EXECUTIVE SUMMARY
Studying books and merely passing exams is not worth, the education, knowledge and experience is incomplete without being exposed to what is happening in real. In orde orderr to make make stud studen ents ts comp compet eten entt enou enough gh to face face real real worl world, d, ther theree is a requirement of course for undergoing training for six to eight weeks with some reputed organization. This exposure to real life situation gives an insight to the students the kind of pressure and problems they can expect to face during their career. or the requirement requirement of undergoing undergoing training training I sent my request for training to !"# $%&' and fortunately it was accepted. I was assigned the pro(ect )a study of investment behavior of people in respect to demographic features i.e. %ge and *ccupation. There are lot many investment avenues are available these days to invest money like Insurance, $ank "eposits, +quity arket etc. The report studies the various inve invest stme ment nt aven avenue uess pref prefer erred red by peop people le and and the the vari variou ouss fact factor orss like like %ge and *ccupation that influence the investment behavior of people.
#hapter #hapter gives the introducti introduction on to investment. investment. It provides informati information on about the various various invest investmen mentt option optionss availa available ble to the invest investor or like like mutual mutual funds, funds, bonds, bonds, shares, real estate, bank deposits etc. &ext chapter describes the industry profile stating about investment management, investment banking - ma(or players. Then comes the turn of company profile where the !istory, ission - the roducts offered by !"# $ank are discussed. Some of the products offered are saving acco accoun unt, t, curre current nt acco accoun unt, t, fixe fixed d depos deposit it,, anyw anywhe here re bank bankin ing, g, onlin onlinee brok brokin ing, g, insurance, lockers etc. Series of steps were undertaken in order to study the investment behavior of people. "escriptive research design - &on probability convenient sampling technique is used.
CHAPTER-1 INTRODUCTION
INTRODUCTION The accumulation of huge non/performing assets in banks has assumed great importance. importance. The depth depth of the problem problem of bad debts debts was first realized realized only in early 0112s. 0112s. The magnitude of &%s &%s in banks and financial fi nancial institutions is over 3s.0,42,222 crores.
5hile gross &% &% reflects the quality of the loans made by banks, net &% &% shows the actual actual burden burden of banks. banks. &ow inc reasin singly gly evid ent ma(or defaulter defau lters &ow it is increa increas reasing ingly ly evident evide nt that the ma(or defaulte rss are the big borrowers coming from the non/priority sector. The banks and and financial institutions institutions have to to take the initiative to reduce &%s &%s in a time titime me bound strategic approach.
ublic sector banks figure prominently in the debate not only because they dominate the banking industries, but also since they have much larger &%s compared with the private sector banks. bank s. This raises a concern in the industry industry and academia academia because generally felt that banks. because it is generally &%s &%s reduce the profitability of a banks, weaken its financial health and erode its solvency. solvency.
or the recovery of &%s &%s a broad framework has evolved for the management of &%s &%s under which several options are provided for debt recovery and restructuring. $anks and Is have the freedom to design and implement their own policies for recovery and write/off incorporating compromise and negotiated settlements.
WHAT WHAT IS A NPA NPA (NON PERFORMING PERFOR MING ASSETS) ? %ction for enforcement of security interest can be initiated only if the secured asset is classified as &onperforming asset.
&on performing asset means an asset or account of borrower ,which has been classified classi fied by bank or financial institution as sub 6standard , doubtful or loss asset, in accordance with the direction or guidelines relating to assets classification issued by 3$I .
%n amount due under any credit facility is treated as )past due7 when it is not been paid within within 82 days from the due date. "ue to the improvement in the payment and settlement system, recovery climate, up gradation of technology tec hnology in the banking system etc, it was decided to dispense
with )past due )concept, with effect from arch 80, 9220. %ccordingly as from that date,
a &on performing asset shell be an advance where
i.
Inte Intere rest st and: and:or or inst instal allm lmen entt of of pri princ ncip ipal al rema remain in over overdu duee for for a per perio iod d of of more more than 0;2 days in respect of a term loan,
ii. ii.
The The acco accoun untt rema remain inss
iii. iii.
The The bill bill remai remains ns over overdu duee for a peri period od of mor moree than than 0;2 0;2 days days in case case of bill bill purchased or discounted.
iv. iv.
Inte Interes restt and: and:or or princ princip ipal al remai remains ns over overdue due for for two two harve harvest st seas season on but but for for a period not exceeding two half years in case of an advance granted for agricultural purpose ,and
v.
%ny %ny amo amoun untt to to be be rec recei eive ved d rem remai ains ns over overdu duee for for a per perio iod d of more more than than 0;2 0;2 days in respect of other accounts
5ith a view to moving towards international best practices and to ensure greater tran transp spar aren ency cy,, it has has been been deci decide ded d to adop adoptt ?12 ?12 days days over overdu duee
i.
Inte Intere rest st and: and:or or inst instal allm lmen entt of of pri princ ncip ipal al rema remain in over overdu duee for for a per perio iod d of of more than 12 days in respect of a term loan,
ii. ii.
The The acco accoun untt rema remain inss
iii. iii.
The The bill bill rem remai ains ns over overdu duee for a peri period od of of more more than than 12 12 days days in case case of bill purchased or discounted.
iv. iv.
Inte Intere rest st and: and:or or prin princi cipa pall rema remain inss over overdu duee for for two two harve harvest st seas season on but but for a period not exceeding two half years in case of an advance granted for agricultural purpose ,and
v.
%ny %ny amo amoun untt to to be be rec recei eive ved d rem remai ains ns over overdu duee for for a per perio iod d of more more than than 12 days in respect of other accounts
Out of or!r
%n account should be treated as out of order if the outstanding balance remains continuously in excess of sanctioned limit :drawing power. in case where the the out stand standin ing g bala balanc ncee in the the princ princip ipal al oper operat atin ing g acco account unt
is less less than than the the
sanctioned sanctioned amount :drawing :drawing power, power, but there are no credits credits continuously continuously for six mont months hs as on the date of bala balanc ncee shee sheett or credit credit are not enough enough to cove coverr
the the
interest debited during the same period ,these account should be treated as
O"!ru!
%ny amount due to the bank under any credit facility facility is
FACTORS FOR RISE IN NPA#
The banking sector has been facing the serious problems of the rising &%s. $ut the problem of &%s is more in public sector banks when compared to private sector banks and foreign banks. The &%s in S$ are growing due to external as well as internal factors.
EXTERNA$ FACTORS %----------------------------------
I&!ff!'t"! r!'o"!r tr*u&+,
The Bovt. has set of numbers of recovery tribunals, which works for recovery of loans and advances. "ue to their negligence and ineffectiveness in their work the bank suffers the consequence of non/recover, their by reducing their profitability and liquidity. liquidity.
W,,fu, D!f+u,t#
There are bor borrow rowers who are able to payback loans but are intentionally withdrawing it. These groups of people should be identified and proper measures should be taken in order to get back the money extended to them as advances and loans.
N+tur+, '+,+t!#
This is the measure factor, which is creating alarming rise in &%s of the S$s. every every now and then India India is hit by ma(or natural natural calamitie calamitiess 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. ainly ours farmers depends on rain fall for cropping. "ue to irregularities of rain fall the farmers are not to achieve achieve the production production level thus they are not repaying the loans.
