then bank will negotiate with ARC for
improvement in their offer to match the reserve price.
 Send to the Board of Director of the UCO Bank for approval for assignment of
account to ARC.
 If approved by the Board of Director of the Bank the Bank will assign the account to
ARC by executing assignment agreement.
 After execution of assignment agreement bank will hand over all the financing
(original) documents to the ARC pertaining to the account assigned.

 ARC will issue Security Receipt (SR) to the bank equivalent to the bid amount
quoted by them.
 ARC will contribute 15% in the SR and remaining 85% shall be contributed by a
qualified institutional buyer or the UCO Bank itself.
 ARC will create a trust account and recovery will be routed through this trust
account only.
ACCOUNTING PROCEDURE
When the bank will sell its financial assets to ASC/ARC, on receipt of the payment from
the ASC/ARC, the same will be removed from the books as NPA and will be considered
as investment only.
If the sale to ASC/ARC be at a price below the net book value (NBV) i.e. book value –
provision held, the short fall should be debited to the profit and loss account of that
year. In case of accounts where outstanding balance has been written off partially or
fully, the amount of bad debts written off will be considered fully provided for and net
book value will be decided accordingly.
If the sale is for a value higher than the NBV, the excess provision will have to be
reserved and the face value of the investment receipt will be increased against the
book value and will be taken into profit at actual realization.
When the bank invests in the security receipts/pass through certificates issued by
ASC/ARC in respect of the financial assets sold to them, the sale shall be recognized in
the book of the bank at the lower of :
 The redemption value of the security receipts/pass through certificates and
 The NBV of the financial assets.
The above investment should be carried in the books of the bank at the price as
determined above till its sale or realization, and on such sale or realization, the loss or
gain must dealt with in the same manner.
ACTION POINTS FOR CASH RECOVERY :

 UCO Bank prepares list of NPA borrowers inclusive of written off debts and amount
of overdue there-against. The lists are compiled village-wise, ward-wise etc.
 Demand notices are served at regular intervals.
 List of such defaulting borrower are handed over to the respective
Panchayat/Municipalities seeking their assistance for recovery of dues.
 Regular recovery camps/settlement camps are organized on pre determined date.
 Recovery campaign are made through loudspeaker in the prominent places/market
etc.
 In certificate cases, the Tehsildar/Amin are contacted regularly and there involved in
the recovery process.
 All employees are involved in the process of recovery.
 Execution proceedings in decreed debts are to be made for disposal of the assets
for recovery of bank dues.
 The Government of India has enacted the SARFAESI Act, 2002, for recovery of dues
in secured NPA accounts. The provisions of the act are invoked in all eligible NPA
accounts where ever validly charged securities are available. Notices are served to
each eligible borrower and possession of the asset is taken in each case. The asset
under possession is disposed of through compliance of required procedural
formalities. Regular follow up and review of development/progress of actions taken
under the SARFAESI Act, 2002 are made. Since the action points are time framed
and steps are to be followed one by one, continuity of steps is essential.
THE SECURITIZATION & RECONSTRUCTION OF FINANCIAL ASSETS &
ENFORCEMENT OF SECURITY INTEREST ACT, 2002
OBJECT CLAUSE OF THE ACT:
An Act to regulate-
1. Securitisation;
2. Reconstruction of financial assets; &
3. Enforcement of security interest;
IMPORTANT DEFINITIONS UNDER THE ACT:

Securitisation
As per section 2 (z) "securitisation" means acquisition of financial assets by any
securitisation company or reconstruction company from any originator, whether by
raising of funds by such securitisation company or reconstruction company from
qualified institutional buyers by issue of security receipts representing undivided
interest in such financial assets or otherwise.
ENFORCEMENT OF SARFAESI ACTION BY UCO BANK
Prior to 2002, there was no option for the banks to recover its dues by enforcing the
security other than through a court/tribunal. Hence, the purpose of this Act is to
empower the banks/FIs to take possession of the secured assets of the borrower
including the right to transfer by way of lease, assignment or sale for realizing the
secured assets without the interference of Courts/Tribunals. Thus, the SARFAESI Act has
been largely perceived as facilitating asset recovery and reconstruction.
The Act stipulates four conditions for enforcing the right by secured creditors:
a) The debt should be a secured debt.
b) The debt should be classified as NPA as per RBI norms.
c) The outstanding dues/debts are Rs. 1 Lac or above and more than 20% of the
principal loan amount and interest thereon.
d) The security to be enforced is not an Agricultural land.
The position in case of Consortium Advances/Joint Financing/Financing by more
than one secured creditor
As per the latest Amendment to the Act (wef. 15.01.2013) in case of financing of asset
by more than one secured creditors or joint financing of a financial asset by secured
creditors, the ceiling to initiate recovery steps under SARFAESI Act has been reduced to
60% from 75% of the amount outstanding as on record date and such action shall be
binding on all the secured creditors.
Members in the consortium have to give their consent for the purpose.
Consent can be obtained prior to or subsequent to the initiation of the proceedings.

Action taken by individual creditor who is having 60% share will be binding on all the
secured creditors.
 First Step followed by UCO Bank under SARFAESI Act, 2002.
 To issue a Demand Notice under Section 13 (2). The notice must be specifically
scribed with “Notice Issued under Section 13 (2) of SARFAESI Act. The notice is to be
issued to the borrower, co-borrowers and guarantors, irrespective of the fact that
the security against which action is contemplated is in one or more names.
 The position of SARFAESI Act when securities are not available : SARFAESI Act
intends to proceed against the securities only. Hence, in the absence of securities,
other modes of recovery are to be initiated viz, civil suit, Revenue Recovery, DRT etc.
 The Securities against which SARFAESI action can be initiated : SARFAESI
proceedings can be initiated against movable and immovable properties, viz,
Mortgaged properties, hypothecated movable items etc, given as security. Section
13 (1) provides that Notwithstanding anything contained in Section 69 or Section 69
A of the Transfer of Property Act, 1882 (4 of 1882), any security interest created in
favour of any secured creditor may be enforced, without the intervention of the
court or tribunal, by such creditor in accordance with the provisions of this Act.
 Authorized officer to issue notice under SARFAESI Act : As per the Security
Interest (Enforcement) Rules, 2002 rules 2 (a) “authorized officer” means an officer
not less than a Chief Manager of Public Sector Bank or equivalent, as specified by
the Board of Directors or Board of Trustees of the secured creditor or any other
person or authority exercising powers of superintendence, direction and control of
the business or affairs of the secured creditor, as the case may be, to exercise the
rights of a secured creditor under the Act.
 How 60 days time will be calculated by the UCO Bank under SARFAESI Act,
2002?

