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Comparative Analysis of Non Performing Assets of Public Sector Banks Private Sector Banks ! "oreign Banks
A Pro#ect $eport Submitte% By &A'$A( S) &*+,AN-n partial fulfillment for t.e a/ar% of t.e %egree of BAC012*$ -N C*331$C1 40*N*'$S5 'n%er +r) P) P) &.os. of S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 'n%er 'niversity of Calcutta $*22 N*9 :;01;0<;0=>:

&ranting of cre%it facilities for economic activities is t.e primary task of banking) Apart from raising resources t.roug. fres. %eposits borro/ings etc) recycling of fun%s receive% back from borro/ers constitutes a ma#or part of fun%ing cre%it %ispensation activities) Non;recovery of installments as also interest on t.e loan portfolio negates t.e effectiveness of process of t.e cre%it cycle) Non;recovery also affects t.e profitability of banks besi%es being re?uire% to maintain more o/ne% fun%s by /ay of capital an% creation of reserves an% provisions to act as cus.ion for t.e loan losses) Avoi%ance of loan losses is one of t.e pre;occupations of management of banks) ,.ile complete elimination of suc. losses is not possible bank managements aim to keep t.e losses at a lo/ level) -n fact it is t.e level of non;performing a%vances /.ic. to a great e@tent %ifferentiates bet/een a goo% an% a ba% bank) 3ounting NPAs may also .ave more /i%esprea% repercussions) 6o avoi% s.ock /aves affecting t.e system t.e salvaging e@ercise is %one by t.e &overnment or by t.e in%ustry on t .e be.est of &overnment/ central bank of t.e country putting pressure on t.e e@c.e?uer)

-n -n%ia t.e NPAs /.ic. are consi%ere% to be at levels t.ose in countries .ave of late attracte% t.e attention of public as also of international financial institutions) .as gaine% prominence in t.e /ake of transparency an% %isclosure measures initiate% by t.e $B- %uring recent years) pro#ect aims at provi%ing an o ov erall vie/ on t .e e@istence of NPAs t.eir treatment t.e /ays at resolving issue an% also a f e/ reports on t.e recent %evelopments in fiel%)

roug.e (ice Principal an% +ean of Commerce /.ave playe% a crucial role in t.eartfelt gratitu%e to pro#ect) .o gave us an opportunity to make t.o supporte% me t.operation an% patience) .ank opportunity to t.eir .o .e first person .it. t. of St) 7avier8s College Aolkata /.aving pro#ects as a part of t.o .is pro#ect /it. utmost co.em for all t.out t.21+&131N6 "irst of all .out t.e follo/ing in%ivi%uals /.eir active cooperation t. to e@press my .ACAN*./ very pro#ect in our final year) "inally to all my frien%s /./oul% like to ackno/le%ge is my gui%e +r) P) P) &.elp support interest an% valuable .ints) .os./oul% like to take t.ankful to t.e specifie% time limit) 6.e preparation of t.ankful to you sir for sparing your precious an% valuable time for me an% for .e B)Com Curriculum) .elping me in %oing t.e pro#ect coul% not .is pro#ect) .ank my College for . for t.ave been complete% /it./ant to also t.elpe% me in making pro#ect) .

=< =C.esis 6esting *verall "in%ings Conclusion Suggestion C) Bibliograp.y B< .6AB21 *" C*N61N6S Sr) No) 1) -ntro%uction to NPA8s @ 3eaning of NPA @ Asset Classification @ 6ypes of NPA @ $easons for an Account becoming an NPA @ -mpact of NPA @ 1arly Symptoms @ Preventive 3easurement of NPA @ Proce%ure of NPA -%entification ! 1B 2< 2C :1.B4 B= BB B> 6*P-CS Pg) No) 1.2> 1 : > < 10 11 1: $esolutions in -n%ia 2) :) 4) =) B) >) <) *b#ectives ! Beneficiaries $esearc. 3et.o%ology Analysis 0ypot.

effect from 3arc.ic. :1 2004) Accor%ingly / bill remains over%ue for a perio% of more t. a vie/ to moving to/ar%s international best practices an% to ensure greater transparency it .nology in t.ereF i) -nterest an% /or installment of principal remain over%ue for a perio% of more t.ere i) -nterest an% /or installment of principal remain over%ue for a perio% of more t.e payment an% settlement systems recovery climate up gra%ation of been %eci%e% to a%opt t.-N6$*+'C6-*N 6* NPA 31AN-N& *" NPA9 Non Performing Asset means an asset or account of borro/er /.stan%ar% %oubtful or loss asset in accor%ance / 1<0 %ays in respect of an over%raft/ cas.e %irections or gui%elines relating to asset classification issue% by $B-) An amount %ue un%er any cre%it facility is treate% as Dpast %ueD /.at %ate a Non performing asset 4NPA5 s.e account remains Eout of or%erE for a perio% of more not been pai% /it.ell be a loan or an a%vance /.e %ue %ate) +ue to C0 %ays in respect of an over%raft/ C0 %ays in respect of a 6erm 2oan ii) 1 6.e account remains Eout of or%erE for a perio% of more t. Cre%it4*+/CC5 Page 1 S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A . effect from 3arc.ell be an a%vance /.er accounts) . :1 2004 a non.e case of an a%vance grante% for agricultural purpose an% v) Any amount to be receive% remains over%ue for a perio% of more :0 %ays from t. Cre%it4*+/CC5 iii) 6. :1 2001) Accor%ingly as from t.e banking system etc) it /as %eci%e% to %ispense /it.performing asset 4NPA5 s.en it .as been classifie% by a bank or financial institution as 1<0 %ays in respect of ot.alf years in t.e improvement in t.ase% an% %iscounte% iv) -nterest an%/ or installment of principal remains over%ue for t/o .an 1<0 %ays in t. t.e EC0 %ays over%ueE norm for i%entification of NPAs from t.e year en%ing 3arc.arvest seasons but for a perio% not e@cee%ing t/o . . Epast %ueE concept / 1<0 %ays in respect of a 6erm 2oan ii) 6.e case of bills purc.

e case of an a%vance grante% for agricultural purpose an% v) Any amount to be receive% remains over%ue for a perio% of more t.iii) C0 %ays in t.alf years in t.arvest seasons but for a perio% not e@cee%ing t/o .e case of bills accounts) Page 2 S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A .ase% an% %iscounte% iv) -nterest an%/ or installment of principal remains over%ue for t/o .e bill remains over%ue for a perio% of more C0 %ays in respect of ot.

en it is NPA an% NPAs are in t.ic.e customer) 0ere it is also very important t.e loan regularly from t.performing assets is amount %ue more t.e principal amount of t.e reasonability of t.oul% not be reckone% for arriving at net NPAs) @ 6.e bank is receiving interest as /ell as case t.e en% of financial year) -f asset fails to be in category of stan%ar% asset C0 %ays t.e arrears of interest an% t.e provisions to/ar%s Stan%ar% Assets nee% not be nette% from gross a%vances but s.e banks s.performing an% t. t.ersE in Sc.eet) Banks are re?uire% to classify non.stan%ar% Assets 25 +oubtful Assets :5 2oss Assets Page : S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A .oul% make a general provision of a minimum of 0)40 percent on stan%ar% assets on global loan portfolio basis) @ 6. *t.e %ues9 15 Sub.e%ule = of t.e ones in /.e follo/ing nee% to classify in sub categories) Provisio ning Norms9 @ "rom t.e balance 2iabilities an% Provisions .ree categories base% on remaine% non.ASS16 C2ASS-"-CA6-*N9 Assets are classifie% into fo llo/ing four catego ries9 @ Stan%ar% Assets9@ @ Sub.e perio% for /.e provisions on stan%ar% assets into t.e asset .e principal amount of loan %o not e@cee% C0 %ays at t.o/n separately as EContingent Provisions against Stan%ar% AssetsE un%er E*t.e year en%ing :1)0:)2000 t.stan%ar% Assets@ @ +oubtful Assets@ @ 2oss Assets@ Stan%ar% Assets9 Stan%ar% assets are t. t.

e realisable value is estimate% on a realistic basis) @ -n regar% to t.e realisable value of t.e banks in fullF an% all t. effect from :1 3arc.stan%ar% category for 12 #eopar%iGe t.e a%vance is not covere% by t.e sub.e /eaknesses /ere classifie% as sub.s) Provisio ning Norms9 @ 100 percent of t.e current market value of t. t.e asset .ic.e follo/ing features are e@.e basis of currently kno/n facts con%itions an% values H . t.aracteristic t. t.ic.e e@tent to /.e %istinct possibility t.arge% is not enoug. .e a%%e% /it.ibite% by substan%ar% assets9 t.Sub.e current net /ort.e rates ranging from 20 percent to =0 percent of /ell. 200= a substan%ar% asset /oul% be one /.erent in assets t.e banks /ill sustain some loss if %eficiencies are not correcte%) Provisio ning Norms9 A general provision of 10 percent on total outstan%ing a vali% recourse an% t.e borro/ers / guarantor or t.) 6.oul% be ma%e /it.e %ues to t.e security to /. :1 200= an asset /oul% be classifie% as %oubtful if it remaine% in t.stan%ar% Assets9 .e %ebt an% are ?uestionable an% improbable) .e /eaknesses make collection or li?ui%ation in full on remaine% NPA for a perio% less t.ig.e follo/ing basis at t.e asset .an or e?ual to 12 mont.e security bank .ic.e li?ui%ation of t. of t. to ensure recovery of t.out making any allo/ance for +-C&C/1C&C guarantee cover an% securities available) +oubtful Assets9 A loan classifie% as %oubtful .e secure% portion provision may be ma%e on t.e perio% for /. effect from 3arc. t.aracteriGe% by t.%efine% cre%it /eaknesses t.e secure% portion %epen%ing upon remaine% %oubtful9 Page 4 S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A .

ase t.ree years9 415 *utstan%ing stock of NPAs as on 3arc. became %oubtful on account of ne/ norm of 1< mont.ic.ic.e a%vance .e re%uction in t.e bank or internal or e@ternal au%itors or t. year) 2oss Assets9 A loss asset is one /. effect from been consi%ere% as %oubtful 'p to one year *ne to /. :1 200= /it.e $ t.e a%%itional provisioning conse?uent upon t. t. a minimum of 20 J eac.e amount /oul% not .e year en%ing 3arc.e previous year in a%%ition to its continuance as a bankable asset is not /arrante%. t.e c. consi%ere% uncollectible an% of suc.ases as un%er9 i) As on:1)0:)200: =0 percent of t. little value t.oug.inspection but t. to be ma%e in p.ave been /ritten.ere may be some salvage or recovery value) Also t. effect from 3arc. :1 200: .e transition perio% from substan%ar% to %oubtful asset from 1< to 12 mont. :1 200B) 100J /it.ange in t.ree years 3ore t.olly) S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A Page = .e %efinition of %oubtful assets effective from 3arc.e assets /.e provisions not ma%e %uring t. :1 2004) 425 A%vances classifie% as I%oubtful‟ more t.ree years on or after April 1 2004) Provision re?uirement 4J5 20 :0 B0J /it.Perio% for /. :1 200=) >=J effect from 3arc.ese assets /oul% .ic.stan%ar% asset to %oubtful category) ii) As on :1)0:)2002 balance of t.s over a four year perio% commencing from t. :1 200>) @ A%%itional provisioning conse?uent upon t.e a%%itional provisioning re?uirement on t.e provisions nee%e% as on :1)0:)2002) @ Banks are permitte% to p.s for transition from sub.ave been i%entifie% as K2oss assetsL by t .

