CHAPTER 1

INDTRODUCTION

Importance :
A healthy banking system is essential for any economy striving to achieve good growth and remain in an increasingly global business environment. The Indian banking system, with one of the largest banking network in the world, has witnessed a series of reforms over the past few years line deregulation of interest rates, dilution of the government stake in public sector banks, guideline being issued for risk management, asset classification and provisioning etc. Its known fact that the bank and financial institution in Indian face the problem of swelling non-performing assets (NPAs) and the issue is becoming more and more unmanageable. In the changed scenario, it has now become extremely important for Indian banks to remain competitive for surviving. This kind of rapid growth however led to strains in the operational efficiency of banks and accumulation of non performing assets in their loan portfolios. The origin of the problem of burgeoning NPAs lies in the quality of managing credit risk by the banks concerned. What is need is having adequate preventive measures in place namely, fixing pre-sanctioning appraisal responsibility and having an effective post-disbursement supervision. Banks concerned should continuously monitor loans to identify account that have potential to become nonperforming Objectives

To know the reasons for NPAs. To know recovery mechanisms adopted by the bank. To evaluate profitability positions of banks To know the measures adopted to avoid NPA. To know the effect of NPA.

Scope The study concentrates on non performing assets. A total of 50 samples were collected in order to study about the awareness of non performing asset among the different banks. Both primary and secondary data was used in order to study about non performing asset. Data Collection This project report is based on primary data. The data was of 50 samples, which were filled by banks.

Limitation Respondents were reluctant to share information.

Chapter Scheme Chapter 1 Introduction Chapter 2 - Review of Literature Chapter 3 - Analysis & Interpretation Chapter 4 Findings & Suggestions

CHAPTER 2

REVIEW OF LITERATURE

2.1 HISTORY OF INDIAN BANKING A bank is a financial institution that provides banking and other financial services. By the term bank is generally understood an institution that holds a Banking Licenses. Banking licenses are granted by financial supervision authorities and provide rights to conduct the most fundamental banking services such as accepting deposits and making loans. There are also financial institutions that provide certain banking services without meeting the legal definition of a bank, a so-called Non-bank. Banks are a subset of the financial services industry. The word bank is derived from the Italian banca, which is derived from German and means bench. The terms bankrupt and "broke" are similarly derived from banca rotta, which refers to an out of business bank, having its bench physically broken. Money Lenders in Northern Italy originally did business in open areas, or big open rooms, with each lender working from his own bench or table. Typically, a bank generates profits from transaction fees on financial services or the interest spread on resources it holds in trust for clients while paying them interest on the asset. Development of the banking industry in India followed below stated steps. Banking in India has its origin as early as the Vedic period. It is believed that the transition from money lending to banking must have occurred even before Manu, the great Hindu Jurist, who has devoted a section of his work to deposits and advances and laid down rules relating to rates of interest Banking in India has an early origin where the indigenous bankers played

a very

important role in lending money and financing foreign trade

and commerce. During the days of the East India Company, was the turn of the agency houses to carry on the banking business. The General Bank of India was first Joint Stock Bank to be established in the year 1786. The others which followed were the Bank Hindustan and the Bengal Bank. The Reserve Bank of India which is the Central Bank was created in 1935 by passing Reserve Bank of India Act, 1934 which was followed up with the Banking Regulations in 1949. These acts bestowed Reserve Bank of India (RBI) with wide ranging powers for licensing, supervision and control of banks. Considering the proliferation of weak banks, RBI compulsorily merged many of them with stronger banks in 1969. The three decades after nationalization saw a phenomenal expansion in the geographical coverage and financial spread of the banking system in the country. As certain rigidities and weaknesses were found to have developed in the system, during the late eighties the Government of India felt that these had to be addressed to enable the financial system to play its role in ushering in a more efficient and competitive economy. Accordingly, a high-level committee was set up on 14 August 1991 to examine all aspects relating to the structure, organization, functions and procedures of the financial system. Based on the recommendations of the Committee (Chairman: Shri M. Narasimham), a comprehensive reform of the banking system was introduced in 1992-93. The objective of the reform measures was to ensure that the balance sheets of banks reflected their actual financial health. One of the important measures related to income recognition, asset classification and provisioning by banks, on the basis of objective criteria was laid down by the Reserve Bank. The introduction of capital adequacy norms in line with international standards has been another important measure of the reforms process. Comprises balance of expired loans, compensation and other bonds such as National Rural Development Bonds and Capital Investment Bonds. Annuity certificates are excluded.

These represent mainly non- negotiable non- interest bearing securities issued to International Financial Institutions like International Monetary Fund, International Bank for Reconstruction and Development and Asian Development Bank. At book value. Comprises accruals under Small Savings Scheme, Provident Funds, Special Deposits of Non- Government In the post-nationalization era, no new private sector banks were allowed to be set up. However, in 1993, in recognition of the need to introduce greater competition which could lead to higher productivity and efficiency of the banking system, new private sector banks were allowed to be set up in the Indian banking system. These new banks had to satisfy among others, the following minimum requirements: It should be registered as a public limited company; The minimum paid-up capital should be Rs 100 crore; The shares should be listed on the stock exchange; The headquarters of the bank should be preferably located in a centre which does not have the headquarters of any other bank; and The bank will be subject to prudential norms in respect of banking operations, accounting and other policies as laid down by the RBI. It will have to achieve capital adequacy of eight per cent from the very beginning. A high level Committee, under the Chairmanship of Shri M. Narasimham, was constituted by the Government of India in December 1997 to review the record of implementation of financial system reforms recommended by the CFS in 1991 and chart the reforms necessary in the years ahead to make the banking system stronger and better equipped to compete effectively in international economic environment. The Committee has submitted its report to the Government in April 1998. Some of the recommendations of the Committee, on prudential accounting norms, particularly in the areas of Capital Adequacy Ratio, Classification of Government guaranteed advances, provisioning requirements on standard advances and more disclosures in the Balance Sheets of banks have been accepted and implemented. The other recommendations are under consideration.

The banking industry in India is in a midst of transformation, thanks to the economic liberalization of the country, which has changed business environment in the country. During the pre-liberalization period, the industry was merely focusing on deposit mobilization and branch expansion. But with liberalization, it found many of its advances under the non-performing assets (NPA) list. More importantly, the sector has become very competitive with the entry of many foreign and private sector banks. The face of banking is changing rapidly. There is no doubt that banking sector reforms have improved the profitability, productivity and efficiency of banks, but in the days ahead banks will have to prepare themselves to face new challenges. Banking system which constitutes the core of the financial sector plays a vital role in transmitting monetary policy impulses to the economic system. Therefore its efficiency and development are vital for enhancing growth and improving the changes for stability. During the recent past, profits of the Bank came under pressure due to rise in interest rates, decrease in non-interest income and increase in provisions and contingencies. The Banks and Financial Institutions have also been burdened with ever increasing Non Performing Assets The mounting menace of NPAs has raised the cost of credit, made Indian businessmen uncompetitive as compared to their counterparts in other countries. It has made Banks more averse to risks and squeezed genuine Small and Medium enterprises from accessing competitive credit and has throttled their enterprising spirits as well to a great extent. 2.2 NON PERFORMING ASSETS The three letters Strike terror in banking sector and business circle today. NPA is short form of Non Performing Asset. The dreaded NPA rule says simply this: when interest or other due to a bank remains unpaid for more than 90 days, the

entire bank loan automatically turns a non performing asset. The recovery of loan has always been problem for banks and financial institution. To come out of these first we need to think is it possible to avoid NPA, no can not be then left is to look after the factor responsible for it and managing those factors. An asset, including a leased asset, becomes non-performing when it ceases to generate income for the bank. A non-performing asset (NPA) was defined as a credit facility in respect of which the interest and/ or instalment of principal has remained past due for a specified period of time. With a view to moving towards international best practices and to ensure greater transparency, it has been decided to adopt the 90 days overdue norm for identification of NPAs, from the year ending March 31, 2004. Accordingly, with effect from March 31, 2004, a non-performing asset (NPA) shall be a loan or an advance where; Interest and/ or instalment 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 more than 90 days, in respect of an Overdraft/Cash Credit (OD/CC), The bill remains overdue for a period of more than 90 days in the case of bills purchased and discounted, Interest and/or instalment of principal remains overdue for two harvest seasons but for a period not exceeding two half years in the case of an advance granted for agricultural purposes, and Any amount to be received remains overdue for a period of more than 90 days in respect of other accounts. As a facilitating measure for smooth transition to 90 days norm, banks have been advised to move over to charging of interest at monthly rests, by April 1, 2002. However, the date of classification of an advance as NPA should not be changed on account of charging of interest at monthly rests. Banks should, therefore, continue to classify an account as NPA only if the interest charged during any quarter is not serviced fully within 180 days from the end of the quarter with effect from April 1, 2002 and 90 days from the end of the quarter with effect from March 31, 2004. 'Out of Order' status:

An account should be treated as 'out of order' if the outstanding balance remains continuously in excess of the sanctioned limit/drawing power. In cases where the outstanding balance in the principal operating account is less than the sanctioned limit/drawing power, but there are no credits continuously for six months as on the date of Balance Sheet or credits are not enough to cover the interest debited during the same period, these accounts should be treated as 'out of order'. Any amount due to the bank under any credit facility is overdue if it is not paid on the due date fixed by the bank.

