This action might not be possible to undo. Are you sure you want to continue?
CHAPTER: 1 EXECUTIVE SUMMARY
B.M. Collage of Business Administration
Non Performing Assets Executive Summary
A project has been prepared under the title of ‘Non Performing Assets in Surat’. First of all the information regarding the banking industry is given. In that various facts regarding the bank industry is being provided. Also the various types of non performing assets. The brief introduction of non performing assets is given. In this the definition, various benefits, objective, limitation etc. are mentioned. Then a analysis of data is made. Then the objective of doing the project is mentioned. After that analysis comes. At the last me find Conclusion & Suggestion. Then comes “facts and finding” part. In this part first of all the details about the non performing assets by me is given. Then a comparison is made among the three companies selected by me on various parameters.
B.M. Collage of Business Administration
Non Performing Assets
CHAPTER: 2 RESEARCH METHODOLOGY
B.M. Collage of Business Administration
Non Performing Assets
Research is a one kind of process to get knowledge about some topic. Research is done so that systematic analysis can be done and problem can also be solved. TITLE OF STUDY Here it is “NON-PERFORMING ASSETS” BENEFITS FROM THE STUDY ©. It helps me to know more about NPA and the situation of NPA in bank. ©. It helps me to know the strategies adopted by banks to reduce the NPA level and to understand the NPA provisions norms in bank. RESEARCH PROBLEM NPA always affect the profit of bank and also the prestige of bank. So here the research problem is to identify the causes for the NPA and to identify the action plan to reduce the NPA. RESEARCH DESIGN Here the research design is exploratory which helps me to explore the NPA problem of bank.
RESEARCH INSTRUMENT As a research instrument I have taken guidance from the CEO of City bank and also my faculty of college. DATA COLLECTION Primary Data B.M. Collage of Business Administration Page 4
Sources of secondary data 1. Websites 4.M. Journals 3. Books ANALYSIS AND REPORT WRITING Here I have done ratio analysis and used various charts for analysis purpose. Collage of Business Administration Page 5 .Non Performing Assets Secondary Data Hence it is an exploratory research their is not any dependence on primary data. B. Annual report 2. And also I have written report on it.
Non Performing Assets CHAPTER: 3 OBJECTIVE OF PROJECT B.M. Collage of Business Administration Page 6 .
To understand the effect of NPA on banks profit and its prestige ©. To understand how corrective measures taken by bank for NPA ©.Non Performing Assets Some objectives for the selection of this project are as follows ©. To understand the credit appraisal policy and NPA recovery policy of bank B. To study and understand the concept of NPA ©.M. Collage of Business Administration Page 7 . To analyze the banks policy to recover the level of NPA ©. To understand RBI’S rules and regulations for the control of NPA ©.
Collage of Business Administration Page 8 .M.Non Performing Assets CHAPTER: 4 LIMITATION B.
Non Performing Assets LIMITATION OF PROJECT Some times bank officer was hesitant to give all data on NPA. Collage of Business Administration Page 9 . B.M. I have selected only one bank for NPA which is very small sample size. I face difficulty in doing proper analysis as I don’t have prior experience for making project report.
Non Performing Assets CHAPTER: 5 INTRODUCTION OF BANKING INDUSTRY B.M. Collage of Business Administration Page 10 .
The term banking is defined as “Accepting for the purpose of leading or investment. honors instruments drawn on them. chartered by a state or federal government. and pays interest on them. and invests in securities. repayable on demand or otherwise and withdrawal by cheque. collects checks. certifies depositor's checks.Non Performing Assets DEFINITION OF BANK “An organization.” B. and issues drafts and cashier's checks.” DEFINITION OF BANKING In general terms. and then lending out this money in order to earn a profit” So we can say that Banking is a company. drafts. which transacts the business of banking. deposits of money from the public. draft. order or otherwise. The Banking Regulations Acts defines the business as banking by stating the essential function of a banker. “The business activity of accepting and safeguarding money owned by other individuals and entities. usually a corporation. makes loans.M. and notes. discounts notes. Collage of Business Administration Page 11 . which does most or all of the following: receives demand deposits and time deposits.
an account holder had to wait for hours at the bank counters for getting a draft or for withdrawing his own money. though conservative. Money has become the order of the day. This is one of the main reasons of India's growth process.M. It is no longer confined to only metropolitans or cosmopolitans in India. From 1786 till today. Now it is simple as instant messaging or dials a pizza.Nationalization of Indian Banks and up to 1991 prior to Indian banking sector Reforms B. In fact. Collage of Business Administration Page 12 .Non Performing Assets HISTORY OF BANKING IN INDIA Without a sound and effective banking system in India it cannot have a healthy economy. Early phase from 1786 to 1969 of Indian Banks ©. he has a choice. The government's regular policy for Indian bank since 1969 has paid rich dividends with the nationalization of 14 major private banks of India. the journey of Indian Banking System can be segregated into three distinct phases. The banking system of India should not only be hassle free but it should be able to meet new challenges posed by the technology and any other external and internal factors. Today. Indian banking system has reached even to the remote corners of the country. Gone are days when the most efficient bank transferred money from one branch to other in two days. For the past three decades India's banking system has several outstanding achievements to its credit. Not long ago. The first bank in India. They are as mentioned below: ©. was established in 1786. The most striking is its extensive reach.
In 1955. was set up in 1894 with headquarters at Lahore. New phase of Indian Banking System with the advent of Indian Financial & Banking Sector Reforms after 1991To make this write-up more explanatory. Punjab National Bank Ltd. During the first phase the growth was very slow and banks also experienced periodic failures between 1913 and 1948. Reserve Bank of India came in 1935. it nationalized Imperial Bank of India with extensive banking facilities on a large scale especially in rural and semi-urban B. Between 1906 and 1913. Indian Bank. These three banks were amalgamated in 1920 and Imperial Bank of India was established which started as private shareholders banks. To streamline the functioning and activities of commercial banks. Bank of Bombay (1840) and Bank of Madras (1843) as independent units and called it Presidency Banks.M. PHASE II Government took major steps in this Indian Banking Sector Reform after independence. we divide scenario in Phase I. Collage of Business Administration Page 13 . Next were Bank of Hindustan and Bengal Bank. Bank of Baroda. Bank of India. the Government of India came up with The Banking Companies Act. Phase II and Phase III PHASE I The General Bank of India was set up in the year 1786. There were approximately 1100 banks. Canara Bank. In 1865 Allahabad Bank was established and first time exclusively by Indians. Reserve Bank of India was vested with extensive powers for the supervision of banking in India as the Central Banking Authority. The East India Company established Bank of Bengal (1809).Non Performing Assets ©. 1949 which was later changed to Banking Regulation Act 1949 as per amending Act of 1965 (Act No. mostly Europeans shareholders. and Bank of Mysore were set up. 23 of 1965). Central Bank of India. mostly small.
M. 1971: Creation of credit guarantee corporation. ©. major process of nationalization was carried out. 1955: Nationalization of State Bank of India. The following are the steps taken by the Government of India to Regulate Banking Institutions in the Country: ©. ©. Seven banks forming subsidiary of State Bank of India was nationalized in 1960 on 19th July. 1975: Creation of regional rural banks. 1969. 1961: Insurance cover extended to deposits. 14 major commercial banks in the country were nationalized. ©.Non Performing Assets areas. This step brought 80% of the banking segment in India under Government ownership. 1969: Nationalization of 14 major banks. It formed State Bank of India to act as the principal agent of RBI and to handle banking transactions of the Union and State Governments all over the country. Collage of Business Administration Page 14 . Banking in the sunshine of Government ownership gave the public implicit faith and immense confidence about the sustainability of these institutions. ©. 1959: Nationalization of SBI subsidiaries. Mrs. ©. It was the effort of the then City Minister of India. Indira Gandhi. ©. 1980: Nationalization of seven banks with deposits over 200 crore. PHASE III B. Second phase of nationalization Indian Banking Sector Reform was carried out in 1980 with seven more banks. 1949: Enactment of Banking Regulation Act. ©.
