Npa Project

` NON-PERFORMING ASSETS AT APGB
A
Project synopsis report on
NON PERFORMING ASSETS
By
M.SWETHALAKSHMI
Regd No. 18G31E0049
MASTER OF BUSINESS ADMINISTRATION
Master of Business Administration

St. Johns College of Engineering &Technology
Yemmiganur, Kurnool(Dist).
2018-2020
1
CERTIFICATE FROM THE GUIDE
This is to certify that Ms. M.SWETHALAKSHMI submits the project
synopsis report entitled “NON PERFORMING ASSETS” in partial fulfillment for the
award of Master of Business Administration, JNTU Anantapur, is a record of bonafied
work carried out by her under my guidance and supervision.
C.RAMSHESH
Assistant Professor
MBA Department
St. Johns College of Engineering &Technology
Yemmiganur,
Kurnool (Dist)
2
SYNOPSIS PROJECT VIVA VOCE CERTIFICATE
This is to certify that Mr/ Ms. M.SWETHALAKSHMI has attended for
the Internal project viva voce examination and completed successfully on
___________ .
Internal examiner1 Internal examiner2
INDEX
3
Introduction
Objectives of the study
Scope of the study
Need for the study
Research Methodology
 Data Collection
 Sample size
 Sample Method
 Questionnaire
Limitations
4
INDEX
Chapter I : Introduction
Objectives of the study
Scope of the study
Need for the study
Research Methodology
Data Collection
Limitations
Chapter II : Industry profile
Chapter III : Company profile
Chapter IV : Theoretical framework
Chapter V : Data analysis and Interpretation
Chapter VI : Findings, Suggestions and Conclusion
Appendix : Bibliography
5
CHAPTER-I
6
INTRODUCTION
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INTRODUCTION
NON-PERFORMING ASSET:
The banks are commercial organization and the main business of banking is to collect the
deposits from the public and lend it to the individuals, business concerns, institution etc. The lending
business is associated with risk. One of the risks in lending is the possibility of account becoming
nonperforming assets. Non-performing assets (NPAs) do not earn interest income and repayment of
loan to bank does not take place according to repayment schedule affecting income of the bank and
their by profitability.
The non- performing assets do not generate interest but at the same time require banks to make
provision for such non- performing assets out of their current profit.
The term Non-Performing Assets figured in the Indian banking sector after introduction of
financial sector reforms in 1992. The prudential norms on income recognition, assets classification and
provisioning thereon are implemented from the financial year 1992-93, as per the recommendation of
the committee on the Financial System (Narsimham Committee). These norms have brought in
quantification and objectivity into the assessment and provisioning for NPAs. Reserve Bank of India
constantly endeavors to ensure that prescriptions in this regard are close to international norms.
The efficiency of a bank is not always reflected only by the size of its balance sheet but by the level
of return on its assets. NPAs do not generate interest income for the banks, but at the same time banks
are required to make provision for such NPAs from their current output.
NPAs have an adverse effect on the return on assets in several way

 The erode current profits through provisioning requirements.
 They result in reduced income.
 They require higher provisioning requirements affecting profits an accretion to capital funds and
capacity to increase good quality risk assets in future.
 They limit recycling of funds, set in asset liability mismatch.
NPAs refer to loans which are in risk of default. Reserve Bank of India (RBI) defines NPAs as below:
8
An asset, including a leased asset, becomes non-performing when it ceases to generate income
for the bank and Financial institutions.
An asset is classified as Non-performing Asset (NPA) if due in the form of principal and interest
are not paid by the borrower for a period of 180 days.
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OBJECTIVES TO THE STUDY
 To know the concept of Non-Performing Asset (NPA).
 To know the reasons for NPA.
 To learn preventive measures.
 To know the past trends of NPA.
 To identify the Non-performing assets in APG Bank
 To offer suggestions based on findings of the study.
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NEED FOR THE STUDY / SIGNIFICANCE OF THE STUDY

The main aim of any person is the utilization money in the best manner since the India is
country were more than half of the population has problem of running the family in the most efficient
manner. However Indian people faced large number of problem till the development of the full-
fledged banking sector. The Indian financial sector came into the developing nature mostly after the
1991 government policy. The financial sector has really helped the Indian people to utilise the single
money in the best manner as they want. People now have started investing their money in the financial
institutions and financial institutions also provide good returns on the deposited amount. The people
now have at the most understood that financial institutions provide them good security to their deposits
and so excess amounts are invested in the financial institutions. Thus, financial institutions have
helped the people to achieve their socio economic objectives.
The financial institutions not only accept the deposits of the people but also provide them
credit facility for their development. Indian financial sector has the nation in developing the business
and service sectors. But recently the financial sectors are facing the problem of credit risk. It is found
that many general people and business people borrow from the financial institutions but due to some
genuine or other reasons are not able to repay back the amount drawn to the financial institutions. The
amount which is not given back to the banks is known as the non performing assets. Many financial
sectors are facing the problem of non-performing assets which hampers the business of the financial
sectors. Due to NPAs the income of the those financial institutions is reduced and the to make the
large number of the provisions that would curtail the profit of the financial sectors sand due to that the
financial performance of the financial institutions would not show good result. The main aim behind
making this report is to know how financial institutions are operating their business and how NPAs
play its role to the operations of the financial institutions.
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RESEARCH METHODOLOGY
The research work undertaken is based on the research methodology, which is given below:
Definition of research:
Research is an academic activity and as such the term should be used in technical sense.
According to Clifford woody, research comprises defining and redefining problem, formulating
hypothesis suggested solution. Collecting, organizing, evaluating data, making deduction and reaching
conclusion and at last carefully testing the conclusion to determine whether they fit the formulating
hypothesis.
Research refers to the systematic method consisting of entailing the problem, formulating a
hypothesis, collecting the fact or data analyzing the fact and reaching certain conclusion either in the
form of solution towards the concerned problem or in certain generalization for some theoretical
formulation.
Data Collection Method:

The researcher has collected information from both the sources i.e.primary and secondary.
Sources of Data:
Primary Data:
For collecting primary data researcher has used information sheet to collect the detailed
particulars required from the branches. Such as information on NPA at branch level, provision made
for NPAs, Cost of deposit, Interest paid on deposit, dividend paid by bank, recovery efforts made by
bank etc.
Secondary Data:
1 Internet,
2 Books,
3 Journals,
4 Newspaper,
5 Annual report,
6 Database available in the library,
7 Catalogues and presentations.
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SCOPE OF THE STUDY
The study has the following scope:
The study has been conducted to understand the position of Non-performing Assets and also to
study in detail the management Non-performing assets in APG Bank The entire study depicts the
movement of Non-performing assets for several years. This study is conducted by referring to leading
bank in Peddakadubur called APG Bank. The study was restricted to only one Financial institution
based on its performance and popularity.
Study can be undertaken to have more accurate results. The study could suggest measures for
the financial institutions to avoid future NPAs & to reduce existing NPAs. The study may help the
government in creating & implementing new strategies to control NPAs. The study will help to select
appropriate techniques suited to manage the NPAs and develop a time bound action plan to arrest the
growth of NPAs.
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LIMITATIONS OF THE STUDY
The study is limited to the functions of Indian financial system, pertaining to its management of NPAs
and profitability. Thus, the important limitations are as follows:
 The study on management of non-performing assets is limited to the Indian financial

