EXECUTIVE SUMMARY

Karnataka bank was founded on 1924. Karnataka bank provided so many different services to its
customer like customer service; daily provides the gold loan, home and vehicle loans, Net
banking, ATM facility, and mobile banking etc.

The need of the study is Non-performing assets in Karnataka bank and the objective of study is
to understand the NPA, to know the impact of Non-Performing Assets on Profitability at
Karnataka bank ltd. NPA on Financial positions of the bank and various factors responsible for
increasing NPA

Primary data has been collected by interacting the loan manager the secondary data was collected
with the help of fact sheets, organizational manual and web site of Karnataka bank.

The study report consists of industry profile which gives a brief overview about Karnataka bank,
company profile which gives brief information about current organization status of the different
products or services they are offering, then the research methodology which includes statement
of the problem, objectives of the study, methodological assumptions, and limitations of the
study. Next comes to the analysis and interpretation of data, the data which has been collected
from the NPA information. The last part of the report includes Major findings which include rise
in NPAs hamper the profitability of the bank followed by suggestions and conclusions.
 Chapter-1
Introduction
1.1 INTRODUCTION ABOUT THE INTERNSHIP:

The project mainly focuses on NON-PERFORMING ASSETS. The purpose of taking this study
is to know the effect of NON-PERFORMING ASSETS on Banking Sector especially on
Karnataka bank and to find some remedies for their effect. The project is carried through
gathering primary information from bank professionals and managers who are proficient in
dealing with recovery management and NPAs and some suggestions given by bank officials.
Secondary information for this project is collected from internet, books and bank journals.

Karnataka bank is organized in small extent Karnataka bank operating in both urban and rural
regions. These banks are traditionally focused on communities, towns and working groups and
that in essence to small borrowers and businesses are provided. The term urban, although not
formally clear, refers to Karnataka main banks located in urban and semi-urban area

This project report covers five chapters, which begins per need for the study, objectives & scope
of the study, research methodology used etc.

The second Chapter covers industry profile and company profile which includes promoters
information, Vision, Mission & Quality policy of the Bank, Competitors information, SWOT
analysis, financial statements etc.

The third Chapter covers theoretical background of the study which includes elaborative
information on the subject chosen for better understanding and usage in the analysis.

The fourth Chapter covers analysis and interpretation of the data collected with relevant to topic
of the study, and it represent in tables and graphs. Results obtained by using statistical tools are
included.

The fifth Chapter it covers Summary of Findings, Conclusion and Suggestions, Bibliography &
Annexure relevant to the project such as figures, graphs, photographs etc.

I am doing project in Karnataka bank with respect to NON-PERFORMING ASSETS in

Karnataka BANK Mangalore. I hope this report will be enormously useful for those it is meant.

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Constructive and healthy Suggestions for developments of the report will be great fully
appreciated.

1.2 TOPIC CHOSEN IN STUDY

"A STUDY ON NON-PERFORMING ASSETS IN KARNATAKA BANK WITH

RESPECT TO MANGALORE BRANCH", now days the borrowers are not repaying the
amount to the Karnataka banks regularly as per the due dates; it is affecting the performance of
the bank. This project helps in providing necessary guidelines in reducing the NPA's of the
Karnataka bank.

1.3 NEED FOR THE STUDY

The study is conducted with respect to NON-PERFORMING ASSETS. The main perseverance
of the study is to analyze the features affecting non-performing asset and analyze the aspect of
Non-performing asset. Recovery management is getting increasingly complex and bank is facing
tough time because of the provisions for NPAs. To know the variables presented to control NPAs
.The need similarly has been felt to study the financial performance. I have taken NON-
PERFORMING ASSETS AT KARNATAKA BANK MANGALORE as my topic of the
study.

1.4 OBJECTIVES OF THE STUDY

To Study the influence of Non-Performing Assets on Profitability at Karnataka bank ltd.

To know the effect of NPA on Financial positions of the bank and various factors
responsible for increasing NPA
To study the steps taken by banks to reduce Non-Performing Assets and to make suitable
recommendations and valuable suggestions

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1.5 SCOPE OF THE STUDY

This can also be applicable to know the reasons of proliferation in NPAs.

This project also gives light upon Influence of NPAs.
The analysis study is empirical and descriptive in nature.

1.6 METHODOLOGY ADOPTED

Data collection
The researches has collected info from both the sources i.e. primary and secondary the
primary data was collected from the records accessible at the branches under study and
the info collected through interviews with respective loan Manager the secondary data is
collected by referring guidelines distributed by reserve bank of India, journals and
seminar proceedings.
Primary Data
Secondary Data
Use of tools and techniques

1.7 LITERATURE REVIEW

A Comparative Analysis of Non- Performing Assets (NPAs) of Selected Commercial

Banks in India (2013) In this Articles, non-preforming asset is affecting the credit
institution in financially and psychologically the major cause of credit management
skills has been in proving the banking sector the skill of the exposure levels and include
the negotiated settlement the effective recourse settlement the effective recourse
settlement of advisory committees restructuring and rehabilitation the banking industry
expose the credit asset to greater risk serious efforts for recovery measures the position
of NPA continues to haunt Indian banking sector and several curb NPA and declared as
a transparent of major legal hurdles in NPA
From the above it is clear That article NPAs are Comparatively higher in Public
Sector banks to improve increase the efficiency the various steps taken by
government has-been to reduce NPAs

Page 3
 NPA MANAGEMENT AND CORPORATE DEBT RESTRUCTURING (2011)
from the article it is clear that, Non-Performing Assets in Indian Banks studied that the
Indian banking sector faced a serious problem of NPAs. The extent of NPAs has
comparatively higher in public sectors banks. To improve the efficiency and
profitability, the NPAs have to be scheduled. Various steps have been taken by
government to reduce the NPAs. It is highly impossible to have zero percentage NPAs.
But at least Indian banks can try competing with foreign banks to maintain international
standard.
It is very difficult to have zero percentage NPAs.

A Study on Management of Non- Performing Assets in Priority Sector reference to

Indian Bank and Public Sector Banks (2013) from the article it is clear that priority
sector in detail advances and three major heads farming small scale industries and
priority sector. The data related to importance sector in 10 years advances for composed
for Indian bank & public sector bank. The data have been tabulated for percentage in
required of this beside loan and advances under grated in sector. Growth in of Indian
bank lending and timely action for future growth of the bank,
NON-PERFORMING ASSETS: A STUDY OF STATE BANK OF INDIA (2013)
From the article it is clear that A study of NPA It is a banking industry it has undergone
a major changes of a bank the first stage of economic of liberatization the importance of
credit management has appeared and current time banks is very extending loan in
cautious in mounting of NPA it is a highlights of reasons an asset NPA and
counteractive measures various steps taken by the government of Indian

A Study on NPA of Public Sector Banks in India (2014) From the article it is clear
that NPA are the subject of major fears to the banking sector and financial institution the
provides loans or lease meet the stated primary amount and interest amount payment of
NPA impact on the banking and economy as a entire the based on the secondary data
annual report taken by the 6 year the difference in NPA occurrence of various bank
significance of NPA. Those banks regardless of their operations have comparable NPAs
in the recent years.

Page 4
 Empirical Study on Non -Performing Assets of Bank (2014) From the article it is
clear that, there is a great need of managing la morosidad en la perspective de los bancos
del sector public en la India banjo estricto norms de classification de activos, el use de la
ultimo platform technological basada en Core Banking Solution, los procedimientos de
recuperation y outros indicators especficos de bancos en el context del Marco regulatory
estricto de la RBI. Sin -Realizar activos es UN parametric importante en el anlisis de
los resultados financieros de UN banco, yam que da Lugar a la disminucin de los
requisitos de margen y mayores provisiones para insolvencias. la reduccin de los
activos no rentables es necesario mejorar la rentabilidad de los banc

Banking Sector Reforms and NPA: A study of Indian Commercial Banks (2010) In
this Articles NPA is the international financial crisis we experiential recently, the
problem of NPA is considerable after liberatization of the financial sector in India
modified and mechanisms in place for reduction of the loans all discussions with bank
level it remains the NPA in the significance sector of the non-priority sector reduction in
bad loans of NPA , banks shun the poor borrowers access loans and ensure of the bank,

A STUDY ON NON PERFORMING ASSETS MANAGEMENT WITH

REFERENCE TO PUBLIC SECTOR BANKS, PRIVATE SECTOR BANKS AND
FOREIGN BANKS IN INDIA (2015) In this articles The Ratio of Loss Advances to
Gross Advances is stable for Public Banks from two consecutive years 2012 and 2013
i.e. 0.14, against 0.18 in the year 2009.The ratio was greater in Foreign Banks, i.e. 0.87
in 2013. Of Foreign Banks it may rise by Rs. 69.062 Billion for the year 2014. The
Highest NPA is predicted for Public Sector Banks in the year 2014
The Ratio of Sub- ordinary advances to Gross Advances is nearby 0.6 from three
consecutive years starting from 2011 to 2013 for Private Banks and is better than foreign
banks and Public Banks
PROFITABILITY AND CREDIT CULTURE OF NPAS: AN EMPIRICAL
ANALYSIS OF PSBs (2012) In this articles The analysis concluded is a diminishing
trend in the ratio of NPA as a GNP&NNP it is a recommended by the paper are valued
fundamentals of volume of NPA ratio is most multiple regression of model it can be

