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Submitted to Lovely Professional University

In partial fulfillment of the Requirements for the award of Degree of Master of Business Administration

Submitted by: Name of the student: TAUSEEF AHMAD SHAGOO University Roll No: RS1904B32.


It giv


me immense pleasure t present t e report of my project titled

NPA AT THE J&K BANK LTD. This work would not have been possible without the assistance and guidance of a no. of people. I would like to take this opportunity to thank each and every one of them. At first I would like to thank the management of the Jammu & Kashmir Bank Ltd. for providing me an opportunity to work as summer trainee at Zonal Office North Kashmir Baramulla. I express my sincere gratitude to my Project in charge at J&K Bank Mr. Ghulam Rasool Hajam, Cluster Head-I, North Kashmir Baramulla and Mr. Ghulam Jeelani for taking keen int erest in my project work and giving me valuable guidance at every stage. I also express my sincere gratitude to my project guide Mr. Harendra for guiding me aptly and at every stage of my project.





J&KB NK 50


y y y y






The future of Indian Banking represents a uni ue mixture of unlimited opportunities amidst insurmountable challenges. On the one hand we see the scenario represented by the rapid process of globalization presently taking shape bringing the community of nations in the world together, transcending geographical boundaries, in the sphere of trade and commerce, and even employment opportunities of individuals. All these indicate newl y emerging opportunities for Indian Banking. But on the darker side we see the accumulated morass, brought out by three decades of controlled and regiment ed management of the banks in the past. It has siphoned profitability of the Government owned banks, accumulated bloated NPA and threatens Capital Adequacy of the Banks and their continued stability. Nationalized banks are hea vily over-staffed. The recruit ment, training, placement and promotion policies of the banks leave much to be desired. In the nutshell the problem is how to shed the legacies of the past and adapt to the demands of the new age. PSBs in India can solve their problems only if they assert a spirit of self-initiative and self-reliance through developing their in-house expertise. They have to imbibe the banking philosophy inherent in de-regulation NPA is a problem created by the Banks and they have to find the cause and the solution - how it was created and how the Banks are to overcome it. I have tried to make an attempt under this study regarding NPA with special reference to THE JAMMU AND KASHMIR BANK LTD and its management regarding their previous record of NPA and the necessary steps taken by them to overcome this problem. This project has been prepared under the title of NON PERFORMING ASSETS with special reference to THE JAMMU AND KASHMIR BANK LTD. First of all the information regarding the J&K bank has been given. Information regarding the structure of the organization then the kind of services it provides to its customers.


1. To get knowledge about the NPAs. 2. Study the current status of NPAs with special reference to J&K bank. 3. Study the defaulters of the bank and people in general. 4. Study the perception of people regarding J&K bank.

The study pertains to behavior aspects such as perception, attitude and expectations towards the Loan products and provided by Jammu & Kashmir bank Ltd.

NPA always affect the profit of bank and also the prestige of bank. So here the research problem is to identify the causes for the NPA and to identify the action plan to reduce the NPA.


The Research Design of my project is based on descriptive research.


PRIMARY SOURCE: Th h questi i e: I initially was asked to prepare a questionnaire with special

reference to NPA and surveyed respondents in general i.e., not only the customers of J&K bank were questioned but customers of other banks in locality.

Face to face i teraction: I was also provided the list of some defaulters i.e., NPAs of J&K bank residing in near locality, I personally interviewed them in order to provide the information to bank and it also helped me in my project report.

7 Discussions : I also with help of discussions with my industry guide was able t o understand how they deal with NPAs.


Records maintained by the bank: My project in charge provided me the necessary records maintained by bank over the past periods regarding NPA in general and also NPAs with special reference to J&K bank so that I can get ample information regarding this topic

Internet: I also collect ed a lot of information regarding NPA in general and related to J&K bank through int ernet.


There have been major structural changes in the financial sector since banking sector reforms were introduced in India in 1992. Since then Banks have been lending aggressively providing funds towards every sector. This study includes NPA with special reference to J&K Bank and this study was also meant to be supportive for J&K Bank with the help of survey conducted especially of bank defaulters. 1.5 LIMITATION OF PROJECT Bank data was restricted. I have selected only one bank for NPA which is not enough to provide me the general information regarding NPA in other banks also it was due to short period of time. I faced difficulty in doing proper analysis as I did not have prior experience for making project report. The unfavorable conditions in Kashmir disturbed the project work. Questionnaire was given by bank as it was meant to be within the bank limitations. Response from respondents while filling the questionnaires was not up to the expectations.

y y

y y y


10 NON- PERFORMING ASSET: INTRODUCTION: Its a known fact that the banks and financial institutions in India face the problem of swelling non-performing assets (NPAs) and the issue is becoming more and more unmanageable. In order to bring the situation under control, some steps have been taken recently. The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 was passed by parliament, which is an important step towards elimination or reduction of NPAs.

MEANING OF NPAs: An asset is classified as non-performing asset (NPAs) if the borrower does not pay dues in the form of principal and interest for a period of 90 days. However with effect from March 2004, default status would be given to a borrower if dues are not paid for 90 days, if any advance or credit facilities grant ed by bank to a borrower become non-performing, then the bank will have to treat all the advances/credit facilities granted to that borrower as non performing without having any regard to the fact that there may still exist certain advances/ credit facilities having performing status. In simple words, an asset which ceases to yield is a non-performing asset.

Thirty days past due An amount due under any credit facility is treated as "past due" when it has not been paid within 30 days from the due date. Due to the improvement in the payment and settlement systems, recovery climat e, up gradation of technology in the banking system, etc., it was decided to dispense with 'past due' concept, with effect from March 31, 2001. Accordingly, as from that date, a Non performing asset (NPA) shall be an advance where: 1. interest and /or installment of principal remain overdue for a period of more than 180 days in respect of a Term Loan, 2. the account remains 'out of order' for a period of more than 180 days, in respect of an overdraft/ cash Credit(OD/CC),

11 3. the bill remains overdue for a period of more than 180 days in the case of bills purchased and discounted, 4. interest and/ or installment of principal remains overdue for two harvest seasons but for a period not exceeding t wo half years in the case of an advance grant ed for agricultural purpose, and 5. Any amount to be received remains overdue for a period of more than 180 days in respect of other accounts. Many institutions now try to sell their non-performing assets through companies like KIMLAR, INC. which helps facilitate the sale of these bundled portfolios. The non-performing assets often include mortgage loans, car loans, credit card debt and installment loans. Ninety days overdue With a view to moving towards international best practices and to ensure great er transparency, it has been decided to adopt the '90 days overdue' norm for identification of NPAs, form the year ending March 31, 2004. Accordingly, with effect from March 31, 2004, a non-performing asset (NPA) shell be a loan or an advance where: 1. interest and /or installment of principal remain overdue for a period of more than 90 days in respect of a Term Loan, 2. the account remains 'out of order' for a period of more than 90 days, in respect of an overdraft/ cash Credit(OD/CC), 3. the bill remains overdue for a period of more than 90 days in the case of bills purchased and discounted, 4. interest and/ or installment of principal remains overdue for two harvest seasons but for a period not exceeding t wo half years in the case of an advance grant ed for agricultural purpose, and

12 EMERGENCE OF THE WORD NON-PERFORMING ASSET: The issues relating to definition, management or the mismanagement and recommendations calling for spectacular solutions to the problem of non-performing advances of banks are being deliberated at frequent intervals during last decade or so. In late 80s the concept of classification of bank advances in several health code categories took place though the terminology non-performing advances did not exist at that time. This is followed by early 90s Anglo-American model of categorization of bank lending portfolio in several blocks of nomenclature in that included the non-performing advances. The rapid popularity of the phenomenon can be ascribed to the opening up of the Indian economy and consequent pressure from western powers to influence our banking system in the name of international standards of accounting, congruence of banking supervision by Basle committee, and so on.

The sudden shock of guidelines relating to non-performing advances and simultaneous of income recognition made the Indian banking system tott er and a number of public sector banks started incurring losses from the mid-nineties. Then came the recommendations of the Narasimham committee with the proposition of creating asset-reconstruction fund for cleaning the balance sheets of the banks of non-performing advances as a one-time measure.


The committee has defined non-performing assets as advances here, as on the date of balance sheet, 1. In respect of term loans, interest remains past due for a period of more than 90 days. 2. Overdrafts and cash credits accounts remain out of order for more than 90 days. 3. Bills purchased and discounted remain over due and unpaid for a period of more than 90 days.

An amount is considered past due when it remains outstanding for 30 days beyond the due date.


 As per latest guidelines issued by Reserve Bank of India the Non Performing Asset is an advance where;
y Interest and or installment of principal remain overdue for a period of more

than 90 days in respect of term Loans.

y The account remains out of order for more than 90 days in respect of an

Overdraft and Cash credit accounts.

y The bill remains overdue for the period of more than 90 days in case of Bills

Purchased and Discounted.

y The loan asset has not been renewed within 90 days from its due date of

y The stock statements have not been obtained within a period of 90 days from

the due dat e.

y The interest and or installment of principal remain un-paid for one crop season

beyond the due date in case of long-term agriculture crop loans.

y (Long-term crop loan would be the crops with crop season longer than one

year and crops, which are not longer duration crops, would be treated as short duration crops.
y Any amount to be received remains overdue for a period of more than 90 days

in respect of other account.

RBI REGULATION REGARDING INCOME RECOGNITION, ASSETS CLASSIFICATION AND PROVISIONING: INCOME RECOGNITION: RBI has notified regulations concerning the income recognition of banks while accepting the recommendations of the Narsimham committee report. The following is the regulations regarding income recognition of banks:

Interest income should not be recognized until it is realized. A non-performing asset is one when it is overdue for two quarters or more.


In respect of non-performing assets, interest is not to be recognized on accrual basis but it is to be treated as income only when it is actually received. NPAs banks should not charge or take into account the interest.