I&u#tr+, #'.&!##
Improper pro(ect handling , ineffective management management , lack lack of adequate resources , lack of advance technology , day to day changing govt. olicies give birth to industrial sickness. !ence the banks that finance those industries
ultimately end up with a low recovery of their loans reducing their profit and liquidity.
$+'. of !+&
+ntrepreneurs in India could not foresee their product demand and starts production which ultimately piles up their product thus making them unable to pay back the money they borrow to operate these activities. The banks recover the amount by selling of their assets, which covers a minimum label. Thus the banks record the non recovered part as &%s and has to make provision for it.
C/+&0! o& Go"t 2o,'!#
5ith ith ever every y new new govt govt.. bank bankin ing g sect sector or gets gets new new poli polici cies es for for its its operation. Thus it has to cope with the changing principles and policies for the regulation of the rising of &%s. &%s. The fallout of handloom sector is continuing as most of the weavers #o/operative societies have become defunct largely due to withdrawal of stat statee pat patrona ronage ge.. The The reha rehabi bili lita tattion ion plan plan worke orked d out out by the #ent #entra rall government to revive the handloom sector has not yet been implemented. So the over dues due du e to the handloom sectors are becoming &%s. &%s.
INTERNA$ FACTORS %---------------------------------
D!f!'t"! $!&&0 2ro'!##
There are three cardinal principles of bank lending that have been followed by the commercial banks since long. i. rinciples of safety ii. rinciple of liquidity iii. rin rinciples of pr profit fitability
i.
rinciples of safety C/ $y 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 borrowersC a. #apa #apaci city ty to pay pay b. 5illingness to pay
Capacity to pay depends upon:
0. Tangible assets 9. Success in business
Willingness Willingness to pay depends on:
0. #haracter 9. !onest 8. 3eputation of borrower
The banker should, there fore take utmost care in ensuring that the enterprise or business for which a loan is sought is a sound one and the borrower is capable of carrying it out successfully .he should be a person of integrity and good character. character.
I&+22ro2r+t! t!'/&o,o0
"ue "ue to inap inappr propr opria iate te tech techno nolo logy gy and and manag managem emen entt info inform rmat atio ion n syst system em,, market driven driven decisions on real time basis can not be taken. roper IS and financial accounting system is not implemented in the banks, which leads to poor credit collection, thus &%. &%. %ll the branches of the bank should be computerized.
I2ro2!r SWOT +&+,##
The improper strength, weakness, opportunity and threat analysis is another reason reason for rise rise in &%s. &%s. 5hile providi providing ng unsecur unsecured ed advanc advances es the banks banks depend more on the honesty, integrity, and financial soundness and credit worthiness of the borrower.
$anks should consider the borrowers own capital investment.
it should collect credit information of the borrowers fromD a. rom rom bank banker ers. s. b. +nquiry from market:segment of trade, industry, industry, business. c. rom exte externa rnall credit credit ratin rating g agencie agencies. s.
%nalyze the balance sheet. True picture of business will be revealed on analysis of profit:loss a:c and balance sheet.
urpose of the loan 5hen bankers give loan, he should analyze the purpose of the loan. To ensure safety and liquidity, banks should grant loan for productive purpose only. only. $ank should analyze the profitability, profitability, viability, viability, long term acceptability of the pro(ect while financing.
Poor 'r!t +22r+#+, ##t!
oor credit appraisal is another factor for the rise in &%s. "ue to poor credit appraisal appraisal the bank gives advances advances to those who are not able to repay it back. They should use good credit appraisal to decrease the &%s. &%s.
M+&+0!r+, !f'!&'!#
The banker should always select the borrower very carefully and should take tangi tangibl blee asse assets ts as secu securi rity ty to safe safe guard guard its its inte interes rests ts.. 5hen 5hen acce accept ptin ing g securities banks should consider theD
0. arketability 9. %cceptability 8. Safety @. Transferability. The banker should follow the principle of diversification of risk based on the famous maxim )do ) do not keep all the eggs in one basket”; it means that the bank banker er shou shoulld not not grant rant adva advanc nces es to a few few big big farm farmss only only or to concentrate them in few industries or in a few cities. If a new big customer meets meets misfort misfortune une or certain certain trader traderss or indust industrie riess affect affected ed adverse adversely ly,, the the overall position of the bank will not be affected. Eike *S#$ suffered loss due to the *T #uttack, and *rissa hand loom industries. industries. The biggest biggest defaulters defaulters of *S#$ are
the *T
=00F =00F.F .FFl Flak akhs hs>, >, and and the the hand handlo loom om sect sector or *ris *rissa sa hand hand loom loom 5#S 5#S ltd ltd [email protected]>.
A*#!&'! of r!0u,+r &u#tr+, "#t
The
irregul irregulari aritie tiess in in spot spot visit visit also also incr increas eases es the &%s. &%s.
%bsenc %bsencee of of
regularly visit of bank officials to the customer point decreases the collection
of interest and principals on the loan. The &%s &%s due to willful defaulters defaulters can be collected by regular visits.
R! ,o+&&0 2ro'!##
&on remittance of recoveries to higher financing agencies and re loaning of the same have already affected the smooth operation of the credit cycle "ue to re loaning to the defaulters and ##$s and %#s, the &%s of *S#$ is increasing day by day.
PRO3$EMS DUE TO NPA
0. *wners *wners do not receive receive a market market return return on there there capital capital .in .in the worst case, case, if the banks fails, owners loose their assets. In modern times this may affect a broad pool of shareholders. 9. "eposi "epositor torss do not receive receive a market retur return n on saving. saving. In the worst case case if the bank fails, depositors loose their assets or uninsured balance. 8. $anks redistri redistribute bute losses losses to other borrowers borrowers by chargin charging g higher interest interest rates, rates, lower deposit rates and higher lending rates repress saving and financial market, which hamper economic growth. @. &on performin performing g loans loans epitom epitomize ize bad invest investmen ment. t. They misall misalloca ocate te credit credit from good pro(ects, which do not receive funding, to failed pro(ects. $ad investment investment ends up in misallocation misallocation of capital, capital, and by extension, labour and natural resources.
&on performing asset may spill over the banking system and contract the money stoc stock, k, whic which h may may lead lead to econ econom omic ic cont contra ract ctio ion. n. This This spil spilll over over effe effect ct can can channelize through liquidity or bank insolvencyC a> 5hen many borrowers borrowers fail to pay interest, interest, banks may experience experience shortage.
liquidity liquidity
This can (am payment across the country, country,
b> Illiquidity constraints bank in paying depositors .c> Hndercapitalized banks exceeds the banks capital base.
The three letters Strike terror in banking sector and business circle today. &% is short form of )&on erforming %sset7. The dreaded &% rule says simply thisC when interest or other due to a bank remains unpaid for more than 45 +#, 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 &%, no can not be then left is to look after the factor responsible for it and managing those factors.
Interest and:or instalment of principal remains overdue for two harvest seasons but for a period not exceeding two half years in the case of an advance granted for agricultural purposes, and
%ny amount to be received remains overdue for a period of more than 12 days in respect of other accounts.