Provisio ning Norms9 6.e entire asset s.e assets are permitte% to remain in t.oul% be /ritten off) -f t.oul% be provi%e% for) Page B S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A .e outstan%ing s.e books for any reason 100 percent of t.

e ?uality of %e%ucte% t.o/s t. t.ose type of NPAs in /. Provisions Page > S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A .e process of recovery an% /rite off of loans is very time consuming t.e provision regar%ing NPAs) Net NPA s.e .e banks .eet %ate) &ross NPA reflects t.y t.eets contain a .) -t can be calculate% by follo/ing9 Net NPAs N &ross NPAs H Provisions &ross A%vances .e loans ma%e by banks) -t consists of all t.e bank .e sum total of all loan assets t.e NPAs accor%ing to are classifie% as NPAs as per $Bgui%elines as on Balance S.e nonstan%ar% assets like as sub.e %ifference bet/een gross an% net NPA is ?uite .e provisions t.stan%ar% %oubtful an% loss assets) -t can be calculate% /it.uge amount of NPAs an% t.ig. t.e central bank gui%elines are ?uite significant) 6.e actual bur%enof banks) Since in -n%ia bank balance is /.ave to make against t.6MP1S *" NPA9 1) &ross NPA 2) Net NPA &ross NPA9 &ross NPAs are t.elp of follo/ing ratio9 &ross NPAs $atio N &ross NPAs &ross A%vances Net NPA9 Net NPAs are t.

anges etc) Page < S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A .roug.ange rates etc) B5 &overnment policies like e@cise %uty %ebt instrument from capital markets) B5 Business failures) >5 +iversion of fun%s for e@pansionOmo%erniGationOsetting up ne/ pro#ectsO .anges countries e@ternaliGation problems a%verse e@c. ups %elaying settlement of paymentsO subsi%iaries by government bo%ies etc) 1@ternal factors9 15 Sluggis.ability of t.anges -mport %uty c.illful %efaults sip.$1AS*NS "*$ AN ACC*'N6 B1C*3-N& NPA9 1) -nternal factors 2) 1@ternal factors -nternal factors9 15 "un%s borro/e% for a particular purpose but not use for t.elping or promoting sister concerns) <5 .e part of t.economic costs) =5 -n.e sai% purpose) 25 Pro#ect not complete% in time) :5 Poor recovery of receivables) 45 1@cess capacities create% on non.ortage of ra/ material ra/ materialOinput price escalation po/er s.a% taken place in labour la/s @ 2ack of sincere effort) 25 Scarcity of ra/ material po/er an% .er countries recession in ot.oning of fun%s frau% %isputes management %isputes mis.ortage in%ustrial recession e@cess capacity natural calamities like floo%s acci%ents) =5 "ailures nonpaymentO over %ues in ot. t.e corporate to raise capital t. legal system H @ 2ong legal tangles @ C.e issue of e?uity or ot.e banks viG) in cre%it appraisal monitoring an% follo/. appropriation etc) C5 +eficiencies on resources) :5 -n%ustrial recession) 45 S.

ic. are %ue to inefficient management system straine% labour relations inappropriate tec.ic.e &overnment of -n%ia) Page C S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A .ic.nology/ tec..6.e part of banks viG %elays in release of limits an% payments/ subsi%ies by t.ortage price variation acci%ents natural calamities etc) 6.e $B. is for e@pansion %iversification mo%erniGation un%ertaking ne/ pro#ects an% for . are because of sip. of NPAs in -n%ian banking sector) @ 6ime/ cost overrun %uring pro#ect implementation stage) @ &overnmental policies suc.e -n%ian banking sector as9 @ +iversion of fun%s /.as summariGe% countries also lea% to gro/t.oning. recessionary tren%s an% failures to tap fun%s in capital an% %ebt markets) @ Business failures fun%s frau%/ misappropriation promoters/ %irectors %isputes etc) @ +eficiency on t.illful %efaults /.er level of NPAs in t.elping associate concerns) is also couple% /it.nical problems pro%uct obsolescence etc) @ $ecession /.ic.e e@ternaliGation problems in ot.e finer factors contributing to .anges in e@cise %uties pollution control or%ers etc) @ .ig. as c. as pro%uct marketing etc)5 /. is %ue to input/ po/er s.

a%versely affect current earning of bank) 2i?ui%ity9 3oney is getting blocke% %ecrease% profit lea% to lack of enoug.e bank) Cre%it loss9 Bank is facing problem of NPA t. lea% to a%%itional cost to t.ic.ave %iverte% to some fruitful activities /.er impact of re%uction in profitability is lo/ $*. is a%%itional cost to t.4return on investment5 /.ic.ic.ave special employees to %eal an% . bank .at to bear %ue to NPA) 6ime an% efforts of management in . at .e functions of bank is an% managing NPA /oul% .er in%irect cost /.e money getting blocke% t. cas. lea% to borro/ing money for NPAs /.o are putting t.ave given goo% returns) No/ %ay‟s banks .ic.-3PAC6 *" NPA9 Profitability9 NPA means booking of money in terms of ba% asset /.en it a%versely affect cause of NPA %ue to lack of money) $outine payments an% %ues) -nvolve ment of management9 6ime an% efforts of management is anot.e value of bank in terms of market cre%it) -t /ill lose its goo%/ill an% bran% image an% cre%it /.oice of client) Because of t.ortest perio% of time /.ave negative impact to t. occurre% %ue to /rong c.term beneficial opportunity) Anot.eir money in t.ic.e amount of NPA but NPA lea% to opportunity cost also as /.ic.ic. .e pro%igality of bank %ecreases not only by t.e people /. /oul% .ic.e banks) Page 10 S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A . may lea% to loss of some long. of profit investe% in some return earning pro#ect/asset) So NPA %oesn‟t affect current profit but also future stream of profit /.ic.e company) +ifficulty in operating t.

as installment) @ . 15 "inancial9 @ Non.e very first installment in case of term loan) @ Bouncing of c. performing asset "our categories of early symptoms9.e accounts it is foun% t.e city /.at t. %oes not cover t.e process of /in%ing up or are not %oing t.e accounts) @ 'npai% over%ue bills) @ +eclining Current $atio) @ Payment /.controllable factor like natural calamities in t.e?ue %ue to insufficient balance in t.e borro/er .ic.e business) @ *ver%ue receivables) @ Stock statement not submitte% on time) @ 1@ternal non.ic.payment of partial amount is %iverte% to sister concern or parent company) 25 *perational an% P.e accounts) @ -rregularity in installment) @ -rregularity of operations in t.ere borro/er con%uct .ile monitoring initiate% t. one can recogniGe a performing asset turning in to business) @ "re?uent c.anges in plan) @ Nonpayment of /ages) Page 11 S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A .e interest an% principal amount of t.ysical9 @ -f information is receive% t.1A$2M SM3P6*3S9 By /.

e market) Page 12 S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A .ers9 @ C.:5 Attitu%inal C. of borro/er) @ Competition in t. bank) @ Problem bet/een partners) 45 *t.anges in &overnment policies) @ +eat.anges9 @ 'se for personal comfort stocks an% s.ares by borro/er) @ Avoi%ance of contact /it.

e security position becomes /orse) -%entifying Borro/ers /it. in terms of re.o .ose /.oul% %eci%e as ?uickly as possible /.economic viability stu%y) $estructuring s.e fact contribute% to sickness of t. genuine intent from t. type of cases s.e a%%itional fun%ing t.ey are t.e promoter‟s intention banks are convince% of a turnaroun% /it. &enuine -ntent9 -%entifying borro/ers / it may not . in fun% flo/ or su%%en re?uirement of a%%itional fun% may be entertaine% at branc.atever is possible it /oul% be /ort.e%ule% timeframe) -n respect of totally unviable units as %eci%e% by t.e situation.oul% be %eci%e%) 6.economic stu%y of t.roug.ieve turnaroun%) Base% on t.nical e@perts /it. level is paramount as t. level an% for t.abilitation of t.e pro#ect an% recovery of bank‟s %ues) -%entification of /eakness in purpose a special limit to suc.e potential of revival may be %one on t.ave intelligent inputs /it. no commitment or stake in revival is a c.allenge confronting bankers) 0ere ob#ective assessment banks s.aving KSpecial -nvestigationL of all financial transaction or business transaction books of account in or%er to ascertain real factors t..ave become NPA is imperative) Assessment of t.e controlling offices in %eserving cases an% .is /ill obviate t.ile to commit a%%itional finance) -n t.roug.e basis of a tec.elp avert many accounts slipping into NPA category) Page 1: S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A .ere after an ob#ective assessment of t.ave penal of is 9 .o/ing first signs of /eakness regar%less of t.e bank it is better to facilitate /in%ing up/ selling of t.e branc. regar% to promoters‟ sincerity an% capability to ac./. legal means before t.o are non.e very beginning t.aving genuine problems %ue to temporary mismatc.e time banks start t.e Problem9 -nvariably by t.e pro#ect of proven e@pertise an% track recor% of preparing tec. t.e borro/ers) Borro/ers .e nee% to route t.P$1(1N6-(1 31AS'$131N6 "*$ NPA9 1arly $ecognition of t. serious / a sc. bot.e borro/er) Banks may .oul% be attempte% /.e role of frontline officials at t.en regar% banks may consi%er .e account starts s.e unit earlier so as to recover /.eir efforts to get involve% in a revival process it ‟s too late to retrieve t.e ones /.

ile financing at t.e conventional fun% flo/ analysis only /.e time of restructuring affects a borro/ing unit‟s fortunes) A bank may commit a%%itional finance to an aling unit only after basic viability of t. by all t.aring of all relevant information on t.economic stu%y an% promoter‟s commitment .ic.ic.e e@it option) "ocus on Cas.e probability of success/failure) Page 14 S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A to be a%e?uate in terms of e@ten% of a%%itional fun%ing an% rela@ations etc) un%er t.e conte@t of ?uality of management is e@amine% an% confirme%) . any future action can be consi%ere%) 3ultiple "inancing9 @ +uring t.ave consultant appointe% as early as possible to e@amine t.e basis of "un%s "lo/) 3anagement 1ffectiveness9 e@ercise for assessment of viability an% restructuring a Pragmatic an% unifie% become aspect) A proper it is lack of finance t.e case all t.ere t. coul% yiel% a potentially mislea%ing picture) Appraisal for fres.e time) 3anagement effectiveness in tackling a%verse business con%itions is a very important aspect t.6imeliness an% A%e?uacy of response9 2onger t. cre%it re?uirements may be %one by analyGing fun%s flo/ in con#unction /it.e basis of tec.e %efault is %ue to %eeper mala%y viability stu%y or investigative au%it s.e banks may not be gui%e% by t.e package of assistance may be fle@ible an% bank may look at t.oul% be %one H it /ill be useful to .is may not be t. "lo/s 9 .abilitation activity) 6.e Cas. economic viability stu%y must t.e borro/er /oul% go a long /ay to/ar% overall success of re.e in#ury to t. t.e account an% response %eci%e% on only on t..e basis on /.e enterprise also in t.e general perception among borro/er is t.e %elay in response grater lea%s to sickness an% NPAs) But t.abilitation e@ercise given t.e asset) 6ime is a crucial element in any restructuring or re. "lo/ rat.e restructuring e@ercise) 6.e len%ing banks/ "-s as also s.

ave a muc.ere s. is not part of t. clients an% violation may attract penal action) 6. %efaulting clients) Current account facilities may also be %enie% at non.ile one set of len%ers may be /illing to /ait for a longer time to recover its %ues anot. flo/s forfeite%5 an% ensure t.oul% be regular flo/ of information among consortium members) A bank /.at been institutionaliGe% in 2001 t o provi%e a timely an% transparent system for restructuring of t.e corporate %ebt of $s) 20 crore an% above /it.erefore any plan for restructuring/re.abilitation may take t.e cas.ere is a ten%ency on part of t.ey %efault for fear of getting aspect into account) @ Corporate +ebt $estructuring mec. cas.ere t.e legal frame/ork) 'n%er t.consortium banks to suc. s.e bank s.anism .@ -n some %efault cases /.e priority of eac.e borro/ers to s/itc.stan%ar% accounts /it. bankers once t. consortium/multiple banking arrangements) Page 1= S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A .ic. t.ange on %efaulting borro/ers once t.e letter categories of len%ers may be /illing to e@it even a t a cost H by a %iscounte% settlement of t.eir cas.orter timeframe in min%) So it is possible len%er may ..e Cre%it -nformation Bureau of -n%ia 2t%)4C-B-25 may be very useful for meaningful information e@c.e consortium may not be allo/e% to offer cre%it facilities to suc.oul% make sure t. len%er /ill be %ifferent) . flo/s are use% for /orking capital purposes) 6o/ar% it captures t.e banks an% "-s on a voluntary basis an% outsi%e en% system banks may greatly benefit in terms of restructuring of large stan%ar% accounts 4potential NPAs5 an% viable sub.e e@posure) 6.e setup becomes fully operational) @ -n a forum of len%ers t. flo/s 4t.e unit is still /orking t.