It is sheltered from any crisis triggered by any external macroeconomics shock as other East Asian Countries suffered. Time is given more importance than money.Non Performing Assets This phase has introduced many more products and facilities in the banking sector in its reforms measure.M. Collage of Business Administration Page 15 . under the chairmanship of M Narasimham. and banks and their customers have limited foreign exchange exposure. Efforts are being put to give a satisfactory service to customers. 100 each fully paid which was entirely owned by private shareholders in the beginning. 2. and four nominated Directors by the Central Government B. The country is flooded with foreign banks and their ATM stations. The Government held shares of nominal value of Rs. The general superintendence and direction of the Bank is entrusted to Central Board of Directors of 20 members. the Governor and four Deputy Governors. This is all due to a flexible exchange rate regime.000 Reserve Bank of India was nationalized in the year 1949. It was established in April 1935 with a share capital of Rs. one Government official from the Ministry of Finance. ten nominated Directors by the Government to give representation to important elements in the economic life of the country. the capital account is not yet fully convertible. a committee was set up by his name which worked for the liberalization of banking practices. The share capital was divided into shares of Rs. 5 crores on the basis of the recommendations of the Hilton Young Commission. The entire system became more convenient and swift. Phone banking and net banking is introduced. RESERVE BANK OF INDIA (RBI) The central bank of the country is the Reserve Bank of India (RBI). In 1991. The financial system of India has shown a great deal of resilience. 20. the foreign reserves are high.
1935. Local Boards consist of five members each Central Government appointed for a term of four years to represent territorial and economic interests and the interests of co-operative and indigenous banks. To B.M. The Reserve Bank of India Act. Chennai and New Delhi. The Act. Collage of Business Administration Page 16 . The Bank was constituted for the need of following: regulate the issue of banknotes to maintain reserves with a view to securing monetary stability and ©. 1934 (II of 1934) provides the statutory basis of the functioning of the Bank. 1934 was commenced on April 1. Kolkata.Non Performing Assets to represent the four local Boards with the headquarters at Mumbai. To operate the credit and currency system of the country to its advantage ©.
The RBI has also been granting licenses to industrial houses. Collage of Business Administration Page 17 . Shares of the leading PSBs are already listed on the stock exchanges. The RBI has given licenses to new private sector banks as part of the liberalization process. retail trade.Non Performing Assets ORGANISATION STRUCTURE OF RBI THE BANKING SYSTEM Almost 80% of the business is still controlled by Public Sector Banks (PSBs). The PSBs will play an important role in the industry due to its number of branches and foreign banks facing the constraint of limited number of branches. Many banks are successfully running in the retail and consumer segments but are yet to deliver services to industrial finance. Hence.M. BANKING SECTORS IN INDIA BANKS Public Sector bank Private sector bank Co-operative bank Regional Rural bank Foreign bank B. small business and agricultural finance. PSBs are still dominating the commercial banking system. in order to achieve an efficient banking system. the onus is on the Government to encourage the PSBs to be run on professional lines.
and their business in the urban areas also has increased phenomenally in recent years mainly due to the sharp increase in the number of primary co-operative banks. but the importance that such banks have assumed in India is rarely paralleled anywhere else in the world. Though registered under the Co- operative Societies Act of the Respective States (where formed originally) the banking related activities of the co-operative banks are also regulated by the Reserve Bank of India. The Cooperative banks are an important constituent of the Indian Financial System. Their role in rural financing continues to be important even today. judging by the role assigned to them. According to NAFCUB the total deposits & landings of Co-operative Banks is much more than Old Private Sector Banks & also the New Private Sector Banks. 1965. and their ability to catch the nerve of the local clientele. They are governed by the Banking Regulations Act 1949 and Banking Laws (Co-operative Societies) Act. The co-operative movement originated in the West. the expectations they are supposed to fulfill.Non Performing Assets CO-OPERATIVE BANKS The Co-operative banks have a history of almost 100 years. Some of the co-operative banks are quite forward looking and have developed sufficient core competencies to challenge state and private sector banks. This exponential growth of Co-operative Banks is attributed mainly to their much better local reach. B. personal interaction with customers. and the number of offices they operate.M. their number. Collage of Business Administration Page 18 .
©. Small scale units ©. Personal finance FACTS ABOUT CO-OPERATIVE BANK ©. Hatchery ©. Cattle ©. Industries ©. According to NAFCUB the total deposits & landings of Cooperative Banks in India is much more than Old Private Sector Banks & also the New Private Sector Banks.M. Personal finance CO-OPERATIVE BANKS FINANCE URBEN AREA AS UNDER ©. Some cooperative banks in India are more forward than many of the state and private sector banks. Farming ©. B. Consumer finance ©.Non Performing Assets CO-OPERATIVE BANKS FINANCE RURAL AREA AS UNDER ©. Self-employment ©. Collage of Business Administration Page 19 . Milk ©. Home finance ©.
Collage of Business Administration Page 20 . and their ability to catch the nerve of the local client.M.Non Performing Assets ©. personal interaction with customers. B. This exponential growth of Co operative Banks in India is attributed mainly to their much better local reach.
Collage of Business Administration Page 21 . BANK LTD B.M.Non Performing Assets CHAPTER: 6 INTRODUCTION OF CITY CO-OP.
Non Performing Assets CITY BANK INTRODUCTION OF BANK B. Collage of Business Administration Page 22 .M.
The bank is governed by the Gujarat co-operative societies act. CITY BANK decided to hold timings as per convenience of the cluster of clients whom it caters. Holiday banking and many more allied methodologies from the very beginning right from the D-day. The bank have follows continues “A” Grade Audit systems and it is the Grade “A” bank till now. he is the Founder Chair person of the bank and continues to supervise its growth and development.M. The bank started as a paperless unit employing Tele-banking. They work on Sundays w/o any alternative drop during the week. In the line with the same philosophy some of their branches in the residential area work all the seven days of the week. The Bank started off with exemplary combination of talented Board & potential staff team. Unlike majority of the banks where working timings are linked with employee-convenience. without a break. B. The bank emerged as an exemplary unit offering a wide range of specialized services in various sectors. a legislation enacted by the state of Gujarat in India. MANOJ PATEL. stuffed with extreme professionalism and well designed contours of working method. Remote banking.City co-operative bank ltd was promoted by an experienced and visionary entrepreneur named Mr. The city co-operative bank was started in 1996. Collage of Business Administration Page 23 . Off-time banking.Non Performing Assets City is a name of the bank where the bank is ready to serve its banking services to all customers. Likewise to focus special attention on the senior citizens the bank offers to credit monthly interest in their account with any bank before 5th day of every month. Sunday banking.
Non Performing Assets
SOCIAL OBLIGATIONS City bank does not lag behind in offering contribution for the social activities, particularly in the field of education and medicines. Out of activities particularly in the field of education and medicines, Out of the substantial profits earned by the City bank every year after the year, several goodwill gestures are made such as, ©. City Bank conference Hall at KP college of Commerce Surat ©. City Bank computer Center at the Engineering College runs by the Sarvajanik Education Society of Surat ©. Contribution for relief services under the auspices of the service organization “Chhaydo” offered at the civil medical campus for patients and their caretakers coming from the surrounding villages. ©. Charity Contribution towards Mahavir Cardiac Hospital of Rs. 11,25,000/in the year 2000-01 BANK’S SERVICES LIFE INSURANCE Bank has tied with Aviva Life Insurance Co ltd. It is joint venture between Dabur – Indian FMCG Co & AVIVA – UK’s No 1 & world’s No 5 insurance co. All the branches are offering all the insurance products of AVIVA viz for child education, daughter’s marriage, retirement solution, term plan etc.
