Study of NPA by Ajinkya (3)Final

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Transcript of Study of NPA by Ajinkya (3)Final

Study of Non-Performing Asset

A Project Report On

A study on NPAs in Co-op banking sectorOF

The Seva Vikas Co-op Bank LTD By sssssssssssss Under the Guidance of sssssssssss Submitted To University of Pune

In partial fulfillment of the requirement for the award of the Degree of Master of Business Administration (MBA) ssssssssssssssssssPune

ACKNOWLEDGEMENT

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Study of Non-Performing AssetFirst and foremost I would like to thank Seva Vikas co-op bank, kothrud branch and Staff Training College, Pune for giving me an opportunity to work as a summer trainee. I would also thank Mrs Adtiee Huprikar, Staff Training College and Mrs Shilpa Dhameja, Faculty, Staff Training College, Seva Vikas Co-op bank, my project guide from Seva vikas co-op bank for sharing their expertise in banking. I am grateful to them for giving me the project idea and providing never-ending motivation.

I take this opportunity to express my sincere gratitude towards internal project guide Mr Deepak Artwani for his invaluable guidance and support during the course of development of this project. Without his cooperation and constant encouragement this project would not have materialized.

I also thank Mr Promod Jogdeov, Executive Direrctor, SBS, for playing the ideal mentor and being a constant source of inspiration throughout.

Lastly, I also thank to the innumerable sources of information and many direct & indirect helping hands without which this project work would not have been possible.

DECLARATION

I MR AJINKYA RANJIT GHOLE .Student of Sankalp business School ,Pune Hereby Declare That The Project Report Submitted By Me Is An Orignal Work 2

Study of Non-Performing AssetConducted By Me For Partial Fulfillment Of Degree Of MASTERS OF BUSIN -ESS ADMINISTRATION And Same Has Not Been Submitted By Me For Any Other Examination Of This University Or Any Other University.

AJINKYA RANJIT GHOLE.

EXECUTIVE SUMMARY

The main basis of banking is granting of credit facilities for economic activities. Apart from raising funds through fresh deposits, borrowings, etc. recycling of funds received back from borrowers constitutes a major part of funding credit dispensation activity. Nonrecovery of principal along with the interest on the loan portfolio wipes out the 3

Study of Non-Performing Asseteffectiveness of the process of credit cycle. Non-recovery also affects the profitability of banks besides being required to maintain more owned funds by way of capital and creation of reserves and provisions to act as cushion for the loan losses. Avoiding loan losses is one of the major concerns of management of banks. While complete elimination of such losses is not possible, bank managements aim to keep the losses at a low level. In fact, it is the level of Non-Performing Assets (hereafter known as NPA), which, to a great extent, differentiates between a healthy and weak banking business. In India, the Non Performing Assets, which are considered to be at higher levels than those in other countries, have attracted the attention of public as also of International Financial Institutions. This has gained further importance in the wake of transparency and disclosure measures initiated by Reserve Bank of India during recent years. These developments have prompted me to undertake a study of NPAs in banks, to understand the problem, its genesis and influence on the banking industry.

The project consists of identifying the causes of non-recovery, impact of NPAs on the financial position of the bank, study of Income Recognition and Asset Classification norms and understanding NPA management through a case study.

Index

Sr.No.

Topic

Page No.

4

Study of Non-Performing AssetChapter I Introduction To Study

Chapter II

Company profile

2

Chapter III

Research methodology

6

Chapter IV

Theoretical Background

7

Chapter V

Data Analysis And Interpretation

8

Chapter VI

Finding And Conclusion

20

Chapter VII

Recommendation

61

Chapter VIII

Bibliography

88

Chapter IX

Annexure

96

Chart Index5

Study of Non-Performing Asset Sr No.Chapter I Chapter II Chapter III Chapter IV

TopicsDeposites Loans And Advances

Page NO

ProfitGross And Net NPA

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INTRODUCTION

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Study of Non-Performing Asset

