Full NPA Dessertation

A Study Of Non-Performing asset Management of Central Bank of India

Chapter 1

INTRODUCTION

1.1 What Is Bank

Finance is the life blood of trade commerce & industry. Now a days banking

sector acts as the backbone of modern business. Development of any country

mainly depends upon the banking.

The term bank id derived From the old Italian world BANCA from a

French world BANQUE both mean a bench a money exchange table. In olden

days, European money lenders or money changes used to display coins of

different countries in big heaps on benches or table for the purpose of lending

or exchanging a bank is financial institution which deals with de[posit &

advances & other related services. It receives money from those who want to

save in the from those who of deposit & it lends money to those who need it.

Also In simple words we can say that bank is financial institution that

undertakes the banking activity. It accept deposit &then lends the same to earn

certain profit activities, either directed by loaning of indirectly through.

CAPITALMARKET: - A banks links together customers that have capital

deficits & customers with capital surplus.

Due the their influential status and upon national economies, banks are highly

regulated in most countries most nations have institutionalised a system known

as fractional reserve bankingin which banks hold only a small reserve of the

funds deposited & lend how the rest for profit. They are generally subject to

minimum capital requirements bujed on an international set of capital standards

known as the Basel accords banking in its modern sense evolved in the 14 th

century in rich

cities of renaissance Italy but in many ways was q constitution of ideas and

concept of credit and lending that had its rootless in the anciet histbanking

number of banking dynasties have played central role over many centuries.

History of banking the origins of modern banking early renaissance Italy,

to the rich cities in the north like Florence Lucca, Siena, Venice & genoas. The

Burdick & Peruzzi families dominated banking in 14TH century Florence

In essence a bank is designed to ba a safe place to keep your money. If you

keep it at home instead, there is a greater chance that it is going to be lost or

stolen. But that is just how banking begins. Once the bank has lots of money,

it can make loans to people & earn interest. I can also pay interest to deposits.

I can create new & more convenient ways to pay for things, such as by check

P. R. Patil College of Engineering & Technology, Amravati


money order, bank wire, withdrawal/deposit or credit card. It can exchange

one from of currency for onther, making international commerce or travel

easier banks are involved in various forms of investment such as the stock

market & have special retirement savings accounts.. With tax deferment

features banks therefore become a part of all aspects of fining planning &

management.

Definition of bank :-

Oxford dictionary definers a bank as “establishment for

custody of money. Which it pays out on customers order.

1.2 Features of bank

1) Dealing in money :- Bank is a financial institution which deals people’s

money i.e. money depositors.

2) Individual/Firms/Company :- A bank may be a person firms or a company.

A banking company means a company which is business of banking.

3) Acceptance of deposit :- A bank accepts money from the people in the form

of deposits which are usually repayable on demand or after the expiry of fixed

period. It gives safety to the depositors’ of its customers. It also act as a

custodian of funds of its customers.

4) Giving advances:-A bank lends out money in the form of loan to those who

require it for different purpose.

5) Payment & withdrawal :- A bank provides early payment & withdrawal

facility to its customers in the form of cheques & deposit. It also brings bank

money in circulation. This money is in the form of cheques, drafts etc.

6) Agency & utility services :- A bank provides various banking facilities to its

customers. They include generally utility services & agency services.

7) Profit & service orientation :- A bank is a profit seeing institution having

service oriented approach.



8) Ever increasing functions :- Banking is an evolutionary concept there is

continuous expansion & diversification as regards the functions, services &

activities of a bank.

9) Connecting bank :- a bank act as a connecting link between borrowers &

lenders of money. Banks collect money from those who have surplus money &

give the same to those who are in need of money’.

10) Banking business :- A banks main activity should be to do business of

banking which should not be subsidiary to any other business.

11) Name identify :- A bank should always add the world bank to do its mane to

enable people to know that it is at bank & that it is dealing in money.

1.3 FUNCTION OF BANK

The Main functions of bank are accepting depots from the public & advancing

them loan However besides these functions there are many other functions

which these banks perform . All these functions can be divider under the

following head



1) Accepting deposit

2) Giving loans

3) Over-draft

4) Discounting bill of exchange

5) Investment of funds

6) Agency functions

7) Miscellaneous function.

1) Accepting deposit :- The most important functions of bank is to accept

deposits from the public, various section of society, according to their needs &

economic condition, deposit their savings with the banks.

For example :- fixed& low income group people deposit their savings in

small amounts from the point of view of security, income & saving promotion.

On the other hand, traders & businessmen deposit their savings in the banks for

the convince of payment.

Therefore keeping the needs & interest of various section of society. Banks

formulate various deposit schemes

I. Fixed deposit :- These are the deposit which are deposited for a define period

of time. This period is generally not less than one year and, therefore, these are

called as long term deposit. These deposit cannot be demanded or withdrawn

by the depositors at any time they want.

Such deposit accounts are highly useful for traders

& big business firms because they have to make payments and accept

payments many time in day.

Fixed deposit :-These are the deposit its which are deposited for a definite period

of time. This period is generally not less than oneyear& therefore, these

deposit cannot be stipulated time & therefore these are also called as time

deposits.

The se deposit generally carry a higher rate of interest because banks can use

these deposit for a definite time without having the fear of being withdrawn.

II. Saving deposit :- In such deposit money upto a certain limit can be deposited

&withdrawn once or twice in a week, on such deposit, the rate of interest in



very less. As is evident from the name of such deposits their main objective is

to mobilise small savings in the form of deposits. These deposits are generally

done by salaried people & the people who have fixed & less income.

1) Giving Loans :-The second important functions of banks is to advance loans to

its customers. Banks charge intrest from the borrowers and this is the main

source of their income. Banks advance loans not only on the basic of the

deposit of the public rather they also advance loan on the basis of the

depositing the money in the accounts of borrowers. In other words. They

create loan out of deposit and deposit out of loan. These is called as credit

creation by commercial banks. Modern banks give mostly secured loans for

productive purpose. In other eords, at the time of advancing loans , they

demand proper security or collateral is equal to the amount of loan. This is

done mainly with a view to recover the loan money by selling the security in

the event of non-refund of the loan.

At times, banks give loan on the basis of personal security

also. Therfore such loan are called as unsecured loan. Banks generally give a

following types of loan & advances.

a) Cash credit ;- In this type of credit scheme, banks advance loans to its

customers on the basis of bonds, inventories & other approved securities.

Under this scheme, banks enter into an agreement which its customers to which

money can be withdrawn many times during year. Under this set up banks

open accounts of their customers & deposit the loan money. With these type of

loan, credit is created.

b) Demand loans :- These are such loans that can be recycled on demand by the

banks. The entire loan amount is paid in lump-sum by crediting is to the loan

account of the borrowers, & thus enter loan become chargeable to interest with

immediate effect.

c) Short term loan :- These loans may be given as personal loans, loans to

finance working capital or as priority sector advance. These are made again

some security and entire loan amount is transfer to the loan account of the

borrower.



2) Over draft:- Banks advance loan to its customers up to a certain in amount

through overdraft, if there are knoe deposit in the current account for these

bank demand security from the customer & harge very high rate of interes

3) Discounting of bills of exchange: - This is the most prevent & important

method of advancing loans to the traders for short term purpose. Under this

system, banks advance loan to the traders & business firms by discounting their

bills. In these way. Businessmen get loans on the basis of their bills of

exchange before the time their maturity.

4) Investment of funds: - The bank invests their surplus fund in the three type of

security.

