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CHAPTER 1st
EXECUTIVE SUMMARY
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1. EXECUTIVE SUMMARY
1.1 Overview of Project
Report is prepared on the topic Management of Non-performing Assets at state bank of
Hyderabad. The purpose behind preparing this report is to study the present situation of
NPAs and to provide suggestions to reduce it. Initially the information was collected about
the topic from the organization.
The concept of Non-Performing Assets was introduced for the first time in the Narasimham
Committee report that was tabled in parliament on Dec.17 1991.The Committee Studied
the prevailing financial system, identified its short comings and weakness and made
various recommendations with regard to non-performing assets, their identification,
disclosure and the extent of provisioning same. The need was felt because the prevalent
accounting and disclosure practices did not always reflect the true state of affairs of banks
and Financial Institutions.
.
1.2 Objective
The Objective behind the project is, to study the concept of Non-Performing Assets, study
present status of NPAs in Nanded City Region of Bank of State Bank of
Hyderabad, comparative study of NPA of the Region for 4 Years, Remedial steps taken by
the Region in order to reduce the NPA, to find out the effect of NPA on the financial health
of the Region, to make the suggestions to overcome the problems of NPA in Nanded City
Region of State Bank of Hyderabad.
1.3Research Methodology
Exploratory / Formulative Research:-
Exploratory research is a preliminary study of the subject matter. It aims to delve into the
nuances of the problem. It is usually a preliminary study and is followed by descriptive,
experimental research. It does not have a formal and rigid design as the researcher may
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have to change his focus or direction, depending on the availability of new ideas and
relationships among variables. It attempts to see what is there, rather than trying to predict
the underlying relationships. An exploratory study usually involves three steps- a review of
pertinent literature, an experience survey, and an analysis of insight stimulating cases.
1.4 Data Collection
The secondary data has been used during the project for collection of data (information) the
companies internal records were explored as well as the external sources like electronic
media (web sites) were used. The Exploratory Type of Research has used in this project.
Interpreting the Data:
The data which was analyzed with various Graphs thereafter it have been
Interpreted with various techniques by taking into consideration the ups & downs ofthe Graphs.
Mapping potential of the Company:-
The data which was interpreted with various techniques, thereafter it has been given
various suggestions for mapping the potential of the company.
1.5 Data Analysis
With the help of Annual Report of the State Bank of Hyderabad & figures made available
for Nanded City Region the present NPA of the Pune City Region are studied and analysis
has been made in the project. On the basis of that analysis some Findings and Suggestions
are given at the end of the project.
1.6Conclusion
However, the conclusion behind the project is, Bank has to keep tab on fresh additions by
increasing quality advances and monitoring them. Critical care has to be taken of stressed
accounts to keep control on fresh additions. Bank has to gear up efforts for upgrading
S.S.A and recovery in D.A & Loss Assets. Staff in State Bank of Hyderabad has gained
good experience to fight the menace of NPAs.
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*******
CHAPTER 2nd
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INTRODUCTION
2.INTODUCTION OF NPA
A Man without money is like a bird without wings, the Rumanian proverb insists the
importance of the money. A bank is an establishment, which deals with money. The basic
functions of commercial banks are the accepting of all kinds of deposits and lending of
money. In general there are several challenges confronting the commercial banks in its day-
to-day operations. The main challenges facing the commercial banks is the disbursement of
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funds in quality assets (Loans and Advances) or other wise it leads to Non-performing
assets.
Since the dawn of independence, Indian financial sector in general and banking in
particular has leaped giant strides into a systematized growth environment. Indian Banks
have consolidated their growth year after year. Measures like setting up of Reserve Bank of
India as the regulator, bank nationalization and other reforms have worked as catalyst in
the development drive. There was always a need to have regulated, uniform and prudent
accounting policies for the banks with special reference to the credit risk involved in
lending activities so that the significant growth in the business volumes of banks was ably
supported by a well set regulatory norms.
As per the traditional frame of mind, banks tended to lean towards security-oriented
approach in assessment of credit proposal as also subsequent classification of the assets in
their books. Overemphasizing the security interest and other charges debited to a
borrowers account was taken into income on the basis of accrual irrespective of the fact
whether such interest and charges accrued earlier were actually realized or not. Such
income was taken to Profit & Loss Account and dividend was declared on the basis of
profits so arrived at. Loans were treated as realizable without actually looking into the
record of recovery. All these resulted in overstating of profit and distorted depiction of the
state of affairs of the banks in their books of accounts.
The business of banking eventually is mobilization of low cost deposits and investment and
making loans, advances and investments at higher rates of interest to generate surplus.
Deposits are Liabilities and loans and advances are the assets of the bank. Interest on
deposits is required to be paid by bank in regular period; hence, the assets of the bank must
also generate a regular income by way of interest earnings. If an asset does not generate
income at fixed intervals quarterly or half yearly, it becomes a Non-Performing asset. The
asset is deemed to be performing only if it yields timely returns because time is essence in
maintaining the liquidity, which enables the bank to make timely payment of interest on
deposits. It is of poor consolation to know that the asset is fully secured as the availability
of security does not mitigates the liquidity risk. The imbalance is cash flows due to
irregular income may necessitate temporary market borrowings at high rate of interest
cutting in to business profits.
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PERFORMING ASSETS:-
An assets can be considered as a performing asset if,
Prompt realization of interest debited to the advance account at periodical intervals.
Prompt realization of installments pertaining to the principal amount of the
advance.
MEANING:-
An asset that ceases to generate income for the bank is called Non-Performing Asset.
NON-PERFORMING ASSETS:-
NPA are advances that have ceased to perform. An advance asset will cease to be a
Performing asset and will be deemed to have become a Non-Performing asset when
there is,
A default in the payment of interest amounts, which are debited to the advance
account.
A default in the repayment of the installments pertaining to the principal amount of
the advance.
In initial stages of Income recognition, Assets Classification Guidelines,
a amount due under any credit facility was treated as Past Due when it has not been paid
within 30 days from the due date. Due to the improvement in the payment and settlement
systems, recovery climate, up gradation of technology in the banking system,
etc., it was decided to dispense with Past Due concept, with effect from March 31, 2001.
Accordingly, a from that date, a Non-Performing Asset shell be an advance where,
(i) Interest and / or installment of principal remain overdue for a period of more
than 180 days in respect of a Term Loan,
(ii) The account remains out of order for a period of more than 180 Days, in
respect of an Overdraft / Cash Credit,
(iii) The bill remains overdue for a period of more than 180 days in the case of Bills
Purchased and Discounted,
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(iv) Interest and / or installment of principal remains overdue for two harvest
seasons but for a period not exceeding two half in the case of an advance
granted for agriculture purpose, and
(v) Any amount to be received remains overdue for a period of more than 180 days
in respect of other accounts.
