Non Performing Asset Managment
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Transcript of Non Performing Asset Managment
Welcome
On
NON PERFORMING ASSET MANAGMENT
At
Submitted By
Waghmode Mangesh BhagawanRoll no.-123
Submitted to
Garware Institute of Career Education & Development Vidyanagari, Santacruz
(East) Mumbai.Under Guidance
Mr.Govande.A
Objectives of study
To Know the Concept of Non Performing Asset . To know the reasons for an asset becoming Non-Performing Asset.
To understand the impacts of NPAs on the operations of the Bank. To study the procedure and tools used for management of NPAs.
What is NPA ?
An asset which ceases to generate income for the bank is called Non-Performing Asset. 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 '90 days from the year ending March 31, 2005.
Interest and/or installment of principal remain overdue for a period of more than 90 days in respect of a Term Loan,
The account remains 'out of order' for a period of more than 90 days, in respect of an Overdraft/Cash Credit,
A loan granted for short duration crop will be treated as NPA, if the installment of
principal and / or interest thereon remains overdue for two crop seasons, beyond due date.
A loan granted for long duration crops will be treated as NPA, if the installment of
principal and / or interest thereon remains overdue for one crop season, beyond due date.
Any amount to be received remains overdue for a period of more than 90 days in respect of other accounts.
Introduction
Role of banks in economic development.
What is loan.
NPAs: An Issue for banks and FIs in India.
Institutional credit to agriculture.
Factors behind rise in NPAsExternal factors
Willful Defaults
Natural calamities
Lack of demand
Lower price for agro product
Change on Govt. policies
Improper functioning of Debt Recovery Tribunals
Diversion of Funds: -
Ineffective legal system: -
Business failure:-
Industrial sickness
Internal factors
Defective Lending process:-
Inappropriate technology
Improper SWOT analysis
Poor credit appraisal system
Managerial deficiencies
Absence of regular industrial visit
Re loaning process
Promoter-banker nexus
Asset classification
Categories of NPAs:-
Standard Assets
Sub-standard Assets
Doubtful Assets
Loss Assets
Impact of NPAs on banks
Profitability
Liquidity
Involvement of management
Credit loss
Symptoms of NPAs Four categories of early symptoms:-
Financial
Operational and Physical
Attitudinal Changes
Others
Financial
Non-payment of the very first installment in case of term loan. Irregularity in installment. Irregularity of operations in the accounts. Unpaid over due bills. Declining Current Ratio. Payment which does not cover the interest and principal amount of that installment. While monitoring the accounts it is found that partial amount is diverted to sister concern or parent company
Operational and Physical: If information is received that the borrower has either initiated the process of winding up or are not doing the business. Stock statement not submitted on time. External non-controllable factor like natural calamities in the city where borrower conduct his business. Frequent changes in plan. Non payment of wages.
Attitudinal Changes: Use for personal comfort, stocks and shares by borrower. Avoidance of contact with bank. Problem between partners.
Others: Changes in Government policies. Death of borrower. Competition in the market.
Preventative measure to reduce NPAs
Recovery Acts, Interest Rate De-regulations & Other Incentives
Suggested strategies for effective management of NPAs
Technological Innovations
Agriculture Insurance
Increase lending through Self help group
Formulation and appraisal of projectProper identification of the borrowerMeaningful pre-sanction inspectionProper assessment of his requirementsUnder / over financing should be avoidedFinding out the technical feasibility and economic viability of the project.Timely delivery of creditFixation of proper repayment schedule is essential to recover loans in Agriculture SegmentCompliance of all the terms of sanction before release of the loanCompromise settlement
Various steps to be taken from sanctioning to recovery of the loan
This is sequel to an objective appraisal of farm credit proposals and procedure and formalities followed in the processing of loans. Following is the standard processing procedure explained.
• INTERVIEW WITH FARMER• SUBMISSION OF APPLICATION
• SRUTINY OF RECORDS• FIELD VISIT
• CRITERIA FOR ELIGIBILITY• SANCTION OF LOAN
• SUBMISSION OF DOCUMENTS• DISBURSEMENT OF LOAN
• FOLLOW UP MEASURES• RECOVERY OF LOAN
Recovery tools
Compromise/Negotiable Settlement
Debt Recovery Tribunals (DRT) The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI ACT)
Lokadalats
Asset Reconstruction Company Rephasement of loan Merger/ Acquisition/ Amalgamation
Recovery through recovery camps
Establishment of Asset Recovery Branches
Research operation Research objective:
To know reasons for an asset becoming Nonperforming at Sangli District.
To understand how Non- Performing Asset affect the performance of the all branches of the Union bank of India at sangli district
To know total advances & NPAs observed in each types of loan.
To know recovery tools taken by all the branches of UBI at Sangli District.
To understand the extent to which all the branches of Union Bank of India at Sangli District has been successful cutting down its Non-performing Asset level.
To understand the extent to which profitability affected by NPAs in branches of UBI at Sangli District.