institutions.
 The basis for identifying non-performing assets is taken from the Reserve Bank of India
circulars.
 Since non-performing assets are critical, bank officials are not willing to part with all
the information with them.
 Reasons for NPAs and Management of NPAs are changing with the time. The study is
done in the present environment without foreseeing future developments.
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CHAPTER-II
15
INDUSTRY PROFILE
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INDUSTRY PROFILE
Vision
Placing our Organisation at the highest altitude among the RRBs in the country and making it
financially strong, viable, vibrant and an effective proactive instrument of social change, with an eye
to work for overall development of the people and the economy of the operational area, through
aggressive banking.
Brief Information:
Andhra Pragathi Grameena Bank came into existence from 01.06.2006 by amalgamating Rayalaseema
Grameena Bank, Sri Anantha Grameena Bank and Pinakini Grameena Bank consequent upon the
Government of India Notification dt.01.06.2006. The Bank is constituted under Regional Rural Banks
Act 1976. The Bank is having its Head Office at KADAPA with a jurisdiction of 5 districts namely
Anantapur, Y. S. R (Kadapa), Rajampeta,Kurnool, Nellore and Prakasam. The Bank is having 8
Regional offices with its Head quarters at 5 district Head Quarters, Kadiri of Anantapur district and in
Nandyal of Kurnool district. The Bank is providing banking services with its 552 branches as on
31.03.2019. The Bank is catering to the needs of Rural Poor mainly and to all other sectors also. The
Bank has been playing a pivotal role in economic development of its operational area by outreaching
the people in the countryside. The Bank earned Net profit of Rs.231.18 Crore as on 31.03.2019 and
stood first among all RRBs sponsored by Syndicate Bank and all RRBs in the Andhra Pradesh State in
respect of networth Rs.2209.77 Crore as on 31.03.2019.
The entire area of operation of the Bank, which is mostly in Rayalaseema region, is characterized by
drought and backwardness. About 75% of the population in the area lives in countryside. The soils are
mostly black and red, about 75% of the area is rain fed and farmers depend on rain fed crops and
Irrigation sources viz., canals, tanks, bore wells etc., the major crops grown are paddy, cotton (hybrid),
chilies, vegetables, horticulture crops like banana, papaya, sweet orange, mango etc., and under rain
fed conditions the major crops grown are ground nut, jowar, Bengal gram, sun-flower, coriander,
tobacco, etc. The area is rich in minerals viz., barites, limestone, granite, black and colour slabs, slates
etc
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The important rivers flowing through the Bank's area of operation are Krishna, Tungabhadra, Hundri,
Pennar, Kundu, Papagni, Chitravathi, Sagileru, Pincha, Cheyyeru, Swarnamukhi, Paleru, Pillaperu and
Gundlakamma .
The Bank has received following awards during 2018-19;
* IBA Award for Best Financial Inclusion Initiatives.
* ASSOCHAM Awards for
a. Best Technology
b. Agri Lending
c. Best Social Bank
d. Priority Sector Lending Otherthan Agri Lending
* SKOCH Awards for Financial Inclusion and Financial Inclusion Technologies
* APY Awards for Leadership Capital Campaign and Outstanding Performance
The paid up capital of the Bank is Rs.300 lakh, contributed by the Govt. Of India, Sponsor Bank
(Syndicate Bank) and the Government of Andhra Pradesh in the ratio of 50:35:15 respectively. As a
part of restructuring process of RRBs, an additional share capital (in the form of share capital deposit)
of Rs.3934.26 lakh was infused by the shareholders in the ratio mentioned above
Highlights for the Financial Year 2018-19:

The Bank has a wide network of 552 branches spread over 5 districts namely 1. Anantapuramu, 2.
YSR Kadapa, 3.Kurnool, 4. SPSR Nellore, 5.Prakasam and as on date 8 Regional Offices were set up
for administrative convenience.
The Total Business of the Bank touched Rs. 28,286 Crore as on 31.03.2019, with a quantum jump of
Rs.3,247 Crore over the previous year registering YoY growth rate of 13%.
The Bank achieved a Deposit Level of Rs. 14,325 Crore as on 31.03.2019, with a quantum increase of
Rs.1,261 Crore over the previous year registering YoY growth rate of 9.7%. Low Cost Deposits
constitute 38% of total Deposits.
The Bank achieved a Deposit Level of Rs. 14,325 Crore as on 31.03.2019, with a quantum increase of
Rs.1,261 Crore over the previous year registering YoY growth rate of 9.7%.
The outstanding Advances of the Bank reached the level of Rs. 13,961 Crore as on 31.03.2019 with a
quantum increase of Rs. 1,986 Crore over the previous year registering YoY growth rate of 16.6%.
* The Bank earned a Net Profit of Rs.231.18 Crore for financial year 2018-19
(After making a provision of Rs. 209 Crore for pension payment)
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* The Total Net Worth of the Bank stood at Rs. 2209.77 Crore as on 31.03.2019, which is highest
among all RRBs in the Country.
Priority Sector Advances and Agriculture Advances touched a level of Rs. 12,771 Crore and Rs.
11,105 Crore respectively.
Credit-Deposit Ratio of the Bank stood at 97.46%.
CRAR of the Bank is 17.98% as against the statutory requirement of 9%.
The Bank is offering Interest rate of 7.85% pa on Deposits for Senior Citizens for one year period
(7.25% pa to others) which is highest among all the the Public Sector Banks.
Bank has extended Financial Assistance to weaker sections, SF and MF to the tune of Rs. 7,874 Crore
constituting56%.
Keeping the empowerment of rural women in the top most agenda, the Bank has linked 99,233 Self
Help Groups with outstanding loan amount of Rs. 2,683 Crore as on 31.03.2019.
Bank has launched Self Help Entrepreneurship (SHE) programme for providing financial assistance
upto Rs. 20 Lakh to Women entrepreneurs in Rural areas.
The Bank has issued 6,67,623 Kisan Credit Cards involving an amount of Rs. 7,330 Crore.
The Bank financed 1712 JOINT LIABILITY GROUPS involving an amount of Rs. 28.91 Crore
covering about 8560 members.
The Credit disbursements of the Bank for 2018-19 are Rs. 11,258 Crore, of which disbursements to
Priority Sector Advances are Rs. 9,407 Crore, Agriculture Advances Rs. 8,262 Crore, and MSME Rs.
977 Crore.
The Bank has opened 03 New Branches during the financial year 2018 - 19.
The Bank’s Business outreach further widened with total number of customers growing to
71.27 lakh with the deposit accounts at about 58.23 lakh while loan accounts are at about 13.04
lakh.
All the 552 branches of the Bank are on Core Banking Solutions (CBS), paving way for online
transactions, anywhere in the operational area of the Bank to our customers.
The Bank is implemented all latest technological initiatives i.e. RTGS/ NEFT, Internet Banking,
BHIM, UPI, Mobile Banking, Missed call Banking, e-Passbook facilities etc., for the benefit of our
customers.
The Bank has opened 108 ATMs and has issued RuPay Cards to 20 Lakh customers.
Bank has launched 2 Mobile ATM Vans to facilitate and cover rural areas.
Introduced SMS Alert facility to Savings Bank / Current Account/CC/OD customers.
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The Bank opened 3,91,564 SB accounts during the year 2018-19 and covered the uncovered persons in
the operational area of the Bank.
The Bank has opened 7,38,196 accounts under PMJDY scheme and has mobilized deposits to the tune
of Rs. 170.26 Crore.
Bank is successfully implementing Financial Inclusion as per Government instructions and has
covered 1899 villages allotted to the Bank and has also conducted Financial Literacy Awareness
Programs in all villages under the auspices of NABARD for creating awareness to the rural clientele
on Banking, during FY 2018-19.
Bank is providing banking facilities to customers in all our service area villages either through Bank
Branch or Business Correspondents. In our Bank there are 995 Business Correspondents (BCs).
All BCs are enabled with AEPS & RuPay Card Transactions, PMJDY account opening, RD account
opening through Micro ATM. Residents are utilizing the services our Bank BCs and are performing
their transactions at their doorsteps without visiting the bank branch.
Bank has received award from Government of India, IBA, Government of Andhra Pradesh,
ASSOCHAM, PFRDA, SKOCH etc., for providing best services in Digital Banking, extending credit
to Agriculture, Financial Inclusion, Enrollments under APY etc.,
The Bank has actively implemented the Social Security Schemes launched by the Government of India
and has enrolled 2,04,825 customers under PMJJBY, 8,27,485 customers under PMSBY and 68,761
customers under APY.
The bank has completed Aadhaar seeding in 38.53 Lakh accounts (98.32% operative SB accounts) of
the customers for availing the benefits under Direct Benefit Transfer (DBT)Scheme.
Bank has established Aadhaar Enrollment Centres in 53 Branches as per the directions of Government
of India/UIDAI for providing Enrollment/Update facility to residents.
The thrust areas of the Bank for the current FY 2019-20:
A. The Bank is aiming at a business level of Rs. 31,000 Crore by 31.03.2020.
B. The Bank is aiming for 40% of CASA deposits out of total deposits during the year.
C. Special emphasis on mobilization of small savings in the form of normal SB accounts, Basic
Savings Bank Deposit Accounts, Recurring Deposit accounts etc.
D. Emphasis will be on improving the Housing and MSME loans Portfolio.
E. Recovery of loans will be the major priority for the Bank during the current financial year as
the prompt repayment would enable the farmers to get the benefit of incentive in interest.
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F. Enrolment of maximum number beneficiaries under Social Security Schemes “Pradhan Mantri
Jeevan Jyothi Bima Yojana (PMJJBY), Pradhan Mantri Suraksha Bima Yojana (PMSBY) and
Atal Pension Yojana (APY) to pass the benefit to the unorganized economic group.
CHAPTER-III
21
COMPANY PROFILE
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COMPANY PROFILE
Andhra Pragathi Grameena Bank at Peddakadubur was started on 24/12/1984 with 4 members of staff
by Kotla Vijaya Bhaskar Reddy, JUDICIAL MINISTER.
Andhra Pragathi Grameena Bank came into existence from 01.06.2006 by amalgamating Rayalaseema
Grameena Bank, Sri Anantha Grameena Bank and Pinakini Grameena Bank consequent upon the
Government of India Notification dt.01.06.2006. The Bank is constituted under Regional Rural Banks
Act 1976. The Bank is having its Head Office at KADAPA with a jurisdiction of 5 districts namely
Anantapur, Y. S. R (Kadapa), Rajampeta,Kurnool, Nellore and Prakasam. The Bank is having 8
Regional offices with its Head quarters at 5 district Head Quarters, Kadiri of Anantapur district and in
Nandyal of Kurnool district. The Bank is providing banking services with its 552 branches as on
31.03.2019. The Bank is catering to the needs of Rural Poor mainly and to all other sectors also. The
Bank has been playing a pivotal role in economic development of its operational area by outreaching
the people in the countryside. The Bank earned Net profit of Rs.231.18 Crore as on 31.03.2019 and
stood first among all RRBs sponsored by Syndicate Bank and all RRBs in the Andhra Pradesh State in
respect of networth Rs.2209.77 Crore as on 31.03.2019.
BANK SERVICES
The following are the types of loans that the bank will provide :
LOANS
NON CORPORATE SMALL BUSINESS LOANS

AGRICULTURAL LOANS
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TWO WHEELER LOANS