With a view to moving towards international best practices and to ensure greater
transparency, it has been decided to adopt the 90 days Overdue norm for identification of
NPAs, form the year ending March 31, 2004. Accordingly with effect form March 31,
2004, a Non-Performing Asset shell be a loan or an advance where;
(i) Interest and / or installment of principal remain overdue for a period of more
than 90 days in respect of a Term Loan,
(ii) The account remains out of order for a period of more than 90 Days, in
respect of an Overdraft / Cash Credit,
(iii) The bill remains overdue for a period of more than 90 days in the case of
Purchased and Discounted,
(iv) In case of direct agricultural advances, the overdue norms specified below are
applicable;
(a) Loan granted for short duration crops will be treated as NPA, if installment of
principal or interest thereon remains outstanding for two crop seasons.
(b) Loan granted for long duration crops will be treated as NPA, if installment of
principal or interest thereon remains outstanding for one crop seasons.
(c) For Agriculture term loans, the norms would depend on type & crop
cultivated by Agriculturist.
(v) Any amount to be received remains overdue for a period of more than 90
days in respect of other accounts
OUT OF ORDER:-
An account should be treated as 'out of order' if the outstanding balance remains
continuously in excess of the sanctioned limit/ drawing power. In case where the
outstanding balance in the principal operating account is less than the sanctioned limit/
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drawing power, but there are no credits continuously for 90 Days as on the date of balance
sheet or credits are not enough to cover the interest debited during the same period, these
account should be treated as 'Out of Order'.
OVERDUE:Any amount due to the bank under any credit facility is 'Overdue' if it is not paid on the
due date fixed by the bank.
******
CHAPTER 3rd
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OBJECTIVE
3.OBJECTIVE
Study the concept of Non-Performing Assets.
Study present status of NPAs in Nanded City Region of State Bank of Hyderabad.
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Comparative Study of NPA of the Region for 4 Years.
Remedial steps taken by the Region in order to reduce the NPA.
To find out the effect of NPA on the financial health of the Region.
To make the suggestions to overcome the problems of NPA in Nanded City
Region of State Bank of Hyderabad.
******
CHAPTER 4th
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COMPANY PROFILE
4.COMPANY PROFILE
STATE BANK OF HYDERABAD
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Philosophy
TECHNOLOGY WITH PERSONAL TOUCH
It is this philosophy that enables State Bank of Hyderabad to reach out to its customers and
cater to the needs of the classes and masses.
EMBLEM
The Deepmal- With its many lights rising to greater heights.
The Pillar- Our institution- symbolizing strength.
The Diyas- Our branches-Symbolizing services.
3Ms
MOBILISATION OF MONEY
MOTIVATION
MODERNISATION
4.1 BOARD OF DIRECTORS
NAME DESIGNATION
Shri. Pratik chaudhuri Chairman,
Ex-officio under section 25(1)(a) of
the state bank of india (subsidiarybanks) Act,1959
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Shri.M Bhagavantha Rao. Managing Director
Shri.Kaza Sudhakar Director,
Nominated by the Reserve Bank
India.Shri.B.S. Gopala Krishna Director,
Nominated by state bank of india.
Shri.P.Narasimha Directotr,
Nominated by Govt of India.
Shri.S.Gopal Krishna Director,
Nominated by Govt of India.
Shri Anand Kamalnayan Pandit Director
Shri.Venkat Chagavalli Director
Nominated by SBI.
Shri.Gopal Vaidya Director,
Nominated by Govt of India.
Shri.Ramesh Datta Director
4.2 STATE BANK OF HYDERABAD
State Bank of Hyderabad was constituted as Hyderabad State Bank on 08.08.1941 under
Hyderabad State Bank Act, 1941. The Bank started with the unique distinction of being
the central bank of the erstwhile State of Hyderabad, covering present-day Telangana
region of Andhra Pradesh, Hyderabad Karnataka of Karnataka state and Marathwada of
Maharashtra state, to manage its currency Osmania Sikka and public debt apart from the
functions of commercial banking. The first branch of the bank was opened at Gunfoundry,
Hyderabad on 5th April, 1942.
In 1953, the Bank took over the assets and liabilities of the Hyderabad Mercantile Bank
Ltd. In the same year, the Bank started conducting Government and Treasury business as
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agent of Reserve Bank of India. In 1956, the Bank was taken over by Reserve Bank of
India as its first subsidiary and its name was changed from Hyderabad State Bank to State
Bank of Hyderabad. The Bank became a subsidiary of State Bank of India on the 1st
October 1959 and is now the largest Associate Bank of State Bank of India.
All the branches of the Bank are totally networked under Core Banking Solutions, offering
a vide range of products to its customers. All the customers of the Bank have access to the
latest technologies like Internet Banking, ATMs etc. The Bank has pan India presence and
operates through more than 1000 Bank branches.
Company Profile: State Bank Of Hyderabad
Exchanges: SBH
Total Deposits: 33919.34 Crores
Total Advances: 23462.00 Crores
Major Industry: Financial Sector
Sub Industry: Commercial Banks
Country: INDIA
Employees: 13893
4.3 Special Services: -
Credit card and Visa Debit Card facilities, keeping the pace with the market
conditions.Bank has tied up with Master card International and Visa Card to impart
plastic money facility to the customers.
ATM facility, Tele banking, Depository services, Touch screen facility and Mobile
Van information center facility for rural areas.
583 Rural and semi urban branches are to be computerized with small TBA
solutions up to march 2007.
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Bank has implemented Real Time Gross Settlement (RTGS) system for customer
transactions and inters bank payments in 368 branches.
Cheque Truncation System is run on pilot basis and will be implementing as RBI
time schedule.
Services
Demat/Depository Services Electronic Fund Transfer System Safe Deposit Lockers
ATM Services Internet Banking RISET Information and Formats
ATM Locations Service Charges Customer Service
Download service_charges.doc RTGS , NEFT & GRPT Frequently Asked Questions (FAQ
Mobile BankingCash Management Products -Divident Warrants
NEFT - Contact Details ofCustomer Facilitation Centres
New Pension System Cheque Collection PolicySettlement of claims in respect ofDeceased Depositors
ATM Complaint Template
4.4 Future Plans: -
Systematic approach for reducing Net NPA level to below .05%.
Consolidation of Regional Rural Banks sponsored by state bank of Hyderabad
Establishing ATM network of more than 345 ATMs with on-line connectivityacross the country.