Sampling plan
Population Size:
The population size is the managers of the branches of Union bank of India at sangli district.Sample Size:10 branches of Union bank of India at Sangli District.Sample Method:Random Sampling is used for all branches of Union bank of India at Sangli District.
Limitations of the study The limitations that I felt in my study are: The study is confined to only one company that is Union Bank of India .
The scope of this study is limited only to the study of non performing asset management in Union Bank of India at Sangli district.
Since the branches of Union Bank of India is so wide so it was not possible for me to cover all the branches of Union Bank of India.
Due to time constraint depth analysis could not be made.
The data taken for interpretation is for a limited period.
Graph -1 showing the types of branches.
Urban Semi-Urban Rural0
10
20
30
40
50
60
30
50
20
Graph -1 showing the types of branches.
Percentage
Per
cent
age
Branches
Graph- 2 Showing period of functioning of branch
24-25 28-29 29-30 >300
10
20
30
40
50
6050
20
10
20 Column2
Years
Per
cent
age
Graph -2 Showing period of functioning of branch
Graph -3 Showing presence of NPAs
10 18 18-19 19-20 >200
5
10
15
20
25
30
35
40
45
30
10
40
20
Graph -3 Showing presence of NPAs
Percentage
Years
Per
cent
age
Graph -4 Showing Approximate Value ofNPAs in Branches
0-5 15-20 20-25 25-30 >300
5
10
15
20
25
30
35
20
10
20
30
20
Graph -4 Showing Approximate Value ofNPAs in Branches
Percentage
Amount in Lakhs
Per
cent
age
Graph -5 showing the value of agriculture NPAs.
0-5 15-20 >200
5
10
15
20
25
30
35
40
4540
30
10
20
Graph -5 showing the value of agriculture NPAs.
Percentage
Amount in lakh
Per
cent
age
5-10
Chart -6 showing agriculture advances Vs total advances and agriculture NPA Vs total NPAs of the branches.
1 2 3 4 5 6 7 8 9 100
10
20
30
40
50
60
70
80
% of agri to total advances
4.2
3
0
45.1
2
52.7
9
66.6
5
0.4
185
17.7
1
27.0
1
51.8
3
28.9
3
50.6
6
53.2
6
27.6
6
0
71.1
4
65.3
3
56.7
4
57.7
5
15.6
1
0.2
4
Per
cent
age
Branch code
Chart -6 showing agriculture advances and agriculture NPA in the branches1-Civil hospital (U)
2-Kameri (S)
3-Kasbe digraj (S)
4-Madhavnagar (S)
5-Miraj (U)
6-Peth (R)
7-Sangli main (U)
8-Soni (R)
9-Tasgaon (S)
10-Vita (S)
Graph-7 Showing Age of NPA.
0-2 2 5 5 8 >80
0.5
1
1.5
2
2.5
3
3.5
2.55
3.2
2.57 2.6
Series 3
Age of NPA (Year)
Wei
ghte
d A
vera
ge
Graph -7 Showing Age of NPA.
Graph -8 Showing NPA level Controllable
Definitely Yes Yes Cant Say No Definitely No0
10
20
30
40
50
60
70
80
20
70
0 0
10
Graph-8 Showing NPA level Controllable
Percentage
Respondents Response
Perc
en
tag
e
Graph -9 Showing Advances and NPA observed in different sectors
Priority Sector Non- Priority Sector0
10
20
30
40
50
60
70
80
90
100
77.85
22.14
93.1
6.89
AdvancesNPAP
erce
nta
ge
Graph -9 Showing Advances and NPA observed in different sectors
Graph -10 Showing Advances and NPA observed in each types of loan.
Personal loan Vehical loan Housing loan0
10
20
30
40
50
60
70
80
1.31
24.3
74.38
40.23
9.94
49.82
AdvancesNPA
Per
cen
tag
e
Loan borrowed
Graph -10 Showing Advances and NPA observed in each types of loan.
Graph-11 showing the main causes of NPA.
1 2 3 4 5 6 7 8 90
1
2
3
4
5
6
7
8
9
4.3
2.13
2.78
7.2
7.7
5.34
6.7
5.27
3.8
Graph -11 showing the main causes of NPA.
Weighted Average
Weig
hte
d A
vera
ge
Causes ( Serial No.)
1-Improper selection of borrowers
2 -Deficiency in processing (sanctioning and realizing the fund).
3-Improper appraisal of assets.
4-Natural calamities.
5-Willful default of the Borrowers.
6-Demand Recession.
7-Business Failure.
8-Diversion of fund.
9-Cost Over Run
Chart -12 showing the causes for repayment failure from the farmers.
Will
fuln
ess.
Crop
dam
age.
Lower
pric
e of
agr
o-pr
oduc
t.
Natur
al cal
amiti
es.
Inad
equa
te S
urpl
us G
ener
atio
n.
Diver
sion
.
Lack
of S
uper
vision
.