B.M. Collage of Business Administration
Non Performing Assets
Bank has tied with IFFCO-TOKIYO General Insurance. It is joint venture between IFFCO a big fertilizer company in co-operative sector & TOKIYO General Insurance – Japan’s No 1 & world’s No 5 General Insurance Co. All the branches are offering all the products viz Mediclaim, Accident insurance, Vehicle Insurance, House Insurance, factory & Shop keeping Insurance. MUTUAL FUND Bank has tied with Principal PNB Mutual Fund, UTI, Benchmark, ICICI Prudential, SBI Mutual Fund, Lotus India, Reliance Mutual Fund, Kotak Mahindra, Birla Sunlight, Sundram BNP Pari Bar Mutual. LOCKERS Rent free locker facilities are available in Baroda at Kareli Baug, at Bharuch, Navsari & at following branches of Surat 1. Ring Road Branch 2. Abhishek Branch 3. City Light Branch 4. Puna Kumbharia Road Branch 5. Udhna Magdalla Branch 6. Ved Road(Katargam)Branch 7. Patel Park Branch(Adajan)
BOARD OF DIRECTORS
B.M. Collage of Business Administration Page 25
Non Performing Assets
NO. 1 2 3 4 5 6 7 8 9 10 NAME Shri. Piyushbahi Patel Shri. Balvanbhai Patel Shri. Manojbhai Patel Shri. Dharmeshbhai Patel Shri. Anandbhai Kalgude Shri. Amaratbhai Brachmabhatt Shri. Dineshbhai Tamakuwala Shri. Gaurang Rushi Shri. Jayshreeben Talati Shri. Umeshabhai Patel DESIGNATION Chairman Vice Chairman Director Director Director Director Director Director Director Director
B.M. Collage of Business Administration
Non Performing Assets
(CEO) (CHIEF MANAGER) (DIVISIONAL MANAGER) (AREA MANAGER) (BRANCH MANAGER) (OFFICER/CLERK)
(Rs. in lacs)
B.M. Collage of Business Administration
77 Cash & Bank Investment Advances Fixed Assets Other Assets 1919. Collage of Business Administration Page 28 .04 2007 1769.84 526. 293.45 Expenses Interest paid Operating Exp.11 236.88 PROFIT & LOSS ACCOUNT (Rs.43 18675.05 340.22 7093.38 11106.01 1572.55 10340.75 24202.76 1572.94 236.52 112.01 1822.37 1879.34 46.37 69.59 390. in lacs) Income Interest & Comm.38 1327.08 305.37 19946.86 305.48 46.M.1 4 1879.1 0 129.Non Performing Assets Share Capital Reserve Profit & Loss a/c Deposits Borrowing Other Liab.77 18675. Other Income 2006 1443.33 9326.05 24202. & Prov.76 15449.79 2282.70 648.86 181.45 12.44 0.26 284. Depreciation Provisions Profit for the year 2006 816.0 1 BRANCHES 1 Main Branch B.63 154.1 4 2007 956.5 6 109.23 1987.11 639.
Udhana Magdalla Branch 11. B. 8. Rander Branch 11. River Park Row House. Surat.Puna KumbhariaRoad Surat . Surat-9.Non Performing Assets 20. 2. Collage of Business Administration Page 29 . Tadwadi. Nr. Adajan Branch 2.7.Balaji Market . 7. 4 Ved Katargam Branch 24 Ground Floor Parth Building.Udhana Magdalla Road.Trapti Plaza.Singapoor (ved) Katargam. City Light Road Surat.M. Surat – 2. Surat – 7. 5. Ring Road. Delhi Gate Ring Road Suart-3. Adajan Surat-9.Sahara Darwaja. Abhishak Branch 1. Patel Park. 6. City Light Branch UG-14 Hira Panna Shopping Mall. Belgium Chamber. 3.Rander Road. Puna Kumbharia Branch 6.
Collage of Business Administration Page 30 . MEANING B.Non Performing Assets CHAPTER: 7 INTRODUCTION OF NON-PERFORMING ASSETS NON-PERFORMING ASSETS ©.M.
However. Earlier an asset was considered as non performing asset based on the concept of “past due”. ©.Non Performing Assets An asset becomes non-performing when it ceases to generate income for the bank. NORMS FOR IDENTIFICATION OF NPA B. The specific period of time was reduced in a phased manner as under: Year ended March. with effect from March31. when it remains outstanding for 30 days beyond the due date.31 1993 1994 1995 2004 Specific Period 4 Quarters 3 Quarters 2 Quarters 1 Quarters An amount is considered as past due. DEFINITION A NPA was defined as credit in respect of which interest and/or installment of principal has remained “past due” for a specific period of time. Collage of Business Administration Page 31 .M. 2001 the “past due” concept has been dispensed with and the period is reckoned from the due date of payment. ©.
M. Collage of Business Administration Page 32 . “90 days” overdue norms are accepted for the identification of NPA from the year ended March 31. Improper selection of borrower’s activities B. 2004. The bill remains overdue for a period of more than 90 days in the case of bills purchased and discounted. Interest and / or installment of principal remain overdue for a period of more than 90 days in respect of a term loan. The account remains out of order for a period of 90 days. in respect of an Overdraft/ Cash Credit (OD/CC). Any amount to be received remains overdue for a period of more than 90 days in respect of any other accounts. Unit bank shall classify their loan accounts as NPA as per 90 day norm as hitherto.Non Performing Assets With an intense to use the international best practice and to ensure greater transparency. a NPA shall be counted on loan and advances where: A. 2004. With effect from March 31. D. B. Tier 2 bank like all the Urban Co-Operative Banks (UCBs) other than the Tier 1 bank i. FACTORS RESPONSIBLE FOR NPA ©.e. C.
According to Reserve Bank of India. asset classification and provisioning norms were tightened over the years. Due to natural calamities and other uncertainties INDIAN ECONOMY AND NPA Gross NPAs (non-performing assets) in Indian banking sector have declined sharply to close to 3.M. Recession in the market ©.0 per cent in 2006 (15. has enabled banks to reduce the backlog of NPAs.7 per cent at end-March 1997).Non Performing Assets ©. Recovery of dues is also more than the fresh slippages. Weak credit appraisal system ©.40 per cent) for standard advances. Collage of Business Administration Page 33 . underpinned by robust macroeconomic environment and upturn in interest rate cycle. Banks are also required to make general provisioning (0. Industrial problem ©. For instance. Slackness in credit management & monitoring ©. Lack of proper follow up by bank ©. NARSIMHAN COMMITTEE B. Net NPAs of the banking sector are now at close to one per cent and the gap between the gross and net NPAs has narrowed over the years. The decline in NPAs is particularly significant as income recognition. banks now follow 90-day delinquency norm as against 180-day earlier. Inefficiency in management of borrower ©. improved profitability.
Non Performing Assets ©. Committee has suggested that banks should operate on the basis of financial autonomy and operational flexibility. also known as Narsimhan Committee. It has recommended “Capital Adequacy Norm” of 8% @. 1992. The income recognition. Classification of assets has to be done on the basis of objective criteria. under the chairmanship of Shri M. If banks want to know the true and fair financial health of bank then they should observed the prudential accounting norms while making balance sheet and profit & loss account. SECOND COMMITTEE B. B. provided that a bank should not show profit which is merely a book profit by resorting to practice like debiting interest to a loan account irrespective of its chance of recovery and booking the same as income or by not making provisions towards loan losses. @. Provisioning should be made on the basis of classification into four different categories. C. These norms are applicable to all UCB’s from 1st April. ©. Collage of Business Administration Page 34 . appointed by the RBI recommended the introduction of these prudential accounting norms by Indian Banks in its report submitted in December 1991. The committee was of view of that… A. NARSIMHAN COMMITTEE’S RECOMMENATIONS @. Narsimhan.M. Assets Classification and provisioning norms also known as Prudential Accounting Norms. ©. FIRST COMMITTEE The committee on financial system.
ASSETS CLASSIFICATION B.25 percent on standard assets.5% on their investment in Government securities with effect from the year ending 31st March. this provision is likely to be raised to 5%. effective from the year 2000-2001. 2000.M. etc…it was considered necessary for government to continue the improvement with striker rules in future also and for that second committee was made to continue changes with certain modifications. 2002. Collage of Business Administration Page 35 . 5. 5. If bank is working in foreign countries at presently then for them the “Capital Adequacy Norm” is 9% which was 8% earlier. 3. Banks have been asked to reduce the level of NPA to 5% of their total advances till 31st March. 2000. 4. which had resulted in basic changes in the matter of treatment of income. Banks can’t classify the account as NPA which are guaranteed by the Central / State government. As per the existing norms. The percentage has to be brought down to less than 3% with effect from 31st March. Banks have to make a provision of 2. The present norm is of 180 days for the account to be treated as NPA but after 31st March. this period is reduced to 90 days only. there is a norm of 0. no provisions for standard assets but from March 31st 2000.Non Performing Assets The first committee had made recommendations in 1991. assets classification and provisioning norms. In future. 2. 2000. The second committee includes the following points: 1.
Collage of Business Administration Page 36 . DEFINITION AS PER THE CLASSIFICATION OF ASSETS B.M. CHART OF ASSETS CLASSIFICATION ASSETS PERFORMING ASSETS OR STANDERED ASSETS NON-PERFORMING ASSETS SUB-STANDERED ASSETS DOUBTFUL ASSETS LOSS ASSETS LESS THAN 1 YEAR 1 TO 3 YEARS ABOVE 3 YEARS ©.Non Performing Assets ©.
