EXECUTIVE SUMMARY

This report aims to summarize “A Study on Credit Risk Management towards MCDCC
Bank Mysore”. Credit risk management is defined as the means of assessing the credit
risk and coming up with measures that will assist in the reduction of credit losses that
could arise as a result of borrowers’ inability to pay their loans. It is a significant part
.

of financial sustainability because, if credit risks are not handled appropriately, they
cause major losses and threaten the solvency of banks or a credit provider.

Banking is the activity of receiving, keeping, and disbursing money on behalf of the
customers for charges or on the basis of agreed principles. Mysore and
Chamarajanagara District Co-operative Central Bank (MCDCC) is banking and credit
society, operating in farming and rural field of Mysore and Chamarajanagara districts
of Karnataka, offering financial services with the help of cooperative societies network.
The main objectives of the analysis are to recognize the credit risk management in The
Mysore and Chamarajanagara District Co-operative Central Bank of Mysore district.
As for the research methodology of this study, the quantitative research approach will
be adopted as the official research method. This comprises the type of data that will be
gathered for the study including both the primary and secondary data.
.

Credit allows people to have access to the funds that are needed to meet a certain
expense, with the intention of repaying the cost at a later date. Risk management has
played an essential role in value creation, and this significance has gone up in recent
years with economic advancement and globalization processes.

In this study, topics include credit risk management of cooperative central banks look
into the credit system factors and credit risk’s effect on bank profit, as well as credit
policy to introduce relevant approaches to manage the risk.
 CHAPTER - 01
INTRODUCTION

1.1 BANKING
Indian banking structure has a history of over 200 years. It began its journey in 1786.
The sector saw significant changes with nationalization of all banks in1969. The
government’s liberalization approach contributed to the industry’s rapid growth. The
liberalization policies and economic reforms which have taken place in India offer
opportunities for banks to diversify other than lending and purchasing. Therefore, the
changes and development of banks appeared in front of most people. Committees
marked the development of banking sector in India and banks made a giant leap toward
this cause. As for the foreign banks, the Indian nationali zed banks are relatively more
.

efficient because these are bigger in size and have a longer reach in banking.

Source: https://happay.com/blog/core-banking-solutions
Fig 1.1 Banking
The banking sector of India is a lively sector with the presence of both public and
internationally functioning private banks. Some of the very important banking
authorities of the India are under the reservation of the Reserve Bank of India or RBI.
Based on size and geographical spread of operations, it is the case of pu blic sector banks
.

in terms of market share, the US state has the share as well as the largest market share
is of State Bank of India. The primary competitors are the pr ivate sector ones and thus
.

one has to mention such leaders as HDFC and ICICI which are known to have a rather
higher service quality as well as pay more attention to local innovations. These are the

1
branch establishment of foreign banks in India and they bring specialization to its
.

clients. Of late there has been strategized efforts towards automation of the banking
systems on the Internet and other mobile devices. Such are issues like NPAs or
regulatory changes and yet the industry is robust and always adapting to volatility in
financial trends.

1.1.2 BANKING SECTOR IN INDIA

Source: https://www.indiatvnews.com
Fig 1.2 Reserve Bank of India

The Indian banking industry includes a wide range of organizations, including public
sector banks (PSBs), private sector banks, foreign banks, co-operative banks, and
.

regional rural banks. The banking companies that under the supervision of India's
. .

central bank, namely the Reserve Bank of India allow for more structural development
and acting as a financial intermediary. Thus, while PSBs with a large market share such
as the State Bank of India have seen competition from newer private sector players such
a HDFC Bank and ICICI onwards Who has been rec ognized for customer focus and
.

operational efficiency. Multinational and cooperative also contribute to the

diversification of this sector in that they serve the niche markets as well as assisting
rural areas. The banking environment has gone through transformations like,
nationalization, reform and its process of embracing a technological revolution
whereby banking is shifting from physical forms where people undertake their financial
activity online using banking portals. However, difficulty is still experienced mainly in

2
the area of NPAs and the regulation systems. Nevertheless, the Indian banking system
as mentioned above is quite ductile which really helps in achieving the Indian
government’s financial inclusion and developmental policy objectives.

1.1.3 COMPETITOR’S/MAJOR PLAYERS

Source: https://www.b4i.unibocconi.it/
Fig 1.3 Major Banks

1. Axis Bank
2. HDFC Bank
3. IDFC First Bank
4. ICICI Bank
5. SBI Bank
6. Kotak Mahindra Bank
7. IndusInd Bank
8. Bank of Baroda
9. Union Bank
10. Bandhan Bank

3
 1.1.4 HISTORY OF INDIAN SECTOR
Established in 1786, it was India's first impact bank, also known as the General Bank
of India. The East India Company established the Bank of Bengal/Calcutta in 1809, the
.

Bank of Bombay in 1840, and the Bank of Madras in 1843. The other one was the Bank
of Hindustan, which was founded in 1870. Each of the thr ee separated institutions, the
.

Bank of Calcutta, the Bank of Bombay, and the Bank of Madras, was known as a
Presidency Bank. The Bank of Allahabad, founded in 1865, was the first Allahabad
bank owned entirely by Indians. Punjab National Bank Ltd. was formed in 1894 and is
headquartered in Lahore, Pakistan. Between 1906 and 1913, numerous new banks were
.

created, including the Bank of India, Central Bank of India, Bank of Baroda, Canara
Bank, Indian Bank, and Bank of Mysore.
The Government of India has made the following key actions to regulate banking
instituteons in the nation.
.

From 2000 to 2024, the Banking Companies Act defines a banking firm as any
corporation that does banking operations in India. This definition of banking refers to
taking money from the public in demand to make loans or otherwise use the money.
Similarly, it can be refunded on request and extracted in the form of a check, draft,
order, or other instrument for public savings, loans, and advances.
Today, the Indian scenario of banking environment, especial after the year 2000 show
the glimpses of dynamism and infrastructure development. Here's a brief overview:

1. Liberalization and Globalization (2000-2005):

• The Indian government remained committed to liberalizing the economy and
unbundling the banking sector through permitting private and foreign bank.
• In an attempt to enhance the stability of the banking sector, economic requirements,
management of risks, as well as the RBI of India investigated supervisory measures.
.

• The competition had got increment in financial sector of India because more
international bank had started their operations and new private bank platform so
started in the nation.
• Banks began incorporating usage of modern gears in a bid to increase efficiency
and extend their ability to provide service, particularly through computerized
options like Internet banking and Automated Teller Machines.

4
2. Consolidation and Expansion (2005-2010):
• In the later years acquisitions and mergers arose, in zone of banking especially in
the public sectors and there are formations of relatively larger banking sector.
• To broaden the geographical coverage in banking services targeting especially
under-banked rural communities, programs to liberalize money management
service. and integrate new parliamentary public institutions such as microfinance
institutions and regional rural banks were implemented by the government.
• The operations of banks remained largely centered on branch expansion strategies
and the introduction of central banking systems.

3. Post-Crisis Reforms and Growth (2010-2015):

• Governments also came up with such programmers - Pradhan Mantri Jan Dhan
Yojana (PMJDY) that aimed at achieving greater platform to financial services.
• Banks emphasized efforts towards the digitization and innovation, including higher
mobile banking penetration, faster growth of digital payments and arrangements
with fintech’s.
• The problems of distressed assets in the system of banking were resolved through
improvements made to the NPA identification as well as the handling mechanisms.

4. Recent Developments (2015-2022):

• There were still improvements in the Indian banking systems, mainly focusing on
issues to do with transparency, governance & efficiency.
• The Insolvency and Bankruptcy Code (IBC) was made effective for early
.

acknowledgement and faster resolution of stressed assets along with enhancing the
credit environment.
• Advanced technologies in bank and financial institutions continued to grow due to
reasons including; the demonetization situation of the country, prevalent mobile
internet connection, etc.
• The COVID-19 outbreak brought certain level of risks and difficulties to banking
industry and thus called for intervention measures such as providing liquidity
facilities, maintaining credit supply and granting concessions to indebted clienteles
for loan deferment.

5
The Indian financial sector changed strongly throughout this period, trying to fulfill its
duties in promoting economic growth and development while responding to changing
skilled, regulatory, and economic conditions.