%s a facilitating measure for smooth transition to 12 days norm, banks have been advised to move over to charging of interest at monthly rests, by %pril 0, 9229. !owever, the date of classification of an advance as &% should not be changed on account of charging of interest at monthly rests. $anks should, therefore, continue to classify an account as &% only if the interest charged during any quarter is not
serviced fully within 0;2 days from the end of the quarter with effect from %pril 0, 9229 and 12 days from the end of the quarter with effect from arch 80, 922@.
6Out of Or!r6 #t+tu#:
%n account should be treated as 'out of order' if if the outstanding balance remains continuously in excess of the sanctioned limit:drawing power. 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 $alance Sheet or credits are not enough to cover the interest debited during the same period, these accounts should be treated as 6out of or!r6. ‘ O"!ru!7% O"!ru!7%
%ny amount due to the bank under any credit facility is
I2+'t of NPA
Proft+*,t% Proft+*,t%-
&% &% means booking of money in terms of bad asset, which occu occurre rred d due due to wron wrong g choi choice ce of clie client nt.. $eca $ecaus usee of the the mone money y gett gettin ing g blocked the prodigality of bank decreases not only by the amount of &% &% but &% &% lead to opportunity cost also as that much of profit invested in
some
return earning pro(ect:asset. So &% doesn?t affect current profit but also future stream of profit, which may lead to loss of some long/term beneficial opportunity. %nother impact of reduction in profitability is low 3*I =return on investment>, which adversely affect current earning of bank.
$8ut% $8ut%-
oney is getting blocked, decreased profit lead to lack of enough cash at hand which lead to borrowing money for shotrtes period of time which lead to additional cost to the company. "ifficulty in operating the functions of bank is another cause of &% &% due to lack of money. 3outine payments payme nts and dues.
I&"o,"!!&t of +&+0!!&t% I&"o,"!!&t
Time and efforts of management is another indirect cost which bank has to bear due to &%. Time and efforts of management in handling and managing &% would have diverted to some fruitful activities, which would have given good returns. &ow day?s banks have special employees to deal and handle &%s, which is additional cost to the bank.
Cr!t ,o##% Cr!t
$ank is facing problem of &% &% then it adversely affect the value of bank in terms of market credit. It will lose it?s goodwill and brand image and credit which have negative impact to the people who are putting their money in the banks .
REASONS FOR NPA%
R!+#o&# '+& *! "! & to t9o *ro+ '+t!0or!#%-
A] Internal Factor B] External Factor
[ A ] Internal Factors:-
Internal actors are those, which are internal to the bank and are controllable by banks.
oor lending decisionC
&on/#ompliance to lending normsC
Eack of post credit supervisionC
ailure to appreciate good payersC
+xcessive overdraft lendingC
&on 6 Transparent Transparent accounting policyC
[ B ] External Factors:-
+xternal +xternal factors are those, those, which are external to banks they are not controllable controllable by banks.
Socio political pressureC
#hang in industry environmentC
+ndangers macroeconomic disturbancesC
&atural calamities
Industrial sickness
"iversion of funds and willful defaults
Time: cost overrun in pro(ect implementation
Eabour problems of borrowed firm
$usiness failure
Inefficient management
*bsolete technology
roduct obsolete
T 2!# of NPA T2!#
A: Gro## NPA NPA 3: N!t NPA NPA
A: Gro## NPA% NPA%
Bross &%s are the sum total of all loan assets that are classified as &%s as per 3$I guidelin guidelines es as on $alanc $alancee Sheet Sheet date. ross !"A reflects t#e $uality of t#e loans %ade &y &ans( 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 ratioC
Gro## NPA# NPA# R+to
Gro## NPA# NPA# Gro## A"+&'!#
B]
!et !"A: !"A:
&et &%s &%s are those type of &%s &%s in which the bank has deducted the provision !"A s#o)s t#e actual &urden of &ans( Since in India, bank regarding &%s. &%s. !et !"A
balance sheets contain a huge amount of &%s &%s and the process of recovery and write off of loans is very time consuming, the provisions the banks have to make against the &%s according to the central bank guidelines, are quite significant. That is why the difference between gross and net &% &% is quite high. It can be calculated by followingD
N!t NPA# NPA#
Gro## NPA# NPA# ; Pro"#o&# Pro"#o& # Gro## A"+&'!# - Pro"#o&#
PREVENTIVE MEASUREMENT FOR NPA
Early
*ecognition of t#e "ro&le%:-
Invariably, by the time banks start their efforts to get involved in a revival process, it?s it?s too late to retrieve the situation/ both in terms of rehabilitation of the pro(ect and recovery of bank?s dues. Identification of weakness in the very beginning that is C 5hen the account starts showing first signs of weakness regardless of the fact that it may not have become &%, is imperative. %ssessment of the potential of revival may be done done on the basis basis of a techno techno/eco /econom nomic ic viabil viability ity study study.. 3estru 3estructu cturin ring g shou should ld be atte attemp mpte ted d wher where, e, afte afterr an ob(e ob(ect ctiv ivee asse assessm ssmen entt of the the prom promot oter? er?ss intention, banks are convinced of a turnaround within a scheduled timeframe. In respect of totally unviable units as decided by the bank, it is better to facilitate
winding up: selling of the unit earlier, so as to recover whatever is possible through legal means before the security position becomes worse.
Identifying
Borro)ers )it# enuine Intent:Intent:-
Identifying borrowers with genuine intent from those who are non/ serious with no commitment or stake in revival is a challenge confronting bankers. !ere the role of frontline officials at the branch level is paramount as they are the ones who has intelligent inputs with regard to promoters? sincerity, and capability to achieve turnaround. $ase don this ob(ective assessment, banks should decide as quickly as possible whether it would be worthwhile worthwhile to commit additional finance.
transa transacti ction on or busine business ss transa transacti ction, on, books books of accoun accountt in order order to ascert ascertain ain real factors that contributed to sickness of the borrower. $anks may have penal of techni technical cal expert expertss with with proven proven expert expertise ise and track track record record of prepari preparing ng techno techno// economic study of the pro(ect of the borrowers.
$orrowers having genuine problems due to temporary mismatch in fund flow or sudden requirement of additional fund may be entertained at branch level, and for this purpose a special limit to such type of cases should be decided. This will obviate the need to route the additional funding through the controlling offices in deserving cases, and help avert many accounts slipping into &% &% category. category.
+i% eliness +i%eliness +i%el iness and Ade$uacy of
response:-
Eonger the delay in response, grater the in(ury to the account and the asset. Time is a crucial crucial elemen elementt in any restru restructu cturing ring or rehabi rehabilit litati ation on activi activity ty.. The respons responsee decided on the basis of techno/economic study and promoter?s commitment, has to be adequate in terms of extend of additional funding and relaxations etc. under the
restructuring exercise. The package of assistance may be flexible and bank may look at the exit option.
Focus on Cas# Flo)s:-
5hile financing, at the time of restructuring the banks may not be guided by the conventional fund flow analysis only, which could yield a potentially misleading picture. %ppraisal for fresh credit requirements may be done by analyzing funds flow in con(unction with the #ash low rather than only on the basis of unds low. low.
