SYNOPSIS ON PROJECT REPORT

ON

NON-PERFORMING ASSETS OF AND IT’S RECOVERY

OF
CANARA BANK

Submitted in partial fulfillment of the requirement for the award of degree of

MASTER OF BUSINESS ADMINISTRATION
To
KAKATIYA UNIVERSITY, WARANGAL.

Submitted By
MANDATI SAIKIRAN
H.NO 23162C1125

Under the guidance of

Dr. M. SRAVANTHI
ASSISTANT PROFESSOR

VAAGDEVI INSTITUTE OF MANAGEMENT SCIENCES

BOLLIKUNTA, WARANGAL.

2024

Introduction of the Study

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The banking system in India comprises commercial and cooperative banks, of which the
former accounts for more than 90 per cent of banking system’s assets. Besides a few
foreign and Indian private banks, the commercial banks comprise nationalized banks
(majority equity holding is with the Government), the State Bank of India (SBI) (majority
equity holding being with the Reserve Bank of India) and the associate banks of SBI
(majority holding being with State Bank of India). These banks, along with regional rural
banks, constitute the public sector (state owned) banking system in India The banking
industry has undergone a sea change after the first phase of economic liberalization in
1991 and hence credit management. Asset quality was not prime concern in Indian
banking sector till 1991, but was mainly focused on performance objectives such as
opening wide networks/branches, development of rural areas, priority sector lending,
higher employment generation, etc. While the primary function of banks is to lend funds
as loans to various sectors such as agriculture, industry, personal loans, housing loans
etc., but in recent times the banks have become very cautious in extending loans. The
reason being mounting nonperforming assets (NPAs) and nowadays these are one of the
major concerns for banks in India. Bankers are the custodians and distributors of the
liquid capital of the country. Therefore most important function of the banking system is
to mobilize the savings of the people by accepting deposits from the public. The banker
becomes the trustee of the surplus balances of the public. Deposit mobilization promotes
the economic prosperity by controlling the money circulation and canalizing for
development and productive purposes. In order to mobilize deposits, the commercial
banks undertake deposit mobilization through various deposit schemes suited to the
different sections of the people. The deposits along with other sources of funds namely
capital, reserves and borrowings, form the sources of funds for the banks. The lending
and investment activities of the bank are based on the sources of funds
Review of Literature
Kumar (2023) in his study on A Comparative study of NPA of Old Private Sector Banks
and Foreign Banks has said that Non-performing Assets (NPAs) have become a nuisance
and headache for the Indian banking sector for the past several years. One of the major
issues challenging the performance of commercial banks in the late 90s adversely
affecting was the accumulation of huge nonperforming assets (NPAs).
Selvarajan & Vadivalagan (2022) in A Study on Management of Non-Performing
Assets in Priority Sector reference to Indian Bank and Public Sector Banks (PSBs) find
that the growth of Indian Bank’s lending to Priority sector is more than that of the Public

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Sector Banks as a whole. Indian Bank has slippages in controlling of NPAs in the early
years of the decade.
Singh (2013) in his paper entitled Recovery of NPAs in Indian commercial banks says
that the origin of the problem of burgeoning NPA’s lies in the system of credit risk
management by the banks. Banks are required to have adequate preventive measures in
fixing pre- sanctioning appraisal responsibility and an effective post-disbursement
supervision. Banks should continuously monitor loans to identify accounts that have
potential to become non- performing.
Research Gap
The different aspects of literature related to Non-Performing Assets of researchers over
the years have been collected and used for this study, but there is a huge time gap existing
for the comprehensive research on quality aspects of Non-Performing Assets. Most of the
research and studies are being done on causes, impact and management aspects of NPAs.
Objectives of the Study
1. To study the status of Non-Performing Assets of Indian Scheduled Commercial
Banks in India
2. To study the impact of NPAs on Banks.
3. To know the recovery of NPAS through various channels.
4. To make appropriate suggestions to avoid future NPAs and to manage existing
NPAs in Banks
Scope of the Study
The study has the following scope: o
 The study could suggest measures for the banks to avoid future NPAs & to reduce
existing
 The study may help the government in creating & implementing new strategies to
control NPAs. The study will help to select appropriate techniques suited to
manage the NPAs and develop a time bound action plan to check the growth of
NPAs.
Research Methodology
i. Data Sources / Data Collection methods