In overdue bill, interest should not be charged or taken as income unless realized. Interest accrued and credited to prior accounting period in respect of non-performing assets should be reversed or provided for in the current account if such interest still remains uncollected.

CLASSIFICATION OF ASSETS FOR MAKING PROVISION: For the purpose of making provisions for bad and doubtful loans and advances, banks need to classify them into the following broad categories:

 Performing assets  Non-performing asset I) PERFORMING ASSETS:

Performing assets is also known as standard assets/loans, where the interest or principal are not overdue beyond 180 days at the end of the financial year. Such loans dont carry more than the normal business risk.


Any loan the repayment of which is overdue beyond 90 days or two quarters is considered as NPA. It is further classified into: a. Standard.

b. Sub-standard assets

c. Doubtful assets

15 d. Loss assets Standard Assets: are those assets, which do not disclose any problem and generate income for the Bank, requires to be provided @0.25% on aggregate balance as on the balance sheet date. Sub -Standard Assets: If the interest and or installment of principal remains over due for a period of more than 90 days, the assets are to be classified as Sub-Standard assets and are t o be provided @10% of aggregate balance as on balance sheet date. With effect from March, 2005 percentage of provision has been increased from 10% to 20%. Doubtful Assets: The assets which have remained in Sub-standard category for a period of 18 months, are to be classified as Doubtful assets. With effect from March 2005,the periodicity of 18 months has been reduced to 12 mont hs for classifying as Doubtful assets. The assets are to be provided @20%. 30%, 50% for secured portion depending upon the age in Doubtful category as mentioned below and 100% in respect of un-secured portion i.e short fall in value of security: a) Up to one year b) One year to three years c) Three years and above 20% 30% 50%

With effect from March, 2005 the provision rates in respect of doubtful assets with three years ago in doubtful category has been increased for the secured portion to the extent of 100%. However, the provision in respect of assets which have already completed three years in doubtful category as on 31.03.2004 are to be provided @ 60%,.75% and 100% as on 31.03.2005, 31.03.2006 and 31.03.2007 respectively. Loss Assets: are those assets, which have no security in terms of mortgage or hypothecation and a provision @100% is required as per prudential norms. Loan assets classified as non-performing can be upgraded as performing assets as soon as the borrower pays in full the arrears of interest and installment of principal. However, in case of re-scheduled/ re-structured loan assets, an asset can be up graded only if the interest and or installment of principal have been serviced regularly as per terms and conditions of renegotiated re-scheduled terms for the period of one year. Gross NPA: Sum of Gross balances of Sub-standard, Doubtful and Loss assets Gross NPA percentage:

16 Gross NPA divided by Gross advances multiply by 100.An increasing trend implies gradual increase in bad credit portfolio. Net NPA: Sum of Net balances of Sub-standard, doubtful and loss assets (Gross balance- Provision=Net balance) Net NPA percentage: Net NPA divided by Net advances multiply by 100. Net advances means Gross advance minus Provisions for NPAs. After classifying assets into above categories, banks are required to make provision against these assets for the interest not collected by them. In terms of exact prudential regulations, the provisioning norms are as under: Asset Classification Provision requirements Standard assets Substandard assets Doubtful assets 0.25% 10% 20% - 50% of the secured portion depending on the age of NPA, and 100% of the unsecured portion. Loss assets It may be either written off or fully provided by the bank.

The increasing levels of bad quality loans marred the prospects of nationalized banks in the past few years. As a result banks shifted their focus from the industrial segment to the corporate lending. This has curtailed the increment al NPAs to a certain extent. In FY01, gross NPAs of public sector banks (PSBs) increased by 3% compared to 9% jump in NPA levels of new privat e sector banks. The RBI has tightened the prudential norms regarding classifying assets as non-performing in line with the international standards. Accordingly, with effect from FY04, an asset will be classified as NPA if the int erest is overdue for 90 days (instead of 180 days). These norms are likely to strengthen the balance sheet of banks, notwithstanding the fact that in the near term the higher provisions could trim the profit growth. The norms are tight ened even for financial institutions (FIs). They are worst affected by the NPA wave thanks to lending to the commodity and economy sensitive sectors, not to mention that loans to steel, chemicals and textile sector played a key role in dragging down

17 performance of FIs. So far they have been enjoying the privilege of recognizing a loan as NPA only if principal is overdue for more than 365 days and interest is outstanding for over 180 days. With a view to bring greater transparency, the RBI has proposed to reduce the time limit to 180 days (for principal). On the one hand imposition of stricter norms could lead to a difficult time for FIs; permitting them an option of restructuring their loans could give them some leeway. To facilitate the speedy recovery of NPAs, the PSBs betting on restructuring Gross NPAs (Rs bn) FY08 FY09 Change Public sector banks Old private banks New private banks Foreign banks 517 38 9 24 533 40 9 26 157 766 3.1% 5.3% 8.6% 10.9% 9.7% 4.8% RBI came up with the idea of a one-time settlement scheme for outstanding loans in FY01. PSBs have recovered about Rs 8 bn from 2lakh accounts in the last fiscal. Although, the scheme was ext ended till June 30, 2009, the response partly due was to not the very legal


Financial institutions 143 Total 731

impediments. However, the scheme actually gave the bankers an opportunity to make contact with borrowers, which were earlier in touch with only legal advisors or accountants.

Empowering banks to enforce their charge without intervention of court could result in expeditious recovery of bad debts in future. Apart from this scheme, the government has designed major policy reforms in order to enhance the efficiency of the banking system. It has decided to set up 7 more debt recovery tribunals (DRTs) in addition to the existing 22 and 5 appellate tribunals. It has also proposed to bring in legislation for facilitating foreclosure and enforcement of securities in case of default. Replacement of SICA (Sick Industrial Companies Act) was another major step. The RBI has already asked banks to file criminal cases against borrowers who are willful defaulters. These initiatives are expected to aid banks to quickly recover their dues from the borrowers.

18 NPA analysis (Rs m) Gross NPAs Gross NPAs as a % Net NPAs as a % of Provision coverage* of total loans Private sector banks ICICI Bank 4,210 HDFC Bank 1,468 UTI Bank 2,258 6.0% 3.2% 4.7% 4.8% 2.2% 0.4% 3.8% 3.1% 63.4% 85.9% 19.7% 36.0% total loans

IDBI Bank 1,500 Public sector banks



14.0% 5.6% 15.3%

6.0% 2.0% 6.8%

56.9% 64.7% 55.8%

Union Bank 4,847 BOB FIs ICICI HDFC 59,880 3,001 41,860

9.9% 2.3%

4.9% 0.9%

50.2% 62.4%

* % of cumulative provisions made on Gross NPAs Although ratio of net NPAs to net advances have been declining in the past two years, it hardly offers any comfort. This is due to the fact that in absolute terms NPAs are still very high (Rs 766 bn). Therefore, it will be a challenge for banks to overcome this problem. For this, the internal control system and risk management system are required to be strengthened by banks. There should be a system for timely detection of NPAs. An important means for positioning appropriate risk management t echniques is the MIS development, which requires building up of strong database and other information sets. The growing NPAs are a source of worry for the Finance Minister too. Looking at the changing scenario in the world markets, the problem becomes more ironical because Indian banking at this juncture cannot afford to remain unresponsive to the global requirements. However, the outlook for the current fiscal looks bleak. Industrial production has slowed down and the recent economic data point to a recession. Credit off take is also lacklust er. It

19 does seem, at this point, that NPA levels of banks would not come down significantly during the current year.



21 Prashant K Reddy (Research paper)

The paper deals with the experiences of other Asian countries in handling of NPAs. It further looks into the effect of the reforms on the level of NPAs and suggests mechanisms to handl e the problem by drawing on experiences from other countries. Financial sector reform in India has progressed rapidly on aspects like interest rate deregulation, reduction in reserve requirements, barriers to entry, prudential norms and risk-based supervision. But progress on the structural-institutional aspects has been much slower and is a cause for concern the shelt ering of weak institutions while liberalizing operational rules of the game is making implementation of operational changes difficult and in effective. Changes required to tackl e the NPA problem would have to span the entire gamut of judiciary, polity and the bureaucracy to be truly effective.

Subhashis Kundu ( Research paper) Banking sector reforms in India has progressed promptly on aspects like interest rat e deregulation, reduction in statutory reserve requirements, prudential norms for interest rates, asset classification, income recognition and provisioning. But it could not match the pace with which it was expect ed to do. The accomplishment of these norms at the execution stages without restructuring the banking sector as such is creating ha voc. This research paper deals with the problem of having non-performing assets. The reasons for mounting of nonperforming assets and the practices present in other countries for dealing with nonperforming assets. Non Performing Assets (AR ICLE) Genesis of Asset Reconstruction Company Most countries in the grip of systemic financial and economic crisis have attempted systemwide clean up of NPAs as a part of restructuring of their banking system. Often, solutions to a system-wide clean up of NPAs result in creation of Asset Reconstruction Companies (ARCs), which are typically public/ government owned. ARCs act as debt aggregators and engage in acquisition of NPAs. Thus ARCs take away the distraction by isolating NPAs from the banking syst em and act as "bad bank". This leaves rest of the banking system free to act as "good bank" and return to equity markets and normal banking business. Governments encourage transfer of assets to ARCs through creation of supportive environment.

22 Governments may also provide special powers to ARCs that are not otherwise available to banking syst em. Indian scenario; The problem of recovery from NPAs, in the Indian banking system, was recognized by the Government of India (GOI) as far back as in 1997, when the "Narasimham Committee" was appointed. The Narasimham Committee Report mentioned that an important aspect of the continuing reform process was to reduce the high level of NPAs as a means of banking sector reform. It was expect ed that with a combination of policy and institutional development, new NPAs in future could be lower; however, the problem of the huge backlog of existing NPAs still remained. This problem of NPAs, impinged severely on banks performance and their profitability. The Report envisaged creation of an "Asset Recovery Fund" to take the NPAs off the lender's books at a discount. Unlike in some countries where ARCs ha ve been set up post financial crises and for the purpose of bailout, in India, the GOI proactively initiated certain measures to control NPAs.