2.2.1 Types of NPA: 2.2.2.1 Gross NPA Gross NPAs are the sum total of all loan assets that are classified as NPAs as per RBI guidelines as on Balance Sheet date. It can be calculated with the help of following ratio: Gross NPAs Ratio Gross NPAs Gross Advances

2.2.2.2 Net NPA: Net NPAs are those type of NPAs in which the bank has deducted the provision regarding NPAs. It can be calculated by following Net NPAs Gross NPAs Provisions Gross Advances - Provisions 2.3 INCOME RECOGNITION

Income recognition - Policy The policy of income recognition has to be objective and based on the record of recovery. Internationally income from non-performing assets (NPA) is not recognised on accrual basis but is booked as income only when it is actually received. Therefore, the banks should not charge and take to income account interest on any NPA. However, interest on advances against term deposits, NSCs, IVPs, KVPs and Life policies may be taken to income account on the due date, 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 debts should be recognised on an accrual basis over the period of time covered by the re-negotiated or rescheduled extension of credit. If Government guaranteed advances become NPA, the interest on such advances should not be taken to income account unless the interest has been realised. Reversal of income: If any advance, including bills purchased and discounted, becomes NPA as at the close of any year, interest accrued and credited to income account in the corresponding previous year, should be reversed or provided for if the same is not realised. This will apply to Government guaranteed accounts also. In respect of NPAs, fees, commission and similar income that have accrued should cease to accrue in the current period and should be reversed or provided for with respect to past periods, if uncollected. The net lease rentals (finance charge) on the leased asset accrued and credited to income account before the asset became non-performing, and remaining unrealised, should be reversed or provided for in the current accounting period. The term 'net lease rentals' would mean the amount of finance charge taken to the credit of Profit & Loss Account and would be worked out as gross lease rentals adjusted by amount of statutory depreciation and lease equalisation account. As per the 'Guidance Note on Accounting for Leases' issued by the Council of the

Institute of Chartered Accountants of India (ICAI), a separate Lease Equalisation Account should be opened by the banks with a corresponding debit or credit to Lease Adjustment Account, as the case may be. Further, Lease Equalisation Account should be transferred every year to the Profit & Loss Account and disclosed separately as a deduction from/addition to gross value of lease rentals shown under the head 'Gross Income'. Interest realised on NPAs may be taken to income account provided the credits in the accounts towards interest are not out of fresh/ additional credit facilities sanctioned to the borrower concerned. In the absence of a clear agreement between the bank and the borrower for the purpose of appropriation of recoveries in NPAs (i.e. towards principal or interest due), banks should adopt an accounting principle and exercise the right of appropriation of recoveries in a uniform and consistent manner. There is no objection to the banks using their own discretion in debiting interest to an NPA account taking the same to Interest Suspense Account or maintaining only a record of such interest in proforma accounts. Banks are required to furnish a Report on NPAs as on 31st March each year after completion of audit. The NPAs would relate to the banks global portfolio, including the advances at the foreign branches. The Report should be furnished as per the prescribed format given in the Annexure I. While reporting NPA figures to RBI, the amount held in interest suspense account, should be shown as a deduction from gross NPAs as well as gross advances while arriving at the net NPAs. Banks which do not maintain Interest Suspense account for parking interest due on non-performing advance accounts, may furnish the amount of interest receivable on NPAs as a foot note to the Report. Whenever NPAs are reported to RBI, the amount of technical write off, if any, should be reduced from the outstanding gross advances and gross NPAs to eliminate any distortion in the quantum of NPAs being reported

2.4. Asset Classification

2.4.1 Standard Assets: Standard assets are the ones in which the bank is receiving interest as well as the principal amount of the loan regularly from the customer. Here it is also very important that in this case the arrears of interest and the principal amount of loan does not exceed 90 days at the end of financial year. If asset fails to be in category of standard asset that is amount due more than 90 days then it is NPA and NPAs are further need to classify in sub categories. Banks are required to classify non-performing assets further into the following three categories based on the period for which the asset has remained nonperforming and the realisability of the dues: 2.4.2 Sub-standard Assets: A sub-standard asset was one, which was classified as NPA for a period not exceeding two years. With effect from 31 March 2001, a sub-standard asset is one, which has remained NPA for a period less than or equal to 18 months. In such cases, the current net worth of the borrower/ guarantor or the current market value of the security charged is not enough to ensure recovery of the dues to the banks in full. In other words, such an asset will have well defined credit weaknesses that jeopardise the liquidation of the debt and are characterised by the distinct possibility that the banks will sustain some loss, if deficiencies are not corrected. 2.4.3 Doubtful Assets: A doubtful asset was one, which remained NPA for a period exceeding two years. With effect from 31 March 2001, an asset is to be classified as doubtful, if it has remained NPA for a period exceeding 18 months. A loan classified as doubtful has all the weaknesses inherent in assets that were classified as sub-standard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions and values highly questionable and improbable.

With effect from March 31, 2005, an asset would be classified as doubtful if it remained in the sub-standard category for 12 months. 2.4.3 Loss Assets: A loss asset is one where the bank or internal or external auditors have identified loss or the RBI inspection but the amount has not been written off wholly. In other words, such an asset is considered uncollectible and of such little value that its continuance as a bankable asset is not warranted although there may be some salvage or recovery value.

2.5 Provisioning Norms In order to narrow down the divergences and ensure adequate provisioning by banks, it was suggested that a bank's statutory auditors, if they so desire, could have a dialogue with RBI's Regional Office/ inspectors who carried out the bank's inspection during the previous year with regard to the accounts contributing to the difference. Pursuant to this, regional offices were advised to forward a list of individual advances, where the variance in the provisioning requirements between the RBI and the bank is above certain cut off levels so that the bank and the statutory auditors take into account the assessment of the RBI while making provisions for loan loss, etc.

The primary responsibility for making adequate provisions for any diminution in the value of loan assets, investment or other assets is that of the bank managements and the statutory auditors. The assessment made by the inspecting officer of the RBI is furnished to the bank to assist the bank management and the statutory auditors in taking a decision in regard to making adequate and necessary provisions in terms of prudential guidelines. In conformity with the prudential norms, provisions should be made on the nonperforming assets on the basis of classification of assets into prescribed categories as detailed in paragraphs 4 supra. Taking into account the time lag between an account becoming doubtful of recovery, its recognition as such, the realisation of the security and the erosion over time in the value of security charged to the bank, the banks should make provision against sub-standard assets, doubtful assets and loss assets as below: 2.5.1 Loss assets: The entire asset should be written off. If the assets are permitted to remain in the books for any reason, 100 percent of the outstanding should be provided for. 2.5.2 Doubtful assets: 100 percent of the extent to which the advance is not covered by the realisable value of the security to which the bank has a valid recourse and the realisable value is estimated on a realistic basis. In regard to the secured portion, provision may be made on the following basis, at the rates ranging from 20 percent to 50 percent of the secured portion depending upon the period for which the asset has remained doubtful: With a view to bringing down divergence arising out of difference in assessment of the value of security, in cases of NPAs with balance of Rs. 5 crore and above stock audit at annual intervals by external agencies appointed as per the guidelines approved by the Board would be mandatory in order to enhance the reliability on

stock valuation. Valuers appointed as per the guidelines approved by the Board of Directors should get collaterals such as immovable properties charged in favour of the bank valued once in three years. A general provision of 10 percent on total outstanding should be made without making any allowance for DICGC/ECGC guarantee cover and securities available. The provisions on standard assets should not be reckoned for arriving at net NPAs. The provisions towards Standard Assets need not be netted from gross advances but shown separately as 'Contingent Provisions against Standard Assets' under 'Other Liabilities and Provisions - Others' in Schedule 5 of the balance sheet. Some of the banks make a 'floating provision' over and above the specific provisions made in respect of accounts identified as NPAs. The floating provisions, wherever available, could be set-off against provisions required to be made as per above stated provisioning guidelines. Considering that higher loan loss provisioning adds to the overall financial strength of the banks and the stability of the financial sector, banks are urged to voluntarily set apart provisions much above the minimum prudential levels as a desirable practice.

2.6 Impact of NPA 2.6.1 Profitability: NPA means booking of money in terms of bad asset, which occurred due to wrong choice of client. Because of the money getting blocked the prodigality of bank decreases not only by the amount of NPA but NPA lead to

opportunity cost also as that much of profit invested in

some return earning

project/asset. So NPA doesnt affect current profit but also future stream of profit, which may lead to loss of some long-term beneficial opportunity. Another impact of reduction in profitability is low ROI (return on investment), which adversely affect current earning of bank. 2.6.2 Liquidity: Money is getting blocked, decreased profit lead to lack of enough cash at hand which lead to borrowing money for shot\rtes period of time which lead to additional cost to the company. Difficulty in operating the functions of bank is another cause of NPA due to lack of money. Routine payments and dues. 2.6.3 Involvement of management: Time and efforts of management is another indirect cost which bank has to bear due to NPA. Time and efforts of management in handling and managing NPA would have diverted to some fruitful activities, which would have given good returns. Now days banks have special employees to deal and handle NPAs, which is additional cost to the bank. 2.6.4 Credit loss: Bank is facing problem of NPA then it adversely affect the value of bank in terms of market credit. It will lose its goodwill and brand image and credit which have negative impact to the people who are putting their money in the banks .

