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PROJECT PRESENTATION

NON PERFORMING ASSETS AND FINANCIAL PERFORMANCE - A CASE STUDY OF KERALA GRAMIN BANK, A R NAGAR BRANCH

UNDER THE GUIDANCE OF , PRESENTED BY,

Dr. P. MOHAN DHANYA KP

PROFESSOR CUANCOM008

Non- performing assets are one of the major concerns for banks in India. NPAs reflect the performance of banks. A high level of NPAs suggests high probability of a large number of credit defaults that affect the profitability and net-worth of banks and also erodes the value of the asset. The NPA growth involves the necessity of provisions, which reduces the overall profits and shareholders’ value. This project deals with understanding the concept of NPAs, its magnitude and major causes for an account becoming non-performing, projection of NPAs over next years in banks and concluding remarks.

INTRODUCTION

STATEMENT OF THE PROBLEM Providing Credit facility to the borrower is one of the

important factors as far as banking sector is concerned.The

borrowers are not repaying the amount to the banks

regularly as per the due dates; it is affecting the performance

of the banks. As per the new banking regulation if the

borrower not paid the principle and interest amount within

90 days it is to be considered as Non- Performing Assets. Here the study is carried out to understand the management

of NPAs in KGB and to find out how NPA related to the

profitability and financial performance of KGB.

To study the extent of NPA and its effect on profitability of the bank

To study the trend in NPA and the reasons for such changes To evaluate the process of loan appraisal, disbursal and

recovery and its effect on NPA . To offer suggestions based on findings of the study. To analyze financial performance of banks at different level of

NPA

OBJECTIVES

This can also be applicable to know the reasons of increase in NPAs. This project also gives light upon Impact of NPAs. Concept of NPAs can be made clear. To study what kind of role NPAs are playing upon the operations of the

Bank. To know the variables available to control NPAs. The need also has been felt to study the financial performance of KGB

bank

SCOPE AND SIGNIFICANCE OF STUDY

Research design is simply the specific presentation of the various steps in the process of research. In this project the research design adopted is descriptive research.

RESEARCH DESIGN

Gross advances Total deposits Gross NPA Net NPA Additions to NPA Reductions to NPA Provisions towards NPA Asset quality Recovery channels

STUDY VARIABLES

Primary data The primary data were collected with interview schedule from the

managers and other officers of the Bank and in-depth interview was also be conducted to collect qualitative data.

Secondary data

The secondary data will be compiled from: Bank records Publications Website information Journals

Sources of data

DATA COLLECTION TOOLS

A structured interview Documents

DATA ANALYSIS TOOLSA. Accounting tool: Ratio analysis Percentage analysis

B. Statistical tool: Correlation

C. Presenting tool: Table Diagram Chart

COMPANY PROFILE

Kerala Grameen Bank (KGB) is a Regional Rural Bank (RRB) formed on 08.07.2013, under the Sub-Section (1) of Section 3 of the RRB Act 1976 (27 of 1976). The bank was formed by amalgamating the

two RRBs of Kerala namely South Malabar Grameen Bank and North Malabar Grameen Bank through a notification by the government of India. The head

office of Kerala Grameen Bank is at Malappuram and the sponsor bank is Canara Bank. Kerala Grameen

Bank is the largest Regional Rural Bank in the country with a total business of above 20,000 Crore

and a network of 565 branches spread all over Kerala. The Bank has a well dedicated team of 3400 odd staff members. It is having dominant presence in all the 14

districts of Kerala State and is the only RRB in the State.

Total advances of the bank is increasing which show the total business of the bank is increasing in a good rate last 3 years with an average growth rate of 30%.It means the credit business of the firm is increasing a good rate.

The Gross NPA of the bank is increasing in couple of years. Last year it was 17.38%. It a negative indication to the management of NPA of the firm.

During the period 2011-2012 to 2012- 2013 the Net NPA of the bank was on a declining stage this is a good indicator to the performance of the firm. Decline in NPA refers to the better performance of the firm. But in the last financial year the Net NPA of the firm increased by 27.47% it shows on an increased proportion of NPA in the performance of the bank.

FINDINGS

The movement of provision towards NPA is on a declining trend. In the last years it was 10.41%. In absolute terms it is increasing as the total advances .

The additions to NPA are increasing in the last year. In the year 2012-2013 it showed a steep decline of -38.8% but in the last year increased by 61.02%. It creates a negative impact to the performance of the firm.

Reductions to NPA increased in the last year by 54.46%. It is a good movement as concerned to the performance of the bank.

The NPA write off ratio of the bank is declining over the years. In the last year its only 1.15%. the declining ratio is a good indicator of the asset quality of the concern. The growth rate writes off shows a negative growth rate.