The data collected is mainly secondary in nature. The sources of data for this thesis
include the literature published by Indian Bank and the Reserve Bank of India, various

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magazines, Journals, Books dealing with the current banking scenario and research
papers.

ii. Period of the study

5 year’s Aggregate data from 2019 to 2024 was used for the study.
iii. Population
Banking industry is taken for the study, where aggregate data related to NPA for
Public sector Banks, Private Sector Banks and Foreign Banks is used.
Limitations of the Study
The basis for identifying non-performing assets is taken from the Reserve Bank of India
Publications. NPAs are changing with the time. The study is done in the present
environment without foreseeing future developments.
Chapterization
Chapter I : Introduction of the study
Chapter – II : Company Profile
Chapter – III : Theoretical Framework

Chapter – IV : Data Analysis and Interpretation .

Chapter – V : Summary of Findings, Suggestions and Conclusion
Bibliography

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 Chapter – II
Company Profile

Chairman & Managing Director's Message

As a premier commercial bank in India, Canara Bank has a distinct track record in the service of the nation for
over 107 years. Today, Canara Bank has a strong pan India presence with 5003 branches and over 6509 ATMs,
catering to all segments of an ever growing clientele base of 5.65 crore. Across the borders, the Bank has 7
branches, one each at London, Hong Kong, Shanghai, Leicester, Manama, Johannesburg and New York and a
Representative Office at Sharjah, UAE. We are recognized as a leading financial conglomerate in India, with as
many as nine subsidiaries/sponsored institutions/joint ventures in India and abroad. In our second century of
dedicated service to the nation, we aspire to emerge as a Preferred Bank by pursuing global benchmarks in
profitability, operational efficiency, asset quality, risk management and expanding the global reach.

Profile
A Brief Profile of the Bank

Widely known for customer centricity, Canara Bank was founded by Shri Ammembal Subba Rao Pai, a great
visionary and philanthropist, in July 1906, at Mangalore, then a small port town in Karnataka. The Bank has
gone through the various phases of its growth trajectory over hundred years of its existence. Growth of Canara
Bank was phenomenal, especially after nationalization in the year 1969, attaining the status of a national level
player in terms of geographical reach and clientele segments. Eighties was characterized by business
diversification for the Bank. In June 2006, the Bank completed a century of operation in the Indian banking
industry. The eventful journey of the Bank has been characterized by several memorable milestones. Today,
Canara Bank occupies a premier position in the comity of Indian banks. With an unbroken record of profits
since its inception, Canara Bank has several firsts to its credit. These include:

 Launching of Inter-City ATM Network

 Obtaining ISO Certification for a Branch
 Articulation of ‘Good Banking’ – Bank’s Citizen Charter
 Commissioning of Exclusive Mahila Banking Branch
 Launching of Exclusive Subsidiary for IT Consultancy

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  Issuing credit card for farmers
 Providing Agricultural Consultancy Services
Over the years, the Bank has been scaling up its market position to emerge as a major 'Financial Conglomerate'
with as many as nine subsidiaries/sponsored institutions/joint ventures in India and abroad. As at June 2014, the
Bank has further expanded its domestic presence, with 5003 branches spread across all geographical segments.
Keeping customer convenience at the forefront, the Bank provides a wide array of alternative delivery channels
that include over 6509 ATMs, covering 3658 centres.Several IT initiatives were undertaken during the year.
The Bank set up 102 hi-tech E-lounges in select branches with facilities like ATM, Cash Deposit Kiosk with
voice guided system, Cheque Deposit Kiosk, Self Printing Passbook Kiosk, Internet Banking Terminal, Online
Trading Terminal and Corporate Website Access. ‘Canara e-Infobook’ – an electronic passbook and banking
related information facility was introduced on mobile platforms - Android, Windows8 & iOS. The Bank also
launched Canara Bank RuPay Debit Card, Canara Club Card – Debit, Canara Secured Credit Card, Canara Elite
Debit Card and EMV Chip Cards under debit and credit cards. Online Savings Bank and PPF account opening
were introduced during the year. The Bank made several value additions under internet banking and mobile
banking services.