Resolving Non-performing Assets of the Indian Banking System He, Dong (2002): Resolig Non-performing Assets of t e Indin Banking System. Published in: India: Selected Issues and Statistical Appendix IMF Country Report No. 02/193 (2002) Abstract This paper reviews the nature of non-performing assets in the Indian banking system and discusses the key design features that would be important for the Asset Reconstruction Companies to play an effective role in resolving such non-performing assets.




Problems of swelling non-performing assets (NPAs) and the issue are becoming more and more unmanageable. The NPAs have direct impact on banks profitability, liquidity and equity. The NPAs of Indian Banks are relatively huge by international standard. Therefore the biggest ever challenge that the banking industry now faces is management of NPAs. It is true that banks have to restrict their lending operations to secured advances only with adequat e collateral securities. In this connection banks must aware of the problems and recovery legislations of NPAs Nonperforming assets means an advance where payment of interest or repayment of installments of principal or both remains for a period of more than 180 days. The magnitude of NPAs have a direct impact on banks profitability as legally they are not allowed to book income on such accounts and at the same time banks are forced to make provision on such assets as per the RBI guidelines. The Indian Banking sector is facing a serious situation in view of the mounting NPAs which are the tune of Rs.56,000 crores in March 2002.NPAs is an important paramet er in the analysis of financial performance of banks. The reduction of NPAs is necessary to improve profitability of the banks and compl y with capital adequacy norms. Therefore, to solve the problems of existing NPAs, quality of appraisal supervision and follow up should be improved. The NPAs can be avoided at the initial stage of credit consideration by putting rigorous and appropriate credit appraisal mechanism. This is in order to recover the NPA debt, the judicial systems should revamped and is essential to enforce the SARFAESI Act with more stringent provisions to realize the securities and personal assets of the defaulters. " ml "

24 Are Non Performing Assets Gloomy from Indian Perspective By: Arpita on 14 February 2010

Continued growth in NPA threatens the repayment capacity of the banks and erodes the confidence reposed by them in the banks. In fact high level of NPAs has an adverse impact on the financial strength of the banks who in the present era of globalisation, are required to conform to stringent International Standards. Non Performing Asset means an asset or account of a borrower, which has been classified by bank or financial institution as substandard, doubtful or loan asset. After nationalisation and globalisation the initial directive that banks were given was to expand their branch network, increase the saving rate and extent credits to rural, urban and the most important SSI sectors. No doubt this mandat e has been achieved admirably under the regulation of economic reforms initiated in 1991 by the then Finance Minister and present Prime minister Dr. Manmohan Singh. No doubt it would have been incomplete without the overhaul of Indian Banking System. Then all of a sudden focus shifted towards improving quality of assets and better risk management.

Performance measurement of Banks -NPA analysis & credentials of Parameters Posted: Sep 28, 2009 Over the last few years Indian Banking, in its attempt to integrate itself with the global banking has been facing lots of hurdles in its way due to its inherent weaknesses, despit e its high sounding claims and lofty achievements. In a developing country like ours, banking is seen as an important instrument of development, while with the strenuous NPAs, banks have become helpless burden on the economy. Looking to the changing scenario at the world level, the problem becomes more ironical because Indian banking, cannot afford to remain unresponsive to the global requirements. The banks are, however, aware of the grim situation and are trying their level best to reduce the NPAs ever since the regulatory authorities i.e., Reserve Bank of India and the Government of India are seriously chasing up the issue. Banks are exposed to credit risk, liquidity risk, interest risk, market risk operational risk and management/ownership risk. It is the credit risk which stands out as the most dreaded one.

25 Though often associated with lending, credit risk arises whenever a party enters into an obligation to make payment or deliver value to the bank. The nature and extent of credit risk, therefore, depend on the quality of loan assets and soundness of invest ments. Based on the income, expenditure, net interest income, NPAs and capital adequacy one can comment on the profitability and the long run sustenance of the bank. Further, a comparative study on the performance of various banks can be done using a ratio analysis of these parameters.

Journal of Asset Management (2010) 11, 6270. doi:10.1057/jam.2010.1 Dynamics of emerging India's banking sector assets: A simple model Soumitra K Mallick1, Amitava Sarkar2, Kalyan K Roy3, Tamal Duttachaudhuri4 and Anjan Chakrabarti5

Abstract Banking sector loans are the principal source of capital for small and medium business ventures in India, comprising firms that are not large enough to be registered with stock exchanges. Non-performing assets (NPAs) are an important measure of the success of these businesses, as well as of their levels of discretion in carrying out their commercial activities conditional on their role in developing India's entrepreneurship outside the stock markets. In this article we analyze certain properties of NPAs in Indian Banks over the 1990s, when liberalization was introduced by opening up a significant portion of the public sector, allowing private banks to do business. We arrive at three conclusions for emerging India's banking sector. First, NPAs (as a ratio of loans and advances) are significantly sticky over time. Second, larger NPAs are associated with larger advances and vice-versa. Third, NPAs do not seem to ha ve spiralled out of control over the 1990s. A simple co integration test is carried out and a set of dynamic graphs, using notions of fibration, is presented to support the results.

26 ANALYSIS BASED ON ARTICLES Indian banks (particularly nationalized banks) are struggling to come out of the net of nonperforming assets. The rising level of non-performing assets (NPAs) amounting to about Rs 600 bn has plagued the Indian banking system. Thus urgent cleaning up of bank balance sheet has become a crucial issue. Banks are in the risk business. In the process of providing financial services, they assume various kinds of risks viz. credit risk, market risk, operational risk, interest risk and country risk. Among these different types of risks, credit constitutes the most dominant asset in the balance sheet, accounting for about 60% of total assets. The credit risk is generally made up of transaction risk (default risk) and portfolio risk. The risk management is a complex function and requires specialized skills and expertise. As a result managing credit risk efficiently assumes greater significance.





Founded Headquarters No. of Locations Industry Employees

1938 Jammu & Kashmir, India > 500 branches/offices Financial , banks 6833 Commercial

Moneylenders have been part of Indian society since ancient times. Modern banking in India began some 200 years ago. First Bank in India was established under the name and style of bank of Calcutta in 1806(a presidency Bank).In 1840 Bombay presidency Bank and in 1843 Madras presidency Bank came into exist ence. In 1921, these three presidency Banks were merged as imperial Bank of India. In 1955, imperial Bank was renamed as State Bank of India. Aimed this scenario, entire banking in the State of Jammu and Kashmir was performed by traditional moneylenders and that too at exorbitant interest rates. At the same time some banks like Punjab National Bank, Grind lays Bank and imperial Bank of India functioned in the State to a limited extent. The role of these banks was reduced to the peopl e of the State owing to the statutory limitations. Under this Scenario banks could not ameliorate the financial social position of the people of the State. To overcome this crisis, the then Maharaja of the State, His Highness Maharaja Hari Singh, conceived the idea to establish a bank to help people of the State to come out of the economic backwardness. The scheme of forming the bank was formulated by an eminent banker sir Sorabji N.Pochkanwala, the then Managing Director of Central Bank of India. The outcome of the efforts of Sir Sorabji resulted in the establishment of the Jammu & Kashmir Bank Limited on October 1, 1938.And the Bank formally commenced its business on July 4, and 1939. The bank opened its first branch at Residency Road, Srinagar. Encouraged by the support of public, it opened its another branch at Jammu. By 1946, the number of branches of the bank went up to 12. Precisely, banking in the State of Jammu & Kashmir actually began in 1939, when Jammu & Kashmir Bank started its operation. Since then, with the continuous changes taking

29 place in the financial services scenario, the banking in Jammu & Kashmir went under tremendous. Besides exhibiting its Commercial character, the bank has been meeting the social obligation of the people of the State too.

The Jammu & Kashmir Bank is the first of its nature and composition as a State owned bank in the country The State government besides contributing half of the issued capital also appointed the bank as bankers for general banking and treasury business of the State government. In its formative years, the bank had to coup up several serious problems, particularly around the time of independence, when two of its branches at Muzaffarabad and Mirpur fell to the other side in 1947.However, the State government came with assistance of Rs 6.00 lac to meet the claims. Following the extension of Central laws to the State of Jammu & Kashmir, the Bank was defined as a government companies Act 1956. The real growth of its operations and business started after 1969, the area of nationalization of major banks, when the union government announced control on banking. It began to emerge from its regional shell, opening branches beyond the State boundaries and emerged as a leading bank. In 1971, the bank was included in the second schedule of the RBI Act 1934.It had its first full time chairman following social control measures in banks in the country. Five years later (in 1976) it was declared an A Class bank. By the end of 1980, its branches numbered 212 with aggregate deposits of Rs. 191.67 corer and advance of Rs. 61.67crores. The bank became pioneer in the finance of road transport, horticulture and hostels to promote tourism and extended finance to the artisans to promote traditional handicrafts. In fact the bank was the first commercial Indian bank to introduce schemes for financing fruit crops on standing trees in the State of Jammu & Kashmir, a policy that was subsequently emulated by other banks elsewhere in the country.

The bank expanded its area of operation and widened its credit base by financing schemes like integrated Rural Development Programmers (IRDP), SEEDY, PMRY, NRY and other self-employed programmers sponsored by the State and Central Governments. In 1976, Bank became the first and the only bank, which was permitt ed by the Reserve Bank of India to sponsor two regional banks, namely, Kamraz Rural Bank and Jammu Rural bank.

30 The bank has also been entrusted with lead bank responsibility in eight of the fourteen districts and governorship of the State Level Bankers committee in J&K State.