Less than 1 year B.Such assets should not be an NPA. STANDARD ASSETS: Standard assets are one which does not carry any problems and which does not carry more than normal risk attached to the business. Some types of these assets are… A.M. 1 to 3 year B. DOUBTFUL ASSETS: In respect to the norms of March 31. In terms of these guidelines. 3. 2005 an asset would be classified as Sub standard if it remained NPA for a period less than or equal to 12 months. conditions and values. An assets where the terms of the loan agreement regarding interest & principal have been regenerated or rescheduled after commencement of production. bank advances are mainly classified in to following categories: 1. should be classified as sub-standard and should remain in such category for at least 12 months of satisfactory performance under the renegotiated terms. highly questionable and improbable. A loan which is classified as doubtful has all the weaknesses inherent as that classified as Sub-standard with the added characteristic that the weaknesses make collection or liquidation in full. on the basis of the currently known facts. Collage of Business Administration Page 37 . 2.Non Performing Assets Reserve Bank of India (RBI) has issued guidelines on provisioning requirement with respect to bank advances. 2005 an asset is required to be classified as doubtful. if it has remained NPA for more than 12 months. SUB-STANDARD ASSETS: These assets involved the two types of view as follows… In respect to the norms of March 31.
Non Performing Assets C. 3 year and above 4.M. READY RECKONER FOR ASSET CLASSIFICATION B. Collage of Business Administration Page 38 . LOSS ASSETS A loss asset is one where loss has been identified by the bank or internal or external auditors or by the Co-operation department or by the RBI inspection but the amount has not been written of. wholly or partly.
1.Non Performing Assets NO. 4. from all available sources is practically negligible or zero. 5. which has not been written off. 6. Collage of Business Administration Page 39 . auditors or RBI inspectors as loss assets. Account has been identified by the bank or internal/external 8. WHEN DATE OF NPA ASSET FALLS? Between 1-10-2006 & 31-032007 Between 1-10-2005 & 30-092006 Between 1-10-2003 & 30-092002 On or before 30-09-2003 No NPA date No security or salvage value of security is less than 5% Chance of realization of dues 7. CLASSIFICATION AS ON 31-03-2007 Sub-Standard assets Doubtful up to 1 year Doubtful asset of 1 year to 3 year Doubtful asset of more than 3 year Loss asset GUIDELINES FOR CLASSIFICATION OF ASSETS The guidelines are as follows… 1. BASIC CONSIDERATION: B. 2. 3.M.
Non Performing Assets In simple terms the classification of assets should be done by considering the well defined credit weaknesses & extent of dependence on collateral security for realization of dues. especially in respect of high value accounts. Collage of Business Administration Page 40 . INTERNAL SYSTEM FOR CLASSIFICATION OF ASSETS AS NPA: Banks should establish appropriate internal systems to eliminate the tendency to delay or postpone the identification of NPAs. A similar relaxation is also made in respect of SSI units which are identified as sick by banks themselves and where rehabilitation packages programs have been drawn by the banks themselves or under consortium arrangements. irrespective of the period for which it has remained as NPA. Such account should be straight away classified as doubtful asset or loss asset. 3. as appropriate. The banks may fix a minimum cut-off point to decide B. ADVANCES GRANTED UNDER REHABILITATION PACKAGES: Banks are not permitted to do classification of any advances in respect of which the term have been re-negotiated unless the package of re-negotiated terms has worked satisfactory for a period of one year.M. 2. In accounts where there is a potential threat to recovery on account and existence of other factor such as fraud committed by borrowers it will not be prudent for bank to classify that account first as sub-standard and then as doubtful.
M. Collage of Business Administration Page 41 . provided adequate margin is available in the accounts. Fees and commissions earned by the banks as a result of re-negotiations or rescheduling of outstanding debt should be recognized on an accrual basis over the period of time covered by the re-negotiated or rescheduled extension of credit. IVPs. The cut-off point should be valid for the entire accounting year. banks should not take to income account interest on nonperforming assets on accrual basis. Therefore. 1992 the income recognition policy is as follows… The policy of income recognition has to be objective and based on the record of recovery. KVPs. Responsibility and validation level for proper assets classification may be fixed by bank.Non Performing Assets what would constitute a high value account depending upon their respective business levels. Income from non-performing assets is not recognized on accrual basis but is booked as income only when it is actually received. interest on advances against term deposits. INCOME RECOGNITION POLICY According to the act of 1st April. and Life policies may be taken to income account on the due date. B. However. The system should ensure that doubts in asset classification due to any reason are settled through specified internal channels with in one month from the date on which the account would have been classified as NPA as per extant guidelines. NSCs.
PROVISIONING NORMS According to the norms the provisions should be made on the nonperforming assets on the basis of classification of assets as we have already discussed. If expected salvage value of the loss asset is negligible then 100% provision should be made on it. Doubtful Assets and Standard Assets as below :-> ( | ). B. If the assets are permitted to remain in the books for any reason. 100% of the outstanding should be provided for. ( || ). LOSS ASSETS The entire assets should be written off after obtaining necessary approval from the competent authority and as per the provisions act of C0-operative society Act. Taking in to account this provisioning norms the banks have to make provision on different assets like Loss Assets.M. the interest on such advances should not be taken to income account unless the interest has been realized.Non Performing Assets If Government guaranteed advances becomes ‘overdue’ and there by NPA. SUB-STANDARD ASSETS A general provision of 10% on the total outstanding should be made on the advances given. Collage of Business Administration Page 42 .
DOUBTFUL ASSETS On doubtful assets provision is made from 20% to 100% as per the period of asset. 2007 .25%.40% from the present level of 0.100% as on March 31. Tier 2 banks are required to do higher provisioning on standard assets as under:A.60% as on March 31.25% on the standard assets. General provisioning requirement is 0. 2000.M. Collage of Business Administration Page 43 . 2007 ( |V ).Non Performing Assets ( ||| ). However. ( V| ).2007 ( || ) Advances classified as ‘doubtful for more than three years’ on or after April1.25%. 2010 -100% From the year ended March 31. The table below shows the provision on doubtful assets. STANDARD ASSETS Provision Requirement 20% 30% .75% as on March 31.50% as on March 31. 2008 . But incase of agriculture or in SME investors the provisioning rate is required to be 0. 2009 . HIGHER PROVISIONS B. Period for which the advance has remained in ‘doubtful’ category Up to one year One to Three year More than Three year ( | ) Outstanding NPA as on March 31. the banks should make a general provision of a minimum of 0.
Non Performing Assets There is no objection if the banks create bad and doubtful debts reserve beyond the specified limits on their own or if provided in the respective State Co-operative Societies Acts. greater encouragement is given to small borrowers. Prompt legal action should be taken. ©. ©. for that the management of NPA in bank is necessary. Position of overdue accounts is reviewed on a weekly basis to arrest slippage of fresh account to NPA. Because NPA is one kind of obstacle in the success of bank so. Adopting the system of market intelligence for deciding the credibility of the borrowers ©. Sound credit appraisal on well-settled banking norms. Collage of Business Administration Page 44 . ©. to review irregular accounts. Recovery competition system is extended among the staff members.M. Pasting of sale notice/ wall posters on the house pledged as security. And this management can be done by following way: ©. Emphasizing reduction in Gross NPAs rather then Net NPAs ©. ©. ©. ©. ©. MANAGEMENT OF NPA t is very necessary for bank to keep the level of NPA as low as possible. Framing reasonably well documented loan policy and rules. Half yearly balance confirmation certificates are obtained from the borrowers regularly. A committee is constituted at Head Office. Recovery effort starts from the month of default itself. ©. Creation of a separate ‘Recovery Department’ with Special Recovery Officer appointed by the RCS B. Due to lower credit risk and consequent higher profitability. The recovering highest amount is felicitated. ©.
Now this act is also applicable to all Urban Co-Operative Banks. Decrease in provisioning requirements. IMPORTANCE OF RECOVERY: 1. @. ©. 3. Increase in the income of bank.M. SECURITIZATION ACT @. Level of NPA reduces as the recovery done. Increase in the trust of share holder in bank. Gujarat state has also by amending under co-op soc. 4. STEPS TAKEN BY GOVERNMENT TO RECOVERING NPA: 1. B. 2. 2. without depending on legal process in the court. act empower co-op bank to appoint their staff as recovery officer on getting order from the board of nominees. Above both act are benefited to bank for the recovery of NPA. Collage of Business Administration Page 45 .Non Performing Assets RECOVERY OF NPA ©. According to this act Bank can take direct possession of the movable and immovable property mortgages against loans and sell out the same for such recovery.