Extensive use of Wide Area Network-MAHANET inter-connectivity of branches
by providing more customer-centric applications like Any Branch Banking Service,
Demat etc.
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http://www.sbhyd.com/services_depositoryservices.asphttp://www.sbhyd.com/services_eftsys.asphttp://www.sbhyd.com/services_safelocker.asphttp://www.sbhyd.com/services_atmcumdebit.asphttp://www.sbhyd.com/services_internetbanking.asphttp://www.sbhyd.com/services_riset.asphttp://www.sbhyd.com/services_atmlocations.asphttp://www.sbhyd.com/service_charges.asphttp://www.sbhyd.com/services_customerservice.asphttp://www.sbhyd.com/customer/service_charges.dochttp://www.sbhyd.com/customer/service_charges.dochttp://www.sbhyd.com/customer/service_charges.dochttp://www.sbhyd.com/services_RTGSNEFT.asphttp://www.sbhyd.com/services_Faqs.asphttp://www.sbhyd.com/services_mobilebanking.asphttp://www.sbhyd.com/services_CMP.asphttp://www.sbhyd.com/services_CMP.asphttp://www.rbi.org.in/Scripts/bs_viewcontent.aspx?Id=2070http://www.rbi.org.in/Scripts/bs_viewcontent.aspx?Id=2070http://www.sbhyd.com/services_NPS.asphttp://www.sbhyd.com/include/pdf/ccp.pdfhttp://www.sbhyd.com/include/pdf/Deceased_Depositors_Annex.pdfhttp://www.sbhyd.com/include/pdf/Deceased_Depositors_Annex.pdfhttp://www.sbhyd.com/customer/ATM_Complaint_Template.pdfhttp://www.sbhyd.com/services_eftsys.asphttp://www.sbhyd.com/services_safelocker.asphttp://www.sbhyd.com/services_atmcumdebit.asphttp://www.sbhyd.com/services_internetbanking.asphttp://www.sbhyd.com/services_riset.asphttp://www.sbhyd.com/services_atmlocations.asphttp://www.sbhyd.com/service_charges.asphttp://www.sbhyd.com/services_customerservice.asphttp://www.sbhyd.com/customer/service_charges.dochttp://www.sbhyd.com/services_RTGSNEFT.asphttp://www.sbhyd.com/services_Faqs.asphttp://www.sbhyd.com/services_mobilebanking.asphttp://www.sbhyd.com/services_CMP.asphttp://www.sbhyd.com/services_CMP.asphttp://www.rbi.org.in/Scripts/bs_viewcontent.aspx?Id=2070http://www.rbi.org.in/Scripts/bs_viewcontent.aspx?Id=2070http://www.sbhyd.com/services_NPS.asphttp://www.sbhyd.com/include/pdf/ccp.pdfhttp://www.sbhyd.com/include/pdf/Deceased_Depositors_Annex.pdfhttp://www.sbhyd.com/include/pdf/Deceased_Depositors_Annex.pdfhttp://www.sbhyd.com/customer/ATM_Complaint_Template.pdfhttp://www.sbhyd.com/services_depositoryservices.asp7/31/2019 NPA Project
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Extending RTGS facility to 368 branches.
Moving towards Core Banking Solution (CBS) by implementing in 600 branches.
SHGs with special reference to agriculture to be promoted and financing be
implemented so as to increase financing to small and marginal farmers.
******
CHAPTER 5th
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LITERATURE SURVEY
5.Literature Survey
The concept of Non-Performing Assets was introduced for the first time in the Narasimham
Committee report that was tabled in parliament on Dec.17 1991.The Committee Studied
the prevailing financial system, identified its short comings and weakness and made
various recommendations with regard to non-performing assets, their identification,
disclosure and the extent of provisioning same. The need was felt because the prevalent
accounting and disclosure practices did not always reflect the true state of affairs of banks
and Financial Institutions. Based on the Narasimham Committee recommendations, RBI
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has implemented the prudential norms for improving the financial heath of commercial
banks and the quality of their loan portfolio.
******
CHAPTER 6th
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Research Design
6.1 Introduction of Research
Research is an ORGANIZED and SYSTEMATIC way of FINDING ANSWERS to
QUESTIONS
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SYSTEMATIC : - Systematic because there is a definite set of procedures and
steps which you will follow. There are certain things in the research process which
are always done in order to get the most accurate results.
ORGANIZED : - Organized in that there is a structure or method in going about
doing research. It is a planned procedure, not a spontaneous one. It is focused and
limited to a specific scope.
FINDING ANSWERS : - Finding Answers is the end of all research. Whether it is
the answer to a hypothesis or even a simple question, research is successful when
we find answers. Sometimes the answer is no, but it is still an answer.
QUESTIONS :-Questions are central to research. If there is no question, then the
answer is of no use. Research is focused on relevant, useful, and important
questions. Without a question, research has no focus, drive, or purpose.
Research Methodology:-
Research Methodology is the systematic design, collection, analysis & reporting of data &
findings, relevant to appraisal specific situation facing the company. The Research was an
exploratory type, which aims at finding the true potential of the organization and also a
qualitative analysis regarding the Recovery Performance of NPA of a Nanded City Region
of State Bank of Hyderabad.
6.2 Type of Research
Exploratory / Formulative Research:-
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Exploratory research is a preliminary study of the subject matter. It aims to delve into the
nuances of the problem. It is usually a preliminary study and is followed by descriptive,
experimental research. It does not have a formal and rigid design as the researcher may
have to change his focus or direction, depending on the availability of new ideas and
relationships among variables. It attempts to see what is there, rather than trying to predict
the underlying relationships. An exploratory study usually involves three steps- a review of
pertinent literature, an experience survey, and an analysis of insight stimulating cases.
Learning the Theoretical aspects:-
Various books on Non-Performing Assets have been collected from State Bank of
Hyderabad (Library) and the theoretical aspects have been understood.
Analyzing the Data:-
The data of Recovery Performance of Nanded City Region of State Bank of Hyderabad
was collected and analyzed with various Graphs.
6.3 Data Collection
Primary Data: -
Primary Data is one, which is collected by the investigator himself for the purpose
of a specific inquiry or study. Such data is original in character and is generated by
surveys conducted by individuals or research institution. In this research there is no
need of primary data.
Secondary Data:-
When an investigator uses the data, which has been already collected by others,
such data is called secondary data. Secondary sources of data provide wealth of
information to the researcher.
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Collecting the Data:-
Collecting sources of data is of two types, i.e. Primary Data & Secondary Data. Data used
in this project is Secondary Data, which is collected from nanded city region state bank of
Hyderabad. Various articles like Annual Report, Reference Books have been collected.
