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NPA analysis
EXECUTIVE SUMMARY
The incidence of Non Performing Assets is
affecting the performance of the Bank both financially and
psychologically which has been reflecting ultimately on the balance
sheet of the Bank. With increased concern towards Non Performing
Assets, this study was undertaken to analyze the Non Performing assets.
Attempts tate Bank of !ndia "okul #oad, Branch $ubli. Attempts are
also made to identify the area or sector which is more inflicted by Non
Performing assets.
Primary data from the tate Bank of !ndia "okul
#oad, Branch constituted the pre%ious three years data relating to Non
Performing assets. Also a sur%ey also conducted to understand officers&
perception of Non Performing assets. A tructured 'uestionnaire was
administered for the sur%ey. The primary data collected from Bank were
found to be interesting. As commonly known Non Performing assets
should be more in industrial sector at this branch. !t was found that it
was not so, but more in Personal Banking sector. This has been
concluded from the data which was analyzed for the pre%ious three
years. !t is also found that Non Performing asset as a percentage to total
ad%ance has been decreasing and the amount of Non Performing assets
has come down.
#eco%ery has not been effecti%e in the Branch.
All the analyses done ha%e been arranged in a summery table, which
reflect the performance of the Branch during the pre%ious three years. !t
is found that (ebt #eco%ery Tribunal )(#T* as set up for reco%ering
Bank dues from the defaulters has not been as effecti%e as it should ha%e
been. The a%erage time taken to gi%e a decree is one year and it is more
than a year in some cases. There are also many formalities to be
followed while referring a case to (#T.
All those finding are based on analyses of through
the sur%ey about the repayment of loans and the ineffecti%eness of
functioning of (#T.
INSTITUTE OF BUSINESS MANAGEMENT & RESEARCH,HUBLI.
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NPA analysis
Recommend!"on#$
The Bank has to go for securitization of those accounts, which
ha%e been in the NPAs category from a long time.
Negotiations ha%e to be made for reco%ery of the +oans Non
Performing assets.
The Bank has to carefully analyze the indi%idual sectors for which
they are pro%iding loans.
!mmediate action has to be taken for reduction in the NPAs in the
sectors like !, B,, and A"+, P-B etc.
INSTITUTE OF BUSINESS MANAGEMENT & RESEARCH,HUBLI.
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NPA analysis
CHA&TER '1
IN(IAN BAN)ING SYSTEM
ince the dawn of independence, !ndian financial
sector in general and banking in particular has leaped giant strides into a
systematized growth en%ironment. !ndian Banks ha%e consolidated their
growth year after year. .easures like setting up of #eser%e Bank of
!ndia as the regulator, bank nationalization and other reforms ha%e
worked as catalyst in the de%elopment dri%e. There was always a need to
ha%e regulated, uniform and prudent accounting policies for the banks
with special reference to the credit risk in%ol%ed in lending acti%ities so
that the significant growth in the business %olumes of banks was ably
supported by a well set regulatory norms.
Bank is a financial institution that borrows money
from the Public and +ends money to the public for producti%e purposes.
The !ndian Banking #egulation Act of /010 defines the term Banking
2ompany as 3Any company which transacts Banking business in !ndia3
and the term Banking as 3Accepting for the purpose of lending all
in%estment of deposits, of money from the public, repayable on demand
or otherwise and withdrawal by che4ue, draft or otherwise5
Banks play important role in economic
de%elopment of a country, like Banks mobilise the small sa%ings of the
people and make them a%ailable for producti%e purposes. Promotes the
habit of sa%ings among the people thereby offering attracti%e rates of
interests on their deposits. Pro%ides safety and security to the surplus
money of the depositors and as well pro%ides a con%enient and
economical method of payment. Banks pro%ide con%enient means of
transfer of fund from one place to another. $elps the mo%ement of
capital from regions where it is not %ery useful to regions where it can
be more useful.