Government securities other approved securities, other securities. Government

securities include both , central & state government such as treasury bills

national saving certificate etc.

Other securities include security of state associated bodies like electricity

bords, housing boards, debenture of land development banks units of UTI,

shares of Regional rural bonds etc.

5) Agency functions :- Bank function in the form of agents and representative of

their customers. Customers give their consent for performance such a

functions. The important functions of these type are as follow.

Bank collect cheques , drafts bills of exchange and give a dividends of the

shares for their customers.

Banks make a payment for their clients and at a time accept the bills of

exchange. Of their customers for which payment is made at the fixed time.

Banks pay insurance premium of their customers. Besides this , they also

deposit instalment, income-tax –interest .

Bank purchase & sale securities, shares and debenture on behalf of their

customers.

Bank arrange to send money from one place to another for the convince of their

customer

1.4 Meaning of NPA



The three letter NPA strike terror in banking sector and business circle today

NPA

Of Non-Performing Asset. The dreaded NPA rule says that, when

interest or other due to bank. Remain unpaid for more than 90 days the entire

bank loan automatically turn as a non-performing Asset the recovery of loan

always a problem for bank and financial institution to overcome these first We

need to think is it possible to avoid NPA.

NPAs are an inevitable on the banking industry. Banks need to monitor

standards asset. To arrest any Account becoming an NPA. Today the success of

bank depends upon the methods of managing NPAs and keeping them with in a

to lance level.

NPA is non-performing asset is defined as a credit facility in respect of which

the interest or installment of Principal has remained past due for specified.

Non-Performing Assets, also called NON-Performing loans, are loans made by

a bank or finance company.

On which repayment or interest payments are not being made on time. A loan

is an asset for a bank as the interest payments and the repayment of the

principal create stream of each flows. It is form the interest payments than a

bank makes its profits. A high level of Non-Performing Assets compared to

similar lenders may be a sign of problems, as may a sudden increase. How ever

this needs to be looked at in the context of the type of lending being done

needs to be looked at in the context of the and type of lending being done.

Some banks lend to higher risk customers than others and therefore tend to

have a higher risk customers than others and therefore tend to have a higher

interest rates, increasing spreads.

A mortgage lenders will almost certainly have lower non-performing assets

than a credit card sealift but the latter will have higher spreads and may well

make a bigger profit on the same assets,even if it eventually has to write off

Non-performing loans

Definition:-

An asset is classified as non-performing asset (NPAs) if dues in the form of

principal and interest are not paid by the borrower for a period of 180 days.

However with effects from March 2004 , default status would be given to a

borrower if dues are not paid for 90 days. If any advance or credit facilities

granted by bank to a borrower become non-performing, then the bank will have



to treat all the advance/credit facilities granted to that borrower as non-

performing without having any granted to the fact that there still exist certain

advances/credit facilities having performing status.

For a bank or a lending institution, an NPA or bad debt is usually a loan

that is not producing income. Earlier it was largely applicable to businesses.

But things have changed with banks widely extending consumer loans (home ,

car, personal and education, among others) and strict asset classification norms.

If a borrower misses paying his equated monthly installment (EMI) for 90

days, the loan is considered bad, or an NPA are a sign of bad financial health.

This has wide-ranging ramification for a bank, especially in the stock market

and money market. So, as soon as a debt goes bad, the banks want it either

made better or taken out of their books.

To begin with it seems appropriate to define Non-performing advances,

popularly called ”NPA”

A Non Performing advances is defined as

“An advance where payment of interst or repayment of interest or

repayment of installment of principal (in case of term loans) or both remains

unpaid for of two quarters or more. An amount under any of the credit

facilities is to be treated as ‘past due’ when it is remains unpaid for 30 days

beyond due date.”

As per recommendation of narasimhan committee, it has been decided that

credit facilities granted by banks will be classified in to ‘performing’ and ‘Non

performing asset’.

“NPA is a loan (whether term loan, cash credit, overdraft, or bills discounted)

which is in default for more than threemonths.In case of such

assets, the income should be shown only on receipt and not shown in the banks

book on a due basis.”

.NPAs have become an issue for banks and financial institutions 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 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 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 fear of burgeoning non-performing assets.

The ratio of Non-performing assets to advantage reflects the quality of a

bank’s loan portfolio.

A distinction is often made between ‘Gross NPA’ and ‘NET NPA’. NET

NPA, which is obtained by deducting from gross NPA items like interest due

but not recovered, part payment received and kept in suspense account, etc, is

internationally accepted as the more relevant indicator of financial health of the

banks.

It is the level of non-performing assets which, to a grant extent, different

between a good and bad banks. The subject of high NPA levels in banks has

also been frequently raised in various areas.

1.5 IMPORTANCE OF NON PERFORMING ASSETS:

The one major cause for the current weakened state of banking sector is the

level and volume of NPAs. The problem has not been looked at in its proper

perspective. Description such as decreased portfolio and figures running into

thousands of cores have all led to treating the problem as a major one-time

aberration requiring emergency treatment. The casual explanation - politica

interface, willful defaults, targeted lending and even fraudulent behavior by

banks – allowed them selves to be pressurized into lowering their guard in the

one area of business that is their bread and butter of existence-risk assessment.

Lending to priority medium and small companies is likely to be the bank’s

main activity in the time to come. The bigger, established corporations would

have the wide world to choose from and to meet their requirement. The shift to

medium-sized borrowers and slightly riskier lending will form prime activity of

all banks. The problem will then, be to ensure that such lending is justified on

a commercial criterion.

The high level of NPAs in Indian banking sector is the result of

application of prudential norms of accounting from 1992 onwards. The

introduction of CAC is subject to the NPA level being brought down to less

than 5% from the present level if around 16%. The government of India



already initiated several steps to help banks in reducing their NPAs. Several of

these NPAs are still outstanding in the books of accounts because they are not

supported by adequate provisions.

Introduction of prudential norms on income, recognition, asset

classification and provisions during 1992-93 and other steps initiated apart

from bringing in transparency in the loan portfolio of banking industry have

significantly contributed towards improvement of the pre-sanction appraised

and post sanction supervision which is reflected in lowering of the level of

fresh accretion of NPAs of banks after 1992.

The researcher has undertaken the study of the fast developing

CENTRAL bank with reference to it’s and review, it is necessary to understand

financial position of bank. It presents a picture of movement of NPA

Chapter: 2

CONCEPT OF THE STUDY

2.1 Introduction

The concept of non-performing asset refers to which ceases to generate

income. In case of bank, all loan and advances are its assets, which can be



classified into performing and non-performing assets, which can be classified

into performing and non-performing assets. Rbi has advises the banks not to

charge interest on those loans and advance classified as non-performing asset.

NPA is short form of “Non-Performing Asset”. The dreated NPA rule say

simply this: when Intrest or other due to a bank remains unpaid for than 90

days. The entire bank loan automatically turns non performing assets. The

recovery of the loan has always been problem for the bank and financial

institutes to come out to this first we need problem for the bank and financial

institutes

To come out of this first we need to things is it possible to avoid NPA no

cannot be then is to look back after the factor responsible for it and managing

those factors.

Over a long period of time the performance of urban co-operative banks

(UCBS) has been deteriorating due to non-recovery of interest and installment

on loan portfolio.

After the deregulation of Indian economy the government has announced

a number of reform measures on the basis of recommendations of Narsimham

committee to make banking sector economically viable and competitively

strong.

The RBI introduced the concept of NPA and certain norms with effect

from 1st April 1992.