Introduction To Study Of NPANon Performing asset (NPA) is defined as a credit facility in respect of which the interest and/or installments of principal has remained over due for a specified period of time i.e. more than 90 days. Before coming to the main topic of Non-Performing-Assets it is important to acknowledgement the relationship of credit and risk associated with lending. The Bank of international settlement Basel, Switzerland, states, Granting credit involves accepting risks as well as producing profits. This statement clearly goes out to show that how important credits are to the banks and how it affects profits. The risk perception implies admission of the fact that some risk is inherent in all credit transactions irrespective of the fact that securities and other precautions are in place. It is also true that for the sake of risk aversion alone, the bank cant stop credit expansion, since the remedy to the problem does not lie there at all. The fact that credit forms nearly 70% of the total assets of the bank and thus cannot be ignored. In all it can be summed up to say that banks cant do without credit and credit cannot be without risk. For study of non-performing assets study of Income recognition, asset classification and provisioning is important. Income Recognition means an eligibility of any account to debit the interest and credit the same to Profit and Loss account. Income can be recognized only if the account is classified as standard asset. Interest accrued but not recovered in specified period cannot be recognized for profit. Generally earlier to 1992 there was a method of the bank used to charged interest on loan and show as income irrespective of whether it was actually received or not. Naturally there was a rosy picture of profit and loss account. 8

Study of Non-Performing AssetTo avoid such practice it was felt necessary to apply NPA concepts and following it methodically.

Assets are classified as follows 1. Standard Assets 2. Sub-standard assets 3. Doubtful assets 4. Loss assets

The asset classification depends on the performance of the account. For these assets classification there are some guidelines and provisioning norms given by RBI.

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Study of Non-Performing Asset OBJECTIVES OF THE STUDY

1. To study Non Performing Assets of SEVA VIKAS CO OPP BANK 2. Identify the Causes of Non Performing Assets and their Impact on Banks 3. Study the Prudential Norms with respect to Income Recognition, Asset Classification and Provisioning. 4. Study the case about restructuring of loan . 5 Recovery of Non-Performing Assets

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Study of Non-Performing Asset

Scope Of StudyConcept of NPA can be studied in each and every bank .therefore the scope of this subject is wide ; but the scope of the study is limited to the study of Seva Vikas Co Op Bank.

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Study of Non-Performing Asset

COMPANY PROFILE

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Study of Non-Performing Asset

COMPANY PROFILE SEVA VIKAS CO-OP BANKHISTORY-

Known as a serving common mans, bank since inception, seva vikas co-op bank was registered on 23th april 1971 with an authorized capital of 11.00 lakh and commenced its business on 25 th june.1971. Its initial help to small units gave birth to many of todays industrial houses. The Bank expanded rapidly. It now has 13 branches (as on 31.03.2011) all over pune. The bank has largest network of branches by any public sector bank in the state of Maharashtra. Believing in the philosophy of technology with personal touch, seva vikas bank aims to cater all types of need of the entire family, in the whole country. Its dream is SEVA + VIKAS, AND HUGE DEVELOPMENT. IT help in giving more and more services with simplified procedures without intervention of Government.

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Study of Non-Performing Asset

VISIONTo be a vibrant, forward looking, techno-savvy, customer centric bank serving diverse sections of the society, enhancing shareholders and employees value while moving towards global present

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Study of Non-Performing Asset

MISSION To ensure quick and efficient response to customer expectation. To innovate products and services to cater to diverse sections of society. To adopt latest technology on a continuous basis. To build proactive, professional and involved work force. To enhance the shareholders wealth through best practices and corporate governance. To enter international arena through branch network.

THE EMBLEMThe Diya in Hand The hands indicates support to society. And people Diya indicates ujala in the society, and in life of commam people . ATTRIBUTES OF THE BANK The Bank has rolled out 13 branches under Core Banking Solution. The Bank is going to soft launched multiple delivery channels like Internet Banking, Phone Banking and Mobile Banking. Real Time Gross Settlement (RTGS) scheme is implemented at 13 branches. Instant Remit facility is made available on RTGS platform at these 13 branches. National Electronic Funds Transfer (NEFT) is also made available at these 13 branches.

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Study of Non-Performing Asset Lockers facilites,safe deposite,stamp franking,SWIFT,ABB anywhere branch bankiang ,sms facility for account status.

VISION 201