Prepare a statement (panchnama) specifying the name/ Father’s name, age, address,occupation of
witness.
Authorised Officer with two witnesses has to enter the premises.
The 60 days time is to be calculated from the date of notice and not from the date of
Service of the notice. (However, in order to avoid legal complexities, it is safer to
calculate the date from date of acknowledgement).
 The recourses on expiry of 60 Days and non settlement of the dues :
In case the borrower fails to discharge his liability in full within 60 days of Demand
Notice, the secured creditor may take recourse to one or more of the following
measures to recover the secured debt under section 13 (4) Take possession of the
secured assets of the borrower including the right to transfer by way of lease,
assignment or sale for realizing the secured assets. Take over the management of the
business of the borrower including the right to transfer by way of lease, assignment or
sale for realizing the secured assets.
Appoint any person (hereinafter referred to as the manager), to manage the secured
assets, the possession of which has been taken over by the secured creditor.
Require at any time by notice in writing, any person who has acquired any of the
secured assets from the borrower and from whom any money is due or may become
due to the borrower, to pay the secured creditor, so much of the money is sufficient to
pay the secured debt.
The procedure to be followed to obtain the assistance of District Magistrate or
Chief Metropolitan Magistrate
As per the recent insertion of Section 14 (1) with effect from 15.01.2013, the application
by the bank to CMM or DM for the purpose of taking possession or control of secured
asset shall be accompanied by an affidavit duly affirmed by the authorized officer
declaring the aggregate amount of financial assistance granted, the total claim of the
bank on the date of filing the application, compliance of the provisions of the Act and
Rules, etc. The requirement of filing affidavit is not applicable to the pending
proceedings already filed before CMM/DM. Earlier, there was no statutory requirement
of filing affidavit by the Authorized Officer of Secured Creditor before the CMM or DM
and the secured creditor had to file only application for taking possession or control of
secured assets.
 How to Take Possession in the Case of Movable Assets?

Effect sale by
the following
modes
Obtaining
quotation
Inviting
tenders
Public
Auction
By Private
Treaty
 Requirement of Notice : 30 days notice of Sale is required.
 Publication of notice : If auction is other than with consent of the borrower (by
public auction or by inviting tender), notice of sale has to be published in two news
papers of which one should be in vernacular language.

Authorized officer is responsible to preserve and protect the property once it is taken
possession (Insure if necessary).
On taking actual possession, the property should be kept under the custody of the authorized
officer or persons appointed by him.
Possession notice shall also be published in two news-papers(one in vernacular language) in
any case not later than Seven days from date of possession.
By affixing the possession notice on the outer door or at such conspicuous place of the
property.
By delivering possession notice in prescribed format to the borrower.
Authorized Officer preferably with two witnesses (not mandatory) may enter the property.
 The details required in the Sale Notice of movable Property
As per rule 6, the following details are required in Sale Notice:
o Details about the borrower and the secured creditors;
o Description of movable secured assets to be sold with identification marks or
number , if any;
o Reserve price, if any, and the time and manner of payment;
o Time and Place of public auction;
o Earnest money, if any, to be deposited;
o Any other material facts.
 Finalization of Sale : As per rule 7, the authorized officer on payment of sale price
shall issue a certificate of sale in prescribed form specifying the movable secured assets
sold, price paid and the name of the purchaser and thereafter the sale shall become
absolute. In the event of default of payment, the movable secured assets shall be liable
to be sold again.
 The formalities for taking possession of Immovable properties

Sale
By obtaining
quotation
Inviting
Tenders from
the Public
By holding
Public
Auction
By Private
treaty
 The possession notice has to be published in two news papers (one in
vernacular) within 7 days of taking possession of the property. (Rule 8)
 The Authorized Officer may affect sale wholly or in part. (Rule 8)
 What are the modes of UCO Bank for Sale?
Sale can be affected in the following modes:
 Reserve price is fixed based on the forced sale value and market value of the
property and its demand.
 The property will not be sold for a value less than the Reserve Price.
 Only with the written consent of borrower/mortgagor, the property can be sold
for a lesser price on the date of sale already fixed.
 On every sale of immovable property, the purchaser shall immediately pay a
deposit of twenty-five percent of the amount of the sale price and balance
amount of purchase price payable shall be paid by purchaser on or before the
fifteenth day of confirmation of sale (Rule 9)

 Cases in which Provisions of SARFAESI Act will not be applicable?
The provisions of the Act are not applicable in the following cases:
o A lien on any goods, money or security given by or under the Indian Contract
Act, 1872 or the Sale of Goods Act,1930 or any other law for the time being in
force;
o A pledge of movables within the meaning of section 172 of the Indian Contract
Act,1872;
o Creation of any security interest in any aircraft as defined in clause (1) of section
2 of the Aircraft Act,1934;
o Creation of security interest in any vessel as defined in clause (55) of section 3 of
the Merchant Shipping Act,1934;
o Any conditional sale, hire-purchase or lease or any other contract in which no
security interest has been created;
o Any rights of unpaid seller under section 47 of Sale of Goods Act, 1930;
o Any properties not liable to attachment (excluding the properties specifically
charged with the debt recoverable under this Act) or sale under the first proviso
to sub-section (1) of section 60 of the Code of Civil Procedure, 1908;
o Any security interest for securing repayment of any financial asset not exceeding
one lakh rupees;
o Any security interest created in agricultural land;
o Any case in which the amount due is less than twenty per cent of the principal
amount and interest thereon.