These norms were introduced not only to know the true financial picture

in the financial statements but also to take corrective action for improving the

performing in the recent years.

Mounting NPAs are adversely affecting the profitability, liquidity and solvency

position of banking sector. Hence in the context of global competition it is a

paramount task for the banks to manage their NPAs more efficiently so that

they can change their character from non performing assets to performing

assets.

With a view to moving towards international best practices and to ensure

grater transparency, it has been decided to adopt the ’90 days overdue’ norm

for identification of NPAs’ from the year ending March 31, 2004, a non-

performing asset (NPA) shell be a loan or an advance where;



1. Interest and/or installment of principal remain overdue for a period of more

than 90 days in respect of a Term Loan

2. The account remains ‘out of order’ for a period of more than 90 days, in

respect of an overdraft / cash credit(OD/CC),

3. The bill remains overdue for due harvest season but for a period not exceeding

two half years in the case of an advance granted for agriculture purpose, and

4. Interest and/or installment of principal remains overdue for two harvest season

but for a period not exceeding two half years in the case of an advances granted

purpose,

.2.2Classification Of Assets:

Assets can be classified as-

1. Standard Assets :-

A standard asset is an asset, which is not a non-performing asset.

A standard asset is one, which does not carry more that normal risk attached to

the business. Such an asset is not a non-performing asset and is performing

advance or a standard asset.

2. sub Standard asset:-

A sub standard asset is one which has remained a NPA for a

period less than or equal to 18 months.

3. Doubtful assets:-


Assets

Standard assets Sub-standard assets Doubtful assets Loss assets


An asset is classified as doubtful asset if it has remained an

NPA for a period exceeding 18 months.

4. Loss Assets

A loss asset is one where loss has been identified by the bank

or the internal or the external auditor or the RBI inspection but the amount has

not been written off wholly.

2.3 Provisions Of Norms

In order to narrow down the divergences and ensure adequate provisioning by

bank’s it suggested that a bank’s statutory auditors, if they so desire, could

have a dialogue with RBI’s Regional Office/ inspectors who carried out the

bank’s inspection during the previous year with regard to the accounts

contributing to the difference.

Pursuant to this, offices were advised to forward a list of individual advances,

where the variance in the provisioning between the RBI and the bank is above

cut off levels so that the bank and the statutory auditors take into account

assessment of the RBI while making provisions for loan loss, etc

The primary responsibility for making adequate provision for any diminution

in the value of loan assets, investment or other assets is that of the bank

managements and the statuary auditors. assessment made by the statutory

auditors in taking a decision In regard to making adequate and necessary

provisions in terms of prudential guidelines.

In conformity with the prudential norms, provision should be made on the non-

performing asset on the basis of classification of assets into prescribed an

account becoming doubtful of recovery its recognition as such the realization

of the security and the erosion over time in the value of security charged to the

bank, the banks should make provision against sub-standard assets, doubtful

assets and loss assets as below:

Loss assets:

A) The entire assets should written off after necessary from the competent

authority and as per the provision of the co-operative societies Act/Rules. If

the assets are permitted to remain in the books for any reason, 100 % of the

outstanding should be provided for.



B) In repent of an asset identified as a loss asset, full provision at 100 % should be

made if the expected salvage value of the security is negliable.

Doubtful assets:

100% of the extent to which the advance is not covered by the realizable value

of the security to which the bank has a valid recourse and the realizable value

estimated on a realistic basis.

2.4 Provisioning Norms against NPAs:-

In order to improve the quality of assets and robust resilience of

banks to handle the future event of downturn and crisis, the provision norms

have been further tightened. Accordingly, in additional to the existing

prudential guidleines to segregate the surplus provisions into a pool known as

‘counter cyclical buffer’ under the provision coverage ratio (PCR) to be

reached to 70% for non performing assets(NPAs) as per on dated sep 30, 2010,

RBI has now proposed to enhance the provisioning requirement on certain

categories of NPAs. As a result it can be observed that there is substantial rise

in the quantum of provision to be made against the NPAs. The total amount of

additional provision will have a bearing on the profit ability the banks. As such

any enhancement in the provision gives rise to different outcomes.

It will improve the quality of assets because logically banks will strengthen the

surveillance and monitoring mechanism to keep their provision levels low to

insure that their profit ability is not hurt. At the same time it will improve the

capacity of banks to avoid volatility therefore need to look at in crisis lending

to better stability ob banking sector banks therefore need to look at in form the

long term sustainability, threw in the short term, it make cut profit pie.

A broader angle of interpretation and a proactive measure to

streamline credit appraisal and stronger monitoring. Mechanism can improve a

sit quality to eventually cut provision. Banks may have to closely follower

health of their borrowers and keep a watch on the movement of their credit

ratings. The measure speaks high of RBI concern to groom banks to take on

higher volume with better credit discipline as banks move toward higher

growth trajectory.

2.5 Income Recognition –Policy



The policy of income recognition has to be objective and based on the record

of recovery. Income from non-performing assets (NPA) is not recognized on

accrual bases but is booked as income only when it is actually received.

Therefore, banks should not take to income account interest on non-performing

assets on accrual basis.

However, interest on advance against term deposit, NSCs, IVPs, KVPs and life

policies may be taken to income account on the due date, provided adequate

margin is available in the accounts.

Fees and commission earned by the banks as a result of re-negotiation or

rescheduling of outstanding debts should be recognized on the accrual basis

over the period of time covered by the re-negotiation or rescheduled extension

of credit.

If government guaranteed advanced become ‘over due’ and thereby NPA the

entrust on such advances should not be taken to income account unless the

interest has been realized.

Reversal of income on accounts becoming NPAs:

If any advanced including bills purchased and discounted become NPA as at

the close of any year, interest accrued and credited to income account in the

corresponding pervious year, should be reversed or provided for if the same is

not realized. This will apply to government. Guaranteed accounts also.

If interest income from asset in respect of a borrower becomes subject to non

accrual, fees, commission and similar income with respect to sane borrower

that have been accrued should ceased to accrue in the current period and should

be reversed or provided for if the same is not realizes. This will apply to govt.

guaranteed accounts also.

Banks undertaking equipment lasing should follow prudential accounting

standards. Lease rentals comprise two elements-a finance charge (i.e. interest

charge) and towards recovery of the cost of the asset.

The interest component alone should be taken to income account, before the

asset become NPA, and remained unrealized should be reversed or provided in

the current accounting period.

2.6 Effect on profitability

The NPA problem is on of the foremost formidable problem that have

shaken the entire banking industry. “The high level of NPA’ in banks and

financial institution has been a matter of grave concern to the public as bank



credit is the catalyst to the economic growth of the country and any bottleneck

in the smooth flow of credit, one cause for which is the mounting NPA’s is

bound to create adverse repercussions in the economy.

“The efficiency of a bank is not always reflected only by the size of its balance

sheet but by the level of return on its assets. NPAs do not generate interests

provisions for such for such NPAs from their current profits.

1. Effects on profitability

a) They erode current profits through provisioning requirement.

b) They result in reduced interest income. They require higher provisioning.

c) Requirement affecting profits and capacity to increase good quality risk assets

in future.

d) They limit recycling of funds.

e) Bank has to spend for making efforts for recovery such as expenses on notice;

follw-up and filing of civil suit & because of this expenses profit get reduced.

f) This decline in profit has a bearings on variable like the capital to risk-

weighted asset ratio (CRAR) with of civil suit& because of this expenses profit

get reduced.

g) Bank to raise Tier-I capital This is because Tier-I capital consist of statutory

and capital reserve that are essential built from profit.

h) In the face of declining profit, in order to maintain the stipulated CRAR, the

bank may have to raise Tier-2 capitals through bond issue the interest cost then

will be higher.