2.7 REASONS FOR NPA: 2.7.1Internal Factors:

Internal Factors are those, which are internal to the bank and are controllable by banks Poor lending decision: Non-Compliance to lending norms: Lack of post credit supervision: Failure to appreciate good payers: Excessive overdraft lending: Non Transparent accounting policy:

2.7.2 External Factors: External factors are those, which are external to banks they are not controllable by banks. Socio political pressure: Chang in industry environment: Endangers macroeconomic disturbances: Natural calamities Industrial sickness Diversion of funds and willful defaults ( Time/ cost overrun in project implementation Labor problems of borrowed firm Business failure Inefficient management Obsolete technology Product obsolete

2.8 Preventive Measurement For NPA 2.8.1 Early Recognition of the Problem: Invariably, by the time banks start their efforts to get involved in a revival process, its too late to retrieve the situation- both in terms of rehabilitation of the project and recovery of banks dues. Identification of weakness in the very beginning that is : When the account starts showing first signs of weakness regardless of the fact that it may not have become NPA, is imperative. Assessment of the potential of revival may be done on the basis of a technoeconomic viability study. Restructuring should be attempted where, after an objective assessment of the promoters intention, banks are convinced of a turnaround within a scheduled timeframe. In respect of totally unviable units as decided by the bank, it is better to facilitate winding up/ selling of the unit earlier, so as to recover whatever is possible through legal means before the security position becomes worse. 2.8.2 Identifying Borrowers with Genuine Intent: Identifying borrowers with genuine intent from those who are non- serious with no commitment or stake in revival is a challenge confronting bankers. Here the role of frontline officials at the branch level is paramount as they are the ones who has intelligent inputs with regard to promoters sincerity, and capability to achieve turnaround. Base don this objective assessment, banks should decide as quickly as possible whether it would be worthwhile to commit additional finance. In this regard banks may consider having Special Investigation of all financial transaction or business transaction, books of account in order to ascertain real factors that contributed to sickness of the borrower. Banks may have penal of technical experts with proven expertise and track record of preparing techno-economic study of the project of the borrowers. Borrowers having genuine problems due to temporary mismatch in fund flow or sudden requirement of additional fund may be entertained at branch level, and for this purpose a special limit to such type of cases should be decided. This will

obviate the need to route the additional funding through the controlling offices in deserving cases, and help avert many accounts slipping into NPA category 2.8.2 Timeliness and Adequacy of response: Longer the delay in response, grater the injury to the account and the asset. Time is a crucial element in any restructuring or rehabilitation activity. The response decided on the basis of techno-economic study and promoters commitment, has to be adequate in terms of extend of additional funding and relaxations etc. under the restructuring exercise. The package of assistance may be flexible and bank may look at the exit option. 2.8.3 Focus on Cash Flows: While financing, at the time of restructuring the banks may not be guided by the conventional fund flow analysis only, which could yield a potentially misleading picture. Appraisal for fresh credit requirements may be done by analyzing funds flow in conjunction with the Cash Flow rather than only on the basis of Funds Flow. 2.8.3 Management Effectiveness: The general perception among borrower is that it is lack of finance that leads to sickness and NPAs. But this may not be the case all the time. Management effectiveness in tackling adverse business conditions is a very important aspect that affects a borrowing units fortunes. A bank may commit additional finance to an aling unit only after basic viability of the enterprise also in the context of quality of management is examined and confirmed. Where the default is due to deeper malady, viability study or investigative audit should be done it will be useful to have consultant appointed as early as possible to examine this aspect. A proper techno- economic viability study must thus become the basis on which any future action can be considered. 2.8.4 Multiple Financing:

During the exercise for assessment of viability and restructuring, a Pragmatic and unified approach by all the lending banks/ FIs as also sharing of all relevant information on the borrower would go a long way toward overall success of rehabilitation exercise, given the probability of success/failure. In some default cases, where the unit is still working, the bank should make sure that it captures the cash flows (there is a tendency on part of the borrowers to switch bankers once they default, for fear of getting their cash flows forfeited), and ensure that such cash flows are used for working capital purposes. Toward this end, there should be regular flow of information among consortium members. A bank, which is not part of the consortium, may not be allowed to offer credit facilities to such defaulting clients. Current account facilities may also be denied at non-consortium banks to such clients and violation may attract penal action. The Credit Information Bureau of India Ltd.(CIBIL) may be very useful for meaningful information exchange on defaulting borrowers once the setup becomes fully operational. In a forum of lenders, the priority of each lender will be different. While one set of lenders may be willing to wait for a longer time to recover its dues, another lender may have a much shorter timeframe in mind. So it is possible that the letter categories of lenders may be willing to exit, even a t a cost by a discounted settlement of the exposure. Therefore, any plan for restructuring/rehabilitation may take this aspect into account. Corporate Debt Restructuring mechanism has been institutionalized in 2001 to provide a timely and transparent system for restructuring of the corporate debt of Rs. 20 crore and above with the banks and FIs on a voluntary basis and outside the legal framework. Under this system, banks may greatly benefit in terms of restructuring of large standard accounts (potential NPAs) and viable sub-standard accounts with consortium/multiple banking arrangements.

2.9 Tools For recovery Of NPAs Once NPA occurred. One must come out of it or it should be managed in most efficient manner. Legal ways and means are there to over come and manage NPAs. We will look into each one of it . A] Lok Adalt and Debt Recovery Tribunal B] Securitisation Act C] Asset Reconstruction 2.9.1 Lok Adalat: Lok Adalat institutions help banks to settle disputes involving account in doubtful and loss category, with outstanding balance of Rs. 5 lakh for compromise settlement under Lok Adalat. Debt recovery tribunals have been empowered to organize Lok Adalat to decide on cases of NPAs of Rs. 10 lakh and above. This mechanism has proved to be quite effective for speedy justice and recovery of small loans. The progress through this chennel is expected to pick up in the coming years. 2.9.2 Debt Recovery Tribunals(DRT): The recovery of debts due to banks and financial institution passed in March 2000 has helped in strengthening the function of DRTs. Provision for placement of more than one recovery officer, power to attach defendants property/assets before judgment, penal provision for

disobedience of tribunals order or for breach of any terms of order and appointment of receiver with power of realization, management, protection and preservation of property are expected to provide necessary teeth to the DRTs and speed up the recovery of NPAs in the times to come. DRTs which have been set up by the Government to facilitate speedy recovery by banks/DFIs, have not been able make much impact on loan recovery due to variety of reasons like inadequate number, lack of infrastructure, under staffing and frequent adjournment of cases. It is essential that DRT mechanism is strengthened and vested with a proper enforcement mechanism to enforce their orders. Non observation of any order passed by the tribunal should amount to contempt of court, the DRT should have right to initiate contempt proceedings. The DRT should empowered to sell asset of the debtor companies and forward the proceed to the winding up court for distribution among the lenders \ Asset classification of accounts under consortium should be based on the record of recovery of the individual member banks and other aspects having a bearing on the recoverability of the advances. Where the remittances by the borrower under consortium lending arrangements are pooled with one bank and/or where the bank receiving remittances is not parting with the share of other member banks, the account will be treated as not serviced in the books of the other member banks and therefore, be treated as NPA. The banks participating in the consortium should, therefore, arrange to get their share of recovery transferred from the lead bank or get an express consent from the lead bank for the transfer of their share of recovery, to ensure proper asset classification in their respective books. 2.9.3 Corporate debt Restructuring (CDR): In spite of their best efforts and intentions, sometimes corporate find themselves in financial difficulty because of factors beyond their control and also due to certain internal reasons. For the revival of the corporate as well as for the safety of the money lent by the banks and FIs, timely support through restructuring in

genuine cases is called for. However, delay in agreement amongst different lending institutions often comes in the way of such endeavours. Based on the experience in other countries like the U.K., Thailand, Korea, etc. of putting in place institutional mechanism for restructuring of corporate debt and need for a similar mechanism in India, a Corporate Debt Restructuring System has been evolved, as under : The objective of the Corporate Debt Restructuring (CDR) framework is to ensure timely and transparent mechanism for restructuring of the corporate debts of viable entities facing problems, outside the purview of BIFR, DRT and other legal proceedings, for the benefit of all concerned. In particular, the framework will aim at preserving viable corporate that are affected by certain internal and external factors and minimize the losses to the creditors and other stakeholders through an orderly and coordinated restructuring programme 2.9.3.1 CDR Standing Forum : The CDR Standing Forum would be the representative general body of all financial institutions and banks participating in CDR system. All financial institutions and banks should participate in the system in their own interest. CDR Standing Forum will be a self-empowered body, which will lay down policies and guidelines, guide and monitor the progress of corporate debt restructuring. The Forum will also provide an official platform for both the creditors and borrowers (by consultation) to amicably and collectively evolve policies and guidelines for working out debt restructuring plans in the interests of all concerned. The CDR Standing Forum shall comprise Chairman & Managing Director, Industrial Development Bank of India; Managing Director, Industrial Credit & Investment Corporation of India Limited; Chairman, State Bank of India; Chairman, Indian Banks Association and Executive Director, Reserve Bank of India as well as Chairmen and Managing Directors of all banks and financial institutions participating as permanent members in the system. The Forum will

elect its Chairman for a period of one year and the principle of rotation will be followed in the subsequent years. However, the Forum may decide to have a Working Chairman as a whole-time officer to guide and carry out the decisions of the CDR Standing Forum. A CDR Core Group will be carved out of the CDR Standing Forum to assist the Standing Forum in convening the meetings and taking decisions relating to policy, on behalf of the Standing Forum. The Core Group will consist of Chief Executives of IDBI, ICICI, SBI, Bank of Baroda, Bank of India, Punjab National Bank, Indian Banks Association and a representative of Reserve Bank of India. The CDR Standing Forum shall meet at least once every six months and would review and monitor the progress of corporate debt restructuring system. The Forum would also lay down the policies and guidelines to be followed by the CDR Empowered Group and CDR Cell for debt restructuring and would ensure their smooth functioning and adherence to the prescribed time schedules for debt restructuring. It can also review any individual decisions of the CDR Empowered Group and CDR Cell. The CDR Standing Forum, the CDR Empowered Group and CDR Cell (described in following paragraphs) shall be housed in IDBI. All financial institutions and banks shall share the administrative and other costs. The sharing pattern shall be as determined by the Standing Forum. 2.9.3.2 CDR Empowered Group and CDR Cell: The individual cases of corporate debt restructuring shall be decided by the CDR Empowered Group, consisting of ED level representatives of IDBI, ICICI Limited and SBI as standing members, in addition to ED level representatives of financial institutions and banks who have an exposure to the concerned company. In order to make the CDR Empowered Group effective and broad based and operate efficiently and smoothly, it would have to be ensured that each financial institution and bank, as participants of the CDR system, nominates a panel of two or three Eds, one of whom will participate in a specific meeting of the Empowered Group dealing with individual restructuring cases. Where, however, a