Page 5
 accomplished as present environment The saying prevention is better than cure or a baste
in time saves nine it including banking sector contract the money stock improving the
managing level of NPA. Problems in faced in bank, the barest minimum by preventing
slippage through effective positive in NPA, Nonperforming assets are an inescapable
burden for each banking industry. The success of banks depends upon methods of
managing NPAs and keeping them within broadmindedness level. Hence, to change the
curve of NPAs,

A STUDY ON NON- PERFORMING ASSETS OF COMMERCIAL BANKS IN

INDIA (2013) In this articles in the banks can avoid authorizing loans to non-
creditworthy compliant of convinced measure, the bank is get both proper and familiar
reports about the goodwill of the customer , then question of sanctioning loan is him to
educate the borrowers regarding effects of NPA use of the technology like the core bank
solutions in apex bank in NPA guideless in the banking sectors of the globalization of
banking
Non -performing assets: Issues, Causes and remedial Solution (2011) in this articles
the NPA is banking industry has undergone an changes on first phase of economic
liberatization significance of credit managing of developed of the bank extending of
loans become of mounting NPA in this article of reasons for assets and remedial
measures and various steps of government of Indian NPA bank bad loans of portfolio
immediately Near 2.7% of the loans on the balance sheet of bank, from 8.8% on NPA,

Consortium loans and its effect on NPA with special reference to King Fisher
Airlines (2015) In this articles It increased regular segregating and equity participation
of promoters is the losses transparency RBI reduce the funds of the top five sectors in
banking it is responsibility of the government of RBI by the setting up respective
regulatory requirement and policy rate is high level of assets in required and good
facilities in the profitability of this banking sector in NPA.

Page 6
1, 8 LIMITATIONS OF THE STUDY

The present study is narrowed to Mangalore region only

The project analysis is done on secondary data for period 5 years
The analysis and interpretation is based on interaction with loan manger and secondary
data

Page 7
 CHAPTER-2
INDUSTRY PROFILE
AND COMPANY
PROFILE
INDUSTSRY PROFILE AND COMPANY PROFILE

2.1 INDUSTSRY PROFILE

2.1.1 NATIONALISATION OF BANKING

The history of banking refers to the development of bank and long banking history .with banking
contemporary sources as defined by the bank. The story begins with the first prototype of bank
traders of the ancient world; The Vedas are ancient Indian texts mention the concept of the word
translated as usury Kusidin usurer. The Jatakas also mentions the existence of loan deeds,

The story begins with the first prototype of bank traders of the ancient world that made loans to
farmers and grain traders carrying goods between cities. This began around 2000 BC in Assyria
and Babylonia, later in ancient Greece and during the Roman Empire,

1969-70: Tribhovandas Domodardas Kansara,

1970-75: J, N Saxena,

1981-84: N Vafhul,

2015: melwyn Rego,

Key people in Banking

Liz Lloyd
Theobald SABI
Alelio Lowasa,
Ruth henry zaipuna,
Juanita Mramba,
Soryya shareef,
Chima Mbanef,

Page 8
2.1.2 Structure

Reserve bank of India

Commercial Regional Rural Co-

bank banks operativebank

public sector private sector State co- Central co-

bank bank operative bank operative bank

other
state bank Primary credit
nationalised Indian Foreign
Group societies
bank

Associate
SBI
banks

SIGNIFICATES

The main area of importance for banks in modern financial systems is as mediators of risk.
Banks are for-profit organizations that seek to use depositors' funds as a basis for long-term
investment the short formula is that banks accumulate deposits of individuals; these deposits are
used as collateral for raising funds in the money markets. And these funds are then placed in
long-term investments

2.2 COMPANY PROFILE

KARNATAKA BANK

Types : private

Traded as : BSE: NSE: KARNATAKA BANK

Industry Banking : Financial Service

Founded : 1924

Headquarters : Mangaluru, Karnataka, India

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 Key people : P Jayarama Bhat (MD)

Number of employees : 6084+

Slogan : Your Family bank,

HISTORY

Karnataka bank was united on 18 February 1924, and commenced business on 23 May 1924 its
founders established it at Mangalore, a littoral toward in Dakshina Kannada. District of madras
presidency.

It is here that five banks viz Canara bank Corporation bank Syndicate bank vijaya bank and
Karnataka bank commenced banking business, it was in the year 1924 that an idea germinated in
the minds of a group of bank on lawyers and agriculturists o Dakshina kannada, The idea took a
concrete shape as they joined together and established bank on 18 -2-2924 at Mangalore,

The over-all business revenue of the bank remained 81,315crores as on 30-9-2015 registering a
y-o-y growth of 10.1% Deposits of the bank rose to 48,872crores registering of 10,98% of
growth, AWARDS

ABP News BFS {Banking financial services &Insurance} Best Bank Reward under the group
of private sector bank

Page 10
Runner up of ASSOCHAM Social banking Excellence Award 2013 under the private sector
banks category

Best bank for customer positioning under the category of midsized banks

Greatest bank Award for managing it for business innovation

IBA Banking Awards

2.3 PROMOTERS

SL NO NAME DESIGNATION

1 B.R Vyasaraya Achar, Directors

2 Nellikai Venka Rao, Directors

3 Pejavar Narayanacharya, Directors

4 Pangal Subba Rao, Directors

5 Udupi Venkat Rao Directors

6 Narikombu Rama Rao Directors

7 Kalmadi Laxminarayana Rao Directors

8 Kakkunje Sadashiva Adiga, Directors

9 Shesha Bhat Bhide, Directors

Page 11
2.4 VISION AND MISSION AND QUALITY POLICY

2.4.1MISSION

Banks mission is to be a technology savvy, customer centric progressive bank with a national
presence, driven by the highest standards of corporate governance and guided by sound ethical
values.

To provide quality banking services bank with customer bank

2.4.2 VISION

Mangaluru headquartered Karnataka bank has unveiled its ambitious Vision 2020 document, a
business plan for the next 5 years and adopted a vision statement to be a progressive, prosperous
and well governed bank.

Guided by vision 2020 and driven by technology Karnataka bank intends to position itself as s
most preferred and trusted bank among the peer group we are sure that all these measures will
help us in realising our vision of emerging as a progressive , prosperous and well governed
bank,

2.4.3 QUALITY POLICY

Fixed Deposit : This is a standards fixed deposit scheme under which you can deposit a
lump-sum amount and earn interest on the same , the interest rate depends upon the
tenure of the deposit,
Loans : A family man has different financial need at different stages in his life by
understanding your changing financial needs
CRS Policy : Karnataka bank as part of its CSR activities has handed over 85 road
barricades and four police umbrellas worth Rs 5 iakh to the district police,
Capital policy : The Karnataka bank Limited has announced that it would be hiking its
authorized capital to Rs 150crore from the current RS 50crore

Page 12
2.5 PRODUCTS /SERVICES

Financial of Agriculture
Financing of Micro small Meium Emterprises,
Wholesale or corporate credit services
Collection & Payment of Cheques,
Foreign Exchange Services
Safe Deposit Lockers &Safe custody
Issuing Demand Drafts & Pay orders
Payment through NEFT/RTGS
Automated Teller Machines
Internet Banking Mobile banking
Marketing of life /non life insurance products
Marketing of Mutual Funds
Selling Gold coins
D-mat Accounts
Banker to the Public issue

2.6 PROFILE AREAS OF OPERATION

Total branches of Karnataka bank in 710+ Branches

Bengaluru
Kolkata
Mumbai
New-Delhi
Bommanahal,
Chikkamagaluru,
Hunsur,
Pune
Shahapur,

Page 13
2.7 INFRASTRUCTURE FACILITIES

Headquarters: Mangalore

Karnataka bank offers a broad reach to various parts of India in the 92 years of its existence. The
bank will provide the required infrastructure for facilities in branches,

Bank shall provide the necessary infrastructure services in all branches to ensure the comfort of
customers adequate space and shell suitable furniture be provided in the facilities of clean
drinking water branches customers will be provided in local pensioners branch of the third age
people with disabilities, etc. It should be addressed in priority and will be comfortable while
carrying out banking transactions.

2.8 COMPETITORS OF INFORMATION

The competitors Page for Karnataka bank Ltd analyzes the current price book value, p/E
ratio and capitalization of its peer group and allows you to directiy compare it with its
competitors Federal Bank
Dhanalakshmi Bank
Lakshmi vilas bank
Vijay Bank
Karur Vysya bank

2. 9 SWOT ANALYSIS

Page 14
STRENGTH

Karnataka bank headed 7669+ workforces and 9.2 million customers including
agriculturalists and artisans in villages and small towns throughout the country
Karnataka bank provides financial services to customer
A facility to make money transmission for non Resident Indians living in Canada USA
and UK
Good work facility for employees
Over 710+ branches across 21 states and 2 union Lands

WEAKNESS

ATM facilities is not there in rural areas

More number of employees are retiring
Overload of work for the existing employees.

OPPORTUNITES

There is a great potential in rural areas with respect to number of branches.

Customer centric has gained more momentum.
More demand for banking products since there is a great demand.