2. Narrow banking

a) Narrow banking means only operation with the existing assets base & not

expanding

b) The business. If NPs are high RBI may ask a bank to do only narrow banking.

c) RBI may impose adverse restriction on business of bank if NPA percentage is

very

d) high. For Example-Restriction on opening new branches, Expansion of

international operation may be curtain

3. Effects on efficiency

a) When NPAs are very high all productivity ration of the bank such as ROI

(Return On Investment) Productivity per employee and profitability ration are

adversely affected.



b) The most important business implication of the NPAs is that it lead to the

credit risk management assuming priority over other aspects of bank’s

functioning. The bank’s whole machinery would thus be pre-occupied with

recovery procedure rather that concentrating on expanding business.

c) Implication can be psychological like ‘play safe’ attitude and risk aversion,

lower moral and disinclination to take decision at all level of staff in the bank.

Factors affecting rise in NPAs:

The banking sector has been facing the serious problem 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.

1. External factor

The government has set of number of recovery tribunals,

which works for recovery of loan and advances. Due to their negligence and

ineffectiveness in their profitability and liquidity.

Willful Defaults

There are borrowers who are able to payback loans but intentionally

withdrawing it. These groups of people should be identified and proper

measure.

Should be taken in order to get back the money extended to them as advances

and laons.

Natural Calamities

This is the measure factor, which is creating alarming rise in NPAs of

the PSBs. Every now and then India is hit by major natural calamities thus

making the borrowers unable to pay back there loans. Thus the bank has to

make large amount of provisions in order to compensate those loans, hence end

up the fiscal with a reduced profit.

Mainly ours farmers depends on rain fall for cropping. Due to irregularities of

rain fall the farmers are not to achieve the production level thus they are not

repaying the loans.

Industrial sickness

Improper project handling, ineffective management, lack of adequate

resources, lack of advance technology, day to day changing government

policies give birth to industrial sickness. Hence the banks that finance those

industries ultimately end up with a low recovery of their profit and liquidity.



Lack of demand

Entrepreneurs in India could not foresee their product demand and starts

production which ultimately piles up their product thus making them unable to

pay back the money borrow to operate these activities. The banks recover the

amount by selling of their assets, which covers a minimum label. Thus.

INTERNAL FACTORS the banks record the non recovered part as NPAs and

has to make provision for it.

Change on Government 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

4. Internal factor

Defective lending process

There are three cardinal principles of bank lending that have been followed by

commercial banks since long.

I. Principles of safety

II. Principles of liquidity

III. Principles of profit ability

II.7 Principles of safety

By safety means that the borrower is in a position to repay the loan

both principles an interest. The repay of loan depends upon the

borrowers.

a. Capacity to pay

b. Willingness to pay

a) Capacity to pay depend upon:

1) Tangible assets

2) Success in business

Willingness to pay depend on:

1) Character

2) Honest

3) Reputation of borrower

The banker should, therefore take out must care in ensuring that the enterprise

or business for which a loan is sought is a sound one and the borrower is

capable of carrying it out successfully he should be a person of integrity and

good character.



Inappropriate Technology

Due to in appropriate technology and management information system,

market driven decision real time can’t be taken. MIS and financial accounting

system is not implemented in the bank which leads to poor credit collection,

thus NPA all the branches of the bank should be computerized.

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, the should analyze the purpose to the loan. To

ensure safety and liquidity, banks should grant loan for productive purpose

only should analyses the profitability, viability, long term ace tabooed of the

project while financing.

Poor credit appraisal system:

Poor credit appraisal is another factor for the fire in NPAs. Due to poor

credit appraisal; the bank gives advances to those who are not able to repay

back. They should use good credit appraisal to decrease the NPAs.

Managerial defectiveness:

The banker should always select the borrower very carefully and should

take tangible assets as security to safe guard its interest. When accepting

securities banks should consider the

1. Marketability

2. Accepting

3. Safety

4. Transferability

The Banker should follow the principal of diversification of risk based on

the famous maxim 2 “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 then

in few industries or in a few cities.

If a few big customer meets misfortune or certain traders or industries affected

adversely, the overall position of the bank will not be affected.

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 the NPA is increasing day by day.



2.8 Implication of NPA

1. The most important of the NPA is that a bank neither credit the income nor

debit to loss, unless either recovered or identified as loss.

2. If a borrower has multiple accounts, all accounts would be considered NPA if

one account becomes NPA.

3. The securitization and Reconstruction of financial Assets and Enforcement of

Security Interest Ordinance, 2002 (“the ordinance) was promulgated on

21.06.2002 and became effective immediately. The far-reaching consequences

can be one hand, the Banks and Financial Institutions will find the said

Ordinance quite handy. On the other hand, the opportunity to defend will come

to defaulters at very high cost. The purpose of the Ordinance is to check the

menace of Non-performing Assets (“the NPAs) that have been increasing by

leaps and bounds. The Ordinance was badly needed to Project the interest of

the Banks and Financial Institutions.

Process of NPA Recovery:-

Every bank in order to recover the dues has a recovery process set for them.

The usual legal recovery process adopted by the bank in the following nature.

Legal Process of Recovery


Personal visit to the Borrower

Notice to Guarantors

Authority Letter to lawyer

Demanding amount through notice

Receiving amount from client

Debit note for expenses

Not receiving amount

File case in court


During the project work I came across with cases of compromising proposals.

Thus these cases are taken in order to the practice feel of the Banks

compromises offer and recovery process adopted thereaft

Chapter3

BANK PROFILE

3.1 Introduction of central bank of India

Central Bank of India

Typ

e

BS

E&NSE:CEN

TRALBK

Ind

ustr

y

Financial

Commercial

banks

Fou

nde

d

21 December

1911; 102

years ago

Hea

dqu

arte

rs

Mumbai,

India

Key

peo

Shri. Rajeev

Rishi,


Recovery expenses

Stopped recovery process after receiving

Completion of

Lawyers argue before issuing

Argument in court if court satisfied, issue

Police station serving the summons to

http://en.wikipedia.org/wiki/India

http://en.wikipedia.org/wiki/Mumbai

http://en.wikipedia.org/wiki/Commercial_banks

http://en.wikipedia.org/wiki/Commercial_banks

http://en.wikipedia.org/wiki/Financial

http://en.wikipedia.org/wiki/National_Stock_Exchange_of_India

http://en.wikipedia.org/wiki/Bombay_Stock_Exchange

http://en.wikipedia.org/wiki/Bombay_Stock_Exchange

http://en.wikipedia.org/wiki/Types_of_business_entity

http://en.wikipedia.org/wiki/Types_of_business_entity


ple

Chairman &

Managing

Director

Rev

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19149.50

crore

(US$3.1 billio

n) (2010-11)[1]

We

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www.centralb

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in

Central Bank of India, Mumbai

Central Bank of India a government-owned bank, is one of the oldest and

largest commercial banks in India. It is based in The bank has 4100 branches

and 270 extension counters across 27 Indian states and three Union Territories.

At present, Central Bank of India has one overseas office, which is a joint

venture with Bank of India, Bank of Baroda, and the Zambian government. The

Zambian government holds 40 per cent stake and each of the banks has 20 per

cent. Recently it has also opened a representative office at Nairobi, Kenya.

