NPA MANAGEMNT

7/29/2019 NPA MANAGEMNT

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A STUDYON NONPERFORMING

ASSETSIN STATEBANKOF MYSORE

Project Guide:

Mrs. Neena Prasad

Asst. Professor

DSCE DOMS

External Guide

Mr. Dinesh Ubar

Branch manager

SBM

By:

Abhijna.P

Reg No. 1DSO7MBA03


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COMPANY PROFILE

Founded : Mysore, 1913 (as Mysore bank)

Head office : Bangalore

Key people : Managing Director P.P.Pattanayak

Products : loans, credit cards, savings.

Slogan : working for better tomorrow

Industry : banking, insurance and allied industries


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NPA : NON-PERFORMING ASSET

Meaning:

An asset, including a leased asset, becomes

nonperforming when it ceases to generate income for the

bank.

A NPA is a loan or an advance where Interest and/

or installment of principal remain overdue for a period of

more than 90 days in respect of a term loan.


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INTRODUCTION

OBJECTIVE OF THE STUDY:

To analyze the NPA and its relation with operating profit of the

bank.

To study the general reasons for assets become NPAs.

To point out the amount of NPAs in SBM. What is the criteria to recover the advances from the bank.

What are the methods adopted by the bank to look after NPA

management.

Scope of this study:

To present a picture of movement of NPA in SBM.

To know how NPA level will affect the profit of the bank.


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RESEARCHDESIGN

Statement of problem:The bank will always face the problem of NPA because

of poor recovery of advances granted by the bank and severalother reasons like adopting a poor recovery strategies sowhen the loan is not recovered from the bank effectively andefficiently that balance amount will become the NPA to the

bank it may create some huge problem to the banks netprofit.

The study completely depends on the secondary data.

The secondary data collected from SBMs annual reports.

RBIs Annual reports.

SBMs quarterly bulletins.

SBMs website.


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ANALYSIS

Items 2005-06 2006-07 2007-08

2008-09

projected

Gross NPA level 398.13 383.76 376 336

Operating profit 438 471.58 515 721

Inference:

From the chart, it

is understood that asthe gross NPA level

started decreasing in

recent year, operating

profit started

increasing drastically.

Gross NPA v/s Operating profit


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CORRELATIONTEST

Gross NPA

Operating

profit

Gross NPA Pearson Correlation 1 -.992(**)

Sig. (2-tailed).008

N4 4

Operating

Profit

Pearson Correlation -.992(**) 1

Sig. (2-tailed).008

N4 4

INFERENCE:

There is a negative correlation exists between gross NPA of a bank

with operating profit at a 0.01 level significance. So H1 is accepted,

which states there is a significant relationship between gross NPA of a

bank to its operating profit.

HYPOTHESISH0: There is no significant relationship between gross NPA of a bank to its

operating profit.

H1: There is a significant relationship between gross NPA of a bank to its

operating profit.

** Correlation is significant at the 0.01 level (2-tailed).


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RECENTYEAR NPA PERFORMANCECHART

State bank of

Mysore

2003-

04

2004-

05

2005-

06

2006-

07

2007-

08

Group

average

2007-

08

All

banks

average

2007-

08

Net NPA ratio 2.96 0.92 0.74 0.45 0.43 1.43 1

Inference:

In recent years

Net NPA ratio has

come down

drastically, which is

very much below the

standard level of 1,which is very

favorable for the

bank.


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COMPARISONWITH OTHERGROUPBANKS

Inference:

Compared to

all other groupbanks SBM is in

good position with

0.43 NPA ratio.

SBM

SBI &

its associates

nationalised

banks

Foreign

banks

All

banks

Net NPA

Ratio 0.43 1.43 0.77 0.78 1


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SEGMENTWISEPOSITIONOF NPAS

Segment Position

as 2007

Reductio

ns during

the year

Addition

s during

the year

Position

as 2008

Industry 141.38 124.78 95.54 112.14

Trade 22.79 13.02 14.33 24.10

SSI 45.08 15.87 8.28 37.49

SBF 47.61 20.20 18.14 45.55

AGR 38.23 19.67 11.68 30.24

Personal 84.52 36.74 61.70 109.48

Misc 4.15 4.15 - -

TOTAL 383.76 234.43 209.67 359.00


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FINDINGS

The bank has achieved its target because the net profit is also

increased and there is a decrease in NPAs. So it is in better

position compared to last year.

The total NPA is 376 crore, last year it was 383.76 crore.

The loans and advances have been increased from 2006-07

to 2007-08

There is decrease in doubtful assets compared to last year.

There is a slight decrease in ROA but there is a slight

increase in ROE.


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SUGGESTIONSANDRECOMMENDATIONS

Effective inspection system should be implemented.

Operating staff should scrutinize the level of

inventories/receivables regularly.

Large exposure on big corporate or single projectshould be avoided.

Uneven scale of repayment schedule with higher

repayment in the initial years normally is preferred.


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CONCLUSION

It is not possible to eliminate totally the NPAs in the banking businessbut can only be minimized. It is always wise it follow the proper policy

appraisal, supervision and follow-up of advances to avoid NPAs.

The banks should not only take steps for reducing present NPAs, but

necessary precaution should also be taken to avoid future NPAs.

But in the case of SBM it is one of the good sign that the amount of

NPA is decreased from last financial year and it should be move like

this in future.


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REFERENCE

State Bank of Mysore

Annual reports

Other circulars

Reserve Bank of IndiaAnnual reports

NPA circulars

Internet sources: www.rbi.org.in

www.eeaecon.org

www.thehindubusinessline.com www.icai.org

www.statebankofmysore.co.in

Books and articles:

Bank Management: Timothy W.

Koch

Banking theory and practice:

K.C.Shekhar

SBM: Policy guidelines 2008-09

Business world magazine

News paper articles
http://www.rbi.org.in/http://www.eeaecon.org/http://www.thehindubusinessline.com/http://www.icai.org/http://www.statebankofmysore.co.in/http://www.statebankofmysore.co.in/http://www.icai.org/http://www.thehindubusinessline.com/http://www.eeaecon.org/http://www.rbi.org.in/


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Thank You.!

NPA MANAGEMNT

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