DEBT RECOVERY TRIBUNAL
DRT : DRT is a recovery process with the intervention of the court. DRT is applicable
when the debt amounts will greater than 10 lakh.
Act and its purpose
The Act is commonly referred to as the DRT Act. It has been enacted to provide for
setting up of Tribunals for expeditious adjudication and recovery of debts due to Banks
and Financial Institutions and other related matters.
1. History of the Act
 Prior to this Act, Banks had to file a Suit in Civil Courts for recovery irrespective
of the amount involved.
 The Civil Courts were over flooded with such matters resulting in delay in
adjudication of Bank’s claim. This delay at time lead to loss in value of assets
charged to Bank.
 Banks were forced to write off big debts on account of futility of recovery
process.
 In 1981, the Tiwari Committee suggested setting up of special tribunals for
recovery of dues by Banks and FIs by following summary procedure.
2. Genesis of the Act
 The Narasimham Committee also considered setting up of financial tribunals
with special powers for speedy recovery of dues by the Banks and Financial
Institutions.
 This led to enactment of the law on Recovery of Debts Due to Banks and
Financial Institutions in 1993.

 The object of this Act is to provide for the establishment of Tribunals and
Appellate Tribunals for expeditious adjudication and recovery of debts due to
Banks and Financial Institutions.
3. Applicability
 The act extends to whole of india (except the State of Jammu & Kashmir).
 It has come into force w.e.f. 24/06/1993.
 The provisions of this Act do not apply where amount of debt due to
Bank/FI/Consortium of Banks or FIs is less than Rs.10.00 lacs (Rupees Ten Lacs).
4. Purpose
 It provides us a Tribunal for fast, and speedy recovery of debts due to Bank.
5. Appointment of Receiver and Power to Remove any Person from Possession
or Custody of the Property.
 Sec. 19 (18) empowers Tribunals that where it appears to be just and convenient
to appoint a receiver of any property before or after grant of certificate for
recovery of debt.
 To remove any person from the possession or custody of the property.
 Commit the same to the possession, custody or management of the receiver.
 Appoint a Commissioner for preparation of an inventory of the properties of the
defendant or for the sale thereof.
6. Final Order
 The DRT, may, after giving the applicant and the defendant an opportunity of
being heard, pass such interim or final order.
 The application before DRT shall be disposed of finally within 180 days from the
receipt of the application (Section 19 sub sec.24).
 The Tribunal shall send a copy of each order passed by it to the parties.
7. Certificate to Recovery Officer

 The Presiding Officer shall issue a CERTIFICATE under his signature on the basis
of the order of Tribunal to Recovery Officer for recovery of amount of debt
specified in the Certificate.
 The Recovery Officer, on receiving the Certificate, proceeds to recover the
amount of debt specified in Certificate.
8. Modes of Recovery of Debt
The Recovery Officer, on receipt of copy of Certificate shall recover in the
following ways:
 attachment and sale of property of the defendant
 arrest of the defendant and his retention in prison.
 appointing a receiver for the management of the properties. (Section 25)
The Recovery Officer, may, without prejudice to modes given in Section 25,
recover the debt also by : Requiring any person, from whom any amount is due
to the defendant, to deduct the said amount from the said amount and pay the
sum to the credit of Recovery Officer. [Sec 28(2)] Further, such order can be
issued where money is due or may become due to the defendant [Sec 28(3)].
Notice to declare on affidavit particulars of assets [Sec 28 (4A)]. APPEALS against
orders of Recovery Officer lies before the Tribunal within 30 days from the date
on which a copy of order is made available to the person aggrieved by the said
order.
9. Manner of Recovery of Debts
After the PO, Debts Recovery Tribunal has passed an order ascertaining the
amount which the defendant is liable to pay to the Bank, he–
 Sends a copy of such order to the Applicant Bank ;

 Prepares a Certificate of Recovery on basis of the order referred to in (a) above ;
 Forwards the said Certificate of Recovery to the Recovery Officer concerned for
recovery of the amount of debt specified therein.
Once the above three processes are carried out, the role of Recovery Officer
comes to fore. Thereafter, he proceeds to recover the amount of debt specified
in the Certificate.
10. Appeal before DRAT
 Appeal before DRAT shall lie within 45 days from the date of copy of order made
by DRT.
 DRAT shall pass orders after giving opportunity of being heard to both the
parties.
 75% of the amount of debt due should be deposited with the DRAT before filing
an appeal where the appeal is by borrower/guarantor
(Section 21).
RECENT DEVELOPMENT
E-Auctions by DRTs.
Ministry of Finance vide its letter no. 3/1/2012-DRT dated 13/06/2012 addressed to the
Presiding Officers of All DRTs directed the DRTs to conduct all auction electronically
and the concerned banks shall arrange e-auction platform and pay for it as they are
paying for the advertisement. But such process cannot be adopted in all circumstances
and in all situations by the Debt Recovery Tribunals. The Debt Recovery Tribunals are,
therefore, directed to adopt the process of e-auction in the case of properties, which
are being sold in municipal areas, where the computer knowing personnel would be
available to participate in the process, it should be treated as a preferred mode of
auction. But in C.W.P.No.21862 of 2012 in respect of properties situated in rural areas,
where the exposure to the computers is less, we leave it to the discretion of the Debt

3%
4%
5%
6%
% OF Gross NPA to Gross
advance
% OF Net NPA to Net advance
Recovery Tribunals to order e-auction as it may consider appropriate. Even after
adopting e-auction, if the Tribunals find that the response is not adequate or for any
other reason, the Tribunals are free to choose such method as it may consider
appropriate for sale of property of the defaulters. With the said directions and
observations, the present writ petition stands disposed of.”
EMPIRICAL ANALYSIS OF NPA FOR LAST 5 YEARS
PARTICULARS 2010 2011 2012 2013 2014
Gross Advance 83371.48 100560.97 117504.7 131469.07 153163.18
Gross NPA 1666.43 3150.36 4086.20 7130.09 6621.37
% of Gross NPA to
Gross Advance
2.00% 3.13% 3.48% 5.42% 4.32%
Net Advance 82671.33 99235.16 115533.49 128270.83 149576.10
Net NPA 966.28 1824.55 2263.94 4069.31 3556.43
% of Net NPA to Net
Advance
1.17% 1.84% 1.96% 3.17% 2.38%
Fresh Generation 1109.03 2729.87 2392.64 5157.52 4363.387
% Fresh Generation
to Gross NPA
66.5513% 86.65265% 58.55416% 72.33457% 65.89855%
RECOVERY
Cash Recovery 399.28 433.70 658.11 827.93 2014.87
Up-gradation 212.00 225.91 416.66 672.54 1032.00
Total Recovery 611.28 659.61 1074.77 1500.47 3046.87

