Beruflich Dokumente
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TABLE OF CONTENTS
Chapters
1. INTRODUCTION
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• Conclusion
• Suggestion
BIBLIOGRAPHY
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3
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That’s why the study of NPAS become necessary due to the below
mentioned reasons:
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Primary Objective
Secondary Objectives
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RESEARCH METHODOLOGY
Data Collection
a) Annual Reports
b) Newspapers & Journals
c) Websites
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HISTORY
The bank was formed in 1872 in the city Manchester in UK. The co-
operative banks in INDIA have a history of almost 100 years. The Co-
operative banks are an important constituent of the Indian Financial
System. Co operative Banks in India are registered under the Co-
operative societies Act. The co operative bank is also regulated by the
RBI. They are governed by the Banking Regulations Act 1949 and
Banking Laws (Co-operative societies) Act, 1965. These banks were
conceived as substitutes for money lenders.
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ESTABLISHMENTS
FEATURE
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Finance Function:
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Home finance
Consumer finance
Personal finance
CLASSIFICATION
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RECENT DEVELOPMENTS
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The PACS
• To raise capital for the purpose of giving loans and supporting the
essential activities of the members.
• To collect deposits from members with the objective of improving
their savings habit.
• To supply agricultural inputs and services to members at
remunerative prices.
• To arrange for supply and development of improved breeds of
livestock for the members.
• To make all necessary arrangements for improving irrigation on
land owned by members.
• To encourage various income-augmenting activities such as
horticulture, animal husbandry, poultry, bee-keeping, pisciculture
and cottage industries among the members through supply of
necessary inputs and services.
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The DCCBs
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(Production Credit)
The NCUI information brochure lists the following functions for the
National Federation of State Co-op Banks.
• Organises conferences/seminars/workshops/meetings.
The NABARD
However, the refinance of all the constituents in the above organ gram
(except the National Federation of State Co-operative Banks) is done by
the National Bank of Agriculture and Rural Development (NABARD),
which was set up in 1982 by the Government of India with the following
mandate.
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OVERVIEW:
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The Bank was registered under the Co-operative Societies Act II of 1912 on
16.03.1914. Its registration no. is 267/1913-14. Its founder members were as
follows:
The Banking Regulation Act, 1949 was made applicable to this Bank on
01.03.1966 like other Co-operative Banks.
The Bank was included in the second schedule of RBI like some other
Commercial and Nationalized Banks in the month of July 1966. Thus this Bank
is a scheduled Bank.
2. Organizational Set-up:
(i) Board:
In terms of amended Bihar Co-operative Societies Act, 2002, total no. of Board
of Directors is 17. Against the above 17 members, 2 posts are reserved for SC
members, 2 for Backward and 2 for women. Three are ex-officio members i.e.
RCS, CGM, NABARD, Regional Office and Managing Director of the Bank.
Out of above 17, 4 posts are vacant under reserve category.
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Ex-Officio Members
24
A
dministrative&Org
anis
a tio nalStruc tureof
Coopera tiveDep artm ent.
Secretary
Asst. Registrar, CS
Officers of the Bank have been re-designated in terms of RCS letter no. 3261
dated 23.03.1988 like Commercial Banks i.e. General Manager, Dy. Gen.
Manager, Asstt. Gen. Manager, Manager, Deputy Manager, Asstt. Manager and
Staff Officer. Besides above there are Assistants and Class IV employees i.e.
peon, Night Guards and Drivers etc.
There are altogether 16 branches of the Bank out of which 11 are located in the
Bihar State jurisdiction and 5 are located under the jurisdiction of Jharkhand State.
Previously, 34 DCCBs were affiliated with the Bank out of which one under the
jurisdiction of Jharkhand State i.e. Daltanganj and three under the jurisdiction of
Bihar State i.e. Chapra, Darbhanga and Madhepura have been bound up by the
RBI.