During this project for the collection of data (information) the
companies internal records were explored as well as the external
sources like electronic media (web sites) were used.
6.4 Data Classification & Tabulation
The Narasimham Committee gave a thought that income recognition should be done on
scientific basis. The screening should be done to expose the bad and doubtful assets. This
would help in preventing further deterioration in the value of asset. The Recommendations
of Narasimham Committee were divided in to Three parts which are as follows:-
6.4.1 INCOME RECOGNITION:-
The policy of Income Recognition should be objective and based on record of recovery
rather than any subjective considerations like availability of security, net worth of borrower
/ guarantor etc.
Income accounting in case of NPA is, therefore, based on actual realization.
Government Guaranteed Advances:-
If any income with respect to advances guaranteed by Governments remain overdue for
specified period and thereby advance becomes NPA, interest on such advances should not
be taken to income account, unless the same is realized.
Renegotiated / Rescheduled Advances:-
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Fees and Commission earned by the banks due to renegotiation or rescheduling of
outstanding advances should be recognized on accrual basis over the period of time
covered by the renegotiated or rescheduled extension of credit.
6.4.2 Appropriation of recovery in NPAs:-
Interest realized on NPAs may be taken to income account provided the credits in the
accounts towards interest are not out of fresh / additional credit facilities sanctioned to the
borrower concerned.
In the absence of a clear agreement between the bank and the borrower for the purpose of
appropriation of recoveries in NPAs, banks should adopt an accounting principle and
exercise the right of appropriation of recoveries in a uniform and consistent manner.
6.4.3 Reporting of NPAs:-
Banks are required to furnish a report on NPAs as on 31st March each year after completion
of audit. The NPAs would relate to the banks global portfolio, including the advances at the
foreign branches.
While reporting NPA figures to RBI, the amount held in interest suspense account, should
be shown as a deduction from gross NPAs as well as gross advances while arriving at the
net NPAs. Banks which do not maintain Interest Suspense Account for parking interest due
on non-performing advance accounts, may furnish the amount of interest receivable on
NPAs as a foot note to the Report.
Whenever NPAs are reported to RBI, the amount of technical write off, if any, should bereduced from the outstanding gross advances and gross NPAs to eliminate any distortion in
the quantum of NPAs being reported.
6.5 ASSETS CLASSIFICATION:-
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Classification of Assets should be done on the basis of objective criteria with uniform and
consistent application of norms duly ensured. There are generally three ways of
classification of assets, which are given as under:
Assets classification under Health Code System:-
Under the Health Code system, bank are required to classify the advances under any one of
the heads depending upon the status of the account, dealings, availability of security cover,
etc.
Asset Classification for Final Accounts:-
Banks are required to prepare their final accounts as per Third Schedule to the Banking
Regulation act, 1949 which bankers / auditors are well conversant with.
Assets Classification under Prudential Norms :-
Under the prudential norms of asset classification, banks are now required to classify their
advances in the following four broad groups:-
(a) Standard Assets:-
These are assets which are Performing and do not disclose any weakness and do not carry
more than normal business risk.
(b) Sub-Standard Assets:-
These are assets which have ceased to Perform but which have not completed a period of
18 months (now 12 Months) after getting classified as Non-performing and there is no
threat to recovery on account of erosion in the realizable value of security or due to non-
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availability of security or due to other factors, to the extent that the account is to be
classified either as Doubtful Assets or as Loss Assets.
With effect from 31st March, 2005, a sub-standard asset would be one, which has
remained NPA for a period less than or equal to 12 months.
(c) Doubtful Asset:-
These are accounts which have completed a period of 18months (now 12 Months) after
getting classified as Sub-standard Assets. A loan classified as doubtful has all the weakness
inherent in assets that were classified as sub-standard, with the added characteristic that the
weakness make collection or liquidation in full on the basis of currently known facts,
conditions and values-highly questionable and improbable. With effect from March 31st,
2005, an asset would be classified as doubtful if remained in the sub-standard
category 12 months.
(d) Loss Assets:
A Borrower account in which a loss has been identified by the internal or external auditors
or by the RBI inspectors. The releasable value of security in the accounts is very little.
Guidelines for Classification of Assets:-
Classification of Assets in to above categories should be done taking into account the
degree of well-defined credit weakness and the extent of dependence on collateral security
for realization of dues.
Banks should establish appropriate internal systems to eliminate the tendency to delay or
postpone the identification of NPAs, especially in respect of high value accounts. The
banks may fix a minimum cut off point to decide what would constitute a high value
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account depending upon their respective business level. The cut of point should be valid for
the entire accounting year. Responsibility and validation levels for ensuring proper asset
classification may be fixed by the banks. The system should ensure that doubts in asset
classification due to any reason are settled through specified internal channels within one
month from the date on which the account would have been classified as NPA as per extant
guidelines.
Upgradation of Loan Accounts classified as NPAs:-.
If arrears of interest and principal are paid by the borrower in the case of loan accounts
classified as NPAs, the account should no longer be treated as non-performing and may be
classified as standard accounts.
Accounts regularized near about the balance date:-
The asset classification of borrowal account where a solitary or a few credits are recorded
before the balance sheet date should be handled with care and without scope for
subjectivity. Where the account indicates inherent weakness on the basis of the data
available, the account should be deemed as a NPA. In other genuine cases, the banks
must furnish satisfactory evidence to the Statutory Auditors / Inspecting Officers about the
manner of regularization of the account to eliminate doubts on their performing status.
s
Asset Classification to be borrower-wise and not facility-wise:-
It is difficult to envisage a situation when only one facility to a borrower becomes a
problem credit and not others. Therefore, all the facilities granted by a bank to a borrower
will have to be treated as NPA and not the particular facility or part thereof which has
become irregular.
If the debits arising out of devolvement of letters of credit or invoked guarantees are parked
in a separate account, the balance outstanding in that account also should be treated as a
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part of the borrowers principal operating account for the purpose of application of
prudential norms on income recognition, asset classification and provisioning.
Government guaranteed Advances:-
The credit facilities backed by guarantee of the Central Government though overdue may
be treated as NPA only when the Government repudiates its guarantee when invoked. This
exemption from classification of Government guaranteed advances as NPA is not for the
purpose of recognition of income. With effect from 1st, April, 2000, advances sanctioned
against State Government Guarantees should be classified as NPA in the normal course, if
the guarantee is invoked and remains in default for more than two quarters. With effect
from March 31st
, 2001 the period of default is revised as more than 180 days and witheffect from March 31st, 2004 the period of default would be revised as more than 90 days.