Not just in commercial banking, the Bank has also carved a distinctive mark, in various corporate social
responsibilities, namely, serving national priorities, promoting rural development, enhancing rural self-
employment through several training institutes and spearheading financial inclusion objective. Promoting an
inclusive growth strategy, which has been formed as the basic plank of national policy agenda today, is in fact
deeply rooted in the Bank's founding principles. "A good bank is not only the financial heart of the
community, but also one with an obligation of helping in every possible manner to improve the economic
conditions of the common people". These insightful words of our founder continue to resonate even today in
serving the society with a purpose. The growth story of Canara Bank in its first century was due, among others,
to the continued patronage of its valued customers, stakeholders, committed staff and uncanny leadership ability
demonstrated by its leaders at the helm of affairs. We strongly believe that the next century is going to be
equally rewarding and eventful not only in service of the nation but also in helping the Bank emerge as a
"Preferred Bank" by pursuing global benchmarks in profitability, operational efficiency, asset quality, risk
management and expanding the global reach.

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 Chapter – III
Theoretical Framework

The banks, in their books, have different kind of assets, such as cash in hand,
balances with other banks, investment, loans and advances, fixed assets and other assets.
The Non-Performing Asset (NPA) concept is restricted to loans, advances and
investments. As long as an asset generates the income expected from it and does not
disclose any unusual risk other than normal commercial risk, it is treated as performing
asset, and when it fails to generate the expected income it becomes a “Non-Performing
Asset”.
In other words, a loan asset becomes a Non Performing Asset (NPA) when it
ceases to generate income, i.e. interest, fees, commission or any other dues for the bank
for more than 90 days. A NPA is an advance where payment of interest or repayment of
installment on principal or both remains unpaid for a period of two quarters or more and
if they have become ‘past due’. An amount under any of the credit facilities is to be
treated as past due when it remain unpaid for 30 days beyond due date Non-Performing
Assets are also called as Non-Performing Loans. It is made by a bank or finance company
on which repayments or interest payments are not being made on time.
A loan is an asset for a bank as the interest payments and the repayment of the
principal create a stream of cash flows. It is from the interest payments that a bank makes
its profits. Banks usually treat assets as non-performing if they are not serviced for some
time. If payments are late for a short time, a loan is classified as past due and once a
payment becomes really late (usually 90 days), the loan is classified as non-performing.
A high level of nonperforming assets, compared to similar lenders, may be a sign
of problems. Narasimham Committee that mandated identification and reduction of
NPAs to be treated as a national priority because NPA direct toward credit risk that bank
faces and its efficiency in allocating resources. Profitability and earnings of banks are
affected due to NPA numbers. If we glance on the numbers of non-performing assets we
may come to know that in the year 1995 the NPAs were Rs. 38385 crore and reached to
71047 crore in 2011 in Public sector banks and comparatively in the year 2001 the NPAs
were Rs. 6410 crore and reached to Rs. 17972 crore in 2011 in Private sector banks.