Accordingly, these DCCBs are presently under liquidation as per the order
of RCS. Thus there are only 30 DCCBs functional at present, affiliated to this
Bank. Out of 30, 22 DCCBs are under the jurisdiction of Bihar State and 8
DCCBs are under the jurisdiction of Jharkhand State. Out of 22 DCCBs functional
in the Bihar State, 18 DCCBs are not complying with the provisions regarding
minimum capital requirement i.e. Section 11 (1) of B.R.Act.
Four DCCBs which are complying with the provisions of Section 11(1) of
B.R.Act are Arrah, Patliputra, Bhagalpur and Gopalganj. Out of 18 DCCBs not
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Bank has improved its operational efficiency during the last 2-3 years. The
employees of the Bank are being sent to BIRD and other training institutions, for
imparting training. Some new recruitment on contractual basis have also been
made of the persons having technical qualification like MBA, MCA, BCA etc. to
improve the operational efficiencies.
Some other efforts have also been made by the Bank for improvement in the
present efficiencies of the Bank viz:
Premises of Head Office as well as all the seven branches located at Patna
have been renovated and modernized. Modernization of the other outstation
branches are also under process.
Computerization of all its branches except Motihari and Bihat have been
finalized. Computerization of above two remaining branches as well as
Head Office is under process.
The Bank has also started Government security trading to increase its
profitability.
4. Constraints:
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In the mean time, Bank has a proposal to fill up the vacancy under higher
cadre i.e. Dy. Gen. Managers by taking officers on deputation basis from the
State Government for which also the correspondence has been made.
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The Loan accounts are classified under the two heads namely.
i. Secured Advances
ii. Unsecured Advances
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CLASSIFICATION OF ADVANCES
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8. Against Deposits
9. Against approved securities(like NSC, LIC, Govt. securities, UTI)
10.Housing Finance
11.Real Estate
12.Consumer Loans
13.Others
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NPAs MEANING:
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“Financial System” RBI has issued on 27th April 1992 the guideline on
Income Recognized taking into the prospectus of reliability of the security.
Bank creates asset for earning income from their loans and advances
and this forms a major part of bank’s asset. These assets generate income in
the form of interest on them. An asset which generates income is said to be
performing asset and the one which does not generate income is called NPA.
The realization of either will make the account NPA. An asset will be
considered Non Performing if interest on such asset remains past dues for a
period non exceeding 90 days as per prudential norms in Income
Recognition as stipulated by RBI.
The prudential norms for loans and advances can be divided into 3
parts.
They are as follows:
a) INCOME RECOGNITION
b) ASSET CLASSIFICATION
c) PROVISIONING
INCOME RECOGNITION
INCOME GENERATION:
Bank creates asset for earning from them.
Loans and advances from a major part of bank assets. This performance one
expects from an asset is the generation of income. As asset which generates
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income is said to be a performing asst and the one which does not generate
income is therefore, called NPA.
RECOVERY BASIS:
ACCURUAL BASIS:
NON PERFORMANCE:
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may soon come to stage where the account can no more be considered as
generating income. In other words, the account is therefore known as NPA.
1) TERM LOAN
2) CASH CREDIT/ OVERDRAFT
3) OTHER ACCOUNT
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The three types of account are different from each other in many aspects,
especially in disbursement as well as repayment. In order to solve the
deficiency of the general definition of NPA the RBI has given different
groups. They are as follows:
TERM LOANS:
APPROPRIATION OF CREDIT:-
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The bank has the discretion to decide the priority at which a credit is
to be appropriated towards interest, installment and other dues. Fees,
commission and such other non interest income get the lowest priority as
default of these items will not an account Non-Performing Assets.
OPTION:-
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It is on the Balance Sheet (and on any date before it) that a cash
credit/ over draft account is to be treated as out of order if there are no
credits during the six months period as on the date of Balance sheet, or if the
credit are not enough to cover the interest debited during the same period.
OTHER ACCOUNT:
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1. Term Deposits
2. National Savings Certificates Eligible For Surrender
3. Indra Vikas Patras
4. Kissan Vikas Patras
5. Life Insurance Policies
The Bank making advances against the security of aforesaid items are
exempted from provisioning requirements. Even if interest is not paid for
90 days the account need to be treated as Non-Performing Assets. Interest
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on such accounts can be taken to the income account on accrual basis, on the
due dates, provided adequate margin is available.
