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A PROJECT REPORT ON MANAGEMENT OF NPA IN PNB Submitted in partial fulfillment of the requirements of the award of degree of
MASTER OF BUSINESS ADMINISTRATION FROM

ARNI SCHOOL OF BUSINESS MANAGEMENT

MARCH 2012

Submitted to: ASBM, ARNI UNIVERSITY KATHGARH (INDORA), KANGRA (H.P) www.arni.in

Submitted By: PARVINDER KUMAR SAHOTRA (AEMB0046A/10) MBA -4th SEM.

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DECLARATION
I, Parvinder Kumar Sahotra Roll No/ID _AEMB0046A/10 M.B.A. Final year (semester IV) of Arni School of Business Management hereby declare that the final project Report entitled MANAGEMENT OF NPA IN PNB is an original work and the same has not been submitted to any other University/Organization for the award of any other degree.

Countersigned Director/Dean/Coordinator

(PARVINDER KUMAR SAHOTRA)

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CERTIFICATE BY THE GUIDE

This is to certify that Parvinder Kumar Sahotra, student of M.B.A. 4th semester at ARNI UNIVERSITY has completed his project entitled MANAGEMENT OF NPA IN PNB Under my supervision. To the best of my knowledge and belief, this is his original work and this wholly or partly has not been submitted for any degree of this or any other university. I appreciate his efforts during his project and wish him Best of Luck for the future. The contents of this report have been verified and up to date.

Dr. Ravikant Swami Project guide

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ACKNOWLEDGEMENTS
I would like to express my gratitude to all those who gave me the opportunity to Complete this project. I would like to thank my institute authorities and my Internal guide Dr. Ravikant Swami first for providing me the opportunity to work with one of the prestigious organization like PNB and all faculty members. I would like to say thanks the Senior Manager Mr. Rakesh Kumar Verma, Manager Subhash kumar and other Staff members who helped and encouraged me to go ahead with my project while proving their valuable suggestions. I am deeply indebted to my faculty whose constant help, stimulating suggestions and encouragement helped me in giving the final shape to this project. I would like to give my special thanks to my parents & my friends their constant support enabled me to complete their project work.

(PARVINDER KUMAR SAHOTRA) AEMB0046A/10 MBA-3rd

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CONTENTS
Declaration Certificate by guide Acknowledgements

Chapter 1 Introduction to project (1)

Abstract (2) Literature Review (3) Objective of study (5)

Chapter 2 Banking Industry (6)

Indian Banking System (7) Nationalization of banks (9) India banking structure (13) Role of banks & FIs in economy (17)

Chapter 3 PNB (22)

History (22) Vision & mission (22) Management (23) Subsidiaries and joint ventures (26) Important facts about PNB (28) Product (29) SWOT analysis (29)

Chapter 4 NPA (31)

Meaning and definition (32) Credit risk and NPA (34) Types of NPA (35) Impact of NPA on banks and economy (35) Factors for rise in NPA (37) Problems due to NPA (41) Tools for recovery (42)

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Chapter 5 Research methodology (47)

Objective & scope of study (48) Research Process (48)

Chapter 6 Data analysis and interpretation (50)

Deposits of public sector banks (52) Advance of public sector banks (53) Gross NPA of public sector banks (54) Net NPA of public sector banks (55) NPA of Pvt. sector Banks (percentage of Net NPA to advances) (56) Gross and Net NPA of Foreign Banks in INDIA (57) Data Analysis of PNB organization (59) Data Analysis of PNB Branch Indora (66)

Chapter 7 Findings & recommendations (72)

Findings (73) Recommendations (74)

Chapter 8 Limitations (76) Chapter 9 Conclusion (78) Chapter 10 References (81)

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Chapter 1
INTRODUCTION
o Abstract o Literature review o Objective of the study

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ABSTRACT

Strong banking system of India helped a lot to survive in slowdowns and economic meltdowns. As India is a developing nation it needs more resources and infrastructure to speed up its growth in all sectors. Banking sector is an emerging sector now a days, providing lot of jobs, helping in development by accepting deposits, extending credits, and also offering various other important financial services. While making lot of profits, the accumulation of huge non-performing assets on the other hand in banks has assumed great importance. The depth of the problem of bad debts was first realized only in early 1990s. The magnitude of NPAs in banks and financial institutions is over Rs.1, 50,000 crore. While gross NPA reflects the quality of the loans made by banks, net NPA shows the actual burden of banks. Now it is increasingly evident that the major defaulters are the big borrowers coming from the non-priority sector. The banks and financial institutions have to take the initiative to reduce NPAs in a time bound strategic approach. Public sector banks figure prominently in the debate not only because they dominate the banking industries, but also since they have much larger NPAs compared with the private sector banks. This raises a concern in the industry and academia because it is generally felt that NPAs reduce the profitability of a bank, weaken its financial health and erode its solvency. For the recovery of NPAs a broad framework has evolved for the management of NPAs under which several options are provided for debt recovery and restructuring. Banks and FIs have the freedom to design and implement their own policies for recovery and write-off incorporating compromise and negotiated settlements.

LITERATURE REVIEW

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Magazine name CAPITAL MARKET Dec. 2009 issue The article taken for reference from this magazine and the article is named Short term pains, long-term gain on Pg.-4. It discusses about the rising NPAs, increase in provision coverage, sluggish credit off take and dwindling treasury income. It states that these measures are going to set ways for better valuations. It tells about how the BSE Bankex has outperformed the BSE Sensex by recording robust returns of 174%. It discusses about various banks namely Bank of India, Union Bank of India, State Bank of India, Bank of Baroda, Punjab National Bank and IndusInd Bank have reached their all time high during Oct. Nov. 2009 period. It discusses about the preparedness of various banks for reducing NPAs i.e. by improving capital adequacy ratio, increasing the minimum provision coverage ratio, introducing new policies for broader interest rate regime, creating more transparent system and extending banking reach. It also discusses about the benchmark prime lending rate (BPLR) concept of RBI which helps to ensure appropriate pricing of loans. Magazine name BUSINESS TODAY Dec. 2009 issue The magazine gives us the data about the various commercial banks operating in India and Ranks them according to four groups namely large banks, Midsize banks, Small banks and Very Small banks. From the data given in the magazine done by BT-KPMG study is clear that despite the global credit crisis continues to take its toll- last month the 100th US bank collapsed since Lehman Brothers the Indian Banks continue to do business as usual and the result is given in numbers through this survey. Research Paper A comparative study of Non Performance Assets in India by Prashanth K Reddy, IIM- Ahmadabad This article discusses about the financial sector reform in India which has progressed rapidly on aspects like interest rate deregulation, reduction in reserve requirements, barriers to entry, prudential norms and risk based supervision but the progress on the structural-institutional aspects has been much slower and is a cause for concern. It tells about what changes are required to tackle the NPA problem. This paper also deals with the experiences of other Asian countries in handling of NPAs. It also suggests mechanisms to handle the problem by drawing on experiences from other countries

Report on Maximizing Value of Non-Performing Assets by Organization for Co-Operation and Development (OECD)

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This report deals with the changing dynamics in Asian Non Performing Loans and the sociological reflections on Insolvency reforms in East Asia. But more importantly it mentions different country reports of Asian region. In case of India Sumant Batra discusses the developments in India. It tells us about what is NPA and gives an overview of non performing assets in India. It also discusses about the factors contributing to NPAs and its impact on the working of commercial banks. The legal reforms and the RBI guidelines for NPAs are discussed. Research Paper on Rooting Out Non-Performing Assets by Nachiket Mor, ICICI research centre The paper attempts to highlight some major micro-level issues that are at the root of why unsustainable performance levels are being observed within Banks. The authors argue that unless the micro level issues are dealt with, even after the systemic issues are resolved, the problem of NPAs or other failures of the intermediation process may resurface with greater intensity. The manner in which banks manage the three phases in the life cycle of an asset (creation, monitoring and recovery) determines the quality of the intermediation process within a bank. In this paper, the need for internally consistent business models to guide the behavior of a bank in each of these three phases is discussed.

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OBJECTIVES OF THE STUDY

The basic idea behind undertaking the Grand Project on NPA was to: To know about the concept of NPA To understand the causes & effects of NPA To study the past trends of NPA. To evaluate NPAs (Gross and Net) in PNB and other public sector banks, Pvt. Sector banks & foreign banks operating in INDIA. To see whether INDIAN banking industry is following international norms regarding NPA or not.

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Chapter 2
INDUSTRY PROFILE
o o o o o Indian banking system History Nationalization of banks Indian banking structure Role of banks and financial institutions in economy

INDIAN BANKING SYSTEM

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History
The first bank in India, though conservative, was established in 1786. From 1786 till today, the journey of Indian Banking System can be segregated into three distinct phases. They are as mentioned below:

Early phase from 1786 to 1969 of Indian Banks Nationalization of Indian Banks and up to 1991 prior to Indian banking sector Reforms. New phase of Indian Banking System with the advent of Indian Financial & Banking Sector Reforms after 1991.

Phase(1) The General Bank of India was set up in the year 1786. Next came Bank of Hindustan and Bengal Bank. The East India Company established Bank of Bengal (1809), Bank of Bombay (1840) and Bank of Madras (1843) as independent units and called it Presidency Banks. These three banks were amalgamated in 1920 and Imperial Bank of India was established which started as private shareholders banks, mostly Europeans shareholders. In 1865 Allahabad Bank was established and first time exclusively by Indians, Punjab National Bank Ltd. was set up in 1894 with headquarters at Lahore. Between 1906 and 1913, Bank of India, Central Bank of India, Bank of Baroda, Canara Bank, Indian Bank, and Bank of Mysore were set up. Reserve Bank of India came in 1935. During the first phase the growth was very slow and banks also experienced periodic failures between 1913 and 1948. There were approximately 1100 banks, mostly small. To streamline the functioning and activities of commercial banks, the Government of India came up with The Banking Companies Act, 1949 which was later changed to Banking Regulation Act 1949 as per amending Act of 1965 (Act No. 23 of 1965). Reserve Bank of India was vested with extensive powers for the supervision of banking in India as the Central Banking Authority. During those days public has lesser confidence in the banks. As an aftermath deposit mobilization was slow. Abreast of it the savings bank facility provided by the Postal department was comparatively safer. Moreover, funds were largely given to traders. Phase(2) Government took major steps in this Indian Banking Sector Reform after independence. In 1955, it nationalized Imperial Bank of India with extensive banking facilities on a large scale

P a g e | 15 especially in rural and semi-urban areas. It formed State Bank of India to act as the principal agent of RBI and to handle banking transactions of the Union and State Governments all over the country. Seven banks forming subsidiary of State Bank of India was nationalized in 1960 on 19th July, 1969, major process of nationalization was carried out. It was the effort of the then Prime Minister of India, Mrs. Indira Gandhi. 14 major commercial banks in the country were nationalized. Second phase of nationalization Indian Banking Sector Reform was carried out in 1980 with seven more banks. This step brought 80% of the banking segment in India under Government ownership. The following are the steps taken by the Government of India to Regulate Banking Institutions in the Country:

1949: Enactment of Banking Regulation Act. 1955: Nationalization of State Bank of India. 1959: Nationalization of SBI subsidiaries. 1969: Nationalization of 14 major banks with deposits over 50 crore. 1971: Creation of credit guarantee corporation. 1975: Creation of regional rural banks. 1980: Nationalization of seven banks with deposits over 200 crore.

