A STUDY ON

NON-PERFORMING ASSETS (NPAs)

WITH SPECIAL REFERENCE TO

BANK OF BARODA, VIJAYAWADA BR.

A project synopsis submitted to the Indira Gandhi National Open University (IGNOU) in partial fulfillment for the award of the degree of

MASTER OF BUSINESS ADMINISTRATION

BY

E. TULASI
(Reg. No: 091620678)

Under the Guidance of

G.DAVID RAJU MBA. M.Phil..

Dept. of Business Administration KBN College-PG Center, Vijayawada.

SCHOOL OF MANAGEMENT STUDIES

INDIRA GANDHI NATIONAL OPEN UNIVERSITY

NEW DELHI

INTRODUCTION AND NEED FOR THE STUDY

Undoubtedly the world economy has slowed and slowed down; recession is at its peak. Globally stock markets have tumbled and business is getting hard to do. The Indian economy has been much affected due to high fiscal deficit, poor infrastructure facilities, sticky legal system, cutting of exposures to emerging markets etc., Further, international rating agencies like, Standard and Poor have lowered Indias credit rating to sub investment grade. Such negative aspects have often outweighed positives such as increasing for ex: Reserves and a manageable inflation rate. Under such a situation, it goes without saying banks are no exception and are bound to face the heat of a global downturn. One would be surprised to know that the banks and financial institutions in India hold nonperforming assets worth Rs.110,000 Crores, Bankers have realized that in less the level of NPAs is reduced drastically, they will find it difficult to survive However lending also carries credit risk, which arises from the failure of borrower to fulfill its contractual obligations either during the courses of a transaction or on a future obligation. A question that arises is how much risk can a bank afford to take? Recent happenings in the business World Lehman Bros. Enron, world Com, Xerox, and Global Crossing do not give much confidence to banks. In case after case, these giant corporates became bankrupt and failed to provide investors with clearer and more complete information thereby introducing a degree of risk that many investors could neither anticipate, nor welcome. The

history of financial institutions also reveals the fact that the biggest banking failures were due to credit risk. Due to this, banks are restricting their lending operations to secured avenues only with adequate collateral on which to fall back upon in a situation of default. It is known fact that the Banks and financial institutions in India face the problem of swelling non performing assets (NPAs) and the issue becoming more and more unmanageable. In order to bring the situation under control, some steps have been taken. The Securitization and Reconstruction of financial Assets and Enforcement of Security interest Act, 2002 was passed by parliament, which is an important step towards elimination or reduction of NPAs. At this juncture, I felt it is essential to through a light on Non-Performing Assets (NPA) of the Banking Sector in Indian and with special reference to Bank of Baroda. In recent times the phenomenon of NPAs has become widely known. The private and public sector commercial banks, cooperative banks, national and state level financial organizations have come to suffer from dangerously high level of NPAs. NPAs are eating into the widels of Indian financial system; they have for a long time treated strictly loan assets as NPAs. The actual concept of accounting convention has also been followed without reckoning the amount actually realized. It means that if a loan given by bank fails to fetch a return in the form of interest realized from the borrower, it (the bank) has no right to debit the borrowal account with the interest chargeable following the accrual

principle. In that event, it truly signifies that the asset is not performing i.e., not yielding any income to the bank. This is the essence of income recognition norms, based on the recommendations of the committee on financial sectors reforms (popularly known as Narasimham Committee), adopted by Indian Banks from 1992-93 which culminate in giving a focused definition to NPA. A study on NPAs is therefore, the need of the day so as to achieve the required levels of profitability.

COMPANY PROFILE BANK OF BARODA, VIJYAWADA BR.

A saga of vision and enterprise It has been a long and eventful journey of almost a century across 21 countries. Starting in 1908 from a small building in Baroda to its new hi-rise and hi-tech Baroda Corporate Centre in Mumbai is a saga of vision, enterprise, financial prudence and corporate governance. It is a story scripted in corporate wisdom and social pride. It is a story crafted in private capital, princely patronage and state ownership. It is a story of ordinary bankers and their extraordinary contribution in the ascent of Bank of Baroda to the formidable heights of corporate glory. It is a story that needs to be shared with all those millions of people - customers, stakeholders, employees & the public at large - who in ample measure, have contributed to the making of an institution.