JEWELLARY LOANS
PERSONAL LOANS
AUTO LOANS
HOME LOANS
GENERATOR LOANS
SERVICES
ATM’s
SMS ALERTS
OFFSITE MONITORING
CBS MANUALS
MOBILE BANKING
CHAPTER-IV
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THEORETICAL
FRAMEWORK
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THEORETICAL FRAMEWORK
WHAT IS A NPA (NON-PERFORMING ASSETS) ?
Action for enforcement of security interest can be initiated only if the secured asset is classified as
Non-performing asset.
Non-performing asset means an asset or account of borrower ,which has been classified by bank or
financial institution as sub-standard , doubtful or loss asset, in accordance with the direction or
guidelines relating to assets classification issued by RBI .
An amount due under any credit facility is treated as “past due” when it is not been paid within 30
days from the due date. Due to the improvement in the payment and settlement system, recovery
climate, 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
shell be an advance where
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i. Interest and/or installment of principal remain overdue for a period of more than 180 days in
respect of a term loan,
ii. The account remains ‘out of order ‘ for a period of more than 180 days ,in respect of an
overdraft/cash credit (OD/CC)
iii. The bill remains overdue for a period of more than 180 days in case of bill purchased or
discounted.
iv. Interest and/or principal remains overdue for two harvest season but for a period not
exceeding two half years in case of an advance granted for agricultural purpose ,and
v. Any amount to be received remains overdue for a period of more than 180 days in respect of
other accounts
with a view to moving towards international best practices and to ensure greater transparency, it
has been decided to adopt ’90 days overdue ‘norms for identification of NPAs ,from the year
ending March 31,2004,a non performing asset shell be a loan or an advance where;
i. Interest and/or installment of principal remain overdue for a period of more than 90
days in respect of a term loan,
ii. The account remains ‘out of order ‘ for a period of more than 90 days ,in respect of an
overdraft/cash credit (OD/CC)
iii. The bill remains overdue for a period of more than 90 days in case of bill purchased or
discounted.
iv. Interest and/or principal remains overdue for two harvest season but for a period not
exceeding two half years in case of an advance granted for agricultural purpose ,and
v. Any amount to be received remains overdue for a period of more than 90 days in
respect of other accounts
ASSET CLASSIFICATION:
Assets are classified into following four categories:
 Standard d Assets
 Sub--standard d Assets s
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 Doubtful l Assets s
 Loss s Assets
Standard Assets:
Standard assets are the ones in which the bank is receiving interest as well as the principal amount of
the loan regularly from the customer. Here it is also very important that in this case the arrears of
interest and the principal amount of loan do not exceed 90 days at the end of financial year. If asset
fails to be in category of standard asset that is amount due more than 90 days then it is NPA and NPAs
are further need to classify in sub categories.
Banks are required to classify non-performing assets further into the following three categories based
on the period for which the asset has remained non-performing and the reasonability of the dues:
1) Sub-standard Assets
2) Doubtful Assets
3) Loss Assets
Sub-standard Assets:
With effect from 31 March 2005, a substandard asset would be one, which has remained NPA for a
period less than or equal to 12 month. The following features are exhibited by substandard assets: the
current net worth of the borrowers / guarantor or the current market value of the security charged is
not enough to ensure recovery of the dues to the banks in full; and the asset has well-defined credit
weaknesses that jeopardize the liquidation of the debt and are characterized by the distinct possibility
that the banks will sustain some loss, if deficiencies are not corrected.
Doubtful Assets:
A loan classified as doubtful has all the weaknesses inherent in assets that were classified as sub-
standard, with the added characteristic that the weaknesses make collection or liquidation in full, on
the basis of currently known facts, conditions and values – highly questionable and improbable.
With effect from March 31, 2005, an asset would be classified as doubtful if it remained in the sub-
standard category for 12 months.
Loss Assets:
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A loss asset is one which considered uncollectible and of such little value that its continuance as a
bankable asset is not warranted- although there may be some salvage or recovery value. Also, these
assets would have been identified as “Loss assets” by the bank or internal or external auditors or the
RBI inspection but the amount would not have been written-off wholly.
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FACTORS FOR RISE IN NPAs
The banking sector has been facing the serious problems of the rising NPAs. But the problem
of NPAs is more in public sector banks when compared to private sector banks and foreign banks. The
NPAs in PSB are growing due to external as well as internal factors.
 EXTERNAL FACTORS :-
 Ineffective recovery tribunal
The Govt. has set of numbers of recovery tribunals, which works for recovery of loans and advances.
Due to their negligence and ineffectiveness in their work the bank suffers the consequence of non-
recover, their by reducing their profitability and liquidity.
 Willful Defaults
There are borrowers who are able to payback loans but are intentionally withdrawing it. These groups
of people should be identified and proper measures should be taken in order to get back the money
extended to them as advances and loans.
 Natural calamities
This is the measure factor, which is creating alarming rise in NPAs of the PSBs. every now and then
India is hit by major natural calamities thus making the borrowers unable to pay back there loans.
Thus the bank has to make large amount of provisions in order to compensate those loans, hence end
up the fiscal with a reduced profit.
Mainly ours farmers depends on rain fall for cropping. Due to irregularities of rain fall the farmers are
not to achieve the production level thus they are not repaying the loans.
 Industrial sickness
Improper project handling , ineffective management , lack of adequate resources , lack of advance
technology , day to day changing govt. Policies give birth to industrial sickness. Hence the banks that
30
finance those industries ultimately end up with a low recovery of their loans reducing their profit and
liquidity.
 Lack of demand
Entrepreneurs in India could not foresee their product demand and starts production which ultimately
piles up their product thus making them unable to pay back the money they borrow to operate these
activities. The banks recover the amount by selling of their assets, which covers a minimum label.
Thus the banks record the non recovered part as NPAs and has to make provision for it.
 Change on Govt. policies
With every new govt. banking sector gets new policies for its operation. Thus it has to cope with the
changing principles and policies for the regulation of the rising of NPAs.
The fallout of handloom sector is continuing as most of the weavers Co-operative societies have
become defunct largely due to withdrawal of state patronage. The rehabilitation plan worked out by
the Central government to revive the handloom sector has not yet been implemented. So the over dues
due to the handloom sectors are becoming NPAs.
 INTERNAL FACTORS :-
 Defective Lending process
There are three cardinal principles of bank lending that have been followed by the commercial banks
since long.
i. Principles of safety
ii. Principle of liquidity
iii. Principles of profitability
i. Principles of safety :-
By safety it means that the borrower is in a position to repay the loan both principal and interest. The
repayment of loan depends upon the borrowers:
a. Capacity to pay
b. Willingness to pay
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Capacity to pay depends upon:

1. Tangible assets
2. Success in business
Willingness to pay depends on:

1. Character
2. Honest
3. Reputation of borrower
The banker should, there fore take utmost care in ensuring that the enterprise or business for which a
loan is sought is a sound one and the borrower is capable of carrying it out successfully .he should be a
person of integrity and good character.
 Inappropriate technology
Due to inappropriate technology and management information system, market driven decisions on real
time basis can not be taken. Proper MIS and financial accounting system is not implemented in the
banks, which leads to poor credit collection, thus NPA. All the branches of the bank should be
computerized.
 Improper SWOT analysis
The improper strength, weakness, opportunity and threat analysis is another reason for rise in NPAs.
While providing unsecured advances the banks depend more on the honesty, integrity, and financial
soundness and credit worthiness of the borrower.
 Banks should consider the borrowers own capital investment.

 it should collect credit information of the borrowers from_
a. From bankers.
b. Enquiry from market/segment of trade, industry, business.
c. From external credit rating agencies.
 Analyze the balance sheet.
True picture of business will be revealed on analysis of profit/loss a/c and balance sheet.
 Purpose of the loan
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When bankers give loan, he should analyze the purpose of the loan. To ensure safety and liquidity,
banks should grant loan for productive purpose only. Bank should analyze the profitability, viability,
long term acceptability of the project while financing.
 Poor credit appraisal system
Poor credit appraisal is another factor for the rise in NPAs. Due to poor credit appraisal the bank gives
advances to those who are not able to repay it back. They should use good credit appraisal to decrease
the NPAs.
 Managerial deficiencies
The banker should always select the borrower very carefully and should take tangible assets as
security to safe guard its interests. When accepting securities banks should consider the_
1. Marketability
2. Acceptability
3. Safety
4. Transferability.
The banker should follow the principle of diversification of risk based on the famous maxim “do not
keep all the eggs in one basket”; it means that the banker should not grant advances to a few big farms
only or to concentrate them in few industries or in a few cities. If a new big customer meets misfortune
or certain traders or industries affected adversely, the overall position of the bank will not be affected.
Like OSCB suffered loss due to the OTM Cuttack, and Orissa hand loom industries. The biggest
defaulters of OSCB are the OTM (117.77lakhs), and the handloom sector Orissa hand loom WCS ltd
(2439.60lakhs).
 Absence of regular industrial visit
The irregularities in spot visit also increases the NPAs. Absence of regularly visit of bank officials to
the customer point decreases the collection of interest and principals on the loan. The NPAs due to
willful defaulters can be collected by regular visits.
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 Re loaning process
Non remittance of recoveries to higher financing agencies and re loaning of the same have
already affected the smooth operation of the credit cycle.
Due to re loaning to the defaulters and CCBs and PACs, the NPAs of OSCB is increasing day by day.
PROBLEMS DUE TO NPA:

1. Owners do not receive a market return on there capital .in the worst case, if the banks fails,
owners loose their assets. In modern times this may affect a broad pool of shareholders.
2. Depositors do not receive a market return on saving. In the worst case if the bank fails,
depositors loose their assets or uninsured balance.
3. Banks redistribute losses to other borrowers by charging higher interest rates, lower deposit
rates and higher lending rates repress saving and financial market, which hamper economic
growth.
4. Non performing loans epitomize bad investment. They misallocate credit from good projects,
which do not receive funding, to failed projects. Bad investment ends up in misallocation of
capital, and by extension, labour and natural resources.
Non performing asset may spill over the banking system and contract the money stock, which may
lead to economic contraction. This spill over effect can channelize through liquidity or bank
insolvency:
a) When many borrowers fail to pay interest, banks may experience liquidity shortage. This can jam
payment across the country,
b) Illiquidity constraints bank in paying depositors
c) Undercapitalized banks exceeds the banks capital base.
The three letters Strike terror in banking sector and business circle today. NPA is short form of “Non
Performing Asset”. The dreaded NPA rule says simply this: when interest or other due to a bank
remains unpaid for more than 90 days, the entire bank loan automatically turns a non performing
asset. The recovery of loan has always been problem for banks and financial institution. To come out
34
of these first we need to think is it possible to avoid NPA, no can not be then left is to look after the
factor responsible for it and managing those factors.
 Interest and/or installment of principal remains overdue for two harvest seasons but for a
period not exceeding two half years in the case of an advance granted for agricultural
purposes, and
 Any amount to be received remains overdue for a period of more than 90 days in respect
of other accounts.
As a facilitating measure for smooth transition to 90 days norm, banks have been advised to move
over to charging of interest at monthly rests, by April 1, 2002. However, the date of classification of
an advance as NPA should not be changed on account of charging of interest at monthly rests. Banks
should, therefore, continue to classify an account as NPA only if the interest charged during any
quarter is not serviced fully within 180 days from the end of the quarter with effect from April 1, 2002
and 90 days from the end of the quarter with effect from March 31, 2004.
'Out of Order' status:

An account should be treated as 'out of order' if the outstanding balance remains
continuously in excess of the sanctioned limit/drawing power. In cases where the outstanding balance
in the principal operating account is less than the sanctioned limit/drawing power, but there are no
credits continuously for six months as on the date of Balance Sheet or credits are not enough to cover
the interest debited during the same period, these accounts should be treated as 'out of order'.
‘Overdue’:
Any amount due to the bank under any credit facility is ‘overdue’ if it is not paid on the
due date fixed by the bank.
Impact of NPA
 Profitability:-
NPA means booking of money in terms of bad asset, which occurred due to wrong choice of client.
Because of the money getting blocked the prodigality of bank decreases not only by the amount of
NPA but NPA lead to opportunity cost also as that much of profit invested in some return earning
project/asset. So NPA doesn’t affect current profit but also future stream of profit, which may lead to
35
loss of some long-term beneficial opportunity. Another impact of reduction in profitability is low ROI
(return on investment), which adversely affect current earning of bank.
 Liquidity:-
Money is getting blocked, decreased profit lead to lack of enough cash at hand which lead to
borrowing money for shot\rtes period of time which lead to additional cost to the company. Difficulty
in operating the functions of bank is another cause of NPA due to lack of money. Routine payments
and dues.
 Involvement of management:-
Time and efforts of management is another indirect cost which bank has to bear due to NPA. Time and
efforts of management in handling and managing NPA would have diverted to some fruitful activities,
which would have given good returns. Now day’s banks have special employees to deal and handle
NPAs, which is additional cost to the bank.
 Credit loss:-
Bank is facing problem of NPA then it adversely affect the value of bank in terms of market credit. It
will lose it’s goodwill and brand image and credit which have negative impact to the people who are
putting their money in the banks .
REASONS FOR NPA:
Reasons can be divided in to two broad categories:-
A] Internal Factor
B] External Factor
[ A ] Internal Factors:-
Internal Factors are those, which are internal to the bank and are controllable by banks.
 Poor lending decision:
36
 Non-Compliance to lending norms:

 Lack of post credit supervision:
 Failure to appreciate good payers:
 Excessive overdraft lending:
 Non – Transparent accounting policy:
[ B ] External Factors:-
External factors are those, which are external to banks they are not controllable by banks.
 Socio political pressure:
 Chang in industry environment:
 Endangers macroeconomic disturbances:
 Natural calamities
 Industrial sickness
 Diversion of funds and willful defaults
 Time/ cost overrun in project implementation
 Labour problems of borrowed firm
 Business failure
 Inefficient management
37
 Obsolete technology
 Product obsolete
Types of NPA
A] Gross NPA
B] Net NPA
A] Gross NPA:
Gross NPAs are the sum total of all loan assets that are classified as NPAs as per RBI guidelines as on
Balance Sheet date. Gross NPA reflects the quality of the loans made by banks. It consists of all the
non standard assets like as sub-standard, doubtful, and loss assets.
It can be calculated with the help of following ratio:
Gross NPAs Ratio  Gross NPAs

Gross Advances
B] Net NPA:
Net NPAs are those type of NPAs in which the bank has deducted the provision regarding NPAs. Net
NPA shows the actual burden of banks. Since in India, bank balance sheets contain a huge amount of
NPAs and the process of recovery and write off of loans is very time consuming, the provisions the
banks have to make against the NPAs according to the central bank guidelines, are quite significant.
That is why the difference between gross and net NPA is quite high.
It can be calculated by following_
Net NPAs  Gross NPAs – Provisions

Gross Advances - Provisions
PREVENTIVE MEASUREMENT FOR NPA
 Early Recognition of the Problem:-
Invariably, by the time banks start their efforts to get involved in a revival process, it’s too late to
retrieve the situation- both in terms of rehabilitation of the project and recovery of bank’s dues.
38
Identification of weakness in the very beginning that is : When the account starts showing first signs of
weakness regardless of the fact that it may not have become NPA, is imperative. Assessment of the
potential of revival may be done on the basis of a techno-economic viability study. Restructuring
should be attempted where, after an objective assessment of the promoter’s intention, banks are
convinced of a turnaround within a scheduled timeframe. In respect of totally unviable units as
decided by the bank, it is better to facilitate winding up/ selling of the unit earlier, so as to recover
whatever is possible through legal means before the security position becomes worse.
 Identifying Borrowers with Genuine Intent:-
Identifying borrowers with genuine intent from those who are non- serious with no commitment or
stake in revival is a challenge confronting bankers. Here the role of frontline officials at the branch
level is paramount as they are the ones who has intelligent inputs with regard to promoters’ sincerity,
and capability to achieve turnaround. Base don this objective assessment, banks should decide as
quickly as possible whether it would be worthwhile to commit additional finance.
In this regard banks may consider having “Special Investigation” of all financial transaction or
business transaction, books of account in order to ascertain real factors that contributed to sickness of
the borrower. Banks may have penal of technical experts with proven expertise and track record of
preparing techno-economic study of the project of the borrowers.
Borrowers having genuine problems due to temporary mismatch in fund flow or sudden requirement
of additional fund may be entertained at branch level, and for this purpose a special limit to such type
of cases should be decided. This will obviate the need to route the additional funding through the
controlling offices in deserving cases, and help avert many accounts slipping into NPA category.
Timeliness
Timeliness and Adequacy of response:-
Longer the delay in response, grater the injury to the account and the asset. Time is a crucial element
in any restructuring or rehabilitation activity. The response decided on the basis of techno-economic
study and promoter’s commitment, has to be adequate in terms of extend of additional funding and
39
relaxations etc. under the restructuring exercise. The package of assistance may be flexible and bank
may look at the exit option.
 Focus on Cash Flows:-
While financing, at the time of restructuring the banks may not be guided by the conventional fund
flow analysis only, which could yield a potentially misleading picture. Appraisal for fresh credit
requirements may be done by analyzing funds flow in conjunction with the Cash Flow rather than only
on the basis of Funds Flow.
 Management Effectiveness:-
The general perception among borrower is that it is lack of finance that leads to sickness and NPAs.
But this may not be the case all the time. Management effectiveness in tackling adverse business
conditions is a very important aspect that affects a borrowing unit’s fortunes. A bank may commit
additional finance to an aling unit only after basic viability of the enterprise also in the context of
quality of management is examined and confirmed. Where the default is due to deeper malady,
viability study or investigative audit should be done – it will be useful to have consultant appointed as
early as possible to examine this aspect. A proper techno- economic viability study must thus become
the basis on which any future action can be considered.
 Multiple Financing:-
A. During the exercise for assessment of viability and restructuring, a Pragmatic and unified
approach by all the lending banks/ FIs as also sharing of all relevant information on the
borrower would go a long way toward overall success of rehabilitation exercise, given the
probability of success/failure.
B. In some default cases, where the unit is still working, the bank should make sure that it
captures the cash flows (there is a tendency on part of the borrowers to switch bankers once
they default, for fear of getting their cash flows forfeited), and ensure that such cash flows are
used for working capital purposes. Toward this end, there should be regular flow of
information among consortium members. A bank, which is not part of the consortium, may not
be allowed to offer credit facilities to such defaulting clients. Current account facilities may
also be denied at non-consortium banks to such clients and violation may attract penal action.
40
The Credit Information Bureau of India Ltd.(CIBIL) may be very useful for meaningful
information exchange on defaulting borrowers once the setup becomes fully operational.
C. In a forum of lenders, the priority of each lender will be different. While one set of lenders
may be willing to wait for a longer time to recover its dues, another lender may have a much
shorter timeframe in mind. So it is possible that the letter categories of lenders may be willing
to exit, even a t a cost – by a discounted settlement of the exposure. Therefore, any plan for
restructuring/rehabilitation may take this aspect into account.
D. Corporate Debt Restructuring mechanism has been institutionalized in 2001 to provide a