After the nationalization of banks, the branches of the public sector bank India rose to approximately 800% in deposits and advances took a huge jump by 11,000%. Banking in the sunshine of Government ownership gave the public implicit faith and immense confidence about the sustainability of these institutions. Phase(3) This phase has introduced many more products and facilities in the banking sector in its reforms measure. In 1991, under the chairmanship of M Narasimham, a committee was set up by his name which worked for the liberalization of banking practices. The country is flooded with foreign banks and their ATM stations. Efforts are being put to give a satisfactory service to customers. Phone banking and net banking is introduced. The entire system became more convenient and swift. Time is given more importance than money. The financial system of India has shown a great deal of resilience. It is sheltered from any crisis triggered by any external macroeconomics shock as other East Asian Countries suffered. This is

P a g e | 16 all due to a flexible exchange rate regime, the foreign reserves are high, the capital account is not yet fully convertible, and banks and their customers have limited foreign exchange exposure.

Nationalization of banks
In order to have more control over the banks 14 large commercial banks whose reserves were more than Rs. 50 crore each was nationalized on July 19, 1969. The banks were: 1. Central bank of India 2. Bank of India 3. Punjab national bank 4. Canara bank 5. United commercial bank 6. Syndicate bank 7. Bank of broad 8. United bank of India 9. Union bank of India 10. Dena bank 11. Allahabad bank 12. Indian bank 13. Indian overseas bank 14. Bank of Maharashtra On April 15, 1980 those private sector banks whose reserves were more than rs. 200 cr. Each was nationalized. These banks were: 1. 2. 3. 4. 5. 6. Andhra bank Punjab & sindh bank New bank of India Vijaya bank Corporation bank Oriental bank of commerce

In September 1993 the New bank of India was merged with Punjab National Bank. These nationalized banks with regional rural banks (RRBs), come under the category of public sector commercial banks. Other kind of commercial banks are private sector commercial banks. At present there are 20 nationalized banks beside the RBI. Indian Banking: A Paradigm shift-A regulatory point of view

P a g e | 17 The decade gone by witnessed a wide range of financial sector reforms, with many of them still in the process of implementation. Some of the recently initiated measures by the RBI for risk management systems, anti money laundering safeguards and corporate governance in banks, and regulatory framework for non bank financial companies, urban cooperative banks, government debt market and forex clearing and payment systems are aimed at streamlining the functioning of these instrumentalities besides cleansing the aberrations in these areas. Further, one or two all India development financial institutions have already commenced the process of migration towards universal banking set up. The banking sector has to respond to these changes, consolidate and realign their business strategies and reach out for technology support to survive emerging competition. Perhaps taking note of these changes in domestic as well as international arena All of we will agree that regulatory framework for banks was one area which has seen a sea-change after the financial sector reforms and economic liberalization and globalization measures were introduced in 1992-93. These reforms followed broadly the approaches suggested by the two Expert Committees both set up under the chairmanship of Shri M. Narasimham in 1991 and 1998, the recommendations of which are by now well known. The underlying theme of both the Committees was to enhance the competitive efficiency and operational flexibility of our banks which would enable them to meet the global competition as well as respond in a better way to the regulatory and supervisory demand arising out of such liberalization of the financial sector. Most of the recommendations made by the two Expert Committees which continued to be subject matter of close monitoring by the Government of India as well as RBI have been implemented. Government of India and RBI has taken several steps to:(a) Strengthen the banking sector, (b) Provide more operational flexibility to banks, (c) Enhance the competitive efficiency of banks, and (d) Strengthen the legal framework governing operations of banks. Regulatory measures taken to strengthen the Indian Banking sectors The important measures taken to strengthen the banking sector are briefly, the Following: Introduction of capital adequacy standards on the lines of the Basel norms, Prudential norms on asset classification, income recognition and provisioning, Introduction of valuation norms and capital for market risk for investments Enhancing transparency and disclosure requirements for published accounts, Aligning exposure norms single borrower and group-borrower ceiling with Inter-national best practices Introduction of off-site monitoring system and strengthening of the supervisory Framework for banks. (A) Some of the important measures introduced to provide more operational flexibility to banks are:

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Besides deregulation of interest rate, the boards of banks have been given the authority to fix their prime lending rates. Banks also have the freedom to offer variable rates of interest on deposits, keeping in view their overall cost of funds. Statutory reserve requirements have significantly been brought down. The quantitative firm-specific and industry-specific credit controls were abolished and banks were given the freedom to deploy credit, based on their commercial judgment, as per the policy approved by their Boards. The banks were given the freedom to recruit specialist staff as per their requirements, The degree of autonomy to the Board of Directors of banks was substantially enhanced. Banks were given autonomy in the areas of business strategy such as, opening of branches / administrative offices, introduction of new products and certain other operational areas. (B) Some of the important measures taken to increase the competitive efficiency of banks are the following: Opening up the banking sector for the private sector participation. Scaling down the shareholding of the Government of India in nationalized banks and of the Reserve Bank of India in State Bank of India. (C) Measures taken by the Government of India to provide a more conducive legal environment for recovery of dues of banks and financial institutions are: Setting up of Debt Recovery Tribunals providing a mechanism for expeditious loan recoveries. Constitution of a High Power Committee under former Justice Shri Eradi to suggest appropriate foreclosure laws. An appropriate legal framework for securitization of assets is engaging the attention of the Government. Due to this paradigm shift in the regulatory framework for banks had achieved the desired results. The banking sector has shown considerable degree of resilience. (a) The level of capital adequacy of the Indian banks has improved: the CRAR of public sector banks increased from an average of 9.46% as on March 31, 1995 to11.18% as on March 31, 2001. (b) The public sector banks have also made significant progress in enhancing their asset quality, enhancing their provisioning levels and improving their profits. The gross and net NPAs of public sector banks declined sharply from 23.2% and 14.5% in 1992-93 to 12.40% and 6.7% respectively, in 2000-01. Similarly, in regard to profitability, while 8 banks in the public sector recorded operating and net losses in 1992-93, all the 27 banks in the public sector showed operating profits and only two banks posted net losses for the year ended March31, 2001.

P a g e | 19 The operating profit of the public sector banks increased from Rs.5628 crore as on March 31, 1995 to Rs.13,793 crore as on March 31, 2001. The net profit of public sector banks increased from Rs.1116 crore to Rs.4317crore during the same period, despite tightening of prudential norms on provisioning against loan losses and investment valuation. The accounting treatment for impaired assets is now closer to the international best practices and the final accounts of banks are transparent and more amenable to meaningful interpretation of their performance.

INDIAN BANKING STRUCTURE

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RBI The central bank of the country is the Reserve Bank of India (RBI). It was established in April 1935 with a share capital of Rs. 5 crores on the basis of the recommendations of the Hilton Young Commission. The share capital was divided into shares of Rs. 100 each fully paid which was entirely owned by private shareholders in the beginning. The Government held shares of nominalvalueofRs.2,20,000. Reserve Bank of India was nationalized in the year 1949. The general superintendence and direction of the Bank is entrusted to Central Board of Directors of 20 members, the Governor and four Deputy Governors, one Government official from the Ministry of Finance, ten nominated Directors by the Government to give representation to important elements in the economic life of the country, and four nominated Directors by the Central Government to

P a g e | 21 represent the four local Boards with the headquarters at Mumbai, Kolkata, Chennai and New Delhi. Local Boards consist of five members each Central Government appointed for a term of four years to represent territorial and economic interests and the interests of co-operative and indigenous banks. The Reserve Bank of India Act, 1934 was commenced on April 1, 1935. The Act, 1934 (II of 1934) provides the statutory basis of the functioning of the Bank. 1. 2. 3. 4. 5. 6. 7. Issue of notes Banker to banks Banker to government Custodian of foreign reserves Controller of credit Supervisory functions Promotional functions

Scheduled Banks A scheduled bank is a bank that is listed under the second schedule of the RBI Act, 1934. In order to be included under this schedule of the RBI Act, banks have to fulfill certain conditions such as having a paid up capital and reserves of at least 0.5 million and satisfying the Reserve Bank that its affairs are not being conducted in a manner prejudicial to the interests of its depositors. Scheduled banks are further classified into commercial and cooperative banks. The basic difference between scheduled commercial banks and scheduled cooperative banks is in their holding pattern. Scheduled cooperative banks are cooperative credit institutions that are registered under the Cooperative Societies Act. These banks work according to the cooperative principles of mutual assistance. Scheduled Commercial Banks (SCBs): Scheduled commercial banks (SCBs) account for a major proportion of the business of the scheduled banks. As at end-March, 2009, 80 SCBs were operational in India. SCBs in India are categorized into the five groups based on their ownership and/or their nature of operations. State Bank of India and its associates are recognized as a separate category of SCBs, because of the distinct statutes (SBI Act, 1955 and SBI Subsidiary Banks Act, 1959) that govern them. Nationalized banks (19) and SBI and associates (7), together form the public sector banks group and control around 70% of the total credit and deposits businesses in India. IDBI ltd. has been included in the nationalized banks group since December 2004. Private sector banks include the old private sector banks and the new generation private sector banks- which were incorporated according to the revised guidelines issued by the RBI regarding the entry of private sector banks in 1993. As at end-March 2009, there were 15 old and 7 new generation private sector banks operating in India.

P a g e | 22 Foreign banks are present in the country either through complete branch/subsidiary route presence or through their representative offices. At end-June 2009, 32 foreign banks were operating in India with 293 branches. Besides, 43 foreign banks were also operating in India through representative offices. Regional Rural Banks (RRBs) were set up in September 1975 in order to develop the rural economy by providing banking services in such areas by combining the cooperative specialty of local orientation and the sound resource base which is the characteristic of commercial banks. RRBs have a unique structure, in the sense that their equity holding is jointly held by the central government, the concerned state government and the sponsor bank (in the ratio 50:15:35), which is responsible for assisting the RRB by providing financial, managerial and training aid and also subscribing to its share capital. Between 1975 and 1987, 196 RRBs were established. RRBs have grown in geographical coverage, reaching out to increasing number of rural clientele. At the end of June 2008, they covered 585 out of the 622 districts of the country. Despite growing in geographical coverage, the number of RRBs operational in the country has been declining over the past five years due to rapid consolidation among them. As a result of state wise amalgamation of RRBs sponsored by the same sponsor bank, the number of RRBs fell to 86 by end March 2009. Scheduled Cooperative Banks: Scheduled cooperative banks in India can be broadly classified into urban credit cooperative institutions and rural cooperative credit institutions. Rural cooperative banks undertake long term as well as short term lending. Credit cooperatives in most states have a three tier structure (primary, district and state level). Non-Scheduled Banks Non-scheduled banks also function in the Indian banking space, in the form of Local Area Banks (LAB). As at end-March 2009 there were only 4 LABs operating in India. Local area banks are banks that are set up under the scheme announced by the government of India in 1996, for the establishment of new private banks of a local nature; with jurisdiction over a maximum of three contiguous districts. LABs aid in the mobilization of funds of rural and semi urban districts. Six LABs were originally licensed, but the license of one of them was cancelled due to irregularities in operations, and the other was amalgamated with Bank of Baroda in 2004 due to its weak financial position.