Central bank of India is one of 18 Public Sector banks in India to get

recapitalisation finance from the government over the next 24 months.

Central Bank of India has approached the Reserve Bank of India (RBI) for

permission to open representative offices in five more locations - Singapore,

Dubai, Doha, London and Hong Kong.

As on 31 March 2011, the bank's reserves and surplus stood at 6,868.85 crore.

Its total business at the end of the last fiscal amounted to 2,09,757.33 crore.

3.2 History

It was established on 21 December 1911 by Sir Sorabji Pochkhanawala with

Sir Pherozeshah Mehta as Chairman and claims to have been the first

commercial Indian bank completely owned and managed by Indians.

In 1923, it acquired the Tata Industrial Bank in the wake of the failure of the

Alliance Bank of Simla.


http://en.wikipedia.org/wiki/Alliance_Bank_of_Simla

http://en.wikipedia.org/wiki/Sorabji_Pochkhanawala

http://en.wikipedia.org/wiki/Recapitalization

http://en.wikipedia.org/wiki/Bank_of_Baroda

http://en.wikipedia.org/wiki/Bank_of_India

http://en.wikipedia.org/wiki/India

https://www.centralbankofindia.co.in/



http://en.wikipedia.org/wiki/Central_Bank_of_India#cite_note-1

http://en.wikipedia.org/wiki/Crore

http://en.wikipedia.org/wiki/Indian_rupee

http://en.wikipedia.org/wiki/File:Central_Bank_of_India,_Mumbai.JPG


In 1969, the Indian Government nationalized the bank on 19 July, together with

13 others.

In the 1980s the managers of the London branches of Central Bank of India,

Punjab National Bank, and Union Bank of India were caught up in a fraud in

which they made dubious loans to the Bangladeshi jute trader Rajender Singh

Sethia. The regulatory authorities in England and India forced all three Indian

banks to close their London branches.

Central Bank of India was one of first bank to issue credit cards in the year

1980 in collaboration with MasterCard Central Bank of India announces

Financial Result for year ended 2013-Total Business Rs.402000 Cr. Net Profit-

Rs.1015 Cr. On August 1st Central Bank of India appoints new CMD Rajiv

Rishi, who was previously ED of Indian Bank and General Manager of OBC.

Raj Kumar Goyal new ED of the bank.1st November 2013 Bank open 2nd

Representative Office at Hongkong.

3.3 Bank Details

Central Bank of India, a public sector banking institution is one of the oldest

and largest commercial banks in India. The bank has their branches in 27

States and four Union Territories in India. The Bank's main business is taking

deposits, lending money and making investments.

They also offer a wide range of general banking services to our customers,

including credit cards, debit cards, cash management and remittance services

and collection services. The Bank distributes third party life and non-life

insurance policies and mutual funds on an agency basis. They act as agent for

various state governments and the Government of India on numerous matters

including the collection of taxes and the payment of pensions. They also issue

traveller's cheques and gift cheques. The Bank's deposit taking and lending

business is divided into three main areas, namely retail, agriculture and

corporate. The retail business provides financial products and services, such

as loans and advances for housing, retail trade, automobiles, consumer

durables, education and other personal loans to their retail customers. The

agricultural banking business offers direct financing to farmers for production

and investment, as well as indirect financing for infrastructure development


http://en.wikipedia.org/wiki/Union_Bank_of_India

http://en.wikipedia.org/wiki/Punjab_National_Bank

http://en.wikipedia.org/wiki/Indian_banking#Nationalisation

http://en.wikipedia.org/wiki/Government_of_India


and credit to suppliers of agricultural inputs. The Bank provides commercial

banking products and services to corporate and commercial customers,

including mid-sized and small businesses and government entities. The Bank

sponsors 7 Regional Rural Banks in collaboration with the state governments

of Madhya Pradesh, Chhattisgarh, Bihar, Maharashtra, Uttar Pradesh and

Rajasthan. Also, they entered into agency agreements with Life Insurance

Corporation of India and The New India Assurance Company Ltd to

distribute their various insurance products, for which they are paid a fee. In

order to develop rural entrepreneurship, the Bank launched a Rural

Development and Self Employment Training Institute (Rudseti) at

Hoshangabad. This provided intensive entrepreneurship training to the rural

youth and enables them to take to vocational activities. Also, the Bank

launched Financial Literacy and Credit Counseling Centre at Vadkun in

Thane, which provides free counseling to the villagers on the various banking

products, both deposits and loans and also counseling to distressed borrowers,

irrespective of whether they are bank's clients or not. Central Bank of India

was incorporated on December 21, 1911 as The Central Bank of India Ltd

and was founded by Sir Sorabji Pochkhanawala. In May 1, 1929, the Bank

incorporated The Central Bank Executor and Trustee Company Ltd (now

known as Central bank Financial and Custodial Services Ltd) as a subsidiary

of the Bank to undertake the trustee and executor business and act as

executors, administrators and trustees and executes private and public trusts,

including, religious and charitable trusts.

In the year 1969, the Bank was nationalized along with 13 other major

commercial banks and the Bank is currently owned by the Government of

India. The Bank was renamed as Central Bank of India. The Bank introduced

the credit card in the name 'Centralcard' in the year 1980. In the year 1984,

Indo-Zambia Bank Ltd, a joint venture Bank was incorporated under the laws

of the Republic of Zambia, which carries out banking activities in Zambia.In

the year 1991, the Bank incorporated Cent Bank Home Finance Ltd (formerly

known as Apna Ghar Vitta Nigam Ltd), a housing finance institution

registered with the National Housing Bank as a subsidiary of the Bank for

providing long term finance for the purchase or construction of houses in

India. In the year 1994, Quick Cheque Collection Service (QCC) & Express

Service was set up to enable speedy collection of outstation cheques. In the

year 2007, the Bank restructured their entire paid up capital by conversion of

an amount aggregating Rs 8,000 million out of the equity share capital of Rs

11,241.40 million into perpetual non-cumulative preference share capital,



while retaining the balance amount aggregating Rs 3,241.41 million as equity

share capital of the Bank. The Bank entered into agreements with UTI Asset

Management Company Pvt Ltd and Tata Asset Management Ltd for the sale

of their mutual fund products, for which the Bank is paid on a commission

basis and fee basis, respectively. During the year 2007-08, the Bank opened

96 branches and 1 new extension counters, upgraded 22 extension counters to

full fledged branches and merged 4 branches and 3 extension counters with

the base office. The Bank launched two retail lending scheme, such as Cent

Udaan, which is the scheme for educational loan for commercial pilot training

courses and Cent Swabhiman, a reverse mortgage loan scheme for senior

citizens, in which senior citizens can monetise their residential property by

mortgaging the same and in turn get periodic payments or lumpsum payment.

In May 2007, the Bank entered into an agreement with Franklin Templeton

Asset Management (India) Pvt Ltd to distribute units of schemes of Franklin

Templeton Mutual Fund. In July 2007, the Bank entered capital market with

their maiden initial public offer. The IPO received stupendous response and

was successfully oversubscribed by 62.07 times-the highest ever subscription

received by any bank in India. After this issue, the Government of India's

shareholding in the Bank reduced to 80.20%. In March 15, 2008, the Bank

entered into a MoU with SME Rating Agency of India Ltd for rating of SME

borrowers.

Central Bank of India was conferred with the 1st Award under National

Awards for Excellence in MSE Lending based on their outstanding

performance in lending to Micro and Small Enterprises during the year 2007-

08. In December 29, 2008, Kotak Mahindra Asset Management Company,

one of India's leading mutual fund houses, entered into a distribution tie-up

with Central Bank of India. Under the agreement Central Bank of India will

offer the entire bouquet of Kotak Mutual Fund products from their branches.