The bank has played a key role in the economic development of the State in particular and the country in general. In the last ten turbulent years, it was the only commercial bank t o sustain economic and business activity as most of the nationalized banks in the State owned their shutters. During this difficult period, it was the J&K Bank alone that supported various aimed at alleviating poverty and generating self-employment opportunities. With a substantial increase in its capital base, the bank participating more extensively in financing of infrastructure projects, a number of leading corporate and blue chip companies as well as prominent public sector undertakings of the Indian Governments have become part of its clientele. The financial of the bank are very strong. The banks debt instruments have been highly rated by CRISIL (Credit Rating Information Service of India Limited), which has reaffirmed its P1+rating of the banks certificate of deposits, including strong degree of safety with regards to timely payments. The bank is governed by the companies act and banking regulation act of India .It is regulated by the Reserve Bank of India and Security and Exchange Board of India (SEBI).At the end of May 2006, the bank had 517 branches spread from Kashmir to Kanyakumari with 98%of its business comput erized. The bank has been playing a vital role in the development of the economy of the state and bolst ering industry, trade, commerce and agriculture in the state. The bank has put a commendable performance in all aspects of banking .The performance of J&K Bank, its growth, profitability, diversification of product portfolio, modernization of its operations and its achievements in other areas have made it one of top most banks of the country.

Sri Sohan Lal Kothari was the first manager of the bank and the then chief Minister major general Roy Bahadur Dewan Bishan Das was appointed as the foundation stone of the Residency road Srinagar branch building. Since 1977 the bank has been responsible for payment of civil pension and receipt of various states taxes. Findings overall performances of the bank good, the RBI issued a license to the J&K Bank to deal in all types of foreign exchange presence in 1980.

The bank installs first ATM in valley connected globally to all master card networks ATMs. All the branches of the bank are connected through V-SAT on 10-08-2001 the bank

31 took over the Srinagar branch of standard chattered Grind lays bank. The bank inaugurat ed its new corporat e headquarter building at M.A road Srinagar-on 2 September 2001.

J&K Bank is today one of the feasted grooving bank of India with a network of 517 branches offices spread across the country offering world class banking products and service to its customers. Today the bank has the status of value driven organization and is always working towards building trust with shareholders, employees, customers, borrowers etc., for which it has adopted strategy direct ed to developing a sound foundation of relationship and trust aimed at achieving excellence which of course comes from the womb of good corporate governance. While announcing the JK Banks financial results for the year 2009-10, the chairman of the bank said that bank is looking ahead to increase the total business turnover to a record Rs one lakh crore in 2012 from 60,294 crore the bank has marked by March 2010 end, and net profit of Rs 1000 crore. The JK Bank that has emerged as face of the economy of the state and is a participant in the active development of the stat e has also created a good network in many foreign countries. The bank has received a net profit of Rs 512.38 crore up by 25% from Rs 409.84 crore recorded during the previous financial year driven by a 70% rise in fee income up to the end the last financial year 2009-10. The total business turnover moved to Rs 60,294 crore, increasing by 12% year on year over Rs 53,935 crore. The loan book as on March 31, 2010 stood at Rs 23,057 crore up to 10% from last years Rs 20,930 crore, while the banks deposit base stood at Rs 37,237 crore up to 13 from 33,004 crore as on March ending 2009. The fixed assets of the bank amount for Rs.19.2 cr. and other assets are worth Rs 48.6 cr. The J&K Bank has the total cash and balance with RBI Rs.321.996677 cr. and balance with banks and money at C&S notice is Rs. as on 31-08-2008. In the state of Jammu and Kashmir, the J&K Bank has been the major contributor in providing credit to poor artisans, retailers, small business, agriculture and other allied activities, small scale industries and technically qualified entrepreneurs. In these sectors with Rs 137.89 cr. in agriculture sector, Rs 145.38 cr. in industries sector and Rs 241.09 cr. in service sector.

32 The IT strategy emphasizes enhanced level of customer service through 24x7 hours availability, multi channel banking and cost efficient through optimal use of electronic channels, wider market reach and opportunities for cross selling. Currently more than 90.5% of the banks business is comput erized. The J&K Bank is the first bank to launch ATM cum debit card in Kashmir. The bank launched ATM cum Debit card J&K Bank global access card in collaboration with the master card international. The bank has grown the number of ATMs to 182 at the end of March 2006.

The bank has launched the three variant types of credit cards with different limits with an interest free credit facility for 20 to 50 days at accept at 125000 mercantile establishments across the globe. The customers have the access to their money for all the 365 days of a year and 24 hours per day. The credit and debit cards of the bank are accept of cash with draws at 7000 ATMs in India and 1 million ATMs across the globe. To maximize value to its customers, the innovation in products and improving the quality and speed of the services in the Hall Mark of banks business strategy. The bank has launched several unique financial and deposit products like education loans, car loans, consumer loans, Flexi deposit recurring plus and Mehandi deposits schemes to meet the needs of customers. The bank has recently won the prestigious Asian banking awards 2004 for Customer convenience programs. The awards are given each to recognize and honor the bank in Asia pacific region for outstanding innovating and world-class products services, projects and programmers.

J&K Bank has embarked on brand strategy exercise and engaged removed consultants to work on business development possibility and engaged over all processes that could be improved in the future to enhance the overall profitability of the bank. This would increase branding of the banks products in order to increase the value for its customers. And now with the right kind of leadership efforts of dedicated employees and State of art technology, the J&K Bank is on the path of growth and success building trust profit, peace and property.




PROFILE:y y y y

Incorporated in 1938 as a limited liability company. Governed by companies Act and Banking regulation Act of India. Regulated by the Reserve bank of India and SEBI. Listed on National Stock Exchange (NSE) and Bombay Stock exchange (BSE). y 53 per cent owned by the Govt. of J&K. y Rated P1+by standard and poor -CRISIL connecting highest degree of safety. y Four decades of uninterrupted profitability and dividends.


35 Unique characteristics: one of a kind

y y y y y y

Private sector Bank despit e Government holding 53% of equity. Sole bankers and lender of last resort to the Govt.of J&K. Plan and non plan funds, taxes and non-taxes revenues, routed through the bank. Salaries of Govt officials disbursed by the bank. Only Private sector designed as agent of RBI for banking business. Collect taxes pertaining to Central Board of Direct Taxes in J&K.


y y y y y y y

The fastest growing Bank with 510 branches across the country. Over 98 per cent of the business computerized. Banking, Tele-banking and SWIFT facilities available. Internet Banking, SMS and Mobile Bank provided. ATMs connect ed globally to all Mast er card Networked ATMs. Mobile ATM Service available-first of its kind in Northern India. J&K bank Global Access Debit card cirrus and Maestro enabled. Own Credit card.

Live on RTGS System of RBI.

FINANCIAL SERVICES PORTFOLIO: ONE STOP FOR ALL FINANCIAL NEEDS. Insurance joint venture with MetLife international. Distributor of : Life Insurance products of MetLife (India) Pvt. Ltd. Non-life insurance products of Bajaj Allianz General Insurance Co.Ltd Providing depository Services. Offering Stocks Barking Service. Collection Agent for utility Services provided by State and private sector.

y y y y y y y

36 NEW BUSINESS INITIATIVES: SHAPING OURSELVES TO SERVE BETTER. To meet the growing needs of the economy, in tune with the competitive banking innovative financial products:

y y y y

Monetizing the Banks branch network. Third party products distribution. Invest ment Banking. Offshore Banking.




Haseeb Ahmad Draboo, Chairman and Chief Executive of the bank is a professional economist who has been on the board of directors of the bank since 11th July 2003. Possessing a diverse skill set and wide ranging experience, he started his professional career with a perspective planning division of the planning commission. Later, he worked as consultant to the economic advisory of the Prime Minister. His final stint with policy making was with the 10th finance commission. At present, he continues to work as the economic advisor the Government of Jammu and Kashmir, a position he has held January 2003. He is credited with having conceptualized wide-ranging economic and physical reforms of the Govt. he has been inducted by the planning commission to its working group on resources for the 11th five year plan.


M.S. Verma serves on the Board of a number of a number of public and private sector companies and is associated with several educational and research institutions in a advisory capacity. He is Vice-President of the governing body of the National Council of Applied Economic Research and member of the Board of Governors of the Institution of Economic growth, University of Delhi.


G.P. Gupta a post graduate in commerce, having combined stints in both academic and public sector, is also the Ex-Chairman and Managing Director, IDBI, and has served on several distinguished positions such as Chairman, UTI, Chairman, SIDBI, Chairman, National Stock Exchange of India Ltd., Member Life Insurance corporation of India , Director, Export -Import Bank of India, Director, Infrastructure Development Finance Company Ltd., Director, Indian Airlines Ltd., Director, Discount & Finance House of India Ltd., Director, Securities Trading Corporation Of India Ltd., Council Member, Indian Institute of Bankers and President, Entrepreneurship Development Institute of India Ahmadabad.

39 B.B. VYAS (IAS):

Bharat Bushan Vyas belongs to the 1986 batch of Indian Administrative Services. During his probation he was awarded Gold Medal by Lal Bhadur Shastri National Academy of Administration, Mussoorie for best all round performance. Mr. Vyas has held several distinguished positions both in Stat e and Central Governments. In the Government of J&K, Mr. Vyas worked as District Magistrate/ Deputy Commissioner of Poonch, Udhampur districts. He is presently holding the position of Commissioner/ Secretary to Government Finance Depart ment.