Non Performing Assets CHAPTER: 8 B. Collage of Business Administration Page 46 .M.
loan rules were changed considering guidelines issued by RBI from time to time.M. INTRODUCTION At the time of registration of bank. Thereafter with the approval of Board. Collage of Business Administration Page 47 . Appraisal policy is framed. one common document viz. B. Now in view to increasing branch network in numbers of geographically also. Surat.Non Performing Assets CITY BANK & NON-PERFORMING ASSETS CREDIT APPRAISAL POLICY AT CITY BANK ©. Loan rules were framed and approved by the DRCS.
5. 2. 3. If applicant maintains loan/current/saving account with any other bank/financial institutions. sales. Working capital facilities beyond Rs. branch to verify such account statement and to satisfy them. before recommending the proposal to higher authority. APPRAISAL A.Non Performing Assets ©. Collage of Business Administration Page 48 . 5 lacs should not be considered in the form of overdraft. Working capital requirement to be assessed properly considering past performance. POLICY ON PRE-SANCTION 1. Branch to collect all the papers/information/documents as suggested in the respective application form. 4.M. etc… 2. Branch to visit the borrower’s office/factory/residence and to satisfy themselves before recommending any loan to higher authority and to keep record of such visit. Branch to ascertain the promptness of applicant in making payment of Power bill/Property Tax/LIC Premium/Existing loan interest or installment. WORKING CAPITAL FACILITY 1. B. holding period for debtors as also for inventory at various level. ©. Application for loan should be in standardized form as devised by the bank.
2. individual as also group exposures.Non Performing Assets 3. EXPOSURE As per the RBI guidelines per party exposure is restricted to 15% of share capital and Free Reserves and group exposures it is 40%. In case of existing borrower/group borrower. B. 2. Margin for CC against stock be 30% and for receivables 50%. Sources for margin money to be ascertained. in case of switch over from other bank. branch to obtain credit information report from the concerned bank. Moratorium period to be fixed considering time required going in for commercial production.M. 3. considering existing earning to be ascertained. RBI has given liberty to recalculate the exposure on the basis of profitability of September B. C. Collage of Business Administration Page 49 . Credit facilities should not exceed segment wise. TERM FINANCE 1. ©. GENERAL 1. Repayment capacity. term loan limit to be arrived @ 25% margin in respect of Machinery/Equipment and Vehicles while 50% against land & building. branch to satisfy themselves about their dealing with the bank. electrification. 3. furniture fixtures. 4.
B. SANCTIONING AUTHORITY 1. COE Committee of executives comprising of all the executives shall have authority to grant all type of fresh loan up to Rs. Collage of Business Administration Page 50 . LOAN COMMITTEE All types of loans to single borrower up to Rs. However irrespective of these it is restricted at lower level i.Non Performing Assets half.77.00 lacs for all types of fresh loan except staff housing loan and Rs. CEO Rs.1. Rs. Chairman/Vice Chairman/Founder Chairman Loan against FDR/LIC/GOVT.00 5.1.50 crores for group.50 lacs and Rs.15.2. AGM Rs. 4.1.00 lacs for renewal 3.00 lac for all types of fresh loan except staff loan and lacs for renewal 2.e. security and any adhoc request.2. BOARD All types of loan within exposure ceiling for individual and group borrower.3.00 lacs except loan against FDR/LIC/GOVT. 6.4. ©.75 crores for group borrower.55 crore for individual and Rs. security and staff housing loan as also renewal of all working capital facilities irrespective of limit. Rs.M.
Collage of Business Administration Page 51 . 2.M. invoice etc… C. DISBURSAL FORMALITIES A. TERM FINANCE B. Immediately after disbursement. Fresh/additional limit against stock to be released only after party obtains adequate insurance for stock and submit stock/book debts statement. Before disbursal branch to ensure that borrowers/guarantors become member of the bank. Disbursement to be made only after complying with all the terms and conditions of sanction. WORKING CAPITAL FACILITY 1.Non Performing Assets ©. working capital facility to be released. So far as possible. ©. branch to follow up insurance policy. TERM FINANCE 1. 3. complete documentation and obtaining disbursal authority. matching contribution to be made by the borrower. 2. POST SANCTION A. GENERAL 1. At every time of disbursement. In case of new unit. 3. receipt for payment made. Company. 2. disbursement to be made by direct payment to seller. only after the unit starts commercial production. In case of Private Ltd. B. charge with ROC to be registered immediately on disbursal of credit facility.
Non Performing Assets 1. Collage of Business Administration Page 52 . On installation of machineries branch to inspect the unit and to ensure that machineries as per sanction is received & place the inspection report on record. 3. 4. Branch to submit the renewal papers along with memorandum for renewal to higher authority for renewal. Renewal of working capital facility 1. No finance to be considered against inter-firm receivable and for the receivables of more than 90 days. financial performance viz.M. WORKING CAPITAL 1. 2. profit etc… B. sales. 2. @. Drawing power to be arrived at regularly every month on the basis of stock statement/book debt statement submitted by the party. B. branch to inspect the unit to ensure that machineries financed by the bank are in running condition. with its comments on performance with the bank. Branch to ensure that receipt and payment through CC/OD accounts represent genuine business transactions. Branch to carry out inspection of the unit at least on quarterly basis. 2. Personal balance sheet of proprietor/partner/directors is also to be obtained. At least twice a year.
STANDARD ASSETS 0. PROVISION: 1. DOUBTFUL ASSETS NPA for more than 12 months is doubtful assets. SUB STANDARD ASSETS 10% of sub standard assets 3.M. Where the accounts are statutorily required to be audited. SUB STANDARD ASSETS Overdue of 90 days and for loan up to Rs. ©.1.00% for personal loan. 4.Non Performing Assets 3.00%. DOUBTFUL ASSETS B. branch to persuade the party to reduce the limit. If financial performance does not justify the limit at current level.20. 0.25% of standard assets in SME and direct agriculture advances. Loan against shares And for housing loan up to Rs. NPA NORMS OF CITY BANK ©. 2.00 lacs overdue for 6 months NPA up to 12 months remain in sub standard assets. 2. CLASSIFICATION: 1.40% in case of all other standard loans 1. Collage of Business Administration Page 53 .00 lacs the provision is 2. Commercial Real Estate Loan. branch to obtain audited accounts at the time of renewal.
decency B. BANK’S POLICY: At present they are making recovery but procedure for the same is not documented in the form of policy.Non Performing Assets 20% for NPA from 13 months to 24 months 30% for NPA from 25 months to 48 months 50% for NPA from 49 months and above 100% for loss assets RECOVERY POLICY AT CITY BANK ©. If the branch does not get response from the borrower for paying the amount. The policy is framed on the principal of courtesy. 2. 3.M. Recovery efforts to starts from the first month of default itself. Although the bank is committed to collection/recovery of its dues but the dignity of and respect for the customer is central to their recovery policy. Branch to continuously inform the borrower about the due date of repayment schedule. fair treatment and persuasion. During visit to customer’s place for collection of dues. they have to visit the unit and meet with the borrower. GUIDELINES FOR BRANCH/RECOVERY STAFF: All the branches of City bank have to follow the following guidelines… 1. ©. Position of overdue account to be reviewed on the monthly basis to arrest slippage of fresh accounts to NPA category. Collage of Business Administration Page 54 .
In such case prompt legal action and seizure action to be taken. 5. 4. 7. Collage of Business Administration Page 55 . 8. On failure of all the recovery steps. as the case may be. If the branch does not get any favorable response. Guarantor must be informed about legal complication to arise if borrower fails to repay the dues.M. 9. they should meet the guarantor and ask guarantor to peruse the borrower. B. If borrower still behaves irresponsible. If party behaves indifferent. 6. at the time of creation of security. If borrower is in genuine difficulty. Preference to be given for steps under Securitization Act rather than go for filling a case in the court of Board of Nominees. branch to contact Area office/Control centre. Area office/Control centre to call the borrower along with guarantor and try to find out the reason for overdue. problem to be resolved in a mutually acceptable and in an orderly manner. legal actions must be initiated. they should write a notice letter to borrower. unless the borrower is about to dispose of/remove the whole or any part of the security from the locality where it ordinarily remained or by whom it is used or caused to be remained or used. Reasonable notice would be given before Repossession of Security and its realization.Non Performing Assets and decorum would be maintained and customer’s privacy would be respected as far as practicable. during personal visit.
Non Performing Assets 10. valuation and realization of security. Collage of Business Administration Page 56 . The aim of possession under Securitization or State co-op.M. The policy fairness and transparency in repossession. B. Act will be to recover the dues and will not be aimed at whimsical deprivation of the property. The bank shall resort to repossession of the security only when the collection/recovery of dues is not forthcoming in spite of request made and the policy for repossession shall be in accordance with the terms and conditions of the loan documents and with in the legal framework.