bank / financial institution has only one Executive Director, the panel may consist of senior officials, duly authorized by its Board. The level of representation of banks/ financial institutions on the CDR Empowered Group should be at a sufficiently senior level to ensure that concerned bank / FI abides by the necessary commitments including sacrifices, made towards debt restructuring. The Empowered Group will consider the preliminary report of all cases of requests of restructuring, submitted to it by the CDR Cell. After the Empowered Group decides that restructuring of the company is prima-facie feasible and the enterprise is potentially viable in terms of the policies and guidelines evolved by Standing Forum, the detailed restructuring package will be worked out by the CDR Cell in conjunction with the Lead Institution. The CDR Empowered Group would be mandated to look into each case of debt restructuring, examine the viability and rehabilitation potential of the Company and approve the restructuring package within a specified time frame of 90 days, or at best 180 days of reference to the Empowered Group. There should be a general authorisation by the respective Boards of the participating institutions / banks in favour of their representatives on the CDR Empowered Group, authorising them to take decisions on behalf of their organization, regarding restructuring of debts of individual corporates. The decisions of the CDR Empowered Group shall be final and action-reference point. If restructuring of debt is found viable and feasible and accepted by the Empowered Group, the company would be put on the restructuring mode. If, however, restructuring is not found viable, the creditors would then be free to take necessary steps for immediate recovery of dues and / or liquidation or winding up of the company, collectively or individually. 2.9.3.3 CDR Cell: The CDR Standing Forum and the CDR Empowered Group will be assisted by a CDR Cell in all their functions. The CDR Cell will make the initial scrutiny of the proposals received from borrowers / lenders, by calling for proposed

rehabilitation plan and other information and put up the matter before the CDR Empowered Group, within one month to decide whether rehabilitation is prima facie feasible, if so, the CDR Cell will proceed to prepare detailed Rehabilitation Plan with the help of lenders and if necessary, experts to be engaged from outside. If not found prima facie feasible, the lenders may start action for recovery of their dues. To begin with, CDR Cell will be constituted in IDBI, Mumbai and adequate members of staff for the Cell will be deputed from banks and financial institutions. The CDR Cell may also take outside professional help. The initial cost in operating the CDR mechanism including CDR Cell will be met by IDBI initially for one year and then from contribution from the financial institutions and banks in the Core Group at the rate of Rs.50 lakh each and contribution from other institutions and banks at the rate of Rs.5 lakh each. All references for corporate debt restructuring by lenders or borrowers will be made to the CDR Cell. It shall be the responsibility of the lead institution / major stakeholder to the corporate, to work out a preliminary restructuring plan in consultation with other stakeholders and submit to the CDR Cell within one month. The CDR Cell will prepare the restructuring plan in terms of the general policies and guidelines approved by the CDR Standing Forum and place for the consideration of the Empowered Group within 30 days for decision. The Empowered Group can approve or suggest modifications, so, however, that a final decision must be taken within a total period of 90 days. However, for sufficient reasons the period can be extended maximum upto 180 days from the date of reference to the CDR Cell. CDR will be a Non-statutory mechanism CDR mechanism will be a voluntary system based on debtor-creditor agreement and inter-creditor agreement. The scheme will not apply to accounts involving only one financial institution or one bank. The CDR mechanism will cover only multiple banking accounts /

syndication / consortium accounts with outstanding exposure of Rs.20 crore and above by banks and institutions. The CDR system will be applicable only to standard and sub-standard accounts. However, as an interim measure, permission for corporate debt restructuring will be made available by RBI on the basis of specific recommendation of CDR "Core-Group", if a minimum of 75 per cent (by value) of the lenders constituting banks and FIs consent for CDR, irrespective of differences in asset classification status in banks/ financial institutions. There would be no requirement of the account / company being sick, NPA or being in default for a specified period before reference to the CDR Group. However, potentially viable cases of NPAs will get priority. This approach would provide the necessary flexibility and facilitate timely intervention for debt restructuring. Prescribing any milestone(s) may not be necessary, since the debt restructuring exercise is being triggered by banks and financial institutions or with their consent. In no case, the requests of any corporate indulging in wilful default or misfeasance will be considered for restructuring under CDR. Reference to Corporate Debt Restructuring System could be triggered by (i) any or more of the secured creditor who have minimum 20% share in either working capital or term finance, or (ii) by the concerned corporate, if supported by a bank or financial institution having stake as in (i) above. The legal basis to the CDR mechanism shall be provided by the Debtor-Creditor Agreement (DCA) and the Inter-Creditor Agreement. The debtors shall have to accede to the DCA, either at the time of original loan documentation (for future cases) or at the time of reference to Corporate Debt Restructuring Cell. Similarly, all participants in the CDR mechanism through their membership of the Standing Forum shall have to enter into a legally binding agreement, with necessary enforcement and penal clauses, to operate the System through laid-down policies and guidelines. Stand-Still Clause:

One of the most important elements of Debtor-Creditor Agreement would be 'stand still' agreement binding for 90 days, or 180 days by both sides. Under this clause, both the debtor and creditor(s) shall agree to a legally binding 'stand-still' whereby both the parties commit themselves not to taking recourse to any other legal action during the 'stand-still' period, this would be necessary for enabling the CDR System to undertake the necessary debt restructuring exercise without any outside intervention judicial or otherwise. The Inter-Creditors Agreement would be a legally binding agreement amongst the secured creditors, with necessary enforcement and penal clauses, wherein the creditors would commit themselves to abide by the various elements of CDR system. Further , the creditors shall agree that if 75% of secured creditors by value, agree to a debt restructuring package, the same would be binding on the remaining secured creditors. Accounting treatment for restructured accounts The accounting treatment of accounts restructured under CDR would be governed by the prudential norms indicated in circular DBOD. BP. BC. 98 / 21.04.048 / 2000-01 dated March 30, 2001. Restructuring of corporate debts under CDR could take place in the following stages: Before commencement of commercial production; After commencement of commercial production but before the asset has been classified as sub-standard; After commencement of commercial production and the asset has been classified as sub-standard. The prudential treatment of the accounts, subjected to restructuring under CDR, would be governed by the following norms: A rescheduling of the instalments of principal alone, at any of the aforesaid first two stages [paragraph 5(a) and (b) above] would not cause a standard asset to be classified in the sub-standard category, provided the loan / credit facility is fully secured.

A rescheduling of interest element at any of the foregoing first two stages would not cause an asset to be downgraded to sub-standard category subject to the condition that the amount of sacrifice, if any, in the element of interest, measured in present value terms, is either written off or provision is made to the extent of the sacrifice involved. For the purpose, the future interest due as per the original loan agreement in respect of an account should be discounted to the present value at a rate appropriate to the risk category of the borrower (i.e. current PLR + the appropriate credit risk premium for the borrower-category) and compared with the present value of the dues expected to be received under the restructuring package, discounted on the same basis. In case there is a sacrifice involved in the amount of interest in present value terms, as at (b) above, the amount of sacrifice should either be written off or provision made to the extent of the sacrifice involved. A rescheduling of the instalments of principal alone, would render a sub-standard asset eligible to be continued in the sub-standard category for the specified period, provided the loan / credit facility is fully secured. A rescheduling of interest element would render a sub-standard asset eligible to be continued to be classified in sub-standard category for the specified period subject to the condition that the amount of sacrifice, if any, in the element of interest, measured in present value terms, is either written off or provision is made to the extent of the sacrifice involved. For the purpose, the future interest due as per the original loan agreement in respect of an account should be discounted to the present value at a rate appropriate to the risk category of the borrower (i.e., current PLR + the appropriate credit risk premium for the borrower-category) and compared with the present value of the dues expected to be received under the restructuring package, discounted on the same basis. In case there is a sacrifice involved in the amount of interest in present value terms, as at (b) above, the amount of sacrifice should either be written off or provision made to the extent of the sacrifice involved. Even in cases where the

sacrifice is by way of write off of the past interest dues, the asset should continue to be treated as sub-standard. The sub-standard accounts at (ii) (a), (b) and (c) above, which have been subjected to restructuring, etc. whether in respect of principal instalment or interest amount, by whatever modality, would be eligible to be upgraded to the standard category only after the specified period, i.e., a period of one year after the date when first payment of interest or of principal, whichever is earlier, falls due, subject to satisfactory performance during the period. The amount of provision made earlier, net of the amount provided for the sacrifice in the interest amount in present value terms as aforesaid, could also be reversed after the oneyear period. During this one-year period, the sub-standard asset will not deteriorate in its classification if satisfactory performance of the account is demonstrated during the period. In case, however, the satisfactory performance during the one year period is not evidenced, the asset classification of the restructured account would be governed as per the applicable prudential norms with reference to the prerestructuring payment schedule. The asset classification under CDR would continue to be bank-specific based on record of recovery of each bank, as per the existing prudential norms applicable to banks. 2.10 Restructuring/ Rescheduling of Loans A standard asset where the terms of the loan agreement regarding interest and principal have been renegotiated or rescheduled after commencement of production should be classified as sub-standard and should remain in such category for at least one year of satisfactory performance under the renegotiated or rescheduled terms. In the case of sub-standard and doubtful assets also, rescheduling does not entitle a bank to upgrade the quality of advance automatically unless there is satisfactory performance under the rescheduled / renegotiated terms. Following representations from banks that the foregoing

stipulations deter the banks from restructuring of standard and sub-standard loan assets even though the modification of terms might not jeopardise the assurance of repayment of dues from the borrower, the norms relating to restructuring of standard and sub-standard assets were reviewed in March 2001. In the context of restructuring of the accounts, the following stages at which the restructuring / rescheduling / renegotiation of the terms of loan agreement could take place, can be identified: before commencement of commercial production; after commencement of commercial production but before the asset has been classified as sub standard, after commencement of commercial production and after the asset has been classified as sub standard. In each of the foregoing three stages, the rescheduling, etc., of principal and/or of interest could take place, with or without sacrifice, as part of the restructuring package evolved. 2.10.1 Treatment of Restructured Standard Accounts: A rescheduling of the instalments of principal alone, at any of the aforesaid first two stages would not cause a standard asset to be classified in the sub standard category provided the loan/credit facility is fully secured.