Advances under rehabilitation approved by BIFR / TLI:-
Banks are not permitted to upgrade the classification of any advance in respect of which
the terms have been renegotiated unless the package of re-negotiated terms has worked
satisfactorily for a period of one year. While the existing credit facilities sanctioned to a
unit under rehabilitation packages approved by BIFR / Term Lending Institutions will
continue to be classified as sub-standard or doubtful as the case may be, in respect of
additional facilities sanctioned under the rehabilitation packages, the Income Recognition,
Asset Classification norms will become applicable after a period of one year from the date
of disbursement.
6.6 PROVISIONING NORMS:-
In order to narrow down the divergences and adequate provisioning by banks, it wassuggested that banks statutory auditors, if they so desire, could have a dialogue with RBIs
Regional Office / Inspectors who arrived out for banks inspection during the previous year
with regard to the accounts contributing to the difference.
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Pursuant to this, regional offices were advised to forward a list of individual advances,
where the variance in the provisioning requirements between the RBI and the bank is above
certain cut off levels so that the bank and the statutory auditors take into account the
assessment of the RBI while making provisions for loan loss, etc.
The primary responsibility for making adequate provision for any diminution in the value
of loan assets, investment of other assets is that of the bank managements and the statutory
auditors The assessment made by the inspecting officer of the RBI is furnished to the bank
to assist the bank management and the statutory auditors in taking a decision in regard to
making adequate and necessary provisions in terms of prudential guidelines.
In conformity with the prudential norms, provisions should be made on the non-performing
assets on the basis of classification of assets into prescribed categories as detailed above.
Taking into account the time lag between an account 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 bank, the banks should make provision against loss assets, doubtful
assets and sub-standard assets as below:
(a) Loss Assets:-
The entire assets should be written off after obtaining necessary approval from the
competent authority. If the assets are permitted to remain in the books for any reason,
100 per cent of the outstanding should be provided.
In respect of an asset identified as a loss asset, full provision at 100 per cent should be
made if the expected salvage value of the security is negligible.
(b) Sub-standard Assets:-
A general provision of 10 per cent on Total Outstanding should be made without making
any allowance for DICGC / ECGC guarantee cover and securities available.
20% provision in case of advances where there was no security/clean form at the time of
sanction.
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(c) Standard Assets:-
Banks are providing for Standard Assets @ 0.25% till 2006. Now the provisions are as
under with effect from 2006-07.
(1) Direct Advances to agriculture & SME sectors: 0.25%
(2) Residential housing loans beyond 20 Lakhs: 0.40%
(3) Personal Loans, Advances qualifying as capital market 2.00%
Exposures & Commercial real estate loans:
(4) Other standard advances: 0.40%
(d) Doubtful Assets:-
100 per cent of the extent to which the advance is not covered by the realizable value of the
security to which the bank has a valid recourse should be made and the realizable value is
estimated on a realistic basis.
In regard to the secured portion, provision may be made on the following basis, at the rates
ranging from 20 per cent to 100 per cent of the secured portion depending upon the period
for which the asset has remained doubtful:
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6.8.1 Sub-Standard Assets:-
(1) 10 percent of net book value.
(2) As per the Guidance Note on Accounting for Leases issued by the
ICAI, Gross book value of a fixed asset is its historical cost or other amount substituted
for historical cost in the books of account of financial statements. Statutory depreciation
should be shown separately in the profit and loss Account. Accumulated depreciation
should be deducted from the Gross Book Value of the leased asset in the balance sheet of
the lessor to arrive at the net book value.
(3) Also, balance standing in Lease Adjustment Account should be adjusted in the net
book value of the leased assets. The amount of adjustment in respect of each class of fixed
assets may be shown either in the main balance sheet or in the Fixed Assets Schedule as a
separate column in the section related to leased assets.
6.8.2 Doubtful Assets:-
100 percent of the extent to which the finance is not secured by the realizable value of
the leased assets. Realizable value to be estimated on a realistic basis. In addition to the
above provision, the following provision on the net book value of the secured portion
should be made, depending upon the period for which the asset has been doubtful.
6.8.3 Loss Assets:-
The entire asset should be written off. If for any reasons, an asset is allowed to
remain in books, 100 percent of the net book value should be provided for.
6.9 Write Off of NPAs:-
In terms of Section 43(D) of the Income Tax Act, 1961, income by way of u\interest in
relation to such categories of bad and doubtful debts as may be prescribed having
regard to the guidelines issued by the RBI in relation to such debts, shall be chargeable
to tax in the previous year in which it is credited to the banks profit and loss account or
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received, whichever is earlier. This stipulation is not applicable to provisioning
required to be made as indicated above. In other words, amounts set aside for making
provision for NPAs as above are not eligible for tax deductions. Therefore, the banks
should either make full provision as per the guidelines or write off such advances and
claim such tax benefits as are applicable, by evolving appropriate methodology in
consultation with their auditors/ tax consultant. Recoveries made in such accounts
should be offered for tax purposes as per the rules.
6.10 GENERAL REASONS FOR ASSETS BECOMING NPAs:-
A multiplicity of factor is responsible forever increasing size of NPAs in banks. A few
prominent reasons for assets becoming NPAs are as under.
Poor credit appraisal system.
Lack of proper monitoring.
Reckless advances to achieve the budgetary targets.
Change in economic policies/ environment.
No transparent accounting policy and poor auditing practices.
Lack of coordination between banks.
Directed lending to certain sectors.
There is no or lack of corporate culture in the Bank. In adequate legal provisions
on foreclosure and bankruptcy.
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6.11 CAUSES OF NPA:-
There are many causes for performing assets becoming Non-
performing. The following are some of the general causes which Contribute to creation of
NPAs and the same can be categorized under three Classes:-
(1) Causes attributable to the Promoter / Borrower:-
Bad intention of securing wrongful gains from banks by availing advances by
misrepresentation of facts.
Financial indisciplinediversion of funds for unapproved purposes.
Mismanagement of Units / Projects---willful or otherwise.
Lack of professional management.
Death / disability of the chief promoter / person behind the show.
Inability to tie up the funds required as margin (promoters contribution) as per the
projection furnished.
Problems due to adverse exchange fluctuations faced by exporters/ importers.
Inadequate control / supervision resulting in time and cost overrun.
Low priority to technology upgradation and inadequate attention to research and
development, quality control etc.
Differences / disputes amongst promoters---family splits, lack of co-ordination
among partners, groupings among the directors of the company etc.
Huge deviation in the demand.
(2) Causes attributable to the Bank:
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Delay in decision making and sanction of credit facilities.
Defective / deficient monitoring and supervision of advance accounts.
Improper /poor credit appraisal due to lack of expertise and scales required for
critical pre-sanction scrutiny of loan proposals.
