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Presentation
on
Management of NPA in PNB
Parvinder kumar
MBA IV, 46
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Objectives of study
The basic idea behind undertaking the Grand Project on NPA is :
To know about the concept of NPA
To understand the causes & effects of NPA
To study the past trends of NPA .
To evaluate NPAs (Gross and Net) in PNB and other public sector banks,
Pvt. Sector banks & foreign banks operating in INDIA.
To see whether INDIAN banking industry is following international norms
regarding NPA or not.
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Indian banking history
Started with the establishment ofGeneral bank of India in 1786
Presidency banks (Bank of Bengal, Bank of Bombay, Bank of madras
established in 1809,1840,1843 respectively )
PNB was the first Indian bank established in 1894.
Imperial bank of India now SBI in 1921
1949: Enactment of Banking Regulation Act.
1969: Nationalization of 14 major banks with deposits over 50 crore.
1980: Nationalization of seven banks with deposits over 200 crore.
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PNB
Established in 1894
Total branches 5674 (as on march 2012)
Circle office 65
Employees 60,000(approx)
Revenue 31,206 crore (2011)
Net income 4,574 crore (2011)
Total assets 3,73,786 crore (2011)
fortune India 500 Ranking #26 in 2011 Forbes global ranking #1243 in 2000
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Management (PNB)
Board of Directors
Shri. K.R.Kamath
Chairman & Managing Director
and Dy. Chairman of Indian Banks Association
Shri. Rakesh Sethi
Executive Director
Smt. Usha AnanthasubramanianExecutive Director
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NPA
Concept of NPA was introduced in 1991
A loan or lease that is not meeting its stated principal and interest
payments. Banks usually classify as non performing assets ,all loans which
are more than 90 days overdue.
More generally an asset which is not producing income after a statedperiod is called NPA
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Classification of assets
Standard Assets
Sub-standard Assets (less than 12 months)
Doubtful Assets (more than 12 months)
Loss Assets (declared loss in auditing)
Provision for NPAs Standard Assets (0.25% )
Sub-standard Assets( 10% )
Doubtful Assets(20 to 100% ) Loss Assets( 100% )
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Causes of NPA
External Ineffective recovery tribunal
Willful Defaults
Natural calamities
Industrial sickness
Lack of demand
Change on Govt. policies
Internal Defective Lending process
Improper SWOT analysis
Inappropriate technology
Poor credit appraisal system
Managerial deficiencies
Absence of regular industrial visit
Re-loaning process
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Effects of NPA
Reduce profitability
Reduce liquidity
Involvement of Management
Credit loss
Impact on economy
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Types of NPA
Gross NPA Gross NPA reflects the quality of
the loans made by banks
(standard, sub-standard, doubtful
& losses)
Gross NPA
Gross NPA ratio == -----------------
Gross advances
Net NPA
Net NPA shows the actualburden of banks and is received
after deducting the provision
gross NPA--provision
Net NPA ratio== -------------------------------
gross advances--provision
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Tools to recover NPA
Recovery
Compromise/negotiable settlement
Establishment of Asset Recovery Branches
Lok adalat & debt recovery tribunal
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Research methodology
Research can simply be defined as search for knowledge; it is an art of
scientific investigation.
In this project report a research has been conducted to know about NPA
of PSB , PNB organization and PNB branch INDORA, reasons of NPA and
branch policies to recover NPAs.
Research design (descriptive study)
DATA
Both primary and secondary data has been used in the project.
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Data analysis
Data analysis part covers the data of
Public sector banks
Pvt. Sector banks &
foreign banks
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(A) NPA of public sector banks (in crore)
s.n
o
PSB GROSS NPA NET NPA
2009 2010 2011 2009 2010 2011
1 SBI & associates18,447 23,533 30,393 10,869 12,830 14,791
2 PNB2,507 3,214 4,379 78 117 238
3 Bank of Baroda
1,843 2,401 3,153 449 602 7914 Bank of India
2,471 4,883 4,812 628 2,207 1,9455 Central bank of
India 2,317 2,458 2,394 1,063 727 8476 Allahabad bank
1,078 1,222 1,648 422 470 736
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(B) NPA of Pvt. sector banks (in crore)
s.no Pvt. Bank Net NPA to NET Advances (in percentage)
2009 2010 2011
1
Axis Bank Ltd. 0.40 0.40 0.292
HDFC Bank Ltd. 0.63 0.31 0.193
ICICI Bank Ltd. 2.09 2.12 1.114
Indusind Bank Ltd. 1.14 0.50 0.285 Kotak Mahindra Bank
Ltd. 2.39 1.73 0.726
YES Bank 0.33 0.06 0.03
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Net NPA to advances in %
0
0.5
1
1.5
2
2.5
3
1 2 3
Axis Bank Ltd.
HDFC Bank Ltd.
ICICI Bank Ltd.
Indusind Bank Ltd.
Kotak Mahindra Bank Ltd.
YES Bank
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(C ) NPA of foreign banks (in crore)
s.no.
