NON-PERFORMING

ASSETS (NPA)

Year ending

March 31

Specified period

1993 four quarters

1994 three quarters

1995 onwards two quarters

An asset, including a leased asset, becomes non-performing when it

ceases to generate income for the bank. A ‘non-performing asset’

(NPA) was defined as a credit facility in respect of which the

interest and/or installment of principal has remained ‘past due’ for a

specified period of time. The specified period was reduced in a

phased manner as under :

DEFINITION

With a view to moving towards international best practices and to

ensure greater transparency, it has been decided to adopt the ’90 days’

overdue’ norm for identification of NPAs, from the year ending March

31, 2004. Accordingly, with effect from March 31, 2004, a non-

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

i. interest and/ or installment of principal remain overdue for a

period of more than 90 days in respect of a term loan,

ii. the account remains ‘out of order’ for a period of more than 90

days, in respect of an Overdraft/Cash Credit (OD/CC),

iii. the bill remains overdue for a period of more than 90 days in

the case of bills purchased and discounted,

iv. interest and/or installment of principal remains overdue for two

harvest seasons but for a period not exceeding two half years in

the case of an advance granted for agricultural purposes, and

v. any amount to be received remains overdue for a period of

more than 90 days in respect of other accounts.

Asset

Non-performing

Asset

Loss AssetDoubtful

AssetSub-standard

Asset

Performing Asset

Standard Asset

CLASSIFICATION

Substandard Asset: Substandard asset is one which has

remained NPA for a period less than or equal to 18 months.

Doubtful Asset: Doubtful asset is one which has remained NPA

for a period exceeding 18 months.

Loss Asset: A loss asset is one where loss has been identified

by the bank or internal or external auditors or the RBI

inspection but the amount has not been written off wholly. In

other words, such an asset is considered uncollectible and of

such little value that its continuance as a bankable asset is not

warranted although there may be some salvage or recovery

value.

S.No Bank Group Year Standard Asset

Sub-standard

Asset Doubtful Asset Loss Asset

Amount % Amount % Amount % Amount %

1 Public Sector Bank 2012 38,255 97 623 1.6 490 1.2 60 0.1

2013 43,957 96.4 815 1.8 761 1.7 68 0.1

1.1 Nationalised Bank 2012 26,909 97.5 402 1.5 268 1 21 0.1

2013 3,03,396 96.8 558 1.8 424 1.3 35 0.1

1.2 SBI 2012 11,345 95.9 221 1.9 222 1.9 39 0.3

2013 13,561 95.6 258 1.8 337 2.4 22 0.2

2 Private Sector Bank 2012 9,629 98.1 52 0.5 104 1.1 29 0.3

2013 11,384 98.2 64 0.6 112 1.1 32 0.3

2.1 Old Private Sector Bank 2012 2,287 98.2 18 0.8 17 0.7 7 0.3

2013 2,679 98.1 23 0.9 23 0.8 6 0.2

2.2 New Private Sector Bank 2012 7,342 98.1 34 0.4 87 1.2 22 0.3

2013 8,705 98.2 41 0.5 89 1 25 0.3

3 Foreign Bank 2012 2,284 97.3 21 0.9 22 0.9 20 0.8

2013 2,610 97 29 1.1 27 1 23 0.9

Scheduled Commercial Bank 2012 50,168 97.2 695 1.3 617 1.2 109 0.2

2013 57,951 96.8 909 1.5 900 1.5 123 0.2

Classification of Loan Assets – Bank Group

Wise

Asset

Classification

Particulars Provision

Required

%

Standard Direct Advances to Agriculture & SME Sectors 0.25

Commercial Real Estate Advances 1.00

All other Loans & Advances not included in above 0.40

Sub-standard Secured Exposure (up to 6 months)

-6 months to 1 year

15

25

Unsecured Exposure for Escrow A/cs available in

case of Infrastructure lending, infrastructure loan

accounts (up to 6 months)

-6 months to 1 year

25

40

Other Unsecured Exposure (up to 6 months)

-6 months to 1 year

25

407

PROVISIONING NORMS

Asset

Classification

Particulars Provision Required

%

Doubtful - Secured Unsecured

D1 (Up to 2 year) 40 100

D2 (3rd and 4th year) 100 100

D3 (5th year onwards) 100 100

Loss Asset 100

•When a loan a/c of a borrower is treated as NPA, all the other loan a/c

of the borrower, even if they are otherwise regular, should be treated as

NPA as NPA classification should be borrower wise & not facility

wise.