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ASSET CLASSIFICATION
The Banks have to classify all their loans and advances into four broad
groups as under:-
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PROVISONING
The provisioning norms are formulated taking into account the time lag
between an accounts becoming doubtful of recovery, its recognition as such,
the realization of the security and the erosion over time in the value of
security charged to the banks. Banks should make provision against sub-
standard asset, doubtful assets and loss assets.
The entire assets should be written off. If the assets are permitted to
remain in the books for any reasons, 100% of the outstanding should be
provided for.
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Depending on the period for which the asset has remained doubtful, a
certain percentage of the secured portion (i.e. estimated realizable value of
the outstanding) on the following basis:-
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NPAS IN BSCB
(RS. IN LACS)
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NPA
30000
25000
20000
15000
10000
5000
0
2003-2004 2004-2005 2005-2006 2006-2007 2007-2008
CROP INSURANCE:
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C0-op. Banks
Rabi 2003-04
Kharif 2004
Rabi 2004-05 48100
Kharif 2005 83252
Rabi 2005-06 59810
Kharif 2006 166150 1903430129.5 60051 267635148.90
9
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(RS. IN LACS)
YEARS FINANCED BY DCCBS REFINANCE BY BSCB REFINANCE BY NABARD
2004-05 27469.02 23307.34 361.00
2005-06 23460.74 11876.99 475.00
2006-07 30299.54 15578.40 1801.50
2007-08 35580.97 17752.30 1857.11
40000
35000
30000
financed by
25000 DCCBs
20000 refinance by
15000 BSCB
refinance by
10000
NABARD
5000
0
2004-05 2005-06 2006-07 2007-08
THERE ARE SEVERAL GENERAL REASONS FOR AN ACCOUNT
BECOMING NPA
INTERNAL FACTORS:
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1) Funds borrowed for a particular purpose but not use for he said purpose.
2) Project not completed in time.
3) Poor recovery of receivables.
4) Excess capacities created on non-economic costs.
5) In-ability of the corporate to raise capital through the issue of equity or
other debt instrument from capital markets.
6) Business failures.
7) Diversion of funds for expansion\ modernization\ setting up new
projects\ helping or promoting sister concerns.
8) Willful defaults, siphoning of funds, fraud, disputes, management
disputes, miss-appropriation etc.
9) Deficiencies on the part of the banks viz. in credit appraisal, monitoring
and follow-ups, delay in settlement of payments\ subsidiaries by government
bodies etc.
EXTERNAL FACTORS:
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Internal factors
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External factors
Recession
Input/ power shortage
Price escalation
Exchange rate fluctuation
Accidents and natural calamities, etc.
Changes in Government Policies in excise/ import duties, pollution
control orders, etc.
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Know your Client’ profile (KYC)- Most banks in India have a system of
preparing ‘know your client’(KYC) profile/ credit report. As a part of
‘KYC’ system, visits are made on clients and their places of business/ units.
The frequency of such visits depends on the nature and needs of
relationship.
Credit Rating System- The credit rating system is essentially one point
indicator of an individual credit exposure and is used to identify measure
and monitor the credit risk of individual proposal. At the whole bank level,
credit rating system enables tracking the health of banks entire credit
portfolio. Most banks in India have put in place the system of internal credit
rating. While most of the banks have developed their own models, a few
banks have adopted credit rating models designed by rating agencies.
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(a) Financial
(b) Operational
(c) Banking.
(d) Management and
(e) External Factors.
DRTs are set up under the Recovery of Debts due to Banks and
Financial Institution Act, 1993. Under the Act, two types of Tribunals were
set up i.e. Debt Recovery Tribunal (DRT) and Debt Recovery Appellate
Tribunal (DRAT). The DRTs are vested with competence to entertain cases
referred to them, by the banks and FIs for recovery of debts due to the same.