During the year 2008-09, the Bank opened 190 branches and 22 Extension

Counters were upgraded into full-fledged branches. Also, two branches

namely, Cuffe Parade branch and Versova Road branch were merged with

Colaba Causeway branch and Seven Bunglows branch respectively.

In August 2008, the Bank launched two premium visa credit card products -

Visa Platinum and Visa Gold credit cards. They completed roll-out of 400

ATMs by October 2008 as per Phase-l implementation. During the year, 3

RRBs namely Satpura Kshetriya Gramin Bank, Chambal Gwalior Kshetriya



Gramin Bank and Ratlam Mandsaur Kshetriya Gramin Bank in Madhya

Pradesh were amalgamated and formed a new entity with the name as Satpura

Narmada Kshetriya Gramin Bank. Also, 2 RRBs namely Uttar Bihar

Kshetriya Gramin Bank and Kosi Kshetriya Gramin Bank in Bihar were

amalgamated and formed a new entity with the name Uttar Bihar Gramin

Bank. During the year 2009-10, the Bank opened 49 branches, upgraded 11

extension counters to full fledged branches and merged 1 branch. As per the

Government of India notification, 2 RRBs namely Ballia Kshetriya Gramin

Bank and Etawaha Kshetriya Gramin Bank in Uttar Pradesh were

amalgamated and formed a new entity with the name as Ballia Etawaha

Gramin Bank. During the year, the Bank introduced new schemes to cater to

market demand. These are Short Term Loan to companies eligible for

issuance of Commercial Paper, Production Equipment Finance Scheme,

Mibor linked short term loan for large corporate and Cent Swabhiman Plus

(Annuity product) Cent Doctor and Cent Personal Gold Loan for Retail

segments. Also, they commenced loan syndication which has elicited good

response from the market. In March 2009, the Bank launched prepaid Cent-

Gift Cards and got license for issuance of prepaid Travel Cards in foreign

currency. They entered into tie-up arrangement with HCL Infosystems Ltd.,

for providing need based finance for purchase HCL computers and also

joined hands with Future Group for marketing Retail products to the

customers at Big Bazaar Departmental Store all over India.

During the year 2010-11, the company opened 82 new branches and

upgraded 53 extension counters into full fledged branches. They also opened

17 Mid Corporate branches and 1 Asset Recovery Branch. They opened 2

temporary branches for Common Wealth Games at Delhi which were closed.

The ATM network was being expanded on a large scale. Banks ATM

network in year 2010-11 was expanded from 400 to 1006. The Bank has

increased their paid-up capital by way of issue of Preference Shares in the

form of Perpetual Non-Cumulative Preference Shares (PNCPS) to the tune of

Rs 250 crore to Government of India. In August 2011, the Bank entered into

an agency tie-up with Cholamandalam MS General Insurance Company for

selling their insurance products. The products will be customised for the Bank

and will be sold through 3,728 bank branches. The Bank is in the process of

installing additional 900 ATMs including 150 bio-metric ATMs. They are

also planned to install 1000 ATMs in rural areas and 1500 off site ATMs. The

Bank is also in the process for having NEFT, direct Tax payment facility

through ATMs.



343.4

logo of bank

3.5 Products and Services offered by Bank

Central Bank offers wide variety of Loans Products and services in India ton

suit your requirements with convenience of networked branches/ ATMs and

facility of E-channels like internet and Mobile Banking, Central Bank brings

banking at your Doorstep.

Select any of our loan product and provide your details online and our

representative will contact for getting loans.

1. Home loans

2. Car loans

3. Personal loans

4. Commercia vehicle loans

5. Two Wheeler loans

1. HOME LOANS :-

Home loan Amount- restricted to a maximum of 80% of the cost of the

property or the cost of construction as applicable.

Tenor- Maximum tenure of your home loan can be 20 years. However, in case

of salaried customers it is capped at retirement age.



Home Loan Repayment Terms

In our endeavor to make taking a Home loan an easy process for you, we at

CENTRAL BANK address all your queries about the repayment terms of loan

with respect to tenure, home loan EMIS, methods of home loan EMI payments

and Pre EMI intrest.

THE REPAYMENT TENURE

Repayment tenure is the tenure for the number of year for which the loan gets

sanctioned. We offer you a wide range of option for the tenure of the loan.

You can take a home loan for up to 20 years provided you do not reach the age

of 65 years or retire within that period.

Loan repayment

An EMI refers to an equated monthly installment. It is a fixed amount which

you pay every month towards your loan. It comprises of both, principal

repayment and interest payment.

Repayment starting

Emi payments start from the month following the month in which the full

disbursement has been made.

EMI payment

The EMI to be paid every month through post-dated cheques (PDCS) or

Electronic Clearing System (ECS).If you are opting for PDCS upfront. The

PDCS are to dated on the 1st of every month. However, if you receive your

salary a few days later, we provide, we provide the flexibility of dating the

cheques for the 10 month. In case you have an CENTRAL BANk saving

account you can also go in for the facility of Auto Debit.

PDC bounces:

IN the case of a bound cheque or delayed payment, Charge and outstanding

dues will be charged as per the prevalling company policy. You can replace

old PDCS with new ones within 5-7 working days.

Pre-EMI Intrest

In the case of part disbursement ofthe loan, monthly interest is payble only on

the disbursed amount. This interest is called pre- EMI intresest (PEMI) and is



payble monthly till the final disbursement is made, after which the EMIs would

commerce.

2. CAR LOANS

Loan amount

The minimu loan amount for taking a new car loan is rs. 1,00,000. The

Maximum loan amount will depend upon the price of the car, model variant,

profile of the customer, etc.

Documentation

At CENTRAL BANK car loans, offer of the most convenient, flexible & quick

car loan of the click mouse. Keeping Your convenience in mind, we ask you

for

Minimal mandatory documents for the sanctioning of your car loan.

Income proof

Salaried individuals

Latest Salary Slip and 2 years From 16/ Income tax returns.

Self Employed individuals

Income Tax Returns of 2 previous financial years.

Partnership Firms, societies & Companies

Income Tax returns of 2 previous financial years along with complete financial/

audit report.

Documents supporting customer information

Identify proof, signature proof and address proofs as per CENTRAL BANK

norms(our representive will help you choose suitable documents)

Other document:

Partnership Fiems: Partnership deed and letter signed by all partners

authorininsing one partner to execute the required Car loans documentation.

Societies and Companies: Resolution by board of Directors (or such

managing body) & Memorandum & Articles of Association (or Society Trust

deed.)



3. PERSONAL LOANS

CENTRAL BANK personal loan:

Loan up to Rs. 10nlakhs.

No security/ Guarantor required.

Faster processing.

Minimum Documentation.

Attractive rates of interest.

Flexible repayment option of 12-48 months.

4. COMMERCIAL WEHICLE LOANS

Loan Amount:-

The loan depends on applicants requirement

Funding can be to extent of 100% of the chasis values: body funding can only

be extend on special requirement.

Repayment:-

The tenure of the loan may vary from 12 to 60 months, depending upon the

nature of the deal and the repayment capacity.

Repayment can be made through post-dated cheques (PDCs)/ ECS or through

Auto_debit in the case of CENTRAL bank account holders.

Prepayment of the loan is allowed, at a charge indicated on the Service Charges

PageIn the event of an accident, you need to inform our local representive of it.