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 The Indian banking sector has been facing serious problems of raising Non-
Performing Assets (NPAs). The NPAs growth has a direct impact on profitability of
banks. Non- performing assets are one of the major concerns for scheduled commercial
banks in India. The recommendations of Narasimham committee and Verma committee,
some steps have been taken to solve the problem of old NPAs in the balance sheets of the
banks. It continues to be expressed from every corner that there has rarely been any
systematic evaluation of the best way of tackling the problem. There seems to be no
unanimity in the proper policies to be followed in resolving this problem. NPAs reflect
the performance of banks. A high level of NPAs suggests high probability of a large
number of credit defaults that affect the profitability and net-worth of banks and erodes
the value of the asset. NPAs affect the liquidity and profitability, in addition to posing
threat on quality of asset and survival of banks. The problem of NPAs is not only
affecting the banks but also the whole economy. In fact, high level of NPAs in Indian
banks is nothing but a reflection of the state of health of the industry and trade. It is
necessary to trim down NPAs to improve the financial health in the banking system. An
attempt is made in this paper to understand NPA, the status and trend of NPAs in Indian
Scheduled commercial banks, the factors contributing to NPAs, reasons for high impact
of NPAs on Scheduled commercial banks in India and recovery of NPAS through various
channels

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 Chapter – IV
Data Analysis and Interpretation

Non-Performing Assets in Indian Scheduled CANARA BANK

Table 1

Gross Advances and Gross NPAS of SCBs (Amount in Rupees Billion)

Year Gross Advances Gross NPAs (Amount) Gross NPAs (Percentage)

2010-11 6809.58 708.61 10.4

2011-12 7780.43 687.17 8.8

2012-13 9020.26 648.12 7.2

2013-14 11526.82 593.73 5.2

2014-15 15513.78 510.97 3.3

2015--16 20125.10 504.86 2.5

2016-17 25078.85 563.09 2.3

2017-18 30382.54 683.28 2.3

2018-19 35449.65 846.98 2.4

2019-20 40120.79 979.00 2.5

2020-21 46655.44 1370.96 2.9

2021-22 59882.79 1931.94 3.2

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 2022-23 68757.48 2641.95 3.8

Interpretation:

1. From the above table depicts the amount of Gross Advances, Gross NPA and
the percentage of Gross NPA during the period of 2010-011to 2021-22.
2. The amount of advances of has increased from Rs. 6810 Billion in 2001-02 to
Rs. 68757 Billion in 2022-23.
3. The amount of gross NPA has increased from Rs.708.61 billion in 2001-02 to
Rs. 2642 billion in 2022-23. Similarly, NPA percentage is also showing the
rising trend from 2.3 in 20016 to 3.8 in 2022.

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 Table 2 – Net Advances and Net NPAS of SCBs (Amount in Rupees Billion)

Year Net Advances Net NPAs (Amount) Net NPAs (Percentage)

2010-11 6458.59 355.54 5.5

2011-12 7404.73 296.92 4.0

2012-13 8626.43 243.96 2.8

2013-14 11156.63 217.54 2.0

2014-15 15168.11 185.43 1.2

2015--16 19812.37 201.01 1.0

2016-17 24769.36 247.30 1.0

2017-18 29999.24 315.64 1.1

2018-19 34970.92 387.23 1.1

2019-20 42987.04 417.00 1.1

2020-21 50735.59 652.00 1.3

2021-22 58797.03 986.00 1.7

2022-23 67352.32 1426.57 2.1

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Interpretation:

1. The above table shows the amount of Net Advances, Net NPA and the percentage of
Net NPA during the period of 2010-11 to 2022-23.
2. The amount of advances has increased from Rs. 6458.59 billion in 2010-11 to
67352.32 billion in 2022-23. Further, the amount of NPA has also increased from
Rs. 355.54 billion to Rs1426.57 billion during the period.

3. The percentage of Net NPA has first declined from 5.5 in 2010-11 to 1.0 in 2016-17.
Then it has increased to 2.10% in 2022-23.