0
500
1000
1500
2000
2500
3000
3500
4000
4500
2010 2011 2012 2013 2014
Net NPA
Recovery
OBSERVATION

1. After analyzing the data of last four year we can find that Net advance of UCO
Bank increased from Rs. 82671.33 in 2010 to Rs. 149576.10 in 2014 and also
increased the Net NPA from 2010 to 2014.
2. Gross advance increased 20.61% from 2010 to 2011, 16.85% from 2011 to 2012,
11.88% from 2012 to 2013 and 16.50% from 2013 to 2014. So the increased was
high in the year 2010 to 2011 but there was small change in the successive year.
3. Gross NPA correspondingly increased by 297.34% from 2010 to 2014.
4. Net NPA has increased by 268.05% from 2010 to 2014.
5. Fresh generation of NPA of Rs 1109 Cr, during 2010 has increased to Rs 4364 Cr
in the year 2014, thus nearly fourfold increased.
6. However % of fresh generation to Gross NPA is mentioned below the level of
2010.
7. Cash Recovery and Up-gradation has increased by 500% from figure of 2010 to
2014.
SECTOR WISE ANALYSIS
IN DEPTH ANALYSIS OF PRIORITY SECTOR
Why I chose priority sector?
The main reason for opting for Priority Sector analysis is because approximately 70% of
UCO Bank’s branches are in the rural and semi-urban area. So the bank is So there is
lesser scope of providing loans to the Non-Priority Sector.
Priority sector has a large effect in Indian Economy. RBI suggests that 40 percent of
Adjusted Net Bank Credit [ANBC] or Credit Equivalent Amount of Off-Balance Sheet
Exposure, whichever is higher should be lending in the Priority Sector by Scheduled
Commercial banks. Foreign banks with 20 branches and above have to achieve the
Total Priority Sector Target within a maximum period of five years starting from April 1,
2013 and ending on March 31, 2018 as per the action plans submitted by them and
approved by RBI.

Priority sector lending scheme is a policy of alloting specified portion of bank lending
to the important sectors of the Indian economy. It includes agriculture small scale
industries, cottage sector, tiny sector, export sector and all small business firms. The
Reserve Bank of India initiated priority lending scheme in India, where the main
purpose of the scheme was to see that timely and sufficient credits/loans are given to
the priority sector. Previously, only Public Sector Banks (PSBs) where ask to give loans
to priority sector. However, now even private and foreign banks have to give loans to
this sector. So, it is very important for me to analyze the loan amount of the priority
sector and NPA level of the priority sector of UCO Bank.
Agriculture is the principal source of livelihood for more than 58% of the population of
this country. Agriculture provides the bulk of wage goods required by non-agriculture
sectors and most of the raw materials for the industries sector. The latest government
estimate, released on Wednesday, put the figure of total food-grain production during
2014-15 crop years (July-June period) at 251.12 million tons (MT) which are lower by
13.92 MT than the last year’s record food-grain production of 265.04 MT.
IMPACT ON INCOME IN INDIA (AS PER SOURCES)
 The average pre loan income in the agriculture sector was Rs.833 and in
the post loan period it has increased to Rs.3458.
 In the SSI (Small Scale Industries) sector it has increased from Rs.656 to
Rs.3944.
 In Government sponsored in programs the average income has improved
from Rs.500 to Rs.2062.
 In other territory sector, the increase was from Rs.1180 to Rs.4413.
 On the whole the average pre loan income was Rs.760 and in the post
loan period it was Rs.3212.
NABARD
NABARD is National Bank for Agricultural and Rural Development. It was
established on 12 July, 1982 to promote sustainable and equitable agriculture and

rural prosperity through effective credit support, related service, institutional
development and other innovative initiative.
OBJECTIVES
1. Refinance, support to Rural Financial Institutions (RFIs). Mainly to co-
operative bank and Regional Rural Banks for Seasonal Agricultural
Operations, Handloom Weavers, Marketing Operation etc.
2. Loans to State Government for creating rural infrastructure from Rural
Infrastructure Development Fund (RIDF).
3. Loans for creation of warehousing infrastructure to State Government,
State of Central Government.
4. Direct lending to state owned institutions/corporation, co-operatives,
producers organizations etc. under NABARD infrastructure Development
Assistance (NIDA).
CAUSES OF NPA IN PRIORITY SECTOR
1. Farmers face difficulty in the repayment of loan due to crop failure. Indian
farmers are mainly dependent on monsoon. Therefore the major cause of crop
failure is the natural calamities.
2. In the MSE, sometimes people are not uses the proper machinery that’s why
they are not able to manufacture the products.
3. Majority of the farmers still follow the traditional method of farming even
though the technology is advanced. This will also contribute to reduction in the
crop output.
4. Lack of labors at the right time to carry out the required operation will lead to
delay in the harvesting of crops or manufacturing the product which in turn
contributes to the crop or product destruction.

5. After taken the loan students are failed to achieve the good performance, so
they do not get the proper job.
6. Lack of inputs like the seeds quality, availability and bio-fertilizers will also
contribute to reduction in output.
7. To get a very high yield it is necessary to sow the crop that is suitable to the
land. Mismatch between the crop and the cultivating land will also lead to crop
failure.
8. Some of the crops need an adequate supply of water for their growth. In these
cases lack of irrigation facility will also lead to crop failure.
9. Pests and diseases to the crops will lead to crop failure.
10. One more reason contributing to reduced profitability is the decrease in the
marketability of the product due to i) low quality product or ii) bulk production.
11. Apart from inbound problems the personal obligation of the farmer and also the
family commitments will also lead to the non-repayment/delayed payment of
loan. For ex: Marriage, Funeral etc.
12. Sometimes the borrowers are believed that the government will bail them out in
case of trouble and so they continue to take high risk.
13. Political peoples are sometimes force the recovery camp to move out from the
area.
14. Steep interest rate rise turned a lot of loans into NPAs.
Assets are become NPA in agriculture sector due to lack of monitoring.
AREAS UNDER PRIORITY SECTOR

Agriculture Sector
Micro/Small.MediumScale Industries
Small Road and Water Transport Operation
Professional and Self Employed
Retail Trade
Education
State Sponsored Corporation for SC/ST
Other Priority Sector

