85739105 Harpreet Singh Project Report on NPA

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Transcript of 85739105 Harpreet Singh Project Report on NPA

Project Report

June-July 2010Non Performing Assets


State Bank of Patiala (Bhadaur)

In Partial fulfillment for award of Degree of Master of Business Administration (MBA) of

Punjab Technical University, Jalandhar


Parneet KaurRoll No. 95202239175Submitted To -:Mr.P.JagdeshMr.Pardeep KumarDept. manager of SBOP Bhadour &Lecturer & Class- In- chargeMr.Pardeep Kumar

Assist. Manager of SBOP Bhadaur


This is to certify that Miss. Parneet Kaur has done the Major Research Project entitled Non Performing Assets under my supervision for the degree of Master of Business Administration. The work done by her is a sole effort and has not been submitted as or its part for any other degree.

Mr. Pardeep Kumar

(Lecturer & Class-In-Charge)

Arayabhatta Institute of Management



Certificate by Bank


I, PARNEET KAUR here-by declare that the project report upon Non Performing Assets for the fulfillment of the requirement of my course from PTU is an original work of mine and the data provided in the study is authentic, to the best of my knowledge.

This study has not been submitted to any other Institution or University for award of any other degree.



Parneet Kaur



It is a matter of Great Pleasure for me in submitting the project report on Non Performing Assets For the fulfillment of the requirement of my course from PTU, Jalandhar.

I am thankful to and owe a deep dept gratitude to all those who have helped me in preparing this report. Words seem to be inadequate to express my sincere thanks to Mr. Pardeep Kumar for his valuable guidance, constructive criticism, untiring efforts and immense encouragement during the entire course of the study due to which my efforts have been rewarded.I would also like to thank Mr. Ajaib Singh (Branch Manger), Mr. P.Jagdesh, (Dept. Manager), Mr. Pardeep Mittal, (Assist. Manager), who gave me an opportunity to learn the recurring acknowledgement of what is working in our lives that can help us not only to survive but surmount ours difficulties.I am highly obliged to those who had helped me to procure primary data to complete my project. Also not to be forgotten all the Lecturers of MBA who contributed their ideas and suggestions.I express my sincere thanks to whole State Bank of Patiala (Bhadour, PB.) for giving me all the facilities during my project and helping & guiding me during my whole internship period.

I want to thank all who have supported me and gave their timely guidance. Last but not least I am very grateful to all those who helped me in one-way or the other way at every stage of my work.

Parneet Kaur


Summer training is a very important part of an MBA curriculum. It provides an optimistic iconography for Future existence through which students are able to see the real industrial environment which gives an opportunity to relate theory with practice. I undertook two months training program at State Bank of Patiala (Bhadour) and worked on the project Non Performing Assets. This report is the knowledge acquired by me during this period of training.

NPAs are becoming very important topic for banks. Because it affects the financial position of any bank or any financial institution. So, as a finance student I have got this topic to study and make my report. I have tried my best to make this report.

5S.NO.ContentsPage No.

1Executive Summary8

2Chapter 1 Introduction9-13

3Chapter 2 Introduction to Banks14-21

4Chapter 3 Concept Of NPAs22-30

Asset Classification

NPA Identification Norms

Income recognition-Policy

Provisioning Norms

5Chapter 431-37

Impact of NPA upon Banks

Reasons for NPAs

Causes for an A/C becoming NPA

Early symptoms of NPAs

Sale of NPA to other banks

6Chapter 538-54

Preventive Measurement for NPA

NAP Management practices in India

Indian Economy & NPAs

Measures Initiated by RBI for

Reduction of NPAs

International Practices on NPA


Difficulties with NPAs


ContentsPage No.

7Chapter 6Research operations55-58

8Chapter 7Literature review59-61

9Chapter 8Research Methodology62-64

10Chapter 9Analysis65-76

11Chapter 10


Objectives of NPA Management



12Chapter 11





13Chapter 12Bibliography83-84


NPAs have turned to be a major stumbling block affecting the profitability of Indian banks before 1992,banks did not disclose the bad debts sustained by them and provision made by them fearing that it may have an adverse. Owing to the low levels of profitability, banks owned funds had to be strengthened by repeated infusion of additional capital by the government. The introduction of prudential norms strengthen the banks financial position and enhance transparency is considered as a milestone measure in the financial sector reform. These prudential norms relate to income recognition, asset classification, provisioning for bad and doubtful debts and capital adequacy.

An Explorative & Descriptive study was adopted to achieve the objectives of the study, and the study was conducted in SBOP Bank Bhadour, Non Performing Assets . The general objective of the study was to analyze the NPA level in SBOP Bank. However the study was conducted with the following specific objectives:-

To analyze the NPA level of State Bank of Patiala.

To study the recovery procedures of State Bank of Patiala. To examine how far the bank has been successful in reducing the NPA level. To suggest measures for efficient management of NPAs.

The major limitation of the study was the paucity of time. Even then, maximum care has been taken to arrive at appropriate conclusion. The method adopted for collection of data was personal interview with bank officials & Observations. It was also sourced from the secondary data. After collecting data from the respective sources, analysis & interpretation of data has been made. On analyzing the data, the following findings were arrived at:-

Net advances are an upward trend.

Net NPAs are also increasing

Staff productivity is increasing but is not reflected the recovery results.

Based on the findings, logical conclusions are drawn, and further, suitable suggestions & recommendations are brought out. The entire project report is presented in the form of a report using chapter scheme, developed logically and sequentially from introduction to bibliography & references.





A strong banking sector is important for flourishing economy. One of the most important and major roles played by banking sector is that of lending business. It is generally encouraged because it has the effect of funds being transferred from the system to productive purposes, which also results into economic growth. As there are pros and cons of everything, the same is with lending business that 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. The failure of the banking sector may have an adverse impact on other sectors. Non- performing assets are one of the major concerns for banks in India. NPAs reflect the performance of banks. A high level of NPAs suggests high probability of a large number of credit defaults that affect the profitability and net-worth of banks and also erodes the value of the asset. The NPA growth involves the necessity of provisions, which reduces the overall profits and shareholders value. The issue of Non Performing Assets has been discussed at length for financial system all over the world. The problem of NPAs is not only affecting the banks but also the whole economy. In fact high level of NPAs in Indian banks is nothing but a reflection of the state of health of the industry and trade. This project deals with understanding the concept of NPAs, its magnitude and major causes for an account becoming non-performing, projection of NPAs over next years in banks and concluding remarks.

The magnitude of NPAs have a direct impact on Banks profitability legally they are not allowed to book income on such accounts and at the same time banks are forced to make provisions on such assets as per RBI guidelines The RBI has advised all State Co-operative Banks as well as the Central Co-operative Banks in the country to adopt prudential norms from the year ending 31-03-1997. These have been amended a number of times since 1997. As per their guidelines the meaning of NPAs, the norms regarding assets classification and provisioning Its now very known that the banks and financial institutions in India face the problem of amplification of non-performing assets (NPAs) and the issue is becoming more and more unmanageable. In order to bring the situation under control, various steps have been taken. Among all other steps most important one was the introduction of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 by Parliament, which was an important step towards elimination or reduction of NPAs.

An asset is classified as non-performing asset (NPAs) if dues in the form of principal and interest are not paid by the borrow