Non-availability of reliable market and industry relevant data on demand / supply
scenario.
Compromise on project viability with overemphasis on security while assessing the
loan proposals.
Disbursement of advance facilities before compliance of terms ad condition of
sanction and incomplete / defective documentation.
Delayed and / or non detection / diagnosis of warning signals and inaction in the
initiation of the remedial measures.
Long pending judicial proceedings and protracted legal battles in courts act more as
a cover to the defaulting borrowers.
Lack of government support and apathy of public to banks recovery efforts.
Non observance of banks well laid down norms and systems and of preventive /
precautionary measures facilitating perpetration of frauds by insiders / outsiders.
(3) Causes beyond the control of banks and borrowers:-
Political uncertainties.
Frauds committed by outsiders, with or without the collusion of outsiders.
Inadequate infrastructure facilities such as supply of power and other essential
inputs.
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Debt Relief Schemes introduced by some states for political mileage have vitiated
the repayment culture and has resulted in a large number of willful defaulters.
Inconsistency in judicial verdicts as a result of improper presentation of facts.
Outdated laws, labour unrest / lockouts / strikes, riots etc.
Law and order problems affecting commercial and industrial activity in certain
parts of the country.
Natural calamities like earthquakes, draughts and floods, etc., resulting in large-
scale destruction of properties and life.
6.11 SOME OF THE INDICATORS SUGGESTING SLIPPAGES TO
NPA:-
A borrower account will not become NPA overnight. Like a major disease to
human body, it does give symptoms beforehand. It is only up to the banker to take sight of
these symptoms and initiate timely remedial measures to prevent the account from actually
slipping in to NPA.
On the basis of auditors experience of banks, the following notable indications would be
available in different types of borrowers accounts:-
(1) Cash Credit / Overdraft:-
Increasing number of goods returned by the clients.
Increasing number of unrecoccilied book debts.
Increasing number of incidences of debit / credit notes in the books of accounts.
Self Cheques presented through some other bank.
Huge cash withdrawals without proper explanation.
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Frequent requests for temporary overdrawing.
Frequent requests for release / exchange of securities.
Increase in transactions in personal accounts of proprietor / partner / directors.
Unexplained delay in submission of financial statements and tax returns.
(2) Bills Discounted / Purchased:-
Incidences of accommodation bills.
Gradual increase in realization period.
Frequent incidences of partial realization of bills.
Gradual increase in dishour of bills discounted and return of bills purchased. As
guidance, dishonor / return of bills in excess of 5% of bills may be taken as the
danger signal.
Frequent requests for discount / purchase of bills draw on parties outside the list of
drawers approved by the bank.
Requests for meeting the amount of dishonored / returned bills from out of discount
/ purchase of fresh bills.
(3) Letter of Credits / Bank Guarantees:-
Invocation of Bank Guarantees / development of Letter of Credit.
Non receipt of original LC / BGs bonds after expiry and several reminders.
(4) Term Loans:-
Misconception of the project.
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Undue and unreported delay in project implementation.
Non-introduction of margin from time to time and mis-utilisation of loan proceeds.
Default in payment of installments / interest.
Frequent breakdowns in plant and machinery.
Drastic fluctuations in operational efficiency and capacity utilization.
Labour unrest in the plant.
Disposal / replacement of vital plant and machineries without the consent of the
bank and without putting an effective alternative arrangement in place.
(5) Foreign Exchange Finance:-
Incidences of accommodation and kite flying.
Frequent overdue in PCL without genuine reasons.
Frequent cancellation of orders by the overseas buyers.
Increasing delay in realization of export bills.
Huge uncovered Foreign Exchange position.
Frequent return of goods.
Drastic changes in the economic / political atmosphere in the importers country.
Serious violation of FEMA / RBI Guidelines by the exporters attracting penal
action.
(6) Other General Warning Signals:-
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Opening of bank accounts with other banks without the consent of the lending
banker.
Unrecoccilied branch accounts where borrowers have branches elsewhere.
Unexplained swing in the behavioral pattern of the borrower.
Noticeable reduction in ancillary business like DDs, TTs, etc.
Notice by partner / director of the borrowing firm / company of irregularities.
Death of key person in the conduct of business of the borrowers.
Suits filed against the borrowers other than in normal course of business.
Issuance of notices to the borrowers from the respective body for not meeting
statutory dues like Income Tax, Sales tax, Excise, ESIC etc
Receipt of attachment orders as a result of non payment of any of the above duties.
Material changes in the demand / supply scenario and supply of raw material potent
enough to pose serious threat to the economic viability of the project / business.
The above list is not exhaustive and each case of advance may require special attention
depending on each case. As the saying goes, a stitch in time saves nine. It is the alertness
and constant vigil exercised at the operational levels along with quality monitoring and
timely follow-up of borrower accounts that will prevent fresh slippages from performing to
non-performing. The practical banker should develop necessary skill to take note of the
warning signals and initiate necessary corrective action.
In order to build-up and maintain a portfolio of quality advances, it is essential to
meticulously follow the good and time-tested systems and procedures. The best way to
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tackle NPA menace is to prevent fresh additions to this undesirable club and, at the
same time, putting vigorous efforts to reduce the size of existing NPA segment.
6.12 GENERAL METHODS OF MANAGEMENT OF NPAs:-
The management of NPA is the difficult task in practice. Management of NPAs means,
how to settle the NPAs account in the books. In simple it focuses on the methods of
settlement of NPAs account. The methods are differs from bank to bank. The following
paragraph explains some general methods of Management of NPAs by the bank. The same
information is given in the chart.
(1) Compromise:-
40
General Methods of Management of NPAs
CompromiseCC
Legal remediesLL
Regular Training ProgramRR
Recovery CampsRR
Write offsWW
Spot VisitSS
Rehabilitation of potentially viable
unitsuu
Other MethodsOO
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The dictionary meaning of the term compromise is settlement of dispute reached by mutual
concessions. The following are the detailed guidelines for compromise/negotiated
settlements of NPAs.
The compromise should be a negotiated settlement under which the bank should
ensure recovery of its dues to the maximum extent possible of minimum expenses.
Proper distinction should be made between willful defaulters and borrowers
defaulting in repayments due to circumstances beyond their control.
Where security is available for assessing the realizable value, proper weight age
should be given to the location, condition and marketable title and possession of
such security.
An advantage in settlement cases is that banks can promptly recycle the funds
instead of resorting to expensive recovery proceedings spread over a long period.
All compromise proposals approved by any functionary should be promptly
reported to the next higher authority for post facto scrutiny.
Proposal for write off/ compromise should be first by a committee of senior
executives of the bank.