e 1.e banks i%entification of potential problem accounts an% t. t. allo/s future plans etc) 6.e borro/er an% report all %evelopments impacting t. /it..e borro/er accounts /.ic.S enable a bank to i%entify business .eir options before.e system) -n a%%ition some of t.e accounts viG) persistent irregularity in accounts %elays in servicing of interest fre?uent %evolvement of 2/Cs unitsE financial problems market relate% problems etc) are capture% by t.eir close monitoring assumes importance) 6.e instance of t.e Page 1B S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A .list/special mention category accounts @ 3onitoring of early /arning signals $elations.ip 3anager/Cre%it *fficer is an official /.t out by a stu%y con%ucte% by $eserve Bank of -n%ia at t.ese banks are revie/ing t.o/ signs of cre%it %eterioration an% initiate reme%ial action) 3any banks .em to i%entify potential %istress signals an% plan t.S5 for i%entification of potential NPAs t.e early /arning signals in%icative of potential problems in t.arning Systems 41. level of NPAs %ampens t.o/ever %iffer from bank to bank) accor%ingly) 6. most banks .e $elations. also serves as an important a%%itional /arning system) 6.o is e@pecte% to .e ma#or components/processes of a 1.ic.ip 3anager .ic.P$*C1+'$1S "*$ NPA -+1N6-"-CA6-*N AN+ $1S*2'6-*N -N -N+-A9 1) -nternal C.S follo/e% by banks in -n%ia as broug.e $elations.eir e@posure to borro/er accounts every ?uarter base% on to keep in constant touc.oug.ese early /arning signals use% by banks are generally in%epen%ent of risk rating systems an% asset classification norms prescribe% by $B-) 6.ip 3anager/Cre%it *fficer 6.ave complete kno/le%ge of borro/er .ip 3anager/ Cre%it *fficer for monitoring account/s @ Preparation of Pkno/ your clientE profile @ Cre%it rating system @ -%entification of /atc. s.ecks an% Control Since .S /.ig.ave 1arly .e% %ata /.ave evolve% an% a%opte% an elaborate 1.e performance of t.e actual processes follo/e% .e Boar% of "inancial Supervision are as follo/s9 @ +esignating $elations.

e time of sanction of ne/ borro/able account an% at t.ibiting certain %istress signals) 6.e time of revie/ rene/al of e@isting cre%it facilities) . $elations.e nature an% nee%s of relations.ile most of t.e e@ercise is generally %one at t.ip) Cre%it $ating System 6.performing) 3ost of t.e bank to protect against t.ave a system of preparing Pkno/ your clientE 4AMC5 profile/cre%it report) As a part of PAMCE system visits are ma%e on clients an% t.ave %evelope% t. of banks entire cre%it portfolio) 3ost banks in -n%ia .e is also e@pecte% to con%uct scrutiny an% activity inspections) -n t.e cre%it rating system is essentially one point in%icator of an in%ivi%ual cre%it e@posure an% is use% to i%entify measure an% monitor t.e banks .e 3anagement to i%entify an% monitor potential risks of a loan asset) 6.e cre%it monitoring process t.e banks .e categoriGation of suc.atc.ese accounts generally e@.eir places of business/units) 6.e fre?uency of suc.ave a%opte% cre%it rating mo%els %esigne% by rating agencies) Cre%it rating mo%els take into account various types of risks viG) financial in%ustry an% management etc) associate% /it.e responsibility of monitoring a corporate account is veste% /it.list/Special 3ention Category 6. are correctable but /arrant banksE closer attention) 6.e bankEs risk assets is an important internal control tool) -t serves t.e loan asset becoming non.ibit /eaknesses /.eir o/n mo%els a fe/ banks ...e nee% of t. list or special mention category Page 1> S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A .ealt. list or special mention category if performing a%vances operating un%er a%verse business or economic con%itions are e@.e /.ip 3anager/Cre%it *fficer) Ano/ your clientE profile 4AMC5 3ost banks in -n%ia .ave a system to put certain borro/able accounts un%er /atc.ave put in place appropriate preventive / corrective steps coul% be initiate% by t.e gra%ing of t.borro/able account) As a part of t. accounts in /atc. a borro/able unit) 6.e cre%it risk of in%ivi%ual proposal) At t.ole bank level cre%it rating system enables tracking t.e system of internal cre%it rating) . visits %epen%s on t.e purpose of i%entification of potential NPAs is to ensure t.e contact .

anges general economic con%itions etc) 1arly /arning signals can be classifie% into five broa% categories viG) a5 "inancial b5 *perational c5 Banking %5 3anagement an% e5 1@ternal factors) "inancial relate% /arning signals generally emanate from t. as %eterioration in operating an% financial performance of factors suc. may trigger early /arning system %epen% not only on %efault in payment of installment an% interest but also ot.ip 3anager or Cre%it *fficer to anticipate cre%it %eterioration an% take necessary preventive steps to avoi% t.e in%icators /.er it is reveale% t.arning Signals -t is important in any early /arning system to be sensitive to signals of cre%it %eterioration) A .ic.eet income e@pen%iture statement statement of cas.e borro/ersE balance s. flo/s statement of receivables etc) "ollo/ing common /arning signals are capture% by some of t.aving relatively %evelope% 1.provi%es early /arning signals enabling $elations.eir slippage into non performing a%vances) 1arly .aracteristics regulatory c.e borro/er /eakening in%ustry t.ost of early /arning signals are use% by %ifferent banks for i%entification of potential NPAs) 3ost banks in -n%ia .at coul% serve to i%entify emerging problems in cre%it e@posures at an early stage) "urt.ave lai% %o/n a series of operational financial transactional in%icators t.e banks .e account @ +efault in repayment obligation @ +evolvement of 2C/invocation of guarantees @ +eterioration in li?ui%ity//orking capital position @ Substantial increase in long term %ebts in relation to e?uity @ +eclining sales @ *perating losses/net losses Page 1< S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A .S) "inancial /arning signals @ Persistent irregularity in t.

t.roug. ot.@ $ising sales an% falling profits @ +isproportionate increase in over.anges in plan @ Nonpayment of /ages/po/er bills @ 2oss of critical customer/s @ "re?uent labor problems @ 1vi%ence of age% inventory/large level of inventory 3anagement relate% /arning signals @ 2ack of co.e account @ *pening of account /it.ip or key personnel @ +esire to take un%ue risks @ "amily %isputes @ Poor financial controls @ "u%ging of financial statements @ +iversion of fun%s Banking relate% signals @ +eclining bank balances/%eclining operations in t.ange in management o/ners.e?ues @ Sales transactions not route% bank @ $eturn of out/ar% bills/%is.operation from key personnel @ C.onore% c.e account @ "re?uent re?uests for loan @ "re?uent %elays in submitting stock statements financial %ata etc) Signals relating to e@ternal factors @ 1conomic recession @ 1mergence of ne/ competition @ 1mergence of ne/ tec.nology @ C.ea%s relative to sales @ $ising level of ba% %ebt losses *perational /arning signals @ 2o/ activity level in plant @ +isor%erly %iversification/fre?uent c.anges in government / regulatory policies @ Natural calamities Page 1C S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A .

are t.anism issue% revise% gui%elines in respect of %etection of /illful %efault an% %iversion S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A Page 20 .e $B.e process of getting operationalise%) :) .eir o/n restructuring sc. borro/ers are foun% to be more effective t. commercial banks an% "-s so as to .a% gross value greater t.e recent past /.constitute% a /orking group to e@amine t.e cases) -t is likely to .an t.ere action is to be initiate%5 is greater t.e list of suit..anisms intro%uce% in t.em minimiGe a%verse selection at appraisal stage) 6.e -n%ian financial system in%icates a significant improvement in management of NPAs) 6. of NPAs incorporate% cre%it -nformation Bureau 4-n%ia5 2imite% 4C-B-25 in Qanuary 2001) Pen%ing t.e S$"A1S.abilitation .e t/o most common approac.ic.ening of +$6s) "rom t. :1 200: t.emes for settlement of NPA accounts) State Bank of -n%ia 0+"C 2imite% 3/s) +un an% Bra%street -nformation Services 4-n%ia5 Pvt) 2t%) an% 3/s) 6rans 'nion to serve as a mec.e %ata available of Public Sector Banks as on 3arc.anism for e@c.e /orking group Banks an% "-s are no/ re?uire% to submit t.e C-B-2 is in t.2) 3anagement/$esolution of NPAs A re%uction in t.emes setting up of t. .an $s) =0 million in all t.e C+$ mec. 4inclu%ing cases /.e gro/ Compromise settlement sc.e recommen%ations of legal measures) 3any banks .e total gross an% net NPAs in is also on account of various resolution been consi%ere%/ a%opte% in only about 1:J of t.emes /it.e number of NPAs in%icating some %ouble counting) As can be seen suit file% an% B-"$ are t. inclu%e t.e role of C-Bs) As per t.elp t.e cases) Settlement . :1 200: /.es to resolution of NPAs in public sector banks) $e.ere /ere 1 =22 numbers of NPAs as on 3arc.e enactment of C-B $egulation Bill t.e total number of resolution been consi%ere% only in CJ of t.ave come out /it.ange of information bet/een banks an% "-s for curbing t.Act one time settlement sc.ese NPAs amounte% to $s) 21= billion) 6.file% cases of $s) 10 million an% above an% suit file% cases of /illful %efaulters of $s) 2)= million an% above to $B.e public sector banks in -n%ia) 6.illful +efaulters $ information /it.ave been a%opte% in even fe/er cases) +ata available on resolution strategies a%opte% by public sector banks suggest /ell as C-B-2) C-B-2 /ill s.e total gross value of t.

an% sip.oning of fun%s) As per t.ese gui%elines a /illful %efault occurs /.en a borro/er %efaults in meeting its obligations to t.e len%er /.en it .as capacity to .onor t.e obligations or /.enfun%s .ave been utiliGe% for purposes t.ose for /.ic. finance /as grante%) 6.e list of /illful %efaulters is re?uire% to be submitte% to S1B- an% $B- to prevent t.eir access to capital markets) S.aring of information of nature .elps banks in t.eir %ue %iligence e@ercise an% .elps in avoi%ing financing unscrupulous

elements) $B- .as a%vise% len%ers to initiate legal measures inclu%ing criminal actions /.erever re?uire% an% un%ertake a proactive approac. in c.ange in management /.ere appropriate)