,anage%ent
Effectieness:-
The general perception among borrower is that it is lack of finance that leads to sickn sicknes esss and and &%s &%s.. $ut $ut this this may may not not be the the case case all all the the time time.. ana anagem gemen entt effectiveness in tackling adverse business conditions is a very important aspect that affects a borrowing unit?s fortunes. % bank may commit additional finance to an aling unit only after basic viability of the enterprise also in the context of quality of mana manage geme ment nt is exam examin ined ed and and conf confir irme med. d. 5here 5here the the defa defaul ultt is due due to deep deeper er malady, viability study or investigative audit should be done 6 it will be useful to have consultant appointed as early as possible to examine this aspect. % proper techno/ economic viability study must thus become the basis on which any future action can be considered.
,ultiple
Financing:-
A "uri "uring ng the the exer exerci cise se for for asse assess ssme ment nt of viab viabil ilit ity y and and rest restru ruct ctur urin ing, g, a Pr+0+t' Pr+0+t' +& u&f! u&f! +22ro+'/ +22ro+'/ by all the lending banks: Is as also
sharing of all relevant information on the borrower would go a long way toward overall success of rehabilitation exercise, given the probability of success:failure.
3 In some default cases, where the unit is still working, the bank should make
sure sure that that t '+2tur!# t/! '+#/ f,o9# =there is a tendency on part of the borrowers to switch bankers once they default, for fear of getting their cash flows forfeited>, and ensure that such cash flows are used for working capital purposes. Toward this end, there should be regular flow of information among consortium members. % bank, which is not part of the consortium, may not be allowed to offer credit facilities to such defaulting clients. #urrent account facilities may also be denied at non/consortium banks to such clients and violation may attract penal action. The Cr!t I&for+to& 3ur!+u of I&+ $t(CI3I$) may be very useful for meaningful information exchange
on defaulting borrowers once the setup becomes fully operational.
C In a forum of lenders, the priority of each lender will be different. 5hile one
set of lenders may be willing to wait for a longer time to recover its dues, another lender may have a much shorter timeframe in mind. So it is possible that the letter categories of lenders may be willing to exit, even a t a cost 6 by a disc discou ount nted ed sett settle lem ment ent of the the expo exposu sure re.. There herefo fore re,, any any plan plan for for restructuring:rehabilitation may take this aspect into account.
D Cor2 Cor2or or+t +t!! D!*t R!#tru R!#tru'tu 'tur r&0 &0 mechan mechanism ism has been been instit instituti utiona onaliz lized ed in
9220 to provide a timely and transparent system for restructuring of the corporate debt of 3s. 92 crore and above with the banks and Is on a voluntary basis and outside the legal framework. Hnder this system, banks may greatl greatly y benefi benefitt in terms terms of restruct restructuri uring ng of large large standa standard rd accoun accounts ts =potential &%s> &%s> and viable sub/standard accounts with consortium:multiple consortium:multiple banking arrangements.
*nce &% occurred, one must come out of it or it should be managed in most efficient manner. Eegal ways and means are there to over come and manage &%s. 5e will look into each one of it.
Willful Wil Willlful ful .efault :-
%J Eok %dalat and "ebt 3ecovery Tribunal
$J Securitization %ct
#J %sset 3econstruction
Lok Adalat:
Eok %dalat institutions institutions help banks to settle disputes involving account in )dou )doubt btfu ful7 l7 and and )los )loss7 s7 cate catego gory ry,, with with outs outsta tand ndin ing g bala balanc ncee of 3s. 3s. 4 lakh lakh for for compro compromis misee settle settlemen mentt under under Eok %dalat. %dalat. "ebt "ebt recover recovery y tribun tribunals als have have been been empowered empowered to organize organize Eok %dalat %dalat to decide decide on cases of &%s &%s of 3s. 02 lakh and above. This mechanism has proved to be quite effective for speedy (ustice and recovery of small loans. The progress through this channel is expected to pick up in the coming years.
y Tribunals(DRT): Tribunals(DRT): Debt Recover Recovery The recovery of debts due to banks and financial institution passed in arch 9222 has helped in strengthening the function of "3Ts. rovision for placement of more than one recovery officer, power to attach defendant?s property:assets before (udgment, penal provision for disobedience of tribunal?s tribunal?s 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 "3T "3Ts and speed up the recovery of &%s &%s in the times to come. "3T "3Ts which have been set up by the Bovernment to facilitate speedy recovery by banks:"Is, have not been able make much impact on loan recovery due to variety of reasons like like inad inadeq equa uate te numb number er,, lack lack of infr infras astr truct ucture ure,, unde underr staf staffi fing ng and and frequ frequen entt ad(ournment of cases. It is essential that "3T 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 "3T should have right to initiate contempt proceedings. The "3T should empowered to sell asset of the debtor companies and forward the proceed to the winding 6 up court for distribution among the lenders
I&+*,t to P+
Consortiu arrangeents: %sset classification of accounts under consortium should be based on the *+&.# and other aspects having a bearing on the recoverability of the record of recovery of the individual member *+&.#
advances 5here the remittances by the borrower under consortium lending arrangements are pooled with one bank and:or where the bank receiving remittances is not parting with the share of other member banks, the account will be treated as not serviced in the books of the other member banks and therefore, be treated as &%. The banks participating in the consortium should, therefore, therefore, arrange to get their share of recovery transferred 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.
Corporate de&t *estructuring /C.*0:
Bacground Bacground
In spite of their best efforts and intentions, sometimes corporate find themselves in financial difficulty because of factors beyond their control and also due to certain internal reasons. or the revival of the corporate as well as for the safety of the money lent by the banks and Is, timely support through restructuring in genuine case casess is call called ed for for. !owe !oweve verr, dela delay y in agree agreeme ment nt amon amongs gstt diff differ eren entt lendi lending ng institutions often comes in the way of such endeavours.
$ased on the experience in other countries like the H.'., Thailand, 'orea, etc. of putting in place institutional mechanism for restructuring of corporate debt and need for a similar mechanism in India, a #orporate "ebt 3estructuring System has been evolved, as under C
*b(ective The ob(ective of the #orporate "ebt 3estructuring =#"3> framework is to ensure timely and transparent mechanism for restructuring of the corporate debts of viable entities facing problems, outside the purview of $I3, "3T and other legal proceedings, for the benefit benef it of all concerned. In particular, the framework will aim at preserving viable corporate that are affected by certain internal and external factors and minimize the losses to the creditors and other stakeholders through an orderly and coordinated restructuring programme.