IN LACS) Details STANDARD ASSETS B. YEAR 2003 (RS. Collage of Business Administration Amount 5912.M.Non Performing Assets CHAPTER: 9 ANALYSIS OF DATA YEAR WISE NPA AT CITY BANK ©.67 %of Total 91.90084 Page 57 .
69 14.Non Performing Assets SUB-STANDARD ASSETS DOUBTFUL ASSETS LOSS ASSETS TOTAL 189.75 2.2 D O U B TF U L A S S E TS 4.94929 1 S TA N D A R D A S S E TS 0 20 40 60 91.922324 0.90084 80 100 ASSETS--> V A L U ES --> ©. IN LACS) Details STANDARD ASSETS SUB-STANDARD ASSETS B.22755 100 N P A OF 2003 LO S S A S S E TS 2755 0.60 %of Total 93.74 143.95 1.64 6433.949291 4.75 316.922324 % of Total S U B -S TA N D A R D A S S E TS 2. YEAR 2004 (RS.95 Page 58 . Collage of Business Administration Amount 6923.M.
15 100 N P A O F YE AR 2004 LO S S A S S E TS. IN LACS) Details STANDARD ASSETS SUB-STANDARD ASSETS Amount 7266. Collage of Business Administration Page 59 .03 B.84 7369.28 2.9 % o f To ta l S U B -S TA N D A R D A S S E TS5 1 .63 156.1 5 0 D O U B TF U L A S S E TS 5 3.M.9 S TA N D A R D A S S E TS 0 20 40 60 9 3 .95 0.Non Performing Assets DOUBTFUL ASSETS LOSS ASSETS TOTAL 291.9 5 80 100 ASSETS--> V A L U E S --> ©.00 10. YEAR 2005 (RS.65 %of Total 94.18 3.
04 7707.40 1.M.58 %of Total 96.Non Performing Assets DOUBTFUL ASSETS LOSS ASSETS TOTAL 278.03 S TA N D A R D A S S E TS 0 20 40 60 80 94. Collage of Business Administration Amount 6867.17 3.61 0.24 213.82 0. IN LACS) Details STANDARD ASSETS SUB-STANDARD ASSETS DOUBTFUL ASSETS B.01 D O U B TF U L A S S E TS 3.61 % of Total S U B -S TA N D A R D A S S E TS 2.72 3. YEAR 2006 (RS.01 100 N P A O F YE A R 2 0 0 5 LO S S A S S E TS 0.81 12.28 100 ASSETS--> V A L U ES --> ©.01 Page 60 .
M.8 2 ASSETS--> 20 40 60 80 100 120 V A L U E S --> ©. IN LACS) B.63 0.Non Performing Assets LOSS ASSETS TOTAL 0.1 7 E TS S TA N D A R D A S S E TS 0 9 6 . YEAR 2007 (RS.0 1 TS % o f To ta l S U B -S TA N D A R D A S S0 . Collage of Business Administration Page 61 .00 7093.00 100 N P A OF YE AR 2006 L O S S A S S E TS 0 D O U B TF U L A S S E 3 .
26 %of Total 94.M.85 10340.54 100 N P A O F YE A R 2 0 0 7 LO S S A S S E TS1.5 % o f Total S U B -S TA N D A R D A S S E1 .80 159.49 120.7 8 80 100 ASSETS--> V A L U ES --> B.78 1.12 258.54 D O U B TF U L A S S E TS 2.Non Performing Assets Details STANDARD ASSETS SUB-STANDARD ASSETS DOUBTFUL ASSETS LOSS ASSETS TOTAL Amount 9801.1 6 TS S TA N D A R D A S S E TS 0 20 40 60 94 .50 1. Collage of Business Administration Page 62 .16 2.
43 21.10 EDUCATION OTHER PRIORITY SECTOR OTHE NON PRIORITY SECTOR TOTAL 2 10.47 134.42 186.33 0.00 0.70 345 459.09 55 285 1496 41.20 538.17 20.86 CONSTRUCTION & REPAIRS 246 323.15 122 88.86 180.48 4.18 1.00 0 0.41 0.52 3.12 SMALL ROAD & TRANSPORTATION 10 5.00 0 0.64 0.86 2.23 0.16 7707.02 50.05 2394.93 SMALL SCALE IND 582 4021.81 5.76 22. Collage of Business Administration Page 63 .82 326 310 3055 68.81 RETAIL TRADE SMALL BUSINESS 31 46.77 B.02 231 343.85 7093.00 2 7.72 0.43 AGRICULTURE 2 3.74 642 3832.90 PROFESSIONAL 84 89.69 NO OF A/C 248 2006 AMOUNT TOTAL ADVANCES 641.00 80 72.55 210.00 8 3.00 517 115.38 25 44.41 225.88 975 6323.00 2454.M.00 177.00 0.94 10340.63 NPA 17.26 16.63 3.82 2178.26 436.00 3 7.29 44.72 0.21 NO OF A/C 343 2007 AMOUNT TOTAL ADVANCES 802.Non Performing Assets SEGMENTWISE CLASSIFICATION OF NPA (RS.90 NPA 20.26 0.03 NPA 76. IN LACS) 2005 SEGMENT NO OF A/C 267 AMOUNT TOTAL ADVANCES 752.00 34 8.71 0.00 0 375 1599 0.
Collage of Business Administration Page 64 . SUB-STANDARD ASSETS RATIO. GROSS NPA RATIO. SHAREHOLDER’S RISK RATIO. 5. LOSS ASSETS RATIO. PROVISION RATIO. 8. 2. 4. NET NPA RATIO.Non Performing Assets RATIO ANALYSIS To analyzed the NPA situation in bank and from that to know about the banks credit appraisal system and level of risk in bank I have done the ratio analysis. B.M. PROBLEM ASSETS RATIO. Some names of ratio are as follows: 1. Ratio analysis is the tool which will help us to do financial analysis of bank. 3. 6. DOUBTFUL ASSETS RATIO. 7.
72 7093.10% 6.18 % PERCENTAGES--> 5 .0 0 % 4 .1 0% 6.2 1% R AT IO 2 0 03 20 0 4 2 00 5 Y EAR --> 2 0 06 20 0 7 B.68% 3.Non Performing Assets 1.63 10340.77 GROSS ADVANCES 6433. IN LACS) GROSS NPA RATIO (%) 8.0 0 % 6 .0 0 % 5 . Collage of Business Administration Page 65 .18% 5.18 7707.0 0 % 0 .0 0 % 1 . GROSS NPA RATIO Gross NPA is the sum of the total assets which are classified as the NPA by bank at the end of every year.0 0 % 7 . It is expressed in percentage form.0 0 % 8 .04% 5.08 445.82 538.0 0 % 8 . Gross NPA Ratio = Gross NPA Gross Advances (RS.M.0 0 % 3 .0 4 % 5 .68 % 3 .44 436.21% * 100 YEAR 2003 2004 2005 2006 2007 GROSS NPA 521.75 7369.0 0 % 2 .09 225.26 G R O SS NPA R AT IO 9 . Gross NPA is the ratio of Gross NPA to Gross Advances.
Co-op. High Gross NPA ratio means bank have liberal appraisal policy and vice-versa. bank in the financial year 2006-2007. This variation was come because City bank has merged with Baroda dist. But again in March-2007 this ratio reach at 5.21%. In city bank this ratio was 8. Collage of Business Administration Page 66 . ANALYSIS Gross NPA ratio shows the bank’s credit appraisal policy. However it is revels from the chart that bank’s Gross NPA ratio is continuously decreasing which is positive trend for bank and we can say that bank have good appraisal system.10% in March-2003 and it has been decreased from year 2003 to 2006 from 8.10% to 3.Non Performing Assets ©.18%.M. B.
00% 3.00% 0.00% 0.00% 4.82% 0. IN LACS) NET NPA RATIO (%) 4.00 NET ADVANCES 6211. This ratio shows the degree of risk in bank’s portfolio.82% ©.13 0.00% PERECNTAGE--> 5.00% 2007 NET NPA RATIO 4.00% 2003 0.74 6622.00% 2006 0.57 9733.62 Net NPA = Gross NPA – Provision for NPA Net Advances = Gross NPA – Provision for NPA NET NPA RATIO 6.84 7236. NET NPA RATIO The Net NPA Ratio is the ratio of net NPA to Net Advances. Collage of Business Administration Page 67 . Net NPA Ratio = Net NPA Net Advances (RS.M.00% *100 YEAR 2003 2004 2005 2006 2007 NET NPA 299. Net NPA ratio can be obtain by Gross NPA minus the NPA provisions divided by Net advances.00 0. ANALYSIS B.00% 2.00% 2005 YEAR--> 0.00% 0.80 6888.00% 0.00% 2004 0.Non Performing Assets 2.00 0.00% 1.00 0.