All India Financial Institution National Bank for Agriculture and Rural Development (NABARD)

P a g e | 23 is an apex development bank in India having headquarters based in Mumbai (Maharashtra) and other branches are all over the country. NABARD was established on the recommendations of Shivaraman Committee, by an act of Parliament on 12 July 1982 to implement the National Bank for Agriculture and Rural Development Act 1981, and its main focus was to uplift rural India by increasing the credit flow for elevation of agriculture & rural non farm sector and completed its 25 years on 12 July 2007.It has been accredited with "matters concerning policy, planning and operations in the field of credit for agriculture and other economic activities in rural areas in India". RBI sold its stake in NABARD to the Government of India, which now holds 99% stake. Small Industries Development Bank of India (SIDBI) SIDBI is an independent financial institution aimed to aid the growth and development of micro, small and medium-scale enterprises in India. Set up on April 2, 1990 through an act of parliament, it was incorporated initially as a wholly owned subsidiary of Industrial Development Bank of India. Current shareholding is widely spread among various state-owned banks, insurance companies and financial institutions. Beginning as a refinancing agency to banks and state level financial institutions for their credit to small industries, it has expanded its activities, including direct credit to the SME through 100 branches in all major industrial clusters in India. Besides, it has been playing the development role in several ways such as support to microfinance institutions for capacity building and on lending. Recently it has opened seven branches christened as Micro Finance branches, aimed especially at dispensing loans up to Rs. 5.00 lakh. Export-Import Bank of India (EXIM) EXIM is the premier export finance institution of the country, established in 1982 under the Export-Import Bank of India Act 1981 to provide financial assistance to industrial enterprises Industrial development bank (IDBI) IDBI is an Indian financial service company headquartered Mumbai, India. RBI categorized IDBI as an "other public sector bank". It was established in 1964 by an Act of Parliament to provide credit and other facilities for the development of the fledgling Indian industry. It is currently 10th largest development bank in the world in terms of reach with 1514 ATMs, 923 branches including one overseas branch at DIFC, Dubai and 621 centers including two overseas centers at Singapore & Beijing. Some of the institutions built by IDBI are the Securities and Exchange Board of India (SEBI), National Stock Exchange of India (NSE), the National Securities Depository Limited (NSDL), the Stock Holding Corporation of India Limited (SHCIL), the Credit Analysis & Research Ltd, the Exim Bank (India)(Exim Bank), the Small Industries Development Bank of India(SIDBI), the Entrepreneurship, and IDBI BANK, which is owned by the Indian Government. IDBI Bank is on a par with nationalized banks and the SBI Group as far as government ownership is concerned. It is one among the 26 commercial banks owned by the Government of India.

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ROLE OF BANKS AND FINANCIAL INSTITUTIONS IN INDIAN ECONOMY

In India, as in many developing countries, the commercial banking sector has been the Dominant element in the countrys financial system. The sector has performed the key functions of providing liquidity and payment services to the real sector and has accounted for the Bulk of the financial intermediation process. Besides institutionalizing savings, the banking sector has contributed to the process of economic development by serving as a major source of credit to households, government, and business and to weaker sectors of the economy like village and small scale industries and agriculture. Over the years, over 30-40% of gross household savings have been in the form of bank deposits and around 60% of the assets of all financial institutions accounted for by commercial banks. An important landmark in the development of banking sector in recent years has been the initiation if reforms following the recommendations of the first Narasimham Committee on Financial System. In reviewing the strengths and weaknesses of these banks, the Committee suggested several measures to transform the Indian banking sector from a highly regulated to amore market oriented system and to enable it to compete effectively in an increasingly globalised environment. Many of the recommendations of the Committee especially those pertaining to Interest rate, an institution of prudential regulation and transparent accounting norms were inline with banking policy reforms implemented by a host of developing countries since 1970s. Modern Day Role Banking system and the Financial Institutions play very significant role in the economy. First and foremost is in the form of catering to the need of credit for all the sections of society. The modern economies in the world have developed primarily by making best use of the credit availability in their systems. An efficient banking system must cater to the needs of high end investors by making available high amounts of capital for big projects in the industrial, infrastructure and service sectors. At the same time, the medium and small ventures must also have credit available to them for new investment and expansion of the existing units. Rural sector in a country like India can grow only if cheaper credit is available to the farmers for their short and medium term needs. Credit availability for infrastructure sector is also extremely important. The success of any financial system can be fathomed by finding out the availability of reliable and adequate credit for infrastructure projects. Fortunately, during the past about one decade there has been increased participation of the private sector in infrastructure projects. The banks and the financial institutions also cater to another important need of the society i.e. mopping up small savings at reasonable rates with several options. The common man has the

P a g e | 25 option to park his savings under a few alternatives, including the small savings schemes introduced by the government from time to time and in bank deposits in the form of savings accounts, recurring deposits and time deposits. Another option is to invest in the stocks or mutual funds. In addition to the above traditional role, the banks and the financial institutions also perform certain new-age functions which could not be thought of a couple of decades ago. The facility of internet banking enables a consumer to access and operate his bank account without actually visiting the bank premises. The facility of ATMs and the credit/debit cards has revolutionized the choices available with the customers. The banks also serve as alternative gateways for making payments on account of income tax and online payment of various bills like the telephone, electricity and tax. The bank customers can also invest their funds in various stocks or mutual funds straight from their bank accounts. In the modern day economy, where people have no time to make these payments by standing in queue, the service provided by the banks is commendable. While the commercial banks cater to the banking needs of the people in the cities and towns, there is another category of banks that looks after the credit and banking needs of the people living in the rural areas, particularly the farmers. Regional Rural Banks (RRBs) have been sponsored by many commercial banks in several States. These banks, along with the cooperative banks, take care of the farmer-specific needs of credit and other banking facilities.

Future Till a few years ago, the government largely patronized the small savings schemes in which not only the interest rates were higher, but the income tax rebates and incentives were also in plenty. The bank deposits, on the other hand, did not entail such benefits. As a result, the small savings were the first choice of the investors. But for the last few years the trend has been reversed. The small savings, the bank deposits and the mutual funds have been brought at par for the purpose of incentives under the income tax. Moreover, the interest rates in the small savings schemes are no longer higher than those offered by the banks. Banks today are free to determine their interest rates within the given limits prescribed by the RBI. It is now easier for the banks to open new branches. But the banking sector reforms are still not complete. A lot more is required to be done to revamp the public sector banks. Mergers and amalgamation is the next measure on the agenda of the government. The government is also preparing to disinvest some of its equity from the PSU banks. The option of allowing foreign direct investment beyond 50 per cent in the Indian banking sector has also been under consideration. Banks and financial intuitions have played major role in the economic development of the country and most of the credit- related schemes of the government to uplift the poorer and the under-privileged sections have been implemented through the banking sector. The role of the banks has been important, but it is going to be even more important in the future.

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A proper financial sector is of special importance for the economic growth of developing and underdeveloped countries. The commercial banking sector which forms one of the backbones of the financial sector should be well organized and efficient for the growth dynamics of a growing economy. No underdeveloped country can progress without first setting up a sound system of commercial banking. The importance of a sound system of commercial banking for a developing country may be depicted as follows: Capital Formation The rate of saving is generally low in an underdeveloped economy due to the existence of deeprooted poverty among the people. Even the potential savings of the country cannot be realized due to lack of adequate banking facilities in the country. To mobilize dormant savings and to make them available to the entrepreneurs for productive purposes, the development of a sound system of commercial banking is essential for a developing economy. Monetization An underdeveloped economy is characterized by the existence of a large no monetized sector, particularly, in the backward and inaccessible areas of the country. The existence of this non monetized sector is a hindrance in the economic development of the country. The banks, by opening branches in rural and backward areas, can promote the process of monetization in the economy. Innovations Innovations are an essential prerequisite for economic progress. These innovations are mostly financed by bank credit in the developed countries. But the entrepreneurs in underdeveloped countries cannot bring about these innovations for lack of bank credit in an adequate measure. The banks should, therefore, pay special attention to the financing of business innovations by providing adequate and cheap credit to entrepreneurs. Finance for Priority Sectors The commercial banks in underdeveloped countries generally hesitate in extending financial accommodation to such sectors as agriculture and small scale industries, on account of the risks involved there in. They mostly extend credit to trade and commerce where the risk involved is far less .But for the development of these countries it is essential that the banks take risk in extending credit facilities to the priority sectors, such as agriculture and small scale industries. Provision for Medium and Long term Finance The commercial banks in underdeveloped countries invariably give loans and advances for a short period of time. They generally hesitate to extend medium and long term loans to businessmen. As is well known, the new business need medium and long term loans for their proper establishment. The commercial banks should, therefore, change their policies in favor of granting medium and long term accommodation to business and industry. Cheap Money Policy

P a g e | 27 The commercial banks in an underdeveloped economy should follow cheap money policy to stimulate economic activity or to meet the threat of business recession. In fact, cheap money policy is the only policy which can help promote the economic growth of an underdeveloped country. It is heartening to note that recently the commercial banks have reduced their lending interest rates considerably. Need for a Sound Banking System A sound system of commercial banking is an essential prerequisite for the economic development of a backward country

P a g e | 28

Chapter 3
COMPANY PROFILE
o o o o o o PNB History Vision & mission Management Subsidiaries & joint ventures Important facts about PNB SWOT analysis

PNB

P a g e | 29

Punjab National Bank (PNB) is an Indian financial services company based in New Delhi, India. PNB is the third largest bank in India by assets. It was founded in 1894 and is currently the second largest state-owned commercial bank in India ahead of Bank of Baroda with about 5000 branches across 764 cities. It serves over 37 million customers. The bank has been ranked 248th biggest bank in the world by the Bankers Almanac, London. The bank's total assets for financial year 2007 were about US$60 billion. PNB has a banking subsidiary in the UK, as well as branches in Hong Kong, Dubai and Kabul, and representative offices in Almaty, Dubai, Oslo, and Shanghai. HISTORY Punjab National Bank was registered on 19 May 1894 under the Indian Companies Act with its office in Anarkali Bazaar Lahore. The founding board was drawn from different parts of India professing different faiths and a varied back-ground with, however, the common objective of providing country with a truly national bank which would further the economic interest of the country. PNB's founders included several leaders of the Swadeshi movement such as Dyal Singh Majithia and Lala HarKishen Lal, Lala Lalchand, Shri Kali Prosanna Roy, Shri E.C. Jessawala, Shri Prabhu Dayal, Bakshi Jaishi Ram, and Lala Dholan Dass. Lala Lajpat Rai was actively associated with the management of the Bank in its early years. The board first met on 23 May 1894.PNB has the distinction of being the first Indian bank to have been started solely with Indian capital that has survived to the present. VISION "To be a Leading Global Bank with Pan India footprints and become a household brand in the Indo-Gangetic Plains providing entire range of financial products and services under one roof" MISSION
"Banking

for the unbanked"

MANAGEMENT

P a g e | 30

Board of Directors o Shri. K.R.Kamath Chairman & Managing Director and Dy. Chairman of Indian Banks Association o Shri. Rakesh Sethi Executive Director o Smt. Usha Ananthasubramanian Executive Director

Directors o Shri. Anurag Jain Govt. of India Nominee Director o Shri. Jasbir Singh Reserve Bank of India Nominee Director o Shri. M P Singh Workmen Employees Director o Shri. Pradeep Kumar Officer Director o Shri. M A Antulay Part-time non-official Director o Shri. B B Chaudhry Part-time non-official Director

PROFILE

P a g e | 31

With over 60 million satisfied customers and more than 5100 offices including 5 overseas branches, PNB has continued to retain its leadership position amongst the nationalized banks. The bank enjoys strong fundamentals, large franchise value and good brand image. Besides being ranked as one of India's top service brands, PNB has remained fully committed to its guiding principles of sound and prudent banking. Apart from offering banking products, the bank has also entered the credit card, debit card; bullion business; life and non-life insurance; Gold coins & asset management business, etc. PNB has earned many awards and accolades during the year in appreciation of excellence in services, Corporate Social Responsibility (CSR) practices, transparent governance structure, best use of technology and good human resource management. Since its humble beginning in 1895 with the distinction of being the first Swadeshi Bank to have been started with Indian capital, PNB has achieved significant growth in business which at the end of March 2011 amounted to Rs 5,55,005 crore. PNB is ranked as the 2nd largest bank in the country after SBI in terms of branch network, business and many other parameters. During the FY 2010-11, with 39.16% share of CASA to domestic deposits, the Bank achieved a net profit of Rs 4433 crore. Bank has a strong capital base with capital adequacy ratio of 12.42% as on Mar11 as per Basel II with Tier I and Tier II capital ratio at 8.44% and 3.98% respectively. As on March11, the Bank has the Gross and Net NPA ratio of 1.79% and 0.85% respectively. During the FY 2010-11, its ratio of Priority Sector Credit to Adjusted Net Bank Credit at 40.67% & Agriculture Credit to Adjusted Net Bank Credit at 19.30% was also higher than the stipulated requirement of 40% & 18% respectively. The Bank has been able to maintain its stakeholders interest by posting an improved NIM of 3.96% in Mar11 (3.57% Mar10). The Earning per Share improved to Rs 140.60 (Rs 123.86 Mar10) while the Book value per share improved to Rs 661.20 (Rs 514.77 Mar10). Punjab National Bank continues to maintain its frontline position in the Indian banking industry. In particular, the bank has retained its NUMBER ONE position among the nationalized banks in terms of number of branches, Deposit, Advances, total Business, Assets, Operating and Net profit in the year 2010-11. The impressive operational and financial performance has been brought about by Banks focus on customer based business with thrust on CASA deposits, Retail, SME & Agri Advances and with more inclusive approach to banking; better asset liability management; improved margin management, thrust on recovery and increased efficiency in core operations of the Bank. The performance highlights of the bank in terms of business and profit are shown below:

Rs. In Crore

P a g e | 32

Parameters Operating Profit Net Profit Deposit Advance Total Business

Mar'09 5690 3091 209760 154703 364463

Mar'10 7326 3905 249330 186601 435931

Mar'11 9056 4433 312899 242107 555005

CAGR (%) 26.16 19.76 22.14 25.10 23.40

Bank always looked at technology as a key facilitator to provide better customer service and ensured that its IT strategy follows the Business strategy so as to arrive at Best Fit. The Bank has made rapid strides in this direction. All branches of the Bank are under Core Banking Solution (CBS) since Dec08, thus covering 100% of its business and providing Anytime Anywhere banking facility to all customers including customers of more than 3200 rural & semi urban branches. The Bank has also been offering Internet banking services to its customers which also enables on line booking of rail tickets, payment of utilities bills, purchase of airline tickets, etc. Towards developing a cost effective alternative channels of delivery, the Bank with 5050 ATMs has the largest ATM network amongst Nationalized Banks. With the help of advanced technology, the Bank has been a frontrunner in the industry so far as the initiatives for Financial Inclusion is concerned. With its policy of inclusive growth, the Banks mission is Banking for Unbanked. The Bank has launched a drive for biometric smart card based technology enabled Financial Inclusion with the help of Business Correspondents/Business Facilitators (BC/BF) so as to reach out to the last mile customer. The Bank has started several innovative initiatives for marginal groups like rickshaw pullers, vegetable vendors, dairy farmers, construction workers, etc. Bank has launched a welfare scheme of adoption of village viz., PNB VIKAS. Under the scheme, Bank has selected 117 villages (60 in lead districts and 57 in non lead district) in different circles for all-round improvement in the living standards of the villagers. Besides, Bank has formed PNB PRERNA, an association of the wives of the Banks senior management. The association through its voluntary initiatives has undertaken activities like distribution of food to the poor and needy, provision of computers, books, stationary items to poor girl students at various orphanages and schools etc. Backed by strong domestic performance, the Bank is planning to realize its global aspirations. Bank has opened one branch each at Kabul and Dubai, two branches at Hong Kong and an Off Shore Banking Unit at Mumbai. In addition to the above, Bank has Representative offices at Almaty, Dubai, Shanghai and Oslo, a wholly owned subsidiary in UK with 7 branches and a subsidiary each in Kazakhstan & Bhutan, and joint venture with Everest Bank Ltd. Nepal. During the year, Bank acquired majority equity stake of 63.64% in Dana Bank of Kazakhstan.

P a g e | 33

SUBSIDIARIES AND JOINT VENTURES

Overseas Punjab National Bank (International) Limited (PNBIL) is a wholly owned UK subsidiary of Punjab National Bank, India. PNBIL was incorporated in UK on 13th April 2006 and registered with the Companies House in England & Wales under No. 5781326. PNBIL was authorised by the Financial Services Authority (FSA) on 13th April 2007 to conduct Banking Business in UK under Registration No. 459701. PNBIL started banking operations in UK on 10th of May 2007 from two locations. The corporate office of PNBIL is at 87, Gresham Street, London EC2V 7NQ (UK). Presently PNBIL has 7 Branches as under: 1. At 87, Gresham Street, London EC2V 7NQ(UK) 2. At 90, South Road, Southall, Middlesex UB1 1RD (UK) 3. At 160 Belgrave Road, Leicester LE4 5AU (UK) 4. At 290 Soho Road, Birmingham B21 9LZ (UK) 5. At 47, Crane book Road, Ilford, Essex, London(UK) 6. At 188 Ealing Road, Wembley HA0 4QD (UK) 7. At 502-504 Dudley Road, Wolverhampton, WV2 3AA DRUK PNB Bank Ltd Druk PNB Bank Ltd. (DPNBL) is our Joint Venture Subsidiary in Bhutan with our Equity participation to the extent of 51%. It started operations on 27 th January, 2010 and has three branches- one each at Thimphu, Phentsholing and Wangduephodrang. Sh N.K. Arora, DGM is the CEO. Contact details of Sh. N.K. Arora are : Phone No. 00975- 17116440 E Mail id : nk_arora@pnb.co.in

JSC (SB) PNB Kazakhstan Our bank has acquired 80.95% stake in JSC (SB) PNB, Kazakhstan. The bank has its head quarters in Almaty. It has five branches at Almaty, Pavlador, Karganda, Astana & Taraz.

Everest Bank Ltd, Kathmandu, Nepal Everest Bank Limited (EBL) is our joint venture in Nepal with equity participation to the extent of 20%. Under a Technical Services Agreement, our Bank is providing Top Management Support. The operations of EBL with Management Support from our Bank started in January, 1997. EBL presently

P a g e | 34 has a network of 44 branches in Nepal. EBL has started Financial Inclusion concept in Nepal.

Domestic Subsidiaries
1. PNB GILTS LTD. PNB Gilts Ltd., a subsidiary of the Bank, is engaged in the business of trading in Govt. securities, treasury bills and Non SLR Investments. It is also engaged in dealing in Money Market Instruments (Call/Notice/Term Money, Repo /Reverse Repo, Inter-corporate Deposits, Commercial Paper, Certificate of Deposit) and Mutual Funds Distribution. The company is listed at NSE and BSE. 2. PNB HOUSING FINANCE LTD PNB Housing Finance Ltd. is engaged in providing housing loans for purchase, construction and upgradation of a dwelling unit. The company offers Loans for construction or for purchase of house/flat from development authorities and also from private builders/ group housing societies as well as for renovation/ repairs. Company also provides finance for construction of residential projects. Loans to NRIs are also provided for purchase/ construction of house/ flat along with a resident/ non-resident co-borrower.

3. PNB INVESTMENT SERVICES LTD PNB Investment Services Ltd, a wholly owned subsidiary, has been set up by the Bank for carrying out Merchant Banking Business. It provides services for Project Appraisal, Loan Syndication, Debt Placement and to executes IPOs/FPO/QIPs. PNBISL is registered with SEBI as a Category- I Merchant Banker.

4. PNB INSURANCE BROKING Pvt. Ltd.

5. PNB LIFE INSURANCE Co. Ltd. The Bank is holding majority stake in above two companies, jointly with Vijaya Bank, minor shareholder. Domestic Joint Ventures The Bank has the following Joint Ventures:

P a g e | 35 1. 2. 3. 4. Principal PNB Asset Management Company Pvt. Ltd Principal Trustee Company Pvt. Ltd Assets Care Enterprises Ltd. India Factoring & Finance Solutions Pvt. Ltd.

AWARDS (recent) PNB Awarded Overall Best Corporate Social Responsibility Awards 2012 PNB Awarded SKOCH Award on Financial Inclusion 2012 PNB bags Most Socially Responsive Bank Award 2011 PNB receives Best Bank Award-2011 PNB Bags Most Productive Public Sector Bank Award PNB Bags MSME National Awards

PNB Awarded Golden Peacock HR Excellence Award-2011 PNB Awarded "IT for Internal Effectiveness" Awards PNB Awarded Rajbhasha Awards PNB adjudged Best Managed Bank by SCOPE Wind Power India 2011 Awards PNB Awarded SKOCH Challenger Award 2011 on Financial Inclusion PNB Awarded Best Technology Bank 2010

SOME IMPORTANT FACTS ABOUT PNB (as on march 2012) o o o o o o o o Total branches 5674 Circle office 65 Employees 60000(approx) Revenue 31206 crore (2011) Net income 4574 crore (2011) Total assets 373786 crore (2011) fortune India 500 Ranking #26 in 2011 Forbes global ranking #1243 in 2000

PRODUCTS OFFERED

P a g e | 36

o o o o o o o o

Saving fund Fixed deposit scheme Credit scheme Current account Card Insurance Gold Mutual fund

SWOT ANALYSIS OF BANK

STRENGTHS: o Strong growth in business o Good branch network o Highest CASA among PSU o Highest NIMs compared to peers o Fine growth in fee income last year o De-risked investment portfolio o Adequate Capital o Proactive on technology front.

WEAKNESS: o Higher Delinquencies o Higher provisions deterring growth in net profits o No development on insurance venture o Slower growth on international front o Slow-down in treasury profits o Its subsidiaries PNB Housing Finance & PNB Gilts are not impressive

P a g e | 37

OPPORTUNITIES: o Expansion on international front o Ample opportunity to expand business, as the economy is doing well. o Growth in Insurance and Mutual Fund business

THREATS: o Entry of foreign banks o Sharp rise in interest rates can hamper economic growth o Regulatory amendments o Implementation of Basel II requires higher capital o Downturn in Agriculture growth

P a g e | 38

Chapter 4
NPA
o o o o o o o Meaning & definition Credit risk and NPA Types of NPA Impact on banking and economy Factors for rise in NPA Problems due to NPA Tool for recovery

NPA

P a g e | 39 The three letters Strike terror in banking sector and business circle today. NPA is short form of Non Performing Asset. The dreaded NPA rule says simply this: when interest or other due to a bank remains unpaid for more than 90 days, the entire bank loan automatically turns a non performing asset. The recovery of loan has always been problem for banks and financial institution. To come out of these first we need to think is it possible to avoid NPA, no cannot be then left is to look after the factor responsible for it and managing those factors. A loan or lease that is not meeting its stated principal and interest payments. Banks usually classify as non performing assets as any commercial loans which are more than 90 days overdue and Consumer loan which is more than 180 days overdue More generally an asset which is not producing income after a stated period is called NPA. Borrower has to deposit a certain amount of money in to his loan a/c for up gradation to make his a/c non-NPA. Definitions: An asset, including a leased asset, becomes non-performing when it ceases to generate income for the bank. A non-performing asset (NPA) was defined as a credit facility in respect of which the interest and/ or installment of principal has remained past due for a specified period of time. With a view to moving towards international best practices and to ensure greater transparency, it has been decided to adopt the 90 days overdue norm for identification of NPAs, from the year ending March 31, 2004. Accordingly, with effect from March 31, 2004, a non-performing asset (NPA) shall be a loan or an advance where; o Interest and/ or installment of principal remain overdue for a period of more than 90 days in respect of a term loan, o The account remains out of order for a period of more than 90 days, in respect of an Overdraft/Cash Credit (OD/CC), o The bill remains overdue for a period of more than 90 days in the case of bills purchased and discounted, o 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. 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.