timely and transparent system for restructuring of the corporate debt of Rs. 20 crore and above
with the banks and FIs on a voluntary basis and outside the legal framework. Under this
system, banks may greatly benefit in terms of restructuring of large standard accounts
(potential NPAs) and viable sub-standard accounts with consortium/multiple banking
arrangements.
41
CHAPTER-V
42
DATA ANALYSIS &

INTERPRETATION
43
44
Data Analysis & Interpretation
1.GROSS NPA RATIO:
Gross NPA Ratio is the ratio of gross NPA to gross Advances of the institutions. Gross NPAs are the
sum total of all loan assets that are classified as NPAs as per RBI Guidelines. The ratio is to be
counted as percentage and the formula for GNPA is
Gross NPA
Gross NPA Ratio = Gross Advances X 100
Table-1
GROSS NPA RATIO OF APG BANK
Year Gross NPA Gross Advances Gross NPA Ratio

(Rs. In Lakhs) (Rs. In Lakhs) (In Percentage)
2014-15 14.00 800 1.75
2015-16 43.00 864 4.97
2016-17 44.14 1021 4.32
2017-18 23.82 1528 1.55
2018-19 18.00 2169 0.82
Average 23.592 1276.4 2.682
In the above table we see that Gross NPA, Gross Advances and Gross NPA Ratio of all the last 5years.
With the help of Gross NPA and Gross Advances we can find out the Gross NPA Ratio. And also we
know the average of Gross NPA, Gross Advances and Gross NPA Ratio.
45
Graphical representation:
Interpretation:
The above table and graph makes it very clear that the average gross NPAs for the 5 years
under consideration is 2.68%. The bank did a commendable job during the F.Y 2014-15 which
resulted in 1.75% of gross NPAs. Though reasons are not known, the bank failed in lending to new
borrowers as well as in recovering its dues from the borrowers one can notice a step rise in the NPAs
ie from 1.75% to 4.97% as at the end of 31.03.2016. However, the bank was able to contain the
slipping of Standard Assets into NPAs during the F.Y 2016-17 and the advances portfolio too got
increased by Rs.157 lakhs. Hence, the gross NPAs got reduced meagerly by 0.65%. During the F.Y
2017-18, hard work of the recovery staff is evident as the gross NPAs were reduced almost by 50%.
Here, we should take into account the huge increase in advances too. Thus the NPAs came down to
1.55%. The bank did not look behind during F.Y 2018-19 and successfully brought down the NPAs to
0.82%. It is evident that the bank has adopted good financing techniques and good recovery strategy.
46
2.NET NPA RATIO:
The net NPA percentage is the ratio of NPA to net advances in which the provision is to be deducted
from the gross advances. The provision is to be made for NPA account. The formula for that is:
Gross NPA – Provisions

Net NPA Ratio = X 100
Gross Advances - Provisions
Table-2
NET NPA RATIO OF APG BANK
Year Net NPA Gross Provisions Net NET NPA

(Rs. In Advances Advances Ratio
Lakhs) (Rs. In (Rs. In (Rs. In (In
Lakhs) Lakhs) Lakhs) Percentage)
2014-15 9.00 800 5.00 795 1.13
2015-16 26.00 864 17.00 847 3.069
2016-17 23.80 1021 20.34 1000.66 2.37
2017-18 3.28 1528 20.55 1507.45 0.21
2018-19 3.44 2169 14.56 2154.44 0.15
Average 13.104 1276.4 15.49 1260.91 1.3858
In the above table we see that Net NPA, Gross Advances, Provisions, Net Advances and Net NPA
Ratio of all the last 5years. With the help of Net NPA, Gross Advances, provisions and Net Advances
we can find out the Net NPA Ratio. And also we know the average of Net NPA, Gross Advances,
Provisions, Net Advances and Net NPA Ratio.
47
Interpretation:
The above graph presents the Net NPAs position for the period under consideration. The provisions
made in the F.Y 2015-16 are insufficient and have the Net NPAs are as high as 3.07%. For the F.Y
2017-18 and 2018-19 the provisioning is sufficient thus bringing down the Net NPAs to 0.15%. The
management of APG Bank has taken enough care in granting advances and they have been very
meticulous in recovering from defaulters. Another observation is that the APG Bank strictly followed
the RBI guidelines by making provisions against NPAs.
48
3.TOTAL PROVISION RATIO:
Provisions are to be made for to keep safety against the NPA, & it directly affect on the gross profit of
the institution. The provision ratio is nothing but total provision held for the NPA to gross NPA of the
company. The formula for that is:
Total Provision
Total Provisions Ratio = X 100
Gross NPAs
Table-3
TOTAL PROVISIONS RATIO OF APG BANK
Year Total Provisions Gross NPA Provision Ratio

