PPT STUDY ON NPA OF PRIORITY SECTION

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  • 7/26/2019 PPT STUDY ON NPA OF PRIORITY SECTION LENDING.pptx

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    STUDY ON NPA ASSET OF PRIORITY

    SECTOR LENDINDG

    MBA (B&F)-Research Project

    BY

    GANESH DATTATRAYA CHOTHE

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    OBJECTIVES :-

    2

    To know and study about the non-performing

    assets in ICICI Bank

    Find out Non-Performing Assets under the PrioritySector lending in ICICI Bank

    Make appropriate suggestions to avoid futureNPAs and to manage existing NPAs in ICICI Bank

    NPA in Priority sector lending

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    Definition of NPA : -

    The Non-Performing Asset (NPA) concept is restricted to loans, advances

    and investments. As long as an asset generates the income expected fromit and does not disclose any unusual risk other than normal commercialrisk, it is treated as performing asset, and when it fails to generate theexpected income it becomes a Non-Performing Asset.

    In other words, a loan asset becomes a Non Performing Asset (NPA)when it ceases to generate income, i.e. interest, fees, commission or anyother dues for the bank for more than 90 days.

    A NPA is an advance where payment of interest or repayment ofinstallment on principal or both remains unpaid for a period of twoquarters or more and if they have become past due.

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    Classification of NPA

    Non-performing assets further into the following three categories based onthe period for which the asset has remained non-performing and thereliability of the dues: Sub-standard assets: a substandard asset is one which has been classifiedas NPA for a period not exceeding 12 months.

    Doubtful Assets: a doubtful asset is one which has remained NPA for aperiod exceeding 12 months.

    Loss assets: where loss has been identified by the bank, internal orexternal auditor or central bank inspectors. But the amount has not beenwritten off, wholly or partly.

    Sub-standard asset is the asset in which bank have to maintain 15% of itsreserves. All those assets which are considered as non-performing for periodof more than 12 months are called as Doubtful Assets. All those assets whichcannot be recovered are called as Loss Assets.

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    CATEGORIES OF PRIORITY SECTOR

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    Reason of NPA in PrioritySection : -

    Owners do not receive a market return on their capital, In the worst case, if

    the bank fails, owners Lose their assets, In modern times, this may affect abroad pool of shareholders

    Depositors do not receive a market return on savings. In the worst case ifthe bank fails, Depositors lose their assets or uninsured balance.

    Non-Performing loans epitomize bad investment. They misallocate creditfrom good projects, which do not receive funding, to failed projects.

    When many borrowers fail to pay interest, banks may experience liquidityshortages. These Shortages can jam payments across the country.

    Major portion of bad debts in Indian Banks arose out of lending to thepriority sector at the dictates of politicians and bureaucrats.

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    The Problems caused by NPAs

    Depositors do not get rightful returns and many times may lose uninsured

    deposits. Banks may begin charging higher interest rates on some productsto compensateNon-performing loanlosses.

    Bank shareholders are adversely affected.

    Bad loans imply redirecting of funds from good projects to bad ones.Hence, the economy suffers due to loss of good projects and failure of badinvestments.

    When bank do not get loan repayment or interest payments, liquidityproblems may ensue.

    When many borrowers fail to pay interest, banks may experience liquidityshortages. These shortages can jam payments across the country.

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    https://en.wikipedia.org/wiki/Non-performing_loanhttps://en.wikipedia.org/wiki/Non-performing_loan
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    Credit Process :-

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    RBI rules and regulations with respect to priority sectorlending

    Categories

    Domestic commercial banks / Foreign banks with 20 and

    above branches

    Total Priority Sector (Target)40%

    Total agriculture(Sub-target) 18%

    Advances to Weaker Sections 10%

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    NPA percentage of Private and Public Sector Bank from 2001 to2011

    Public Sector Bank Private Sector Bank

    YEAR Gross NPAs (%) Net NPAs (%) Gross NPAs (%) Net NPAs (%)

    2001-02 11.09 5.82 9.64 5.73

    2002-03 9.36 4.54 8.08 4.95

    2003-04 7.8 3 5.85 2.8

    2004-05 5.5 2 6 2.7

    2005-06 3.6 1.3 4.4 1.7

    2006-07 2.7 1.1 3.1 1

    2007-08 2.2 1 2.3 0.7

    2008-09 2 0.94 2.36 0.9

    2009-10 2.2 1.09 2.32 0.82

    2010-11 2.4 1.2 1.97 0.53

    2011-12 3.3 1.7 1.8 0.6

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    NPA percentage of Sate Bank of India and ICICI BANK LTD as on

    March 2!"