(2) Legal remedies:-
The legal remedies are one of the methods of management of NPAs. The banks observed
that the borrower is making willful default; no more time should be lost institutingappropriate recovery proceedings. The legal remedies are:
Filing civil suits.
Filing criminal suits under sec.138.
Filing suits in DRT.
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Use of SARFAESI Act for quick recovery.
Putting cases to Lokadalat.
(3) Regular Training Program:-
The all levels of Staff, Officers should undergo the regular training program on credit and
NPA management. It is very useful and helpful to the Staff, Officers & Executives for
dealing with proper appraisal of advances & using correct techniques for NPA recovery &
reduction.
(4) Recovery Camps:-
The banks should conduct the regular or periodical recovery camps in the bank premises or
some other common places; such type of recovery camps reduces the level of NPAs in the
Banks.
(5) Write offs:-
Write offs is also one of the common management techniques of NPAs. The assets are
treated as loss assets, when the bank writes off the balances. The ultimate aim of the write
off is to clean the Balance sheet.
(6) Spot Visit:-
The bank officials should visit to the borrowers business place or borrowers field regularly
or periodically & should have continuous meaningful dialogue, it will help in proper
diagnosis of reasons and deciding correct course of action for recovery. It is also help full
to the bank to control or reduce the NPAs limit.
(7) Rehabilitation of potentially viable units:-
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Technically feasible & economically viable NPA units can be rehabilated through
rescheduling, rephrasing, additional financial support, interest rebate, etc. This will help the
units to come back on the track & start generating income to banks overdue & come out of
NPA status.
(8) Other Methods:-
Persistent phone calls.
Media announcement.
Help of recovery agents.
Help of advocates for speedy disposals.
Upgradation of account through recovery of overdue amount.
******
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RECOVERY OF NON-PERFORMANCE ASSET OF
NANDED CITY REGION
TABLE-1 (Rs. In Crores)
TABLE-1.1 CLOSING LEVEL OF NPAs
(Rs. in Crores)
YEAR CLOSING NPA
AMT
TOTAL
ADVANCES
IN %
2007 156.05 1399.90 11.14
2008 188.23 1650.92 11.40
45
YEAR 2007 2008 2009 2010
Opening NPA 133.47 156.05 188.23 194.60
Reduction in Ledger Balance
Due to Recovery
19.72 20.21 17.75 32.49
Up gradation 3.35 2.37 0.49 0.57Written off 2.40 5.25 9.59 27.82
Total Reduction 25.47 27.83 27.83 60.88
Sub total 108.00 128 160 135
Fresh Additions 48.05 60.01 34.20 13.08
Closing NPAs 156.05 188.23 194.60 147.74
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2009 194.6 2280.67 8.53
2010 147.74 3180.94 4.64
GRAPH.1.1
Interpretation:-
The above table & graph is giving information about closing NPA level for the year 2007,
2008, 2009 & 2010.
It is observed on the basis of above table that the closing NPA level has increased
continuously for three years and finally reduced by good margin in 2010. It is very
important to keep NPA level much low & have a reducing graph. Recovery department
46
0
2
4
6
8
10
12
20072008
2009
2010
11.14 11.4
8.53
4.64
IN%
YEAR
CLOSING NPA
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plays a vital role for keeping the NPA level low by negotiating to various recovery
techniques.
Most important ways to keep the graph coming down is as under.
(1) Acquiring quality assets only through proper selection of borrowers.
(2) Acquiring quality assets through proper technical, commercial, financial, managerial,
organizational, legal, environmental, economical, social and risk appraisal.
(3) Continue pre and post sanction visits by different officers where by any deteriation in
health of account can be spotted by either of them.
(4) Immediate timely steps for support in deserving cases.
(5) Immediate timely steps for recovery may be by way of criminal, legal, compromise
Lokadalat, SARAFAESI act etc.
(6) Help of various government organization & authorities NGOS, farmers clubs, SHGS
deployment of recovery agents, and incentives to advocates for early execution may
also help in recovery NPAs & put a tab on closing NPAs.
TABLE1.2. RECOVERY IN LEDGER BALANCE
(Rs. in Crores)
YEAR RECOVERY
AMT
OPENING NPAs IN %
2007 19.72 133.47 14.77
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2008 20.21 156.05 12.95
2009 17.75 188.23 9.42
2010 32.49 194.60 16.69
GRAPH.1.2
Interpretation:-
The above table & graph is giving information about recovery in ledger balance.
It is observed that on the basis of above figures that the recovery from opening NPAs in the
year 2007 was 14.77%, in 2009 it was 12.95%, but in the year 2006 it was 9.42%.
However, in the year 2010 recovery was improved and it was 16.69%. Thus the target is
48
RECOVERY IN LEDGER BALANCE
14.77
12.95
9.42
16.69
0
2
4
6
8
10
12
14
16
18
2007 2008 2009 2010
YEAR
IN%
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achieved professionally only because of good recovery techniques. It is also seen that the
total NPAs increased because of fresh additions in respective years.
The recovery in NPAs can help Bank to use such amount for better earning by giving credit
to quality borrowers. Recovery helps in getting write back in provisions already made
which helps in improving the bottom line of the bank. Good recovery gives moral boost to
the staff to work more for enhanced recovery in remaining NPA account
TABLE1.3. UPGRADATION OF NPA
(Rs. In Crores)
YEAR UP
GRADATION
TOTAL NPAs IN %
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The up gradation means to recover overdue amount due in given NPA account. If
regularized it is withdrawn from NPA category. This account is then classified as a
standard account for balance amount.
In the above table it is observed that in year 2007 up gradation amount was in percentage
2.14%, but in year 2008 to2010 is much less as compares to previous year. Just with small
recovery in the NPA amount, total outstanding amount is removed from NPA category and
is classified as standard assets. Especially sub-standard assets if are followed for amount,
bank can substantially reduce NPAs by up gradation and get write back in provisions.
Immediate steps for recovery in hard cases like legal use of SARFAESI act may prove to
be stitch in time. The figures must show improvements every year.
TABLE1.4 WRITE OFF A/C
(Rs. In Crores)
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YEAR WRITE OFF
AMT
TOTAL NPAs IN %
2007 2.4 156.05 1.53
2008 5.25 188.28 2.78
2009 9.59 194.60 4.92
2010 27.82 147.74 18.83
GRAPH1.4
Interpretation:-
The above table & graph is giving information about write off figure.
52
WRITE OFF NPAs
1.53 2.78
4.92
18.83
0
5
10
15
20
2007 2008 2009 2010
YEAR
IN%
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The write off means taking away the non- performing assets from balance sheet. It is
cleaning of the balance sheet.