A rescheduling of interest element at any of the foregoing first two stages would not cause an asset to be downgraded to sub standard category subject to the condition that the amount of sacrifice, if any, in the element of interest, measured in present value terms, is either written off or provision is made to the extent of the sacrifice involved. For the purpose, the future interest due as per the original loan agreement in respect of an account should be discounted to the present value at a rate appropriate to the risk category of the borrower (i.e., current PLR+ the appropriate credit risk premium for the borrower-category) and compared with the

present value of the dues expected to be received under the restructuring package, discounted on the same basis. In case there is a sacrifice involved in the amount of interest in present value terms, as at (b) above, the amount of sacrifice should either be written off or provision made to the extent of the sacrifice involved. 2.10.2 Treatment of restructured sub-standard accounts: A rescheduling of the instalments of principal alone, would render a sub-standard asset eligible to be continued in the sub-standard category for the specified period, provided the loan/credit facility is fully secured. A rescheduling of interest element would render a sub-standard asset eligible to be continued to be classified in sub standard category for the specified period subject to the condition that the amount of sacrifice, if any, in the element of interest, measured in present value terms, is either written off or provision is made to the extent of the sacrifice involved. For the purpose, the future interest due as per the original loan agreement in respect of an account should be discounted to the present value at a rate appropriate to the risk category of the borrower (i.e., current PLR + the appropriate credit risk premium for the borrower-category) and compared with the present value of the dues expected to be received under the restructuring package, discounted on the same basis. In case there is a sacrifice involved in the amount of interest in present value terms, as at (b) above, the amount of sacrifice should either be written off or provision made to the extent of the sacrifice involved. Even in cases where the sacrifice is by way of write off of the past interest dues, the asset should continue to be treated as sub-standard. 2.10.3 Up gradation of restructured accounts: The sub-standard accounts which have been subjected to restructuring etc., whether in respect of principal

instalment or interest amount, by whatever modality, would be eligible to be upgraded to the standard category only after the specified period i.e., a period of one year after the date when first payment of interest or of principal, whichever is earlier, falls due, subject to satisfactory performance during the period. The amount of provision made earlier, net of the amount provided for the sacrifice in the interest amount in present value terms as aforesaid, could also be reversed after the one year period. During this one-year period, the sub-standard asset will not deteriorate in its classification if satisfactory performance of the account is demonstrated during the period. In case, however, the satisfactory performance during the one-year period is not evidenced, the asset classification of the restructured account would be governed as per the applicable prudential norms with reference to the pre-restructuring payment schedule. These instructions would be applicable to all type of credit facilities including working capital limits, extended to industrial units, provided they are fully covered by tangible securities. As trading involves only buying and selling of commodities and the problems associated with manufacturing units such as bottleneck in commercial production, time and cost escalation etc. are not applicable to them, these guidelines should not be applied to restructuring/ rescheduling of credit facilities extended to traders. While assessing the extent of security cover available to the credit facilities, which are being restructured/ rescheduled, collateral security would also be reckoned, provided such collateral is a tangible security properly charged to the bank and is not in the intangible form like guarantee etc. of the promoter/ others.

2.11 Projects under implementation It was observed that there were instances, where despite substantial time overrun in the projects under implementation, the underlying loan assets remained

classified in the standard category merely because the project continued to be under implementation. Recognising that unduly long time overrun in a project adversely affected its viability and the quality of the asset deteriorated, a need was felt to evolve an objective and definite time-frame for completion of projects so as to ensure that the loan assets relating to projects under implementation were appropriately classified and asset quality correctly reflected. In the light of the above background, it was decided to extend the norms detailed below on income recognition, asset classification and provisioning to banks with respect to industrial projects under implementation, which involve time overrun. The projects under implementation are grouped into three categories for the purpose of determining the date when the project ought to be completed: Projects where financial closure had been achieved and formally documented. Projects sanctioned before 1997 with original project cost of Rs.100 crore or more where financial closure was not formally documented. Projects sanctioned before 1997 with original project cost of less than Rs.100 crore where financial closure was not formally documented. In case of each of the three categories, the date when the project ought to be completed and the classification of the underlying loan asset should be determined in the following manner: (Projects where financial closure had been achieved and formally documented): In such cases the date of completion of the project should be as envisaged at the time of original financial closure. In all such cases, the asset may be treated as standard asset for a period not exceeding two years beyond the date of completion of the project, as originally envisaged at the time of initial financial closure of the project. In case, however, in respect of a project financed after 1997, the financial closure had not been formally documented, the norms enumerated for category III below, would apply.

(Projects sanctioned before 1997 with original project cost of Rs.100 crore or more where financial closure was not formally documented): For such projects sanctioned prior to 1997, where the date of financial closure had not been formally documented, an independent Group was constituted with experts from the term lending institutions as well as outside experts in the field to decide on the deemed date of completion of projects. The Group, based on all material and relevant facts and circumstances, has decided the deemed date of completion of the project, on a project-by-project basis. In such cases, the asset may be treated as standard asset for a period not exceeding two years beyond the deemed date of completion of the project, as decided by the Group. Banks, which have extended finance towards such projects, may approach the lead financial institutions to which a copy of the independent Groups report has been furnished for obtaining the particulars relating to the deemed date of completion of project concerned. (Projects sanctioned before 1997 with original project cost of less than Rs.100 crore where financial closure was not formally documented): In these cases, sanctioned prior to 1997, where the financial closure was not formally documented, the date of completion of the project would be as originally envisaged at the time of sanction. In such cases, the asset may be treated as standard asset only for a period not exceeding two years beyond the date of completion of the project as originally envisaged at the time of sanction. In all the three foregoing categories, in case of time overruns beyond the aforesaid period of two years, the asset should be classified as sub-standard regardless of the record of recovery and provided for accordingly. As regards the projects to be financed by the FIs/ banks in future, the date of completion of the project should be clearly spelt out at the time of financial closure of the project. In such cases, if the date of commencement of commercial production extends beyond a period of six months after the date of completion of the project, as originally envisaged at the time of initial financial closure of the project, the account should be treated as a sub-standard asset.

There will be no change in the existing instructions on income recognition. Consequently, banks should not recognise income on accrual basis in respect of the projects even though the asset is classified as a standard asset if the asset is a "non performing asset" in terms of the extant instructions. In other words, while the accounts of the project may be classified as a standard asset, banks shall recognise income in such accounts only on realisation on cash basis if the asset has otherwise become non performing as per the extant delinquency norm of 180 days. The delinquency norm would become 90 days with effect from 31 March 2004. Consequently, banks, which have wrongly recognised income in the past, should reverse the interest if it was recognised as income during the current year or make a provision for an equivalent amount if it was recognised as income in the previous year(s). As regards the regulatory treatment of income recognised as funded interest and conversion into equity, debentures or any other instrument banks should adopt the following: Funded Interest: Income recognition in respect of the NPAs, regardless of whether these are or are not subjected to restructuring/ rescheduling/ renegotiation of terms of the loan agreement, should be done strictly on cash basis, only on realisation and not if the amount of interest overdue has been funded. If, however, the amount of funded interest is recognised as income, a provision for an equal amount should also be made simultaneously. In other words, any funding of interest in respect of NPAs, if recognised as income, should be fully provided for. Conversion into equity, debentures or any other instrument: The amount outstanding converted into other instruments would normally comprise principal and the interest components. If the amount of interest dues is converted into equity or any other instrument, and income is recognised in consequence, full provision should be made for the amount of income so recognised to offset the effect of such income recognition. Such provision would be in addition to the

amount of provision that may be necessary for the depreciation in the value of the equity or other instruments, as per the investment valuation norms. However, if the conversion of interest is into equity, which is quoted, interest income can be recognised at market value of equity, as on the date of conversion, not exceeding the amount of interest converted to equity. Such equity must thereafter be classified in the "available for sale" category and valued at lower of cost or market value. In case of conversion of principal and /or interest in respect of NPAs into debentures, such debentures should be treated as NPA, ab initio, in the same asset classification as was applicable to loan just before conversion and provision made as per norms. This norm would also apply to zero coupon bonds or other instruments which seek to defer the liability of the issuer. On such debentures, income should be recognised only on realisation basis. The income in respect of unrealised interest, which is converted into debentures or any other fixed maturity instrument, should be recognised only on redemption of such instrument. Subject to the above, the equity shares or other instruments arising from conversion of the principal amount of loan would also be subject to the usual prudential valuation norms as applicable to such instruments.