The order passed by a DRT is appeal able to the Appellate Tribunal but no
appeal shall be entertained by the DRAT unless the applicant deposits 75%
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of the amount due from him as determined by it. However, the Affiliate
Tribunal may, for reasons to be received in writing, waive or reduce the
amount of such deposit. Advances of Rs. 1 million and above can be settled
through DRT process. An important power conferred on the Tribunal is that
of making an interim order (whether by way of injunction or stay) against
the defendant to debar him from transferring, alienating or permission of the
Tribunal. This order can be passed even while the claim is pending. DRTs
are criticized in respect of recovery made considering the size of NPAs in
the country. In general, it is observed that the defendants approach the High
Country challenging the verdict of the Appellate Tribunal which leads to
further delays in recovery. Validity of the Act is often challenged in the
court which hinders the progress of the DRTs.
B. LOKADALATS-
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2000 for recovery of NPAs of Rs. 50 million and less. These guidelines
were effective until June 2001 and helped banks recover Rs. 26 billion.
In India, companies whose net worth has been wiped out on account
of accumulated losses come under the purview of the Sick Industrial
Companies Act (SICA) and need to be referred to BIFR, once a company is
referred to the BIFR (and even if an enquiry is pending as to whether it
should be admitted to BIFR), it is afforded protection against recovery
proceedings from its creditors. BIFR is widely regarded as a stumbling
block in recovering value for NPAs. Promoters systemically take refuge in
SICA – often there is a scramble to tile a reference in BIFR so as to obtain
protection from debt recovery proceedings. The recent amendments to the
Companies Act vest powers for revival and rehabilitation of companies with
the National Company Law Tribunal (NCLT), in place of BIFR, with
modifications to address weakness experienced under the SICA provisions.
The NCLT would prepare a scheme for reconstruction of any sick company
and there is no bar on the lending institution of legal proceedings against
such company whilst the scheme is being prepared by the NCLT.
Therefore, proceedings initiated by any creditor seeking to recover monies
from a sick company would not be suspended by a reference to the NCLT
and, therefore, the above provision of the Act may not have much relevance
any longer and probably does not extend to the tribunal for this reason.
However, there is a possibility of conflict between the activities that may be
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undertaken by the ARC, e.g. change in management, and the role of the
NCLT in restructuring sick companies.
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The study was done in Branch Patna of the Bihar State Co-Operative Bank
Ltd. Mainly to know about the ‘Non-Performing Assets’ and the measure
taken by the bank as whole and the steps taken by bank in reducing the level
of Non-Performing Assets.
Now a days Non-Performing Assets in banking industry has become a
key factor and paramount thrust is given by banks to reduce Non-
Performing Assets to the maximum extent possible around which all other
business parameters revolves.
The Non-Performing Assets is the subject matter to be dealt
exclusively by the management of the bank at all levels. Now it has become
prime duty of every bank manager to see that the advance accounts does not
go out of order. A proper follow up of all advance accounts, following the
prudential norms for NPA and Asset Classification and follow up of
instructions meticulously contained in the circular released from Head
Office.
The data was collected form the different types of advance accounts
with consultation with senior Manager. The data was collected from the
monthly, quarterly, half yearly and annual statements submitted by bank to
its head office.
The bank has a prudent approach to the valuation of its assets and is
focusing on bringing down the level of NPA. The level of NPA has been
engaging the Bank’s close attention, although these are within manageable
limits.
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Financial Position:
financial position of the bank for the last eight years is given below.
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1. Reserve:
2. Deposit:
3. Borrowings:
4. Working Fund:
5. Net Worth:
68
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PATNA UNIVERSITY
As on
31.03.2010 As on
CAPITAL & LIABILITIES Schedule (Current Year) 31.03.2009
No. Amount (Rs.) Amount (Rs.)