Foreign bank Net NPA
2009 2010 2011
1 HSBC Bank Ltd. 391 543 2492 The Royal Bank of
Scotland NV366 261 174
3 Standard Chartered
Bank514 580 132
4 Citibank1,051 784 493
5 American Express
Banking Corporation 30 14 16
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Net NPA of foreign banks
0
200
400
600
800
1000
1200
1 2 3
HSBC Bank Ltd.
The Royal Bank of Scotland NV
Standard Chartered Bank
Citibank
American Express Banking Corporation
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PNB
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AdvancesV deposits of PNB (figures in crore)
Year 2007 2008 2009 2010 2011deposit 1,39,860 1,66,457 2,09,760 2,49,330 3,12,,899advances 96,597 1,19,502 1,54,703 1,86,601 2,42,107
0
50000
100000
150000
200000
250000
300000
350000
1 2 3 4 5
deposit
advances
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CD ratio
year 2007 2008 2009 2010 2011deposit 139860 166457 209760 249330 312899credit 96597 119502 154703 186601 242107ratio 69.06 71.79 73.75 74.84 77.37
64
66
68
70
72
74
76
78
1 2 3 4 5
CD ratio
ratio
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Net NPA ratioyear 2007 2008 2009 2010 2011ratio 0.76 0.64 0.17 0.53 0.85
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1 2 3 4 5
Net NPA ratio
NetNPA
ratio
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Sectoral segmentationSector amountPriority sector 2742Of which agriculture 1171Of which MSME 1349Other 222Non priority sector 1637
Priority sector
Non priority
sector
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PNBBranch indora
Established in 1971
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Deposit V advances
Year March 2010 March 2011 Feb 2012Deposit 34.18 41.72 49.20Advances 10.23 12.43 15.03
0
5
10
15
20
25
30
35
40
45
50
1 2 3
Deposit
Advances
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CD ratio of PNB indorayear March 2010 March 2011 Feb 2012deposit 34.18 41.72 49.20credit 10.23
12.43
15.03
ratio 29.92 29.79 30.54
29.4
29.6
29.8
30
30.2
30.4
30.6
1 2 3
CD ratio
CDratio
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% of gross NPA to advancesyear March 2010 March 2011 Feb 2012advances 10.23 12.43 15.03Gross NPA 53.12 lac 25.60 lac 65.28 lacpercentage 5.19 2.05 4.34
0
1
2
3
4
5
6
1 2 3
% of NPA to advances
% of NPA toadvances
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% of indora branch to NPA of PNB
year 2010 2011 2012Gross NPA of PNB
2767 3645 4379Gross NPA of indora
branch (in lac)
53.12 25.60 65.28percentage .019 .0071 .014
0
0.002
0.004
0.006
0.008
0.01
0.012
0.014
0.016
0.018
0.02
1 2 3
Percentage
Percentage
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findings
I found that the advances of the bank are increasing continuously
which leads to increase in the profits also.
The CD ratio of the bank is good which makes it position strong.
The recovery system of the bank needs to be stronger which can help
the bank to make its position better.
The fluctuations in the amount of NPA were due to various reasons
(internal & external). Various bank loans are not utilized for the same purpose for which
they are granted specially in agricultural sector.
NPA of PNB has been reduced to 2 % which is very good and showing
the strong position of the bank.
Since PNB is the second largest Indian public sector bank and has agreat opportunity of growth but various times due to some factors
bank uses conservative measures which hindrance for the bank to
grab the opportunity.
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recommendations Each bank should have its own independence credit rating agency which
should evaluate the financial capacity and credit history of the borrower.
There should be proper monitoring of the restructuring accounts because
there is every possibility of the loan slipping into NPAs
Willful default of bank loans should be made a criminal offence.
Settlement procedure should be more strict and faster.
Strong laws need to be enacted to deal with the problem of NPA.
Proper training is important to the staff of the banks at the appropriate
level so that they should deal with the problem of NPAs
No loan is to be given to a group whose one or the other undertaking
became a defaulter.
The overall banking environment should be improved through reduction
of govt. intervention in credit mgmt.
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Limitations
It was critical for me to gather the financial data of the bank so the better
evaluation of the performance of the bank is not possible.
Since my study is based more on the secondary data, the practical
operations as related to the NPAs are adopted by the bank are not
learned.
Since the Indian banking sector is so wide, so it was not possible for me to
cover all the banks of the Indian banking sector.
There is also variation in figures available at different sources which
creates confusion.
The RBI norms for the classification of assets / NPAs are available on a paysite & not publicly available through any source.
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conclusion As NPA is big threat to profitability of all banks and need to be managed
effectively
NPA of PSB is much more than Pvt. Sector banks and foreign banks.
As for as PNB is concerned have less amount of NPA as compare to other
PSB.
However with the introduction ofSARFAECI ACT (The Securitisation and
Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002) banks
can issue notices to defaulters to repay their loans. Also, the Supreme
Court has given the banks the freedom to sell mortgage assets of the
borrowers, if they do not respond to the legal proceedings initiated by
lender. This enables banks to get rid of sticky loans thereby improving
their bottom lines.
Various steps have been taken by government to reduce the NPA. It is
highly impossible to have zero percentage NPA. But at least Indian banks
can try competing with foreign banks to maintain international standard.
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