P a g e | 40 Classification of assets into the following broad groups, viz. 1. 2. 3. 4. Standard Assets Sub-standard Assets Doubtful Assets Loss Assets

Standard Assets Standard Asset is one which does not disclose any problems and which does not carry more than normal risk attached to the business. Such an asset should not be an NPA. Sub-standard Assets 1. With effect from March 31, 2005 an asset would be classified as sub-standard if it remained NPA for a period less than or equal to 12 months. In such cases, the current net worth of the borrowers/ guarantors or the current market value of the security charged is not enough to ensure recovery of the dues to the banks in full. In other words, such assets will have 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 2. An asset where the terms of the loan agreement regarding interest and principal have been re-negotiated or rescheduled after commencement of production, should be classified as sub-standard and should remain in such category for at least 12 months of satisfactory performance under the re-negotiated or rescheduled terms. In other words, the classification of an asset should not be upgraded merely as a result of rescheduling, unless there is satisfactory compliance of this condition. Doubtful Assets With effect from March 31, 2005, an asset is required to be classified as doubtful, if it has remained NPA for more than 12 months. For Tier I banks, the 12-month period of classification of a substandard asset in doubtful category is effective from April 1, 2009. As in the case of substandard assets, rescheduling does not entitle the bank to upgrade the quality of an advance automatically. A loan classified as doubtful has all the weaknesses inherent as that classified as sub-standard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions and values, highly questionable and

P a g e | 41 improbable. Note: Consequent to change in asset classification norms w.e.f. March 31, 2005 banks are permitted to phase the consequent additional provisioning over a five year period commencing from the year ended March 31, 2005, with a minimum of 10 % of the required provision in each of the first two years and the balance in equal installments over the subsequent three years. Loss Assets A loss asset is one where loss has been identified by the bank or internal or external auditors or by the Co-operation Department or by the Reserve Bank of India inspection but the amount has not been written off, wholly or partly. In other words, such an asset is considered un-collectible and of such little value that its continuance as a bankable asset is not warranted although there may be some salvage or recovery value.

CREDIT RISK AND NPAs Quite often credit risk management (CRM) is confused with managing non-performing assets (NPAs). However there is an appreciable difference between the two. NPAs are a result of past action whose effects are realized in the present i.e. they represent credit risk that has already materialized and default has already taken place. On the other hand managing credit risk is a much more forward-looking approach and is mainly concerned with managing the quality of credit portfolio before default takes place. In other words, an attempt is made to avoid possible default by properly managing credit risk. Considering the current global recession and unreliable inforn1ation in finaI1cial statements, there is high credit risk in the banking and lending business. To create a defense against such uncertainty, bankers are expected to develop an effective internal credit risk models for the purpose of credit risk management.

TYPES OF NPA

P a g e | 42 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

IMPACT OF NPA ON BANKS AND FIs IN INDIA

To start with, performance in terms of profitability is a benchmark for any business enterprise including the banking industry. However, increasing NPAs have a direct impact on banks profitability as legally banks are not allowed to book income on such accounts and at the sometime are forced to make provision on such assets as per the Reserve Bank of India (RBI) guidelines. Also, with increasing deposits made by the public in the banking system, the banking industry cannot afford defaults by borrower s since NPAs affects the repayment capacity of banks. Further, Reserve Bank of India (RBI) successfully creates excess liquidity in the system through various rate cuts and banks fail to utilize this benefit to its advantage due to the tear of burgeoning non-performing assets. Followings are the impact of NPA on banks

P a g e | 43

Profitability: NPA means booking of money in terms of bad asset, which occurred due to wrong choice of client. Because of the money getting blocked the prodigality of bank decreases not only by the amount of NPA but NPA lead to opportunity cost also as that much of profit invested in some return earning project/asset. So NPA doesnt affect current profit but also future stream of profit, which may lead to loss of some long-term beneficial opportunity. Another impact of reduction in profitability is low ROI (return on investment), which adversely affect current earning of bank. 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. Involvement of management: Time and efforts of management is another indirect cost which bank has to bear due to NPA. Time and efforts of management in handling and managing NPA would have diverted to some fruitful activities, which would have given good returns. Now days banks have special employees to deal and handle NPAs, which is additional cost to the bank. Credit loss: Bank is facing problem of NPA then it adversely affect the value of bank in terms of market credit. It will lose its goodwill and brand image and credit which have negative impact to the people who are putting their money in the banks. Not only banks get hit due to rising NPA but our economy also getting a big jolt from the same. As India is a developing nation and need fund for the infrastructure and development, So NPA needs to be managed. Deficit financing is not a good method to cover all losses & increased need of fund because it makes an adverse impact on economy as well.

INDIAN ECONOMY AND NPAs

Undoubtedly the world economy has slowed down, recession is at its peak, globally stock markets have tumbled and business itself is getting hard to do. The Indian economy has been much affected due to high fiscal deficit, poor infrastructure facilities, sticky legal system, cutting of exposures to emerging markets by FIs, etc. Further, international rating agencies like, Standard & Poor have lowered Indias credit rating to sub-investment grade. Such negative aspects have often outweighed positives such as increasing forex reserves and a manageable inflation rate.

P a g e | 44 Under such a situation, it goes without saying that banks are no exception and are bound to face the heat of a global downturn. One would be surprised to know that the banks and financial institution in India hold nonperforming assets worth Rs. 110000 crores Bankers have realized that unless the level of NPAs is reduced drastically, they will find it difficult to survive.

GLOBAL DEVELOPMENTS AND NPAs

The core banking business is of mobilizing the deposits and utilizing it for lending to industry. Lending business is generally encouraged because it has the effect of funds being transferred from the system to productive purposes, which results into economic growth. However lending also carries credit risk, which arises from the failure of borrower to fulfill its contractual obligations either during the course of a transaction or on a future obligation. A question that arises is how much risk can a bank afford to take? Recent happenings in the business world -Enron, WorldCom, Xerox, Global Crossing do not give much confidence to banks. In case after case, these giant corporate becan1e bankrupt and failed to provide investors with clearer and more complete information thereby introducing a degree of risk that many investors could neither anticipate nor welcome. The history of financial institutions also reveals the fact that the biggest banking failures were due to credit risk. Due to this, banks are restricting their lending operations to secured avenues only with adequate collateral on which to fall back upon in a situation of default.

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 (A) Ineffective recovery tribunal The Govt. has set 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, thereby reducing their profitability and liquidity. (B) Willful Defaults There are borrowers who are able to pay back 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.

P a g e | 45 (C) Natural calamities This is the major 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. (D) 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 finance those industries ultimately end up with a low recovery of their loans reducing their profit and liquidity. (E) 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 bank records the non-recovered part as NPAs and has to make provision for it.

(F) 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 (A) 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

P a g e | 46 ii. iii. 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 depends upon: 1. Tangible assets 2. Success in business b) Willingness to pay depends on: 1. Character 2. Honest 3. Reputation of borrower The banker should, therefore 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. (B) Inappropriate technology Due to inappropriate technology and management information system, market driven decisions on real time basis cannot 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. (C) 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 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 Principle of liquidity Principles of profitability

P a g e | 47 should analyze the profitability, viability, long term acceptability of the project while financing.

(D) 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. (E) 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). (F) 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. (G) 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

P a g e | 48 1. Owners do not receive a market return on their capital .in the worst case, if the banks fails, owners lose 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 lose 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. Nonperforming 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, labor and natural resources. Nonperforming asset may spill over the banking system and contract the money stock, which may lead to economic contraction. This spillover effect can channelize through liquidity or bank insolvency: a) When many borrowers fail to pay interest, banks may experience can jam payment across the country. b) Illiquidity constraints bank in paying depositors c) Undercapitalized banks exceed the banks capital base. '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. liquidity shortage. This

TOOLS FOR RECOVERY OF NPA

P a g e | 49 Once NPA occurred, one must come out of it or it should be managed in most efficient manner. Legal ways and means are there to overcome and manage NPAs. We will look into each one of it. 1 Willful Default:A] Lok Adalat and Debt Recovery Tribunal B] Securitization Act C] Asset Reconstruction

Lok Adalat: Lok Adalat institutions help banks to settle disputes involving account in doubtful and loss category, with outstanding balance of Rs.5 lakh for compromise settlement under Lok Adalat. Debt recovery tribunals have been empowered to organize Lok Adalat to decide on cases of NPAs of Rs. 10 lakh and above. This mechanism has proved to be quite effective for speedy justice and recovery of small loans. The progress through this channel is expected to pick up in the coming years. Debt Recovery Tribunals (DRT): The recovery of debts due to banks and financial institution passed in March 2000 has helped in strengthening the function of DRTs. Provision for placement of more than one recovery officer, power to attach defendants property/assets before judgment, penal provision for disobedience of tribunals order or for breach of any terms of order and appointment of receiver with power of realization, management, protection and preservation of property are expected to provide necessary teeth to the DRTs and speed up the recovery of NPAs in the times to come. DRTs which have been set up by the Government to facilitate speedy recovery by banks/DFIs, have not been able make much impact on loan recovery due to variety of reasons like inadequate number, lack of infrastructure, under staffing and frequent adjournment of cases. It is essential that DRT mechanism is strengthened and vested with a proper enforcement mechanism to enforce their orders. On observation of any order passed by the tribunal should amount to contempt of court, the DRT should have right to initiate contempt proceedings. The DRT should empowered to sell asset of the debtor companies and forward the proceed to the winding up court for distribution among the lenders. 2 Inabilities to Pay Consortium arrangements: Asset classification of accounts under consortium should be based on the record of recovery of the individual member banks and other aspects having a bearing on the recoverability of the advances. Where the remittances by the borrower under consortium lending arrangements are pooled with one bank and/or where the bank receiving remittances is not parting with the share of other member banks, the account will be treated as not serviced in the books of the

P a g e | 50 other member banks and therefore, be treated as NPA. The banks participating in the consortium should, therefore, arrange to get their share of recovery transferred from the lead bank or get an express consent from the lead bank for the transfer of their share of recovery, to ensure proper asset classification in their respective books. 3 Restructuring / Rescheduling of Loans A standard asset where the terms of the loan agreement regarding Interest and principal have been renegotiated or rescheduled after commencement of production should be classified as sub-standard and should remain in such category for at least one year of satisfactory performance under the renegotiated or rescheduled terms. In the case of sub-standard and doubtful assets also, rescheduling does not entitle a bank to upgrade the quality of advance automatically unless there is satisfactory performance under the rescheduled / renegotiated terms. Following representations from banks that the foregoing stipulations deter the banks from restructuring of standard and sub-standard loan assets even though the modification of terms might not jeopardize the assurance of repayment of dues from the borrower, the norms relating to restructuring of standard and sub-standard assets were reviewed in March2001. In the context of restructuring of the accounts, the following stages at which the restructuring / rescheduling / renegotiation of the terms of Loan agreement could take place, can be identified: 1) Before commencement of commercial production; 2) After commencement of commercial production but before the asset has been classified as substandard, 3) After commencement of commercial production and after the asset has been classified as substandard. In each of the foregoing three stages, the rescheduling, etc., of principal and/or of interest could take place, with or without sacrifice, as part of the restructuring package evolved. 4 Treatments of Restructured Standard Accounts: A rescheduling of the installments of principal alone, at any of the aforesaid first two stages would not cause a standard asset to be classified in the substandard category provided the loan/credit facility is fully secured. A rescheduling of interest element at any of the foregoing first two stages would not cause an asset to be downgraded to substandard category subject to the condition that the amount of sacrifice, if any, in the element of interest, measured in present value terms, is either written off or provision is made to the extent of the sacrifice involved. For the purpose, the future interest due as per the original loan agreement in respect of an account should be discounted to the present value at a rate appropriate to the risk category of the borrower (i.e., current PLR+ the appropriate credit risk premium for the borrower-category) and compared with the present value of the dues expected to be received under the restructuring package, discounted on the same basis.

P a g e | 51 In case there is a sacrifice involved in the amount of interest in present value terms, as at (b) above, the amount of sacrifice should either be written off or provision made to the extent of the sacrifice involved.