CHAPTER-> COMPANY COMPANY PROFI PROFI$E $E
A3OUT HDFC
The !ousing "evelopment inance #orporation Eimited Eimited =!"#> =!"#> was amongst the first to receive an Kin principleK approval from the 3eserve $ank of India =3$I> to set up a bank in the private sector, sector, as part of the 3$IKs liberalization of the Indian $anking Industry in 011@. The bank was incorporated in %ugust 011@ in the name of K!"# $ank EimitedK, with its registered office in umbai, India. !"# $ank commenced operations as a Scheduled #ommercial $ank in Lanuary 0114. !"# is IndiaKs premier housing finance company and en(oys an impeccable track record in India as well as in international markets. Since its inception in 01FF, the #orporation has maintained a consistent and healthy growth in its operations to remain the market leader in mortgages. Its outstanding loan portfolio covers well over a million dwelling units. !"# has developed significant expertise in retail mortgage loans to different market segments and also has a large corporate client base for its housing related credit facilities. 5ith its experience in the financial markets,
a strong market reputation, large
shareholder base and unique consumer franchise, !"# was ideally positioned to promote a bank in the Indian environment. !"# !"# $ank began operations in 0114 with a simple mission C to be a
< Wor, or, C,+## C,+## I&+& I&+& 3+&.= 3+&.= 5e realized realized that only only a single single minded minded focus on
product quality and service excellence would help us get there. Today, oday, we are proud to say that we are well on our was towards that goal. %s of arch 80, 922;, the $ank?s $ank?s distributi distribution on network network was at FG0 $ranches $ranches and 01FF %Ts in 89F cities as against G;@ branches and 0,G24 %Ts in 892 cities cities as of arch 80, 922F. %gainst %gainst the regulatory regulatory approvals approvals for new branches branches in hand, the $ank $ank expect expectss to furthe furtherr expand expand the branch branch network network by around 042 branches by Lune 82, 922;. "uring the year, the $ank stepped up retail customer acquisitio acquisition n with deposit deposit accounts accounts increasing increasing from G.9 milli million on to ;.F ;.F millio million n and total cards issued =debit and credit cards> increasing from F million to 1.9 million.
PERSONA$ 3ANING
$o+& Prou't
%uto Eoan
Eoan
D!2o#t Prou't
%gainst
Security
Eoan
%gainst
roperty
ersonal loan
#redit card
9/wheeler loan
#ommercial vehicles finance
!ome loans
I&"!#t!&t @ I&#ur+&'!
Saving a:c
utual und
#urrent a:c
$onds
ixed deposit
'nowledge #entre
"emat a:c
Insurance
Safe
Beneral and !ealth
"eposit
Eockers
Insurance
+quity
and
"erivatives
udra Bold $ar
3etail
business
banking
Tractor loan
5orki orking ng
#apit apital al
inance
#onstruction +quipment inance
!ealth
#are
inance
+ducation Eoan
Bold Eoan
C+r#
P+!&t S!r"'!#
#redit #ard
"ebit #ard
erchant
*neMiew
repaid #ard
repaid 3efill
Insta%lert
$illpay
obile$anking
Misa $illpay
%T
Instaay
hone $anking
"irectay
+mail Statements
Misaoney
$ranch &etwork
//////////////////////////////// For! S!r"'!#
////////////////////////////////
&etSafe
A''!## To 3+&.
Transfer
roduct - Services
Trade Services
+lectronic
orex
unds Transfer
service
$ranch Eocater
3$I Buidelines
e6onies
*nline ayment of "irect Tax
&et$anking
WHO$ESA$E 3ANING
Cor2or+t!
S+,,
+&
M!u F&+&' &+&'+,
E&t!r2r#!#
unded
Services
&on
unded
+& Tru#t# 3ANS
unded Services &on
I&#t I&#tt tut uto&# o&#
unded
Specialized Services
Malue alue %dde %dded d
Malue added services
Services
Internet $anking
Sub/
embership
Services
Services
#learing
3TBS submembership
und Transfer
Internet
%T Tie/ups
$anking
#orporate Salary a:c
Tax #ollection
F&+&'+, I&#ttuto&#
Mutu+, Fu&#
Sto'. 3ro.!r#
I&#ur+&'! Co2+&!#
6
Coot!# 3u#&!##
Tru#t#
HDFC7# +& 0o+,# +r! to %-
The primary ob(ective of !"# is to enhance residential housing stock and to promote home ownership. To acquire by purchase, lease, exchange, hire or otherwise lands - property or any interest in the same in India. To advance money to any person: persons, company or corporation, society or association either at interest without, and or with or without any security and in particular to advance money to shareholders shar eholders of the company or to oth@r persons to enable the person to erect, or purchase, or enlarge, or repair any house or building or any part or portions thereof or to purchase any freehold or leasehold or any lands or estate or property proper ty in India upon the terms and conditions as laid by the company.
CHAPTER-B RESEARCH METHODO$OGY
RESEARCH METHODO$OGY
3esearc 3esearch h method methodolo ology gy is a way to system systemati atical cally ly solve solve the researc research h problem problem.. 3esearc 3esearch h method methodolo ology gy constit constitute utess of research research methods methods,, select selection ion criter criterion ion of research methods, used in context of research study and explanation of using of a particular method or technique so that research results are capable of being evaluated either by researcher himself or by others TIT$E%
)PROCEDURE TO REDUCE NON-PERFORMING ASSETS IN 3ANS 7.
O3ECTIVES OF THE STUDY
The basic idea behind undertaking the Brand ro(ect on &% &% was toC
To 'now the #oncept of &on erforming %sset To know reventive easures To evaluate &%s &%s =Bross and &et> in different banks. To analyze financial performance of banks at different level of &% &% To 'now the Impact of &%s To 'now the 3easons for &%s
SIGNIFICANCE OF THE STUDY
This is a limited study which takes into considerati consideration on the responses responses of 022 people. people. This data can be exported to take in the trends across the industry. The significance for the industry lies in studying these trends that emerge from the study. It is a rapidly changing and evolving sector. eople are only beginning to wake up to it?s vast possibilities. % study like this can attempt to guide the future of the industry based on current trends. SCOPE OF THE STUDY
The scope of the study refers to the (ob that to know about the activities of the organizati organization. on. The study means that the analysis of the products of the company company on which he:she has to focus. Scope of the Study
#oncept of &on erforming %sset
Buidelines
Impact of &%s
3easons for &%s
reventive easures
Tools to manage &%s
"uring the summer training the volunteer need to find out the corporate strategies of the running company and The mile stone which the company has covered during its (ourney. In the summer training, it is necessary for the student that he :she involve with the experience guys to get the knowledge about the company. That is how the company has got the success, *r if it is going in the loss, why. why.
RESEARCH DESIGN
NON-PRO3A3I$ITY
EXP$ORATORY @DISCRIPTIVE EXPERIMENTA$ RESEARCH
The research is primarily both exploratory as well as descriptive in nature. The sources of information are ar e both primary - secondary. Pr+r D+t+%
rimary data is basically the live data which I collected on field while doing cold calls with the "istributor and shopkeeper, shopkeeper, customers, I shown them list list of quest questio ion n for for whic which h I had had requi required red thei theirr resp respon onse ses. s. In some some cases cases I got got no response form their side and than on the basis of my previous experiences I filled those fields. Sour Sour'!% '!% ain source for the primary data for the pro(ect was questionnaires
which I got filled by the customers or some times filled myself on the basis of discussion with the customers. S!'o&+r D+t+%
0
Internet ,
9
$ooks
8
Lournals ,
@
&ewspaper,
4
%nnual report,
G
"atabase available in the library, library,
F
#atalogues and presentations.