2014-15 5.00 14.00 35.71
2015-16 17.00 43.00 39.53
2016-17 20.34 44.14 46.08
2017-18 20.55 23.82 86.27
2018-19 14.56 18.00 80.88
Average 15.49 28.592 57.694
In the above table we see that Total Provisions, Gross NPA and Provision Ratio of all the last 5years.
With the help of Total provisions and Gross NPA we can find out the Provision Ratio. And also we
know the average of Total Provisions, Gross NPA and Provision Ratio.
49
Interpretation:
Since the publication of the Narsimham Committee Report, the RBI published guidelines for making
provisions against NPAs for all Financial institutions, including banks. The total provisions against
gross NPAs must be such that its Net NPA comes to zero. It means that three must be 100% provision,
so that the above table, it is seen that APG Bank has made more than enough provisions for their gross
NPA. During the last five years the provisions Ratio has been nearly 100%. This marks a very
satisfactory position and it signifies the satisfactory policy of the managements.
4.PROBLEM ASSET RATIO:
It is the ratio of gross NPA to total asset of the institution. The formule for that is:
Gross NPA
Problem Asset Ratio = X 100
Total Assets
50
Table-4
PROBLEM ASSETS RATIO OF APG BANK
Year Gross NPA Total Assets Problem Assets

(Rs. In Lakhs) (Rs. In Lakhs) Ratio
(In Percentage)
2014-15 14.00 800 1.75
2015-16 43.00 864 4.97
2016-17 44.14 1021 4.32
2017-18 23.72 1528 1.55
2018-19 18.00 2169 0.82
Average 28.592 1276.4 2.682
In the above table we can see that the Gross NPA, Total Assets and Problem Assets Ratio of all the
last 5 Years. With the help of Gross NPA and Total Assets we can find out the Problem Assets Ratio.
And also we know the average of the Gross NPA, Total Assets and Problem Assets Ratio.
51
Interpretation:
The Problem assets ratio shows the proportion of Gross NPA to total assets and the table & graph
given above shows that the percentage of APG Bank is 2.68% on an average for the last 5 years. The
percentage shown is, however not stable. It increase in the year 2015-16 but it went slightly down in
the year 2016-17 from then onwards the NPAs percentage went in decreasing and reached 0.82% in
the F.Y 2018-19 . It seems that much attention has been given by the management to the proportion of
Gross NPA and total assets of the company. The gross NPA is on the rise due to the increase in
advances.
5. SUBSTANDARD ASSETS RATIO:
Total Sub–Standard assets

Substandard Assets Ratio = X 100
Gross NPAs
Table-5
SUB-STANDARD ASSETS RATIO OF APG BANK
Year Total Sub- Gross NPA Sub-standard

standard Assets (Rs. In Lakhs) Assets Ratio
(Rs. In Lakhs) (In Percentage)
2014-15 10.00 14.00 71.42
2015-16 39.00 43.00 90.69
2016-17 12.66 44.14 28.68
52
2017-18 2.11 23.82 8.85

2018-19 3.46 18.00 19.22
Average 13.446 28.592 43.772
In the above table we can see that the Total Sub-standard Assets, Gross NPA and Sub-standard Assets
Ratio of all the last 5 Years. With the help of Gross NPA and Total Sub-standard Assets we can find
out the Sub-standard Assets Ratio. And also we know the average of the Gross NPA, Total Sub-
standard Assets and Sub-standard Assets Ratio.
Graphical Representation:
53
Interpretation:
The substandard assets ratio indicates the scope for improvement in NPA. The higher
the ratio, the better is position of recovering the advances. From the above table and
graph it is found that ratio has been increasing in the first two years of study and
decreased much in the last three years. The variations in the substandard assets ratio are
caused by the higher percentage of doubtful assets over sub standard assets in some of
the institutions. The management should take necessary measures to reduce doubtful
assets and loss assets and to increase the percentage of substandard assets.
54
6.DOUBTFUL ASSETS RATIO:
Total Doubtful Assets

Doubtful Assets Ratio = X 100
Gross NPAs
Table-6
DOUBTFUL ASSETS RATIO OF APG BANK
Year Total Doubtful Gross NPA Doubtful Assets

Assets (Rs. In Lakhs) Ratio
(Rs. In Lakhs) (In Percentage)
2014-15 4.00 14.00 28.5
2015-16 4.00 43.00 9.30
2016-17 21.48 44.14 48.66
2017-18 21.71 23.82 91.14
2018-19 14.53 18.00 80.72
Average 13.144 28.592 51.664
In the above table we can see that the Total Doubtful Assets, Gross NPA and Doubtful Assets Ratio of
all the last 5 Years. With the help of Gross NPA and Total Doubtful Assets we can find out the
Doubtful Assets Ratio. And also we know the average of the Gross NPA, Total Doubtful Assets and
Doubtful Assets Ratio.
55
Interpretation:
The doubtful assets ratios of APG Bank is presented in the above table and graph. Company can
recover more of the advances through compromise and that is the stage of compromise. The doubtful
assets ratio indicates the proportion of total doubtful assets to gross NPAs. If the ratio is higher, there
is more scope for compromising and reducing NPAs. From the table we understand that the ratio had
been satisfactory except for the years i.e. 2017-18 (91.14%), 2018-19 (80.72%) . The managements‟
must try to recover as much doubtful advances as possible so that the Gross NPAs are reduced.
7.LOSS ASSETS RATIO:

Total Loss Assets
Loss Assets Ratio = X 100
56
Gross NPAs
Table-7
LOSS ASSETS RATIO OF APG BANK
Year Total Loss Assets Gross NPA Loss Assets Ratio