4) 2egal an% $egulatory $egime
+ebt $ecovery 6ribunals +$6s /ere set up un%er t.e $ecovery of +ebts %ue to Banks an% "inancial -nstitutions Act 1CC:) 'n%er t.e Act t/o types of 6ribunals /ere set up i)e) +ebt $ecovery 6ribunal 4+$65 an% +ebt $ecovery Appellate 6ribunal 4+$A65) 6.e +$6s are veste% /it. competence to entertain cases referre% to t.em by t.e banks an% "-s for recovery of %ebts %ue to t.e same) 6.e or%er passe% by a +$6 is appealable to t.e Appellate 6ribunal but no appeal s.all be entertaine% by t.e +$A6 unless t.e applicant %eposits >=J of t.e amount %ue from .im as %etermine% by it) 0o/ever t.e Affiliate 6ribunal may for reasons to be receive% in /riting /aive or re%uce t.e amount of suc. %eposit) A%vances of $s) 1 million an% above can be settle% t.roug. +$6 process) An important po/er conferre% on t.e 6ribunal is of making an interim or%er 4/ by /ay of in#unction or stay5 against t.e %efen%ant to %ebar .im from transferring alienating or %ealing /it. or %isposing of any property an% t.e assets belonging to .im / prior permission of t.e 6ribunal) or%er can be passe% even /.ile t.e claim is pen%ing) +$6s are criticiGe% in respect of recovery ma%e consi%ering t.e siGe of NPAs in t.e Country) -n general it is observe% t.e %efen%ants approac. t.e 0ig. Country c.allenging t.e ver%ict of t.e Appellate 6ribunal /.ic. lea%s to %elays in recovery) (ali%ity of t.e Act is often c.allenge% in t.e court /.ic. .in%ers t.e progress of t.e +$6s) 2astly many nee%s to be %one for making t.e +$6s stronger in terms of infrastructure) S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A
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2oka%alats 6.e institution of 2oka%alat constitute% un%er t.e 2egal Services Aut.orities Act 1C<> .elps in resolving %isputes bet/een t.e parties by conciliation me%iation compromise or amicable settlement) -t is kno/n for effecting me%iation an% counseling bet/een t.e parties an% to re%uce bur%en on t.e court especially for small loans) Cases involving suit claims up to $s) l million can be broug.t before t.e 2oka%alat an% every a/ar% of t.e 2oka%alat s.all be %eeme% to be a %ecree of a Civil Court an% no appeal can lie to any court against t.e a/ar% ma%e by t.e 2oka%alat) Several people of particular localities various social organiGations are 2oka%alats /.ic. are generally presi%e% over by t/o or t.ree senior persons inclu%ing retire% senior civil servants %efense personnel an% #u%icial officers) 6.ey take up cases /.ic. are suitable for settlement of %ebt for certain consi%eration) Parties are .ear% an% t.ey e@plain t.eir legal position) 6.ey are a%vise% to reac. to some settlement %ue to social pressure of senior bureaucrats or #u%icial officers or social /orkers) -f t.e compromise is arrive% at t.e parties to t.e litigation sign a statement in presence of 2oka%alats /.ic. is e@pecte% to be file% in court to obtain a consent %ecree) Normally if suc. settlement contains a clause if t.e compromise is not a%.ere% to by t.e parties t.e suits pen%ing in t.e court /ill procee% in accor%ance /it. t.e la/ an% parties /ill .ave a rig.t to get t.e %ecree from t.e court) -n general it is observe% banks %o not get t.e full a%vantage of t.e 2oka%alats) -t is %ifficult to collect t.e concerne% borro/ers /illing to go in for compromise on t.e %ay /.en t.e 2oka%alat meets) -n any case /e s.oul% continue our efforts to seek t.e .elp of t.e 2oka%alat)

1nactment of S$"A1S- Act 6.e D6.e SecuritiGation an% $econstruction of "inancial Assets an% 1nforcement of Security -nterest ActD 4S$"A1S-5 provi%es t.e formal legal basis an% regulatory frame/ork for setting up Asset $econstruction Companies 4A$Cs5 in -n%ia) -n a%%ition to asset reconstruction an% A$Cs t.e Act %eals /it. t.e follo/ing largely aspects @ SecuritiGation an% SecuritiGation Companies @ 1nforcement of Security -nterest S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A
Page 22

@ Creation of a central registry in /.ic. all securitiGation an% asset reconstruction transactions as /ell as any creation of security interests .as to be file%) 6.e $eserve Bank of -n%ia 4$B-5 t.e %esignate% regulatory aut.ority for A$CS .as issue% +irections &ui%ance Notes Application "orm an% &ui%elines to Banks in April 200: for regulating functioning of t.e propose% A$CS an% t.ese +irections/ &ui%ance Notes cover various aspects relating to registration operations an% fun%ing of A$CS an% resolution of NPAs by A$CS) 6.e $B- .as also issue% gui%elines to banks an% financial institutions on issues relating to transfer of assets to A$CS consi%eration for t.e same an% valuation of instruments issue% by t.e A$CS) A%%itionally t.e Central &overnment .as issue% t.e security enforcement rules 4D1nforcement $ulesD5 /.ic. lays %o/n t.e proce%ure to be follo/e% by a secure% cre%itor /.ile enforcing its security interest pursuant to t.e Act) 6.e Act permits t.e secure% cre%itors 4if >=J of t.e secure% cre%itors agree5 to enforce t.eir security interest in relation to t.e un%erlying security /it.out reference to t.e Court after giving a B0 %ay notice to t.e %efaulting borro/er upon classification of t.e correspon%ing financial assistance as a non;performing asset) 6.e Act permits t.e secure% cre%itors to take any of t.e follo/ing measures9 @ 6ake over possession of t.e secure% assets of t.e borro/er inclu%ing rig.t to transfer by /ay of lease assignment or saleF @ 6ake over t.e management of t.e secure% assets inclu%ing t.e rig.t to transfer by /ay of lease assignment or saleF @ Appoint any person as a manager of t.e secure% asset 4suc. person coul% be t.e A$C if t.ey %o not accept any pecuniary liability5F an% @ $ecover receivables of t.e borro/er in respect of any secure% asset /.ic. .as been transferre%) After taking over possession of t.e secure% assets t.e secure% cre%itors are re?uire% to obtain valuation of t.e assets) 6.ese secure% assets may be sol% by using any of t.e follo/ing routes to obtain ma@imum value) @ By obtaining ?uotations from persons %ealing in suc. assets or intereste% in buying t.e assetsF @ By inviting ten%ers from t.e publicF @ By .ol%ing public auctionsF or @ By private treaty)
Page 2:

S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A

e%uling of %ebt) A$CS are also permitte% to act as a manager of collateral assets taken over by t .as not yet been possible to recover value from most suc.e .up e?uity capital of t.e business of t.e S$" 10J of t.roug.e borro/erF @ Settlement of t.Act) .at an A$C $s) 20 000 000) "urt.ol%ing company of or being in control of t.e bargaining po/er of len%ers is likely to improve furt.o/ne% fun% of not less t.anging S$"A1S.Act A$CS can be set up un%er t.oul% maintain on an ongoing basis a minimum capital a%e?uacy ratio of 1=J of its risk /eig.e +irections re?uire t.ese inclu%e9 @ 1nforcement of security interestF @ 6aking over or c.e Act stipulates several measures t.e len%ers un%er security enforcement rig.ol%ing not less t.$ules/ &ui%elines re?uire A$CS to .em or as a recovery agent for any bank or financial institution an% to receive a fee for t.e assets) 6.e %ate of ac?uisition of t.vis %efaulting borro/ers t.ts available to t.e A$C) 6.e borro/ersE %uesF an% @ $estructuring or an% one /oul% e@pect to see a large number of NPAs being resolve% in ?uick time eit.e sale or lease of t.e S$"A1S.te% assets) A$CS . settlements) 'n%er t.ave seiGe% collateral in some cases an% /.ave a minimum net.ur%les len%ers are no/ clearly in a muc.e %isc.ey /ere before t. security enforcement or t.2en%ers .ol%ing a controlling interest in being can be un%ertaken by A$Cs for asset reconstruction) 6. better bargaining position vis.ave been grante% a ma@imum realiGation time frame of five years from t.e legal .e management of t.en t.e business of t.ey can also be appointe% to act as a receiver if appointe% by any Court or +$6) Page 24 S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A .ile it . seiGures %ue to certain legal .roug.arge of t.a..e enactment of S$"A1S.e A$C as a sponsor an% pro.e pai%.e Act %esignates any person .ur%les are remove% t.ibits any sponsor from .e Companies Act 1C=B) 6.e borro/erF @ 6.ese functions) 6.

.Source9 .e C+$ mec.cre%itor agreement) $estructuring .anism .e frame/ork is inten%e% to preserve viable corporate affecte% by certain internal/e@ternal factors an% minimiGe losses to cre%itors/ot.anism) Accounts falling un%er stan%ar% been to ensure timely an% transparent restructuring of corporate %ebt outsi%e t. flo/ pro#ections as reassesse% at t.anism base% on issue% revise% gui%elines in "ebruary 200: /it.stan%ar% or %oubtful categories can be consi%ere% for restructuring) C+$ is a nonstatutory mec.elps in aligning repayment obligations for bankers /it. flo/s) Page 2= S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A .e 'A 6.e C+$ mec. borro/ings from t.anism for resolution of NPAs of viable entities facing financial %ifficulties) institute% t.ailan% Aorea an% 3alaysia) 6.roug.anism institute% in -n%ia is broa%ly along t.e Boar% for -n%ustrial an% "inancial $econstruction 4B-"$5 +$6s or ot.anism) Corporate borro/ers /it.cre%itor agreement an% inter.e e@pecte% business plan along /it.e banking system of $s) 20crores an% above un%er multiple banking arrangement are eligible un%er t.e C+$ mec.e lines of t. t.e lines of similar systems in t.erefore it is critical to prepare a restructuring plan on t.e C+$ stake.ol%ers t. pro#ecte% legal procee%ings) 6.anism 6.e time of restructuring) 6.e cas.e purvie/ of t.e ob#ective of t.ttp9/////)rbi)org)in -nstitution of C+$ 3ec. respect to t. an or%erly an% coor%inate% restructuring programme) $B.e $B.e Corporate +ebt $estructuring 4C+$5 mec..

ile in t.ortly) 0o/ever t.eme for NPAs up to $s) 10crores t.ic. 2000 /.ic.Act an% also cases pen%ing before Courts/+$6s/B-"$ sub#ect to consent %ecree being obtaine% from t.e broa% frame/ork for suc.eme also covers NPAs classifie% as sub.e sc.e outstan%ing balance in t.e C+$ forum) 2en%ers in -n%ia prefer to resort to C+$ mec.ic..e S$"A1S.eir internal teams for recommen%ing restructuring programs) Compromise Settlement Sc.e eligibility criteria 4amount of borro/ings5 an% time frame for restructuring) "oreign banks are not members of t.e C+$ process is being stabiliGe%) Certain revisions are envisage% / sc.e *6S sc.emes NPAs in all sectors /. 2000) 6. .e account) 25 Negotiate% Settlement Sc.e $B.stan%ar% as on :1st 3arc.gui%elines it .6.ese gui%elines /ere effective until Qune 2001 an% .ey /oul% be signing t. Asset $econstruction Company of -n%ia 4A$&-25 is a member of t.oul% be 100J of t.anism to avoi% unnecessary %elays in multiple len%er arrangements an% to increase transparency in t.ave initiate% action un%er t.e $B-/&overnment .ave become %oubtful or loss as on :1st 3arc.emes 15 *ne 6ime Settlement s. t.e minimum amount t.elpe% banks recover $s) 2B billion) Page 2B S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A .emes been encouraging banks to %esign an% implement policies for negotiate% settlements particularly for ol% an% unresolve% NPAs) 6.ey atten% meetings) 6.e first A$C to be operational in -n%ia. respect to t.time settlements of NPAs of small scale sector) 6.eme /as vali% until September 2000 an% enable% banks to recover $s B)> billion from various accounts) $evise% gui%elines /ere issue% in Quly 2000 for recovery of NPAs of $s) =0 millionan% less) 6.e Courts/+$6s/B-"$ are covere%) 0o/ever cases of /illful %efault frau% an% malfeasance are not covere%) As per been recommen%e% to involve in%epen%ent consultants banks are so far resorting to t. .e agreements s.e banks .ave subse?uently become %oubtful or loss) All cases on /.oul% be recovere% s. settlements /as put in place in Quly 1CC=) Specific gui%elines /ere issue% in 3ay 1CCCto public sector banks for one.e process) .e C+$ forum an% it is e@pecte% t.