AGRICULTURE SECTOR
DIRECT AGRICULTURE : Direct Agricultural advances denote advances given by
banks directly to farmers for agricultural purposes. Direct finance to agriculture shall
include short, medium and long-term loans given for agriculture and allied activities
directly to individual farmer, Self-Help Groups (SHGs) or Joint Liability Groups (JLGs) of
individual farmers. It also includes loans to small and marginal farmers for purchase of
land for agricultural purposes, Purchase of agricultural implements and machinery,
Development of irrigation potential, Reclamation and Land Development Schemes,
Construction of farm buildings and structures, etc.
INDIRECT AGRICULTURE: Indirect finance may include loan for construction and
running of storage facilities to store agricultural products. Indirect finance denotes to
finance provided by banks to farmers indirectly, i.e., through other agencies. Priority
sector lending by commercial banks is monitored by Reserve Bank of India through
periodical Returns received from them.
For sustaining higher levels of production, it is necessary to target new
areas of food grain production, while promoting conservation agriculture
in the high production areas, to maintain current levels of productivity.
New technologies are needed to break yield barriers, utilize inputs more
efficiently and diversify to more sustainable and higher value cropping
patterns.
Investment in Agriculture: As a result of the initiatives taken by the
Government, the share of total investment in Gross Capital Formation in
agriculture and allied sectors has been going up in recent years. Gross capital
formation (GCF) i.e. investment in Agriculture and Allied Sectors relative to GDP
in this sector has been showing a steadily increasing trend from 13.9 per cent in
2004-05 to 20.1 per cent in 2010 -11.

0
10000
20000
30000
40000
50000
60000
70000
80000
90000
100000
2011-2012 2012-2013 2013-2014
Gross NPA
Provision
Net NPA
6.20%
6.30%
6.40%
6.50%
6.60%
6.70%
6.80%
6.90%
7.00%
7.10%
2011-2012 2012-2013 2013-2014
Gross NPA to Gross
Advance
ADVANCE AND NPA LEVEL OF AGRICULTURE SECTOR AT UCO BANK
*Rs. In lac
YEAR GROSS
ADVANCE
GROSS
NPA
PROVISION NET
NPA
GROSS
NPA TO
GROSS
ADVANCE
2011-12 965292 62462 36145 26317 6.47%
2012-13 1262513 88123 39379 48744 6.98%
2013-14 1399337 95123 50957 44166 6.79%

OBSERVATION
1. Gross NPA to gross advance in agriculture sector was almost same in all the
year.
2. The gross NPA to gross advance was increased slowly. The NPA level was
depends on the advance of the bank on that particular area.
3. In the year 2013-2014 the provision level in agriculture sector was in the safe
position that’s why the NPA level on that particular year was not more than the
previous year.
4. The gross NPA to gross advance 6.47% in 2011-2012, and 6.98% in the year
2012-2013 and 6.79% in the year 2013-2014.
MICRO, SMALL & MEDIUM SCALE ENTERPRISE SECTOR
Employment
MSME Sector in India creates largest employment opportunities for the Indian
populace, next only to Agriculture. It has been estimated that 100,000 rupees of
investment in fixed assets in the small-scale sector generates employment for four
persons.
Export
MSME Sector plays a major role in India's present export performance. 45%-50% of the
Indian Exports is contributed by SSI Sector. Direct exports from the SSI Sector account
for nearly 35% of total exports. Besides direct exports, it is estimated that small-scale
industrial units contribute around 15% to exports indirectly. This takes place through
merchant exporters, trading houses and export houses. They may also be in the form of
export orders from large units or the production of parts and components for use for
finished exportable goods. It would surprise many to know that non-traditional
products account for more than 95% of the SSI exports. The exports from SSI sector
have been clocking excellent growth rates in this decade. It has been mostly fuelled by
the performance of garments, leather and gems and jewelers units from this sector. The

product groups where the SSI sector dominates in exports are sports goods,
readymade garments, woolen garments and knitwear, plastic products, processed food
and leather products.
Opportunity
The opportunities in the small-scale sector are enormous due to the following factors:
 Less Capital Intensive
 Extensive Promotion & Support by Government
 Reservation for Exclusive Manufacture by small scale sector
 Project Profiles
 Funding - Finance & Subsidies
 Machinery Procurement
 Raw Material Procurement
 Manpower Training
 Technical & Managerial skills
 Tooling & Testing support
 Reservation for Exclusive Purchase by Government
 Export Promotion
 Growth in demand in the domestic market size due to overall economic growth
 Increasing Export Potential for Indian products
 Growth in Requirements for ancillary units due to the increase in number of
Greenfield units coming up in the large scale sector. Small industry sector has

0
20000
40000
60000
80000
100000
120000
140000
2011-2012 2012-2013 2013-2014
Gross NPA
Provision
Net NPA
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
2011-2012 2012-2013 2013-2014
% change in MSE Sector
Gross NPA to Gross Advance
performed exceedingly well and enabled our country to achieve a wide measure
of industrial growth and diversification.
ADVANCE AND NPA LEVEL OF MSE SECTOR AT UCO BANK
*Rs. in lac
YEAR GROSS
ADVANC
E
GROSS
NPA
PROVISION NET
NPA
GROSS NPA
TO GROSS
ADVANCE
2011-2012 1343681 59842 30386 29456 4.45%
2012-2013 1593186 95123 42480 52643 5.97%
2013-2014 2464895 120665 62589 58076 4.89%

OBSERVATION
1 The gross NPA to gross advance was increased slowly. The NPA level was
depends on the advance of the bank on that particular area and in the year
2013-2014 the level of gross NPA become high due to high advance, provision
also high on this sector but the net NPA was low than the provision of the bank.
Its help the bank from the loss.
2 The gross NPA to gross advance was 4.45% in the year 2011-2012 but it was a
change of 1.52% in 2012-2013.
3 MSE sector lending was high then the other sector in the bank on that particular
year. UCO Bank provided a huge loan in MSE Sector.
EDUCATION SECTOR
Education loans into priority sector include loans and advances granted to only
individuals for educational purposes up to Rs. 10 lakh for studies in India and Rs. 20
lakh for studies abroad, and do not include those granted to institutions;
ADVANCE AND NPA LEVEL OF EDUCATION SECTOR AT UCO BANK
Rs in Lac
YEAR GROSS
ADVANC
E
GROSS
NPA
PROVISION NET
NPA
GROSS NPA
TO GROSS
ADVANCE
2011-2012 81423 2595 1018 1577 3.19%
2012-2013 119402 8876 2905 5971 7.43%
2013-2014 131991 6295 2932 3363 4.76%

0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
8.00%
2011-2012 2012-2013 2013-2014
% change in Education
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
2011-2012 2012-2013 2013-2014
Gross NPA
Provision
Net NPA
OBSERVATION
1. In the Education Sector there was a huge change in the year 2012-2013 and
2013-2014 from 2011-2012.
2. The gross advance was high in the year 2013-2014 but the gross NPA was low
from 2012-2013. So we can say that the loan monitoring department of the bank
performs well on that year.
3. The gross NPA to gross advance was 3.19% in the year 2011-2012 but in the
year 2012-2013 it was 7.43% it was high but in the year 2013-2014 the gross
NPA to gross advance become low and was 4.76%.]