(Business Operations)


(Corporat e Functions)


40 ABDUL MAJID MIR (Chief Financial Officer)


.(Chief Peoples Officer)


(Chief Strategist/Chief Tech. Officer)


(Chief Credit Officer)


(Chief Regulatory Officer)


(Chief Treasury Consultant)

VICE PRESIDENTS: GHULAM MOHAMMAD RESHI (Assist Monitoring and Information)


(Finance and Risk Management)


(Strategy and Business Development)

MOHAMMAD BASHIR-UL-ISLAM... (Treasury Operations)

SUMAN DUR ASWAL.. (Retail Credit)


(Company Secretary)






With the changing times, the luxuries of yes teryears ha ve become basic necessities of today ensuring that you dont miss out living a quality for yourselves and your family. Our whole suite of personal finance products helps you in owning all basic necessities of life and proudly so be it having your own sweet home, renovating and refurbishing it with items like: TV, refrigerator, washing machine etc. or bring a proud owner of a stylish car, we have a loan product for every such need.

Eligibility :

Permanent employees of central/state Govt., public sector undertakings, autonomous bodies, institutions, having at least 3 years of active remaining services.

Amount of Loan :
y y

Maximum Rs.7.00 Lakh or 30 times gross monthly salary Gross deductions including installments of the proposed loan not exceed 60% of the gross income.

Margin: Nil

Repayment period: The loan along with interest would be repayable in 84 monthl y installments beginning one month after the disbursement of the loan.


Professionals and self-employed like Doctors, engineers, chartered accounts, advocat ed with minimum standing of 3 years.





depart ments,



undertakings with minimum 3 years service.


Purchase with construction of house/flat renovation/additions/alterations of existing house, purchase of land

y y

For construction/purchase of house: 15% For renovation: 25%

Repayment period: Up to 20 years including 9 months moratorium by equal monthly installments.

Rate of interest: Repayment Period Floating ROI Up to Above 2 Lakh 2 Lakh 11.5% 13.25% 11.75% 14% 12.75% 14.25% 13% 14.75% Fixed ROI Up to 2 Lakh 12% 13% 13% 13%

5 years 5 to 10 years 10 to15 years Above 15 years

Above 2 Lakh 14.25% 15% 15% 15%

CAR LOAN: Eligibility:


Employees of Govt./semi-Government departments, autonomous bodies, public sector undertakings, individual, firms, limited companies having a minimum 5 years active service.

Security: Hypothecation of vehicle, third party guarantee of one person,

Quantum of Finance : Maximum 10 Lakh.

Margin: 20% of the cost of the vehicle.

44 Repayment: 7 years in equal monthly installments

Rate of Interest: 12 % up to 4 Lakh 13.50 % above 4 Lakh

For bright students with a good academic background and pursuing graduation/post graduation courses in Science/Arts/Commerce, Medicine, Surgery, Hotel

Management, Design, Architecture, Biochemistry, Veterinary Science, ICWA, CA, CFA, Computer Certificate Courses/leading to Diploma/Degree, MCA, MBA, MS etc.


Should have secured admission to professional/technical courses in

domestic/foreign universities/institutions through entrance test/selection process.

Margin: Up to 5 Lakh: Above 5 Lakh i) Studies in India: ii) Studies Abroad: Repayment:
Moratorium: Course period + one year or Six months after getting Job Whichever is earlier? The loan is to be repaid in 5 to 7 years after moratorium period.


5% 15

Rate of Interest: 2.5 to 5 Lakh 5 to 10 Lakh 10 to 20 Lakh 11.5% 12.5% 14.5%



J&K Bank in its endeavor to promot e trade, industry and to preserve the traditional arts and crafts of the state devised a scheme aimed at the financial needs of the artisan community aptly called JK Bank Dastkaar Finance. The scheme provides easy and soft credit to craftsmen engaged in the trade and helps them to set up their own ventures, weeding out the middlemen responsible for their exploitation. Keeping in view the specific production cycle associated with this trade the loan comprises of a term loan and working capital components. The disbursement is phased in quarterly installments and aligned to the status of WIP (work in Progress). This ensures proper end use, quality control and timel y completion of work. The weavers/ artisans are allowed a reasonable time for the

Repayment of the bank finance. To make the credit hassle free, no Collateral /third party guarantee is required. The product has been designed on the banks philosophy of confidence based lending as opposed to collateral based lending. There is no requirement of any collateral security under this product. The legal documentation has been kept at bare minimum with only two documents to be executed for disbursement of the loan. In order to increase the reach of this product the database of the weavers/ artisans available with various trade associations is being utilized besides identification of people by concerned branches of the bank.


Kashmiri Saffron the most expensive spice in the world has a unique aroma and flavor. It is considered worlds best because of its scientifically proven superior quality, hence commanding a price much higher than the saffron from any other part of the world. Saffron is extensively used for culinary and coloring purposes. Besides, because of its medicinal qualities, it is an important ingredient for both traditional (Ayurvedic and Unani) and allopathic medicines. Its demand in the markets, both domestic and international, is growing. Saffron is a niche-economy, involving hundreds of Kashmiri families. Still, the recent decline in saffron production is going to affect this segment of state economy. In 2003-04, around 6.98 metric tons of saffron was exported while as the exports declined to 5.19 metric tons in 2004 -05.

46 With a view of preserving this prized spice, J&K Bank tailored a specific product named JK Bank Zafran Finance. Its purpose is to provide adequate, timely and need-based finance to saffron growers. The scheme is for all saffron growers, especially the smaller and marginal ones including even the contract farmers engaging in or intending to start its cultivation. The quantum of finance is proportionate to the land holding of a grower. The product also provides an additional finance for post harvest and packaging. A Product that covers the entire plantation and production costs including plant material, agricultural machinery, labor etc. this scheme is provided to Saffron growers. The disbursement is done in two phases; 60% in the first year and 40% in the second, when the growers are in need of funds. The repayment of the advance is scheduled within the four year growing cycle of saffron. Re-financing facility can be availed for fresh plantation of the crop. The documentation has been simplified and kept low to make it hassle-free. With a view of preserving this prized spice, J&K Bank tailored a specific product named JK Bank Saffron Finance. Its purpose is to provide adequate, timely and need-based finance to saffron growers. The scheme is for all saffron growers, especially the smaller and marginal ones including even the contract farmers engaging in or intending to start its cultivation. The quantum of finance is proportionate to the land holding of a grower. The product also provides an additional finance for pos t harvest and packaging.

Other such products like Khatamband Craftsmen Finance for Khatamband Craftsmen and Ghiri Finance for taking complete care of the expenses involved in procurement processing sale and export of walnut kernels.


Agriculture is the mainstay of our economy but unfortunately being financed mainly from outside of the banking sector. Our rural finance strategy envisages extending the frontier of formal finance ton incorporate agriculture along with other rural economies on principles of sustainability, efficiency and significant outrage.


Rate of Interest: Up to .50 Lakh: .50 to 2.00 Lakh 2.00 to 5.00 Lakh 5.00 to 20.00 Lakh 12.5% 13.5% 14.0% 14.5%


The product aptly named as All-Purpose Agri-Term Loan has been designed in a way that lays special emphasis on small and marginal farmers and provide sufficient and, more importantly, timely finances to the farmers engaged in all types of agricultural and allied activities. The product aims to cater to the needs of small farmers within very little land holdings in the rural and semi-urban areas of the state. The product is given to the people engaged in any kind agriculture and allied activities. Horticulture, Sericulture, Animal Husbandry, Plantation and Fisheries can be financed through this product. The objective has been to provide easy finance to needy farmers through regular channels of finance and to wean them away from the exploitative circle created by the nonbanking intermediaries. For that purpose, the product has been devised in such a way that hitherto un-banked customers get an easy access to banking services through simple and affordable documentation process. A maximum credit of Rs 1.00 Lakh, depending upon the Agri-activity to be financed is provided but multiple activities can also be considered for finance. The product is offered at affordable int erest rates.

Rate of Interest: Up to .50 Lakh: Above .50 Lakh 13.0% 14.0%



Apple, the king of Kashmir fruit, lies at the heart of horticultural economy of J&K state. Every year hundreds of truckloads of apple reach the markets of Delhi, Punjab, Jaipur, Bangalore, Chennai and Ahmadabad. The pot ential yearly returns on the fruit, as per some of the findings, stand at somewhere between Rs. 2000 to 2500 crores. Al most 2.5 million people of the state are directly or indirectly associated with the apple business. J&K Banks specially designed product named as Apple Advance has struck at the root of this exploitative system that thrived on scant or untimely fund availability and at times even lack of finance through formal channels. Last year, after a detailed study of the apple economy, a need-based, time specific product was introduced. The product incorporated all the critical inputs necessary to make our financial intervention effective and grower-friendly. Apple Advance was introduced to meet the comprehensive requirements of the apple growers with distinctive features like reduced margins, higher scale of finance that includes production and post harvest maint enance, auto renewal of limits and most importantly very easy and hassle free documentation. With an effective product monitoring mechanism i n place, the scale of finance was increased from Rs 1.50 Lakh per acre from Rs 40,000 per acre. Regular revision of scales of finance is carried out to match the rising production and marketing costs.

The objectives that guided the customization of the product included the easy access, simplified documentation, `avoiding redundancies, shortened process time and flexible fund limit. Even for the growers who have just leased orchards can avail finance under the scheme. With hypothecation of fruit crop and Third Party Guarantee of 2 persons as security and no emphasis on collaterals, the borrower is also allowed withdrawals up to 50% of the previous years limit till the bank renews the sanction for the next year. The process has been made extremely easy and hassle free to ensure that comprehensive requirements of Apple growers to take care of Production & Marketing Costs are fulfilled adequately and in time. Simplified legal documentation has been made to expedite the loan processing.

Rate of Interest: Up to .50 Lakh: .50 to 2.00 Lakh 12.5% 13.5%


2.00 to 5.00 Lakh 5.00 to 20.00 Lakh BUSINESS LOAN:

14.0% 14.5%

Right from financing the contractors, providing credit to transporters, funding the working capital of shopkeepers, providing financial solution to business men to corporate, SME and infrastructure finance, our regular loan products cater to all kinds of business of industrial activities in the state and rest of country.