1.1.5 TYPES OF BANKS IN INDIA

1. Central Bank: It also regulates and controls the country’s monetary and banking
system where RBI is the Central Bank of India.
2. Commercial Bank: It has three primary forms of banks, the first is the public &
private sector and the last being the foreign banks. These are their services they
offer; savings and current accounts, loans and investment.
• Public sector Bank: It is a type of bank that is started, regulated and managed by
government to offer banking services to the people and to spearhead
socioeconomical goals.
i. Indian bank
ii. Bank of Baroda
iii. Canara bank
iv. State Bank of India
v. Central Bank of India
• Private Sector Bank: It is a bank owned and operated by individuals or
corporations rather than the government
i. ICICI Bank
ii. South Indian Bank
iii. YES Bank
iv. Karnataka Bank
v. Kotak Mahindra Bank
• Foreign Bank: It is a bank that operates in a country. It’s not chartered or
headquartered.
i. National Australia Bank
ii. AB Bank
iii. Australia and New Zealand Banking Group
iv. HSBC Bank
v. Bank of America

6
3. Cooperative Bank: A cooperative bank is owned and controlled by shareholders
who are usually the customers of that bank Most of them have a restricted area of
operation and their main duty is to provi de financial services to members. Of all
.

cooperative banking institutions, all the members of the cooperative banks actively
.

engage in decision-making processes and run the institutions through democracy.

Thus, their primary aims are the latter’s social outreach and the provision of access
to money services.

4. Payment Bank: It is a particular category of banks and are common in two

traditional ways: payment banks are a select kind of new age institution that is
authorized to undertake payments and related services but provides a restricted
range of banking solutions. Although the current laws permit them to accept deposit
as well as perform transfer services, they are prohibited from extending credit,
providing credit cards. Payment banks offer simple forms of banking products such
as, savings, deposits, money remittance, bill payments, mobile banking, etc to the
unbanked and underprivileged section of the society. Most of them are capable to
offer services to the customers with less balance and transactions since they are
often cheap and online.

1.1.6 GDP CONTRIBUTION

• The amount increased to ₹130.4 trillion, or 50.3% of GDP, by September 2022.
• In 2021, the banking industry's share of the GDP was almost 7.7%. The rate of GDP
that is attributed to net debts within the financial sector is 30%.
• According to CareEdge Ratings, bank loan growth in India would be between 14%
and 14.5% in the financial year 2024–2025. With the HDFC merger excluded, credit
offtake is expected to identify the current financial year 2023–24 with an increase
of about 16 percent

7
1.2 COMPANY PROFILE

Source: https://starofmysore.com
Figure 1.4 The Mysore and Chamarajanagara District Co-operative
Central Bank Ltd.

The Mysore & Chamarajanagar District Co-operative Central Bank Ltd. was formed in
the year 1955 and since its formation it has been leading in the deve lopment of
.

agricultural credit structure in the Mysore and Chamarajanagar districts of Karnataka

.

state. Major activities of Bank are to advance short-term funds for seasonal agriculture
practices and products, to market agricultural crops, and to support long term
agriculture projects, for instance, plantation development, irrigation and lifting, dairy
and poultry farming, construction of bulk sheds, farm houses, and fences among others.

Banking can be defined as organization company that provides banking and similar
services to its clients. In the traditional concept, a bank is defined a place where
fundamental services such as accepting deposit and providing credit are provided.
Several additional institutions which provide some, at least, of the banking services
mentioned by the legal banks as stated above, but are not legal banking institutions are
also a part of the financial system. Banking system also referred to as a system by the
bank to the customers in which the account and portfolio details of the custom ers in
.

relations to the day’s transactions is made available. While the banking system must be
complication free in India it must be able to address new challenges that come along
.

with new technology and any other changes internal and external to the economy.
.

8
Enumerated below are some of the key achievements that the banking system of India
has achieved over a period of three decades. The structure of the financial system in
.

India and the banks is one of them one of the most important stakeholders of this
structure.

1.2.1 PROMOTERS
• Mr. Gatti Ravenna
• Mr. C.H. Lingadevaru
• Mr. B.N. Ramegowda
• Mr. N. Huchamasthigowda
• Mr. T.N. Moodalagirigowda

1.2.2 VISION & MISSION

• Vision:
1. Be the trusted partner for members.
2. Drive sustainable development in communities.
3. Uphold co-operative values in all operations.
4. Strive for financial inclusion.

• Mission:
1. Provide accessible and affordable financial services.
2. Foster trust and cooperation.
3. Empower communities through economic support.
4. Promote financial literacy for members.

1.2.3 QUALITY POLICY

The Mysore and Chamarajanagar District Cooperative Central Bank work jointly to
hire more together to hire more people, improve their buildings, and create new
programs that match the needs of today. The employees are involved in making
decisions, and everything is overseen by the higher-ups in the organization.

9
1.2.4 PRODUCTS / SERVICES PROFILE
1. Credit Facilities to Self-help Group: The MCDCC Bank has taken interest in the
formation of self-help group. Members of the self-help groups pool their saving and
obtain credit facilities from bank.
2. Financing of Short-term loans: These are used for unique seasonal agricultural
activities and crop marketing, and they must be repaid within one year.
3. Financial of Medium-term loans: It has previously been noticed that these loans are
.

used to provide agricultural financing and non-agricultural credit. This bank aids in
providing loans to all the eligible person for facilities.
4. Financing of Kisan Credit card Schemes/Loans: Each bank in the state has adopted
the Kisan credit scheme which aims at providing farmers with timely and viable
credit for agriculture, investment credit needs in an efficient way and cheaply.
5. Collection of Cheques and Drafts: They are involved in lending money to the small
business and industries in the rural areas for them to expand and prosper.

1.2.5 AREAS OF OPERATION:

• Bannur
• Chamarajanagara
• Hanur
• Heggadadevanakotte
• Hunsur
• Kollegal
• Krishnarajanagara
• Mandya
• Mysuru
• Nanjungud
• Periyapatna
• T. Narasipura
• Yelandur

10
1.2.6 INFRASTRUCTURE FACILITIES
For the Firm:
• Small two-story building designed according to the professions.
• Comfortable facilities and well-designed comfortable accommodation for
employees.
• Distribution of computers, weighing machines, and loan.
For employee facilities:
• Facilities to drink edible water.
• Staff restrooms are designated areas.
• Hygienic, brightly lit rooms with fans and sufficient sunlight for employee’s
comfort.
For Customer Facilities:
• Finished NEFT/RTGS interbank transfers.
• Smooth transfers between branches.
• Assistance with online payments via IBPS.
• The accessibility of services through mobile applications.
• Easy access to cash ATMs.

1.2.7 COMPETITOR’S INFORMATION

1. Axis Bank
2. HDFC Bank
3. ICICI Bank
4. Karnataka Gramin Bank

1.2.8 SWOT ANALYSIS

The article begins by explaining the purpose and objectives of a SWOT analysis.
SWOT, or Strengths, Weaknesses, Opportunities, and Threats, is a strategic planning
technique that evaluates and analyzes the internal and external elements influencing a
firm.

11
 Source: https://www.software4nonprofits.com
Fig 1.5 SWOT Analysis

1. Strength of MCDCC Bank:

• Community Engagement
• Customer satisfaction
• Risk Mitigation
• Financial Services
• Member Ownership
2. Weakness of MCDCC Bank:
• Limited Resources
• Regulatory Implementation
• Scale Limitations
• Technology Infrastructure
• Dependency on Community
3. Opportunities of MCDCC Bank:
• Digital Transformation
• Product Diversification
• Partnerships
• Geographic Expansion
• Economic Development Initiatives

12
4. Challenges of MCDCC Bank:
• Economic Conditions
• Technological Disruption
• Talent Acquisition
• Cybersecurity Risks

1.2.9 FUTURE GROWTH & PROSPECTS AND FINANCIAL STATEMENT

1. The banks have announced the availability of MDCC Gold Savings Bank A/c for
their customers, enabling them to offer group insurance coverage through their
branches.
2. Eleven additional branches will be added to the 56 branches that the city's revenue
division now operates to further grow the banking sector.
3. It is necessary to allow speedy money transfers, Bank plans to integrate NEFT
capabilities via the RTGS system.