Too,# +& T!'/&8 T!'/&8u!#% u!#%
%s no study could be successfully completed without proper tools and techniques, same with my pro(ect. or the better presentation and right explanation I used tools of statistics and computer very frequently. %nd I am very thankful to all those tools for helping me a lot. $asic tools which I used for pro(ect from statistics are/ / 3+r C/+rt#
- P! '/+rt# - T+*,!#
bar charts and pie charts are really useful tools for every research to show the result in a well clear, ease and simple way. $ecause I used bar charts and pie charts in pro(ect for showing data in a systematic way, way, so it need not necessary for any observer to read all the theoretical detail, simple on seeing the charts any body could know that what is being said. T!'/&o,o0'+, !'/&o,o 0'+, Too,# M#-A''!## M#-Wor
%bove application software of icrosoft helped me a lot in making pro(ect more interactive and productive. icrosoft/+xcel had a great role in my pro(ect, it created for me a situation of )you sit and get7. I provided it simply all the detail of data and in return it given me all the relevant information.. SAMP$ING METHODO$OGY S+2,&0 T!'/&8u!%
Initially, Initially, a rough draft was prepared keeping in mind the ob(ective of the research. % pilot study was done in order to know the the accuracy of the Nuestionnaire. The final Nuestionnaire was arrived only after certain important changes were done. Thus my sampling came out to be (udgment and convenient S+2,&0 U&t%
The respondent who were asked to fill out questionnaires are the sampling units. These comprise of employees of &#, Bovt. +mployees, Self +mployed etc. S+2,! #!%
The sample size was restricted to only 022, which comprised of mainly peoples from different regions of $!*%E $!*%E due to time constraints.
S+2,&0 Ar!+ %
The area of the research was &ew "elhi.
CHAPTER- DATA ANA$YSIS @ INTERPRETATION
G enderC
#lassification of #ustomers $ased *n Sex Se x
&o. of respondents
ercentage O
ale emale
84 G4
84 G4
total
022
022
I nterpretationC
84O of the respondents are male and G4O of the respondents are female. rom the above table we can conclude that, the ma(ority of the respondents were belongs to female group.
O ccupationC
%nalysis of *ccupation of the 3espondents
*ccupation $usiness +mployee !ouse wife *thers Total
&o. of. respondents
ercentage
92 02 G4 24 022
O 92 02 G4 24 022
I nterpretationC
92O of the respondents are business, 02O of the respondents are employees, and G4O of the respondents are house wives, 24O of the respondents are others group.
I ncomeC
%nalysis of onthly Income of the 3espondents
onthly income
&o. of respondents
ercentage O
$elow 4222 4220/02222 02220/04222 04220 - above Total
8; 82 90 00 022
8; 82 90 00 022
I nterpretationC
%s per the data 8;O of the respondents earn per month below 4222, 82O of the respondents earn 4220 to 02222, 90O of the respondents earn above 02220 to 04222. 00O of the respondents earn 04222 - above. rom the above table we can conclude that ma(ority of the respondents? monthly income group of below 4222 and more than 4222 to 02222.
0. "* P*H '&*5 T!+ &*& +3*3I&B %SS+TS %SS+TS * $%&'
*pinions Pes &o Total
&o. of 3espondents 02 12 022
ercentage =O> 02 12 022
I nterpretationC
*nly 02O of the respondents said that they know about
&*&
+3 +3*3 *3I I&B &B %SS+ %SS+TS TS whil whilee 12O 12O don? don?tt know know abou aboutt &*& &*& +3 +3*3 *3I I&B &B %SS+TS
9. IT IS *SSI$E+ *SSI$E + T* +EII&%T+ +EII&%T+ T*T%EE T*T%EEP P T!+ &%S &%S I& T!+ $%&'I&B $HSI&+SS
%nalysis of 3ecommendations 3ecommended Pes &o Total
&o. of 3espondents 14 24 022
ercentage =O> 14 24 022
I nterpretationC
*ut of 022 respondent , 14O of the respondents were recommended It is possible to eliminate totally the npas in the banking business while only 4O told It is not
8. ++#TIM+ I&S+#TI*& SPST+ S!*HE" $+ IE++&T+"
*ption
ercentage of respondents
Pes
G@
&o
8G
INTERPRETATION
*ut of 022 respondent G@ O respondent were satisfied satisfied with effective inspection system should be implemented while 8GO told no.
@. "* P*H T!I&' *+3%TI&B *+3%TI&B ST% ST% S!*HE" S#3HTI&IQ+ S#3HTI&IQ + T!+ E+M+E * I&M+&T*3I+S:3+#+IM%$E+S 3+BHE%3EP
*ption
ercentage of respondents
Pes
F;
&o
99
INTERPRETATION
*ut of 022 respondent F; O respondent are satisfied with the statement that operating staff should scrutinize the level of inventories:receivables regularly while only 99O were not satisfied.
4. "* P*H T!I&' E%3B+ +R*SH3+ *& $IB #*3*3%T+ *3 SI&BE+ 3*L+#T S!*HE" $+ %M*I"+" %M*I"+"
*ption
ercentage of respondents
Pes
9@
&o
FG
INTERPRETATION
*ut of 022 respondent only 9@O think large exposure on big corporate or single pro(ect should be avoided 5hile FGO don?t think about that.
G. H&+M+& S#%E+ * 3+%P+&T S#!+"HE+ 5IT! !IB!+3 3+% 3+%P+&T I& T!+ T !+ I&ITI%E I& ITI%E P+%3S &*3%EE & *3%EEP P IS 3++33+" 3+ +33+"
RESPONSE
NO OF
SHARE ()
RESPONDENT S
Satisfied
@4
@4O
&ot satisfied
44
44O
&ot 3esponded
2
2.2O
022
022O
Total
45.00% 55.00%
Satisfied
Not satisfied
INTERPRETATION
@4O of the respondents are satisfied with uneven scale of repayment schedule with higher repayment in the initial years normally is preferred 44O of the respondents are not satisfied with that statement. F. %3+ P*H S%TISI+ S%TISI+" " 5IT! ST% ST%T++&T T++&T T!+ $%&'S S!*HE" S!*HE" &*T *&EP T%'+ ST+S *3 3+"H#I&B 3+S+&T &%S, $HT &+#+SS%3P 3+#%HTI*& 3+#%HTI *& S!*HE" S!*HE " %ES* $+ T%'+& T* %M*I" %M*I" HTH3+ &%S &%S
RESPONSE
NO OF RESPONDENT
SHARE ()
S
Satisfied
G2
G 2O
&ot satisfied
@2
@2O
&ot 3esponded
2
2.2O
022
022O
Total
0% 40%
60%
Satisfied
Not satisfied
Not Responded
INTERPRETATION G2O of the respondents were think the banks should not only take steps for reducing present &%s, &%s, but necessary precaution should also be taken to avoid future &%s &%s . @2O of the respondents are not satisfied with that statement.
"* P*H T!I&' T!%T T!%T &+#+SS%3P &+#+SS%3P 3+#%HTI*& 3+#%HTI*& S!*HE" %ES* $+
T%'+& T* %M*I" HTH3+ &%S RESPONSE
NO OF
SHARE ()
RESPONDENT S
Pes
F2
F2O
&o
82
82O
Total
022
022O
30%
70%
Yes No
INTERPRETATION
*ut *f the sample size of 022 surveyed respondents F2O of the respondents respondents think that necessary precaution should also be taken to avoid future &% &% 82O don?t think that.