5 Treatment of restructured sub-standard accounts: A rescheduling of the installments of principal alone would render a sub-standard asset eligible to be continued in the sub-standard category for the specified period, provided the loan/credit facility is fully secured. A rescheduling of interest element would render a sub-standard asset eligible to be continued to be classified in substandard category for the specified period subject to the condition that the amount of sacrifice, if any, in the element of interest, measured in present value terms, is either written off or provision is made to the extent of the sacrifice involved. For the purpose, the future interest due as per the original loan agreement in respect of an account should be discounted to the present value at a rate appropriate to the risk category of the borrower (i.e., current PLR + the appropriate credit risk premium for the borrower category) and compared with the present value of the dues expected to be received under the restructuring package, discounted on the same basis. In case there is a sacrifice involved in the amount of interest in present value terms, as at (b) above, the amount of sacrifice should either be written off or provision made to the extent of the sacrifice involved. Even in cases where the sacrifice is by way of write off of the past interest dues, the asset should continue to be treated as sub-standard. 6 Up gradation of restructured accounts: The sub-standard accounts which have been subjected to restructuring etc., whether in respect of principal installment or interest amount, by whatever modality, would be eligible to be upgraded to the standard category only after the specified period i.e., a period of one year after the date when first payment of interest or of principal, whichever is earlier, falls due, subject to satisfactory performance during the period. The amount of provision made earlier, net of the amount provided for the sacrifice in the interest amount in present value terms as aforesaid, could also be reversed after the one year period. During this one-year period, the sub-standard asset will not deteriorate in its classification if satisfactory performance of the account is demonstrated during the period. In case, however, the satisfactory performance during the one-year period is not evidenced, the asset classification of the restructured account would be governed as per the applicable prudential norms with reference to the pre-restructuring payment schedule. 7 General: These instructions would be applicable to all type of credit facilities including working capital limits, extended to industrial units, provided they are fully covered by tangible securities.

P a g e | 52 As trading involves only buying and selling of commodities and the problems associated with manufacturing units such as bottleneck in commercial production, time and cost escalation etc. are not applicable to them, these guidelines should not be applied to restructuring/ rescheduling of credit facilities extended to traders. While assessing the extent of security cover available to the credit facilities, which are being restructured/ rescheduled, collateral security would also be reckoned, provided such collateral is a tangible security properly charged to the bank and is not in the intangible form like guarantee etc. of the promoter/ others. 8 Income recognition There will be no change in the existing instructions on income recognition. Consequently, banks should not recognize income on accrual basis in respect of the projects even though the asset is classified as a standard asset if the asset is a "non performing asset" in terms of the extant instructions. In other words, while the accounts of the project maybe classified as a standard asset, banks shall recognize income in such accounts only on realization on cash basis if the asset has otherwise become non performing as per the extant delinquency norm of 180 days. The delinquency norm would become 90 days with effect from 31 March2004. Consequently, banks, which have wrongly recognized income in the past, should reverse the interest if it was recognized as income during the current year or make a provision for an equivalent amount if it was recognized as income in the previous year(s). As regards the regulatory treatment of income recognized as funded interest and conversion into equity, debentures or any other instrument banks should adopt the following: 9 Funded Interests: Income recognition in respect of the NPAs, regardless of whether these are or are not subjected to restructuring/rescheduling/ renegotiation of terms of the loan agreement, should be done strictly on cash basis, only on realization and not if the amount of interest overdue has been funded. If, however, the amount of funded interest is recognized as income, a provision for an equal amount should also be made simultaneously. In other words, any funding of interest in respect of NPAs, if recognized as income, should be fully provided for.

9.1. Conversion into equity, debentures or any other instrument: The amount outstanding converted into other instruments would normally comprise principal and the interest components. If the amount of interest dues is converted into equity or any other instrument, and income is recognized in consequence, full provision should be made for the amount of income so recognized to offset the effect of such income recognition. Such provision would be in addition to the amount of provision that may be necessary for the depreciation in the value of the equity or other instruments, as per the investment valuation

P a g e | 53 norms. However, if the conversion of interest is into equity, which is quoted, interest income can be recognized at market value of equity, as on the date of conversion, not exceeding the amount of interest converted to equity. Such equity must thereafter be classified in the "available for sale" category and valued at lower of cost or market value. In case of conversion of principal and /or interest in respect of NPAs into debentures, such debentures should be treated as NPA, ab initio, in the same asset classification as was applicable to loan just before conversion and provision made as per norms. This norm would also apply to zero coupon bonds or other Instruments which seek to defer the liability of the issuer. On such debentures, income should be recognized only on realization basis. The income in respect of unrealized interest, which is converted into debentures or any other fixed maturity instrument, should be recognized only on redemption of such instrument. Subject to the above, the equity shares or other instruments arising from conversion of the principal amount of loan would also be subject to the usual prudential valuation norms as applicable to such instruments. 9.2. Provisioning While there will be no change in the extant norms on provisioning for NPAs, banks which are already holding provisions against some of the accounts, which may now be classified as standard, shall continue to hold the provisions and shall not reverse the same.

P a g e | 54

Chapter 5
RESEARCH METHODOLOGY
o Objectives o Scope o Research process

RESEARCH METHODOLOGY
Research can simply be defined as search for knowledge; it is an art of scientific investigation. In this project report a research has been conducted to know about NPA of PNB organization and PNB branch INDORA, reasons of NPA and branch policies to recover NPAs.

P a g e | 55 In this report descriptive research has been used.

OBJECTIVES

o o o o

To understand the concept of NPA in Indian Banking industry. To understand the causes & effects of NPA To analyze the past trends of NPA of banks in different sector. To analyze NPA in PNB

SCOPE OF THE STUDY:

o NPA ,Indian banking sector, Indian economy & world o PNB indora branch o Tools to deal with NPA

RESEARCH PROCESS

1. Define research problem and objective: - first of all we need to define research problem with out which we can not proceed. In our study our research problem and Objectives is to know about NPA in PNB & its reasons

2. Define the information needed: - here we need to define the information actually required for our study. In the offered project information is needed about o o o o Indian banking sector NPA its reasons and impact Total NPA in PNB and indora branch Methods to deal with NPA

3. Research design: - A research design is a framework or conceptual structure with in which research would be conducted and also helps us to collect maximum

P a g e | 56 information with minimal expenditure of effort, time and money. In this project Descriptive Research (in which researcher has no control over variables) is designed.

4. Collection of data: - In this project primary as well as secondary data has been used and the same is collected from various sources like PNB indora branch, internet, books etc. 5. Analysis of data: - After collection of data analysis is done to make it understandable and to draw a conclusion.

P a g e | 57

Chapter 6
DATA ANALYSIS AND INTERPRETATION
o o o o o o o o Deposit of Public Sector Banks Advances of Public Sector Banks Gross NPA of Public Sector Banks Net NPA of Public Sector Banks NPA of Pvt. sector Banks (percentage of Net NPA to advances) Gross and Net NPA of Foreign Banks in INDIA Data Analysis of PNB organization Data Analysis of PNB Branch Indora

DATA ANALYSIS AND INTERPRETATION

After collection of data analysis is done to make it understandable and to draw a conclusion. For the purpose of analysis I have included total deposit, advances, gross NPA, net NPA of

P a g e | 58 public sector banks. This report also has NPA of Pvt. Sector banks and foreign banks operating in India While analyzing the data of PNB organization I found that the organization getting its position good continuously. I also have also included data of PNB branch Indora which was established in 1971 and is the oldest branch in our region.

(1) Table shows the DEPOSIT of public sector banks As on march 31 PUBLIC SECTOR BANK : fig. in crore

DEPOSITS

P a g e | 59

S.No. I 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

BANKS NATIONALISED BANKS Allahabad Bank Andhra Bank Bank of Baroda Bank of India Bank of Maharashtra Canara Bank Central Bank of India Corporation Bank Dena Bank Indian Bank Indian Overseas Bank Oriental Bank of Commerce Punjab & Sind Bank Punjab National Bank Syndicate Bank UCO Bank Union Bank of India United Bank of India Vijaya Bank TOTAL OF 19 NATIONALISED BANKS State Bank of India (SBI) TOTAL OF ASSOCIATES TOTAL OF STATE BANK GROUP Other Public Sector Bank IDBI Ltd. TOTAL OF PUBLIC SECTOR BANKS[I+II+III+IV]

2009 84,972 59,390 192,397 189,708 52,255 186,893 131,272 73,984 43,051 72,582 100,116 98,369 34,676 209,760 115,885 100,222 138,703 54,536 54,535

Deposits 2010 106,056 77,688 241,262 229,762 63,304 234,651 162,107 92,734 51,344 88,228 110,795 120,258 49,155 249,330 117,026 122,416 170,040 68,180 61,932

2011 131,887 92,156 305,439 298,886 66,845 293,973 179,356 116,747 64,210 105,804 145,229 139,054 59,723 312,899 135,596 145,278 202,461 77,845 73,248

1,993,305 2,416,267 2,946,636 742,073 264,968 804,116 303,969 933,933 311,930

II

1,007,041 1,108,086 1,245,862 112,401 167,667 180,486

IV 1

3,112,747 3,692,019 4,372,985

The above data shows the total deposit of public sector banks which shows an increasing trend.SBI the largest bank is leader in deposits followed by PNB, Bank of Baroda, Bank of India and Bank of Maharashtra is the last player in the list. (2) Table shows the ADVANCES of public sector banks

P a g e | 60 Public sector bank :ADVANCES As on March 31 S.No. I 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 BANKS NATIONALISED BANKS Allahabad Bank Andhra Bank Bank of Baroda Bank of India Bank of Maharashtra Canara Bank Central Bank of India Corporation Bank Dena Bank Indian Bank Indian Overseas Bank Oriental Bank of Commerce Punjab & Sind Bank Punjab National Bank Syndicate Bank UCO Bank Union Bank of India United Bank of India Vijaya Bank TOTAL OF 19 NATIONALISED BANKS State Bank of India (SBI) ASSOCIATES OF SBI TOTAL OF ASSOCIATES TOTAL OF STATE BANK GROUP Other Public Sector Bank IDBI Ltd. TOTAL OF PUBLIC SECTOR BANKS[I+II+III+IV]

fig. in Crore) Advances 2009 58,802 44,139 143,251 142,909 34,291 138,219 85,483 48,512 28,878 51,396 74,885 69,065 24,615 154,703 81,532 68,804 96,534 35,394 35,468 1,416,881 542,503 196,947 739,450 103,428 2,259,759 2010 71,605 56,114 175,035 168,491 40,315 169,335 105,383 63,203 35,462 62,146 78,999 83,489 32,639 186,601 90,406 82,505 119,315 42,330 41,507 1,704,880 631,914 226,023 857,937 138,202 2,701,019 2011 93,625 71,435 228,676 213,096 46,881 212,467 129,725 86,850 44,828 75,250 111,833 95,908 42,638 242,107 106,782 99,071 150,986 53,502 48,719 2,154,380 756,719 237,434 994,154 157,098 3,305,632

II III

IV 1

Above data shows the credits extended by the bank. Here SBI also leads in the same followed by second largest bank PNB, BOB is at third place and last in the list is bank of Maharashtra. (3) Table shows the GROSS NPA of public sector banks
Public Sector Banks : Gross NPA

P a g e | 61 As on March 31 Gross NPA S.No. I 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 II III BANKS NATIONALISED BANKS Allahabad Bank Andhra Bank Bank of Baroda Bank of India Bank of Maharashtra Canara Bank Central Bank of India Corporation Bank Dena Bank Indian Bank Indian Overseas Bank Oriental Bank of Commerce Punjab & Sind Bank Punjab National Bank Syndicate Bank UCO Bank Union Bank of India United Bank of India Vijaya Bank TOTAL OF 19 NATIONALISED BANKS State Bank of India (SBI) ASSOCIATES OF SBI TOTAL OF ASSOCIATES TOTAL OF STATE BANK GROUP Other Public Sector Banks IDBI Ltd TOTAL OF PUBLIC SECTOR BANKS[I+II+III+IV] 2009 2010 2011

1,078 1,222 1,648 368 488 996 1,843 2,401 3,153 2,471 4,883 4,812 798 1,210 1,174 2,168 2,590 3,089 2,317 2,458 2,394 559 651 790 621 642 842 459 510 740 1,923 3,611 3,090 1,058 1,469 1,921 161 206 424 2,507 3,214 4,379 1,595 2,007 2,599 1,540 1,666 3,150 1,923 2,671 3,623 1,020 1,372 1,356 699 994 125 25,108 34,265 40,304 15,714 19,535 25,326 2,733 3,998 5,066 18,447 23,533 30,393 1,436 2,129 2,785

IV 1

44,991 59,927 73,481

Above table shows the gross NPA of Indian Banks. All banks are having the problem .Amount of NPA shows the efficiency of bank operations and the same need to be managed carefully. And here PNB shows its good position and having least amount of NPA.