THREATS

Due to large number of players there is a huge Competition in the market.

Highly competitive environment
Economic slowdown
Stringent banking norms

2.10 FUTURE GROWTH AND PROSPECTS

The bank has Set up a new IT bus cell for considering and implementing new
technology based banking business
On the road to recovery

Page 15
 Return ratios to strengthen
Focus on Branch Expansion
Stronghold in Southern India
Karnataka Bank a prenvier bank have developed wide-ranging range of customized
products and services Suitable for every kind of marketplace.

Page 16
2.11 FINANCIAL STATEMENT

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31-MARCH- 2015

(000s omitted)

Particulars 31-3-14(crs) 31-3-15 (crs)

1 Income
Interest Earned 4188,83 4,698,42
Other Income 505,58 580,90
Total Income 4,694,41 5,279,32
2 EXPENDITURE
Interest Expended 3132,76 3,529,57
Operating Expended 874,60 916,93
Provisions and Contingencies 278,39 278,39
Total Expenditure 4,285,75 4724,89
3 PROFIT
Net Profit 311,03 451,45
Profit Brought Forward 0,09 0,16
Total Profit 311,12 451,61
4 APPROPRIATIONS
Transfer to Statutory Reserve 147,00 230,00
capital Reserve 0 3,15
Revenue Reserve 63,00 0
Transfer to special Reserve 23,21 84,87
Reserve Account -11,48 19,25
proposed dividend 75,41 0
Balance carried over to balance sheet 0,17 0,40
Tax on proposed dividend 12,81 113,94
Transfer to other funds 1,00 0
TOTAL 311,12 451,61

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 The Total income of a company in the year 2015 was Rs 5, 279, 32 corers as against Rs
4, 694, 41 in the year 2014.
The Total Expenditure of a company in the year 2015 was Rs 4724, 89 crs as against Rs4,
285, 75 in the year 2014.
The Total Profit of a company in the year 2015 was Rs 451, 61 crs as against Rs311, 12
in the year 2014.
The Total APPROPRIATIONS of a company in the year 2015was Rs 451,61 crs as
against Rs311,12 in the year 2014

Page 18
BALANCE SHEET OF THE KARNATAKA BANK FOR THE YEAR 2014 AND 2015

Particular 31-3-2015 31-3-2014

(in lakhs) (in lakhs)
CAPITAL AND LIABILITIES
Capital 18846 188,42
Reserves and surplus 320060 2863,78
Deposits 4600860 40582,83
Borrowings 103776 1915,19
Other liabilities and provisions 140118 1478,58
Total 5183660 47028,80

ASSETS
Cash and balances 248845 2152,73
Balances with banks and call and short notice 12571 184,67
Investment 1598806 15226,78
Advances 3167999 28345,49
Fixed Assets 29185 197,48
Other Assets 126254 921,65
Total 5183660 47028,80

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 The Total deposits of a company in the year 2015 were Rs 4600860 crores as against Rs
40582, 83 in the year 2014.
The Total Borrowings of a company in the year 2015 was Rs1915, 19 crs as against
Rs103776 in the year 2014.
The total advance of a company in the year 2015 was Rs28345, 49 crs as against
Rs3167999 in the year 2014.
The Total Fixed asset of a company in the year 2015 was Rs197, 48 crs as against Rs
29185 in the year2014.

Page 20
Chapter-3
Theoretical
background
3. THEORETICAL BACKGROUNDS

3.1 INTRODUCTION

NPA are popularly known as commercial bank assets NPA are of various types. All assets that
generate regular income are called productive assets, while all assets that do not generate regular
income are referred to as clients of non-performing assets do not pay the amount and the
principal interest of a certain period time, so that such loans become non-performing assets of
non-performing assets are fundamentally not make Indian loan.in the deadline for classification
of assets as NPA is 90 days compared to 45 days to 90 days, the international rules.

Indian NPA was very high in the early 90 over a period of time, there is a significant drop from
the end of the NPA a bank in the case of public banks non-performing gross assets were 9.4% in
2002-03 it decreased to 7.8% in 2003-04 net NPA during the same period fell from 4.5% to 3%.
As assets, including leased assets become unproductive when it ceases to generate income for the
bank

Here are eight categories, with a health code assigned to each loanable account:

Source: RBI

1. Satisfactory - conduct is satisfactory; all terms and conditions are met; all accounts are in
order and the security of the advance is not in doubt.

2. Advance security irregularities is not a suspect, but there may be occasional irregularities,
which can be considered as a short-term phenomenon.

3. Viable sick - Advances to units who are sick but achievable - in nursing units for which
nursing care plans / recovery are absorbed.

4. Sick, unsustainable / tights - irregularities persist and there is no immediate prospect of

regularization and the accounts could cast some of the usual symptoms of early disease.

5. Advances recalled - the accounts whose return is doubtful and nursing are not considered valid
and where it has taken the decision to recall advance

6. Lawsuit filed accounts - Accounts that legal proceedings were instituted action or recovery

Page 21
7. decreed debts - which were obtained decrees (verdict).

8. debts and doubtful - where the recoverability of bank charges has become questionable due to
short fall in the value of the guarantee, the implementation of difficulty and application of
securities or inability / refusal to borrowers pay bank fees in part or in full

Assets have been declared non-performing loan or the borrower's account has been classified as
assets and loss doubtful substandard, according to the instructions or guidelines for the
classification of assets issued by RBI earlier asset as NPA after end of the entire payment period
of the loan amount and 30 days of grace. All current scenarios assets are declared as NPA if no
fees are paid up to six months I.e.90 days about a long-term loan.

3.2 DEFINITION

An asset not run [NPA] is a loan or advance for payment of principal or interest remained
delayed for a period of 90 days; a bank description is required to classify NPA even more
doubtful assets and loss of lower quality

A classification used by financial institutions that refer to loans that are at risk of default, once
the borrower has stopped making interest or principal payments for 90 days the loan is
considered to be a default

Also known as non-performing loan

The specified period was reduced in a phased manner as under:

31.03.1993: four quarters
31.03.1994: three quarters
31.03.1995: two quarter
31.03.2001:90 days
31.03.2004:90 days
Days wrongdoing norms are not applicable to Agriculture segment

Page 22
3.3 TYPES OF NPA
Standard Assets
An asset is a standard performance standard assets generate direct income assets and
reimbursement as they become due those assets have a normal risk and NPA are not in the real
sense, so that no special provisions for assets required level
Sub- standard
All those assets that are considered not perform for a period of 12 months is called as low-quality
assets
Doubtful assets
All those assets that are considered unprofitable for the period of over 12 months is called as
doubtful assets
The assets of the loss
All those assets that cannot be recovered are called as loss assets
These assets can be identified by the central bank or by the auditors,

3.4PROVISIONING COVERAGE RATIO, STANDARD ASSETS AND

CLASSIFICATION OF NPA
Provision coverage
For each loan granted to banks to keep more funds aside to pay for this with these loans is
called the bank provision coverage refers to the case where the ratio of problem loans to fund
losses
Asset Standards
If the borrower regularly pay their dues on time, said bank lending as part of its assets in
accordance with the general provisions of the standard 0.40% of Standard Bank must be made
for all loans and advances to customers, in addition to agriculture and small industries and
companies - PCR .The increase classification of non-performing assets in the next section
discusses,
classification of non-performing assets
payments from the borrower fails to end the quarter at 90 days, loans become non-performing
assets, and appointed as special mention account, under the term of the loan if the SMA is still

Page 23
less than or equal to 12 months, which is referred to the case of assets under Norm , banks must
provide the following or
In the case of unsecured loans, at 25% of the asset-backed case, 15% of outstanding loans
sub-standard still remains a third until the end, in this case, on the banks of the configuration is
called a period of 12 months or less non-performing assets
Until the situation this year, at 100% of the assets to unsecured loans, guaranteed loans of 25%
40% for three years, in the case of unsecured loans at 100% of the balance of the guaranteed
loan, the outstanding amount --1
If the active sub-standard maintained even after more than three years, can be identified as
internal and external audit will be referred to irreversible loss of assets PAN can declare the
result, if the loan was not paid has been determined that the internal or external audit,
sample NPA
We assume that one part of the loan is 1 January 2010 maturity date to pay for the June 1, 2010
but the party does not pay. It would be a great standard of value than the standard 30 under the
January 2010 to June 2010 1, 1999 (the expiration date) will account for the special prize June
2010 2 and August 29, 2010 (90 days) August 2010 to 29 August 2011 will be suspicious from
30 August 2011 to 29 August 2012 may be grounds for 12 months as an NPA is still a period of
three years overdue, but once the auditors identified as a loss, you the loss of access to assets;
however, the period may be something more than three years.

3.5 GROSS and net NPA

The NPA can be gross and net NPA, NPA is simply the first sentence of the book standing
volume, borrowal account whether any registered debit interest and net NPA gross NPA but less
discount, rather than valuation or find RBI has specified income formula to determine the total or
net NPA NPA

Page 24
Gross NPA formula

GROSS NPA RATIO =

Net NPA formula

NET NPA RATIO =

RESEARCH OBJECTIVES
The purpose of this article is to analyze the nature, scope and extent of the NAPs of the BCL, as
a group. This study also analyzes the impact of national action programs on the profitability of
RSP operating in India. Moreover, the study could provide useful information to determine
whether changes in the efficiency of the banks were in the desirable direction and is also useful
in regulation and politics.
The objectives of this work are:
To analyze the nature, scope and extent of the NPA in the banking sector in India.
To examine the relationship between the PAN and the measure of profitability (ROA) of banks.