With the help of figures, we can observe that every year the write off is increasing and year
2010 it is in percentage 18.83% which also shows sustained growth in profit allowing
higher write off. Regarding to write off the loss account for full amount as Banks has made
100% provision for loss accounts unless recoverable there is no need to continue such loss
assets in the books of banks. Thus number of account will reduce and the recovery officer
may concentrate on other NPA accounts.
However, branches should concentrate on recovery in write off account as such recovery
amounts to 100% additions to profit of the banks. Various techniques especially
compromise in write off; can help a long way to recover in write off accounts.
TABLE 1.5. FRESH ADDITIONS DURING THE YEAR
(Rs. In Crores)
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YEAR FRESH NPAs
AMT
TOTAL
ADVANCES
IN %
2007 48.04 1399.90 3.43
2008 60.01 1650.92 3.63
2009 34.2 2280.67 1.49
2010 13.08 3180.94 0.41
GRAPH1.5
Interpretation:-
The above table & graph is giving information about additional fresh NPA during the yr
54
FRESH NPAs
3.433.63
1.49
0.41
0
0.5
1
1.5
22.5
3
3.5
4
2007 2008 2009 2010
YEAR
IN%
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Bank must concentrate on reduction of fresh additions to NPA which should be minimized
as compared to previous years. In above table we can see that in year 2007 fresh additions
are in percentage 3.43% which were quit high, but in year 2008 fresh additions were in
percentage 3.63% however, in the year 2009 it decreased and in year 2010 fresh additions
had been quite low as compared to previous years.
So, Branches must concentrate more on following of such stressed account which can slip
down to NPAs. Improving appraisal techniques and financing for only quality credit is the
better solution to reduce fresh slippages. Control of fresh slippages is the real control on
NPA assets.
******
CHAPTER 8th
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FINDINGS
8.FINDINGS
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(1) Absolute NPAs increased in 2008 over 2007 and again in 2009 over 2008.
(2) Due to increase in amount of total advances the % NPA had been around the same in
2008 over 2007. In 2009 because of quantum jump in advances the NPAs % came
down to 8.53% inspite of increase in absolute NPAs.
(3) In 2010 nanded city Region did exceptionally well in reducing Gross NPAs as well as
a big leap in advances amount. The result has been fabulous reduction in NPA % to
4.64% which is Banking Industry average.
(4) If the trend of Gross reduction in NPAs and increase in quantum of quality advances is
continued, the nanded City Region would be an example to follow for other Regions
of the Bank and also other Banks.
(Refer to graph 1)
(5)The Region has done exceptionally well in recovery in NPA in 2010 over 2009. The
recovery from opening NPAs in the year 2007 was 14.77%, in 2008 it was 12.95%, but in
the year 2009 it was 9.42%. However, in the year 2010 recovery was improved and it was
16.69%. Thus the target is achieved professionally only because of good recovery
techniques. It is also seen that the total NPAs increased because of fresh additions in
respective years.
(Refer to graph 2)
(6) The Region has little to its credit as regards efforts in up gradation of NPA accounts.
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This area needs special attention.
(Refer to graph 3)
(7) The Write off amount has increased every year. Reduction of NPA is due to heavy
write off which is not a good sign of real achievement. However, recovery in write
off will help in increasing profits.
(Refer to graph 4)
(8) Fresh Additions are controlled in 2009 over 2008 and there is repeat performance in
2010 over 2009. This is a very positive sign of restricting NPAs.
(Refer to graph 5)
******
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CHAPTER 9th
CONCLUSION
9.CONCLUSION
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NPA is a double-edged weapon, which affects bank profitability due to interest
income not being recognized on NPA accounts and creation of provision from hard
earned profit amount. The bank must adopt structured NPAs management policy
for elimination or reducing the NPAs in the Bank. State Bank of Hyderabad has
adopted very good techniques to control the NPAs.
State Bank of Hyderabad was facing a problem of NPA in 1992 to 2000.Thereafter
the bank has taken over the problem & achieved remarkable success in containing
the NPAs. There has been consistent recovery on NPA for many years but the
problem was fresh additions. Now Bank has turned almost the corners in fresh
additions also. The Percentage of Gross NPAs & Net NPAs is much in line with
other Nationalized Banks & especially peer group. The recovery in 2007 has been
the highest for last many years.
However Bank has to keep tab on fresh additions by increasing quality advances
and monitoring them. Critical care has to be taken of stressed accounts to keep
control on fresh additions. Bank has to gear up efforts for upgrading S.S.A and
recovery in D.A & Loss Assets. Staff in state bank of Hyderabad has gained goodexperience to fight the menace of NPAs.
******
.
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CHAPTER 10th
RECOMMENDATIONS
10. RECOMMENDATIONS & SUGGETIONS
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Monitoring Officers should be assigned the responsibility of monitoring the A/c
with special efforts to maintain and upgrade the asset quality.
Identify critical branches for recovery.
Fix target for recovery and draw time bound action plan.
Proper appraisal of new proposals so that credit quality is given more importance.
Proper selection of borrowers so that real entrepreneurs can be provided credit and
willful defaulters can be avoided.
Training of staff for improving credit appraisal abilities, improving techniques in
recovery, negotiations, understanding legal formalities.
Forming recovery teams at the branch or team of staff pooled from branches with in
the city.
Distribution of accounts for monitoring & NPA recovery within all staff members
so that they feel that monitoring an NPA recovery is a job of all staff members.
Weekly meeting of staff to take stock of recovery made in each account and
deciding fresh strategies for achieving planned targets.
Uses of Lokadalat facility so that legal expenses can be reduced and further appeals
are stopped.
Use of SARFAESI Act so that recovery can be done without intervention of courts
and time is saved.
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Resorting to criminal actions in misuse cases and also under sec.138 by obtaining
post-dated Cheques.
Early disposals of legal suits pending in courts & effective execution of decrees.
Rephasing & rescheduling in NPA account so that they can be upgraded within one
year from first repayment installment date.
Compromise in suitable cases with immediate decision.
Incentive to staff doing good work in NPA recovery.
NPA free branches target be set up.
******
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CHAPTER 11th
BIBLIOGRAPHY
11.BIBLIOGRAPHY
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Bankers guide to Non-Performing Advances:By S. D. Yardi.
V. S. Prabhu.
Management of Non-Performing Assets: By N. P. Agarwal.
S. C. Jain.
Web site of State Bank of Hyderabad:www.sbhyd.com
Web site of Reserve Bank of India: www.rbi.org.in
******
http://www.sbhyd.com/http://www.sbhyd.com/http://www.rbi.org.in/http://www.sbhyd.com/http://www.rbi.org.in/