Rate of Interest: Up to .50 Lakh: .50 to 2.00 Lakh 2.00 to 5.00 Lakh 5.00 to 20.00 Lakh 13.0% 14.0% 14.5% 15.0%

J&K Bank is working on empowering people and demonstrating that people with lesser means can be reached profitably. For us, at J&K Bank, empowerment is the process of enhancing the capacity of individuals or groups make choices and to transform those choices into desired actions and outcomes. One of the many of such products is our craft development loan which caters to the needs of our highly talented and skilled artisans engaged in Wood Craving, Paper Mache, Namdasazi, Copper Smithy, Willow Wicker and Kangri making etc. Likewise all our other such products have been designed keeping in view the seasonal and craft specific requirements.



The Non-Performing Assets (NPAs) problem is one of the greatest problems that have shaken the entire banking industry in India. This malady is spreading and has infect ed every limb of the banking system in the country. The fast growing NPAs in Banks have a worst effect on capital formation arresting the economic activity in the country on one hand; it erodes the profitability of banks through reduced interest income and provisioning

51 requirements on the other hand, besides restricting the recycling of funds leading to serious asset liability mismatches. The recovery of money has never been an easy experience for banks, as Indias legal system has so far been more geared to protect borrowers and not lenders. The borrowers, in India, have been using thousands of delaying tactics to keep lenders at bay. Major reasons for high incidence of NPAs can be:y y y y y y y y y

Improper and inadequate credit appraisal. Diversion of funds. Miss utilization of loans and subsidies. Industrial sickness and labor problems. Corruption. Political Compulsions. Willful default. Bad financial management. Fear psychosis among banks for compromise settlements.

Seeing the gravity of the situation, Reserve Bank of India, has taken several constructive steps for arresting the trend of increasing NPAs. Some of the steps taken are;i) Lok Adalats; Lok Adalats have been set up for recovery of debts in doubtful and loss category by way of compromise settlements. ii) Debt Recovery Tribunals ; DRTs set up in the country have not been able to deliver, as expected, as they got swamped under the large number of cases filed with them. iii) One-Time Settlement Schemes; These schemes launched in May, 99 and thereafter have proved useful in recovering a considerable portion of NPAs. iv) Corporate Debt Restructuring; CDR is a non-statutory mechanism institutionalized in the year 2001 to provide timely and transparent system for restructuring corporate debts of Rs.20 Crores and above, of viable entities financed by banks. v) Securitization Act; Sec. Act is a comprehensive piece of legislation. It is a giant leap forward in the realm of financial sector reforms. This act is revolutionary in the Indian context, as it gives sweeping powers to banks t o

52 seize the assets charged to them without intervention of courts and sell them off to realize the loans, which have become NPAs. But it is to be realized that the Act is not a financial TADA. It is a tool and not a weapon in the hands of Banks. It is to be seen whether this act is going to cure this fundamental illness until more legal reforms are made and strictly enforced. The problem is so serious that the NPAs will continue to haunt banks though in a different way.

Like other Banks in the country The Jammu & Kashmir Bank Ltd., has also been facing the problem of increasing NPAs. The problems faced are multidimensional in view of regional charact er of the Bank. The Bank has adopt ed the following strategies for reducing the NPAs:1. 2. 3. 4. 5. 6. 7. 8. 9. Replacement/Rescheduling of Loans. Rehabilitation of potentially viable units. Acquisition of sick units by healthy units. Compromise and settlement with borrowers. Enforcement of Securities under SARFAESI ACT-2002. Sale of NPAs. Establishment of special loan recovery branches. Legal action. Write-off in deserving cases.

In addition to this the Bank has also taken steps to improve Credit Appraisal, Monitoring, Supervision and Follow-up. A separate Risk Management Cell has been created at Head office Level for proper risk assessment, rating and review. The bank is studying the problem of NPAs; branch-wise, amount-wise and age wise besides creating special recovery cells at Head Office/Zonal Office levels. The bank is also fixing branch-wise and zone-wise targets for recovery in NPAs. Despite all these steps the increasing NPAs are a matter of concern for the Bank. However, the percentage of gross NPAs at 2.34% and net NPAs at 0.96% as on 30-062008 is among the lowest at industry level as per statement of the Bank. The capital Adequacy ratio of the Bank is 12.20% as against prescribed 9%, which is comfortable at present, but the bank will ha ve to strive hard to keep the NPAs under control. The Bank accepts that it is not possible to bring down the NPA ratio to 0-level but the steps taken by

53 them and the strategies adopt ed by the bank at Macro/Micro levels have helped them to keep the NPAs at minimum level.


GROSS NPAs(in Rs Cr) NET NPAs (in Rs Cr)

2005-06 2006-07
370.19 501.83


2008-09 Q1 09-10
559.27 511.32

133.87 2.52% 0.92% 63.64% 20.57%

193.57 2.89% 1.13% 61.43% 24.98%

203.55 2.53% 1.08% 58.05% 21.02%

287.51 2.64% 1.37% 48.59% 21.32%

159.56 2.44% 0.77% 68.79% 18.66%

Gross NPA Ratio (%) Net NPA Ratio (%) NPA Coverage Ratio (%) Gross NPA to Net Worth Ratio (%)

According to the above table the gross NPAs of J&K bank have been increasing from the year 2005 onwards but the first quarter of current financial year (Q1 09-10) shows the decline in the gross NPAs, which indicat es that bank is able to contain the NPAs. The net NPAs also shows the same position over previous years and has shown big decline in current financial years first quarter (Q1 09-10). Now the ratios of both Gross NPA and Net NPA show decline in current financial years beginning i.e., 2.44% and 0.77% respectively-lowest as compared to previous years. Now the important thing in the above table is the coverage of NPAs by the bank over a given period of time above, and the coverage has been highest in the current years first quarter which is almost 69%. It indicates that the bank is recovering its advances plus interest on it at good percentage; in fact it is the highes t percentage as compared to the previous years. The ratio of NPAs to Net worth has also decreased in the first quarter of current financial year.

54 Some recent article related to NPAs of JK Bank; Article I: According to the recent announcement by the Chairman of the bank the Gross NPAs as on March, 2010 have declined considerably to Rs 462.31 crore from Rs 559.27 crore a year ago, according to him J&K bank NPAs were the lowest in the country. The gross and net NPAs as proportion of gross and net advances as on March 2010 had further come down to 1.37 percent a year ago. He said the bank had increased the NPA coverage ratio as on March 2010 by 37 percent to 86 percent from 49 percent a year ago. This means even if all NPAs of the bank go bad, it will not collapse the bank, he said, adding that this limit was well above the RBI stipulated norm of 70 per cent. Article II: Operating profits up by 31 per cent Rising Kashmir News Srinagar, Jan 29: Continuing its steady performance, J&K Bank registered a net profit of Rs. 392.33 crore for the nine months ending December 2009, up by 18 per cent when compared to the net profit of Rs.331.16 crore of the corresponding period of the previous financial year. For the third quarter ended December 2009, the net profit was r egistered at Rs 139.99 crores as against Rs 120.67 crores during the same quarter last financial year. The operating profits of the Bank increased by 31 per cent during the same period. This was announced during the review of the financial results for the quarter ended December, 2009, by the banks Board of Direct ors in a meeting. The distinguishing feature of the Q3 results is the remarkable increase of 143% in the income earned by the bank other than the interest during the period ended December, 2009. The income of the Bank rose to Rs 95.81 crore from Rs 39.39 crore earned during the quarter ended December, 2008. The boost in the income has been primarily by the earnings on Commission/Exchange and profit on investments. The other highlight of the quarter is that the bad loans of the bank have decreased by almost 100 crores compared to March 2009. The J&K Bank now has coverage of its NPAs at 88 per cent, is well above the RBI stipulation of 70 per cent which Banks have to do by October this year. In fact, it is among the highest in the banking industry. It indicates the stability of the bank. Commenting on the quarterly results, Dr Haseeb A Drabu, Chairman and CE said, This has been a difficult quarter as the macro -economic environment has become adverse. We have outperformed the market, because our balanced policy approach that aims to achieve our short -term targets while keeping in mind our long -term objectives as the leading financial organization of the state. Dr Drabu further stated, That is one of the reasons why we have maintained a steady focus on the development of all the segments of local economy through enhanced credit deployment and smooth disbursement mechanisms in J&K. We are a commercial bank but we are also a developmental organization of our state. Under the JK specific lending, the advance portfolio in the J&K state has seen a spectacular leap from mere Rs.1200 crores to Rs.12000 crores in just four years.

55 Besides, the credit - deposit (CD) ratio has risen from 20% to 65%, said Dr. Drab u. The total Balance Sheet size of the bank as on December, 2009 increased to Rs 39204 crore by 11 % from Rs 35282 crore a year ago. The Operating Profit has increased by 30.77% YoY to Rs 723.46 crore from Rs 556.10 crore earned during the corresponding period of last fiscal year. The low cost Demand and Savings Deposits of the Bank as on Dec, 2009 are at Rs 13842.80 crore up by 21 % YoY from Rs 11476.69 crore as on Dec, 2008 taking the CASA (Current Account to Savings Account) ratio up to 41.12 % from 36.7 3 % a year ago. Besides, the Return on Assets for the current quarter improved to 1.43% (annualized) compared to 1.37 % for the corresponding quarter of last financial year. Thanks to the prompt follow-up procedures that have been put in place, the Gross NPAs as on Dec, 2009 have declined to Rs 460.27 crore from 545.69 crore a year ago. This has in turn resulted in an improved NPA Coverage Ratio as on Dec, 2009 to 82.87 % from 53.60 % a year ago. The said ratio is well above the RBI stipulated norm of 70%

Bank continuously is monitoring the NPA level and simultaneously ensuring maintenance of standard assets to avert further slippage. The existing NPAs would ha ve been still lower but for the loan waiver scheme announced by Govt. of India some years ago. The recovery process got some reversals as the borrowers expectations mounted. But the situation is now clear and the borrowers outside the ambit of the waiver scheme have started repayments The bank has several novel schemes in New Delhi. For e.g. in some branches of New Delhi the bank has been able to have a traders / fruit growers association who undertake the repayment responsibility of their members, which does a great deal in recovery and resultant reduction in NPA.