3.6 CAUSES NPA AND SARFAESI Act

Causes of NPA
Default
One of the main reasons behind NPA is default by borrowers
Economic conditions
Economic conditions of a region affected by natural calamities or any other reason may
cause NPA
NO more proper risk management
Speculation is one of the major reason behind default sometimes banks provide loans to
borrowers with bad credit history there is high probability of default in these cases
Mis-management
Often ill-minded borrowers bribe bank officials to get loans with an intention of default,

Page 25
 Diversion of funds
Many times borrowers divert the borrowed funds to purposes other than mentioned in loan
document it is very hard to recover from these kinds of borrowers In case you have any query or
you want to add anything then comment below if I find any comment is adding value to the post
then I will add that comment to the post

SARFAESI Act

Securitization and reconstruction of financial assets and interest enforcement of safety laws
require banks to take legal means to recover the fee if the borrower quietly pay any default and
your account is classified as NPA secured creditor must give notice of the borrower 60 days
SARFAESI Act, according to the payment he deserves,

3.7 FACTORS ON NPA

There are several details for an account becoming NPA

Internal factors
External factors
Other factors
Internal factors

Internal factors responsible for high level of NPAs in commercial banks of India, the most
important is what concerns the loan fund for a purpose but used in some other poor recovery,
the ability of the legal person to increase capital by issuing equity or other debt instrument of
capital markets, diversion of funds in promoting the concerns of the sister, fraud, misuse of
funds, fraud disputes, disputes management, misappropriation, etc.

Loans therefor obtained for a Particular purpose, do not use aim For That purpose

Project is not finished in time

Poor salvage of accounts receivable

The overcapacity created on non-economic outlays

Page 26
 In the capacity of the legal entity pour augmenter by Issuing equity capital or debt
instrument --other of capital markets

Business failures

The diversion of funds for expansion \ modernizing / creating new projects \ helping gold
promoting the Concerns of the sister

Intentionally failed siphon funds fraud management conflicts Discussed misappropriation,

etc.

Deficiencies in the Bank in monitoring Namely credit assessment and follow-up delay in
settlement of payments \ Subsidies from government agencies, etc.

External factors
A major reason for the growing of the PAN was generated with liberalization, a dream of
globalization led to the huge investment that unfortunately could not be used due to
vacillating policies of liberalization. Prevalence of traditional industries in credit
portfolios, industrial disease, labor problems, the slowing global economy and domestic,
legal system weak, long legal entanglements. Other external factors, the RBI study noted
that non-availability of raw materials, energy shortages, bottlenecks in transport, financial
bottlenecks, changes in government policy as changes excise duty changes import duties,
etc., natural disasters, industrial disease, increased import costs, increased overhead costs,
market saturation, product obsolescence, falling demand and similar reasons were
responsible for resulting performance gains slow and weak that they are given by the
bank in evil. Legally and politically ineffective infected system is the only factor that
contributes greatly to the high level of NPAs in Indian banks.
The slow legal system
Or long legal entanglements
Or changes that have occurred in labor legislation
or lack of sincere effort
Energy shortages of raw materials and other resources
Industrial recession

Page 27
 Shortage of Raw Materials, Raw Materials \ input prices climbing recession Energy
Shortage Industrial overcapacity natural calamities like floods accidents
Payment Failures \ overdue is not recession Other countries Other countries
externalizing problems unfavorable exchange rates, etc.
Government policies such as the Excise Tax Change Import exchange, etc.

3.8 INCOME RECOGNITION AND ASSETS CLASSIFICATION ON NPA

Revenue recognition

Investment Income recognition has also been made on the basis of bank prudential standards
should not be predetermined regardless of the accrual in respect of any security which it
contains; principal interest is in arrears more than 90 days of classes.

Asset Classification

Banks should its assets be divided into the following groups namely

Standards-based assets
Of any asset is a matter of undisclosed .asset NPA ratio should not be attached to a
normal business risk and more,
substandard assets
Assets interest and principal on the loan agreement terms have been re-negotiated or
rescheduled to begin production after the NPA,
Doubtful assets
Assets required to be classified as doubtful assets of more than 12 suspected NPA starting
this month, in a failed bank doubtful assets classification is valid for 12 months.
Loss of assets
Loss assets is one of the loss has been determined by an internal or external audit of the
bank or NPA. In whole or in part, in other words, this is considered as assets,

Page 28
3.9PROBLEMS DUE TO NPA

The problem to NPA have been receiving greater consideration since 1991 in India, NPAs do not
just reproduce severely in a banks account books they unfavorably impact the national economy
following are some of the repercussions of NPAs

Depository do not get rightful earnings and many time may misplace uninsured deposits
Bank shareholders are adversely affected
Once bank do not get loans advance or interest payment liquidness problems may ensue
The bank may face a thoughtful liquidity crunch when a large number of mortgagors fail
to pay interest
Shareholders do not receive a commercial return on savings. In the nastiest case, if the
bank fails, depositors drop their assets or uninsured balance.
Lok adalats have been found suitable for the recovery of small loan accordance with the
guidelines issued in RBI
compromise settlement scheme provides a simple mechanism for the recovery of NPA
A good information system is required to prevent loans become NPAs
Banks redistribute losses other borrowers by charging higher interest rates, lower deposit
rates and higher rates of savings and loans repressed financial markets, hindering
economic growth.
The proprietors do not receive market reappearance on their capital in the worst case, if
banks fail, the proprietors lose their assets. In modern times this can affect a large group
of shareholders.

3.10EFFECT AND IMPACTS OF NPA ON BANKING OPERATION IN INDIA

Effect of NPA
The day to day running of the bank account becomes difficult as setting money deposited
against their shares begins
The attitude of the bankers to the borrower be more arrogant
The borrower's reputation in the market is adversely affected
This leads to the discouragement of the borrower who has been working with the bank
for the year number as the customer has donated to the profit of banks

Page 29
 The principle of customer service and customer deserted torture begins this take the
borrower in a helpless situation and at the mercy of the bank
There are many cases where a borrower has been invaluable customer of the bank, but
become vulnerable after being declared as NPA SMEs are still more in a pitiable
condition
Impacts of NPA
When the bank does not receive payment of the loan or interest payment or liquidity
problem can arise interest payments
Bank shareholders are adversely affected
Depositors do not get legitimate yields and can often lose uninsured bank deposits can
start charging higher interest rates on some products to offset the non-performing loan
losses
Inadequate loan involves redirecting funds to the bad good projects, therefore, the
economy suffers due to the loss of good projects and the failure of bad investment

3.11 SECURITIZATION ON NPA

Securitization of existing assets or future cash flows into the process of conversion of securities
for the purpose of distinction, convert existing assets into tradable securities are known as asset
securitization and future cash flow conversion inflow of securities is known as Future -flows
Securities

A typical securities comprises the steps of

create a special purpose vehicle of the underlying securities held by financial assets
sale financial assets, SPV which the asset originator or holder will hold the assets and
realize assets
Financial assets arising from the issuance of securities investors SPV
held by the NPA

The bill was welcomed by the banking sector, the validity of borrowers communities in the
courts to challenge the grounds that it is mainly on behalf of lenders and therefore the lender

Page 30
cannot enforce the provisions of the full amount, but the key question is whether the bill would
boycott It is an effective tool for the difference between the NPA bigger threat.

3.12 RECOVERY OF NPA

Securities and financial assets, and in 2002 the government enacted legislation to implement the
security interests of the securities allowed banks to rebuild is easy to legal recourse if the legal
dispute is the violation of the principles of justice, equity and direct load good conscience,
because it is arbitrary, simple unilateral reason is not intentional fault and fault, because he was
unable to control even more the situation in the creation of non-recognition of the NPA
distinguish the premise that the bank of this legal framework is borrowers NPA creative one, this
row no effect, which is a well-known fact that many of the accounts become NPA fact are
outdated due to lack of funding from other sources and joblessness receipts capital are not highly
dependent on timely delivery and long-term loans,

There are three types of diseases, industry {1} {2} be born sick to treat diseases and disorders
{3} they trusted each type must be different, and the reason is that some diseases contributions
resume beyond the control and the banks of the borrower, in this case, the bank has become a
spectator to the deteriorating situation in the recovery not yet do anything alone to blame the
borrower is required, so it is to take a pragmatic and practical approach the NPA and even when
to start the recovery process sincere, the borrower must not be allowed to suffer.

3.13 PREVENTIVE MEASUREMENT FOR NPA

Early identification of problems

Always in the process of recovery time banks began to get involved in the effort, it was too late
to retrieve the situation both in terms of reconstruction and restoration projects bank
contributions

identify genuine intention of the Borrower

Determines that the Borrower and those who are really serious bad intentions and no
commitment or revival of shares is a challenge faced by the bank.