0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
8.00%
9.00%
2011-2012 2012-2013 2013-2014
% change in Housing
HOUSING SECTOR
Loan granted to housing finance companies (HFCs), approved by National Housing
Bank for the purpose of refinance, for lending to individuals for purchase/construction
of dwelling units, provided the housing loans granted do not exceed Rs.20 lakh per
dwelling unit per family, are classified under priority sector.
The eligibility under priority sector loans to HFCs is restricted to five percent of the
individual bank’s total priority sector lending, on an ongoing basis. The maturity of
bank loans should be co-terminus with average maturity of loans extended by HFCs.
Banks should maintain necessary borrower-wise details of the underlying portfolio.
ADVANCE AND NPA LEVEL OF HOUSING SECTOR AT UCO BANK
Rs in Lac
YEAR GROSS
ADVANCE
GROSS
NPA
PROVISION NET NPA GROSS NPA
TO GROSS
ADVANCE
2011-2012 305561 19253 9053 10199 6.30%
2012-2013 472199 39080 15058 24022 8.28%
2013-2014 608393 21363 11086 10277 3.51%

0
5000
10000
15000
20000
25000
30000
35000
40000
45000
2011-2012 2012-2013 2013-2014
Gross NPA
Provision
Net NPA
OBSERVATION
1. The advance of housing sector was continuously increased from 2011-2012 to
2013-2014.
2. Only in the year 2012-2013 the gross advance was high and the net NPA level
was also high.
3. In the year 2011-2012 the gross NPA to gross advance was 6.30% but it was
changed to 8.28% in 2012-2013. In that year the bank performance was not
good.
4. In 2013-2014 the gross NPA to gross advance was decreased from 8.28% to
3.51%.

0%
2%
4%
6%
8%
10%
2011-2012 2012-2013 2013-2014
% change in Other Sector Loan
0
1000
2000
3000
4000
5000
6000
7000
8000
2011-2012 2012-2013 2013-2014
Gross NPA
Provision
Net NPA
OTHERS SECTOR
Other sector of UCO Bank included Auto loan, Small Road and Water Transport
Operation, Operation Retail Trade Loan, State Sponsored Corporation for SC/ST, Other
Recommended Priority Sector etc.
ADVANCE AND NPA LEVEL OF OTHERS SECTOR AT UCO BANK
Rs in Lac
YEAR GROSS
ADVANC
E
GROSS
NPA
PROVISION NET
NPA
GROSS NPA TO
GROSS
ADVANCE
2011-2012 134156 10731 5995 4736 8%
2012-2013 48890 1464 947 517 2.99%
2013-2014 157180 4782 1884 2898 3.04%

OBSERVATION
1 Gross advance in the year 2012-2013 was decreased from the preceding year
and the gross NPA level was also go down from 6710 to 1464.
2 There was a huge change in gross NPA to gross advance. We can find that the %
of gross NPA to gross advance was 8% in 2011-2012 but it was change to 2.99%
in the year 2012-2013 which was better for the bank. For that the total NPA level
also reduced from the balance sheet of the bank.
3 In the year 2013-2014 the gross advance was very high, the bank provided huge
loans in Auto Sector on that year but the NPA was low relating to the gross
advance. So we can say that the overall performance of the on that particular
sector was outstanding.

TOTAL PRIORITY
SECTOR ADVANCE
Agriculture
MSE
Education
Housing
Others
GROSS NPA IN
PRIORITY SECTOR
Agriculture
MSE
Education
Housing
Others
GROSS NPA IN
PRIORITY SECTOR
Agriculture
MSE
Education
TOTAL PRIORITY
SECTOR ADVANCE
Agriculture
MSE
Education
YEAR WISE ANALYSIS
2011-2012
2012-2013

TOTAL PRIORITY
SECTOR ADVANCE
Agriculture
MSE
Education
Housing
Others
GROSS NPA IN
PRIORITY SECTOR
Agriculture
MSE
Education
Housing
Others
2013-2014
OBSERVATION
1 In the year 2012-2013 the gross advance in agriculture sector was higher than
the previous years and was 36.11%. But the gross NPA was high on that year
than the others. The gross NPA was 40.32%.

2 The highest gross advance in Priority Sector was 51.76% in MSE Sector in the
year 2013-2014 and the gross NPA was 48.61% which was very high on that
particular year.
3 Amount of loan provided to the Others Sector in the year 2012-2013 was only
1.40% and the gross NPA level was also low, which was 0.63%.
4 In Education sector only 2.87% in 2011-2012, 3.41% in 2012-2013 and 2.77% in
2013-2014 of gross advance provided by the UCO Bank. So UCO Bank does not
provide the good amount of loan in Education Sector.
5 In 2011-2012 10.79% of gross advance in Priority Sector provided to Housing
Sector but there was a gross NPA of 12.43% out of such advances.
WILFUL DEFAULTER
System of identifying and reporting of wilful defaulters
The Bank undertakes the exercise of identification and declaration of Wilful Defaulters,
strictly in accordance with the guidelines issued by RBI and amendments thereon. As
per latest amendment in the policy for declaration of wilful defaulters issued by RBI
vide its master circular RBI Master Circular RBI/2014-15/73 DBOD
No.CID.BC.3/20.16.003/2014-15 dated 01.07.2014 (updated upto 07.01.2015), the
bank has constituted the following committees for identification and declaration of
willful defaulters:
1. Committee for Identification of Wilful Defaulters headed by the Executive
Director & two GMs/DGMs of the bank
Role: Examination of NPAs with balances outstanding Rs. 25 Lacs & above for elements
of willful default, and on confirmation of such willful acts of default, it issues
show cause notice to the concerned borrowers/promoters/directors. In due
course, this committee also grants hearing the borrowers who represent against
their identification, if necessary.