CHAPTER 3

ANALYSIS

AND INTERPRETATION

Functioning of Branches
Table No 3.1 Description 0-2 years 2-3 years 3-5 years 5 years Total & above No of 02 09 21 18 50 Respondent % 04 18 42 36 100

Source:- Primary Data Graph No 3.1

Interpretation: From the above graph it is observed that, 02(04%) respondent responded that their branch is functioning from 0-2 years, 09(18%) respondent responded that their branch is functioning from 2-3 years, 21(42%) respondent responded that their branch is functioning from 3-5 years, 18(36%) respondent responded that their branch is functioning from 5 years and above.

Duration of Working in this Bank

Table No 3.2 Description 0-1 years 2-3 years 4-5 years More than Total 5 years No of 02 25 13 10 50 Respondent % 04 50 26 20 100

Source-Primary Data Graph No 3.2

Interpretation: From the above graph it is observed that, 02(04%) respondent responded that their working in this branch from 0-2 years, 25(50%) respondent responded that their working in this branch from 2-3 years, 13(26%) respondent responded that their working in this branch from 3-5 years, 10(20%) respondent responded that their working in this branch from more than 5 years.

Presence of NPA
Table No 3.3 Description 0-1 years 2-3 years 4-5 years More than Total 5 years No of 03 30 14 03 50 Respondent

% 06 Source-Primary Data Graph No 3.3

60

28

06

100

Interpretation: From the above graph it is observed that, 03(06%) respondent responded that presence of NPAs is observed in there branch from 0-2 years, 30(60%) respondent responded that presence of NPAs is observed in there branch from 2-3 years, 14(28%) respondent responded that presence of NPAs is observed in there branch from 3-5 years, 03(06%) respondent responded that presence of NPAs is observed in there branch from more than 5 years.

Reasons of NPA
Table No 3.4

Description Improper Credit Appraisal No of 03 Respondent % 06 Source Primary Data Graph No 3.4

Lack of Effective Follow up 11 22

Manageme nt Failure 33 66

Difficulty In Execution 02 04

Diversion Others Total Of Funds 03 06 00 00 50 100

Interpretation: From the above graph it is observed that, 03(06%) respondent responded that main reason of NPAs in banks are improper credit appraisal,11(22%) respondent responded that main reason of NPAs in banks are lack of effective follow up,33(66%) respondent responded that main reason of NPAs in banks is management failure,02(04%) respondent responded that main reason of NPAs in banks is diversion of funds.

Percentage of Standard assets to Total Assets

Table No 3.5.1

Description 0-20 21-40 No of 04 11 Respondent % 08 22 Source- Primary Data Graph No 3.5.1

41-60 33 66

61-80 02 04

81-100 00 00

Total 50 100

Interpretation: From the above graph it is observed that, 04(08%) respondent responded that 0-20 percent of total assets are standard assets in their branch,11(22%) respondent responded that 21-40 percent of total assets are standard assets in their branch,33(66%) respondent responded that 41-60 percent of total assets are standard assets in their branch,02(04%) respondent responded that 61-80 percent of total assets are standard assets in their branch.

Percentage of Sub-Standard assets to Total Assets

Table No 3.5.2

Description 021-40 20 No of 05 10 Respondent % 10 20 Source- Primary Data Graph No 3.5.2

41-60 32 64

61-80 03 06

81-100 00 00

Total 50 100

Interpretation: From the above graph it is observed that, 05(10%) respondent responded that 0-20 percent of total assets are sub-standard assets in their branch,10(20%) respondent responded that 21-40 percent of total assets are sub-standard in their branch,32(64%) respondent responded that 41-60 percent of total assets are sub-standard in their branch,03(06%) respondent responded that 61-80 percent of total assets are sub-standard in their branch.

Percentage of Doubtful Assets to Total Assets

Table No 3.5.3 Description 021-40 20 No of 07 13 Respondent % 14 26 Source- Primary Data Graph No 3.5.3

41-60 08 16

61-80 22 44

81-100 00 00

Total 50 100

Interpretation: From the above graph it is observed that, 07(10%) respondent responded that 0-20 percent of total assets are doubtful assets in their branch,13(26%) respondent responded that 21-40 percent of total assets are doubtful in their branch,08(16%) respondent responded that 41-60 percent of total assets are doubtful in their branch,22(44%) respondent responded that 61-80 percent of total assets are doubtful in their branch.

Percentage of Loss Assets to Total Assets

Table No 3.5.4 Description 021-40 20 No of 05 31 Respondent % 10 62 Source- Primary Data Graph No 3.5.4 41-60 09 18 61-80 05 10 81-100 00 00 Total 50 100

Interpretation: From the above graph it is observed that, 05(10%) respondent responded that 0-20 percent of total assets are loss assets in their branch,31 (62%) respondent responded that 21-40 percent of total assets are loss assets in their branch,09(18%) respondent responded that 41-60 percent of total assets are loss assets in their branch,05(10%) respondent responded that 61-80 percent of total assets are loss assets in their branch.

Effect of NPA in Last 5 years

Table No 3.6 Description Improve Profitability No of 10 Respondent % 20 Source- Primary Data Graph No 3.6 Decreased Profitability 38 76 No Change 02 04 Total 50 100

Interpretation: From the above graph it is observed that, 05(10%) respondent responded that 020 percent of total assets are loss assets in their branch,31 (62%) respondent responded that 21-40 percent of total assets are loss assets in their branch,09(18%) respondent responded that 41-60 percent of total assets are loss assets in their branch,05(10%) respondent responded that 61-80 percent of total assets are loss assets in their branch.

Loan Maximum causes NPA

Table No 3.7 Description Commercial Personal No of 15 35 Respondent % 30 70 Source Primary Data Graph No 3.7 Total 50 100

Interpretation: From the above graph it is observed that, 15(35%) respondent responded that maximum NPAs are caused from commercial loan, 35(70%) respondent responded that maximum NPAs are caused from Personal loan.

Commercial Loan
Table No 3.7.1 Description SSI No of 02 Respondent % 13 Source Primary Data Graph No 3.7.1 Traders Others Total 07 06 15 47 40 100

Interpretation: From the above graph it is observed that, 02(13%) respondent responded that NPA caused from commercial loan is due to SSI, 07(47%) respondent responded that NPA caused from commercial loan is due to Traders, , 06(40%) respondent responded that NPA caused from commercial loan is due to other loans.

Personal Loan
Table No 3.7.2 Description Housing Loan No of 05 Respondent % 14 Source Primary Data Graph No 3.7.2 Education Others Total Loan 04 26 35 11 75 100

Interpretation: From the above graph it is observed that, 05(14%) respondent responded that NPA caused from personal is due to Housing loan, 04(11%) respondent responded that NPA caused from personal loan is due to Education loan,26(75%) , respondent responded that NPA caused from commercial loan is due to other Loans.

Impact of NPA in profitability

Table No 3.8 Description < 5 % 6-10 % No of 02 24 Respondent % 04 48 Source Primary Data Graph No 3.8 11-20 % 22 44 > 20 % 02 04 Total 50 100

Interpretation: From the above graph it is observed that, 05(14%) respondent responded that NPA caused from personal is due to Housing loan, 04(11%) respondent responded that NPA caused from personal loan is due to Education loan,26(75%) , respondent responded that NPA caused from commercial loan is due to other Loans.

NPA Control
Table No 3.9 Description Yes No No of 18 32 Respondent % 36 64 Source Primary Data Graph No 3.9 Total 50 100

Interpretation: From the above graph it is observed that, 18(36%) respondent responded that NPA can be controlled, 32(64%) respondent responded that NPA cant be controlled.

One Time Settlement scheme

Table No 3.10 Description Yes No of 15 Respondent % 30 Source Primary Data Graph No 3.10 No 35 70 Total 50 100

Interpretation: From the above graph it is observed that, 15(30%) respondent responded that they have one time settlement scheme in their branch, 35(70%) respondent responded that doesnt they have one time settlement scheme in their branch.

Benefit of One Time Settlement scheme

Table No 3.10.1 Description Waiver in Penal charges No of 04 Respondent % 27 Source Primary Data Graph No 3.10.1 Concession In Interest 06 39 Concession Others principal 04 27 01 07 Total 15 100

Interpretation: From the above graph it is observed that, 04 (27%) respondent responded that customers gets waiver in penal charges in one time settlement scheme,06(39%) respondent responded that customers gets concession in interest in one time settlement scheme,04(27%) respondent responded that customers gets concession in principal in one time settlement scheme.

Additional Securities to Curtail NPA

Table No 3.11 Description Yes No of 36 Respondent % 72 Source Primary Data Graph No 3.11 No 14 28 Total 50 100

Interpretation: From the above graph it is observed that, 36 (72%) respondent responded that they take additional securities in the form of collateral to curtail NPA, 14(28%) respondent responded that they doesnt take additional securities in the form of collateral to curtail NPA.

Measures to avoid NPA

Table No 3.12 Descriptio Prudent n Selection of borrower s No of 02 Respo ndent % 04 Source Primary Data Graph No 3.12 Appropriat e Valuation of Assets 03 06 Regular Supervisio n Effective Others Loan Total

35 70

07 14

03 06

50 100

Interpretation: From the above graph it is observed that, 02 (04%) respondent responded that measure taken to avoid NPA is prudent selection of borrowers, 03(06) %) respondent responded that measure taken to avoid NPA is appropriate valuation of assets,35(70%) %) respondent responded that measure taken to avoid NPA is regular supervision, 07( 14%) %) respondent responded that measure taken to

avoid NPA is effective loan procedure ,03(06%) respondent responded that others are measure taken to avoid NPA.