1."* P*H T!I&' T!+3+ IS SIB&II#%&T 3+E%TI*&S!I $+T5++& B3*SS &% &% * % $%&' T* ITS *+3%TI&B *+3%TI&B 3*IT
RESPONSE
NO OF
SHARE ()
RESPONDENTS
Pes
;F
;FO
no
08
08O
Total
022
022O
13.0%
87.0%
ye s
no
INTERPRETATION
*ut of 022 respondent ;FO think there is significant relationship between gross &% &% of a bank to its operating profit only only 08O don?t think there there is significant relationship between gross npa of a bank to its operating profit.
02. "* " * P*H T!I&' T!+ $%&' $% &' 5IEE %E5 %E5%PS %#+ T!+ 3*$E+ 3* $E+ * &% &% $+#%HS+ * **3 3+#*M+3 3+#*M+3P P * * %"M%&#+S %"M%&#+S B3%&T+" $P T!+ $%&'
RESPONSE
NO OF RESPONDENT
SHARE ()
S
P+S
@4
@4O
&*
44
44O
&ot 3esponded
2
2.2O
022
022O
Total
45.00% 55.00%
YES
NO
INTERPRETATION
*ut of 022 respondent 44O respondent think the bank will always face the problem of npa because of poor recovery of advances granted by the bank while @4O don?t think.
ANA$YSIS
or the purpose of analysis and comparison between private sector and public sector banks, we take five/five banks in both sector to compare the non performing assets of banks. banks.
or underst understand anding ing we further further bifurc bifurcate ate the non performin performing g assets in
priority sector and non priority sector, gross &% &% and net &% &% in in percentage as well as in rupees, deposit 6 investment 6 advances.
"eposit 6 Investment 6 %dvances is the first in the analysis because due to these we can understand understand the where the bank stands stands in the competitiv competitivee market. %s at end of marc march h 922; 922;,, in priv privat atee sect sector or I#I# I#I#II $ank $ank is the the high highes estt depo deposi sit/ t/in inve vest stme ment nt// advances figures in rupees crore, second is !"# $ank and '*T%' '*T%' $ank has least figures. In public public sector sector banks banks un(ab un(ab &ation &ational al $ank $ank has highes highestt deposi deposit/i t/inve nvestm stment ent// advances but when we look at graph first three means $ank of $aroda and $ank of India are almost the similar in numbers and "ena $ank is stands for last in public sector bank. bank. 5hen we compare compare the private sector sector banks with public public sector banks among these banks, we can understand the more number of people prefer to choose public sector banks for deposit/investment.
$ut when we compare the private sector bank I#I#I $ank with the public sector banks I#I#I $ank is more deposit/investment figures and first in the all banks.
DEPOSIT DEPOSIT-INVES -INVESTMENT TMENT-ADV -ADVANCE ANCES S ( RSCRORE) RSCRORE) of *ot/ #!'tor *+&.# +& 'o2+r#o& +o&0 t/! !+r >55-5
3AN AXIS HDFC ICICI OTA INDUSIND TOTA$
DEPOSIT J>J 155J4 >B1 1J> 145B J>
INVESTMENT BB5K 4B4 111K 41> JJB5 >15B>K
ADVANCES K4JJ1 JB> >>KJ1J 1KKK> 1>4K B5K1
3AN 3O3 3OI DENA PN3 U3I TOTA$
DEPOSIT 1K>5B 1K551> BB4B 1JJK 15BK4 J5JB5K
INVESTMENT B5 15B 15>> KB44> BB>B 1B5
ADVANCES 15J51 11BJ >B5> 114K5> B B5K1
ICICI 3AN AND PUNA3 NATIONA$ 3AN %-
3AN ICICI 3AN PN3
DEPOSIT >B1 1JJK
INVESTMENT 111K KB44>
ADVANCES >>KJ1J 114K5>
There There are two concep concepts ts related related to non/per non/perform forming ing assetsD assetsD gross and net. Bross Bross refers to all &%s &%s on a bank?s bank?s balance sheet irrespective of the provisions made. It consists consists of all the non standard standard assets, viz. sub standard, standard, doubtful, doubtful, and loss assets. % loan asset is classified as < sub standard7 if it remains &% up to a period of 0; monthsA ) doubtful7 doubtful7 if it remains &% &% for more than than 0; monthsA and loss, loss, without any waiting period, where the dues are considered not collectible or marginally collectible. &et &% &% is gross &% &% less provisions. Since in India, bank balance sheets contains a huge amount of &%s and the process of recovery and write off of loans is very time consuming, the provisions the banks have to make against the &% according to the central bank guidelines, are quite significant.
!ere, we can see that there are huge difference between gross and net &%. W/,! 0ro## NPA r!f,!'t# t/! 8u+,t of t/! ,o+&# +! * *+&.# &!t NPA #/o9# t/! +'tu+, *ur!& of *+&.# The requirements for provisions are C
022O for loss assets
022O 022O of the the unse unsecu cure red d port portio ion n plus plus 92/4 92/42O 2O of the the secu secure red d port portio ion, n, depending on the period for which the account has remained in the doubtful category
02O general provision on the outstanding balance under the sub standard category.
!ere, there are gross and net &% data for 922G/2F and 922F/2; we taken for comparison comparison among banks. These data are &% &% %S +3#+&T%B+ +3#+&T%B+ * T*T%E T*T%E %SS+TS. %SS+TS. %s we discuss earlier earlier that gross &% &% reflects reflects the quality quality of the loans made by banks. %mong all the the ten banks "ena $anks has highest highest gross &% &% as as a percentage of total assets in the year 922G/2F and also net &%. &%. un(ab &ational $ank $ank shows shows vast differenc differencee betwee between n gross gross and net &%. &%. There There is almost almost same figures between $*I and $*$.
P+%3 922F/2;
3AN
GROSS NPA
NET NPA
3O3 3OI DENA PN3 U3I
1J 1 >B >54 1>
5BK 5K 11J 5K 5K4
922F/2;
3AN
GROSS NPA
NET NPA
3O3 3OI DENA PN3 U3I
115 15 1 1J 1B
5> 5BB 5KJ 5B 515
922G/2F
3AN
GROSS NPA
NET NPA
AXIS HDFC ICICI OTA INDUSIND
5K 5> 1>5 1B4 1J
5BJ 5>> 5K 154 1B1
922F/2;
3AN
GROSS NPA
NET NPA
AXIS HDFC ICICI OTA INDUSIND
5K 5J 145 1KK 1J4
5>B 5>> 5 54 1>K
#*%3IS* #*%3IS*& & * GROSS NPA 5IT! %EE $%&'S *3 T!+ P+%3 922F/2;. 922F/2;. The growing &%s &%s affects affects the health of banks, profitabilit profitability y and efficiency. efficiency. In the long run, it eats up the net worth of the banks. 5e can say that &% &% is not a healthy sign for financial institutions. institutions. !ere we take all the ten banks gross &% &% together for better understanding. %verage of these ten banks gross &%s &%s is 0.91 as percentage of total assets. So if we compare in private sector banks %RIS and !"# $ank are below average of all banks and in public public sector sector $*$ and $*I. $*I. %verage verage of these these five private private sector sector banks gross &% &% is 0.94 and average of public sector banks is 0.88. 5hich is higher in compare of private sector banks.