2. Review Committee headed by the Chairman & Managing director of the
bank and two other independent directors of the bank
Role: This committee reviews the order for declaration of willful defaulters and the
order becomes final only after it’s confirmed by the said committee.
Subsequently, reporting of Wilful Defaulters is made to CIBIL under two
categories- Suit-filed cases and Non-suit filed cases as per the latest
guidelines as referred to above.
During the financial year 2014-15, the bank has reported 79 cases of willful default with
balance outstanding of Rs. 678.12 crores. The total number of Wilful Defaulters as on
31.03.2015 is 588 with balance outstanding of Rs. 3445.04 crores.
FRAUD
Incidence of frauds, robberies, etc., in banks is a matter of concern. While the primary
responsibility of preventing frauds lies with banks themselves, Reserve Bank of India
(RBI) has been advising them from time to time about the major fraud prone areas and
the safeguards necessary for prevention of frauds. RBI has also been circulating to
banks, the details of frauds of an ingenious nature, not reported earlier so that banks
could introduce necessary safeguards / preventive measures by way of appropriate
procedures and internal checks. Banks are also being advised about the details of
unscrupulous borrowers and related parties who have perpetrated frauds on other
banks so that they could exercise caution while dealing with them. To facilitate this
ongoing process, it is essential that banks report to RBI complete information about
frauds and the follow-up action taken thereon.
CLASSIFICATION OF FRAUDS
In order to have uniformity in reporting, frauds have been classified as under, based
mainly on the provisions of the Indian Penal Code:
 Misappropriation and criminal breach of trust.

 Fraudulent encashment through forged instruments, manipulation of books of
account or through fictitious accounts and conversion of property.
 Unauthorized credit facilities extended for reward or for illegal gratification.
 Negligence and cash shortages.
 Cheating and forgery.
 Irregularities in foreign exchange transactions.
 Any other type of fraud not coming under the specific heads as above.
REPORTING OF FRAUDS TO RESERVE BANK OF INDIA
Banks need not furnish FMR-1 return in fraud cases involving amount below 1 lakh to
RBI in either hard or soft copy. However, banks at their end should make the data entry
in respect of such cases through the FRMS package individually in FMR-1 format (less
than 1 lakh) which will get automatically captured in FMR-2 return and will form part of
the consolidated database relating to frauds for the respective bank.
Penal Measures not affecting costs/recovery
FIRST INVESTIGATION REPORT (FIR)
If the borrower/ guarantor is not traceable/If the account is fraud, the bank may file a
FIR against the borrower.
IMPOUNDING OF PASSPORTS
The bank may issue letter to the Passport Office for impounding of Passport of the
borrower so that the borrower is unable move out the country.

LODGEMENT OF CHEQUE BOUNCE CASE U/S 138
Cheques are Negotiable Instruments, where there is always a possibility of the same
being issued without sufficient amount in the account. With a view to protect drawee of
the cheque, the need was felt that dishonour of cheque be made a punishable offence.
With that purpose Sec.138 to 142 was incorporated by Banking Public Financial
Institutions and Negotiable Instruments clause (Amendment) Act, 1988. This was done
by making the drawer liable for penalties in case of cheque bounce due to insufficiency
of funds with adequate safeguards to prevent harassment of the honest drawer.
CAUSES OF NPA
NPA arise due to number factors or causes like –
INTERNAL REASONS-
Many internal reasons like inefficient management, outdated technology, labour
problem, marketing failure etc
EXTERNAL REASONS-
External reason like recession in the economy, govt. policy, infrastructural problem,
price rise, natural calamities etc.
SPECULATION –
Investment in high risk assets to earn high income.
DEFAULT –
Willful default by the borrower.
FRAUDULENT PRACTICES –

Fraudulent Practice like advancing loan to ineligible person, advance without security or
reference etc.
DIVERSION OF FUND –
Funds are diverted for personal use or use for unnecessary/unrelated activities.
MEASURES
Suggestions for Improvement of Recovery Performance & NPA Management:
1. All staff members at branch level require sensitization with regard to NPA
recovery.
2. Engage more and more number of recovery agents and use of existing BC for
recovery purpose.
3. OTS and other compromise schemes must be widely publicized and earnest
attempt should be made for making them successful.
4. Lok adalats should be attended by branch/zonal officials for on the spot
compromises.
5. Owing to the reluctance shown by Recovery Agents in recovering unsecured
small loan accounts up to 10 lacs, the commission should be revised from 10 %
to 20 %.
6. Every Zonal Manager should keep close liaison with DRT/DRAT Officials.

7. Vehicle seizure policy for NPA/potential SWA should be adopted at the earliest
with necessary parameters in place.
8. Merely on assurance of the borrower, SARFAESI action should not be
stopped/delayed.
9. The zone should be equipped with a Dedicated Authorized Officer to oversee
SARFAESI action. Prompt action for vacating stays against Bank’s SARFAESI
action. Caveats should be filed in all the cases. A system of maintaining a due
date diary of caveats is required.
10. All modes of service of summon for DRT cases to be done simultaneously with
the permission of PO.
11. DRT cell/AMB branches should be suitably strengthened and provided with
Officers with law background.
12. Policy for engagement of competent law firms for complete resolution of big
NPA a/cs of Rs.10 crores and above.
13. As the growth rate and volume in Retail is very low, it triggers very high
percentage NPA, hence Bank should continue to give Corporate credit to highly
rated companies even if the actual rate of return is less, in order to reduce % of
GNPA.
CONCLUSION
Banking industry has undergone a major change after the first phase of economic
liberalization. Further, after adoption of BASEL system the concept of NPAs has come
into the Indian Banking Sector. Hence NPA management is the most important aspect
of banking sector, especially considering the huge rise in NPAs dues to slowdown in
Real Estate & Manufacturing/Mining sectors in particular as well as drought/lack of
irrigation creating huge financial burden on the farmers on the run up to the economic
crisis 2008.
Thereafter, banks are very cautious in extending loan, because of mounting NPAs. This
study highlights the reasons for assets becoming NPA and remedial measures to be
taken. Due to innovative and pro active steps taken by bank, mostly private & foreign