Page 31
 Timely and adequate response

In the longer response time to delay trauma accounts and assets is a key factor in the response to
any restructuring or rehabilitation of technical and economic decisions based on research and
promoters promised,

focus on cash flow

And in the financing of restructuring the bank may not be through the traditional flow of funds
analysis, only guide.

Management Effectiveness

Borrower's prevailing view is that this is a lack of funds, leading to disease and bad assets, but
this may not be true when,

Page 32
 Chapter-4
Analysis and
interpretation
4. DATA ANALYSIS

Details of NPA for the year ending from 31.03.2011 to 31.03.2015:

Table 4.1

The Table showing the comparison between total loans and NPA loans31-3-2011to 2015:

Year Total loans and advances(crs) NPA loans and advances(crs)

2011 21,204 320

2012 23,404 378

2013 25,208 413

2014 28,345 654

2015 31,680 1,043

Analysis:

From the above Table 4.1 we can clearly able to understand the total loans and advance as well
as NPA loans and advance. In the year2011 and 2012 the total loans and advance was Rs21, 204
and 23,404 crs and NPA loans and advance was 320 and 378 crs. In the year 2013 total loans and
advance was increased to Rs.25, 208 crs and NPA loans and advance was 413crs. In the year
2014 the total loans and advance was increased to Rs 28,345crs and NPA loans and advance was
Rs 654crs. In the year total loans and advance was increased to 31,680crs and NPA loans and
advance 1,043.

Page 33
Figure 4.1:

The Chart showing the comparison between total loans and NPA loans:

35,000
31,680

30,000 28,345
25,208
25,000 23,404
21,204

20,000
Total loan and advances

15,000 NPA loan and advances

10,000

5,000
320 378 413 654 1,043
0
2011 2012 2013 2014 2015

Interpretation:

From the above fig 4.1 we can clearly able to understand the total loans and advance as well as
NPA loans and advance. In the year2011 to 2015 the total loans and advance in increase. And
NPA loans and advance is increased in 2011 to 2015.

Page 34
Table 4.2:

The table shows information regarding Exposures in NPA in 2014 - 15

Mar 2014(crs) Mar 2015(crs)

Sector Bal o/s % to Tot Bal o/s % to Tot
Adv. In Adv. In that
that Sector Sector
Priority Sectors

Agi & allied activities 83.08 1.99 83.54 1.95

Industry 128.53 4.61 86.66 2.85

Services 63.11 2.85 111.49 3.36

Personal & other Loans 20.29 1.12 25.65 1.24

Total 295.01 2.69 307.34 2.24

ANALYSIS:

Form the about table of 2014 Bal o/s and %to tot Adv. in that sector in Agi and allied activities,
83.08 & 1.99, Industry 128.53 &4.61, Services 63.11&2.85, Personal &other loan 20.29&1.12.
Was 2015 BAL o/s and % to tot Adv. In that sector in Agi and activities 83.54 &1.95, Industry
86.66 & 2.85, Services 111.49&3.36, Personal &other loans 25.65&1.24.

Page 35
Figure 4.2:

The chart showing the comparison between Exposures in NPA in 2014 - 15.

250

2.85

200

86.66 3.36
1.95 Mar 2015 % to Tot Adv.
In that Sector
150 Mar 2015 Bal o/s
83.54 4.61
111.49
Mar 2014 % to Tot
100 Adv. In that Sector
1.99 Mar 2014 Bal o/s
128.53 2.85
50 1.24
83.08
63.11 25.65
1.12
20.29
0
1 2 3 4 5

Interpretation:

From the above figure 4.2 we can clearly able to understand the Exposures in NPA. 2014 and
2015 Bal o/s Agi & allied activities is increased. Industry BAL o/s is decreased. Services in
increased in BAL o/s.and Personal & other Loans are increased. And % to Tot Adv. In that
sector Agi & allied activities decreased. A service is increased. Industry is decreased. And
Personal & other loans in increased in 2014 to 2015.

Page 36
Table 4.3:
The table shows of NPA Composition in Percentage of 2014 and 2015:

2014 2015
SL Particulars
Percentage Amount Percentage Amount
No
(%) (crs) (%) (Crs)
Sub standard 48.73 407.33 45.03 425.09
1.
Doubtful 45.85 383.25 50.91 480.71
2.
Loss Assets 5.42 45.36 4.06 38.41
3.
Gross NPA 2.92 638.86 2.95 825.94
4.
Net NPA 1.91 538.03 1.98 623.55
5.
104.11 2012.83 104.93 2511.97
Total

ANALYSIS:
From the about table of 2015 in Percentage and amount of Substandard 45.03&425.09,Doubtful
50.91&480.71, Loss assets 4.06 &38.41, Gross NPA 2.95 &825.94, Net NPA 1.98&623.55. was
2014 in substandard 48.73&407.33, Doubtful 45.85&383.25, loss assets 5.42&45.36, Gross NPA
2.92&638.86, Net NPA 1.91&538.03.

Page 37
Figure 4.3:

The chart showing the NPA Composition in Percentage of 2014 and 2015:

Chart Title
900
800
700
600
Axis Title

500
400
300
200
100
0
Sub standard Doubtful Loss AssetsGross NPA Net NPA
2014 Percentage (%) 48.73 45.85 5.42 2.92 1.91
2014 Amount (crs) 407.33 383.25 45.36 638.86 538.03
2015 Percentage (%) 45.03 50.91 4.06 2.95 1.98
2015 Amount (Crs) 425.09 480.71 38.41 825.94 623.55

Interpretation:

From the above table figure 4.3 we can clearly understand that the NON-PERFORMING
ASSETS for the period 2015 and 2014 were given in detail as follows in Percentage on sub
standers Doubtful, Loss Assets, Gross NPA and Net NPA increase and decreased in amount and
% in 2014 and 2015 respectively.

Page 38
Table 4.4:

The Table showing the comparison between Provisions and NPA loans:

SLNO Particulars 2013(crs) 2014(crs) 2015(crs)

25,416.46 28,623.94 31,995.33
1, Gross Advances
638.86 835.93 944.21
2. Gross NPA
208.79 278.45 315.34
3. Provision made thereon
32.68 33.31 33.40
4. Provision made to Gross NPA (%)
13,520.40 15,323.79 16,017.74
5. Gross investment
12.85 14.11 12.86
6. Non- performing Investment
12.85 14.11 12.86
7. Provisions made thereon NPA
100 100 100
8, Provisions made to NPI %

ANALYSIS:

From the above Table we can clearly identify the Non-performing assets of individual product.
For the period 2013 NPA Investment provisions made thereon 25,416.46, 2014 years in NPA
Provisions made thereon 28,623.94, 2015 years in NPA Provisions made thereon 31,995.33,

Page 39
Figure 4.4:

The chart showing the comparison between Provisions and NPA loans:

100%

90%
33.4 16,017.74 12.86 12.86 100
80% 944.21 315.34

70%

60%

50% 33.31 15,323.79 14.11 14.11 100 Non- performing Investment

835.93 278.45 2015(crs) 31,995.33
40%

30% Non- performing Investment

2014(crs) Provisions made
20% thereon 28,623.94
32.68 13,520.40 12.85 12.85 100
638.86 208.79
10% Non- performing Investment
2013(crs) Provisions made
0% 0 0 0 0 0 0 0 0
thereon 25,416.46

Interpretation:

From the above figure 4.4 we can clearly identify the Non-performing assets of 2013 in 2014 is
increased in Non-performing Investment and provisions made the reason for increan in 2015 is
increased of this Non performing investment and provisions made.

Page 40
Table 4.5:

The Table shows NPA for a period of 31.03.2014:

SL NO NPA NPA Amount Percentage

Particular
Above 10 Lakhs
1,
13 231.03 57
Between 5 Lakhs and 10 Lakhs
2,
11 74.67 18.42
Between 3 Lakhs and 5 Lakhs
3,
9 30.71 7.58
Between 2 Lakhs and 3 Lakhs
4,
4 10.55 2.6
Between 1 Lakhs and 2 Lakhs
5,
10 12.88 3.18
Below 1 Lakhs
6,
193 45.49 11.22
TOTAL
240 405.33 100

ANALYSIS:

From the above Table we can clearly understand the NON-PERFORMING ASSETS for the
period of 2014. Above 10 Lakhs we have 57%, between 5-10 Lakhs 18.42%, between 3-5 Lakhs
7.58%, between 2-3 Lakhs 2.60%, between 1-2 Lakhs 3.18%, below 1 Lakhs 11.22%.

Page 41
Figure 4.5:

The chart shows NPA for a period of 31.03.2014:

11%

3% 3%

8% 2
3
4
57% 5

18% 6

Interpretation:

From the above figure 4.5 we can clearly understand the NON-PERFORMING ASSETS for the
period of 2014. Above 10 Lakhs we have 57%, between 5-10 Lakhs 18.42%, between 3-5 Lakhs
7.58%, between 2-3 Lakhs 2.60%, between 1-2 Lakhs 3.18%, below 1 Lakhs 11.22%.