Adoption of NPA reduction Techniques

Table No 3.13 Description Improved No of 36 Respondent % 72 Source Primary Data Graph No 3.13 No Not Total Change Improved 10 04 50 20 08 100

Interpretation: From the above graph it is observed that, 36 (72%) respondent responded that profitability has improved after adopting NPA reduction techniques, 10(20%) respondent responded that there is no change in profitability after adopting NPA reduction techniques, 04(08%) respondent responded that profitability had not improved after adopting NPA reduction techniques.

NPA caused due to improper selection of borrowers

Table No 3.14.1 Description Very High Moderate Low Total High No of 10 20 15 05 50 Respondent % 20 40 30 10 100 Source- Primary Data Graph No 3.14.1

Interpretation: From the above graph it is observed that, 10 (20%) respondent responded that very high NPA is caused due to improper selection of borrowers,20(40%) respondent responded that high NPA is caused due to improper selection of borrowers, 15(30%) respondent responded that moderate NPA is caused due to improper selection of borrowers, 05(10%) respondent responded that low NPA is caused due to improper selection of borrowers.

NPA caused due to deficiency in processing

Table No 3.14.2 Description Very Hig Hig h h No of 05 15 Respondent % 10 30 Source- Primary Data Graph No 3.14.2 Moderate Low Total 25 50 05 10 50 100

Interpretation: From the above graph it is observed that, 05(10%) respondent responded that very high NPA is caused due to deficiency in processing, 15(30%) respondent responded that high NPA is caused due to deficiency in processing, 25(50%) respondent responded that moderate NPA is caused due to deficiency in

processing, 05(10%) respondent responded that low NPA is caused due to deficiency in processing.

NPA caused due to improper appraisal of Assets

Table No 3.14.3 Description Very Hig Hig h h No of 08 08 Respondent % 16 16 Source- Primary Data Graph No 3.14.3 Moderate Low Total 20 40 14 28 50 100

Interpretation: From the above graph it is observed that, 08(16%) respondent responded that very high NPA is caused due to improper appraisal of assets, 08(16%) respondent responded that high NPA is caused due to improper appraisal of assets, 20(40%)

respondent responded that moderate NPA is caused due to improper appraisal of assets, 14(28%) respondent responded that low NPA is caused due to improper appraisal of assets.

NPA caused due to Lack of Supervision

Table No 3.14.4 Description Very High High No of 14 16 Respondent % 28 32 Source- Primary Data Graph No 3.14.4 Moderate Low Total 20 40 00 00 50 100

Interpretation: From the above graph it is observed that, 14(28%) respondent responded that very high NPA is caused due to lack of supervision, 16(32%) respondent responded that high NPA is caused due to lack of supervision, 20(40%) respondent responded that moderate NPA is caused due to lack of supervision.

NPA caused due to natural calamities

Table No 3.14.5 Description Very Hig h 00 Hig h 12 24 Moderate 28 56 Low 10 20 Total 50 100

No of Respondent % 00 Source- Primary Data Graph No 3.14.5

Interpretation: From the above graph it is observed that 12(24%) respondent responded that high NPA is caused due natural calamities, 28(56%) respondent responded that moderate NPA is caused due to natural calamities, 10(20%) respondent responded that moderate NPA is caused due to natural calamities.

NPA caused due to wilful default of the Borrowers

Table No 3.14.6 Description Very Hig h 03 Hig h 08 16 Moderate 21 42 Low 18 36 Total 50 100

No of Respondent % 06 Source- Primary Data Graph No 3.14.6

Interpretation: From the above graph it is observed that 03(06%) respondent responded that high NPA is caused due to wilful default of the borrowers, 08(16%) respondent responded that moderate NPA is caused due to wilful default of the borrowers, 21

(42%) respondent responded that moderate NPA is caused due to wilful default of the borrowers, 18(36%) respondent responded that moderate NPA is caused due to wilful default of the borrowers.

Effectiveness of Constant dialogue in reduction of NPA

Table No 3.15.1 Description Effective 12 24 Least Effective 18 36 Average 20 40 No effect 00 00 Total 50 100

No of Respondent % Source- Primary Data Graph No 3.15.1

Interpretation: From the above graph it is observed that 12(24%) respondent responded that constant dialogue with the borrowers is effective factor in reducing NPA,

18(36%) respondent responded that constant dialogue with the borrowers is least effective factor in reducing NPA,20(40%) respondent responded that constant dialogue with the borrowers is average factor in reducing NPA.

Effectiveness of Borrowers in reduction of NPA

Table No 3.15.2 Descriptio n No of Responden t % Source- Primary Data Graph No 3.15.2 Effectiv e 16 32 Least Effectiv e 12 24 Averag e 14 28 No effec t 08 16 Tota l 50 100

Interpretation: From the above graph it is observed that 16(32%) respondent responded that effective selection of borrower is effective factor in reducing NPA, 12(24%) respondent responded that effective selection of borrower is least effective factor in reducing NPA,14(28%) respondent responded that effective selection of borrower is average factor in reducing NPA. 08(16%) respondent responded that effective selection of borrower has is no effect in reducing NPA.

Effectiveness of Recovery camp in reduction of NPA

Table No 3.15.3 Description Effective 12 24 Least Effective 10 20 Average 14 28 No effect 14 28 Total 50 100

No of Respondent % Source- Primary Data Graph No 3.15.3

Interpretation:

From the above graph it is observed that 12(24%) respondent responded that recovery camp is effective factor in reducing NPA, 10(20%) respondent responded that recovery camp is least effective factor in reducing NPA,14(28%) respondent responded that recover camp is average factor in reducing NPA. 14(28%) respondent responded that recovery camp has is no effect in reducing NPA.

Effectiveness of Self involvement in reduction of NPA

Table No 3.15.4 Description Effective 02 04 Least Effective 10 20 Average 23 46 No effect 15 30 Total 50 100

No of Respondent % Source- Primary Data Graph No 3.15.4

Interpretation: From the above graph it is observed that 02(04%) respondent responded that self involvement of management is effective factor in reducing NPA, 10(20%) respondent responded that self involvement of management is least effective factor in reducing NPA, 23(46%) respondent responded that effective self involvement of management is average factor in reducing NPA. 15(30%) respondent responded that self involvement of management has is no effect in reducing NPA.

Effectiveness of Lok Adalat in reduction of NPA

Table No 3.15.5 Description Effective 14 28 Least Effective 12 24 Average 14 28 No effect 08 16 Total 50 100

No of Respondent % Source- Primary Data Graph No 3.15.5

Interpretation: From the above graph it is observed that 14(28%) respondent responded that Lok Adalat is effective factor in reducing NPA, 12(24%) respondent responded that Lok Adalat is least effective factor in reducing NPA, 14(28%) respondent responded that Lok Adalat is average factor in reducing NPA. 08(316%) respondent responded that Lok Adalat has is no effect in reducing NPA.

Effectiveness of Debt recovery in reduction of NPA

Table No 3.15.6 Description Effective Least Effective 08 16 Average 12 24 No effect 10 20 Total 50 100

No of 10 Respondent % 20 Source- Primary Data Graph No 3.15.6

Interpretation: From the above graph it is observed that 10(20%) respondent responded that debt recovery is effective factor in reducing NPA, 08(16%) respondent responded that debt recovery is least effective factor in reducing NPA, 12(24%) respondent responded that debt recovery average factor in reducing NPA. 10(20%) respondent responded that debt recovery has is no effect in reducing NPA.

NPA converted into standard assets in last 5 years

Table No 3.16 Description No of Respondent % Source- Primary Data Graph No 3.16 1 % 0 2 0 4 2 % 0 3 0 6 3 % 1 5 3 0 4% 25 50 > 5 % 0 4 0 8 Not Converted 01 02

Interpretation: From the above graph it is observed that 02(04%) respondent responded that 1% NPA has been converted into standard assets in last 5 years, 03(06) respondent responded that 2% NPA has been converted into standard assets in last 5 years, 15(30%) respondent responded that 3% NPA has been converted into standard assets in last 5 years, 25(50%) respondent responded that 4% NPA has been converted into standard assets in last 5 years, 04(08%) respondent responded that more than 5% NPA has been converted into standard assets in last 5 years, 01(02%) respondent responded that no NPA has been converted into standard assets in last 5 years.

Insurance against Loan

Table No 3.17 Description Yes No of 15 Respondent % 30 Source Primary Data Graph No 3.17 No 35 70 Total 50 100

Interpretation: From the above graph it is observed that 15(30%) respondent responded that they insist borrower to take insurance against loan, 35(70%) respondent responded that they dont insist borrower to take insurance against loan

Type of Insurance
Table No 3.17.1 Description Credit Insurance 06 Life Insurance 07 47 Others 02 13 Total 15 15

No of Respondent % 40 Source Primary Data

Graph No 3.17.1

Interpretation: From the above graph it is observed that 06(40%) respondent responded that credit insurance is preferred against loan, 07(47%) respondent responded that life insurance is preferred against loan, 02(13%) respondent responded that other insurance is preferred against loan.

Recovery measures adopted

Table No 3.20 Description Legal Personal Contacts 10 20 Both 23 46 Others 09 18 Total 50 100

No of 08 Respondent % 16 Source- Primary Data Graph No 3.20

Interpretation: From the above graph it is observed that 08(16%) respondent responded that legal measures are adopted to recover NPA, 10(20%) respondent responded that personal contacts are used to recover NPA, 23(46%) respondent responded that both methods are used to recover NPA, 09(18%) respondent responded that other method are used to recover NPA.