2014-15 0 14.00 0
2015-16 0 43.00 0
2016-17 0 44.14
2017-18 0 23.82 0
2018-19 0 18.00 0
Average 0 28.592 0
In the above table we can see that the Total Loss Assets, Gross NPA and loss Assets Ratio of all the
last 5 Years. With the help of Gross NPA and Total Loss Assets we can find out the Loss Assets Ratio.
And also we know the average of the Gross NPA, Total Loss Assets and Loss Assets Ratio.
57
Interpretation:
Loss assets ratio shows the proportion of loss that the company are likely to suffer as compared to
Gross NPAs. The ratio must be minimum, as it will indicate that the assets to be lost would be lower
as compared to Gross NPAs. The loss assets are not likely to be recovered at all and so a higher ratio
would suggest higher losses. From the above table it is understood that the loss assets ratio had been
very low in the first year of study i.e. 2014-15(0%) it is remains same in the next four years i.e. 2014-
15(0%) to 2018-19 (0%). The loss assets ratio in the APG Bank is very satisfactory.
58
COMMON – SIZE ANALYSIS OF NPAs OF APG BANK
The average proportion of various components of Non-performing assets of APG Bank is shown in
the above pie chart it depicts 51.664% doubtful assets, 43.772% sub standard assets and 0% of loss
assets. As far as sub standard assets and doubtful assets are concerned it can be said that a high sub
standard assets over doubtful assets may signify a satisfactory and safe position as the prospect of
recovery of advances is bright. Company should make such efforts to recover advances from the
default, even by making some compromise, that the proportion of gross NPA gets reduced.
Considering the position of company under study, it can be concluded that the situation is not
pessimistic. The increasing doubtful assets suggest that there is a very good scope of recovery, as more
scope is there for compromising and reducing NPAs.
59
CHAPTER-VI
60
FINDINGS, SUGGESTIONS
AND CONCLUSION
61
FINDINGS
 Gross NPA Ratio of APG Bank has continuously decreasing for the last five years.
 Net NPA Ratio of APG Bank Ltd has reducing in first two years and finally it comes to zero.
 Provision Ratio of APG Bank of last three will be exceeded 200% when compared to first two
years.
 Problem Asset Ratio of APG Bank is not stable.
 Sub-standard Assets Ratio of APG Bank has decreased in First two years and later it will goes
up a little in the last two years .
 Doubtful Assets Ratio of APG Bank has been satisfactory for the last two years.
SUGGESTIONS
62
 The bank has to take care of recovery management with proper execution and planning.
 The bank should continuously monitor loans to identify accounts that have potential to become
Nonperforming.
 Timely visit by the field staff and making personal contact with the borrowers should be done.
 Bank should try their best to recover NPAs
 The problem should be identified very early so that the bank can try their best to stop an asset
or a/c becoming NPA.
 The bank should have its own independent credit rating agency which should evaluate the
financial capacity of the borrower before than credit facility.
 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.
 Bank has to increasing the cash balances by reducing the unnecessary expenses for future plan.
CONCLUSION
63
The NPAs have always created a big problem for the financial institutions in India. It is just not only
problem for the financial institutions but for the economy too. The money locked up in NPAs has a
direct impact on profitability of the financial institutions as Indian financial institutions are highly
dependent on income from interest on funds lend. This study shows that extent of NPA is
comparatively high in financial institutions. Although various steps have been taken by government to
reduce the NPAs but still a lot needs to be done to curb this problem. The NPAs level of our institution
is still high as compared to the foreign institutions. It is not at all possible to have zero NPAs. The
institution management should speed up the recovery process. The problem of recovery is not with
small borrowers but with large borrowers and a strict policy should be followed for solving this
problem. The government should also make more provisions for faster settlement of pending cases and
also it should reduce the mandatory lending to priority sector as this is the major problem creating
area. So the problem of NPA needs lots of serious efforts otherwise NPAs will keep killing the
profitability of institution which is not good for the growing Indian economy at all.
64
BIBLIOGRPHY
REFERENCES
1. Ammannaya, K.K. (2004), “ Indian Banking: 2010”, IBA Bulletin, March 2004, P 156
65
2. Baiju, S. and Tharril, G.S. (2000), “Performance Banks with Non-performing Assets: An Analysis
of NPAs, Yojna, March 2000, PP 5-9.
3. Satyanarayana, K. & Subrahmanyam, G. (2000), “Anatomy of NPAs of Commercial Banks,

Applied Finance, Volume 6, No.3, July, 2000, pp 14-26.
4. Chaitanya V Krishna (2004). Causes of Non-performing Assets in Public Sector Banks. Economic
Research, 17 (1): 16-30.
5. King, R G and R Levine (1993). Finance and Growth: Schumpeter Might Be Right. Quarterly
Journal of Economic, 108 (3): 717-37.
6. Mor N and B Sharma (2003). Rooting out Non-performing Assets. Paper presented at the 5th annual
conference on Money and Finance in the Indian Economy, at IGIDR, Mumbai
7. Rajaraman, I & Vashistha, G (2002): „Non-Performing Loans of Indian Public Sector Banks -Some
Panel Results‟, Economic & Political Weekly, February 13, 2002.
8. Sudhakar, V.K. (1998), “Managing NPA Menace in Banks”, IBA Bulletin, April 1998, PP 27-30.
9. Vallabh, G., Mishra, S. and Bhatia, A. (2007), “Non-Performing Assets of Indian Public, Private
and Foreign Sector Banks: An Empirical Assessment”, ICFAI Journal of Bank Management, Vol. 6,
No. 3, pp. 7-28, August 2007.
10. Boudriga, A., Taktak, NB., & Jellouli, S. (2009). Bank specific business and institutional
environment determinants of nonperforming loans: Evidence from MENA countries, ERF 16th
Annual Conference on Shocks, Vulnerability and Therapy, November 2009.
11. Dash, MK., & Kabra, G. (2010). The Determinants of Non-Performing Assets in Indian
Commercial Banks: an Econometric Study, Middle Eastern Finance and Economics, Issue 7 (2010).
12. Karunakar, M., Vasuki, K., & Saravanan, S. (2008). Are non - Performing Assets Gloomy or
Greedy from Indian Perspective?, Research Journal of Social Sciences, 3: 4- 12, 2008
13. Reserve Bank of India, Report on Trend and Progress of banking in India, Various issues,
Bombay, India. Reserve Bank of India (2010), Trend and Progress of Banking in India.
WEBSITES:
66
1) http://rbi.org.in/scripts/AnnualPublications.aspx?head=Trend and Progress of Banking in India

2)http://rbi.org.in/scripts/AnnualPublications.aspx?head=StatisticalTables Relating to Banks of India
3) http://rbi.org.in/scripts/NotificationUser.aspx
4) http://en.wikipedia.org/wiki/Banking_in_India
5) http://www.ibef.org/industry/Banking.aspx
6) http://www.bankingindiaupdate.com/general.html
67

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MASTER OF BUSINESS ADMINISTRATION

Master of Business Administration

CERTIFICATE FROM THE GUIDE

This is to certify that Ms. M.SWETHALAKSHMI submits the project

award of Master of Business Administration, JNTU Anantapur, is a record of bonafied

work carried out by her under my guidance and supervision.

SYNOPSIS PROJECT VIVA VOCE CERTIFICATE

This is to certify that Mr/ Ms. M.SWETHALAKSHMI has attended for

the Internal project viva voce examination and completed successfully on

Internal examiner1 Internal examiner2

Objectives of the study

Scope of the study

Need for the study

Chapter II : Industry profile

Chapter III : Company profile

Chapter IV : Theoretical framework

Chapter V : Data analysis and Interpretation

Chapter VI : Findings, Suggestions and Conclusion

NPAs have an adverse effect on the return on assets in several way

OBJECTIVES TO THE STUDY

 To know the concept of Non-Performing Asset (NPA).

 To know the reasons for NPA.

 To learn preventive measures.

 To know the past trends of NPA.

 To identify the Non-performing assets in APG Bank

 To offer suggestions based on findings of the study.

NEED FOR THE STUDY / SIGNIFICANCE OF THE STUDY

Data Collection Method:

SCOPE OF THE STUDY

The study has the following scope:

LIMITATIONS OF THE STUDY

 The study on management of non-performing assets is limited to the Indian financial

Highlights for the Financial Year 2018-19:

NON CORPORATE SMALL BUSINESS LOANS

TWO WHEELER LOANS

WHAT IS A NPA (NON-PERFORMING ASSETS) ?

Assets are classified into following four categories:

FACTORS FOR RISE IN NPAs

 Ineffective recovery tribunal

 Change on Govt. policies

 Defective Lending process

Capacity to pay depends upon:

Willingness to pay depends on:

 Improper SWOT analysis

 Banks should consider the borrowers own capital investment.

 Purpose of the loan

 Absence of regular industrial visit

PROBLEMS DUE TO NPA:

'Out of Order' status:

REASONS FOR NPA:

Reasons can be divided in to two broad categories:-

 Non-Compliance to lending norms:

 Failure to appreciate good payers:

 Excessive overdraft lending:

 Non – Transparent accounting policy:

 Socio political pressure:

 Chang in industry environment:

 Endangers macroeconomic disturbances:

 Diversion of funds and willful defaults

 Time/ cost overrun in project implementation

 Labour problems of borrowed firm