As part of the reform process, there were other
changes, which also had an impact the traditional role of the Banker in
INSTITUTE OF BUSINESS MANAGEMENT & RESEARCH,HUBLI.
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NPA analysis
terms of resource mobilization and deployment. These were caused by
the entry of Pri%ate Banks, deregulation of interest rates, deepening and
widening of capital markets enabling the corporate with good rating to
access the capital markets and finally Pri%atization and broad basing the
ownership of the Public sector Banks. While the earlier changes affected
the Banks business profile, the last factor made the Banks accountable
for profits to a new group of stakeholders namely the shareholders. This
meant that the Banks had to ha%e balance sheets that are transparent and
drawn as per the re4uirements of the best accounting standards practiced
in !ndia and else where 6 raising capital abroad meant following global
standards.
!n /077, #B! ac4uired control of the !mperial
Bank of !ndia, which was renamed as tate Bank of !ndia. !n /070, B!
took o%er control of eight Pri%ate Banks floated in the erstwhile princely
states, making them as its /889 subsidiaries. #B! was empowered in
/0:8, to force compulsory merger of weak Banks with the strong ones.
The total number of Banks was thus reduced from 7:: in /07/ to ;7 in
/0:0. !n <uly /0:0, go%ernment nationalized /1 Banks ha%ing deposits
of #s.78 crores and abo%e. !n /0;8, go%ernment ac4uired : more Banks
with deposits of more than #s.=88 crores. Nationalization of Banks was
to make them play the role of catalytic agents for economic growth. The
Narsimham 2ommittee #eport suggested wide ranging reforms for the
Banking sector in /00= to introduce internationally accepted Banking
practices. The number of Bank offices in the country recorded more than
a se%en>fold rise in the post nationalization era mo%ing up from ;,=:=
branches in /0:0 to :7,7=; by .arch =881. As a result of the e?pansion
in banking facilities, the a%erage population ser%ed by a Bank Branch
has declined from :7,888 to //,888.
INSTITUTE OF BUSINESS MANAGEMENT & RESEARCH,HUBLI.
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NPA analysis
1.1 STRUCTURE OF IN(IAN BAN)ING$
The !ndian Banking industry has #eser%e Bank of
!ndia as its regulatory authority. The !ndustry is a mi? of the Public
sector, Pri%ate sector, 2o>operati%e Banks and ,oreign Banks. The
Pri%ate ector Banks are again split into @ld Banks and New Banks.
CHA&TER'3
(ATA ANALYSIS AN( INTER&RETATION OF
THE STU(Y$
The data collected from the Bank is analyzed
here. 2omparison is made for the last year few years. ,or the sake of
clear understanding all the assets are arranged in tabular form.
INSTITUTE OF BUSINESS MANAGEMENT & RESEARCH,HUBLI.
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NPA analysis
3.1 SUBSTAN(AR( ASSETS$
T4.e 0$ Se2men!"#e C.##"1"c!"on o1 A##e!# o1 L#! 2 Ye7#
2;;* 2;;+ 2;;, To!.9R#:
SSI =1;;: NA 2*33,
SBF /C:1/0 ==;1=: NA *;*3*+
&ER C;:= ==CC178 223+%12
To!.9R#: 2;61,, 2+;+30, NA 201+;*%
INSTITUTE OF BUSINESS MANAGEMENT & RESEARCH,HUBLI.
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NPA analysis
0
/000000
2000000
3000000
.000000
5000000
6000000
+000000
00I 0BF
2003 200. 2005
F"2/7e 1;$ S/4#!nd7d A##e!#
INTER&RETATION$
The figures and table show e%en more
satisfactory results. $ere find that only two sectors are grown that are
! - B,. There is a small rate of decrease in the B, sector in the
year =887. But when compared with the =88B it is in the positi%e. There
has been positi%e growth in ! sector in =887 while comparing with the
year =88B. !n mall cale !ndustry ector /C.719 growth is there and in
mall Business ,inance ector 71.:C9 is there.