(4) Table shows the NET NPA of public sector banks

P a g e | 62

Public Sector Banks : Net NPA As on March 31 Net NPA S.No. I 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 BANKS NATIONALISED BANKS Allahabad Bank Andhra Bank Bank of Baroda Bank of India Bank of Maharashtra Canara Bank Central Bank of India Corporation Bank Dena Bank Indian Bank Indian Overseas Bank Oriental Bank of Commerce Punjab & Sind Bank Punjab National Bank Syndicate Bank UCO Bank Union Bank of India United Bank of India Vijaya Bank TOTAL OF 19 NATIONALISED BANKS State Bank of India (SBI) ASSOCIATES OF SBI TOTAL OF ASSOCIATES TOTAL OF STATE BANK GROUP Other Public Sector Banks IDBI Ltd TOTAL OF PUBLIC SECTOR BANKS[I+II+III+IV] 2009 422 79 449 628 272 1,507 1,063 138 313 94 999 442 78 264 632 813 326 525 292 9,337 9,677 1,192 10,869 949 21,155 2010 470 96 602 2,207 662 1,800 727 197 428 145 1,995 724 117 982 963 966 965 779 582 15,407 10,870 1,960 12,830 1,406 29,644

( ` Crore)

2011 736 274 791 1,945 619 2,347 847 398 549 398 1,328 939 238 2,039 1,031 1,825 1,803 757 741 19,605 12,347 2,444 14,791 1,678 36,074

II III

IV 1

All banks are having the provision for the NPA .after deducting the provision from Gross NPA we get net NPA. Above table shows the net NPA of public sector banks. (5) Percentage of net NPA to advances in Pvt. Sector banks

P a g e | 63

S.No. I 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 I II 16 17 18 19 20 21 22 II III

Private Sector Banks As on March 31 Net NPA to Net Advances (in %) BANKS 2009 2010 2011 City Union Bank Ltd. ING Vysya Bank Ltd. SBI Commercial & International Bank Ltd.* Tamilnad Mercantile Bank Ltd. The Bank of Rajasthan Ltd. The Catholic Syrian Bank Ltd. The Dhanalakshmi Bank Ltd. The Federal Bank Ltd. The Jammu & Kashmir Bank Ltd. The Karnataka Bank Ltd. The Karur Vysya Bank Ltd. The Lakshmi Vilas Bank Ltd. Nainital Bank Ltd. The Ratnakar Bank Ltd. The South Indian Bank Ltd. AVERAGE OF 15 PVT BANKS [I] NEW PRIVATE SECTOR BANKS Axis Bank Ltd. Development Credit Bank Ltd. HDFC Bank Ltd. ICICI Bank Ltd. Indusind Bank Ltd. Kotak Mahindra Bank Ltd. YES Bank AVERAGE OF 7 NEW PVT BANKS [II] AVERAGE OF 22 PVT BANKS [I+II] 1.08 1.20 0.00 0.34 0.73 2.39 0.88 0.30 1.37 0.98 0.25 1.24 0.00 0.68 1.13 0.90 0.40 3.88 0.63 2.09 1.14 2.39 0.33 1.40 1.29 0.58 1.20 0.00 0.24 1.60 1.58 0.84 0.48 0.28 1.31 0.23 4.11 0.00 0.97 0.39 0.83 0.40 3.11 0.31 2.12 0.50 1.73 0.06 1.09 1.03 0.52 0.39 0.00 0.27 0.00 1.74 0.30 0.60 0.20 1.62 0.07 0.90 0.00 0.36 0.29 0.61 0.29 0.97 0.19 1.11 0.28 0.72 0.03 0.56 0.57

This table shows the net NPA in percentage to net advances of Pvt. Sector banks in India. (6) Table shows the Gross & net NPA of foreign banks in INDIA

P a g e | 64 Foreign Banks :Gross NPA/Net NPA As on March 31 S.No 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 Name of the Bank AB Bank Ltd. Abu Dhabi Commercial Bank Limited American Express Banking Corporation Antwerp Diamond Bank N.V. Bank Internasional Indonesia # Bank of America NA Bank of Bahrain and Kuwait B.S.C. Bank of Ceylon Barclays Bank PLC BNP Paribas Chinatrust Commercial Bank Citibank N.A.. Commonwealth Bank of Australia Credit Agricole Corporate & Investment Bank Credit Suisse AG DBS Bank Ltd. Deutsche Bank AG FirstRand Bank Ltd. JPMorgan Chase Bank JSC VTB Bank Krung Thai Bank Public Company Limited Mashreqbank psc MIZUHO Corporate Bank Ltd. Oman International Bank S.A.O.G. Sberbank Shinhan Bank Societe Generale Sonali Bank # Standard Chartered Bank Gross NPA 2009 2010 2011 3 14 45 26 0 1 3 14 17 100 0 1 3 13 20 100 0 1 (Crore) Net NPA 2009 2010 2011 2 0 30 23 0 1 0 14 64 0 8 389 0 3 784 0 0 15 77 9 0 0 0 0 0 0 0 0 514 138 40 102 0 29 -0 0 0 0 0 0 0 580 0 5 16 18 0 2 122 0 3 493 0 0 0 23 33 0 0 -0 0 0 0 0 0 0 0 132

12 11 5 2 1,048 1,422 68 68 0 3 1,806 1,275 0 1 31 243 61 0 0 0 6 0 277 76 261 0 95 -0 0 6 0

10 0 2 781 485 11 32 3 839 1,051 0 199 0 83 179 0 27 -0 0 6 0 0 0 1 1 1,148

0 0 0 1 1 1 928 1,096

P a g e | 65 30 31 32 33 34 35 36 State Bank of Mauritius Ltd. The Bank of Nova Scotia The Bank of Tokyo-Mitsubishi UFJ Ltd. HSBC Ltd The Royal Bank of Scotland NV UBS AG United Overseas Bank Ltd. Total of Foreign Banks in India 0 2 19 10 18 10 0 0 17 0 13 0 1 249 174 0 0 1,283

8 7 7 1 1 1,316 1,683 996 391 543 819 685 614 366 261 0 0 0 0 0 0 0 0 6,445 7,134 5,071 2,997 2,976

Foreign banks are also operating in India. The above table is all about NPA (gross & net) of foreign banks.

P a g e | 66

DATA ANALYSIS OF PNB ORGANIZATION

(Figures in crore)

The following data is about PNB its deposit, Advances, gross NPA, CD Ratio, net NPA Ratio, Capital Adequacy Ratio and sectoral NPA of the organization.

1. Deposit of PNB organization

year deposit 2007 139860 2008 166457 2009 209760 2010 249330 2011 312899

deposit
350000 300000 250000 200000 150000 100000 50000 0 1 2 3 4 5 deposit

From the above table and diagram we can see that the total deposit of PNB organization has been increasing year by year. It shows the increasing trend in the business of PNB which is second largest public sector bank of INDIA. The deposit shown here is the total deposit of PNB under all the schemes and services being provided by the bank.

2. Advances of PNB organization

P a g e | 67

year Advances

2007 96597

2008 119502

2009 154703

2010 186601

2011 242107

Advances
250000 200000 150000 Advances 100000 50000 0 1 2 3 4 5

We know all commercial banks exist for the purpose of profit & main source of there earning is the interest from loans and advances. From the above diagram we can see the increasing trend of total advances of bank year by year which lead to the increase in the income of the bank.

3. Deposit V advances
year deposit advances 2007 139860 96597 2008 166457 119502 2009 209760 154703 2010 249330 186601 2011 312899 242107

P a g e | 68

350000 300000 250000 200000 150000 100000 50000 0 1 2 3 4 5 deposit advances

Here we can see the increasing trend in the business of bank. Both deposit and advances of the organization is increasing year by year. In the year 2011deposite of bank was 312899 cr. And advances were 242107 cr.

4. Credit to Deposit ratio of PNB

year deposit advances CD ratio 2007 139860 96597 69.06 2008 166457 119502 71.79 2009 209760 154703 73.75 2010 249330 186601 74.84 2011 312899 242107 77.37

CD ratio
78 76 74 72 70 68 66 64 1 2 3 4 5 ratio

P a g e | 69 CD ratio is an index of the health of banking system in terms of demand for credit in proportion to total deposit growth in the banking sector. A declining CD ratio implies that banking sector was flush with funds without any corresponding demand for credit affecting the bank's profitability in the long run as they have to pay interest to depositors without corresponding income from the credit outflow.

The above table and diagram shows the credit deposit ratio of the bank. It is the ratio of total credit to the total deposit of the bank. CD ratio should be near about 75 % .bank can extend credit less than its deposits, so PNB is having good CD ratio.

5. Gross NPA of PNB

year Gross NPA 2007 3391 2008 3319 2009 2767 2010 3645 2011 4379

Gross NPA
4500 4000 3500 3000 2500 2000 1500 1000 500 0 1 2 3 4 5

Gross NPA

Diagram shows the gross NPA of PNB

P a g e | 70 6. Percentage of gross NPA to advances

Year Advances Gross NPA percentage 2007 96597 3391 3.51 2008 119502 3319 2.77 2009 154703 2767 1.78 2010 186601 3645 1.95 2011 242107 4379 1.80

percentage of gross NPA to advances

4 3.5 3 2.5 2 1.5 1 0.5 0 1 2 3 4 5 percentage of gross NPA to advances

The table shows the increasing advances of PNB year by year which indicates its increasing business capabilities and growth on the same time organization reduced its NPA percentage to near about 2 from 3.5 which shows the efficiency of the bank.

7. Net NPA ratio of PNB

Year Net NPA ratio 2007 0.76 2008 0.64 2009 0.17 2010 0.53 2011 0.85

P a g e | 71

Net NPA ratio

1 0.8 0.6 Net NPA ratio 0.4 0.2 0

The net NPA ratio of the PNB is fluctuating. It was reduced to 0.17% from 0.76% in 2009 but it rises again in 2011 to 0.85%
1 2 3 4 5

8. Sectoral segmentation of NPA of PNB as on March 2011

Sector Priority sector Of which agriculture Of which MSME Other Non priority sector Amount 2742 1171 1349 222 1637

Priority sector Non priority sector

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Banks in India are required to reserve a part of their lending for the priority sector broadly this comprises the sub-sector such as Agriculture, Small scale Industries, and other activities such as small business, retail trade, small transport operators, professional and self employed persons, education loans etc.