Chapter4

RESEARCH METHODOLOGY

4.1 RESEARCH METHODOLORY

Research is a common parlance refer to search for knowledge. One can

also define research as a scientific and systematic search for pertinent

information on a particular topic. Infect, research is an art of scientific

investigation. Research methodology is a way of systematically solve the

problem. It also includes the type of data required and the type of method of

data analysis and interpretation to be used.

The system of collecting data for research projects is known as research

methodology. The data may be collected for either theoretical or practical

research for example management research may be strategically conceptualized

along with operational planning methods the change management. Some

important factor in research methodology include validity of research data.

Formulating of research question along with sampling weather probable or

non probable is followed by measurement that includes surveys. This is

followed by research design, which may be either experimental or quasi

experimental.



4.2 PROBLEM DEFINATION:-

The researcher has studied the NPA management strategies and practise,

various measures for controlling NPA in the bank, and process of NPA

management in bank with care of that not getting affected to profitability of

bank.

4.3 OBJECTIVES OF THE STUDY

To identify significant strategy for NPA management.

To study the past trends of NPA.

To calculate the rate of NPA in banking.

To analyze financial performance of banks at different level of NPAs

4.4 REASERCH DESIGN:-

Exploratory research design is use when researcher is unfamiliar with the

problem. It is design to analyses inside the stu

Sample Unit

The researcher has selected CENTRAL BANK OF INDIA

4.5 SOURCES OF DATA COLLECTION:-

Primary Data

The researcher has collected the primary data about NPA management by

personally visiting the CENTRAL BANK at main branch Amravati and

conduct the personal interview with branch manager.

Secondary data

With this, researcher has also collected secondary data from various

published sources from books, CENTRAL BANK’S annual report, Various

Research articles and RBI’s and CENTRAL Bank website.

4.6 RESEARCH PROCESS

IDENTIFICATION AND FORMULATION OF PROBLEM

REVIEW RESEARCH FINDING



REVIEW CONCEPT OF THE THEORY

RESEARCH DESIGN

COLLECTION OF DATA

ANALYSIS OF DATA

INTERPRITATION OF DATA

4.7 RESEARCH TOOLS AND TECHNIQUES

In this research the tool and technique was used for data evaluation was

Interview with branch manager, visit to the bank.

4.8 LIMITATIONS:-

To conduct research systematically the following limitation have occurred.

The study is restricted only for CENTRAL Bank of India

Approximate values are used for the analyzing. Hence the results also reveal

the approximate values.

The data analysis is on the of home loans, car loans, personal loans,

commercial vehicle loans and two wheeler loans provided by CENTRAL

Bank.

The period of study is also restricted for 3 years.

4.9 SCOPE OF THE STUDY :

The study is laid on macro level and to find the impact of NPAs in CENTRAL

BANK. It also analysis the efficiency of recovery measures undertaken by

CENTRAK BANK. Keeping in view the important CENTRAL BANK in rural

development of economic significant of CENTRAL bank operates in the

economy of the country in bank. In this study it covers how NPAs level will



affect the profit of the bank. It shows reason of the bank. It shows reason of

NPAs and Preventive Measures. It gives the opportunity to studying the

various kind of loan and its having eligibility and how to sanction it.

Chapter 5

DATA ANALYSIS & INTERPRITATION

5.1) Total NPAs for the year 2011, 2012, and 2013:

Table: 5.1 (Rs.In Lakhs)

Year Amount

2010-11 847.29

2011-12 4556.77

2012-13 4987.55

Graph 5.1



2010-11 2011-12 2012-130

500100015002000250030003500400045005000

847.290000000001

4556.774987.55

Total NPAs for the year 2011-2013

(Source: Secondary Data)

Analysis of Data:

The graph shows the total amount of defaulter of the Central bank of India during

past three years. The amount of default has decrease as the years have passed over. There

has been a drastic increase from year 2011-2013.

Interpretation:

From the above analyze data it is interpreted that bank NPA in the year 2010-11

was 847.29, and then drastic increase in the NPA in the year 2011-12 was reached at

4556.77 and in the year 4987.55.

Calculation of NPA ratio during year 2010-11, 2011-12, 2012-13

Year-2012-13

Net NPA = 4987.55

Loan = 178748.79

NPA ratio= Net NPA

Loan

= 4987.55

178748.79


= 0.0280


Year-2011-12

Net NPA = 4556.77

Loan = 6443.11

NPA ratio = Net NPA

Loan

= 4556.77

6443.11

Year-2010-11

Net NPA = 847.29

Loan = 7819.24

NPA ratio= Net NPA

Loan

= 847.29

7819.24

Table no. 5.2: NPA ratio during 2010-11, 2011-12, and 2012-13

Year NPA ratio

2010-11 0.108

2011-12 0.707

2012-13 0.0280

Graph No. 5.2: NPA ratio during 2010-11, 2011-12, 2012-13


= 0.707

= 0.108


2010-11 2011-12 2012-130

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.108

0.707000000000001

0.028

NPA ratio


Analysis of Data:

The graph shows NPA ratio in the last three years, and the more ratio was for 2011-

12.

Interpretation:

From the above analyze data it is interpreted that bank NPA ratio in the year 2010-

11 was 0.108, and then drastic increase in the NPA in the year 2011-12 was reached at

2011-12 and in the year 0.028.

Calculation of Gross NPA ratio during year 2010-11, 2011-12, 2012-13

Year-2012-13

Gross NPA = 8456.18

Gross Adv. = 172321.94

Gross NPA = Gross NPA *100

Gross Adv

= 8456.18 *100

172321.94

Year-2011-12


= 4.91%


Gross NPA = 7273.46

Gross Adv. = 147718.08


Gross Adv

= 7273.46 *100

147718.08

Year-2010-11

Gross NPA = 2394.53

Gross Adv. = 129840.57


Gross Adv

= 2394.53 *100

129840.57

Table no. 5.3: Gross NPA ratio during 2010-11, 2011-12, 2012-13

Year Gross NPA ratio

2010-11 4.91

2011-12 4.92

2012-13 1.84

Graph No. 5.3: Gross NPA ratio during 2010-11, 2011-12, 2012-13


= 4.92%

= 1.84%


2010-11 2011-12 2012-130

0.51

1.52

2.53

3.54

4.55

4.91 4.92

1.84

Gross NPA ratio


Analysis of Data:

The graph shows Gross NPA ratio in the last three years, and the more ratio was for

2011-12.

Interpretation:

From the above analyze data it is interpreted that bank gross NPA ratio in the year

2010-11 was 4.91, and then increase in the NPA in the year 2011-12 was 4.92 2011-12 and

in the year 1.84.

Year wise analysis:

5.2) Total Deposits and Advance:

Table 5.4

Year Deposits Advances

2010-11 79378.55 129840.57

2011-12 196235.32 147718.08

2012-13 226279.07 172321.94

Graph 5.4



2010-11 2011-12 2012-130

50000

100000

150000

200000

250000

79378.55

196235.32

226279.07

129840.57

147718.08

172321.94

Deposits Advances

(Source: Secondary data)

Analysis of Data:

This graph shows that total loan and advances in the last three years, mostly loan

advance for the year is 2012-13.