13
1.2.10 FINANCIAL STATEMENT:
Table 1.1 Balance Sheet as on 31.03.2023
SL. Particular Sch. As on As on
NO No 31.03.2023 31.03.2022

CAPITAL AND LIABILITIES

1 Share Capital 1 902110500.00 729687300.00

2 Reserves and Surplus 2 919787396.14 917744913.29

3 Deposits 3 9453675883.64 8800399601.17

4 Borrowings 4 8432230296.00 6447702694.00

5 Other Liabilities and Provisions 5 983604449.05 582610455.47

Total Liabilities 20691408524.83 17478144963.93

ASSETS

1 Cash and balance with Reserve 6 183563752.00 146899639.00

bank of India

2 Balance with banks and money at 7 927583918.47 1069736394.22

call and short notice

3 Investments 8 2413029050.23 2047634544.23

4 Loans and Advances 9 15580112046.08 12885407007.44

5 Fixed Assets 10 244685927.07 264021048.04

6 Other Assets 11 132433830.98 1064446331.00

Total Assets 20691408524.83 17478144963.93

Contingent Liabilities DEAF A/c 12 7000782.65 6556912.20

14
Table 1.2 Balance Sheet as on 31.03.2022
SL. Sch. As on As on
Particular
NO No 31.03.2022 31.03.2021

CAPITAL AND LIABILITIES

1 Share Capital 1 729687300.00 641095600.00

2 Reserves and Surplus 2 917744913.29 886555427.41

3 Deposits 3 8800399601.17 6957534798.16

4 Borrowings 4 6447702694.00 59339148975.00

5 Other Liabilities and Provisions 5 582610455.47 648052236.19

Total Liabilities 17478144963.93 15067157036.76

ASSETS

1 Cash and balance with Reserve 6 146899639.00 159281923.00

bank of India

2 Balance with banks and money at 7 1069736394.22 1049531723.33

call and short notice

3 Investments 8 2047634544.23 2453658100.55

4 Loans and Advances 9 12885407007.44 10128257991.89

5 Fixed Assets 10 264021048.04 285598998.72

6 Other Assets 11 1064446331.00 990828299.27

Total Assets 17478144963.93 15067157036.76

Contingent Liabilities DEAF A/c 12 6556912.20 4935252.52

15
Table 1.3 Balance Sheet as on 31.03.2021
SL. Sch. As on As on
Particular
NO No 31.03.2021 31.03.2020

CAPITAL AND LIABILITIES

1 Share Capital 1 641095600.00 535350262.00

2 Reserves and Surplus 2 886555427.41 825234044.13

3 Deposits 3 6957534798.16 5663504604.59

4 Borrowings 4 59339148975.00 3714976985.00

5 Other Liabilities and Provisions 5 648052236.19 883047253.55

Total Liabilities 15067157036.76 11622113149.27
ASSETS

1 Cash and balance with Reserve 6 159281923.00 70066241.00

bank of India

2 Balance with banks and money at 7 1049531723.33 1029078795.12

call and short notice

3 Investments 8 2453658100.55 1491348143.71

4 Loans and Advances 9 10128257991.89 7657308795.00

5 Fixed Assets 10 285598998.72 299386368.09

6 Other Assets 11 990828299.27 1074924806.35

Total Assets 15067157036.76 11622113149.27

16
Table 1.4 Balance Sheet as on 31.03.2020
SL. Sch. As on As on
Particular
NO No 31.03.2020 31.03.2019

CAPITAL AND LIABILITIES

1 Share Capital 1 535350262.00 528515162.00

2 Reserves and Surplus 2 825234044.13 928159169.70

3 Deposits 3 5663504604.59 5289635269.93

4 Borrowings 4 3714976985.00 3778440995.00

5 Other Liabilities and Provisions 5 883047253.55 783514926.86

Total Liabilities 11622113149.27 11308265523.49
ASSETS

1 Cash and balance with Reserve 6 70066241.00 129940536.00

bank of India

2 Balance with banks and money at 7 1029078795.12 1058763826.49

call and short notice

3 Investments 8 1491348143.71 1454335033.71

4 Loans and Advances 9 7657308795.00 6232913622.55

5 Fixed Assets 10 299386368.09 398962041.32

6 Other Assets 11 1074924806.35 2033350463.42

Total Assets 11622113149.27 11308265523.49

17
 CHAPTER - 02
CONCEPTUAL BACKGROUND AND LITERATURE REVIEW

2.1 THEORETICAL BACKGROUND OF THE STUDY

Credit supports the individual to meet his requirements at a specific purpose of time
and cost of that need can be paid further. The significance of risk mitigation was carried
by economic advancement and global. A bank has the responsibility to recognize and
manage its credit risk. Banks are making major improvements in credit risk mitigation
and financial performance.

Source: https://www.linkedin.com/pulse/credit-risk-management
Fig- 2.1 Credit Risk Management

Risk mitigation is a significant problem in banking industry and a technique. Every

financial institution has to build falling cost portfolio credit score chance management
structures and green hazard adjusted return on capital processes. Indeed, credit score
danger rising through lending has stayed a central issue to financial organizations.
Several risks such as the market risk for instance, started revealing itself to the
.

management when financial organizations ventured into new markets and exchanged
.

new goods. Over the last few years market risk has been succeeded by economic
institutions through innovative instruments and techniques.

18
2.1.1 Credit
Credit is defined as rendering of cash, goods, or other services with the intention of
being paid back at some other later date. When a person goes out and buys something
on credit for another person, it simply means that person lends the other a cash amount
or provides him with cash to purchase goods or receive services with the view of paying
for the same at a later date. sometimes with the interest or other cost is being added to
it. Credit is available in many different forms, like trade credit, credit cards, loans, and
credit lines. It is essential to the economy because it makes investment, consumption,
and corporate operations easier, but it also carries risk because borrowers must make
their shared repayments.
Forms of credit:
1. Long term loan
2. Cash credit
3. Bank guarantee
4. Purchase bills

Advantages of Credit:
• Provides quick access to funds in emergencies
• Offers a cashless and convenient way to make transactions
• Helps build and improve credit history and credit score
• Allows for managing cash flow and making large purchases
• Can offer rewards, cashback, and other incentives
• Provides purchase protection and fraud liability coverage
• Facilitates record-keeping and tracking of expenses

Disadvantages of Credit:
• Can lead to debt accumulation if not managed properly
• Often involves high-interest rates and fees
• May encourage overspending due to easy access to funds
• Can negatively impact credit score if payments are missed
• Risk of falling into a debt cycle with minimum payments
• Potential for identity theft and credit card fraud
• Those with poor credit ratings may locate it challenging to get credit.

19
2.1.2 Risk:
Risk refers to the uncertainty or probability of experiencing an unfavorable outcome or
loss. In a variety of applications, including business, finance, and daily life, risk is the
possibility that an action or event may not have the anticipated or planned result. It
involves possibility for injury, damage, loss of money, or any other unfavorable
outcomes. To mitigate possible bad effects, make educated decisions, and allocate
resources efficiently, individuals, companies, and organizations require to understand
and manage risk.
This are the mainly three types of risk
1. Market Risk
2. Operational Risk
3. Credit Risk

Advantages of Risk:
• Encourages innovation and development of new financial products
• Drives higher returns on investments for banks and investors
• Promotes a competitive market, improving services and rates for customers
• Enhances risk management practices and regulatory compliance
• Leads to better assessment and mitigation strategies
• Encourages banks to diversify their portfolios
• Can identify and capitalize on emerging market opportunities

Disadvantages of Risk:
• Can lead to instability and insolvency of banks
• Possibility of large financial losses
• Increases the likelihood of defaults and non-performing loans
• May result in loss of customer trust and confidence
• Can lead to increased regulatory scrutiny and penalties
• Necessitates higher capital reserves, reducing funds for lending
• May cause market volatility and systemic financial crises

20
2.1.3 Loans
Loans are financial agreements where a lender provides money to a borrower with the
expectation that the borrower will repay the borrowed amount, typically with interest,
over a predetermined period. Loans are useful for a variety of things. such as purchasing
a home, financing a business, paying for education, or covering personal expenses. The
terms of the loan, including the interest rate, repayment schedule, and any collateral
requirements, are specified in a loan agreement.