e NC26 an% t.e A$C e)g) c.e Propose% $epeal of B-"$ -n -n%ia companies /.eme is being prepare% by t. t.-ncrease% Po/ers to NC26s an% t.erefore t.e been initiate% Page 2> S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A . .e Bill to repeal S-CA is currently pen%ing in Parliament an% t.e Sick -n%ustrial Companies Act 4S-CA5 an% nee% to be referre% to B-"$) *nce a company is referre% to for reconstruction of any sick company an% t.e NC26 /oul% prepare a sc. mo%ifications to a%%ress /eaknesses e@perience% un%er reason) 0o/ever may be un%ertaken by t. company /.e National Company 2a/ 6ribunal 4NC265 in place of B-"$ /it.e Companies Act vest po/ers for revival an% re.erefore procee%ings initiate% by any cre%itor seeking to recover monies from a sick company /oul% not be suspen%e% by a reference to t.e process of staffing of NC26s .e S-CA provisions) 6.e NC26 in restructuring sick companies) 6.ere is a scramble to file a reference in B-"$ so as to obtain protection from %ebt recovery procee%ings) 6.e Act may not .ere is a possibility of conflict bet/een t.ilst t.ose net /ort. often t.ere is no bar on t.e B-"$ 4an% even if an en?uiry is pen%ing as to /.e role of t.e activities t.e NC26) 6.e purvie/ of t.ave muc.abilitation of companies / been /ipe% out on account of accumulate% losses come un%er t.e len%ing institution of legal procee%ings against suc.e recent amen%ments to t.e above provision of t. relevance any longer an% probably %oes not e@ten% to it s.oul% be a%mitte% to B-"$5 it is affor%e% protection against recovery procee%ings from its cre%itors) B-"$ is /i%ely regar%e% as a stumbling block in recovering value for NPAs) Promoters systematically take refuge in S-CA .ange in management an% t.e tribunal for t.

ance t.ic.e researc.*BQ1C6-(1S -) Problem statement/*b#ective of t.e economy) @ Stu%ent9 6o get $esearc.e $easons for ! -mpact of NPAs @ 6o evaluate t.e pro#ect /oul% be t.e present scenario of t.e outcomes analyGe% from t.ers t.e ma#or beneficiaries from t.e topic) 6.e concept of Non Performing Asset in -n%ian perspective) @ 6o stu%y NPA stan%ar% of $B@ 6o stu%y t. profits) @ 6o c.em as to /.is is t. sector s.e stu%y 6.e efficiency in managing Non Performing Asset of %ifferent types of banks 4Public Private ! "oreign banks5 using NPA ratios ! comparing NPA / stu%y /oul% be beneficial to various sections suc.ers9 6.e emerging in%ustry in t.e un%erstan%ing of NPA concept as a /.eck stu%y /oul% %efinitely benefit t.eir kno/le%ge about t.ole) Page 2< S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A .is in%ustry as t. @ 6o stu%y of t.e proportion of NPA of %ifferent types of banks in %ifferent categories) --) Beneficiaries of stu%y /oul% en.emselves as t. as9 @ Banks9 6.e banks in a /ay t.oul% be given priority for len%ing money) @ "urt.t of t.e financial sector of t.ey get an insig.e %irects t.

e researc.ere is no significant correlation bet/een profits ! NPAs of Private Sector Banks for last C years 019 6.$1S1A$C0 3160*+*2*&M -) $esearc.ere is no significant correlation bet/een profits ! NPAs of "oreign Banks for last C years 019 6. %esign t.esis testing) 6est of Correlation9 a5 009 6.ere is correlation bet/een profits ! NPAs of Private Sector Banks for last C years c5 009 /ill be use is +escriptive $ emerge %uring analysis) @ *ften uses visual ai%s suc.ering %ata %escribe events an% t.en organiGes tabulates %epicts an% %escribes t.e rea%er) @ 'sing of .) @ -nvolves gat.ypot.e %ata) @ 'ses %escription as a tool to organiGe %ata into patterns t.ere is correlation bet/een profits ! NPAs of "oreign Banks for last C years --) +ata Collection Sources Secon%ary +ata Secon%ary %ata refers to t.ic.e %ata about NPAs ! its composition classification of loan assets profits 4net ! gross5 ! a%vances of %ifferent banks is taken from $eserve Bank of -n%ia /ebsite an% in%iastat)com) Page 2C S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A .arts to ai% t.e %ata /. .ere is no significant correlation bet/een profits ! NPAs of Public Sector Banks for last C years 019 6.ere is correlation bet/een profits ! NPAs of Public Sector Banks for last C years b5 009 6. as grap.s an% c. +esign alrea%y been generate% an% is available for use) 6.

e stu%y 6.e analysis ma%e as a part of t.e concept of NPA in -n%ian Banking in%ustry) @ 6o un%erstan% t.ile t.e stu%y @ 6o un%erstan% t.ere are some %ata /. an% /eakness of t.e causes ! effects of NPA @ 6o analyGe t.---) Scope of t.priority sector public sector ! ot.e same %ata for its counterparts /ere available for C years) So e@act comparison /as not possible) Page :0 S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A .Priority sector may make efforts to overcome limitations for len%ing money to %ifferent sectors like agricultural SS.e past tren%s of NPA of Public Private ! "oreign banks in %ifferent sector) -() 1@pecte% contribution of t.ers) () 2imitation 6.ole / stu%y may contribute in a /ay analysis of strengt. regar% to Non Performing Asset of banks) (arious banks from %ifferent categories toget.e banking sector as /. are available for #ust : years /.

ic.e back%rop of global financial crisis) -t is note/ort. reflecting t.e tren% in some a%vance% countries t.eir gro/t.e slo/%o/n of t. a level of about : per cent by 200C from aroun% = per cent in t.ig.e private sector banks an% foreign banks registere% a %eceleration in gro/t.y t.ANA2MS-S *(1$A22 ANA2MS-S9 Sc.ig.e tren% in some a%vance% countries t.e effects of t. rate of banks‟ len%ing to in%ustries personal loans an% services sector /itnesse% a %eceleration /. rate of banks‟ len%ing to agriculture an% allie% activities increase% substantially) *verall t. of remaine% .e incremental Cre%itH+eposit 4C.e -n%ian banking system) "or instance as observe% by t.e .ile t.e gro/t.e strengt.e -n%ia economy) 6.e private sector banks an% foreign banks registere% a %eceleration in gro/t. as corporates %eferre% .e 1CC0s) *n t.e ot.e slo/%o/n in cre%it gro/t.e consoli%ate% balance s.e ol% Page :1 S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A .e previous year) .eir gro/t. 2010 as compare% /it. 2002 to reac. 2010) 6.arply reflecting t. /as accentuate% after 2000 to reac.e leverage ratio 46ier .e back%rop of /i%esprea% uncertainty) -t is note/ to total assets ratio5 in -n%ia .roug.eir investments against t.e leverage ratio for -n%ian banks .at contrary to t.e%ule% Commercial banks 4SCBs5 in -n%ia remaine% robust against t.ile gro/t.3arc.out 1CC0s /.orl% Bank t.e leverage ratio of banks in t. momentum t.e leverage ratio in -n%ia .e 'A /itnesse% a %ecline risen from about 4)1 per cent in remaine% . momentum t.+5 ratio %ecline% s.e balance s. rate) "urt.eets of SCBs e@pan%e% by 21)2 per cent as at en%. 2=)0 per cent in t. of t.eets of public sector banks maintaine% t.y t. a level of B): per cent by 3arc. rate) +uring contrary to t.e strengt.ermore t.eet of public sector banks maintaine% t.e -n%ian banking system) 0o/ever t. reflecting t.e -n%ian banking sector /as not completely insulate% from t.e balance s.10 t..

as a rising tren% till 200C. Private an% "oreign Sector Banks) 6.eir ne/er counterparts in t.10 &rap.ttp9/////)rbi)org)in -nterpretation9 @ "rom t.10) been observe% in bot. it .e above it is observe% t.e %eclining tren% from 2004 to 200> of NPA /as %ue to t.private sector banks /.a% been registering a significantly lo/er gro/t.9 1 Source9 .at net NPA of public sector banks .e recent past manage% a better performance t.02 to 200C.e same tren% .an t.0> an% after t.e implementation of SecuritiGation Act 420025) Page :2 S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A .as a %eclining tren% up to year year) @ N16 NPAs *" BANAS9 2001. rate t.

at is increase in NPA as per percent of a%vance after 200>) @ 6.ic.ave a ma#or proportion of len%ing in non.e increase in NPA /as increasing in absolute term as NPA as per percent of a%vance affecte% by global financial crisis) Page :: S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A .e increase in NPA as per percent of a%vance of Private an% "oreign Sector Banks is because of t.ile t.ey .o/s a %eclining tren% in Public Sector Banks /.at of in Private an% "oreign Sector Banks s. priority sectors inclu%es 3e%ium an% large scale in%ustries /.@ But t. /as .o/s an up/ar% tren% t. to 1:)2 per cent at en%.e past fe/ years as reflecte% in t.9 2 Source9 .stan%ing t.e %eclining NPA to a%vances ratio) -t is especially note/ort.e asset ?uality of banks in -n%ia .S*'N+N1SS -N+-CA6*$S9 1) Capital Ruality 2) Asset Ruality Capital Ruality9 A soun% an% efficient banking system is en% pro%uct for maintaining financial stability) 6.e Capital to $isk.asis .te% Assets $atio 4C$A$5 of SCBs a measure of t.e -n%ian banking sector .erefore consi%erable in terms of t.e capacity of been improving over t.ening t. 2010 from 1:)0 per cent at e@.e t/o crucial soun%ness in%icators viG) capital an% asset ?uality t.e net NPA to net a%vances ratio increase% only marginally to 1)1 per cent as at en% 3arc.ttp9/////)rbi)org)in Page :4 S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A . 2010 from 1)0 per cent as at en% 3arc.ere of uncertainty been place% on strengt. 200C) 6.ibite% resilience ami%st testing times) &rap.y not/it.e capital re?uirements in recent years) 6.e economy an% an atmosp.e banking system to absorb une@pecte% losses improve% furt.e pressures of a slo/%o/n in t. 200C) Significantly gross NPA to gross a%vances ratio remaine% constant at 2): per cent) 6./eig.3arc.

3arc.Asset Ruality9 3ovements in Non.3arc.3arc.3arc./ise *l% Public Sector Banks NationaliGe% Banks State Bank &roup Private Sector Banks Ne/ Private Sector Banks "oreign Banks &ross NPAs As at en%. 200C A%%ition %uring t.e year $ecovere% %uring t.3arc.e year As at en%. 200C 1n%. 2010 Net NPAs/Net A%vances $atio 1n%.ttp9/////)rbi)org)in Page := S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A .performing Assets H Bank &roup. 200C 1n%. 2010 &ross NPAs/&ross A%vances $atio 1n%. 200C As at en%.3arc. 2010 Net NPAs As at en%. 2010 0)< 0)> 0)> 0)> 1)4 1)= 0)> 0)C 1)1 1): 0)C 1)> 2)2 2 2)1 1)< 2)B 2)= 2): 2): 2)4 2)< 1)< 4 1>>2B 210:: <24= C::C <:C< 10>4= >40 11B= 4B40 B2=: 124> 2C>: 0 4=1=B 0 2=:B< 0 1<:=2 0 :0>2 0 1:C11 1=14 B<:: 2B2>1 1=<B: C<2C 1=>C B=10 2C=4 :1::< 1><22 12<>C 20C4 10=20 <4:0 400<C 2:410 1=:0: 2==> CC01 2<>2 Source9 .e year .3arc.3arc.ritten off %uring t.

er bank groups %ecline%) .e repayment of loans %ifficult for some borro/ers resulting in some increase in NPAs in t.e increase in gross NPAs /as more noticeable in respect of ne/ private sector an% foreign banks /.10 /as .er amount of NPAs %uring sector) -t may be note% %uring t.e year /.er t.eless it may be note% t. a%%ition of NPAs 4$s)=2 :<2 crore5 %uring t.ousing loans segments) @ &ross NPAs 4in absolute terms5 increase% for all of interest rates at $s):< <2< in 200C.e banks increase% over of nationaliGe% banks) Page :B S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A .0C it /as lo/er t.e . .e /orl%) 6.e problems face% by banks all over t.e bank groups) -n t.e asset ?uality of banks continue% %uring t.e gross NPAs to gross a%vances of foreign banks increase% significantly %uring $s)2< 2<: crore in 200< t.e banks) 6.e NPAs ratio of all in t.e previous year e@cept t.ig.e total amount recovere% an% /ritten.ile t. of private sector banks increase% marginally) 6.e gross NPAs of SCBs increase% across all t.e previous year) 6.10 conte@t it may be note% t.oug.-nterpretation9 @ 6.ic.e tren% of improvement in t.e year) -n%ian banks recovere% a .e present conte@t of financial turmoil some slippage in NPAs coul% be e@pecte%) @ Nevert.e year) As a result t.ile net NPAs to net a%vances ratio of all t.t .ave ma%e t.e real estate an% .ave been more active in slippage /as mo%erate as compare% to t.