So.00% which shows that bank has now enough provision capacity.91 15935. And shareholder will get fewer dividends. 3. High ratio means high risk for bank.M. But after that from March-2004 to March-2007 Net NPA ratio is 0.44 TOTAL ASSETS 13381.Non Performing Assets Net NPA ratio shows the degree of risk in portfolio of bank. In City Bank Net NPA ratio was 4. here the degree of risk is less.08 445. When all bank will do provision then Net NPA will become zero but if we want to know the true and fair situation of bank we must consider the Gross NPA of bank. Problem Assets Ratio = Gross NPA Total Assets (RS.82% in year March-2003 which shows that in that year bank had not enough fund for provisions. PROBLEM ASSETS RATIO This ratio is also known as the Gross NPA to Total Assets ratio. City bank has done more provision every year which is good at one side but at other side it also reduces the profit of bank. High net NPA ratio means banks don’t have enough fund to do provision against the Gross NPA.97 ASSETS RATIO (%) 3. This ratio shows the percentage of risk on the total assets of the bank.80% Page 68 *100 B.89% 2. IN LACS) PROBLEM YEAR 2003 2004 GROSS NPA 521. Collage of Business Administration .
23% in March2007 because in that year City Bank was merged with Baroda dist.00% 1.21% 2.50% 4.77 16337. In City Bank this ratio was 3.23% PROBLEM ASSETS RATIO 4.09 225. Collage of Business Administration Page 69 .00% 3.50% 0.89% 2.69% 2.89% to 1.M.21% in March-2006. ANALYSIS This ratio shows the percentage of risk on the assets of bank.35 18675. B.00% 0.21% PROBLEM ASSETS RATIO PERCENTAGE--> 2003 2004 2005 YEAR--> 2006 2007 ©. But overall this ratio is good for bank which indicates the level of risk is low in bank. High ratio shows the high risk on liquidity.00% 3. It shows the level of risk on bank’s assets. But again it increase to 2.23% 1.89% in March-2003 and after that it has been decreased from 3. This ratio is continuously decreasing in bank except in March-2007. bank in the financial year 2006-2007.77 2.05 24202.50% 1.50% 3.69% 1.00% 2.80% 2. Co-op.50% 2.82 538.Non Performing Assets 2005 2006 2007 436.
M.76 2075. Shareholder’s risk Ratio = Net NPA Total Capital & Reserve TOTAL CAPITAL & RESERVE 1793. IN LACS) SHAREHOLDER’S RISK RATIO (%) 16.13 0. SHAREHOLDER’S RISK RATIO It is the ratio of Net NPA to Total capital and reserve of bank. Collage of Business Administration Page 70 .00% B.06 *100 YEAR 2003 2004 NET NPA 299.68% 0.00 (RS.Non Performing Assets 4.
High ratio means high ratio with the investment.00% 2.00 0. As we know that this ratio is 0.00% 0.68% 16.00% 8.00% 2003 2004 2005 2006 2007 YEAR--> PERCENTAGE--> S HAREHOLDER’S RISK RA TIO ©.00% 4.00% 0.39 2551.00 0. In City Bank this ratio was 16.00% up to year March-2007. ANALYSIS This ratio shows the degree of risk with share holder’s investment.00% 6. Collage of Business Administration Page 71 . B.00% 0.00% S HARE HOLDER’S RIS K RA TIO 18.00% 0.58 0.Non Performing Assets 2005 2006 2007 0.00% 0.68% in year March-2003 which shows that in that year risk on share holder’s investment was quite high but after that this ratio is 0.00% 12. which shows that Bank have enough capacity for provision and the risk on investment is nil.64 3014.00 2262.00% 0.M.00% 10.00% 0.00% show the risk is nil but on the other side because of more provision the profit will decrease and the shareholder will get less dividends.00% 16.00% 14.
Collage of Business Administration Page 72 . IN LACS) YEAR TOTAL PROVISION PROVISION GROSS NPA RATIO (%) *100 B. Provision Ratio = Total Provision Gross NPA (RS.M. PROVISION RATIO Provisions are to be made against the Gross NPA of bank. This ratio shows the relation of total provision to Gross NPA. As bank make provision for NPA it directly affects the profit of bank.Non Performing Assets 5.
59% 112. In City Bank they have made 42.M.60% PROVISION RATIO 250.06 606.59% 112.83%108.00% 150.08 445.00% 50.64 521.44 436.83% and 108% respectively which indicate that provision was nearer to total amount of Gross B.00% 0.59% provision in March-2003 which shows that it was under provision but after that in March-2004 and March-2005 it is 107.83% 108.59% 107.09 225.59% 107. Collage of Business Administration Page 73 .82 538.34 470.00% 100.60% 208.77 42.00% PROVISION RATIO ©.Non Performing Assets 2003 2004 2005 2006 2007 221. ANALYSIS Provision ratio shows the degree of provision that is made against the Gross NPA of bank.95 480.00% 2003 2004 2005 YEAR--> 2006 2007 42.00% 208.98 471. If Provision ratio is less then it means that bank has make under provision and if provision is more then it means that it is over provision.00% PERCENTAGE--> 200. As bank made the provision it directly affect the profit of bank and also the dividend payout ratio of bank too.
IN LACS) SUB-STANDARD ASSETS RATIO (%) 36.65 GROSS NPA 521.41% 32. City bank should make the provision in the range of 100% to 115%.59% which indicate that it is the very over provision.44 436. Collage of Business Administration Page 74 .60 156. 6. The provision in March-2006 which is 208.M.08 445.59% is very high and it is not necessary to do that.60% which is fair ratio.92% YEAR 2003 2004 2005 SUB-STANDARD ASSETS 189. SUB-STANDARD ASSETS RATIO Sub-standard Assets Ratio = Total Sub-standard Assets Gross NPA *100 (RS.06 B. And again in March-2007 it is 112.75 143.Non Performing Assets NPA but in March-2006 the provision ratio reach at 208.24% 35.
42% in year March-2006 which is not good for bank.00% 0.00% 2003 2004 2005 YEAR--> 2006 2007 5.30% S UB -S TA NDA RD A S S E TS RA TIO 40.00% 15.41% 35.30% S UB -S TA NDA RD A S S E TS RA TIO 32. Collage of Business Administration Page 75 .00% 5.42% 22.00% 20.77 5.24% 35.24 120. High ratio shows that there is a chance of recovery of assets is high.00% PERCENTAGE--> 30. High Sub-Standard ratio means more proportion of Sub-Standard asset in the Gross NPA.92% ©.42% 22.00% 25. In City bank this ratio was 36.M.12 225. B.Non Performing Assets 2006 2007 12. ANALYSIS This ratio shows the percentage of Sub-Standard assets in the Gross NPA of bank.41% in March-2003 which is good for bank and it is 5.82 538.00% 36. As the level of Sub-Standard assets are more the chances of recovery of NPA are high.00% 10.
69 291.78% 65. DOUBTFUL ASSETS RATIO It is the ratio of total doubtful assets to Gross NPA of the bank.M.08 445.00 278.09 60. Doubtful Asset Ratio = TOTAL DOUBTFUL ASSETS 316.33% 63.40 Total Doubtful Assets *100 Gross NPA (RS.Non Performing Assets 7.44 436. IN LACS) DOUBTFUL GROSS NPA ASSETS RATIO (%) 521. Collage of Business Administration .84% Page 76 YEAR 2003 2004 2005 B.
As the Doubtful assets ratio is high which shows that bank should take quick action to reduce that level.M.00% 65.Non Performing Assets 2006 2007 213.00% 60. Collage of Business Administration Page 77 PERCENTAGE--> DO UB TF UL A S S E TS RA TIO .00% 40.58 258. More Doubtful assets means Bank should take action through recovery policy to reduce the level of Doubtful assets.00% 10. B.82 538.58% 48.77 94. This ratio should be less for the bank.33% 63. High Doubtful assets ratio means more proportion of Doubtful asset in the Gross NPA.80 225.00% 20.03% DO UB TF UL A S S E TS RA TIO 94.03% 50.58% 100.00% 30.00% 2003 2004 2005 2006 2007 YEAR--> ©.00% 80.78% 60.00% 0.00% 90.84% 70.00% 48. ANALYSIS This ratio shows the percentage of Doubtful assets in the Gross NPA of bank.