Capital 1 188107650.00 187080650.00
Reserve and Surplus 2 1777226187.54 1372069512.38
Deposits 3 15056973138.11 11590558999.43
Borrowings 4 1187436494.76 613938133.81
Other Liabilities and provision 5 4088242058.80 3991382740.31
Total (Rs.) 22297985529.21 17755030035.93
ASSETS
Cash and balance with Reserve Bank of
India 6 628329688.37 863969297.27
Balance with Banks and money at call and
short notice 7 10231758691.73 6670600019.37
Investments 8 3556930100.00 2684199100.00
Advances 9 6415708101.66 6147929368.62
Fixed Assets 10 636919545.79 638393702.48
Other Assets 11 828339401.66 749938548.19
Total (Rs.) 22297985529.21 17755030035.93
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The Bihar State Cooperative Bank Ltd.,Ashok Raj Path,Patna
PATNA UNIVERSITY
SCHEDULE 1
Capital
As on
31.03.2010 As on
(Current Year) 31.03.2009
Amount (Rs.) Amount (Rs.)
Share Capital
Authrised Capital of 2000000 shares of
Rs.500/=each 1000000000.00 1000000000.00
SCHEDULE 2
Reserve & Surplus
As on
31.03.2010 As on
(Current Year) 31.03.2009
Amount (Rs.) Amount (Rs.)
i Statutory Reserve 541541867.53 386591064.23
ii Agriculture Credit Stablisation Fund 463126230.75 385163828.75
iii Building Fund 51754871.46 38754871.46
iv Bad & Doubtful Debt Reserve 265501785.80 201801632.14
v Investment Depreciation Fund 51827527.50 44827527.50
vi Capital Redemption Fund 39900.00 39900.00
vii Staff Benefit Fund 15707938.27 15707938.27
viii Administrative Fund Reserve 378060.85 378060.85
ix Risk Fund 900000.00 900000.00
x Building Depreciation Fund 18286367.68 18286367.68
xi Fund for Contigency Interest 3320935.17 3320935.17
xii Reserve for Contigency Expenditure 51113010.55 51113010.55
xiii Development Fund 5300000.00 5300000.00
xiv Capital Reserve Fund 59406716.78 59406716.78
xv Cooperative Education Development Fund 124510487.60 80238829.50
xvi Equity Redemption Fund 124510487.60 80238829.50
Total :- 1777226187.54 1372069512.38
SCHEDULE 3
Deposits
As on
72 31.03.2010 As on
(Current Year) 31.03.2009
Amount (Rs.) Amount (Rs.)
PATNA UNIVERSITY
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CONCLUSION
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SUGGESTION
Certain facts gleaned from the findings of the survey may prove to be
effective if properly implemented in improving the profitability of the Co-
Operative Bank Limited. Though the level of Non-Performing Assets in the
C0-Operative Bank is within the prescribed limit but the percentage of NPA
to total advance of the Branch Patna is very much on higher side.
The regulatory framework governing the operations of the bank is
undergoing significant changes. Only those banks with sustained
profitability records, capital adequacy of 8% and over and with low Non-
Performing level will be allowed greater freedom of operation.
The profitability should be the main concern of all banks around
which all other business parameters should revolve. The pricing of liability
has to keep in sharp focus the asset creation at acceptable spreads. Thus
asset management will be one of the major planks of our device towards
sustaining profitability. Quality of assets is one of the biggest challenges
that would continue to hurt the banks in the near terms.
Paramount thrust should be give to reduce the non-performing assets
to the maximum extent possible thereby augmenting profitability and
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eagling recycling of funds. The following strategies are suggested for better
results in the management of NON PERFORMING ASSETS:-
2. RESCHEDULING OF LIMITS-
It should be ensured that adequate cushion period is sought
for/granted at the time of forwarding/sanctioning advance proposal by
looking at the various parameters of the proposal and suggest suitable
cushion period. It is felt that there will be time over run in project
implementation; immediate steps are to be taken for rescheduling the
repayment programme and moratorium period suggested for servicing the
interest.
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NPA. Therefore, more vigilant is required to see that all the accounts are
kept performing.
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6. RECOVERY MANAGEMENT-
Recovery of overdue installments and interest will have direct impact
on the profitability of the bank. The recovery management of NPAs to the
find tuned to ensure better results strategic recovery drivers.
7. REVIEW/RENEWWAL OF ACCOUNTS-
Timely review/renewal of advance accounts will help us to prevent
the accounts turning into NPA.
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BIBLIOGRAPHY
v. NEWSPAPER
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