0> 200>.aving t.e T 2J category /.10) PSBs %i% not .ile t.ere =0J of its bank /as in 2J to =J category) .is is compensate% by t.e /orst situation in 200=..10) PSBs :0J NPA profile in t.0> C0J in 200>.0C 200C.a% aroun% B0J of t.0B 200B.0B t.e year 200=.0< 200<. 200<.0B belongs to 2J to =J category /.0B /.e years 200<.ic.0C ! 100J in 200C.0C t. re%uce% over t."$1R'1NCM +-S6$-B'6-*N *" BANAS ACC*$+-N& 6* 21(12 *" NPAs9 "re?uency +istribution of Banks accor%ing to level of NPAs 100J C0J <0J >0J B0J =0J 40J :0J 20J 10J 0J "B PSB Pvt)SB "B PSB Pvt)SB "B PSB Pvt)SB "B PSB Pvt)SB "B PSB Pvt)SB S 10J =J to 10J 2J to =J T 2J 200=.0< .e years an% .ttp9/////)rbi)org)in -nterpretation9 @ -n t.ic.e rise in number of banks in T 2J) = Pvt) SB‟s banks /ere in Page :> S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A .ave any of its banks in S 10J category) @ Private sector banks 4Pvt)SBs5 /as .e Public sector banks 4PSBs5 .e year 200=.9 : Source9 . increase% >=J in been totally eliminate% in 200C.10 & ratio is %eclining over t.eir NPA profile in t.

10 t.e initial years) >0J of its NPA profile belongs to T 2J category) 6.ic.ere is increase in number of banks in .e years) Page :< S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A . /as totally eliminate% in 200<.er NPA category) @ "oreign banks 4"B5 /ere comparatively in goo% position compare to privat e sector banks in t.ig.0C) But %ue to poor financial con%ition in 200C.=J to10J category in 200=.0B /.e number of banks increase% in T 2J category) So among all t.ree sectors public sector banks manage% to re%uce NPAs over t.

e NPA of public sector bank) -n t.e least contributor to/ar%s t.e above c. priority sector) @ Priority sector consist of a%vance given to agriculture public sector category is t.ere priority sector contributes more t.-S19 C*3P*S-6-*N *" NPAs *" P'B2-C S1C6*$ BANAS .er non priority sectors) Page :C S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A .art it is observe% t.C*3P*S-6-*N *" NPAs *" BANA S1C6*$ .e initial years from 2002 to 200B priority sector) But in later years from 200> it‟s /ay roun% /.an priority sector a%vances) Non priority sector consist of large in%ustries me%ium in%ustries ! ot.! ot. 2002 6* 2010 :0000 2=000 Amount in $s) Crore 20000 1=000 10000 =000 0 Priority Sector 2002 241=B 200: 2=1=0 2<40= C0: 2004 24C:C 2B><1 10<> 200= 2:<41 2=BC< B10 200B 21C2B 2:24C 444 200> 22:>4 1<BB4 :41 200< 22C=4 1=1=< 4C0 200C 2=2<> 141B: 2CC 2010 24:1< 1C2=1 4>4 Non.9 4)1 Source9 .ttp9/////)in%iastat)com/ -nterpretation9 @ "rom t. priority sector contributes more to/ar%s NPA t.priority Sector 2>:0> Public Sector 1>11 &rap.

oug.e increase in NPAs /as more noticeable in priority sector /.@ -n case of priority sector it starte% falling from 2004 up to 200B over previous year) But in t.ig. t.e real estate an% .at /aiver package /as announce% in union bu%get of 200C) -t may also be note% t.est in 200C) -n or%er to re%uce priority sector NPAs of non.ave been more active in t.ousing loans segments) @ NPA in non priority sector is re%ucing constantly from 200: to 200C i)e) by =0J) t.priority sector /as .er t.e a%vance given to non.ic.ig.e loan given to t.priority sector is comparatively) Page 40 S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A . .e farmers) -t /as .ere is rise NPA because of %efaults on t.e later years i)e) from 200> t.

0< t..e private sector banks) .ere is increase in NPA of priority sector) -n t.ic.e year 200>. it is observe% t.ousing sector) @ -n public sector contributes very negligible to/ar%s t.e overall NPA of foreign banks) 6.e real estate market /as on boom /.ile average NPA of priority sector constitutes of 2=J of total NPA) -n later years from 200< to 2010 on an average only :)=J of total a%vance is ma%e to/ar%s public sector category) @ Priority sector category on an average constitutes almost :4J of t.ttp9/////)in%iastat)com/ -nterpretation9 @ "rom t.e above grap.9 4)2 Source9 .ere /as su%%en fall in real estate market ! people became %efault to pay t. encourage% people to take more loans) But after t.e ma#or reason for t.e loan) S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A Page 41 .Priority Sector Public Sector 2002 1<:= 44=2 12: 200: 2=4B C0C0 :1 2004 244= C:2> C= 200= 24<2 >>CB >= 200B 21<< B=BC 42 200> 22<4 ==41 4 200< 2<<4 B:=: : 200C :41C C==< 0 2010 :B40 1:1>2 >= &rap.e subprime crisis t. 2002 6* 2010 14000 12000 Amount in 10000 $s) Crore <000 B000 4000 2000 0 Priority Sector Non.ese years more a%vances /as given to agriculture ! .is is t.e total a%vances ma%e by t.C*3P*S-6-*N *" NPAs *" P$-(A61 S1C6*$ BANAS .

e %eclining tren% in NPA of non.est amongst t.priority sector t.e can see t.ig.e average a%vances ma%e are B0)=J of total a%vance ma%e by private sector banks) But t.@ -n case of non. is .ic.priority sector from 2004 to 200>) as a result of securitiGation Act 2002) Page 42 S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A .priority sector is almost >4J /.e entire category) .e average NPA of non.

ere is no NPA in public sector category in all t.C*3P*S-6-*N *" NPAs *" "*$-1&N BANAS .ey are more affecte% by t.priority sector) As foreign banks are .Priority Sector Public Sector 200< ::1 2 120 0 200C 402 2>12)0 0 2010 B4C B=0B 0 & too are ma%e to SS-) @ 6.9 4): Source9 .est to/ar%s t.priority sector constitute appro@imately B=J of t.ig. 200< 6* 2010 Amount in $s) Crore >000 B000 =000 4000 :000 2000 1000 0 Priority Sector Non.priority sector) @ NPA is lo/ in priority sector because very fe/ a%vances are ma%e in priority sector ! t.e total a%vances ma%e by foreign banks) So NPA /ill also be more in non.e a%vances are ma%e to me%ium ! large scale in%ustries in non.ere /as no a%vance ma%e to public sector category) @ Non.ttp9/////)in%iastat)com// -nterpretation9 @ -t is observe% from t.e global melt%o/n ! financial crisis of 200<) So its effect is seen by su%%en rise in NPA in 200C) S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A Page 4: .priority sector contributes .ree years because t.aving global presence t.e c.e t.e NPA of foreign banks because t.

02 to 200C. rate in recent past starts performing better t.ic.9 = Compile% from9 .at net NPA of ol% private sector banks .e above t.e contrary ne/ private sector banks .as a %eclining tren% over t. P$-(A61 S1C6*$ BANAS9 2001.C*3PA$-S*N *" N16 NPA *" *2+ AN+ an up/ar% tren%) @ *l% private sector banks /.an t.10 &rap. is passing from lo/er gro/t.ttp9/////)rbi)org)in -nterpretation9 @ "rom t.eir ne/ counterparts) *l% private sector banks are more efficient of ne/ private sector banks in managing NPA) Page 44 S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A .e years on it is clearly observe% t.

e years) Public sector banks .at only public sector banks .0C 0)< 1)2 0)C banks) Also t.0> 1): 1 0)< 200>.0> t. year /.ereas in case of private sector bank it .e foreign banks /ere ba%ly affecte% by t.ave been able to re%uce t.e global melt%o/n) 1ven for private sector bank t.e re%uction in 2010 /as t.e perio% of time) -t is constantly re%ucing eac.0< 1)1 1 1 200<.N16 NPAs AS P1$C1N6A&1 *" A+(ANC1S *" BANAS9 Net NPAs/Net A%vances 2)= NPA as J of A%vance 2 1)= 1 0)= 0 Public Sector Private Sector "oriegn Sector 200=.ere ratio by BB)>J from 200B to 2010) Public sector banks as a result of stringent c.e above it is clearly observe% t.ttp9/////)in%iastat)com/ -nterpretation9 @ "rom t.0B 2)1 1)C 0)C 200B.e ratio increase% by <CJ for foreign banks /.en it got stable an% starte% rising from 200<.0C on/ar%s) @ -n case of foreign banks it is fluctuating over t.e ratio increase% by 2=J in 2010 %ue to financial crises ! also for public sector bank re%uce% in 200B.10 0)> 1)= 1)> &rap.e lo/est i)e) 12)=J S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A Page 4= .ave succee%e% in re%ucing net NPA against net a%vances ma%e over t.9 B Source9 .ecks ! control able to manage lo/ ratio compare to ot.

e above category Stan%ar% stan%ar% asset is increasing every year ! on t.e rise in sub stan%ar% ratio .er types of asset i)e) Sub.ave succee%e% in re%ucing NPA over t.9 >)1 Compile% from9 .art states t.ere is a .Stan%ar% ! +oubtful asset) public sector banks .is proves t.Stan%ar% Asset +oubtful Asset 2oss Asset 0)C 0)> :)4 1)2 0)= 2): 1)1 0): 1)= 1)0 0)2 1)1 1)0 0)2 1)0 0)C 4): 2)B C4)B C2)2 CB)1 C>)2 C>)> C>)C 200= 200B 200> 200< 200C 2010 &rap.stan%ar% +oubtful ! 2oss Asset are %ecreasing every asset) 6.e years) @ Public sector banks .e contrary all t.ttp9/////)rbi)org)in -nterpretation9 @ ma#or proportion in%icates t.e above fre?uency %istribution c. scope of up gra%ation or improvement in NPA recovery in initial stage because it /ill be very easy to recover t.C2ASS-"-CA6-*N *" 2*AN ASS16 *" BANAS9 Classification of 2oan Asset of Public Sector Banks Stan%ar% Asset Sub.e loan as minimum %uration of %efault) Page 4B S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A .e ot.ave taken various measures to re%uce NPA also convert Sub. Stan%ar% +oubtful ! loss asset into t.

e year) -n 2010 percentage of stan%ar% asset .ttp9/////)rbi)org)in -nterpretation9 @ 6.e private sector banks .e percentage of Sub.e stan%ar% assets over t.9 >)2 Compile% from9 .as re%uce% to a great e@tent amongst all) So clearly states t.e year 2010 t.e years compensates t.e fall in t.ree types of assets) But in t.Stan%ar% asset is .Classification of 2oan Asset of Private Sector Banks Stan%ar% Asset Sub.e ot.e percentage of %oubtful asset .e rise in t. is compensate% by increase in Sub.Stan%ar% Asset +oubtful Asset 2oss Asset 0)= 0)4 2)= 0): 1)= 0)2 1)0 1)1 0): 0)C 1)= 0): 1)0 2)0 :)B 1)0 1)< 0)< C>)4 CB)1 C4)2 C>)B C>): CB)< 200= 200B 200> 200< 200C 2010 &rap. Stan%ar% ! %oubtful assets) re%uce% by 0)=J /.e %oubtful asset) Page 4> S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A .est among all t.e above increase is %ue to interest ! principle amount unpai% %ue to financial crisis in 200C) 6.ave manage% to re%uce t.