81% 2.64 10. Collage of Business Administration Page 78 .Non Performing Assets In City Co.03% which is good for bank.43% 0.00 159.00% in year from March2003 to March-2005 but in March-2006 this ratio reach at 94.00% 29.84 1.M. Bank this ratio is in between from 60.24% 0.00% to 65.82 538.77 B. LOSS ASSETS RATIO It is the ratio of Total loss assets to Gross NPA of bank. 8.08 445.09 225. Loss Assets Ratio = Total loss Assets Gross NPA *100 (RS.44 436.58% which indicate that bank must take some necessary action to recover it.04 0.67% YEAR 2003 2004 2005 2006 2007 TOTAL LOSS ASSETS 14.85 GROSS NPA 521. IN LACS) LOSS ASSETS RATIO (%) 2. And again in March-2007 this ratio decrease to 48.
In City Co.00% 10.00% 2. The high ratio indicates that bank has more fraudulent account and it is bad for bank. B. This should be less in bank.00% LOSS A SSE TS RA TIO 29.81% 2. This ratio is decreasing in bank which is good for bank but again in March2007 this ratio reaches at 29.00% PERCENTAGE--> 25.81% in March-2003 and from it reach at 0.67% which is the very high increase and it is very bad for bank. The bank must take necessary action to reduce the level of loss assets. But the increase in the ratio of March-2007 is because bank was merged with Baroda dist. ANALYSIS This ratio shows the percentage of loss assets in the Gross NPA of bank. Co-op.67% 2003 2004 2005 2006 2007 YEAR--> ©. Hence.43% 0. bank in that year.00% 5.00% 0.00% 30. High loss assets ratio means more proportion of loss asset in the Gross NPA.00% 15.M. Bank this ratio is 2.00% in the year March-2006.00% 20. bank should take some action to reduce the level of loss assets from the total NPA.Non Performing Assets LOS S ASS ETS RATIO 35.24% 0. Collage of Business Administration Page 79 .
the idle gross NPA ratio is 5.82% in the year 2003 and from 2004 to 2007 it remains 0. And this ratio is 2.21% in the year 2007. we can say that bank’s financial condition is good.00% which is positive for bank. Hence. So. And this correction is because of City bank was merged with Baroda Industrial co-op bank in year 2007. From ratio I am able to find the following findings… 1. this effect of merging can be showing from the ratio of year 2007. 3. Bank’s Net NPA ratio is 4.Non Performing Assets FINDINGS FROM RATIO As I have already analyze the ratio and from that I can say that bank’s financial condition is good. 2.10% in the year 2003 after then it reaches to 5. Hence. So.23% in the year 2007. there is correction in the ratio of year 2007. B.M. The Gross NPA ratio of bank is 8.21% in the year 2006 which is good for bank.21%. Collage of Business Administration Page 80 . The Problem assets ratio was 3.89% in the year 2003 which was the highest ratio and from that year it is decrease to 1.00% and bank have 5.
6. And it is also bad for bank. B.Non Performing Assets 4.58% in the year 2006 which is very bad but in year 2007 this ratio decrease to 48.42% in the year 2006 which is very bad for bank’s health.00% in the year 2006 which is good but in year 2007 this ratio reaches to 29.67% which is very rapid change with in a one year. 5. It will be considered good if the Sub-standard assets ratio is high.03% which is positive for bank. For City bank this ratio is 36. Doubtful assets ratio should be low for the good health of bank and in City bank this ratio is 94.60% which shows that bank have enough profit for the provision. Provision ratio for the year 2003 is 42.M. Collage of Business Administration Page 81 .59% which show that their was under provision in that year but in year 2007 this ratio is 112. 7.41% in the year 2003 which is good but it reaches to 5. Loss assets ratio should be zero and bank have 0.
Non Performing Assets CLASSIFICATION OF TOTAL NPA (RS.58 0.40 1.09 2006 12.65 278.04 436.80 159.85 538.77 B. IN LACS) YEAR SUBSTANDARD ASSETS DOUBTFUL ASSETS LOSS ASSETS TOTAL NPA 2005 156.M.24 213.12 258.82 2007 120.00 225. Collage of Business Administration Page 82 .
Non Performing Assets CLASSIFICATION OF NPA 600 500 400 300 200 100 0 2003 2004 2005 2006 2007 YEAR--> PERCENTAGE--> SUB-STANDARD ASSETS DOUBTFUL ASSETS LOSS ASSETS TOTAL NPA CLASSIFICATION OF TOTAL ADVANCES (RS.81 7093.63 2007 538.M.49 10340.75 2004 445.74 7369.67 6433. Collage of Business Administration Page 83 .72 2006 225.82 6867.08 5912.63 7707.26 B.44 6923.77 9801.09 7266. IN LACS) YEAR TOTAL NPA STANDARD ASSETS TOTAL ADVANCES 2003 521.18 2005 436.
M. Collage of Business Administration Page 84 .Non Performing Assets C L A S S IF IC A T IO N O F T O T A L A D V A N C E S 1200 0 1000 0 RS IN LACS--> 800 0 600 0 400 0 200 0 0 200 3 200 4 2005 200 6 200 7 YEA R --> TO TA L N P A S TA N D A R D A S S E TS TO TA L A D V A N C E S CHAPTER: 10 B.
Collage of Business Administration Page 85 .Non Performing Assets CONCLUSION & SUGGESTION CONCLUSION Now as we know that NON-PERFORMING ASSETS is like a black spot on diamond. They affect the profit of bank and also the financial health of bank. This NPA have number of effects on banks working. B. During my training in bank I gathered as much as possible information about NPA from bank and on the basis my experience I conclude the following points: City Co. bank’s NPA level is decreasing year by year which good for bank.M.
21%.67% which is very rapid change with in a one year. Bank has sound credit appraisal system and also sound recovery policy.M. Hence.82% in the year 2003 and from 2004 to 2007 it remains 0. Loss assets ratio should be zero and bank have 0.10% in the year 2003 after then it reaches to 5.00% in the year 2007.7% but now it is 3.00% in the year 2006 which is good but in year 2007 this ratio reaches to 29. And it is also bad for bank. The Gross NPA ratio of bank is 8.21% in the year 2007. Bank’s NPA level is decreasing year by year and because of that City Co. Bank is being considered very good bank by citizens of Surat. City Co. City Co. B. Government’s act and also the Narsimhan committee on NPA are very useful to reduce the level of NPA. So.00% and bank have 5. the idle gross NPA ratio is 5. So. In year 1997 in India the Gross NPA was 15. This is very favorable to Indian economy and also banking sector of India. we can say that bank’s financial condition is good. Hence in present time the position of NPA in bank is much better then the past position. Bank’s Net NPA ratio is 4.Non Performing Assets In year 2007 City bank’s own NPA is very low but because of merger with Baroda industrial co-op bank the level of NPA was increase. I can conclude that level NPA in any bank is important parameter to analyze the health of bank.00% which is positive for bank. Collage of Business Administration Page 86 .
M. In year 2007 City Co. bank should have consider the NPA situation of that bank before merger. City Co. they should try to reduce that level of NPA. bank’s own NPA is very low but because of merger with Baroda industrial co-op bank the level of NPA increase so City Co. bank there is no any special recovery department so bank should develop the department for the fastest recovery of NPA.Non Performing Assets SUGGSTIONS 1. 5. Bank have more NPA in Small Scale Industry so. Collage of Business Administration Page 87 . CHAPTER: 11 B. 2. Bank should motivate the staff to do fast recovery NPA. In City Co. 4. bank’s NPA level is decreasing year by year which good for bank but bank should follow the recovery policy strictly. 3.
indiamart.Non Performing Assets BIBILIOGRAPHY JOURNALS • • • Co-Operative Banker’s Diary 2008 -by John D’salve Annual Report of City Co-Operative Bank -year. 2003.2006.html Page 88 B.2005.com/investment_in_india/banking_in_india.2007 Periodical circular and statement of RBI regarding to NPA managing and UCB’s WEBSITES • http://finance. 2004.M. Collage of Business Administration .
com/banking/cintro.Non Performing Assets • • • • http://www.aspx http://www.in/Home. Collage of Business Administration Page 89 .com/ http://www.banknetindia.rbi.indiabankassociation.investorwords.com/ B.htm http://www.M.org.
This action might not be possible to undo. Are you sure you want to continue?
We've moved you to where you read on your other device.
Get the full title to continue listening from where you left off, or restart the preview.