•When various advance a/c of a borrower are in different categories of

NPA, then the provisioning shall be as per the lowest category

applicable.

BORROWER WISE & NOT

FACILITY WISE

Particulars Amount

1. Gross advances *

2. Gross NPAs *

3. Gross NPAs as a percentage of gross advances

4. Total Deductions (i+ii+iii+iv)

i) Balance in Interest Suspense account$

ii) DICGC/ECGC claims received and held pending adjustment

iii) Part payment received and kept in suspense account

iv) Total provisions held **

5. Net advances (1-4)

6. Net NPAs (2-4)

7. Net NPAs as a percentage of net Advances

Reporting Format for Non-Performing

Asset – Gross and Net Position

Name of the Bank:

Position as on ....................

(rupees in crore up to two decimals)

*excluding Technical write off of Rs. ………. crore.

** excluding amount of technical write off (Rs…….. …crores) and provision on standard assets (Rs………..crore)

$ banks which do not maintain an Interest Suspense account to park the accrued interest on NPAs, may furnish the amount of

interest receivable on NPAs as a foot note to this statement

NPA of the banks, especially PSBs have been going up sharply

recently.

The Gross NPA of the listed banks rose 35.2% to 2.43 crore lakh crore

during the first three quarters of 2013-14. in absolute terms, the 40

listed banks added ₹63,386 crore to their gross NPA during the nine

months till Dec,13, with the SBI the largest lender in the country,

leading with an accretion of ₹16,610 crore.