Stan%ar% asset is because of interest ! principle amount unpai% %ue to poor global con%itions for t.e loan provi%e% in a 200C) 6.9 >): Compile% from9 .Stan%ar% Asset +oubtful Asset 2oss Asset 1)= 0)< 1): 0)= 0)> 1)0 0)4 0)= 1)1 0)2 0)= 1)2 0)2 0)B 1)< 0)C :)= 1)B C>)C C>)0 C=)2 C=)> C<)1 C<)1 200= 200B 200> 200< 200C 2010 & increase in 1<0 %ays but less t.e proportion of ot.e proportion of Sub. Stan%ar% asset /.e proportion of Stan%ar% Asset is increasing from 200= an% starte% getting stable in 200< ! 200C) But it .ree types of assets is falling over t.Classification of 2oan Asset of "oriegn Banks Stan%ar% Asset 1 year) Page 4< S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A .er t.e interest ! principle amount remaine% unpai% for perio% of more fallen in 2010) 6.ttp9/////)rbi)org)in -nterpretation9 @ 6.ic. is as a result of %ecrease in proportion of Stan%ar% asset) 6.ere is great increase in t.e years but in 2010 t.

0= 200=.02 2002.04 2004.e above grap.0= ! from 200B.9 <)1 Source9 .ere is constant increase in net profit from 2001.e percentage of re%uction over t.02 to 2004.ere e@ist no particular relations.e contrary public sector banks .0: to 200B.ttp9/////)in%iastat)com/ -nterpretation9 @ -t is observe% from t.0: 200:. Public Sector Banks 40000 :=000 Amount :0000 in $s) Crore 2=000 20000 1=000 10000 =000 0 Net NPA Net Profit 2001.e previous year is lo/ compare% to percentage of rise in profit over previous year) 6.0< 200<.0> 200>.0B 200B.C*3PA$-S*N *" N16 P$*"-6 AN+ N16 NPA *" BANAS9 Comparison of Net Profit An% Net NPA . t.oug.ave manage% to re%uce net NPA constantly from 2002.10) 6.0C 200C.10 2>C>> 4:1> 2>C=< <:01 24<>> 122C= 1C::= 1B=4B 1BC04 1=><4 14=BB 1B=:C 1=14= 201=2 1>>2B 2B=C2 210:: :4:C4 &rap.ip bet/een net profit ! net NPA of public sector banks) 6.0> to 200C.0>) Alt. t.e average of percentage increase in net profit M*M basis comes to :2):J @ *n t.e average of percentage %ecrease in net NPA M*M basis comes to 2)=J Page 4C S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A .

ttp9/////)in%iastat)com/ -nterpretation9 @ -t is clearly observe% from t.e years) 6.Comparison of Net Profit An% Net NPA . Private Sector Banks 12000 10000 Amount in <000 $s) Crore B000 4000 2000 0 Net NPA Net Profit 2001.04 2004.e contrary t.e line grap.0= 200=.02 to 200C.0B 200B.e average of percentage increase in net profits of private sector banks comes to appro@imately :4J) @ *n t.e average of percentage rise in net NPA comes to almost 1=J) Page =0 S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A .0< 200<.0> 200>.10 :>00 1142 BB>B 1>>C :CB: 2C=< 412< :4<1 4212 :=:: :1>1 4C>= 402< B4B= =:<0 C=22 >41< 10<B< &rap.0: 200:.10) 6.ere is rise in net NPA from 2001.0C t.9 <)2 Source9 . t.ere is continuous rise in net profit of private sector banks over t.ere is no continuous rise/fall in net NPA) But overall t.02 2002.

0= 200=.e average of percentage increase in net profit M*M basis comes to :2J) .ere is rise in net NPA of foreign banks) 6.e average of percentage increase in net NPA M*M basis comes to appro@imately 2=J) So t.0C 200C.e perio% from 2001.o/s t.o/s net profit of foreign banks is increasing t.04 2004.ip bet/een net NPA ! net profit of foreign banks) Page =1 S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A .is s.0< 200<.. "oreign Banks C000 <000 Amount in $s) CroreB000 =000 4000 :000 2000 1000 0 Net NPA Net Profit 2001.ere is no continuous up/ar% or %o/n/ar% movement) @ But overall t.10 C20 14C2 C0: 1<24 C:: 224: B:C :0C< <0< 410C C2> =:4: 124> >=44 2C>: <4=C >000 &rap.Comparison of Net Profit An% Net NPA .ttp9/////)in%iastat)com/ -nterpretation9 @ 6.e above line grap.10) 6.02 ><= C4= 2002.9 <): Source9 .out t. s.roug.02 to 200C.0> 200>.ereas in case of net profit t.ere is positive relations.0B 200B.0: 200:.

0B to 200B.0>) Similarly it .10) @ .0B to 200B.0< to 200<.0> 200>.as re%uce% by :<J from re%uce% by 2=J 1<)=J ! CJ respectively from 200B. Public Sector Banks B =)= = 4 :)B : 2)> 2 2)1 1): 2)2 2 &ross NPAs/&ross A%vances Net NPAs/Net A%vances 1 1)1 0)< 0)> 0 200=..e percentage in re%uction of gross NPA to gross a%vances ratio is %ecreasing year on year i)e) it .0C to 200C.9 C)1 Compile% from9 .0< 200<.0C to 200C.0< to 200<.as re%uce% by :4)=J from 200=.0>) Similarly it .0< from 200>.0C ! 200<.0> to 200>. A%vances.ange is varying) -t .10) Page =2 S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A .as re%uce% by 1=):<J 2>)2>J ! 12)=J respectively from 200B.ile in case of net NPA to net a%vances ratio t.e percentage c.0< from 200>.0> to 200>.10 &rap.0C 200C.0B 200B.ttp9/////)rbi)org)in/ -nterpretation9 @ 6.0C ! 200<.NPA 6* A+(ANC1 $A6-* *" BANA9 Comparison of NPA /it.

est in 200> because in 200> a%vances . is %e%ucte% from &ross NPA is c.@ gap is .ave increase% tremen%ously over 200B) +ue to /.ic.e years) Page =: S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A .at succee%e% to re%uce t.e %ifference in gross NPA/ gross a%vances ! net NPA/net a%vances is .er years it near to B:J) 6.e years) -n all t.e line grap.e non performing assets against t.ic. clearly states t. NPA also increase% ! so provisions also increase%) @ 6.ig.est in 200B.e public sector bank .0> UB>JV ! lo/est in 200>.anging over items like interest %ue but not recovere% part payment receive% an% kept in suspense account etc /.0< U=CJV) -n ot.e a%vances ma%e over t.e ratio of gross NPA to gross a%vances ! net NPA to net a%vances is %ecreasing over t.ig.e above calculate% figure states t.e years) -t is not %ecreasing in same proportion as gross NPA) @ t.e provisions ma%e for NPA ! ot.

0C 200C.0> to 200>.0<) -t .0> 200>.0B 200B.0>) -t is re%uce% by 4>J from 200=.ange% from 200B.0B to private sector banks makes more provisions in gross NPA ! gross a%vances) S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A Page =4 .9 C)2 Compile% from9 .e percentage c.0C ! 200<.0B to 200B.0C to 200C.10) @ 6.10 1 1 1)2 1)C 1)= 2)= 2)2 &ross NPAs/&ross A%vances Net NPAs/Net A%vances 2)= 2)C :)< &rap.e years states increase% by 20J ! 2=J respectively from 200>.as re%uce% by 12J from 200B.0>) Similarly it .0<) -t .as re%uce% by :4)2J from 200=..ereafter starte% rising from 200>.e percentage c.ange is var ying %rastically) -t .Comparison of NPA /it. 10) @ .0C ! 200<.e percentage c.0< to 200<.0C to 200C.0> to 200>.ttp9/////)rbi)org)in -nterpretation9 @ 6. A%vances.ile in case of net NPA to net a%vances ratio t.0< 200<.0< ! t.ange in gross NPA to gross a%vances ratio ! net NPA to net a%vances ratio over t.ange in of gross NPA to gross a%vances ratio is %ecreasing initially ! t.0< to 200<.ereafter increase% by 1<)=J ! CJ respectively from 200>. Private Sector Banks 4 :)= : 2)= 2 1)= 1 0)= 0 200=.

ig.est increase in a%vances over previous year amongst all t.ere is .0> UB0JV ! lo/est in 200C.ic.e %ifference in gross NPA/ gross a%vances ! net NPA/net a%vances is .e years as bot.e a%vances ma%e over t.est in 200B.e year) 6. t.e ratios are increasing in later years) Page == S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A .e provisions an% unrecogniGe% interest income) @ Private sector banks .@ years it near to =4J) -n 200> t. in turn increase% resulte% increase in NPA /.10 U4<JV) -n ot.ave not succee%e% to re%uce NPA as against t.ig.

0C to 200C.10 0)C 0)< 1 0)C 2 1)< 1)< &ross NPAs/&ross A%vances 1)> Net NPAs/Net A%vances 2)< 4 &rap.0<) -t .en increase% in 200C.ttp9/////)rbi)org)in -nterpretation9 @ 6.0< 200<.as re%uce% by 2<)=J ! 10J respectively from 200=. "oreign Banks 4)= 4 :)= : 2)= 2 1)= 1 0)= 0 200=.0B to 200B.0B to 200B.ereafter it increase% by 2=J in 200>.e gross NPA to gross a%vances ratio is %ecreasing till 200>. A%vances.10) -t .ile in case of net NPA to net a%vances ratio t.0> ! from 200B.0> 200>.0<)-t is unc.0<) Again it re%uce% by 10J in 200C an% finally increase% by <CJ in 200C.0C ! t.ere is great volatility) -t .10 is %ue to poor global con%itions) Page =B S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A .0> to 200>.0B 200B.0>) 6.ange% in 200<..0C increase% tremen%ously by 122J from 200<.10) @ .Comparison of NPA / re%uce% by 11J from 200=.e steep rise in gross NPA ! net NPA 200C.10) @ 6.9 C): Compile% from9 .

est compare to ot.e line grap.ile it /as lo/est in 200>.ange in net NPA to net a%vances is ?uite .as succee%e% to re%uce t.e c.0B provisions ! unrecogniGe% interest income /as .at t.out t. clearly states t.@ 6.e a%vances ma%e over t.0B ! lo/est in 200>.ig.e years) @ gross NPA to gross a%vances) Page => S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A .er years /.ig.0<) -n 200=.0<) @ 6.aving parallel movement t.e public sector bank .e ratio of gross NPA to gross a%vances ! net NPA to net a%vances is %ecreasing over t.e years) -n all in foreign banks gross NPA to gross a%vances ratio ! net NPA to net a%vances ratio are not .e non performing assets against t.e %ifference in gross NPA/ gross a%vances ! net NPA/net a%vances is .er t.e perio%) 6.ig.est in 200=.

ile on t.10) .e above c. is represente% by %eclining tren% from for ne/ private sector banks net NPA to net a%vances ratio is fluctuating over t.ic.e years) Page =< S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A .er .9 C)4 Source9 .ttp9/////)rbi)org)in -nterpretation9 @ "rom t.& it is clearly observe% t..02 to ol% private sector banks are constantly improving in terms of net NPA to net a%vances ratio /.e ot.

B 04> .4C1< .ere is correlation bet/een NPA an% Profit of Public Sector Banks for last C years Net NPA Mear7M Net Profit 7 20 B1: 20 B1: 20 B1: 20 B1: 20 B1: 20 B1: 20 B1: 20 B1: 20 B1: M 1> 21: 1> 21: 1> 21: 1> 21: 1> 21: 1> 21: 1> 21: 1> 21: 1> 21: 7.0C 1>>2B 2B=C2 200C.0< 1=14= 201=2 200<.20CB<:C1 1B::2<4444:CB<=1C=: 1:>=BB<12040<C<=2C<B>> :B=BB20C4=4>:440>>>:4 2C<CC024<B:<>>C.ere is no significant correlation bet/een NPA an% Profit of Public Sector Banks for last C years 019 6.M .10 210:: :4:C4 6otal 1<==21 1=4C21 3ean 20 B1: 1> 21: Page =C S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A .0> 14=BB 1B=:C 200>.<C12 .12<CB .is test researc.0B 1BC04 1=><4 200B.relation is use% to i%entify t.7524M.B=4=B<>> 1<1<1BCB 241<2200.$12A6-*N 6.: >0C .= 4B< .04 24<>> 122C= 2004.e co.142C .1B0>14:B <::>=41<>CB=B41.02 2>C>> < applie% to i%entify t.M5 =422<4CB 1BB:0<:B4.2 <<> 420 M.e test of co.relation bet/een t/o variables i)e) Net NPA an% Net profit of Public Private an% "oreign Sector Banks) Public Sector Banks9 009 6.C4CBB=<B =:C4C02= >C41C4BB.B>4 2C:C C:>C 1>1<1 47.0: 2>C=< 200:.BB> . 7 > :B4 > :4= 4 2B4 .e .M5247.e variable in our stu%y is Net NPA an% Net profit) 6.1 2>< .2>0<1B>= 1>B:<:2C=1<B>B1>21=B>B 21B>2<::C BB4B412:< .0= 1C::= 1B=4B 200=.20>100C24 4:1>2001.relation bet/een t/o variables) 6.0MP*601S-S 61S6-N& 61S6 *" C*.

esis5 is re#ecte% Page B0 S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A .M5 XU47.rN X47.752W4M. 0)=4=B> 00 4Null 0ypot.M52V 1/2 rN .20>100C2:)C :>C=:4>04 r N .75 W4M.