Page 42
Table 4.6:

The Table shows NPA Movement of 31.03.2014 to 2015:

SL NO Particulars 2014(crs) 2015(crs)

1, Gross NPA (Opening) 63886 83594

2, Addition to NPA 653.88 929.83

3, Gross NPA (Closing) 83943 94421

4, Net Addition to NPA 197.08 108.27

5, Slippage ratio (%) 2.64 3.35

ANALYSIS:

From the about table in 2015 and 2014 Gross NPA (opening) in 63886 &83594, Addition to
NPA 653.88&929.83, Gross NPA (Closing) 83594 &94421, Net Addition to NPA 197.08
&108.27, and Slippage Ratio 2.64 &3.35.

Page 43
Figure 4.6:

The chart shows NPA Movement of 31.03.2014 to 2015

100000 94421

90000 83594 83943

80000

70000 63886

60000

50000

40000

30000

20000

10000 929.83
653.88 197.08
108.27
0
Gross NPA (Opening) Addition to NPA Gross NPA (Closing)Net Addition to NPA

2014(crs) 2015(crs)

Interpretation:

From the above figure 4.6 we can clearly understand the NON-PERFORMING ASSETS for the
period of 2015 and 2014. Gross NPA Opening and closing is increase, Addition and Net
Addition NPA is decreased in respectively.

Page 44
Table 4.7:

The Table shows the Details of NPA ratios of 31.03.2011 to 15.

Year Gross NPA in advances (%) Net NPA in advances (%)

2011 3.97 1.62

2012 3.27 2.11

2013 3.51 1.51

2014 2.92 1.91

2015 2.95 1.98

Analysis:

From the about table of NPA ratios in Gross NPA advances 2011,2012,2013,2014 and
201533.97, 3.27, 3.51, 2.92and 2.95, Net NPA to net advances1, 62, 2.11, 1.51, 1.91 and
1.98,2011 2012, 2013, 2014 and 2015

Page 45
Figure 4.7:

The chart shows the Details of NPA ratios of 31.03.2014 to 15:

4.5
3.97
4
3.51
3.5 3.27
2.92 2.95
3

2.5
2.11 % of gross npa advances
1.91 1.98
2 % of Net npa advances
1.62
1.51
1.5

0.5

0
2011 2012 2013 2014 2015

Interpretation:

From the above table fig 4.3 we can clearly understand that the NON-PERFORMING ASSETS
for the ratio in 2011-15 increased and decreased of this year Gross NPA to gross advances. And
NET NPA to net advances increased and decreased of this years 2011-15

Page 46
Table 4.8:

The table shows information regarding loan Interest rate for the period 2015

SL NO Particulars Base rate Spread Effective rate

1. Gold loan 20.50 00.00 27.50

2. Home loan 20.50 2.25 22.75

3. Car finance Loan 20.50 4.50 25

4. Mortgage loan 10.25 3.00 13.25

5. New udyog Mitra Loan 41 7.75 48.75

6. New vahan Mitra Loan 41 7.75 48.75

Total 153.5 25.25 186

ANALYSIS:

From the about table regarding loan Interest rate Base rate, Spread and Effective rate gold loan
20.50&27.50, home loan 20.50, 2.25 &22.75, Car finance loan 20.50,4.50&25, Mortgage loan
10.25, 3.00&13.25, New udyog Mitra loan 41,7.75&48.75, New vahan Mitra loan 41,
7.71&48.75.

Page 47
Figure 4.8:

The chart shows information regarding loan Interest rate for the period 2015

48.75 48.75
50

45
41 41
40

35

30 27.5
25 Base rate
25 22.75
20.5 20.5 20.5 Spread
20 Effective rate

15 13.25
10.25
10 7.75 7.75
4.5
5 2.25 3
0
0
Gold loanHome loan
Car financeMortgage
Loan Newloan
udyog
New
Mitra
vahan
LoanMitra Loan

Interpretation:

From the above figure 4.8 Loan is increased 2015 all the loan is improved in the new Mitra loans

Gold, home, finance, Mortgage loans in improved.

Page 48
Table 4.9:

The table shows details of NPA ratios as on date in 30-3-2011to 15.

SL 30-3-2011 30-3-2012 30-3-2013 30-3-2014 30-3-2015

NO Particulars

1,
Gross NPA 70217 68472 63886 83593 94421

2, Net NPA 28034 43520 37775 53804 62355

3, % of Gross NPA 3.97 3.27 2.51 2.92 2.95

4, % of Net NPA 1.62 2.11 1.51 1.91 1.98

5, Return on assets 0.67 0.73 0.89 0.71 0.91

ANALYSIS:

From the about table of NPA ratios2011, 2012-13 Gross NPA 70217, 68472 &63886, Net NPA
28034,43520 &37775, % of gross NPA 3.97,3.27 &2.51, % of Net NPA1.62 , 2.11 &1.51, and
2014-15 gross NPA 83593 &94421, Net NPA 53804&62355, % of Gross NPA 2.92&2.95, %of
Net NPA 1.91&1.98.

Page 49
Figure 4.9:

The figure shows details of NPA ratios as on date in 30-9-2014to 15.

100000
90000
80000
70000
60000
50000
40000
30000
20000
10000
0
2011 2012 2013 2014 2015
Gross npa 70217 68472 63886 83593 94421
Net npa 28034 43520 37775 53804 62355
% of gross npa 3.97 3.27 2.51 2.92 2.95
% of net npa 1.62 2.11 1.51 1.91 1.98
Return on asstes 0.67 0.73 0.89 0.71 0.91

Interpretation:

From the above chart 4.9 we can clearly understand the NON-PERFORMING ASSETS for the
Gross NPA amount and Net NPA amount and% of Gross NPA And % of Net NPA increased and
decreased, Return on assets is increased of this. Development of the bank.

Page 50
Table 4.10:

The table shows the details regarding NPAs in 2013 to 2015

SL NO Particulars 2013 2014 2015

1. Additions NPA 684.72 638.86 929.83

2. Gross NPA 413.45 653.88 835.94

3. Up-gradations NPA 75.52 192.99 282.63

4. Recoveries NPA 191.40 117.54 320.07

5. Technical NPA 90.66 134.86 53.47

6. Write offs other than those under 101.73 11.42 165.39

Total 1557.48 1749.55 2587.33

ANALYSIS:

From the about table 2013-15 in Additions 684.72, 638.86, &929.83,Gross NPA 413.45,
653.88&835.94.Up-gradations 75.52,192.99 &282.63, Recoveries 191.40, 117.54&320.07.
Technical 90.66, 134.86&53.47. Write offs other than those under 101.73, 11.42&165.39.

Page 51
Figure 4.10:

The chart shows the details regarding NPAs in 2013 to 2015

1000 929.83
900 835.94
800
684.72
700 638.86 653.88

600
500 413.45
400 320.07
282.63
300 2013
192.99 191.4 165.39
200 134.86
117.54 90.66 2014
75.52 101.73
100 53.47 2015
11.42
0

Interpretation:

From the about chart 4.10 is NPA bank recovering the banking NPA is increased of the year by
years of the all NPA increased in profitability of the bank.

Page 52
The following ratios are found out for ratio analysis as well as comparative statement
analysis:-

GROSS NPA RATIO.

NET NPA RATIO.
PROBLEM ASSET RATIO.
DEPOSITORS SAFETY RATIO.
SHAREHOLDERS RISK RATIO.
PROVISIONS RATIO.
INTEREST SPREAD RATIO.
CAPITAL ADEQUACY RATIO.
DOUBTFUL ASSETS.

Page 53
 GROSS NPA RATIO:-

Gross NPA is sum of all the loan assets that are classified as NPA as per the RBI guiding
principle as on the balance sheet. Gross NPA is the Ratio of gross NPA to gross advantages of
the bank. When it is to be expressed in %, it is known as Gross NPA percentage.

GROSS NPA RATIO=

Table 4.11:

The table shows the Gross NPA ratio for the period 31.03.2011-31.03.2015:

Particulars 2011 2012 2013 2014 2015

Gross NPA (%) 3.97 3.27 2.51 2.92 2.95

Analysis:

From the above table it is rich that the Gross NPA for year 2011 is Rs 3.97%, 2012 and 2013
is3.27% and 2.51% as against 2.92% and 2.95% in the year 2014 and 2015 respectively.

Page 54
Figure 4.11:

The chart shows the Gross NPA ratio for the period 31.03.2011-31.03.2015:

3.97
4

3.5 3.27

2.92 2.95
3

2.51
2.5

Gross NPA (%)

2

1.5

0.5

0
2011 2012 2013 2014 2015

Interpretation:

From the above chart 4.11 specifies the quality of credit portfolio of the bank. High Gross NPA
ratio designates low quality credit portfolio of the bank and vice-versa. It indicates the quality of
credit portfolio is lower in this period.

Page 55
 NET NPA RATIO:

The net NPA measurement is the ratio of NPA to the net advances, whereas the net NPA can be
simply worked out as the gross NPA minus provision held for NPA account, and net advances
can be basically worked out as the gross advances minus provision held for the NPA account.

NET NPA RATIO =

Table 4.12:

The table shows the Net NPA ratio for the period 31.03.2011-31.03.2015:

2011 2012 2013 2014 2015

Particulars
Net NPA Ratio (%) 1.62 2.11 1.51 1.91 1.98

Analysis:

From the above table it is clear that the net NPA for the year2011 Rs 1.62%,2012 and2013 was
2.11% and 1.51% as against 1.91 and 1.98% in the year 2014 and 2015 respectively.