Interpretation:

From the above analyze data it is to be interpreted that in the year 2012-13 the

maximum deposits and advances was granted by bank, in the year the advances was

172321.94 & deposits was 226219.07. Other two years having less deposits and advances

Advance during year 2009-10

Table: 5.5 ( Rs. In Lakhs)

Type of Loan Amount

Home loan 207.56

Car loan 47.38

Personal Loan 478.56

Commercial vehicle loan 38.6

Two wheeler loan 14.67

Graph no. 5.5



Home loan Car loan Personal Loan Commercial vehicle loan

Two wheeler loan

0

100

200

300

400

500

600

207.56

47.38

478.56

38.614.67

Advance during Year 2009-10


Analysis of Data:

This graph shows that for the year 2009-10 maximum loan were being granted as

the personal loan. The minimum being granted for two wheeler loan, the home loan is near

to personal loan and higher than car loan & commercial vehicle loan.

Interpretation:


maximum loan was granted by bank for personal loan about Rs. 478.56 lakhs and

minimum for two wheeler loan about Rs. 14.67 lakhs.

.

5.6) Advance during year 2010-11:


Type of Loan Amount

Home loan 167.34

Car loan 105.89




Graph: 5.6




Two wheeler loan

0

50

100

150

200

250

300

350

167.34

105.89

306.75

54.979.8



Analysis of Data:


the personal loan. The minimum being granted for commercial vehicle loan, the home loan

is near to personal loan and higher than two wheeler loan & car loan.

Interpretation:


maximum loan was granted by bank for personal loan about Rs. 306.75 lakhs and

minimum for commercial vehicle loan about Rs. 54.9 lakhs.

.5.7) Advance during year 2011-12:


Type of Loan Amount

Home loan 647.45

Car loan 126.5




Graph: 5.7




Two wheeler loan

0

100

200

300

400

500

600

700 647.45

126.5

229.12

68.31

208.07



Analysis of Data:


the home loan. The minimum being granted for commercial vehicle loan, the personal loan

is near to home loan and much greater than two wheeler loan & car loan.

Interpretation:


maximum loan was granted by bank for home loan about Rs. 647.45 lakhs and minimum

for commercial

5.8) Advance during year 2012-13:


Type of Loan Amount

Home loan 448.56

Car loan 201.39

Personal Loan 59.89



Graph: 5.8




Two wheeler loan

0

50

100

150

200

250

300

350

400

450

500448.56

201.39

59.89103.67

19.1



Analysis of Data:


the home loan. The minimum being granted for personal loan and two wheeler loan, the car

loan is near to home loan loan and much greater than commercial vehicle loan.

Interpretation:


maximum loan was granted by bank for home loan about Rs. 448.56 lakhs and minimum

for two wheeler loan about Rs. 19.1 lakhs.

5.9) THE TOTAL LOAN SANCTION IN THE LAST FOUR YEARS

Table 5.9: Home Loan sanction

Sr. No. Year Sanction Amount

1 2012-13 5018.56

2 2011-12 6157.48

3 2010-11 1667.43

4 200910 2071.65

Graph 5.9: Home Loan sanction



2012-13 2011-12 2010-11 2009-100

1000

2000

3000

4000

5000

6000

7000

5018.56

6157.48

1667.432071.65

Home loan Sanction Amount


Analysis of Data:

This graph shows the amount of home loan sanction in the last four years and it

shows that most home loan sanction in the year 2011-12.

Interpretation:

From the above analyze data it is to be interpreted that maximum 6157.48 loan

sanction in 2011-12, then secondly 5018.56 in the year 2012-13, in the year 2009-10 it was

2071.65 and in the 2010-11 it was 1667.43.

Table no 5.10: Car Loan sanction


1 2012-13 1851.39

2 2011-12 1265.12

3 2010-11 1051.98

4 2009-10 470.83

Graph no. 5.10: Car Loan sanction



2012-13 2011-12 2010-11 2009-100

200

400

600

800

1000

1200

1400

1600

1800

2000 1851.39

1265.12

1051.98

470.83

Car loan Sanction Amount


Analysis of Data:

This graph shows the amount of car loan sanction in the last four years and it shows

that most car loan sanctions in the year 2012-13.

Interpretation:

From the above analyze data it is to be interpreted that maximum 1851.39 in the

year 2012-13, 1265.12 in the 2011-12, 1051.98 in the 2010-11 and 470.83 in the 2009-10.

Table no 5.11: Personal Loan Sanction


1 2012-13 603.98

2 2011-12 2180.91

3 2010-11 3117.75

4 2009-10 4780.56

Graph no 5.11: Personal Loan Sanction



2012-13 2011-12 2010-11 2009-100

1000

2000

3000

4000

5000

6000

603.98

2180.91

3117.75

4780.56

Personal loan Sanction Amount


Analysis of Data:

This graph shows the amount of Personal loan sanction in the last four years and it

shows that most personal loan sanctions in the year 2009-10.

Interpretation:



Table no. 5.12: Commercial Loan Sanction


1 2012-13 1137.67

2 2011-12 679.83

3 2010-11 540.09

4 2009-10 381.73

Graph no. 5.12: Commercial Loan sanction



2012-13 2011-12 2010-11 2009-100

200

400

600

800

1000

1200 1137.67

679.83

540.09381.72999999999

9

Commercial loan Sanction Amount


Analysis of Data:

This graph shows the amount of commercial loan sanction in the last four years and

it shows that most commercial loan sanctions in the year 2012-13.

Interpretation:



Table no 5. 13: Two wheeler Loan sanction


1 2012-13 201.15

2 2011-12 2280.07

3 2010-11 798.00

4 2009-10 138.96

Graph no 5.13: Two wheeler Loan sanction



2012-13 2011-12 2010-11 2009-100

500

1000

1500

2000

2500

201.15

2280.07

798

138.96

Two wheeler loan Sanction Amount


Analysis of Data:

This graph shows the amount of Two-wheeler loan sanction in the last four years

and it shows that most Two-wheeler loan sanctions in the year 2011-12.

Interpretation:


year 2011-12, 798 in the 2010-11, 138.96 in the 2009-10 and 201.15 in the 2012-13.

Chapter 6

CONCLUSION & SUGGESTIONS

6.1CONCLUSION

1. As the advance were maximum than the deposit for the respective 3 years, Ex It shows

the bank was found in loss because bank have granted more of advances as compared

to the deposit.

2. In the study of three year performance of the bank it is followed that the NPAs level

had followed a continuously decrease.

3. In the year 2010-2011 the NPAs level was higher which reduced in next two years.



4. In the year 2011-12 NPA ratio shows that the level is higher which to reduced in the

other two years.

5. It has been observed that the NPA level is highest in 2010-11 and 2012-13 .

6. More amount & advances are granted in the year 2011-12 considering at the concerned

loans for the period of study.

7. From the ratio analysis, it was found that the NPA ratio is highest than gross NPA

ratio. Which is good for the bank .

8. Due to compulsory lending to the priority sector NPA is more in central bank of India.

9. The recovery of non-performing asset is slow due to sluggish level system proving in

India.

10. Recognition of an account becoming an is not done in time.

11. To be followed by bank.

6.2) SUGGESTIONS:

1. The bank must take great care while granting of car loan, personal loan, home loan and

two wheeler loans.

2. The security of the proposal should be done considering all the point and related

aspects.

3. The security and the financial position must be given due importance.

4. The system of MPBF is a good one. It must be followed to reduce the risk on losses

After granting a loan the frequent follow up must be taken by bank or frequent visit

must be given to the clients, borrowers.



5. The assets given as a mortgage must be properly valued. Not overvalued or

undervalued.

6. During granting loan bank should analyze borrower’s financial condition.

7. Banks have to find out the original reason for the loan.

BIBLIOGRAPHY


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