Types of Loans:
1. Agriculture loans:
• Short term loans
• Medium term loans
• Long term loans
2. Non agriculture Loans:
• Vehicle loans
• Gold
• Salary reserves
• Housing loan
• Loan against govt securities
• Mortgage

Advantages of Loans:
• Provides access to funds for large purchases and investments
• Facilitates business expansion and growth
• Helps individuals and businesses manage cash flow
• Allows for home ownership through mortgages
• When payments are made on time, credit score might increase.
• Offers opportunities for education through student loans
• Provides financial support during emergencies and unexpected expenses

21
Disadvantages of Loans:
• Accrues interest, increasing the total repayment amount
• May lead to debt accumulation if not managed properly
• Requires regular repayments, impacting cash flow
• Can negatively affect credit score if payments are missed
• Often involves fees and charges, adding to costs
• May necessitate collateral, risking asset loss if defaulted
• Can lead to financial stress and burden on borrowers

2.2 LITERATURE REVIEW

1. Tolulope Esther Edunjobi and Opeyemi Abayomi Odejide (2024)15: The subject
addresses intelligent technology (AI) framework can improve credit risk assessment
in banking by increasing efficiency and accuracy. It discusses various AI techniques
such as machine learning techniques and neural networks, and their use in assessing
creditworthiness. The paper also discusses the challenges and opportunities of AI
in revolutionizing the banking sector. AI has altered credit risk assessment by
allowing banks to analyze huge datasets, identify movements, and respond to
market movements. This technology enables banks to make more informed loan
decisions and improve their credit rating systems. AI also assists banks in
identifying possible defaulters, tailoring loan conditions, and managing credit
portfolios in real time to avoid harmful effects.

2. Nathalie Lallemand-Stempak (2024)10: This study explores how tools influence

on professional practices, specifically in the context of credit management at a
French bank. It talks about how quantitative tools support pluralistic and reflective
activities, highlight the necessity of the productive response and the possibility of
disputes. In order to maintain reflexivity, the study highlights the significance of
dynamic interactions between review, confirmation, and action. It means that even
in operational procedures like credit risk management, the combination of
pluralistic methods and quantitative technologies can promote reflexivity without
limiting action

22
3. Wilhelmina Afuw Addy (2024)19: In order to comprehend the function of
predictive analytics in banking credit risk management, this review generates case
studies and literature. The use of advanced machine learning, a focus on ethics and
compliance, and integration with other banking activities are some of the key
developments. It highlights how predictive analytics may improve risk
identification and decision-making, even in the face of challenges like personnel
shortages and poor data quality. In the future, it views predictive analytics as
essential to reducing credit risk and providing regulators and banking professionals
with useful guidance.

4. M Venkateswara Rao (2023)8: The efficiency and number of services available

in the banking industry have changed strongly in recent decades. As the global
population increases, banks must deal with a rise in clients and online transactions,
which generates a lot of data. Banks from all over the globe, especially those in the
US, use Big Data Analytics (BDA), to identify patterns in their records for greater
profits. This change extends from a more basic approach to credit risk management
to one that is more specific. Comparative assessments show that big data technology
makes multiple data analysis possible, which improves the effectiveness and
security of risk management systems.

5. Tribhuwan Kumar Bhatt (2023)16: In the months after of the current economic
downturn, the management of credit risks has become increasingly critical. to
international leaders. Current frameworks are not continuous or integrated, which
results in incomplete risk perceptions. During a financial crisis, effective risk
management approaches have shown to be critical. Environmental risk, credit
.

assessment, market risk study, and credit risk management have a good relationship,
based on a study conducted in Nepal that investigate the elements that determine
credit risk management and how it affects the concert of commercial banks. The
report highlights how important risk-management strategies are to reducing credit
risk and increasing financial performance.

23
6. Parmujianto Parmujianto (2023)12: Despite its growth Islamic banking still faces
issues related to financial institutions and enterprises, particularly when acting as a
middleman for Indonesian businesses. Measuring, reducing, and addressing such
hazards need effective risk management. In this respect, the Bank of Indonesia has
made great steps, concentrating on eight main areas, such as operational risks,
liquidity and credit. Effective checks on internal control processes need an effective
risk management system. Any financial system must be capable of identifying and
managing risks, particularly when dealing with Islamic banking operations.

7. Maryem Naili (2022)9: Non-performing loans (NPLs), an object of credit risk in

banks, are an essential issue for the banking sector. This study analyzes the body of
research on non-performing loans and their impact on banks. Considering these
aspects could be beneficial in forecasting crashes in banks and direct policy
decisions. Credit risk is an issue that requires more exploration despite lots of
previous studies. The report makes ideas for future research paths to address this
issue.

8. Xiao Yan Zhou (2022)20: This research looks at how Chinese banks green lending
impacts their credit risk and how government regulations influence banks' stability.
Analyzing 41 Chinese banks from 2007 to 2018, it finds that the relationship
between green lending and credit risk varies based on state ownership and bank
size. While the Green Credit Policy reduces risk for state-controlled banks, it
increases risk for city and regional commercial banks due to information disparities.
Policymakers utilizes the data to adapt green financing policies and Encouraging
sharing data across various bank types to improve risk management.

9. Wen Zhang (2022)18: Credit risk in Supply Chain Finance (SCF) for Small and
Medium-sized Enterprises (SMEs) refers to the likelihood of SMEs defaulting on
loans from SCF platforms. Traditional models for predicting this risk rely on static
SME data, neglecting dynamic financing behavior, hindering accuracy. A new
method called Deep risk combines demographic and behavioral data, using multi-
modal learning. Experiments show Deep risk outperforms existing methods,
highlighting the importance of both types of data for accurate risk prediction, with
behavioral data proving more predictive. Decision makers in SCF can benefit from
utilizing Deep risk to manage credit risks effectively.

24
10. Niklas Bussmann (2021)11: This work offers an explainable AI model for credit
risk management, with an emphasis on peer-to-peer lending platforms. This
approach uses correlation networks and Shapley values to aggregate AI predictions
based on common underlying reasons. Empirical research of 15,000 small and
medium-sized businesses seeking loan reveals that risky and non-risky borrowers
have comparable financial features, which can explain their credit ratings and
forecast their future behavior. This technique improves openness and
comprehension in credit risk assessment, allowing lenders to make more informed
judgments.

11. Vanessa Drager (2021)17: This topic examines risk management in small and
medium-sized German banks using survey data. It finds that banks adjust to a 200-
bp (basis points) interest rate increase by reducing net interest margin volatility,
allocating risk budgets to interest rate or credit risk. Bank’s exposures to these risks
are rewarded. In the first year, impairments on bond portfolios exceed net interest
.

income reductions, mitigated by liquidating hidden reserves, while banks using

interest derivatives show lower bond portfolio impairments.

12. Iryna Yanenkova (2021)3: This article introduces a neural-cell-based cost risk
model for bank credit risk management, integrating value-of-risk methodology,
fuzzy programming, and symbiotic methods. It aids in decision support for
nonperforming loan management and forecasts overdue payments, assesses credit
portfolio quality, and predicts bank development. The model detects early loan
default risk and forecasts credit problematic changes, offering a methodology for
troubled loan debt analysis and integration at decision support systems of portfolio
risk monitoring.

13. Shibiru Tade Kidane (2020)13: The study analyzed credit risk management impact
on Ethiopian commercial banks profitability using data from 2010-2019. It used
Correlation analysis and a fixed effect Model, focusing on bank-specific and
macroeconomic factors. Findings revealed significant effects on profitability,
emphasizing the need to consider both internal and external factors in credit risk
management approaches to maintain commercial banks profitability in Ethiopia.

25
14. Ekaterina V Orlova (2020)2: Credit operations are crucial for banks income, but
they come with growing credit risks, emphasizing the need to improve lending
management. The research aims to develop new skills and models using statistical
data from the Bank of Russia and Rosstat, employing various methods including
system analysis and machine learning. To increase credit institutions profitability
and innovation, these models is required established successfully.

15. Adire Siman Deng (2020)1: The study in South Sudan explores how Credit Risk
Management affects for financial institutions' performance. Compliance with the
.

Basel Accord notably impacts performance, while monitoring corporate credit risk
and risk management environment shows minimal influence. Surprisingly, credit
risk operational practices negatively affect performance insignificantly.

16. Khaled Alzeaideen (2019)6: Banks are really important for Jordan's economy, but
deciding who gets loans can be tricky. Right now, decisions mostly rely on the bank
officer's gut feeling or old-fashioned scoring systems. To make better decisions, a
study in Jordan used fancy computer tools called Artificial Neural Networks. These
tools analyze lots of data to help banks decide who should get loans. The
investigation create that these technologies are a useful supplement to traditional
procedures.