3.2 (OUBTFUL ASSETS
T4.e 3$ (o/4!1/. A##e!# o1 L#! % Ye7#
2;;% 2;;* To!.9R#:
SSI /8880: 8 1;;;6,
SBF 7/1;8 8 +1*3;
&ER B;01/0: C;0.8: %36*63+
To!.9R#: *;*+002 036 *;*,+,1
INSTITUTE OF BUSINESS MANAGEMENT & RESEARCH,HUBLI.
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NPA analysis
F"2/7e 11$ (o/4!1/. A##e!#
INTER&RETATION$
The figures and table show that doubtful assets
are found in only in mall cale !ndustry ector, mall Business
,inance ector - PF# sectors. There has been o%erall decrease in the all
sectors. The figures re%eal a satisfactory picture. But in the year =88B
only in PF# sector has the highest growth of (oubtful Assets. !n the
year =887 no sector has (oubtful Assets.
3.% LOSS ASSETS$
T4.e 6$ Lo## A##e!# o1 L#! % Ye7#
2;;% 2;;* 2;;+ To!.9R#:
SSI NA =/B/8B7 =/CB71 NA
SBF /=B=/0 =0/07B B/7;B/ 0%1;;%
INSTITUTE OF BUSINESS MANAGEMENT & RESEARCH,HUBLI.
0
500000
/000000
/500000
2000000
2500000
3000000
3500000
.000000
00I 0BF 64R
2003 200.
1;+
NPA analysis
&ER NA =17;;8C 7BB/;: NA
To!.9R#: NA *33106* 1;,,%01 NA
0
500000
/000000
/500000
2000000
2500000
00I 0BF 64R
200. 2005
F"2/7e 12$ Lo## A##e!#
INTER&RETATION$
The figures and table shows that +oss assets are
there in mall cale !ndustry ector - mall Business ,inance ector,
PF#. !n the year =881 all three sectors had some +oss assets. But in the
year =887 it is found that the +oss assets ha%e increase in some sector
and decreased in some other sector.
3.* OVER ALL &ERFORMANCE$
T4.e 1;$ O?e7 A.. &e71o7mnce
&7!"c/.7# 2;;% 2;;* 2;;+ TOTAL9R#:
S/4#!nd7d
A##e!# 7;0;017 ;87C1CB ;17C;08 22*1*%;3
INSTITUTE OF BUSINESS MANAGEMENT & RESEARCH,HUBLI.
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NPA analysis
(o/4!1/. A##e!# 1817CC= C;0 8 *;*,+,1
Lo## A##e!# NA 1;;/C01 /8::BC= NA
TOTAL9R#: NA 126*;;+0 6+2*2,2 NA
0
/000000
2000000
3000000
.000000
5000000
6000000
+000000
,000000
-000000
200. 2005
0!*standard 2ssets )o!*tf! 2ssets 7oss 2ssets
F"2/7e 1%$ O?e7 A.. &e71o7mnce o1 A.. Sec!o7#
INTER&RETATION$
!n abo%e table and figures show that ub tandard
Assets are more dominant in the past three years - (oubtful Assets are
declined, +oss assets ha%e decreased in the last year. "rowth of the ub
tandard Assets from =88B to =887 is 1B.719.
3.+ SECTOR @ISE ANALYSIS$
3.+9": SMALL SCALE IN(USTRIES$
INSTITUTE OF BUSINESS MANAGEMENT & RESEARCH,HUBLI.
1;0
NPA analysis
T4.e 11$ Sm.. Sc.e Ind/#!7"e#
($$) ($$* ($$+ ,otal
S/4#!nd7d A##e!# 200.+.- 2.,,6 22,.26 +-(*.$/
Doubtful Assets /000-6 0 23330 .$$$-/
0oss Assets 0 0 0 /$(*($(
,otal (.$/1*1 )/-+22$ (+2+-1+ 1)21/$)
0
500000
/000000
/500000
2000000
2500000
2003 200. 2005
0!*standard 2ssets )o!*tf! 2ssets 7oss 2ssets
F"2/7e 1*$ Sm.. Sc.e Ind/#!7"e#
INTER&RETATION$
!n the mall cale !ndustry figure shows decrease
in the categories of the Non Performing Assets. There has been a
decrease in the total amount locked in this sector.