04 2004.02 2002.M5 :C<>B21 .M .M52 14B=101= 101>B<:0 404B1=0 221::<4 20B1B>< 2< 22:<1=2 20>2>>B= :4>C===: C0C10=== 47.14<< .ere is correlation bet/een NPA an% Profit of Private Sector Banks for last C years Mear 2001.7 .0= 200=.10 6otal Average 7 :>00 BB>B :CB: 412< 4212 :1>1 402< =:<0 >41< 42B>B 4>42 M 1142 1>>C 2C=< :4<1 :=:: 4C>= B4B= C=22 10<B< 44>2: 4CBC 7 4>42 4>42 4>42 4>42 4>42 4>42 4>42 4>42 4>42 M 4CBC 4CBC 4CBC 4CBC 4CBC 4CBC 4CBC 4CBC 4CBC 7.=:0 .10B><B2 2C0BB>B 1=><=B:C 1<B>:<21 rN X47.1=>1 .1042 1C:4 .B1>0:=2 1=BB=:C C1:1B2 >B0>01 .0> 200>.0: 200:.M52V 1/2 rN 1<B>:<20)=> :<<<C<40)>> rN 0)4<01>2 00 4Null 0ypot.0C 200C.752 10<=:2B :>411>0 B0B=1: :>B>:< 2<0B>> 24B>:<0 =0C4CB 40>B0B >1B144: 1BB:B:4C 4M.Private Sector Banks9 009 6.0< 200<.752W4M.75W4M.>>C .75 W4M.0B 200B.:<2< .esis5 is re#ecte% Page B1 S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A .14:B = 14CB 4==: =<CC 47.>14 B:< 2B>B M.2012 .B14 .<:02 .:1C0 .ere is no significant correlation bet/een NPA an% Profit of Private Sector Banks for last C years 019 6.M5 XU47.

0< 200<.1:B2 .02 2002.752 11B:=0 424>< 4C>>4 :>2<< 2:>2B< 1011<C :CB42 14=22 :4121B2 40=0B>4 4M.1C: .75 W4M.M5 XU47.04 2004.:41 .esis5 is re#ecte% Page B2 S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A .22: .10 6otal Average 7 ><= C20 C0: C:: B:C <0< C2> 124> 2C>: 101:= 112B M C4= 14C2 1<24 224: 2002 :0BC 4=<= BB12 >=10 :02<2 ::B= 7 112B 112B 112B 112B 112B 112B 112B 112B 112B M ::B= ::B= ::B= ::B= ::B= ::B= ::B= ::B= ::B= 7.752W4M.0: 200:.20B .1=41 .1CC 121 1<4> M.M52V 1/2 rN 10::4C4:)<< 1::>:>40)04 rN 0)>>2>><<<: 00 4Null 0ypot.1122 .7 .ere is no significant correlation bet/een NPA an% Profit of "oreign Sector Banks for last C years 019 6.75W4M.0C 200C.:1< .4<> .0= 200=.M52 =<==0>> :=0BB1< 2:>:B=4 12=<04B 1<==C0> <>B>C 14<C=0B 10=44C14 1>1<:4=> 441=4<=C 47.ere is correlation bet/een NPA an% Profit of private Sector Banks for last C years Mear 2001."oreign Sector Banks9 009 6.0> 200>.2CB 1220 :24> 414= 47.2420 .M .0B 200B.242CC4 :C1:2B >B=>202 10::4C44 rN X47.1<>: .M5 <2=:>: :<=C4= :4:>2= 21B=<< BB:=<> C41C2 .

e last si@ years average of percentage increase in income ot.e banks t. private sector ! foreign banks) But for private sector ! foreign banks rise in income from -nterest/+iscount on a%vances/bill contributes minimal to t. as commission brokerage an% e@c.ere is negative correlation bet/een net profit ! net NPA of public sector banks /.e ma#or contributor to/ar%s NPA) @ Average >=J of total earning of public sector bank comes from -nterest/+iscount on a%vances/bill /.e last si@ years average of percentage increase in income from -nterest/+iscount on a%vances/bill M*M basis t.en public sector bank recor%s only 1<J increase /. $B..ig.e bank) But in interest income income from -nterest/+iscount on a%vances/bill is t.est in foreign banks i)e) =>J ! 4=J for private sector banks) @ 6.e banks) -ncome is %ivi%e% into t/o parts interest income ! ot.e total income but it is .er t.interest income inclu%es fee income components -nterest/+iscount on a%vances/bill income M*M basis /as .ile non.e rise in overall income) @ 6.ile it is positive for private sector ! foreign banks) @ Net profit consists of income earne% by t.ile its ::J for i)e) public sector private sector an% foreign banks on an average stoo% at :2)<J of t. is 1=J ! 1CJ for public sector bank ! private sector banks respectively) 101 Page B: S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A .er ot.e income ot.e interest income generate% by -nterest/+iscount on a%vances/bill income for all t. bank fun%s t.ic.ange transactions sale of investments corporate finance transactions 3!A %ealsF an% any income ot.est for foreign banks i)e) 2BJ /.er income) -nterest income inclu%es -nterest/+iscount on a%vances/bill -ncome on investments -nterest on balances / inter.ers) .-nterpretation9 @ 6. is ==J ! 4:J for private sector banks ! foreign banks) -f /e consi%er t.

ese banks) 6.base% earnings coming from services remain ?uite lo/) @ 6.ic.e private sector an% t.e private sector ! foreign banks earn .ig.ese inclu%e "ore@ +esk +erivatives +esk 6ec.interest income in private sector ! foreign banks is %ue to t.annel "inancing Corporate Salary Account Bankers to $ t.eir peers in t.9 10 Compile% from9 ."re?uency +istribution of Banks -ncome 100J <0J B0J 40J 20J -nterest -ncome 0J Pvt)SBs "Bs PSBsPvt)SBs "Bs PSBsPvt)SBs "Bs PSBsPvt)SBs "Bs PSBsPvt)SBs "Bs PSBsPvt)SBs PSBs "Bs Non.e .er non.eir fee. value a%%e% services) 102 Page B4 S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A .interest -ncome 200= 200B 200> 200< 200C 2010 &rap.nology "inance Syn%ication Services $eal 6ime &ross Settlement C.e value a%%e% services offere% by proportion of non.ere are some services /.e above mentione% services like &lobal 6ra%e Solutions "actoring Solutions +erivatives Clearing asset management private e?uity placement) So t.eir interest income as compare% to t. are offere% by private sector banks but not by public sector banks) 6.t/Public -ssue) "oreign banks offers some more services ot.ttp9/////)rbi)org)in @ Public sector banks %epen% e@cessively on t.interest income because of suc.ig.

e perio% of time @ Public sector banks .e% to 100J in year) @ Among all t.ile Public sector banks .ic.eir ne/er counterparts in t.e proportion of stan%ar% assets in Private sector banks re%uce% in 200C an% 2010 /.e T 2J category of public sector banks /as reac.e ol% private sector banks /.ave been more active in t.ange in gross NPA to gross a%vances ratio ! net NPA to net a%vances ratio over t.ic.e years) NPA profile in t. /as 1)2J of loan assets in 200C) @ 6.o/s a up/ar% tren%s over t.e years) public sector banks makes more provisions in gross NPA ! gross a%vances as compare% to private an% foreign banks) @ Public sector banks almost >=J of income comes from -nterest/+iscount on a%vances/bill) .10 as compare% to Private an% "oreign sector banks /.ousing loans segments) -t s.10 /. .e stan%ar% assets over t.e proportion of sub. /as aroun% <0J @ Net NPA against net a%vances increase% more in "oreign an% Private sector banks in 200C.*(1$A22 "-N+-N&S @ NPAs /ere more noticeable in respect of ne/ private sector an% foreign banks /.a% been registering a significantly lo/er gro/t.ic. /as compensate% by increase in sub.e percentage c. .ave manage% to increase increase% tremen%ously by :)=J of loan assets in 2010 /.e real estate an% .stan%ar% an% %oubtful assets) -n "oreign sectors banks t.ave manage% to re%uce NPAs over t.e years states t.ic.ave succee%e% in re%ucing net NPA against net a%vances ma%e over t.ereas it is #ust ==J ! 4:J for private sector banks ! foreign banks) 10B Page B= S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A .e recent past manage% a better performance t.e years as compare% to ot.stan%ar% asset .ree sectors public sector banks ..ers @ 6. rate t.

e NPAs an% /oul% affect ne/ private sector banks) But efficient management of NPA is not t.e sole factor t.arging .ig.e management of nonperforming assets) 1ven among private sector bank ol% private sector banks are more efficient t.ic.amper t.) Public sector banks are more efficient t.e -n%ian banking sector) 6.e proper management of t.e -n%ian Banks are facing to%ay) -f t.ig.tly it /oul% be %angerous for t.e NPA is one of private sector ! foreign banks /it.e biggest problems t. functioning of len%ing rates repress savings an% financial markets /.e current profit interest income %ue to large provisions of t .e recycling of t.e fun%s Banks also re%istribute losses to ot.C*NC2'S-*N 6.e business of interest rates) 2o/er %eposit rates an% .e overall efficiency of banks Page BB S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A .e smoot.e NPAs /oul% %estroy borro/ers by c.e NPAs is not un%ertaken it /oul% . regar% to t.e concept of NPAs is taken very lig. .ampers economic gro/t.e banks) -f %etermines t.

oul% be preferre%) @ Private sector ! "oreign banks s.ance%) @ All banks s.oul% keep stringent c.ig.oul% focus more on recovery of sub. .e NPA in 200C ! 2010) @ 'neven scale of repayment sc.stan%ar% ! %oubtful assets) @ Public sector banks s.S'&&1S6-*NS @ Ne/ bo%y like +ebt $ecovery 6ribunal s.ousing segment as t.e%ule /it.e% ! capacity of +$6s s.ese segment contribute% .oul% increase t.e profits %rastically) ) S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A Page B> .eir to/ar%s t.oul% be establis.e initial years normally s.eck on a%vance being ma%e to real estate ! .interest income as rise in NPA %ue to %efault in interest income may affect repayment in t.oul% be en.

&ui%elines Circulars on -ncome $ecognition an% Asset Classification @ $eport on 6ren% an% Progress of Banking in -n%ia 200C.e 1conomic 6imes @ 6.10 @ Statistical 6ables $elating to Banks of -n%ia @ 3aster Circular () *t.() Sources -nternet .performing Assets in Banks S) N) Bi%ani --) 3agaGines @ -nvestor @ Business -n%ia ---) e.ebsites @ .ttp9/////)in%iastat)com/ 110 Page B< S6) 7A(-1$8S C*221&1 4A'6*N*3*'S5 A*2AA6A .e% 3aterial @ $B.B-B2-*&$AP0M -) Books @ 3anagement *f Non.Performing Assets -n Banks by Sugan C Qain @ 3anaging Non.Ne/spapers @ 6.e Business Stan%ar% .ttp9/////)rbi)org)in/ @ .