17. Logan Ewanchuk & Christoph Frei (2019)7: The International Financial
Reporting Standard 9 mandates banks to provision for expected losses using
forward-looking models, necessitating additional provisions in case of significant
credit risk increase. Setting a threshold for identifying such risk affects income
volatility; a lower threshold detects risk early but increases volatility. We propose
a statistical framework to balance early risk recognition and income stability,
analyzing optimization across various models and relating it to the European Union
banking stress test. Standard and Poor’s default data illustrate our approach.

18. Snjezana b Stanisic (2018)14: In Republika Srpska, the banking sector mainly
watches out for risks related to loans, money availability, and foreign currencies
due to its unique economic situation. Lately, there's been a decrea se in bad loans
.

and a bit more profit for banks. But, there's concern that bad loans might rise again,

26
 which could be a problem. This study wants to find better ways to keep track of bad
loans and prevent big problems, especially after some banks had issues paying back
depositors.

19. J.N. Taiwa (2017)5: This study looks at how well Nigerian banks manage the risks
involved in giving out loans and how it affects their performance and ability to lend
money. They used data from Nigerian government reports and the World Bank, and
some math to analyze it. They found that when banks handle risks better, people
trust them more and Firms produce greater amounts of cash, but it does not always
imply that they lend out more money. They argue that banks should be selective
.

about who they lend to.

20. Isaiah Oino (2016)4: The investigation of Indian public and private banks manage
the risk of lending money from 2009 to 2012. It finds that private banks tend to be
more profitable and financially stable than public ones. Both types of banks are
affected by the quality of loans they give out. Good loans lead to higher profits. The
study emphasizes the importance of to have adequate funds stored away for
emergencies and managing risks in the financial system stable.

2.3 RESEARCH GAP:

1. Above literature review studies about the concept in abroad are not much
considered the studies referred to India.
2. It does not include the study on the factors or determinants that will affect the
management of the credit risk.
3. There is no much study done with respect to the issue of agricultural loan by the
banks.
4. There is the no study conducted on the effectiveness of credit risk management
practices in emerging markets.

27
 CHAPTER - 03
RESEARCH DESIGN

3.0 RESEARCH TOPIC

“A study on Credit Risk management towards Mysore and Chamarajanagar District
Central Co-operative Bank Mysore”

3.1 STATEMENTS OF THE PROBLEM

The banking sector faces challenges in effectively managing credit risk, which is the
risk of borrowers defaulting on their loan obligations. Despite getting into various risk
management strategies, there remains requires to address key issues such as accurately
assessing borrower creditworthiness, mitigating the impact of economic downturns on
loan portfolios, and ensuring compliance with regulatory requirements. Furthermore,
the introduction of new technology and business models creates complications that
necessitate novel methods to credit risk management. Overall, few major points to
research and practical solutions to improve credit risk management methods in the
banking industry, protect financial stability, and promote sustainable lending
operations.

3.2 NEED FOR THE STUDY

• The study of credit risk management is essential for mitigating financial losses and
ensuring regulatory compliance, which in turn supports the overall stability of the
financial system.
• The study of credit risk management is crucial for identifying emerging risks
promptly and fostering a risk-aware culture, enhancing operational efficiency, and
facilitating strategic planning.
• To ensure that the loan given won't be set as default, it is necessary to know the risk
getting into bank granting credit for borrower.
• To determine what steps must be taken in order for the Bank to reduce the risk
involved with its lending.
• The several aspects the bank must look at before making a loan in term of lower its
loan and maintain profitability.

28
3.3 OBJECTIVES OF THE STUDY
• To understand the credit risk management at The Mysore and Chamarajanagara
District Co-operative Central Bank of Mysuru district.
• To identify the factors influencing on credit system.
• To analyze the impact of credit risk on profitability of the bank.
• To evaluate the methods of credit policy.

3.4 SCOPE OF THE STUDY

The study's scope describes the amount of which the research field will be investigated
.

in the work and the parameters within which the investigation will operate. Identifying
all potential sources of credit risk, including loans, bonds, derivatives, and off-balance-
sheet exposures. Borrowers' creditworthiness is assessed using credit ratings, financial
documents, cash flow analysis, and credit history. Borrower creditworthiness and loan
portfolio performance are tracked on a systematic basis.

3.5 RESEARCH METHODOLOGY

• This research was conducted to investigate the risk associated with credit risk
management in MCDCC Bank. The major aim of this project is:
• This is the quantitative type of research and is to prob the data which is provided
by MCDCC Bank.
• The analysis is complete on the basis of data collected from the secondary sources
collection survey they are:
➢ The MCDCC Bank website.
➢ MCDCC Bank annual reports.
➢ Bank circular.
➢ Records, manuals, journals and files from the MCDCC Bank.

3.5.1 Sources of Data Collection

• Primary Data
The interaction with the bank manager and observation of the bank’s working process
is the primary data.

29
• Secondary Data
The Secondary Data has been accepted in this learning because, data’s were
extracted from various sources such as – Websites, Journals, Articles, and related
.

documents to analyze the study.

3.6 HYPOTHESES
H0: There is no relationship between credit risk and profitability

3.6.1 Tools for the study

➢ Parametric Test: Correlation
The Correlation is used to analyze the relationship between credit risk and
profitability at MCDCC Bank.

Statistical tool Formula

𝑁𝛴𝑑𝑥𝑑𝑦−(𝛴𝑑𝑥)(𝛴𝑑𝑦)
Correlation r=
√𝑛𝛴𝑑𝑥 2 −(𝛴𝑑𝑥)2 √𝑛𝛴𝑑𝑦 2 −(𝛴𝑑𝑦)2

3.7 LIMITATIONS OF THE STUDY:

• The particular study is restricted to only Chamarajanagar and Mysore Cooperative
Bank, Mysuru.
• The study is limited to five years financial data i.e., 2020 to 2023.
• The outcome of this particular study is unavoidable because major data are acquired
from the secondary sources.

3.8 CHAPTER SCHEME

Chapter 01 Introduction
Banking, Banking industry in India. Competitors / Major players, History of the Indian
sector. Types of Banks in India: GDP Contribution, Company Profile, Promoters Vision
and Mission Quality Policy, Product/Service Profile, Areas of Operation, Infrastructure
Facilities Competitor information, SWOT Analysis Future development and potential,
as well as financial statements.

30
Chapter 02 Conceptual Backgrou nd and Literature Review
.

The theoretical underpinning of the stud y, meaning: credit, risk, and loans, types of
.

loans, Literature Review: Research Gap

Chapter 03 Research Design

Problem statements Need for the study, objectives, Scope of the Study, Research
methodology, hypothesis, The study has limitations, Chapter scheme

Chapter 04 Analysis and Interpretation

Data analysis and interpretation: Showing the installment of vehicle loan, Personal
loan, Mortgage loan & Housing individual loan from 2020 to 2023, Showing
correlation between profitability and credit risk, Calculating of coefficient of
correlation for X and Y variable

Chapter 05 Findings, suggestions and conclusion

In this chapter the study’s conclusion and the findings and suggestions that were
revealed in the particular investigation.
.

31
 CHAPTER - 04
ANALYSIS AND INTERPRETATION

4.1 DATA ANALYSIS AND INTERPRETATION

4.1.1 SHOWING THE INSTALLMENT OF VEHICLE LOAN OF 2020

10709050.20
L × R (1+R)n
EMI = Where,
(1+R)n −1
‘L’ – Loan amount

‘R’ – Interest rate

‘n’ – Number of the years

10709050×0.10(1+0.10)5
=
(1+0.10)5 −1

1070905(1+0.10)5
=
(1+0.10)5 −1

1724703
=
0.61051

= 2825020

Table 4.1 Installment of Vehicle Loan of 2020

End of the Year Instalment Interest @ 10% Principle Balance
10709050
2825020 1070905 1754115 8954935
2825020 895493.5 1929526.5 7025408.5
2020
2825020 702540.85 2122479.15 4902929.35
2825020 490292.935 2334727.07 2568202.285
2825020 256817.715 2568202.285 ---------------

Interpretation
In the year 2020 Vehicle Loan Installment is calculated for 5 years. Each year, an
installment of 2825020 is due. The rate of interest is calculated @10% on the remaining
balance annually. The principal amount of the installment increases annually as the

32
interest amount decreases. By the end of the five-year period, the loan is completely
returned, with the final installment paying the outstanding principal and interest.