3.+9"": SMALL BUSINESS FINANCES$
INSTITUTE OF BUSINESS MANAGEMENT & RESEARCH,HUBLI.
1;3
NPA analysis
T4.e 12$ Sm.. B/#"ne## F"nnce#
($$) ($$* ($$+ ,otal
S/4#!nd7d A##e!# 3,-./-6 6.-.+.2 6/0/265 ./*-$($)
Doubtful Assets 5/.,0 0 0 +.*1$
0oss Assets /232/- 2-/-53 3/5,3/ 2).$$)
,otal *$2$1-1 /211/-- /*.-.$. .2(2(/1/
0
/000000
2000000
3000000
.000000
5000000
6000000
+000000
2003 200. 2005
0!*standard 2ssets )o!*tf! 2ssets 7oss 2ssets
F"2/7e 1+$ Sm.. B/#"ne## F"nnce#
INTER&RETATION$
The abo%e graph shows that in the mall
business firms Non Performing Assets ha%e decreased in the last two
years. The rate has decreased to C=.7=9 in the year =887.
3.+9""": &ERSONAL BAN)ING SECTOR$
T4.e 1%$ &e7#on. Bn-"n2 Sec!o7
($$) ($$* ($$+ ,otal
INSTITUTE OF BUSINESS MANAGEMENT & RESEARCH,HUBLI.
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NPA analysis
S/4#!nd7d A##e!# N2 N2 N2 NA
Doubtful Assets 3,-./-6 +,- 0 )1-*-1+
0oss Assets N2 2.5,,0+ 533/3,6 NA
,otal NA NA NA
INTER&RETATION$
The figures can not be showed because of non
a%iability of information. The abo%e table shows that in the Personal
banking sector Non Performing Assets ha%e increased in the last two
year in loss Assets.
3., COMBINE( &ICTURE OF ALL THE THREE
SECTOR ANALYSIS$
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NPA analysis
33%
6+%
0#a scae Ind!stries 0#a B!siness Finances
F"2/7e 1,$ A.. Sec!o7 An.=#"#
INTER&RETATION$
!n the abo%e graph shows that Personal banking
sector dominated with :C9 of co%erage. And B, sector dominated
with BB9 in the last three years.
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NPA analysis
3.0 RECOVERIES$
T4.e 1*$ Reco?e7"e# O1 T5e L#! % Ye7#
2;;%
RECOVERIES
@7"!e
O11
U8
27d!"on To!.
S/4#!nd7d A##e!# =8/7:/C 8
BB7C;78.0
= +%0%*,3
(o/4!1/. A##e!# :C;0= 8 7707==.1 ,20*1+
To!.# 2;3%+1; ;
%610%0%.%
2 ,;;;33%
2;;*
RECOVERIES
@7"!e
O11
U8
27d!"on To!.
S/4#!nd7d A##e!# C8888 8 //770;B 122+63%
(o/4!1/. A##e!# C:; 8 0,3
Lo## A##e!# /88888 ; 1;;;;;
To!.# 10;0,3 0 11++63% 1%2,0+1
2;;+
RECOVERIES
@7"!e
O11
U827d!"o
n To!.
S/4#!nd7d A##e!# =B1=17 8 08;B7.B; %2+;3;
Lo## A##e!# /8B;7B.B; 8 1;%3+%
To!.# %%3;63.%3 ; 6;3%+.%3 *236%*
INSTITUTE OF BUSINESS MANAGEMENT & RESEARCH,HUBLI.