Polit
ical
pre
ssur
e.0
1
2
3
4
5
6
7
5.78 6
5.25
6.23
5.1
4.25
2.52
Weighted average
Wei
ghte
d av
erag
e
Causes
Chart - 12 showing the causes for repayment failure from the farmers.
Graph-13 showing effective measure to reduce the NPAs
Recovery agent
SARFAESI Act
Lok adalats DRT Recovery camp
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5 4.6
3.5
4.23 4.13 44.2
Graph -13 showing effective measure to reduce the NPAs
Weighted average
Wei
ghte
d av
erag
e
Recovery tools
Constantdialoguewith borrowers
Chart-14 showing NPA reduced in each recovery tools
Constant dialogue with bor-
rower
Recovery agent
SARFAESI Act
Lok adalats
DRT Recovery camp
0
0.5
1
1.5
2
2.5
1.671.5
2
1.2
1.67 1.63
0
Chart -14 showing NPA reduced in each recovery tools
Weighted average
Wei
ghte
d av
erag
e
Recovery tools
Graph -15 showing the extent to which profitability affected by NPAs
0-5 >200
10
20
30
40
50
60
50
30
10 10
Percentage
Profitability affected by NPA in %
Per
cent
age
Graph -15 showing the extent to which profitability affected by NPAs
5-10 10-20
Chart -16 showing purpose for farmers have been taken loan from the bank
Agriculture House Education Other0
0.5
1
1.5
2
2.5
3
3.5
43.78
2.8
1.45
2.2
Weighted average
Wei
ghte
d av
erag
e
Purpose
Chart -16 showing purpose for farmers have been taken loan from the bank
Graph -17 showing categories of the farmers have taken loan from the bank.
Marginal Small Other0
0.5
1
1.5
2
2.5
3
2.12
2.7
1.23
Graph -17 showing categories of the farmers have taken loan from the bank.
Weighted average
Farmers category
Wei
ghte
d av
erag
e
Graph -18 showing no. of farmers account classified as defaulter on the basis of farmers category.
Marginal Small Other0
5
10
15
20
25
30
35
40
45
50
35.86
44.02
20.1
Graph -18 showing no. of farmers account classified as defaulter on the basis of farmers category.
Percentage
Farmers category
Per
cent
age
Graph -19 Showing agriculture advances and NPA observed in each types of loan.
Short term Medium term Long term0
10
20
30
40
50
60
32.52
40.8
26.68
6.52
53.33
40.14
Agriculture advancesAgriculture NPA
Per
cent
age
Loan types
Graph -19 Showing agriculture advances and NPA observed in each types of loan.
Graph-20 showing the role of Government in reducing NPA level in the bank.
More helpful Helpful Not helpful Cant say0
10
20
30
40
50
60
70
10
60
30
0
Graph-20 showing the role of Government in reducing NPA level in the bank.
Percentage
Result
Per
cent
age
Conclusion
We studied the concept of Non performing asset.
We understood different reasons behind rise in NPAs.
We understood how NPAs affect the operations of the banks.
The study then highlights the policy and recovery tools that are to be taken to reduce NPAs.
We observed that NPAs rate in personal loan is more than vehicle & housing loan.
We observed that share of NPAs in short term loan is minimum than medium & long term loan.
We observed that management of NPAs in Kasbe Digraj branch is good than other branches at sangli district.
We observed that most of the branches of UBI at sangli district profitability affected by 0-5%.
We observed that NPAs rate in small farmer’s category more than marginal & other farmers in branches of UBI at sangli district.
We also clear that opinion of the branch managers at sangli district about role of Government in reducing NPAs level in bank. v
Suggestions
It is recommended that the proper documentation and verification to be made before sanctioning the loan. Empowering staff to make decisions related to sanctioning of loans. Constant interactions have to be maintained with the customers to keep track of their loan payment. Strict measures have to be taken while issuing or sanctioning the loan. The measures can include verification of job and salary slips, verification of securities and the like. Bank should give more thrust on vehicle and housing loan instead of personal loan because NPAs rate in personal loan is more Bank should give more thrust on Constant dialogue with borrower for compromise/ recovery of critical amount to reduce NPAs level in the bank because bank get opportunity of time value of money. To encourages farmers about crop insurance and personal insurance. Avoid disbursement of loan to customer whose account is NPA from More than 3 year.
Bank have good opportunity to expand short term advances in agriculture where share of NPAs minimum in this category.
Field publicity campaign should be evolved to improve the recovery climate.
To continue a system of incentives related to performance of the managers should be devised and proper rewards are given to the bank staff for their performance in recovering the loans.
To reduce political interference.
Bank should prefer compromise option if defaulter is not willful and its good opportunity for bank to take advantage of time value of money.
Timely delivery of credit.
Meaningful pre-sanction inspection
Proper identification of the borrower
Finding out the technical feasibility and economic viability of the project.
Recovery in Agriculture segment is effort elastic, it is necessary that close follow up is maintained, on an ongoing basis, more particularly during the harvesting period.
References
www.banking .com
www.rbi.org
www.google.com
www.google.com
www.unionbankofIndia.co.in
Thank You