Effectiveness of Lok Adalat in recovering NPA

Table No 3.21.1 Description Very Effective 08 16 Effective 17 34 Moderate 18 36 Less Effective 07 14

Tota

No of Respondent % Source- Primary Data Graph No 3.21.1

50

100

Interpretation: From the above graph it is observed that 08(16%) respondent responded that Lok Adalat is very effective mechanism of recovering NPA, 17(34%) respondent responded that Lok Adalat is effective mechanism of recovering NPA,18 (36%) respondent responded that Lok Adalat is moderate mechanism of recovering NPA, 07(14%) respondent responded that Lok Adalat is Less effective mechanism of recovering NPA.

Effect of Civil Court in recovering NPA

Table No 3.21.2 Description Very Effective 09 18 Effective 14 28 Moderate 11 22 Less Effective 16 32

Tota

No of Respondent % Source- Primary Data

50

100

Graph No 3.21.2

Interpretation: From the above graph it is observed that 09 (18%) respondent responded that Civil court is very effective mechanism of recovering NPA, 14 (28%) respondent responded that Lok Adalat is effective mechanism of recovering NPA, 11 (22%) respondent responded that Lok Adalat is moderate mechanism of recovering NPA, 16 (32%) respondent responded that Lok Adalat is Less effective mechanism of recovering NPA.

Effect of Debt recovery tribunals in recovering NPA

Table No 3.21.3 Description Very Effective 12 24 Effective 18 36 Moderate 12 24 Less Effective 08 16

Tota

No of Respondent % Source- Primary Data

50

100

Graph No 3.21.3

Interpretation: From the above graph it is observed that 12 (24%) respondent responded that debt recovery tribunals is very effective mechanism of recovering NPA, 18 (36%) respondent responded debt recovery tribunals is effective mechanism of recovering NPA, 12 (24%) respondent responded that debt recovery tribunals is moderate mechanism of recovering NPA, 08 (16%) respondent responded that debt recovery tribunals Less effective mechanism of recovering NPA.

Effect of one time settlement in recovering NPA

Table No 3.21.4 Description Very Effective 10 20 Effective 10 20 Moderate 16 32 Less Effective 14 28

Tota

No of Respondent % Source- Primary Data

50

100

Graph No 3.21.4

Interpretation: From the above graph it is observed that 10(20%) respondent responded that one time settlement is very effective mechanism of recovering NPA, 10 (20%) respondent responded that one time settlement is effective mechanism of recovering NPA, 16 (32%) respondent responded that one time settlement is moderate mechanism of recovering NPA, 14 (28%) respondent responded that one time settlement Less effective mechanism of recovering NPA.

CHAPTER 4

FINDING AND SUGGESTION

4.1 FINDING
4.1.1 42% respondent responded that their branch is functioning from 3-5 years. 4.1.2 50% respondent responded that their working in this branch from 2-3 years. 4.1.3 60% respondent responded that presence of NPAs is observed in there branch from 2-3 years. 4.1.4 66% respondent responded that main reason of NPAs in banks is management failure.

4.1.5.1 66% respondent responded that 41-60 percent of total assets are standard assets in their branch. 4.1.5.2 64% respondent responded that 41-60 percent of total assets are substandard in their branch. 4.1.5.3 44% respondent responded that 61-80 percent of total assets are doubtful in their branch. 4.1.5.4 62% respondent responded that 21-40 percent of total assets are loss assets in their branch. 4.1.6 76% respondent responded that NPA has decreased profitability in last 5 years. 4.1.7 70% respondent responded that maximum NPAs are caused from Personal loan. 4.1.7.1 47% respondent responded that NPA caused from commercial loan is due to Traders. 4.1.8 48% respondent responded that profitability has been reduced 6-10 percent due to NPA. 4.1.9 64% respondent responded that NPA cant be controlled. 4.1.10 70% respondent responded that doesnt they have one time settlement scheme in their branch. 4.1.10.1 39% respondent responded that customers gets concession in interest in one time settlement scheme. 4.1.11 72% respondent responded that they take additional securities in the form of collateral to curtail NPA. 4.1.12 70% respondent responded that measure taken to avoid NPA is regular supervision. 4.1.13 72% respondent responded that profitability has improved after adopting NPA reduction techniques. 4.1.14.1 40% respondent responded that high NPA is caused due to improper selection of borrowers. 4.1.14.2 50% respondent responded that moderate effect on NPA is caused due to deficiency in processing. 4.1.14.3 40% respondent responded that improper appraisal of assets has moderate effect on NPAs. 4.1.14.4 40% respondent responded that lack of supervision has moderate effect on NPA. 4.1.14.5 56% respondent responded that natural calamities has moderate effect on NPA. 4.1.14.6 42% respondent responded that moderate NPA is caused due to wilful default of the borrowers. 4.1.15.1 40% respondent responded that constant dialogue with the borrowers is average factor in reducing NPA

4.1.15.2 32% respondent responded that effective selection of borrower is effective factor in reducing NPA. 4.1.15.3 28% respondent responded that recover camp is average factor in reducing NPA. 4.1.15.4 46% respondent responded that effective self involvement of management is average factor in reducing NPA. 4.1.15.5 28% respondent responded that Lok Adalat is average factor in reducing NPA. 4.1.15.6 24% respondent responded that debt recovery average factor in reducing NPA. 4.1.16 50% respondent responded that 4 percentage NPA has been converted into standard assets in last 5 years. 4.1.17 70% respondent responded that they dont insist borrower to take insurance against loan. 4.1.17.1 47% respondent responded that life insurance is preferred against loan. 4.1.18 46% respondent responded that both methods are used to recover NPA. 4.1.19.1 36% respondent responded that Lok Adalat is moderate mechanism of recovering NPA. 4.1.19.2 32% respondent responded that Lok Adalat is Less effective mechanism of recovering NPA. 4.1.19.3 36% respondent responded that debt recovery tribunals are effective mechanism of recovering NPA. 4.1.19.4 28% respondent responded that one time settlement less effective mechanism of recovering NPA.

4.2 SUGGESTION 4.2.1

BIBLOGRAPHY

ANNEXURE

Interview Schedule
Name: Bank: Age: 1. Less than 25 [ [ 1. ] Since how long is the Branch Functioning? a) 2 Years c) 3-5 Yrs 2. b) 2-3 Years d) 5 Years & above ] 2. Between 25-50 [ ] 3. Above 50 Designation:

How long you are working in this bank? a) 0-1 years b) 2-3 year c) 4-5 years d) More than 5 years Since how long the presence of NPA is observed in your branch? a) 0-1Years c) 4-5Years b) 2-3 Years d) >5 Years

3.

4.

What are the main reasons for NPAs in the Bank? a) Improper credit appraisal up c) Management failure decrease e) Diversion of funds _____________ f) Others d) Difficulty in execution of b) Lack of effective follow

5.

What is the percentage of following out of total assets in your branch? 02 0 Standard assets Substandard assets Doubtful assets Loss assets 21 40 41 60 61 80 81100

6.

What has been the effect on NPA in last 5 year? b) Decreased Profitability c) No

a) Improve Profitability Change 7.

From which type of loan maximum NPA are caused? a) Commercial Loan b) Personal

a) If commercial Loan from which of the following a) SSI b) Traders c) Others b) If Personal Loan from which of the following a) Housing Loan b) Education Loan c) Others 8. To what extent the Profitability has been reduced by NPA a) <5% b) 6-10% c) 11-20% d) >20%

9.

Do you think that NPA can be controlled? a) Yes b) No

10.

Does your bank have one time settlement scheme of loan? a) Yes b) No If yes, What is benefit provided in one time settlement Scheme? a) Waiver in penal charges b) Concession in interest c) Concession principal d) other_______

11.

Do you take additional securities in the form of Collateral to curtail NPA? a) Yes b) No

12.

What are the measures taken to avoid NPAs? a) Prudent selection of Borrowers assets c) Regular Supervision and follow up e) Others_________ b) Appropriate Valuation of d) Effective loan

13.

Has the profitability improved after adopting NPA reduction Techniques? a) Improved b) No Change c) Not Improved

14.

What is the level of NPAs caused due to following factors ? S . N O . 1 . 2 . 3 . 4 . 5 . 6 . CAUSE Ve ry Hi gh Hig h Moder ate Low

Improper selection of Borrowers. Deficiency in processing. Improper appraisal of assets Lack of supervision and follow up. Natural calamities. Wilful default of the Borrowers.

15.

What is the effectiveness of the following on reduction of NPAs ? Effective Constant dialogue Recovery camps Self involvement Lok Adalats Debt Recovery Least Effective Average No Effect

16.

To what extent NPA has been converted into standard asset in last 5 years? 1% [ ] 2% [ ] 3% [ ] 4% [ ] >5% [ ] Not converted [ ]

17.

Do you insist borrower to take insurance against loan? a) Yes If yes b) No What type of insurance they have taken? b) Life Insurance

a) Credit Insurance c) Other_____________ 18.

How much provisions are made on Performing Assets & NPAs by the bank for the following years 2008 -09 2009 -10 2010 -11 2011 -12 201213

Particulars Substandard Assets Loss Assets Doubtful Assets 19.

Details of different categories of Performing Assets & NPAs of bank Particulars Substandard Assets 2008 -09 2009 -10 2010 -11 2011 -12 201213

Loss Assets Doubtful Assets

20.

What are the measures for the recovery of NPAs adopted by the bank? a. Legal c) Both b) Personal Contacts d) Others (if any), Specify

21.

What is the effect of following mechanism in recovering NPA?

Very Effective Lok Adalat Civil Court Debt Recovery tribunals One time Settlement

Effective

Moderate

Less Effective