Page 56
Figure 4.12:

The chart shows the Net NPA ratio for the period 31.03.2011-31.03.2015:

2.5

2.11
1.98
2 1.91

1.62
1.51
1.5 Net NPA Ratio (%)

0.5

0
2011 2012 2013 2014 2015

Interpretation:

From the Above figure 4.12 signposts the degree of risk in the portfolio of the bank. High NPA
ratio signposts high quantity of the hazardous assets in the bank for which no provision was
made.

Page 57
 PROBLEM ASSET RATIO:

It is the Ratio of gross NPAs to total assets of the bank.

PROBLEM ASSEST RATIO =

Table 4.13:

The table shows the Problem Asset Ratio for the period 31.03.2011-31.03.2015:

Particulars 2011 2012 2013 2014 2015

Gross NPA (Rs in Lakhs) 70217 68472 63886 83593 94421

Net NPA (RS in Lakhs) 28034 43520 37775 53804 62355

Problem Asset Ratio (%) 2.21 1.88 1.54 1.78 1.82

Analysis:

From the above table it is clear that the problem asset Ratio for the year2011 is Rs2.21%, 2012
and 2013 was 1.88% and 1.54% as against 1.78% and 1.82% in the year 2014 and 2015
respectively.

Page 58
Figure 4.13:

The chart shows the Problem Asset Ratio for the period 31.03.2011-31.03.2015:

Problem Asset Ratio (%)

1.82 2.21
2011
1.78
1.88 2012
1.54
2013
2014
2015

Interpretation:

From the about chart 4.13it has been direct behavior on return of assets as well as liquidity risk
management of the bank. High problematic asset ratio means high liquid.

Page 59
 DEPOSITORS SAFETY RATIO:

It is also known as standard assets to total outside liability ratio. Here standard assets mean total
standard loans and investments. Outside liquidities are total liquidities minus capital and
reserves.

DEPOSITORS SAFETY RATIO=

DEPOSITORS SAFETY RATIO =

Table 4.14:

The table shows the Depositors Safety Ratio for the period 31.03.2011-31.03.2015:

Particulars 2011 2012 2013 2014 2015

Total assets (Rs in lakhs) 3169300 3632157 4152638 4702880 5183660

Investment (Rs in lakhs) 1150633 1284123 1343248 1522678 1598806

Total liabilities (Rs in lakhs) 3169300 3632157 4152638 4702880 5183660

Capital & reserves (Rs in lakhs) 242908 259821 285708 305220 338906

Depositors safety ratio (%) 147.62 145.78 142.12 141.56 139.10

Analysis

From the above table it is clear that the depositors safety Ratio for the year2011 is 147.62%,
2012 and 2013 was 145.78% and 142.12% as against 141.56% and 139.10% in the year 2014
and 2015 respectively.

Page 60
Figure 4.14:

The chart shows the Depositors Safety Ratio for the period 31.03.2011-31.03.2015:

2015
139.1

2014
141.56

2013
142.12

Depositors safety ratio

2012 (%)
145.78

2011
147.62

134 136 138 140 142 144 146 148 150

Interpretation:

From the about chart 4.14it indicates the degree of safety of depositors money. The figure
indicates the depositors safety ratio is increasing year by year. This increases the confidence of
customers.

Page 61
 SHARE HOLDERS RISK RATIO:-

It is the Ratio of NET NPA to total of capital and standby of the bank.

SHARE HOLDERS RISK RATIO=

Table 4.15:

The table shows the Shareholders Risk Ratio for the period 31.03.2011-31.03.2015:

Particulars 2011 2012 2013 2014 2015

SL NO
Net NPA (Rs in Lakhs) 28034 43520 37775 53804 62355
1,
Total Capital & Surplus (Rs in 242908 259821 285708 305220 338906
2, Lakhs)
Shareholder's Risk Ratio (%) 11.54 16.75 13.22 17.63 18.40
3,

Analysis:

From the above table it is clear that the shareholders risk ratio for the year 2011 is Rs 11.54%,
2012and 2013 was 16.75% and 13.22% as against 17.63% and 18.40% in the year 2014 and
2015 respectively.

Page 62
Figure 4.15:

The chart shows the Depositors Safety Ratio for the period 31.03.2011-31.03.2015:

20

18.4
18
17.63
16.75
16

14
13.22
12 Shareholder's Risk
11.54 Ratio (%)
10

0
2011 2012 2013 2014 2015

Interpretation:

From the above figure 4.15 indicates the degree of risk connected with the bondholders
investment. High ratio means high hazard to the shareholder. The banks ratio is moderate but
increasing which may lead to divert their funds to other bank which has lower risk. Bank should
keep constant eye on the ratio to maintain and attract the funds of the shareholders.

Page 63
 PROVISION RATIO:-

It is the Ratio of total provision held in respect to gross NPA of the bank.

(Total Provision = Gross NPA Net NPA)

PROVISION RATIO=

Table 4.16:

The table shows the Provision Ratio for the period 31.03.2011-31.03.2015

2011 2012
Particles 2013 2014 2015
Gross NPA (Rs in Lakhs) (a)
70217
63886 83593 94421
68472
Net NPA (Rs in Lakhs) (b)
28034 43520 37775 53804 62355
(a-b) (Rs in Lakhs)
42183 24952 26111 29789 32066

Provision ratio (%)

60.07 36.44
40.87 35.63 33.96

Analysis:

From the above table it is clear that the provision ratio for the year 2011 was Rs 60.07% 2012
and 2013 was 33.44% and 40.87% as against 35.63% and 33.96% in the year 2014 and 2015
respectively.

Page 64
Figure 4.16:

The chart shows the Depositors Safety Ratio for the period 31.03.2011-31.03.2015:

70

60.07
60

50
40.87
40 36.44 35.63 Provision ratio (%)
33.96

30

20

10

0
2011 2012 2013 2014 2015

Interpretation:

From the above chart 4.16 indicates the degree of security measures implemented by the bank. It
has direct bearing on profitability, surplus and safety of the shareholders fund. If the delivery
Ratio is less, it indicates that the bank has made under providing.

Page 65
 INTEREST SPREAD RATIO

This is the surplus of total interest expanded by the interest spread ratio.

( )
INTEREST SPREAD RATIO=

Table 4.17:

The table shows the Interest Spread Ratio for the period 31.03.2011-31.03.2015:

Particulars 2011 2012 2013 2014 2015

Interest received (Rs in lakhs) 237.084 310.099 376.429 418.883 469.842

Interest Paid (Rs in lakhs) 175.836 236.887 286.056 313.276 352.957

Standard Assets (Rs in lakhs) 3169.300 3632.157 4152.638 4702.880 5183.660

Interest Spread ratio (%) 1.93 2.01 2.18 2.24 2.25

Analysis:

From the above table it is clear that the interest spread ratio for the year 2011 is Rs 1.93%,
2012and 2013 was 2.01% and 2, 18% as against 2.24% and 2.25% in the year 2014 and 2015
respectively.

Page 66
Figure 4.17:

The chart shows the Depositors Safety Ratio for the period 31.03.2011-31.03.2015:

2.3
2.24 2.25

2.2 2.18

2.1

2.01
2 Interest Spread ratio (%)
1.93

1.9

1.8

1.7
2011 2012 2013 2014 2015

Interpretation:

From the about chart 4.17 this ratio indicates the efficiency of the bank in managing and
marching the interest disbursement and interest income efficiently. Interest spread is dangerous
to bank success as it exerts a strong influence on its bottom line .that its interest spread ratio is
increasing and non performing accounting is rapidly converting in the performing account.

Page 67
 CAPITAL ADEQUACY RATIO:-

Capital Adequacy Ratio can be defined as Ratio of the capital of the Bank, to its assets, which
are weighted /adjusted according to risk devoted to them.

CAPITAL ADEQUACY RATIO = 18842 92165

Table 4.18:

The table shows the Capital Adequacy Ratio for the period 31.03.2011-31.03.2015:

Particulars 2011 2012 2013 2014 2015

Capital Adequacy ratio 26.62 25.38 24.60 20.44 14.92

Analysis:

From the above table it is clear that the bank adequacy ratio for the year2011 is Rs 26.24%, 2012
and 2013 was 24.79% and 25.17% as against 26.50% and 25.08% in the year 2014 and 2015
respectively.

Page 68
Figure 4.18:

The chart shows the Capital Adequacy Ratio for the period 31.03.2011-31.03.2015:

Capital Adequacy ratio

30
26.62
25.38
24.6
25
20.44
20

14.92
15 Capital Adequacy ratio

10

0
2011 2012 2013 2014 2015

Interpretation:

The figure 4.18 shows the capital adequacy ratio of the bank. The Bank needs to create the
capital Reserve to recompense the Non-Performing Assets.

Page 69
 DOUBTFUL ASSET RATIO:

It is the Ratio of total doubtful assets to gross NPA of the bank.

DOUBTFUL ASSETS RATIO =

Table 4.19:

The table shows the Doubtful Asset Ratio for the period 31.03.2011-31.03.2015.