Credit risk-General disclosure of J&K Bank:

The general qualitative disclosure requirement with respect to credit risk including: 1) Any account or bill wherein the repayment of principal or interest remains overdue for more than 90 days is declared as NPA. In case of agricultural advances the period is bet ween two consecutive crop periods. If an account receives credits, which is less than the interest applied during the period or where the limit remains overdrawn as on date of Balance sheet, it is declared as irregular. A bill or loan is declared overdue if it remains unpaid on its due date.

2) In respect of securities, where int erest/principal is in arrears, the bank does not reckon income on the securities and makes appropriate provisions for the depreciation in the value of the invest ment. A non-performing investment is similar to a NPA in classification as defined above.

3) The bank has a credit risk management policy in place, which is aimed at supporting the business strategies, achieving target earnings with satisfaction of its customer needs and maintaining a sound credit portfolio. It also seeks to achieve prudent credit growth both qualitative and quantitative and adhere to the prudential norms wit h balanced sartorial and diversified growth of credit. The bank has put in place prudential limits for controlling credit concentration across industries, sections and geographies. The bank has a well defined credit appraisal & approval authority, legal support, reporting cum monitoring and follow-up syst em.

4) The bank is following standardized approach as prescribed by RBI for computing capital for credit risk. 5) The Bank has developed a robust Management Information System (MIS) hosting the complete credit portfolio database of the Bank. In addition to the regulatory returns, the MIS is doubling as a real-time DSS tool providing information about parametric distribution, maturity profiling and NPA tracking of the portfolio, among others.



80 70

60 50

30 20
10 0


According to the abo e chart the NPA co erage by the bank has been the highest in first quarter of the year 2010 i.e., 70% of ad ances since 2008. There ha e been ups and downs from the year 2008 in case of reco ery of NPAs but has reco ered good percentag e throughout this time period. ourth quarter of the year 2009 has shown biggest slow down in case of reco ery but immediately after this bank has reco ered a good percentage of NPAs which indicates that bank is getting its ad ances back from the customers.


Asset Quality Non Performing Asset (In crores)

Particulars 31.03.2009 31.03.2008

Net NPAs to Net Advances (%)

31-03-2009 31-03-2008

1.38% 485.23 401.89 327.85 559.82 203.55 346.09 261.82 287.51

1.07% 501.83 227.93 244.53 485.23 193.57 197.93 188.06 203.55

Movement in Gross NPAs a) Opening Balance b) Additions during the year c) Reduction during the year d) Closing balance Movement in Net NPAs a) Opening balance b) Additions during the year c) Reductions during the year d) Closing balance (after reducing interest suspense amounting to Rs. 1.29 cr previous year 0.98 cr) Movement of Provisions for NPAs (excluding provisions on standard assets)

a) Opening balance* b) Add/Transfer Provision made during the year c) Less write-off d) Closing Balance*
*Including floating provision of Rs.52.90 crores.

280.70 55.80 66.03 270.48

307.17 30.00 56.47 280.70

The performance of the Bank in recovery of NPAs during the year continued to be good. During the year, the Bank effect ed cash recovery, up-gradation of NPAs and technical writeoff of Rs. 327.85 crore compared to Rs. 244.53 crore in the previous year.

59 ILLUSTRATIVE STEPS WHICH MAY BE TAKEN BY THE CONTROLLING OFFICES OF COMMERCIAL BANKS FOR REDUCING NPAS Step 1 Study the problem of NPAs: Branch-wise, amount-wise and age-wise Step 2 Formulate a loan recovery policy and several strategies for reducing NPAs Step 3 Create special recovery cells at HO/ZO/RO/ other controlling offices Step 4 Identify Critical branches for recovery Step 5 Fix branch-wise and region/zone-wise targets for recovery and draw time bound action programmers for the branches/ROs/ZOs etc to enable them to achieve their respective targets Step 6 Select proper strategy (including combination of strategy) and techniques for solving the problem of each critical NPA on a case to case basis and common strategy and technique for other NPAs. Step7 Monitor implementation of the time bound action plan drawn Step8 Take corrective steps wherever necessary and change/modify the original plan, if necessary.


A) Important Provision of the ACT

Chapter 1: Preliminary Definition
1. Asset Reconstruction means acquisition by any secur itization company or

reconstruction company of any right or interest of any bank or financial institution for the purpose of realization of such financial assistance;
2. Borrower means any person who has been granted financial assistance by any Bank

or FI or who has given any guarantee or created any mortgage or pledge as Securit y for the financial assistance granted by any bank or FI and includes a person who becomes borrower of a securitization company or reconstruction company consequent upon acquisition by it of any rights or interest of any bank or FI in relation to such financial assistance.
3. Debt has the same meaning as in sec 2(g) of RDDBFI Act1993.



Default means nonpayment of any principal debt or int erest there on or any other amount payable by a borrower in any secured creditor consequent upon which the account of such borrower is classified as nonperforming assets. Sec2 (I) (j)


Financial Asset means debt or receivable and includes;      A claim to any debt or receivable or part thereof whether secured or unsecured. A debt or receivables secured by , mortgage of or charge on , immovable property; A mortgage charge ,hypothecation or pledge of immovable property; Any right or int erest in the security , whether full or part under lying such debtor receivable Any beneficial interest In property whether movable or immovable or in such debt receivables whether such interest is exiting , future, accruing, conditional or contingent  Any financial assistance


Hypothecation means a charge in or upon any movable property , existing or future created by a borrower in favor of a secured creditor with delivery of position of the movable property to such creditor as a security for financial assistance and includes floating charges and crystallization of such charge into fixed charge on movable property


Non performing Assets means an asset or account of a borrower which has been classified by a bank or financial institution as sub standard ,doubtful or loss assets, in accordance with the directions or guidelines relating to asset classification issued by the regulatory /administering authority/body or by Reserve Bank as the case may be.


Obligor means a person liable to the originator whether under a contract or other wise to pay a financial asset or to discharge any obligation in respect of a financial asset, whether existing future, conditional or contingent and includes a borrower;


originator means the owner of the financial asset which is acquired by a securitization company or reconstruction company for the purpose of securitization or asset reconstruction

10. Securitization means acquisition of financial assets by any securitization company

or reconstruction company from qualified institutional buyers by issue of security

61 receipts representing undivided int erest in such financial assets or otherwise; secured creditor means any bank or FI or group of banks or FIs and includes:
y y

Debenture trustee appoint ed by any bank or financial institution. Securitization company (sc) or reconstruction company (Rc) whether acting as such or its managing a trust set up for securitization /reconstruction;

Any other trustee holding securities on behalf of a bank or FI I whose favor securit y interest is created for due repayment by any borrower of any financial assistance.

Chapter II: 1. 2. 3. 4. 5. 6. Registration of securitization/ Reconstruction companies Acquisition of right or interest in financial assets Issue of Security By Security Reconstruction Company Measures for asset reconstruction other functions of security Reconstruction Company Regulation of disputes.

Chapter III: Enforcement of security interest 1. Not withstanding anything u/s 69A in TPA 1882 without intervention of any court tribunal the secured creditor may enforce the security interest. 2. The secured creditor may issue a notice in writing to the borrower of NPA account with details of amount payable by him and the securities int ended to be enforced in case of his failure to pay by the stipulated date and giving him 60days time to adjust his dues in full. 3. If the borrower makes any representation /raises any objection on receipt of notice the secured creditor shall communicate with in one week the reasons for its non acceptance Provided that such reasons communicated /likely to be communicat ed shall not confer any right upon the borrower to prefer an application to the DRT/ court of dist judge. 4. If the borrower fails to repay in full within the specified period the creditor may do one or more of the following: (i) Take possession of the secured assets of the borrower including the right to lease/assign/sell to realize the secured asset. (ii) Take over the management of the business of borrower including the right

to lease/assign/sell to realize the secured asset.

62 5. All costs, charges and expenses incurred with connection of action taken u/s 13(4) shall be recovered first and the balance shall be paid to the entitled person from the money received by the secured creditor. Chapter IV: Central Registry 1. setting up central registry for registration of securitization and reconstruction of financial assets and creation of security int erest S. 20 2. Filling of transactions of securitization and reconstruction of financial assets and creation of security interest S. 23 3. 4. modification of security interest Securitization Company or Reconstruction Company or secured creditor to report satisfaction of security interest.

Chapter VII: Offences and Penalties 1. Penalties: penalties up to Rs 5000 per day for every company secured creditor /their every officer in default in filling particulars u/s 23 or sending particulars u/s 24 or giving intimation u/s 25. 2. Penalties for non-compliance of directives of RBI by any securitization company/reconstruction company: Finance up to Rs 5lakhs and in case of a continuing offence with an additional fine, which may extend to Rs 10,000 per day during the period of default 28


Offence: Imprisonment up to 1 year or fine or both for contravening or attempting to contravening or a betting the contravention of the provisions of the ACT or of any rules made there under. 29.

Chapter VI: Miscellaneous; 1. Provisions of the Act not apply in case of: (a) Lien on any good/money/ security. (b) Pledge of movables. (c) Creation of security in any aircraft/ vessel (d) Any conditional sale/ hire-purchase/lease/any other contract. Where no security interest has been created (e) Any right of unpaid seller.

63 (f) Any properties not liable to attachment (excluding the properties specially charged with the debt recoverable under this Act) or sale under the first provision to 60 (1) of CPC (g) Repayment of loans not exceeding Rs1lakh. (h) Agriculture land and (i) Amount of due<20% of principal & interest.