4.1.2 SHOWING THE INSTALLEMENT OF VEHICLE LOAN OF 2021

30152237.83
L × R (1+R)n
EMI = Where,
(1+R)n −1
30152237×0.10(1+0.10)5
=
(1+0.10)5 −1

3015223.7(1+0.10)5
=
(1+0.10)5 −1

4856048
=
0.61051

= 7954084

Table 4.2 Installment of Vehicle Loan of 2021

End of the Year Instalment Interest @ 10% Principle Balance
30152237
7954084 3015223.7 4938860.3 25213376.7
7954084 2521337.67 5432746.33 19780630.37
2021
7954084 1978063.037 5976020.963 13804609.41
7954084 1380460.941 6573623.059 7230986.348
7954084 723097.652 7230986.348 ---------------

Interpretation
In the year 2021 Vehicle Loan Installment is calculated for 5 years. Each year, an
installment of 7954084 is due. The rate of interest is calculated @10% on the remaining
balance annually. The principal amount of the installment increases annually as the
interest amount decreases. By the end of the five-year period, the loan is completely
returned, with the final installment paying the outstanding principal and interest.

33
4.1.3 SHOWING THE INSTALLEMENT OF VEHICLE LOAN OF 2022

53328644.52

L × R (1+R)n
EMI = Where,
(1+R)n −1
53328644×0.10(1+0.10)5
=
(1+0.10)5 −1

5332864.4(1+0.10)5
=
(1+0.10)5 −1

8588631
=
0.61051

= 14067961

Table 4.3 Installment of Vehicle Loan of 2022

End of the Year Instalment Interest @ 10% Principle Balance
53328644
14067961 5332864.4 8735096.6 44593547.4
14067961 4459354.74 9608606.26 34984941.14
2022
14067961 3498494.114 10569466.89 24415474.25
14067961 2441547.425 11626413.57 12789060.68
14067961 1278900.321 12789060.68 ---------------

Interpretation
In the year 2022 Vehicle Loan Installment is calculated for 5 years. Each year, an
installment of 14067961 is due. The rate of interest is calculated @10% on the
remaining balance annually. The principal amount of the installment increases annually
as the interest amount decreases. By the end of the five-year period, the loan is
completely returned, with the final installment paying the outstanding principal and
interest.

34
4.1.4 SHOWING THE INSTALLEMENT OF VEHICLE LOAN OF 2023

81422221.22

L × R (1+R)n
EMI = Where,
(1+R)n −1
81422221×0.10(1+0.10)5
=
(1+0.10)5 −1

8142222.1(1+0.10)5
=
(1+0.10)5 −1

13113130
=
0.61051

= 21478976

Table 4.4 Installment of Vehicle Loan of 2023

End of the Year Instalment Interest @ 10% Principle Balance
81422221
21478976 8142222.1 13336753.9 68085467.1
21478976 6808546.71 14670429.29 53415037.81
2023
21478976 5341503.781 16137472.22 37277565.59
21478976 3727756.559 17751219.44 19526346.15
21478976 1952629.85 19526346.15 ---------------

Interpretation
In the year 2023 Vehicle Loan Installment is calculated for 5 years. Each year, an
installment of 21478976 is due. The rate of interest is calculated @10% on the
remaining balance annually. The principal amount of the installment increases annually
as the interest amount decreases. By the end of the five-year period, the loan is
completely returned, with the final installment paying the outstanding principal and
interest.

35
4.1.5 SHOWING THE MYSORE & CHAMARAJANAGAR DISTRICT CO-
OPERATIVE CENTRAL BANK LTD., LAST 4 YEAR VEHICLE LOAN
DISBURSEMENT
Table 4.5 Loan Disbursement of Vehicle Loan
Year Loan Disbursement

2023 81422221

2022 53328644

2021 30152237

2020 10709050

CHART 4.1.1 SHOWING THE MYSORE & CHAMARAJANAGAR DISTRICT

CO-OPERATIVE CENTRAL BANK LTD., 4 YEARS VEHICLE LOAN
DISBURSEMENT

Loan Disbursement

10709050

30152237

81422221

53328644

2023 2022 2021 2020

Chart 4.1 Loan Disbursement of Vehicle Loan

36
4.1.6 SHOWING THE INSTALLEMENT OF PERSONAL LOAN OF 2020

22600912.36

L × R (1+R)n
EMI = Where,
(1+R)n −1
22600912×0.14(1+0.14)5
=
(1+0.14)5 −1

3164128(1+0.14)5
=
(1+0.14)5 −1

6092244
=
0.92541

= 6583292

Table 4.6 Installment of Personal Loan 2020

End of the Year Instalment Interest @ 14% Principle Balance
22600912
6583292 3164127.68 3419164.32 19181747.68
6583292 2685444.68 3897847.325 15283900.36
2020
6583292 2139746.05 4443545.95 10840354.4
6583292 1517649.62 5065642.383 5774712.022
6583292 808579.978 5774712.022 ---------------

Interpretation
Period of 2020 Personal Loan Installment Is computed for 5 years. Each year, an
installment of 6583292 is due. The rate of interest is calculated @14% on the remaining
balance annually. The principal sum of the installment increases annually as the interest
amount decreases. At end of five-year period, the loan is completely returned, with the
final installment paying the outstanding principal and interest.

37
4.1.7 SHOWING THE INSTALLEMENT OF PERSONAL LOAN OF 2021

40427959.68

L × R (1+R)n
EMI = Where,
(1+R)n −1
40427959×0.14(1+0.14)5
=
(1+0.14)5 −1

5659914(1+0.14)5
=
(1+0.14)5 −1

10897655
=
0.92541

= 11776029

Table 4.7 Installment of Personal Loan 2021

End of the Year Instalment Interest @ 14% Principle Balance
40427959
11776029 5659914.26 6116114.74 34311844.26
11776029 4803658.196 6972370.804 27339473.46
2021
11776029 3827526.284 7948502.716 19390970.74
11776029 2714735.904 9061293.096 10329677.64
11776029 1446351.356 10329677.64 ---------------

Interpretation
In the year 2021 Personal Loan Installment is calculated for 5 years. Each year, an
installment of 11776029 is due. The rate of interest is calculated @14% on the
remaining balance annually. The principal amount of the installment increases annually
as the interest amount decreases. By the end of the five-year period, the loan is
completely returned, with the final installment paying the outstanding principal and
interest.

38
4.1.8 SHOWING THE INSTALLEMENT OF PERSONAL LOAN OF 2022

119519756.95

L × R (1+R)n
EMI = Where,
(1+R)n −1
119519756×0.14(1+0.14)5
=
(1+0.14)5 −1

16732766(1+0.14)5
=
(1+0.14)5 −1

18081462
=
0.92541

= 19538866

Table 4.8 Installment of Personal Loan 2022

End of the Year Instalment Interest @ 14% Principle Balance
119519756
19538866 16732765.84 2806100.16 116713655.8
19538866 16339911.82 3198954.182 113514701.7
2022
19538866 15892058.23 3646807.768 109867893.9
19538866 15381505.14 4157360.855 105710533
19538866 -86171667.03 105710533 ----------------

Interpretation
In the year 2022 Personal Loan Installment is calculated for 5 years. Each year, an
installment of 19538866 is due. The rate of interest is calculated @14% on the
remaining balance annually. The principal amount of the installment increases annually
as the interest amount decreases. By the end of the five-year period, the loan is
completely returned, with the final installment paying the outstanding principal and
interest.

39
4.1.9 SHOWING THE INSTALLEMENT OF PERSONAL LOAN OF 2023

142806024.61

L × R (1+R)n
EMI = Where,
(1+R)n −1
142806024×0.14(1+0.14)5
=
(1+0.14)5 −1

19992843(1+0.14)5
=
(1+0.14)5 −1

38494420
=
0.92541

= 41597151

Table 4.9 Installment of Personal Loan 2023

End of the Year Instalment Interest @ 14% Principle Balance
142806024
41597151 19992843.36 21604307.64 121201716.4
41597151 16968240.29 24628910.71 96572805.65
2023
41597151 13520192.79 28076958.21 68495847.44
41597151 9589418.642 32007732.36 36488115.08
41597151 5109035.917 36488115.08 ---------------

Interpretation
In the year 2023 Personal Loan Installment is calculated for 5 years. Each year, an
installment of 41597151 is due. The rate of interest is calculated @14% on the
remaining balance annually. The principal amount of the installment increases annually
as the interest amount decreases. By the end of the five-year period, the loan is
completely returned, with the final installment paying the outstanding principal and
interest.