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 Table 3

Showing NPAs recovered by SCBs through Lok Adalats

(Amount in Crore)

Item 2017 2018 2019 2020 2021 2022 2023

4,76,07
Number of Cases 1,86,535 5,48,308 7,78,833 6,16,018 3 8,40,691 16,36,957

Referred

Amount Involved 2142 4023 7235 5254 1700 6600 23200

Amount 176 96 112 151 200 400 1400

Recovered

% of Amount 8.2 2.4 1.55 2.87 11.8 6.1 6.2

recovered

Sources: R.B.I

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Interpretation:

Table 3 is showing NPAs of CANARA BANK recovered through Lok Adalats

during the study period of 2017 to 2023.
1. From the analysis of the table, it is clear that the number of cases referred to
Lok Adalats for the recovery of NPAs of CANARA BANK has increased
largely in 2023 as compared to 2017.
2. However, if we look at the amount recovered by Lok Adalats during the
study period, it shows a continuous decline from 2017 to 2018 and then it
shows improvement from 2019 to 2023, but it is much less than the other
recovery channels.
3. These Lok Adalats are only successful in recovering 1400 crore out of
23200 crore means only 6.2% of the total amount involved in NPAs of the
CANARA BANK. Due to its inefficiency in recovering, the amount
involved in NPAs, the CANARA BANK resorting to others means of
recovery.

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 Table 4.

Showing NPAs recovered by SCBs through DRTs \

Item 2017 2018 2019 2020 2021 2022 2023

Number of Cases
Referred 3728 2004 6019 12872 13,365 13408 28258

Amount Involved 5819 4130 9797 14092 24,100 31000 55300

Amount Recovered 3020 3348 3133 3930 4100 4400 5300

% of Amount
recovered to Total 51.9 81.1 32.00 27.89 17.00 14.1 9.5

Amount

Sources: R.B.I.

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Interpretation:

1. Table 4 is showing NPAs of CANARA BANK recovered through DRTs

during the study period of 2017 to 2023. From the analysis of the table, it is
clear that the number of cases for the recovery of NPAs referred to DRTs is
increasing through the study period and also the amount involved in these
cases and the amount recovered through DRTs has increased.

2. DRT shows their efficiency in 2017-18 where it recovers 81.1pc of the total
amount involved in NPAs and in later years also the amount recovered by
DRTs is quite significant.

3. This is the basic reason why the CANARA BANK are approaching DRTs
for the recovery of their NPAs as compared to Lok Adalats in which the
percentage of recovered amount of NPAs is very low.

4. Though we can say that there is a slight decrease in the percentage of

amount recovered by DRTs of the NPAs of CANARA BANK, though these
are a significant recovery channel for the CANARA BANK.

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 Table 5.

Showing NPAs recovered by SCBs through SARFAESI Act

Item 2017 2018 2019 2020 2021 2022 2023

Number of Cases 83,94 61,760 78,36 1,18,64 1,40,991 1,90,53 1,94,707

Referred 6 2 7
2

Amount Involved 7263 12067 14249 30604 35300 68100 94600

Amount Recovered 4429 3982 4269 11561 10100 18500 24400

% of Amount 61.0 33. 30.0 37.78 28.6 27.1

recovered to 25.8
0 0
Total Amount

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Interpretation:

1. Table 5 is showing NPAs of CANARA BANK recovered through SARFAESI

Act during the study period of 2017 to 2023.

2. From the analysis of the table, it is clear that the number of cases referred to
SARFAESI Act and the amount of NPAs involved is increased largely during
the study period.

3. This is done because of the efficiency of SARFAESI Act in recovering these

NPAs of CANARA BANK. From the table it is clear that the SARFAESI Act
is able to recover 25.8% of the amount of NPAs of the cases referred to it in
the year 2023.

4. In 2017 recovery percentage was quite higher 61.0% this act has emerged as a
blessing in disguise for the CANARA BANK as now they are using this act
largely in recovering their NPAs in order to increase their profitability.