The above table and diagram depicts the NPA of the PNB is more in priority sector as compare to non priority sector. 9. Capital adequacy ratio of PNB
year CRAR 2007 12.29 2008 13.46 2009 14.03 2010 14.16 2011 12.42

A measure of a bank's capital. It is expressed as a percentage of a bank's risk weighted credit exposures and should be less than equal to 10 %. Tier I capital + tier II capital ------------------------------------Risk weighted assets

CAR =

Also known as "Capital to Risk Weighted Assets Ratio (CRAR)." This ratio is used to protect depositors and promote the stability and efficiency of financial systems around the world. Two types of capital are measured: tier one capital, which can absorb losses without a bank being required to cease trading, and tier two capital, which can absorb losses in the event of a winding-up and so provides a lesser degree of protection to depositors. Tier I capital is core capital; this includes equity capital and disclosed reserves. Tier II capital is secondary bank capital that includes items such as undisclosed reserves, general loss reserves, subordinated term debt, and more.

CRAR
14.5 14 13.5 13 12.5 12 11.5 11 1 2 3 4 5 CRAR

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DATA ANALYSIS OF PNB BRANCH INDORA

(Figures in crore) 1. Deposit of PNB indora branch

Year Deposit March 2010 34.18 March 2011 41.72 Feb 2012 49.20

deposit
50 40 30 20 10 0 1 2 3 deposit

Banks manages liquidity in economy and they do their business on their deposits. Above table shows the increasing trend in deposit of the PNB indora (scale 3) branch which is near 50 cr. In February 2012 showing good business.

2. Advances of PNB indora branch

Year Advances March 2010 10.23 March 2011 12.43 Feb 2012 15.03

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Advances
16 14 12 10 8 6 4 2 0 1 2 3 Advances

With the increasing deposit of the branch advances are also increasing which help in gearing investment and consumption and same is helpful in development of the area.

3. Deposit V advances of branch

Year Deposit Advances March 2010 34.18 10.23 March 2011 41.72 12.43 Feb 2012 49.20 15.03

50 40 30 20 10 0 1 2 3 Deposit Advances

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The table and diagram shows the figures of deposit and advances of the branch. Here Deposit is 49.20 cr. And advances are15.03 cr. Both are increasing year by year.

4. CD ratio of branch
Year Deposit Advances CD ratio March 2010 34.18 10.23 29.92 March 2011 41.72 12.43 29.79 Feb 2012 49.20 15.03 30.54

CD ratio
30.6 30.4 30.2 30 29.8 29.6 29.4 1 2 3 CD ratio

Table shows the credit deposit ratio of the Indora branch which is increased to 30.54 in 2012 from 29.92 in 2010.

P a g e | 76 5. Gross NPA of Indora branch

Year Deposit advances Gross NPA March 2010 34.18 10.23 53.12 lac March 2011 41.72 12.43 25.60 lac Feb 2012 49.20 15.03 65.28 lac

50 45 40 35 30 25 20 15 10 5 0 Deposit advances Gross NPA

2010

2011

2012

This diagram shows the relation between deposit, advances and gross NPA of the indora branch

6. Percentage of NPA to advances

Year advances Gross NPA Percentage of NPA March 2010 10.23 53.12 lac 5.19 March 2011 12.43 25.60 lac 2.05 Feb 2012 15.03 65.28 lac 4.34

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% of NPA to advances
6 5 4 3 2 1 0 1 2 3 % of NPA to advances

Above table and diagram shows the percentage of NPA to the advances extended by the branch .it shows percentage was 5.19 in 2010, 2.05 in 2011 and 4.34 in 2012 which is below 5% now.

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7. Percentage of indora branch NPA to total NPA of PNB organization

Year Gross NPA of PNB (in crore) Gross NPA of Indora branch (in lac) Percentage 2010 2767 53.12 .019 2011 3645 25.60 .0071 2012 4379 65.28 .014

Percentage
0.02 0.015 0.01 0.005 0 1 2 3 Percentage

Above table shows the contribution of the indora branch in the total NPA of PNB in different years from 2010 to 2012.

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Chapter 7
FINDINGS AND RECOMMENDATIONS
o Findings o Recommendations

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FINDINGS AND RECOMMENDATIONS

On an overall, in comparison to the gross NPA portfolio of the financial sector in India for the year ended March 31, 2011 approximately Rs 952 billion from the total gross NPAs of Indian banking sectors

o o o o

Public Sector Banks cover 55% of gross NPAs Private Sector banks cover 11% of gross NPAs Foreign Sector banks cover 3.02% and Financial Institutions cover 29%

FINDINGS Working on a project is a challenging task for a person who undertakes the same. While working on the presented project I Have learned a lot about the topic. Various new facts came to my knowledge during the work.

o I found that the advances of the bank are increasing continuously which leads to increase in the profits also. o The CD ratio of the bank is good which makes it position strong. o NPA has been reduced to 2 % which is very good and showing the strong position of the bank. o The recovery system of the bank needs to be stronger which can help the bank to make its position better.

o The fluctuations in the amount of NPA were due to various reasons (internal & external). o Various bank loans are not utilized for the same purpose for which they are granted specially in agricultural sector.

P a g e | 81 o Since PNB is the second largest Indian public sector bank and has a great opportunity of growth but various times due to some factors bank uses conservative measures which hindrance for the bank to grab the opportunity. RECOMMENDATIONS

As we know due to inflation and increasing population worldwide more infrastructure and funds are required and banks and financial institutions play very important role in the same. During global slowdown in 2009 India was not much affected due to its strong banking system and also during the phase of euro zone crises India was partially affected. Through RBI has introduced number of measures to reduce the problem of increasing NPAs of the bank such as CDR mechanism, one time settlement schemes, enacted of SRFAESI ACT etc. A lot of measures desired in terms of effectiveness of these measures. What I should suggest for introducing. The evolutions of the NPAs of public sector banks as under:--

o Each bank should have its own independence credit rating agency which should evaluate the financial capacity and credit history of the borrower before extending credit facility. o The credit rating agencies should regularly evaluate the financial condition of the clients.

o Special accounts should be made of the clients where monthly loan concentration report should be made. o Bank should evaluate the SWOT analysis of the borrower to know how they would face the environmental threats and opportunities with the use of their strength and weakness, and what will be their possible future growth in concerned to financial and operation performance.

o There should be proper monitoring of the restructuring accounts because there is every possibility of the loan slipping into NPAs category again. o Proper training is important to the staff of the banks at the appropriate level so that they should deal with the problem of NPAs and what continues steps should take to reduce the NPAs.

o Willful default of bank loans should be made a criminal offence.

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o Strong laws need to be enacted to deal with the problem of NPA. o No loan is to be given to a group whose one or the other undertaking became a defaulter. o Settlement procedure should be more strict and faster.

o A careful appraisal of the bank assets quality in relation to financial situation need to be made on regular basis which will keep a check on the NPA as the level of doubtful assets is increasing continuously. o The overall banking environment should be improved through reduction of govt. intervention in credit mgmt.

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Chapter 8
LIMITATIONS

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LIMITATIONS OF THE STUDY

Nothing in the world is complete and my presented work is not an exception to this saying. Since banking is a very vast topic to cover, it includes a lot of things and NPA is also a very big affair. The limitations that I felt in my study are: o It was critical for me to gather the financial data of the bank so the better evaluation of the performance of the bank is not possible. o Since my study is based on the secondary data, the practical operations as related to the NPAs are adopted by the bank are not learned. o Since the Indian banking sector is so wide so it was not possible for me to cover all the banks of the Indian banking sector. o There is also variation in figures available at different sources which create confusion. o Provision for the classification of the Assets / NPAs differs within each public sector bank & this information is not available publicly. o The RBI norms for the classification of assets / NPAs are available on a pay site & not publicly available through any source.

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Chapter 9
CONCLUSION

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CONCLUSION

A report is not said to be completed unless and until the conclusion is given to the reports. A conclusion reveals the explanations about what the report has covered and what is the essence of the study. What my project report cover is concluded below. The problem on which I focused my study is NPAs the big challenge before the public sector banks .The Indian Banking sector is the important service sector that helps the people of the India to achieve the socio economic objective. The Indian banking sector is developing with good appreciate as compared to the global benchmark banks. The Indian banking system is classified into schedule and non schedule banks. The public sector banks play very important role in developing the nation in terms of providing good financial service. The public sector banks have also shown good performance in the last few years. The only problem is that the public sector banks are facing today is the problem of nonperforming assets. The non performing assets means those assets which are classified as bad assets which are not possibly by return back to the banks by the borrowers. If the proper management of the NPAs is not undertaken it would be hampers the business of the banks. The NPAs would as try the current profit, interest income due to large provisions of the NPAs and would affect the smooth functioning of the recycling of the funds. If we analyze the past years data, we may come to know that the NPAs have increased very drastically after 2001, in 1997 the gross NPAs of the Indian banking sector was47,300 crore where as in 2001 the fig was63,883 and which increase at faster rate in 2003 with 94,905 crore. The public sector banks involve its nearly 50% of share in the NPAs .The RBI has been trying to take number of measures but the ratio of NPAs is not decreasing of the banks. The banks must find out the measures to reduce the evolving problem of the NPAs. If the concept of NPAs is taken very lightly it would be dangerous for the Indian banking sector. The reduction of the NPAs would help the banks to boost up their profits, smooth recycling of funds in the nation. This would help the nation to develop more banking branches and developing the economy by providing the better financial services to the nation. The Punjab National Bank or PNB is one of the well known commercial and banking institutions in India. It is the second largest government owned and regulated commercial bank in the country and offers specialized solutions and financial services in a number of sectors. Around 37 million customers are served by the bank on an average basis. The customized facilities and services make it a trusted name in the domain of banking. Its deposit has touched 312899 crore and advances 242107 crore in 2011 and aims Rs 10 lakh crore turnover by 2013. PNB in March 2012 plans to undertake capital infusion to the tune of Rs 2,360 crore to maintain the financial strength of the bank. While the bank would go for capital infusion of Rs 1,075 crore from LIC of India, an amount of Rs 1,285 crore has been sought from the government,

P a g e | 87 The performance of the bank during the first nine months of the current fiscal total business of the bank crossed Rs 6,00,000 crore milestone to reach Rs 6,19,122 crore, recording a growth of 21.4%. PNB's net profit for nine months ended December, 2011, stood at Rs 3,460 crore, registering a year-on-year growth of 7%, adding net profit of the bank for the third quarter of 2011-12 recorded a growth of 5.5% to reach Rs 1,150 crore but it also has to take more measure to deal with NPAs which can increase its profitability. As NPA is big threat to profitability of all banks and need to be managed effectively NPA of PSB is much more than Pvt. Sector banks and foreign banks. As for as PNB is concerned have less amount of NPA as compare to other PSB. However with the introduction of SARFAECI ACT (The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002) banks can issue notices to defaulters to repay their loans. Also, the Supreme Court has given the banks the freedom to sell mortgage assets of the borrowers, if they do not respond to the legal proceedings initiated by lender. This enables banks to get rid of sticky loans thereby improving their bottom lines. Various steps have been taken by government to reduce the NPA. It is highly impossible to have zero percentage NPA. But at least Indian banks can try competing with foreign banks to maintain international standard.

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Chapter 10
REFERENCES

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REFERENCES

Books

1.
2. 3.

Goyal Tarun, General knowledge 2011, Arihant Publications (I) Pvt. Ltd, Meerut, p

59-60 73-74

Rajeev Kumar, Indian Economy and development 2010, Embassy Books, Mumbai, p Bhole, L. M., Financial Institutions and Markets, Tata McGraw Hills, New Delhi, p
4.27

4.26-

Magazine o Economic and political weekly, January 16, 2012, CARLTON PEREIRA, INVESTING IN NPAs. o Pratiyogita Darpan monthly, November 2011/869,impact of NPA in INDIAN banking system Web o www.google.com o www.projectsformba.com o www.rbi.org.in o www.iba.com