40
4.1.10 SHOWING THE MYSORE & CHAMARAJANAGAR DISTRICT CO-
OPERATIVE CENTRAL BANK LTD., LAST 4 YEAR PERSONAL LOAN
DISBURSEMENT

Table 4.10 Loan Disbursement of Personal Loan

Year Loan Disbursement

2023 142806024

2022 119519756

2021 40427959

2020 22600912

CHART 4.1.2 SHOWING THE MYSORE & CHAMARAJANAGAR DISTRICT

CO-OPERATIVE CENTRAL BANK LTD., 4 YEARS PERSONAL LOAN
DISBURSEMENT

LOAN DISBURSEMENT
22600912

40427959

142806024

119519756

2023 2022 2021 2020

Chart 4.2 Loan Disbursement of Personal Loan

41
4.1.11 SHOWING THE INSTALLEMENT OF MORTGAGE LOAN OF 2020

107174619.56
L × R (1+R)n
EMI = Where,
(1+R)n −1
107174619×0.13(1+0.13)5
=
(1+0.13)5 −1

13932700(1+0.13)5
=
(1+0.13)5 −1

25670024
=
0.84243

= 30471403

Table 4.11 Installment of Mortgage Loan 2020

End of the Year Instalment Interest @ 13% Principle Balance
107174619
30471403 13932700.47 16538702.53 90635916.47
30471403 11782669.14 18688733.86 71947182.61
2020
30471403 9353133.739 21118269.26 50828913.35
30471403 6607758.736 23863644.26 26965269.09
30471403 3506133.914 26965269.09 ----------------

Interpretation
In the year 2020 Mortgage Loan Installment is calculated for 5 years. Each year, an
installment of 30471403 is due. The rate of interest is calculated @13% on the
remaining balance annually. The principal amount of the installment increases annually
as the interest amount decreases. By the end of the five-year period, the loan is
completely returned, with the final installment paying the outstanding principal and
interest.

42
4.1.12 SHOWING THE INSTALLEMENT OF MORTGAGE LOAN OF 2021

175711874.86
L × R (1+R)n
EMI = Where,
(1+R)n −1
175711874×0.13(1+0.13)5
=
(1+0.13)5 −1

22842543(1+0.13)5
=
(1+0.13)5 −1

42085786
=
0.84243

= 49957606

Table 4.12 Installment of Mortgage Loan 2021

End of the Year Instalment Interest @ 13% Principle Balance
175711874
49957606 22842543.62 27115062.38 148596811.6
49957606 19317585.51 30640020.49 117956791.1
2021
49957606 15334382.85 34623223.15 83333567.98
49957606 10833363.84 39124242.16 44209325.81
49957606 5748280.185 44209325.81 -----------------

Interpretation
In the year 2021 Mortgage Loan Installment is calculated for 5 years. Each year, an
installment of 49957606 is due. The rate of interest is calculated @13% on the
remaining balance annually. The principal amount of the installment increases annually
as the interest amount decreases. By the end of the five-year period, the loan is
completely returned, with the final installment paying the outstanding principal and
interest.

43
4.1.13 SHOWING THE INSTALLEMENT OF MORTGAGE LOAN OF 2022

238480568.24
L × R (1+R)n
EMI = Where,
(1+R)n −1
238480568×0.13(1+0.13)5
=
(1+0.13)5 −1

31002474(1+0.13)5
=
(1+0.13)5 −1

57119888
=
0.84243

= 67803720

Table 4.13 Installment of Mortgage Loan 2022

End of the Year Instalment Interest @ 13% Principle Balance
238480568
67803720 31002473.84 36801246.16 201679321.8
67803720 26218311.84 41585408.16 160093913.7
2022
67803720 20812208.78 46991511.22 113102402.5
67803720 14703312.32 53100407.68 60001994.78
67803720 7801725.223 60001994.78 -----------------

Interpretation
In the year 2022 Mortgage Loan Installment is calculated for 5 years. Each year, an
installment of 67803720 is due. The rate of interest is calculated @13% on the
remaining balance annually. The principal amount of the installment increases annually
as the interest amount decreases. By the end of the five-year period, the loan is
completely returned, with the final installment paying the outstanding principal and
interest.

44
4.1.14 SHOWING THE INSTALLEMENT OF MORTGAGE LOAN OF 2023

288660158.16
L × R (1+R)n
EMI = Where,
(1+R)n −1
288660158×0.13(1+0.13)5
=
(1+0.13)5 −1

37525820(1+0.13)5
=
(1+0.13)5 −1

69138696
=
0.84243

= 82070553

Table 4.14 Installment of Mortgage Loan 2023

End of the Year Instalment Interest @ 13% Principle Balance
288660158
82070553 37525820.54 44544732.46 244115425.5
82070553 31735005.32 50335547.68 193779877.9
2023
82070553 25191384.12 56879168.88 136900709
82070553 17797092.17 64273460.83 72627248.15
82070553 9443304.85 72627248.15 -----------------

Interpretation
In the year 2023 Mortgage Loan Installment is calculated for 5 years. Each year, an
installment of 82070553 is due. The rate of interest is calculated @13% on the
remaining balance annually. The principal amount of the installment increases annually
as the interest amount decreases. By the end of the five-year period, the loan is
completely returned, with the final installment paying the outstanding principal and
interest.

45
4.1.15 SHOWING THE MYSORE & CHAMARAJANAGAR DISTRICT CO-
OPERATIVE CENTRAL BANK LTD., LAST 4 YEAR MORTGAGE LOAN
DISBURSEMENT

Table 4.15 Loan Disbursement of Mortgage Loan

Year Loan Disbursement

2023 288660158

2022 238480568

2021 175711874

2020 107174619

CHART 4.1.3 SHOWING THE MYSORE & CHAMARAJANAGAR DISTRICT

CO-OPERATIVE CENTRAL BANK LTD., 4 YEARS MORTGAGE LOAN
DISBURSEMENT

LOAN DISBURSEMENT

107174619

288660158
175711874

238480568

2023 2022 2021 2020

Chart 4.3 Loan Disbursement of Mortgage Loan

46
4.1.16 SHOWING THE INSTALLEMENT OF HOUSING LOAN
INDIVIDUALS OF 2020

22315481.15
L × R (1+R)n
EMI = Where,
(1+R)n −1
22315481×0.09(1+0.09)5
=
(1+0.09)5 −1

2008393(1+0.09)5
=
(1+0.09)5 −1

3090154
=
0.53862

= 5737169

Table 4.16 Installment of Housing Loan Individuals 2020

End of the Year Instalment Interest @ 9% Principle Balance
22315481
5737169 2008393.29 3728775.71 18586705.29
5737169 1672803.476 4064365.524 14522339.77
2020
5737169 1307010.579 4430158.421 10092181.35
5737169 908296.3211 4828872.679 5263308.666
5737169 473860.3339 5263308.666 ---------------

Interpretation
In the year 2020 Housing Loan Individuals Installment is calculated for 5 years. Each
year, an installment of 5737169 is due. The rate of interest is calculated @9% on the
remaining balance annually. The principal amount of the installment increases annually
as the interest amount decreases. By the end of the five-year period, the loan is
completely returned, with the final installment paying the outstanding principal and
interest.

47
4.1.17 SHOWING THE INSTALLEMENT OF HOUSING LOAN INDIVIDUALS
OF 2021
52032959.27
L × R (1+R)n
EMI = Where,
(1+R)n −1
52032959×0.09(1+0.09)5
=
(1+0.09)5 −1

4682966(1+0.09)5
=
(1+0.09)5 −1

7205305
=
0.53862

= 13377344

Table 4.17 Installment of Housing Loan Individuals 2021

End of the Year Instalment Interest @ 9% Principle Balance
52032959
13377344 4682966.31 8694377.69 43338581.31
13377344 3900472.318 9476871.682 33861709.63
2021
13377344 3047553.867 10329790.13 23531919.49
13377344 2117872.754 11259471.25 12272448.25
13377344 1104895.751 12272448.25 ---------------

Interpretation
In the year 2021 Housing Loan Individuals Installment is calculated for 5 years. Each
year, an installment of 13377344 is due. The rate of interest is calculated @9% on the
remaining balance annually. The principal amount of the installment increases annually
as the interest amount decreases. By the end of the five-year period, the loan is
completely returned, with the final installment paying the outstanding principal and
interest.