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NPA analysis
0
/000000
2000000
3000000
.000000
5000000
6000000
+000000
Recoveries
2003 200. 2005
F"2/7e 10$ Reco?e7"e#
INTER&RETATION$
The abo%e chart shows that in the year =88B
reco%eries are more and in the year =881 reco%eries are %ery less. !n the
last year =887 reco%eries are higher than that of =881. #eco%eries ha%e
decreased B0.=79 in the year =887.
INSTITUTE OF BUSINESS MANAGEMENT & RESEARCH,HUBLI.
11%
NPA analysis
3.3 NON &ERFORMING ASSETS MOVEMENTS
The table shows the mo%ement of Non
Performing Assets throughout the year. $ence the data of three pre%ious
years has been analyzed for finding out the mo%ements of Non
Performing Assets.
T4.e 1+$ Non &e71o7m"n2 A##e!# Mo?emen!# 9In Lc-#:
2;;%';* 2;;*';+
Non &e71o7m"n2 A##e!# # on 87e?"o/# =e7 2;21% 1+662
)Q* transferred from other branches 0 0
)Q* fresh Non Performing Assets added during the
period /=7/: /3+3/
)>* transferred to other branches 0 0
)>* reduction due to reco%eries 7=01 78:C
)>* reduction due to up gradation B0/C //B:8
)>* reduction due to write off C7=: B010
Ne! Non &e71o7m"n2 A##e!# # on c/77en! =e7 1+662 6%*0
INTER&RETATION$
The mo%ement of Non Performing Assets tables
shows that there is decrease in Non Performing Assets from #s /700=
lacs in the year =88B>81 to #s 0B1Clacs during the year =881>87.
INSTITUTE OF BUSINESS MANAGEMENT & RESEARCH,HUBLI.
11*
NPA analysis
3.6 NON &ERFORMING ASSETS$
T4.e 1,$ L#! % Ye7# Non &e71o7m"n2 A##e!#
2;;% 2;;* 2;;+
Non Performing
Assets )in lacs* =8B.B; /70.0= 0B.1C
Non 6erfor#in" 2ssets
0
50
/00
/50
200
250
2003 200. 2005
F"2/7e 13$ Non &e71o7m"n2 A##e!#
INTER&RETATION$
!n this ,igure shows that Non Performing Assets
are decreasing year after year. Then this study states that the
performance of the tate Bank of !ndia )"okul Branch* is good in
reducing Non Performing Assets.
INSTITUTE OF BUSINESS MANAGEMENT & RESEARCH,HUBLI.
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NPA analysis
3.1; NET NON &ERFORMING ASSETS$
T4.e 10$ Ne! Non &e71o7m"n2 A##e!#
2;;% 2;;* 2;;+
Non Performing
Assets in 9
:.//9 B.;B9 B.B19
INTER&RETATION$
,rom the abo%e table shows that Net NPA to
Total Assets has been decreasing o%er the years and this indicates that
the Bank is continuously trying to reduce its NPAs position. !t is
calculated with the total ad%ances of the year.
CHA&TER'11
BIBLIOGRA&HY
BOO)S REFERRE(
/. Prasanna 2handra, Financial Management, )Fdition 7
th
, :
th
reprint*,Tata .c"raw $ill
=. (ebasish BenerEee, /00=, !isis o" #an$ing Secto!%
Recommen&ation o" Na!simham ommittee, Dol B7, No./8,
pg/8.
B. <ose L.", .ar /, =88=, Non 'e!"o!ming Assets
Management, Dol 18, Pg /=>/:.
1. Nair Balachandran L.L, No% /7, /000, #an$s an& Non
'e!"o!ming Assets, Dol B;, Pg /1>/:.
7. Gardi Prabhu, Banker&s "uide, .ar =881, Non>Performing
Ad%ances.
:.
@EB SITES
www.sbionline.com
www.google.com
!nternal circulars of B!
MAGPINES AN( AOURNALS
2irculars of the Branch.
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NPA analysis
Annual #eports of tate Bank of !ndia )"okul #oad
Branch*.