Our mission statement To be a top ranking National Bank of International Standards committed to augmenting stake holders' value through concern, care and competence. Our Logo Our new logo is a unique representation of a universal symbol. It comprises dual B letterforms that hold the rays of the rising sun. We call this the Baroda Sun. The sun is an excellent representation of what our bank stands for. It is the single most powerful source of light and energy its far-reaching rays dispel darkness to illuminate everything they touch. At Bank of Baroda, we seek to be the source that will help all our stakeholders realise their goals. To our customers, we seek to be one-stop, reliable partners who will help them address different financial needs. To our employees, we offer rewarding careers and to our investors and business partners, maximum return on their investment. The single-colour, compelling vermillion palette has been carefully chosen, for its distinctivenes as it stands for hope and energy. We also recognize that our bank is characterised by diversity. Our network of branches spans geographical and cultural boundaries and rural-urban divides. Our customers come from a wide spectrum of industries and backgrounds. The Baroda Sun is a fitting face for our brand because it is a universal symbol of dynamism and optimism it is meaningful for our many audiences and easily decoded by all.

Our new corporate brand identity is much more than a cosmetic change. It is a signal that we recognize and are prepared for new business paradigms in a globalised world. At the same time, we will always stay in touch with our heritage and enduring relationships on which our bank is founded. By adopting a symbol as simple and powerful as the Baroda Sun, we hope to communicate both.

OBJECTIVES OF THE STUDY

The objective of the study is mainly divided into two categories they are: 1. Primary Objective of the study 2. Secondary Objective of the study Primary Objective: To study the Conceptual Frame work, Cause and Effects of NPAs with special reference to Bank of Baroda (BOB) Secondary Objective: 1. To study the NPA pertaining to banking industry in general and Bank of Baroda (BoB). 2. To study the recent developments in Management of NonPerforming Assets 3. To offer conclusions and suggestions for better management of NPAs

METHODOLOGY OF THE STUDY

While attempting analysis of non performance in Indian Banking Sector the research work will involve the collection of data. Sources of data collected are basically divided into two categories 1. Primary Sources 2. Secondary Sources Primary Source It is the information collected directly with out any references. It is mainly through interactions with concerned officers and staff, either individually or collectively, some of the information have been verified or supplemented with personal observation. Primary data for this research study will be collected from the officers working with Bank of Baroda (Vijayawada Branch) through a questioner and also through Interviews. Secondary Source Secondary data for this research study will be collected from the Narasimham Committee findings on NP.As from R.B.I. Publication Trend and Progress Banking in India Business India, Economic Baroda. The Bank of Barodas official Web Sites, Journals and its Financial Reports will be another source to complete this research study work. Times and various Publications of Bank of

LIMITATIONS OF THE STUDY

1) The study of NPA will be confined to BOB of Vijayawada Branch so the results cannot be generalized to other banks. 2) The present study will focus on NPA of Banking Industry in General and NPAs of BOB, Vijayawada in particular. Hence the other aspects of financial statements can not elaborate.

PLAN OF THE STUDY (CHAPTERISATION)

The whole project study is going to divide in 6 Chapters. Chapter 1 Introduction (Objectives, need and importance of the study) Chapter 2 Company Profile (Bank of Baroda) Chapter 3 Industry Profile (Banking Industry) Chapter 4 Theoretical framework (Non-Performing Assets) Chapter 5 Data Analysis & Interpretation (Tables, diagrams, charts etc.) Chapter 6 Findings & Suggestions

BIO DATA

1. Name 2. Address (Office)

: :

DAVID RAJU GOLLAPUDI Dept. Of MBA, KBN PG College, Kothapet, Vijayawada 520 001.

3. Address (Res.)

G.David Raju, D.No: 57-11-17/2, Sarvothama Apartments (S1), New Postal

Col. Vijayawada -520 010, Mobile: 9440427797 4. Qualifications : MBA (Finance) From AU (1997-99), M.Phil. from Acharya Nagarjuna University (2005-07) 5. Experience : Dept. of MBA (2000-till date) Presently working for KBN PG College as Asst. Professor in the Dept. of MBA (2006 to till date) Working as GUEST FACULTY in the Dept. of Tourism of Acharya Nagarjuna University since 2007 to till date Worked as GUEST FACULTY in MBA (Hospital Administration) of NRI Medical College, Mangalagiri during 2007-09 Academic Counsellor of Management Program of IGNOU Academic Counsellor of Computer Program of IGNOU Worked as a Lecturer in the Dept of MBA, Andhra Loyola College, Vijayawada, during 2003-2006 Worked as a Lecturer in the Dept of Commerce & Management Studies, VSM College, Ramachandra Puram, during 2000-2003. 10+ Years of Teaching experience in the

6. Project works guided :

 No. of Projects Works were guided to the various Universities (both regular & distance) students on different topics 7. Achievements : Organised Many National Level Seminars Question Paper Setter to Autonomous Colleges, Vijayawada Participated in many faculty improvement programs Presented many papers on Management Topics in National Seminars. 2 more articles are waiting to publish in leading magazines Article Writer to Sakshi Telugu Daily

7. Date of Birth

10th May, 1974

Date

G.DAVID RAJU