2011 2012 2013 2014 2015

Particles
15114 15637 28579 38325 48071
Total Doubtful Assets (Rs in lakhs)
70217 68472 63886 83593 94421
Gross NPA (Rs in lakhs)
Doubtful assets in ratio 21.52 22.84 44.73 45.85 50.91

Analysis:

From the above table it is clear that the doubtful assets ratio for the year2011 is Rs21.52%, 2012
and 2013 was 22.84% and 44.73% as against 45.85% and 50.91% in the year 2014 and 2015
respectively.

Page 70
Figure 4.19:

The chart shows the Doubtful Asset Ratio for the period 31.03.2011-31.03.2015:

60

50.91
50 45.85
44.73

40

Doubtful assets in ratio

30
21.52 22.84

20

10

0
2011 2012 2013 2014 2015

Interpretation:

From the above chart 4.19 indicates the doubtful asset ratio. It specifies the scope of concession
of up NPAs lessening. The bank ratio is considerably decreasing for the last three years, which
implies that it has to go compromise.

Page 71
 Chapter-5
Summary of
findings,
suggestions and
conclusion
5.1 FINDINGS:

The total loan was increased consecutively in the year which is a good sign for a bank.
NPA with regards to Exposures in 2014-15. In Sector Agriculture & allied activities has
also increased.
NPA Composition in Percentage in the year 2014 and 2015 Percentage and amount year
by year increased but loss assets are decreased, it will become dangerous in the banking.
The comparison between Provisions and NPA loans three years is moderate but
increasing, so the bank should divert their funds to other bank.
NPA movement is very good of the bank year to year increased.
NPA ratio gross NPA to Gross advance And Net NPA to net advance increased to year
by year
Loans regarding loan Interest rate for the period 2015 gold loan have increased year by
year and non performing accounting is rapidly converting in the performing account.
NPA ratios as on date in 30-3-2011 to 2015 increasing year to year.
NPAs in 2013 to 2015 in the last three years is moderate but increasing, so the bank
should divert their funds to other bank.
From the gross NPA Ratio of the bank in 2011 year 2011 is 3.97% which suddenly
decreases in 2012 i.e3.27% by 0.7% which suddenly decreased in 2013i.e 2.51%by0.71%
it is good for the bank but it increases in 2014i.e 2.92% by0.41 %, it is good for the bank
but it increased in 2015i.e2.95%by 0.03% it is beneficiary for the bank.
The Net NPA of the bank is higher compared to the previous years. It shows that the bank
consists of risky assets. It will become dangerous in the long term solvency of the bank.
Problem assets ratio of the bank is total asset in the bank gross NPA is compared to the
previous year it shoes that the bank consists of problem, it will become dangerous in the
banking.
Depositors safety ratio higher as compared to previous year. This helps to win the
confidence of depositors safety of banking.
The shareholders risk in the last five years is moderate but increasing, so the bank should
divert their funds to other bank.
Provision ratio find that total provision divided by gross NPA of the bank in 2011 is
139.92% and it is increasing in 2012 i.e. 163.56% by 23.64% and it also decreases in

Page 72
 2013 i.e. 159.13% by 4.43% and it also increased in 2014i.e 164.36% by 5.23%. And it
also increased in 2015 i.e. 166.04% by 2.68% so the firm keeps higher safety.
Interest spread ratio is increasing year by year and non performing accounting is rapidly
converting in the performing account.
The capital adequacy ratio of the bank is increased and decreasing year by year. Bank
needs to create the funds Reserve to recompense the Non-Performing Assets.
Doubtful assets Ratio is continuously increasing year by year.

Page 73
5.2 SUGGESTIONS:

Identify reasons for turning each account of a bank into NPA is the most important factor
for upgrading the asset quality, as that would help initiate suitable steps to upgrade the
accounts.
The bank must focus on recovery from those borrowers who have the capacity to repay
but are not repaying initiation of coercive action a few such borrowers may help.
The recovery machinery of the bank has to be streamlined; targets should be fixed for
field officers/supervisors not only for recovery in general but also in terms of upgrading
number of existing NPAs.
In the bank there should be a proper manpower planning with respect to recovery
department .
Bank should try to establish the branches in competitive market, so it will increase their
profit.
Now a days more competition increase in the market so bank should give more facility
to its customer like ATM facilities by which it can attract more and more customers.
Bank should prevent diversion of funds by the promoters.
Projects with old technology should not be considered for finance.
More focus has to be emphasized on service execution level.

Page 74
5.3 CONCLUSION:

From the study I can conclude that service in the banking sector play a vital role in the success of
an organization, I have made an analysis to study the Non-performing assets of Karnataka bank
with respect to Mangalore

Growing NPAs is one of the biggest problems in Indian banks they are facing today. If proper
management of the NPAs is not undertaken it would hamper the efficiency of the banks. If the
concept of NPAs is taken very lightly it would be dangerous for the banking sector.

The concepts of NPAs destroy the current profit and interest income of the bank and affect the
smooth functioning of the recycling of the funds. Banks also redistribute losses to other
borrowers by charging higher interest rates. Lower deposit rates and higher lending rates repress
savings and financial markets, which in turn hampers the economic growth of the country. Thus,
Karnataka bank has to concentrate more on the non-performing assets and take certain remedial
measure to overcome the same.

Page 75
BIBLIOGRAPHY
JOURNALS:

B selvarajan and Dr G Vadivalagam - A Study on Management of Non- Performing

Assets in Priority Sector reference to Indian Bank and Public Sector Banks (PSBs)
(2013)
Dr. Sonia Narula Monika Singla- Empirical Study on Non -Performing Assets of
Bank (Volume 2, Issue 1, January 2014 pg)
Dr.D.Ganesan R.Santhanakrishnan- NON-PERFORMING ASSETS: A STUDY OF
STATE BANK OF INDIA (October 2013, Volume: I, Issue: X)
Kumar NPA MANAGEMENT AND CORPORATE DEBT RESTRUCTURING
(October 2011, Volume: I, Issue: X)
Mayur Raoa and Ankita Patelb- A STUDY ON NON PERFORMING ASSETS
MANAGEMENT WITH REFERENCE TO PUBLIC SECTOR BANKS, PRIVATE
SECTOR BANKS AND FOREIGN BANKS IN INDIA (Vol.5. No.1 | March2015)
Meenakshi Rajeev H P Mahesh - Banking Sector Reforms and NPA: A study of
Indian Commercial Banks (2010, Copyright Reserved The Institute for Social and
Economic Change, Bangalore)
Ms.S.Sangeetha Ms.R.Divya- Consortium loans and its effect on NPA with special
reference to King Fisher Airlines(February 2015 - Vol 5 Issue 2)
NAMITA RAJPUT; MONIKA GUPTA; MR. AJAY KUMAR CHAUHAN -
PROFITABILITY AND CREDIT CULTURE OF NPAS: AN EMPIRICAL
ANALYSIS OF PSBs (Vol.1 Issue 9, September 2012)
Poongavanam.S -Non -performing assets: Issues, Causes and remedial
Solution(Copyright 2010 All rights reserved Integrated Publishing association)
Samir and Deepa Kamra - A Comparative Analysis of Non- Performing Assets
(NPAs) of Selected Commercial Banks in India (Opinion Vol. 3, No. 1, June 2013)
Srinivas K T- A STUDY ON NON- PERFORMING ASSETS OF COMMERCIAL
BANKS IN INDIA ( Volume II, December13)
Sulagna Das, AbhijitDutta- A Study on NPA of Public Sector Banks in India
(Volume 16, Issue 11.Ver. I (Nov. 2014), PP 75-83)
WEBSITES:

https://www.google.co.in/webhp?sourceid=chrome-instant&ion=1&espv=2&ie=UTF-
8#q=karnataka+bank

http://www.indianresearchjournals.com

https://www.google.co.in/webhp?sourceid=chrome-instant&ion=1&espv=2&ie=UTF-
8#q=npa+information

BOOKS

BOOKS REFFERED AUTHORS PUBLISHERS

Management of NPAs and Global research

Indian banking sector Dr Durga modhab publications

Financial management Khan and Jain Vikas Publication

Management of non- Gopalakrishnan Macmillan publications

performing asstes
ANNEXURES
BALANCE SHEET OF THE KARNATAKA BANK FOR THE YEAR 2013

Particulars 31-3-2013
CAPITAL AND LIABILITIES
Capital 18835
Reserves and surplus 266873
Deposits 3605622
Borrowings 157976
Other liabilities and provision 103332
TOTAL 4152638

ASSETS
Cash and balances with reserve bank of India 171796
Balances with banks and Money at call &short notice 23584
Investment 1343248
Advances 2520768
Fixed asstes 16696
Other asstes 76546
TOTAL 4152638
BALANCE SHEET OF THE KARNATAKA BANK FOR THE YEAR 2011 AND 2012

Particulars 31-3-2011 31-3-2012

CAPITAL AND LIBILITIES

Capital 18820 18829

Reserves and surplus 224088 240992

Deposits 2733645 3160833

Borrowings 108633 114707

other liabilities 84114 96796

TOTAL 3169300 3632157

ASSTES

Cash and balances with reserve bank of India 193980 170475

Balances with banks and money at call & short
notice 4625 16082

Investments 1150634 1284123

Advances 1734807 2072070

Fixed assets 14553 15223

Other asstes 70701 74184

TOTAL 3169300 3632157