The Net NPA ratio of the bank is declining over the periods. In the last year it was only .29%. The ratio is reached its highest in 2010-2011. From the 2011-2012 onwards the ratio is declining in a continuous manner. It is a best indication of good management of NPA in the Bank . The Net NPA in the Net NPA Ratio of the bank increased in the year 2010-2011 due to the high addition of NPA during the year.

Gross NPA ratio of the bank is declining over the period by the last year it reached its lowest level .97%. This indicates that the bank shows following a good NPA management system.

The problem asset ratio of the bank shows a declining trend over the last 3 years. It indicates that the asset quality of the bank is good and its get strengthen over the years. The ratio reaches its lowest in the last year 2013-2014. It shows that the bank is in a good position.

The shareholders risk ratio was increased slightly in the last year to 3.52%. The ratio indicates that the risk of shareholders is very low in relation to the NPA. The bank maintains a good shareholders risk ratio.

The ratio of provision for NPA of the bank is declining continuously from 2009-2010 onwards. The provision ratio reached its minimum point in the year 2013-2014 by .46% the ratio is calculated in proportion to the total assets of the bank. The ratio indicates that the bank having a good NPA management system. The asset quality of the bank indicates to be very good.

The NPA reduction ratio showed an increase of nearly 30% over the last year. It is good indicator to asset management. The ratio indicates that on an average 50% of the Gross NPA is redeemed in the coming year.

The sub-standard assets ratio of the bank indicates an increase nearly 30% increase over the last year. The last year it was increased as the total Gross NPA of the bank increased. The increase in substandard asset will affect the asset quality of the bank.

The loss asset ratio of the bank is declined during the last year as compared to previous year to 44.86% the loss assets of the bank declined in absolute terms also. It indicates asset quality is good.

The Acceleration ratio of the bank in the last year was 127.33%. It is not a good indication towards the asset quality of the concern. The ratio indicates that as compared to reduction in NPA the proportion of addition is higher.

The Depositors Safety ratio indicates how far the customers are safe. The table and chart shows the increasing Trend of this ratio. In last year the ratio was 96.016% means the safety ratio of the bank is increasing as well as the depositors safety is also improving

The slippage ratio of the bank indicates the additions to NPA during the year as compared to standard assets of previous year. Means the amount of assets slipped into NPA. The slippage ratio was declining till 2012-13. By the last year it showed an increase in ratio. There is a 20% increase in slippage ratio in 2012-13.

Debt recovery tribunal is an important way of recovering NPA of the banks. As the recovery from the last 3 years of the bank is compared to amount involved. But the fact to be noted that the ratio is showing an increasing trend. In the last year 32.63% amount is recovered as compared to the amount involved. The DRT is also shows an increase in the number of cases referred.

Recovery through suit files as compared to the target for the period shows a recovery percentage of more than 50%. In the last year it showed a recovery of 61.3%.The recovery through suit files is an important medium of recovery.

The value of NNPA and Advances move in opposite direction so that an increase in the value of Advances, result in to a decrease in the value of NNPA. The correlation between two variables has been negative.

The values of two variables move in the same direction. An increase in the value of NNPA results in to increase in to the value of GNPA. If decrease in the value of one NNPA, results in to a decrease in the value of GNPA. The relationship between two variables has been positive.

The value of total amount of advances and total amount of deposits move on the same direction. The correlation between two variables is to be positive. It shows positive relationship between total amount of advances and the total amount of deposits

During the course of interview, number of defaulter borrowers informed that they could not pay banks dues because of personal problems. At the same time, they informed that they had not communicated their problems/difficulties to the bank. Few of them who approached the bank got satisfactory solution to their problems.

Awareness & Training Camps for Borrowers. Improvement in Recovery Act. The bank should send the continuous notices to

defaulters regarding the dues and should conduct the meeting with account holders whose accounts are in the way of becoming NPAs.

SUGGETIONS

The bank should have to adopt an independent credit rating agency for assessing the credit worthiness of the corporate borrowers.

Position of overdue accounts is reviewed on a weekly basis to arrest slippage of fresh account to NPA.

Half yearly balance conformation certificates should be obtained from the borrowers.

Due to lower credit risk and consequent higher profitability, greater encouragement should be given to small borrowers.

Adopting market intelligence for deciding the credibility of the borrowers.

Prepare good recovery policy & strategies for reducing NPA have and identify critical branches for recovery

 

CONCLUSION Finally it can conclude that the banks can avoid sanctioning loans to

the non-creditworthy borrowers by adopting certain measures. Banker can constantly monitor the borrower in order to ensure that the amount sanctioned is utilized properly for the purpose to which it has been sanctioned. The banker should get both the formal and informal reports about the goodwill of the customer. If he had already proven as a defaulter then there is no question of sanctioning loan to him. The banker also has to educate the borrowers regarding the effects and consequences of defaulting. By considering all the above factors the banker can reduce the non-performing assets in a bank.

THANK YOU