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 Chapter – V
Summary of Findings, Suggestions and Conclusion

Findings

i. Gross NPAs of scheduled commercial banks have increased from Rs. 708
Billion in 2012-13 to Rs 2642 Billion in 2021-22.
ii. Net NPAs of scheduled commercial banks have increased from Rs. 355
Billion in 2012-13 to Rs. 986 Billion in 2021-22.
iii. NPAs as a Percentage of Net Advances, which was lowest 1.0 % in
2016-17 and highest 5.5 % in 2011-12. It was 2.2 % in 2022-23.
iv. The average Percentage of Net NPAs during 2012-13 to 2013-14 was around 2.0

v. Number of Cases Referred to Lok Adalats was 1,86,535 in 2008 and

reached to 16,36,957 in 2023.
vi. Ineffective recovery, willful defaults and Defective lending process are
the important factors, which are responsible for the rise of NPAs in
banks.
vii. NPAs reduce the earning capacity banks and badly affect the ROI.

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 Recommendations for management of NPAs

i. RBI should revise existing credit appraisals and monitoring systems.

ii. Banks should improve upon and strengthen the loan recovery methods.

iii. Credit appraisal and post –loan monitoring are crucial steps which need
to concentrate by all the public sector banks.
iv. There must be regular follow-up with the customers and it is the duty
of banker to ensure that there is no diversion of funds. This process can
be taken up at regular intervals.
v. Personal visits should be made after sanction and disbursal of credit
and further close monitoring of the operations of the accounts of
borrowed units should be done periodically.
vi. Managers under credit monitoring and recovery department should
have dynamism in their work. Many managers say that “we do not fear
to negotiate but we do not negotiate out of fear. Such fear leads to
arbitrary negotiation, which fails.
vii. Frequent discussions with the staff in the branch and taking their
suggestions for recovery of dues.
viii. Assisting the borrowers in developing his/her entrepreneurial skill will
not only establish a good relation between the borrowers but also help
the bankers to keep a track of their funds.
ix. RBI may initiate actions against defaulters like, publishing names of
defaulters in Newspapers, broadcasting media, which is helpful to other
banks and financial institutions.
x. As a part of curative measures, bankers may resort to Compromise
Settlement or One Time Settlement. Lok Adalats and Debt Recovery
Tribunals are other ways for the recovery of dues. It has been observed
that Banks these days are highly resorting to SARFAESI Act for the
management of NPA.

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 xi. If the delinquencies are due to reasons beyond the control of borrower,
which are namely draughts, floods, or other natural calamities, the
banker should suitably restructure the loans taking into account the
genuine difficulty of the borrowers.

Conclusion

The Non-Performing Assets have always created a big problem for the
banks in India. It is just not only problem for the banks but for the economy too.

The money locked up in NPAs has a direct impact on profitability of the

bank as Indian banks are highly dependent on income from interest on funds lent.

This study shows that extent of NPA is comparatively very high in public
sectors banks. Although various steps have been taken by government to reduce
the NPAs but still a lot needs to be done to curb this problem.

The NPAs level of our banks is still high as compared to the foreign
banks. It is not at all possible to have zero NPAs.

The bank management should speed up the recovery process. The problem
of recovery is not with small borrowers but with large borrowers and a strict
policy should be followed for solving this problem.

The government should also make more provisions for faster settlement of
pending cases and also it should reduce the mandatory lending to priority sector
as this is the major problem creating area. So the problem of NPA needs lots of
serious efforts otherwise NPAs will keep killing the profitability of banks which
is not good for the growing Indian economy at all.

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 Bibliography

References

1. Karunakar, M., “Are non - Performing Assets Gloomy or Greedy

from Indian Perspective, Research Journal of Social Sciences, 3: 4-
12, 2008.

2. Taori K.J., “Problems and Issues relating to Management of Non

Performing Assets of Banks in India” – The Journal of Indian
Institute of Bankers– April June 2000, Volume 2, p.no – 21-24.

3. Murthy C.R.K., “Branch Level Management of Non Performing Assets:

Part III – Effective Management of Civil Litigation” – Vinimaya,
Vol.XXI, No.2, 2000 – 2001 p.no: 5-11.15

4. Kaveri V.S., Faculty, National Institute of Bank Management, Pune,”

Prevention of NPAs– Suggested strategies” - IBA Bulletin, August
2001.

Website: https://www.canara.com/

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