Item

Public

Sector

Bank

Nationalized

Bank SBI Group

Private

Sector Bank

Old Private

Sector Bank

New

Private

Sector Bank

Foreign

Bank

Scheduled

Commercial

Bank

Gross NPA

Clossing Balance for 11-12 1178 696 482 187 42 145 62 1429

Opening Balance for 12-13 1178 696 482 187 42 145 62 1429

Addition during 12-13 1198 772 425 128 41 87 41 1368

Recovered during 12-13 648 429 219 63 30 33 24 736

Written off during 12-13 78 17 60 42 1 40 0 120

Clossing Balance for 12-13 1650 1022 627 210 52 158 79 1940

Gross NPA as percent of Gross Advances

2011-12 3.3 2.8 4.6 2.1 1.8 2.2 2.6 3.1

2012-13 4.1 3.6 5 2 1.9 2 2.9 3.6

Net NPA

Closing Balance for 2011-12 593 391 202 44 13 30 14 652

Closing Balance for 2012-13 900 619 281 59 20 39 26 986

Net NPA as percent of Net

Advances

2011-12 1.5 1.4 1.8 0.5 0.6 0.4 0.6 1.3

2012-13 2 2 2 0.5 0.8 0.4 1 1.7

Trends in NPA – Bank Group Wise

0

0.5

1

1.5

2

2.5

2011-12 2012-13

NP

A %

Year

Trends in NPA

Public Sector Bank

Private Sector Bank

Foreign Bank

Bank GroupPriority

Sector

Agricultur

eMSE Others

Non

Priority

Sector

Total

Amount % Amount % Amount % Amount % Amount %

Public Sector Bank

2011-12 562 50 227 20.2 174 15.5 161 14.3 563 50 1125

2012-13 669 42.9 280 18 284 18.2 105 6.7 890 57.7 1559

Nationalised Bank

2011-12 323 48.4 129 19.3 134 20 60 9.1 345 51.6 668

2012-13 405 42.2 156 16.3 178 18.6 70 7.3 554 57.8 959

SBI Group

2011-12 239 52.3 98 21.4 41 9 100 22 218 47.7 457

2012-13 264 44.1 124 20.7 106 17.6 35 5.8 335 55.9 599

Private Sector Bank

2011-12 51 27.9 22 11.8 17 9.4 12 6.7 132 72.1 183

2012-13 52 26 22 10.9 20 9.9 11 5.3 148 74 200

Old Private Sector Bank

2011-12 18 42.9 6 13.4 7 16.8 5 12.8 24 57.1 42

2012-13 19 36.8 6 12.2 7 13.9 6 10.7 33 63.2 52

New Private Sector Bank

2011-12 33 23.4 16 11.3 10 7.2 7 4.9 108 76.6 141

2012-13 33 22.2 15 10.4 12 8.5 5 3.3 115 77.8 148

Schedule Commercial

Banks

2011-12 613 46.9 249 19 191 14.7 173 13.2 695 53.1 1308

2012-13 721 41 302 17.2 304 17.3 116 6.5 1038 59 1759

Sector wise NPA of Domestic Banks

• Economic Slowdown

Economic growth slowing down & rate of interest going up sharply,

corporate have been finding it difficult to repay loans, and it add up to

rising NPA.

•Wait and watch approach

Banks allow deteriorating asset class to go from bad to worse in the

hope of revival and often offer restructuring option to corporate.

• Poor credit assessment process

•Operational factors

Ordinary people often complain about difficulty in getting loans, while

some large borrowers just get loans on a platter.

REASONS FOR INCREASED NPA’s

•Other factors

−Project not completed in time

−Failure of business

−Willful defaulters

−Natural calamities

−Diversion of funds

•Reduce profitability

•Liquidity & Opportunity Cost

•Waste of valuable management time

•Impact on share prices

•Loss of credibility as high NPA reflect poorly on

Management

•Gross NPA more than 10% in case of Co-op. Banks,

Supervisory Action follows & restrictions imposed.

IMPACT OF NPA

•Banks should stop “ever-greening” or repeated restructuring of

corporate debt to check the constant burging of their NPA.

Management issue of ever-greening of loans could be avoided by “not

renewing loans, particularly of corporate”.

Extending those extra helping hand can go against the financial

health of banks.

•Bank need to be more conservative in granting loans to sectors that

have been traditionally found to be contributors of NPAs.

•Banks need to go much beyond the traditional analysis of financial

statements & analyzing the history of promoters. There is a need to

incorporate significance of economic factors in credit assessment

process.

HOW TO REDUCE ?

•Banks need to evolve strategy through which defaulters are kept

out of system unless they honor the previous payment.

•Banks need to look at operational factors causing increasing

incidents of bad loans.

NPA RECOVERING TOOLS

•Lok adalats

•Debt Recovery Tribunals (DRTs)

•SARFAESI ACT, 2002 (Securitization & Reconstruction

of Financial Assets & Enforcement of Security Interest Act,

2002)

Lok Adalats

Small value loans up to Rs 20 lakh can be amicably settled between

the borrower and the lender using the forum of Lok Adalats.

Debt Recovery Tribunals (DRTs)

•Narasimham Committee Report I (1991) recommended the setting up

of Special Tribunals to reduce the time required for settling cases.

Accepting the recommendations, Debt Recovery Tribunals (DRTs)

were established.

•There are 22 DRTs and 5 Debt Recovery Appellate Tribunals.

•In this court, only the recovery cases of Rs.10 Lacs & above can be

filed.

•The SARFAESI Act, 2002 gives powers of "seize and desist" to banks.

Banks can give a notice in writing to the defaulting borrower requiring

it to discharge its liabilities within 60 days.

•The Act provides three alternative methods for recovery of non-

performing assets, namely:

- Securitization

- Asset Reconstruction

•Bad loans with outstanding above Rs. 1.00 Lac.

•NPA loan accounts where the amount is less than 20% of the Principal

& Interest are not eligible to be dealt with under this Act.

SARFAESI ACT, 2002

2011-2012 2012-2013

Recovery channel

No of

cases

referred

Amount

Involved

Amount

recovered

(4) as a %

of (3)

No of

cases

referred

Amount

Involved

Amount

recovered

(4) as a %

of (3)

1. Lok Adalats 476073 17 2 11.8 8,40,691 66 4 6.1

2. DRTS 13,365 241 41 17 13,408 310 44 14

3.SARFAEST AcT 1,40,991 353 101 28.6 1,90,537 681 185 27.1

Total 6,30,429 611 144 23.6 10,44,636 1,058 232 21.9

NPAs OF Schedule Commercial Banks

Recovered through various channels

THANK YOU