banks, NPA levels have reduced considerably. However, Public Sector Banks have not
been as successful as Private & Foreign Banks in managing their NPAs.
For instance, 70% of UCO Bank’s branches are in the rural and semi-urban area and
hence, the no. of loan accounts are maximum in Priority Sector. So this is the strong
areas of UCO Bank for earned income through interest. However, this has a flip side as
the scope of non-priority sector advances & big advances is comparatively narrow.
Hence, the bank is compensating the same in extending advances to in huge
Infrastructure, power & other Manufacturing units while also focusing in retail sector
advances. However, it is observed that, whereas the bank has been successful in
expanding its retail advances portfolio and is managing its retail advances NPAs well, it
is facing a huge uphill task in recovery in small loans as well as huge borrowal accounts
such as REI Agro Ltd., Kingfisher Airlines Ltd., Tayal Group of Accounts, Zoom
Developers, etc to name a few. And most of these advances are in priority sector
and/or manufacturing sector which have been badly hit due to economic recession in
the past.
Hence, the bank must incorporate in vogue practices, taking cue from private and
foreign banks, to turn its lacunas or areas of concern into its forte. Modernization, use
of IT infrastructure, appointment of experts for project engineering, assessment and
sustainability as well as super-specialized professionals for niche segment lending is the
call of the hour to ensure the continuous growth and profitability of this Major Public
Sector Bank.
APPENDIX
 CERSAI
Central Registry of Securitization Asset Reconstruction and Security Interest of India is a
govt. company with a share holding of 51% by the Central Government and select
public sector banks and the National Housing Bank are also share holders of the
company.
The object of the company is to maintain and operate a Registration System for the
purpose of registration of transactions of securitization, asset reconstruction of financial
assets and creation of security interest over property under SARFAESI Act, 2002.

 Hypothecation
The definition of hypothecation is given under section 2 (n) which means a charge in or
upon any movable property, existing or future created by a borrower in favour of
secured creditor without delivery of possession of the movable property to such
creditor.
 Basic difference between RDDB & FI Act and SARFAESI Act
The RDDB & FI Act allows filing of proceedings for recovery of the entire defaulted
amount, including enforcement of secured assets and recovery from the personal
properties of the debtors, whereas, the SARFAESI Act confers power of enforcement
only in respect of the secured assets.
 Gross NPA
Gross NPAs are the sum total of all loan assets that are classified as NPAs as per RBI
guidelines as on Balance Sheet date. Gross NPA is advance which is considered
irrecoverable, for bank has made provisions, and which is still held in banks' books of
account Gross NPA reflects the quality of the loans made by Banks. It consists of all the
nonstandard assets like as sub-standard, doubtful, and loss assets. It can be calculated
with the help of following ratio:
Gross NPAs Ratio = Gross NPAs / Gross Advances
 Net NPA
Net NPAs are those type of NPAs in which the bank has deducted the provision
regarding NPAs. Net NPA shows the actual burden of banks. Since in India, bank
balance sheets contain a huge amount of NPAs and the process of recovery and write
off of loans is very time consuming, the provisions the banks have to make against the
NPAs according to the Central bank guidelines, are quite significant. That is why the
difference between gross and net NPA is quite high. It can be calculated by following
Net NPAs = Gross NPAs – Provisions / Gross Advances – Provisions

 Secured creditor
As per Section 2 (zd) "Secured creditor" means any bank or financial institution or any
consortium or group of banks or financial institutions and includes—
(i) debenture trustee appointed by any bank or financial institution; or
(ii) securitisation company or reconstruction company, whether acting as such or
managing a trust set up by such securitisation company or reconstruction company for
the securitisation or reconstruction, as the case may be; or
(iii) any other trustee holding securities on behalf of a bank or financial institution, in
whose favour security interest is created for due repayment by any borrower of any
financial assistance.
 Asset Reconstruction
As per section 2 (b) “Asset Reconstruction” means acquisition by any securitisation
company or reconstruction company of any right or interest of any bank or financial
institution in any financial assistance for the purpose of realisation of such financial
assistance.
The word “asset” means property of all kinds, real and personal, tangible and
intangible, including inter alia, for certain purpose, patents and causes of action which
belong to any person including a corporation and the estate of a deceased. The entire
property of a person, association, corporation or estate that is applicable or subject to
the payment of his or her or its debts (Black’s Law Dictionary).
“Reconstruction” is the act of constructing again. It presupposes the non-existence of
the thing to be reconstructed as an entity, that the thing before existing has lost its
entity.
 CIBIL
CIBIL is Credit Information Bureau of India Limited, which is a Credit Information
Company. CIBIL collects and maintains records of an individual’s payment pertaining to
loans and credit cards. Three records are submitted to CIBIL by banks and on other
lenders on a monthly basis. This information is then used to create Credit Information
Report (CIR) which is provided to lenders in order to help evaluate and approve loan
applications.

 ECGC
Export Credit Guarantee Corporation of India (ECGC) is a Government of India
Enterprise which provided export credit insurance facilities to exporter and banks of
Ministry of Commerce & Industry
ECGC is the seven largest credit insurer of the World in term of converges of national
export.
ECGC provides a range of credit risk insurance covers to exporters against loss in export
of goods and services.
 CGTMSE
CGTMSE is Credit Guarantee Fund Trust for Micro and Small Enterprise. Ministry of
Micro, Small and Medium Enterprise (MSME) Govt. of India launched Credit Guarantee
Scheme (CGS) so as to strengthen credit delivery system and facilitate flow of credit to
the MSE sector.100 Lacs
BIBLIOGRAPHY
http://ucobank.co.in
https://www.rbi.org.in
http://www.thehindu.com
https://www.nabard.org
http://www.business-standard.com

http://www.iarc.co.in
http://drtsarfaesi.blogspot.in
http://www.moneycontrol.com
Report on movement of NPAs of schedule commercial bank.
Report on NPAs - Indian perspective.
RBI Master Circulars
Supervision follow-up of advances
UCO CMD Report.
Report of Agricultural Department.
Indian Contract Act.
Different kind of Press Release Report.
Priority Sector Lending Report.
SARFAESI-Handbook

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