NO 2%

YES 98%

According to the above chart the percentage of respondents having bank account is considerably very high i.e., 98% and the main reason behind it is that people feel themselves secure while depositing huge amounts of their money in banks and also get interest on such money from the bank, and can demand their money back as and when needed. There are also people who do not keep their money deposit ed in the bank and one of the major reason we were told by the respondents is that they dont have savings what ever they earn gets spent.





SBI 36 J&K B A K  50 P B  8

According to the above fig J&K bank has got the highest percentage as compared to the other banks as having maximum number of customers and the reason told by the respondents was that the bank being the first and old in the state is being trusted by the people because of the kind of services and facilities it provides to its customers. SBI has also got the good percentage of customers in the state as it is the other fully reliable bank in the state. PNB and other banks the state also ha ve good business spread all over the state of Jammu and Kashmir.




NO 40%

YES 60%

According to the survey only 60% of respondents agreed that they have taken the facility of loans from their respective banks, and almost 40% of them were those who didnt had taken the facility of loan from bank.




NILL 44%

J&K BANK 32%

S BI 18% OTHERS 2%


The above chart describes that the maximum number of loans and advances have been raised through J&K bank as 32% of respondents said that they ha ve taken loan from J&K bank. After J&K bank SBI plays major role in advancing loans to the people as it contributes 18% of the whole sample size. But the majority of people denied and told that they havent taken loan from any bank. PNB with Other banks contribute less percentage towards loans and advances given to people.





YES 48%

NO 12%

While asking about the repayment of loan to respondents majority agreed that they are repaying their loan at regular intervals which contributes almost 48% of the whole sample size and 40% of them have not taken the facility of loan and 12% of the whole respondents were those who were not repaying of their loan due to some reasonable problems.





YES 48%

NO 1 2%

According to the above chart when respondents were asked about the present status of their loan majority of them who have taken loan from the bank know the status of their loan and are repaying it at regular intervals in installments. 40% of respondents have not taken the loan at all from bank. About 12% were those who dont know the status of their loan as they didnt disclosed the fact that why they were not able to know the status of their loan and tol d there are some personal reasons.




NO 30%

YES 70%

In above chart about 70% respondents agreed about their interest in opening bank accounts in future and the main reason they told was that they feel safe and secure to keep their money with bank rather than keeping it at their own custody. 40% of responden ts were those who are not interest ed to open bank accounts in future the reason they told that either they ha ve a number of existing accounts in banks or they are satisfied with their existing bank accounts.



NIL 30%

SB I 14%

PNB 4%

O TH E R S 4%

J&K BAN K 48%

The above chart shows the response of people towards those banks in which they would like to open their bank accounts in near future, according to above chart it clearly reveals that people prefer to ha ve their money in J&K bank and the main reason behind it is that J&K bank is one of the oldest financial institution existing in the state of Jammu and Kashmir. Other major portion of chart is covered by SBI as it is also one of the trusted banks in the state, banks like PNB and other private banks have less portion as compared to J&K bank and SBI this clearly indicates that J&K bank and SBI are working up to the expectations of people.




NO 6%

YES 94%

The above chart shows that the interest of people towards the banks as it shows the percentage of family members of respondents ha ving bank accounts, and the major portion of the chart indicates that family members are having bank accounts belonging from the same family and there is very less portion of people who do not have any other bank account accept one that of respondent himself.




. GOO D 18%

GOO D 52%

In the above chart we can clearly see that people are enjoying good experience with their bank because of the kind of facilities and services they provide.

11. What are the reasons for default in repayment of loan?

As it was an open ended question and also one of the important questions for our research, there were rare number of people who responded aptly to this question some of them had raised loan for business purpose and due to failure of business they were not able to repay their loan and needed sufficient amount of time to repay it, some of them had their famil y problems and increasing day by day cost. Some of them also were willingly doing this.



The data collected through Questionnaire based on NPAs particularly with special reference to J&K bank clearly reveal that people showed positive response especially for J&K bank. In the state of Jammu and Kashmir J&K bank being the oldest and first financial institution is highly trusted and successful bank in the state of Jammu and Kashmir, as our questionnaire also reveals this fact that people show their trust towards J&K bank and in reply J&K bank is also fully reliable and providing good value to its each and every customer and serve them in any kind of situations as J&K is trusted to be the highly disturbed state in country and to exist under such circumstances is work of bravery. Now concluding especially regarding NPAs with special reference to J&K bank, bank has provided huge amounts of loans and advances to its customers and huge amount out of these have turned into NPAs. The bank authorities provided me the list of number of its customers who have turned into NPAs and have been declared as defaulters as not being able to repay the loans raised by them. I personally went to them to fill my questionnaire and some of them totally disagreed with being the defaulters and even some of them totally disagreed with the fact that they have raised the loan from the bank; this clearly shows their intention and reveals that the fault lies with them. And some said that due to failure of their purpose for which loan was raised was not accomplished. In case of NPAs bank has taken several steps in order to make the recovery of NPAs. In the first quarter of current financial year 2010 bank has recovered almost 70% of NPAs which is positive sign for the bank. Bank should maintain proper record of the loans and advances given out to its customers with time period mentioned and there should be proper credit management in order to gauge and control the loans provided to customers. Defaulters should be given proper time and should be motivat ed to pay their respective debts to bank. Otherwise a strict action needs to be taken because NPA one of the major threat faced by each and every bank in the country and public sector banks have got the highest NPAs as compared to private banks and international financial institutions.


y y

J&K bank is the highly trustable bank of the state of J&K. Percentage of recovery of NPAs was the highest in the country at the end of the first quarter of current year.

Bank has huge number of customers in the whole state besides the competitors like SBI, PNB, and HDFC etc.

RECOMMENDATIONS: 1. Bank should have its own independence credit rating agency which should evaluat e the financial capacity of the borrower before than credit facility. 2. Special accounts should be made of the clients where monthly loan concentration report should be made. 3. There should be proper monitoring of the restructuring accounts because there is every possibility of the loan slipping into NPAs category again. 4. Proper training is important to the staff of the bank at the appropriate level either ongoing process. That how they should deal with the problem of NPAs and what steps should be taken to reduce the NPAs. 5. It is recommended that the proper documentation and verification to be made before sanctioning the loan. 6. Constant int eractions have to be maintained with the customers to keep track of their loan payment. 7. Strict measures have to be taken while issuing or sanctioning the loan. The measures can include verification of job and salary slips, verification of securities and the like. 8. When all possible attempts for recovery is failed only option is to proceed with legal action and this should be speedy otherwise this will be costly. 9. It is also wise for the bank to carryout special investigative audit of all financial and business transactions and books of accounts of the borrower company when there is possibility of the diversion of the funds and mismanagement. 10. Independent settlement procedure should be more strict and faster and the decision made by the settlement committee should be binding both borrowers and lenders and any one of them failing to follow the decision of the settlement committee should be punished severely.

77 11. The bank should come out with new and innovative methods to recovered NPA and should motivate customers to pay their dues in time. 12. Wilful Default of Bank loans should be made a Criminal Offence. 13. Identifying reasons for turning of each account of a branch into NPA is the most important factor for upgrading the asset quality, as that would help initiate suitable steps to upgrade the accounts. 14. The bank must focus on recovery from those borrows who have the capacity to repay but are not repaying initiation of coercive action a few such borrows may help. 15. The recovery machinery of the bank has to be streamlined; targets should be fixed for field officers / supervisors not only for recovery in general but also in terms of upgrading number of existing NPAs.



! "#$%&', (#l#)01#23 Ludhi#)# 4.5 6oad

17 Do you have a Bank Account ?(if no go to Qno11) YES NO

2. In which Bank you have an account?(IF OTHERS PLEASE SPEACIFY) SBI

PNB J& 8


OTHERS_______________________________________________________ _____________ __________ 3. Have you taken the facility of loan from your bank? YES NO


9hat is the amount of loan availed______________________________

5. From which branch you have taken the loan_______________________________________________________


6. Whe@ was loan availeABAate)___________________________________

7. What was the purpose of loan availeA_____________________________________________________ _____________ __________

8. Are you repaying your loan? YES NO

9. Are you aware about your present status of your loan amount? YES NO

10. What are the reasons for Default in repayment of loan

11. Why dont you have bank account?

12. Do you have any other account apart from loan account(specify if yes)

13. Are you interested in future to open a bank account?(if NO go to Q no 16)



14. In whi ch bank will you be interested in opening a bank account?(if others please specify) SBI




OTHERS OTHERS_____________________________________________ 15. What are the reasons of opening bank account with the bank you specified above?

16. Any other family members account



17. His/her experi ence with bank

18. First Name

19. Last Name

20. S/O

21. R/O_____________________________________________________________ ________ ________________


___________________________________________________________________ ________ __________

22. AGE_____________________________________

23. Occupation ________________________ _______________________________________ ________________ __________________________ _________________________ ________________________ _________________



During the completion of this project work I have taken references from various sources which include:

Books y Pandey, I.M. (2006), Financial Management, 7th Ed. New Delhi: Vikas Publishing House Pvt. ltd y Kotler, P. (2006), Marketing Management, 12 th Ed. New Delhi: Pearson Publishers Ltd. y Gupta, Shashi K.(2007), Financial Management, 5 th Ed. Ludhiana: Kalyani Publishers. y Risk Management by Indian institute of banking and finance . (Macmillan).

He, Dong (2002): ResolCing Non-performing Assets of t e Indian Banking System. Published in: India: Selected Issues and Statistical Appendix IMF Country Report No. 02/193 (2002) Journal of Asset Management (2010) 11, 6270. doi:10.1057/jam.2010.1


83 " ml "


y Annual report of The Ja mmu and Kashmir Bank Ltd. y Magazines such as Business Economics. y Newspapers such as Greater Kashmir (Corporate Section), bank dairy, bank magazine, catalogue etc. y Yearly journals of The Ja mmu and Kashmir Bank Ltd.