48
4.1.18 SHOWING THE INSTALLEMENT OF HOUSING LOAN INDIVIDUALS
OF 2022

50463532. 78
L × R (1+R)n
EMI = Where,
(1+R)n −1
50463532×0.09(1+0.09)5
=
(1+0.09)5 −1

4541718(1+0.09)5
=
(1+0.09)5 −1

6987978
=
0.53862

= 12973855

Table 4.18 Installment of Housing Loan Individuals 2022

End of the Year Instalment Interest @ 9% Principle Balance
50463532
12973855 4541717.88 8432137.12 42031394.88
12973855 3782825.539 9191029.461 32840365.42
2022
12973855 2955632.888 10018222.11 22822143.31
12973855 2053992.898 10919862.1 11902281.2
12973855 1071573.795 11902281.2 ---------------

Interpretation
In the year 2022 Housing Loan Individuals Installment is calculated for 5 years. Each
year, an installment of 12973855 is due. The rate of interest is calculated @9% on the
remaining balance annually. The principal amount of the installment increases annually
as the interest amount decreases. By the end of the five-year period, the loan is
completely returned, with the final installment paying the outstanding principal and
interest.

49
4.1.19 SHOWING THE INSTALLEMENT OF HOUSING LOAN
INDIVIDUALS OF 2023

86286205.71
L × R (1+R)n
EMI = Where,
(1+R)n −1
86286205×0.09(1+0.09)5
=
(1+0.09)5 −1

7765758(1+0.09)5
=
(1+0.09)5 −1

11948550
=
0.53862

= 22183636

Table 4.19 Installment of Housing Loan Individuals 2023

End of the Year Instalment Interest @ 9% Principle Balance
86286205
22183636 7765758.45 14417877.55 71868327.45
22183636 6468149.471 15715486.53 56152840.92
2023
22183636 5053755.683 17129880.32 39022960.6
22183636 3512066.454 18671569.55 20351391.06
22183636 1832244.942 20351391.06 ---------------

Interpretation
In the year 2023 Housing Loan Individuals Installment is calculated for 5 years. Each
year, an installment of 22183636 is due. The rate of interest is calculated @9% on the
remaining balance annually. The principal amount of the installment increases annually
as the interest amount decreases. By the end of the five-year period, the loan is
completely returned, with the final installment paying the outstanding principal and
interest.

50
4.1.20 SHOWING THE MYSORE & CHAMARAJANAGAR DISTRICT CO-
OPERATIVE CENTRAL BANK LTD., LAST 4 YEAR HOUSING LOAN
INDIVIDUALS DISBURSEMENT

Table 4.20 Loan Disbursement of Housing Loan Individuals

Year Loan Disbursement

2023 86286205

2022 50463532

2021 52032959

2020 22315481

CHART 4.1.4 SHOWING THE MYSORE & CHAMARAJANAGAR DISTRICT

CO-OPERATIVE CENTRAL BANK LTD., 4 YEARS HOUSING LOAN
INDIVIDUALS DISBURSEMENT

LOAN DISBURSEMENT

22315481

86286205
52032959

50463532

2023 2022 2021 2020

Chart 4.4 Loan Disbursement of Housing Loan Individuals

51
 4.2 HYPOTHESES ANALYSIS
SHOWING CORRELATION BETWEEN PROFITABILITY AND CREDIT
RISK

Profitability is denoted as ‘x’

Credit risk is denoted as ‘y’

Table 4.21 Profitability & Credit Risk

Year Profitability (X) Credit Risk or NPA (Y)
2020 20660763 162800062
2021 40379098 298325029
2022 20465999 461792500
2023 30379116 599174608

Here: Profitability – depended variable ‘X’ and Credit Risk – Independed variable ‘Y’

Table 4.22 Correlation Between Profitability & Credit Risk

Year X Y dx dy 𝒅𝒙𝟐 𝒅𝒚𝟐 dxdy
̅)
(𝒙 − 𝒙 ̅
𝒚−𝒚
2020 20.66 162.80 -7.31 124.75 53.44 15562.3 -911.9225
2021 40.37 298.32 12.4 260.27 153.76 67740.5 3227.348
2022 20.46 461.79 -7.51 423.74 56.40 179555.6 -3182.2874
2023 30.37 599.17 2.4 561.12 5.76 314855.6 1346.688
N = 04 Σx Σy = Σdx = Σdy = Σ𝑑𝑥 2 = Σdy2 Σdxdy =
=111.86 1522.08 -0.02 1369.88 269.36 =577714 479.8261

Mean of X Mean of Y
Σx Σx
𝑥̅ = 𝑦̅ =
𝑁 𝑁
111884976 1522092199
𝑥̅ = 𝑦̅ =
4 4

𝑥̅ = 27.97 𝑦̅ = 38.05

52
CALCULATION OF COEFFICENT OF CORRELATION FOR ‘X’ AND ‘Y’
VARIABLE

𝑁𝛴𝑑𝑥𝑑𝑦−(𝛴𝑑𝑥)(𝛴𝑑𝑦)
r=
√𝑛𝛴𝑑𝑥 2 −(𝛴𝑑𝑥)2 √𝑛𝛴𝑑𝑦 2 −(𝛴𝑑𝑦)2

04(479.8261)−(−0.02)(1369.88)
r=
√(04 × 269.36 )−(−0.02)2 √(04 × 577714) –(1369.88)2

1919.3044 −(−27.3976)
r=
√1077.44−(0.0004) √2310856 −(1876571)

1946.702
r=
32.824 × 659.003

r = 0.0899

Conclusion:
In the above coefficient of correlation is been calculated the answer is less than 1. Hence
there is a low correlation between credit risk and profitability.

Interpretation
The result is 0.0899 which is positive correlation between the profitability and credit
risk. Therefore H0: There is no relationship between credit risk and profitability.

53
 CHAPTER - 05
FINDINGS, SUGGESTIONS AND CONCLUSION

5.1 FINDINGS:
As per the analysis of information it is been found that:
• It has a significant increase of 86.84% in the vehicle loan disbursement from 2020
to 2023.
• Personal loan payments have been grown by 84.17% from 2020 to 2023.
• From 2020 to 2023, the amount of mortgage loans disbursed raised by 62.87%.
• Housing loan disbursement increased to 67.37% between the years 2020 to 2023.
• The correlation between profitability and credit risk calculated by last 4 years and
the correlation (r) is 0.089 and there is low correlation between profitability and
credit risk.
• Projects findings reveal that MCDCC Bank is sanctioning less credit vehicle loan
and housing loan individuals compare to the other forms of loan.
• Total loans provided by MCDCC Bank upscaled every year frequently.
• There is no relationship between credit risk and profitability. Hence, the hypotheses
(H0) are rejected.

5.2 SUGGESTIONS
• Before offering any credit to person as a banker need to examine net worth of an
individual as well as their previous transaction on the bank.
• Effective policy has to frame to minimize the NPA proportion.
.

• Banker needs to verify the credit score of an individual.

• Bank should also provide subsidy facilities to agriculture customer.
• The bank needs to supply loans Interest rates lower than other banks and then it can
reduce the credit risk management.
• The bank should be care full about the borrowers and keep a track of their
repayments.
• The bank should use the recovery of amount loan amortization schedule to reduce
the year-by-year loan amount in credit risk management.
• The strict credit policies and standards reduces variability and further guarantees
that there are little risks as far as credit is concerned.

54
• The spread of credit risks is an effective way of decreasing the amount of credit
risks with a particular borrower or field. Both of them are important to monitor the
signs of credit deterioration and early warning system.
• Staff that is involved in credit management are well trained and informed on new
risk management practic es in their line of work, as well as new regulations.
.

5.3 CONCLUSION
Thus, credit risk management is crucial to guaranteeing the soundness of those lending
institutions. This project also affirms the need to develop sound credit assessment
models still encompassing quantitative and non-quantitative evaluation formulae.
Through more technical and efficient data analysis and Machine learning model
structures, Institutions have the ability to forecast borrowers’ default and possibly the
probable losses. More so, adopting the pro-active strategies in the credit risk
management through monitoring and early warning mechanisms guarantee early
intervention measures. Other measures that support the fight against credit adversities
include clarity in the formulation of organizational credit policies and promotion of
credit risk culture in the organization. Finally, CCRM enables the prevention of losses
of the institution’s assets and also lays a foundation that will help the institution achieve
sustainable profitability.

55
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 ANNEXURE

Financial Statements (2020-2023)