B3*SS &% C/
#*%3IS*& * NET NPA 5IT! %EE $%&'S *3 T!+ P+%3 922F/ 2;. %verage of these these ten bank?s bank?s net &% &% is is 2.4G. %nd in the public public sector sector banks all these five banks are below this. $ut in private sector banks there are three banks are above above average. The difference difference between between private private and public banks average is also vast. rivate sector banks net &% &% average is 2.F0 and in public sector sector banks it is 2.@0 as percentage percentage of total assets. assets. %s we know that net &% &% shows shows actual burden burden of banks. IndusInd IndusInd bank has highest net &% &% figure and !"# $ank has lowest in comparison. comparison.
&+T &% &% of banksC/
"*I1*I+2 3!1! "*I1*I+2 4EC+1*
5hen 5hen we furt furthe herr bifu bifurc rcat atee &% &% in prior priorit ity y sect sector or and and &on &on prio priori rity ty sect sector or.. %griculture small others are priority sector. sector. In private sector banks I#I#I $ank has the highest &% in both sector in compare to other private sector banks. %round F9O of &% is with I#I#I $ank with 3s.0841 crore in priority sector and around F;O in non priority sector. sector. 5e can see that in private sector banks , banks has more &% in non priority sector than priority sector.
3AN
AGRI (1)
AXIS 021.09 HDFC 8G.09 ICICI 1;0.;4 OTA 02.22 INDUSIND 82.@@ TOTA$ 00GF.48
3AN
SMA$$ OTHERS PRIORITY (>)
[email protected] 002.4G 98.84 88.;@ 8.0; 0;4.G1
(B)
SECTOR
PRIORITY
;G.F0 @F.F2 [email protected] @.2@ 82.29 499.G2
( 1L>LB ) >15K4 141 1BK4B JBJ 1KK
>K5J 54>B J>111> 5K>5 B>J 4>4>
PRIORITY SECTOR
NPA NPA
(ADVANCED 3O3 3OI DENA PN3 U3I
NON-
RSCRORE ) 4@G1 89G1 00G2 8FF9 019@
842 894 02G @@8 01F
5hen we talk about public sector banks they are more in priority sector and they given advanced to weaker sector or industries. industries. ublic sector banks give more loans to %griculture , small scale and others units and as a result we see that there are more number number of &% &% in public public sector banks than than in private sector banks. banks. $*$ given more advanced to priority sector in 922F/2; than other four banks and "ena $ank is in least.
$ut when there are comparison between private bank and public sector bank still I#I# I#I#II $ank $ank has has more more &% &% in both both prior priorit ity y and and non non prior priorit ity y sect sector or with with the the comparison of public sector banks. Earge &% &% in I#I#I $ank because the strategy of bank that risk/rewa risk/reward rd attitude attitude and initiati initiative ve in each each sector sector.. %bove %bove we also also discuss that I#I#I $ank has highest deposit/investment/advance than other banks.
&ow, &ow, when we compare the all public sector banks and public sector banks on priority and non/priority sector than the figures are really shocking. $ecause in compare of private sector banks, public sector banks numbers are very large.
SECTOR 3I*3ITP H$EI# &*& 3T 3T T*T%E
PU3$IC SE SECTOR >55J-5 >55-5 >>4K 45 1K1K BJ5>
>K> >44 11JB B44
NEW PRIVATE >55J-5 >55-5 1J B 55 J>1
>55 5 BB4 1514
!ere, there are huge difference between private and public sector banks &%. There is increase in new private sector banks &% of 3s.@0@; cr in 922F/2; which is almost GGO rise rise than previous previous year. year. In public sector sector banks the numbers numbers are not increased like private sector banks.
CHAPTER-J FINDING SUGGESTION CONC$USION
FINDING
or the purpose of analysis and comparison between private sector and public sector banks, we take five/five banks in both sector to compare the non performing assets of banks. banks.
or underst understand anding ing we further further bifurc bifurcate ate the non performin performing g assets in
priority sector and non priority sector, gross &% &% and net &% &% in in percentage as well as in rupees, deposit 6 investment 6 advances. 44O respondent think the bank will always face the problem of npa because of poor recovery of advances granted by the bank while @4O don?t think. @4O of the respondents are satisfied with uneven scale of repayment schedule with higher repayment in the initial years normally is preferred 44O of the respondents are not satisfied with that statement G2O of the respondents were think the banks should not only take steps for reducing present &%s, &%s, but necessary precaution should also be taken to avoid future &%s &%s . @2O of the respondents are not satisfied with that statement. "eposit 6 Investment 6 %dvances is the first in the analysis because due to these we can understand understand the where the bank stands stands in the competitiv competitivee market. %s at end of marc march h 922; 922;,, in priv privat atee sect sector or I#I# I#I#II $ank $ank is the the high highes estt depo deposi sit/ t/in inve vest stme ment nt//
advances figures in rupees crore, second is !"# $ank and '*T%' '*T%' $ank has least figures. In public public sector sector banks banks un(ab un(ab &ation &ational al $ank $ank has highes highestt deposi deposit/i t/inve nvestm stment ent// advances but when we look at graph first three means $ank of $aroda and $ank of India are almost the similar in numbers and "ena $ank is stands for last in public sector bank. bank. 5hen we compare compare the private sector sector banks with public public sector banks among these banks, we can understand the more number of people prefer to choose public sector banks for deposit/investment. comparison of net npa with all banks for the year 922F/2;. %verage of these ten bank?s bank?s net &% &% is 2.4G. %nd in the public sector banks all these five banks are below this. $ut in private sector banks there are three banks are above average SUGGESTION
+ffective inspection system should be implemented.
*perating staff should scrutinize the level of inventories:receivables regularly.
Earge exposure on big corporate or single pro(ect should be avoided.
Hneven scale of repayment schedule with higher repayment in the initial years normally is preferred.
Earge exposure on big corporate or single pro(ect should be avoided
CONC$USION
It is not possible to eliminate totally the &%s &%s in the banking business but can only be minimized. It is always wise it follow the proper policy appraisal, appr aisal, supervision and follow/up of advances to avoid &%s. &%s.
The banks should not only take steps for reducing present &%s, &%s, but necessary precaution should also be taken to avoid av oid future &%s. &%s.
The bank has achieved its target because the net profit is also increased and there is a decrease in &%s. &%s. So it is in better position compared to last year
CHAPTER- 3I3$IOGRAPHY
3I3$IOGRAPHY
arket arketing ing anage anagemen mentt hilip hilip 'otler 'otler,, The ille illenni nnium um +ditio +dition, n, renti rentice ce !all !all *f India rivate Eimited, &ew "elhi.
arke rketing 3esearch rchC
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#.3.'o #.3.'otha thari ri , 9nd edition. S.& urty and H $ho(anna
5ebsite %ddressC www.hdfcbank.com www.scribed.com www.googlesearch.com
UESTIONNAIRE
UESTIONNIRE
I am student of first year $% of the B.B.I.T.. B.B.I.T.. $hopal, I am doing pro(ect on )rocedure to reduce non performing assets in banks7 as a part of study. I request you to provide the required information for the completion of my study. study. romise that the information is used exclusively for academic purpose only. only.
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