    Bank #ross NPAs

    #ross

    Ad$ances

    #ross NPAs to #ross Ad$ances %atio

    &'()

    State Bank ofIndia *!!+, !.+**.! /.*

    ICICI Bank Ltd/ ,0.+ 2,+!0 "/22

    Above table it has been found that up to the March 2013 NPA percentage of SBIis more than ICICI bank

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    Farm Equipment Delinquency of ICICI Bank in Maharashtra state wefound following result

    BucketsSum - Total Amount

    Due

    Sum -

    TOT_PRIN_OS

    Sum -

    TOT_INST_OS

    PERCENTAGE OF

    NPA1 42267241.3 227994923.16 712 18.54

    2 24012474.8 135527828.42 397 17.71

    3 15696606.16 89765383.1 282 17.48

    4 13219737.24 66631368.9 210 19.84

    5 14078348 73778616.5 204 19.08

    6 11022139 56139807.5 149 19.63

    7 19116413.9 46577388.3 259 41.04

    8 10971516.1 27330146.7 144 40.14

    9 5709471.9 12535430.2 69 45.54

    10 5394342 11318337.7 64 47.66

    11 6311934 15463289.7 78 40.8112 3888900 9329509.9 46 41.68

    13 32984718.62 34991021.2 78 94.26

    total 204673843.02 807383051.280001 3005 25.35

    If we see in above table total amount overdue in FE product is 20.47 cr. Out of

    Total Advances 80.73 cr which is 25 % of total advances. Total Cases in Due is3005.

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    Maharashtra state we found following result

    Bucket Sum - Total Amount Due Sum - TOT_PRIN_OS Sum - TOT_INST_OS percentage

    1 4398738.05000001 50184773.97 1018 8.7650849093

    2 4236188.77 17205480.6 783 24.621159202

    3 2691839.23 6803832.53 484 39.5635727089

    4 2015526.65 3197982.12 390 63.0249505585

    5 1650157.9 1889786.9 299 87.3197872205

    6 1350750.01 1553692.1 274 86.9380754398

    7 1223119.99 1417313.75 281 86.2984635547

    8 1375781.8 1421407.4 243 96.7901109844

    9 832566.62 662935.77 154 125.587825801

    10 682149.75 575681.05 131 118.4943902531

    11 522736.8 438590.9 76 119.1855097769

    12 556542 434901.05 107 127.969799107213 2776273.97 1974549.57 515 140.6029006403

    Total Result 24312371.54 87760927.71 4755 27.7029564003

    If we see in above table total amount overdue in SHG product is 8.78 cr. Out

    of Total Advances 24.32 cr which is 27 % of total advances. Total Cases in Dueis 4755. 136/9/16

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    #e foun$ follo#ing re"ult

    Bucket Sum - Total Amount Due Sum - TOT_PRIN_OS Sum - TOT_INST_OS P%RC%NTA&%

    1 3491630.04 10160834.05 136 34.36

    2 3492625 9871914.41 157 35.38

    3 4614066.94 11751258.64 189 39.26

    4 4181215.33 11120604.69 252 37.60

    5 6733052.67 14597650.94 303 46.12

    6 4133977.79 9851972 276 41.96

    7 7581909.06 12155883.3 401 62.37

    8 7620805.59 10868276.69 346 70.12

    9 6154520.3 9634233.29 391 63.88

    10 5574774.72 8071894.6 382 69.06

    11 7692414.64 10987857.1 358 70.01

    12 5789613.28 8680589 365 66.70

    13 103296568.48 97099655.46 5773 106.38

    Total Re"ult '()*+('(*,. //.+/0/.,'( 1*/1 (+,(0

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    If we see in above table total amount overdue in ATL product is 17.04 cr.Out of Total Advances 22.49 cr which is 93 % of total advances. TotalCases in Due is 9329.

    If we observe in Agriculture sector lending of Maharashtra State ATLloan are in highest deliquency.which May possibility of huge NPA loan inATL.

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    Agriculture Sector NPA"

    Loan and NPAs of Public Sector Banks in Agriculture Sector

    Source: RBI, Report on Trend and Progress of Banking in India, various issues

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    In 2001 the NPAs of public sector banks in Agriculture sector amounted to Rs.7377