14 npa - an overview

8/9/2019 14 NPA - An Overview

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NPANPA An OverviewAn Overview

SUDHEENDRAN.M

SCMS - COCHIN


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NPANPA

TermTerm LoanLoan :: InterestInterest and/and/ oror installmentinstallment ofof

principalprincipal remainremain overdueoverdue >> 9090 daysdays

TheThe accountaccount remainsremains outout of of orderorder inin

respectrespect ofof anan overdraft/overdraft/ cashcash creditcredit


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NPANPA

BillsBills purchasedpurchased andand discounteddiscounted ::TheThe billbill

remainsremains overdueoverdue >> 9090 daysdays..

TheThe installmentinstallment oror interestinterest remainsremains overdueoverdue

forfor twotwo cropcrop seasonsseasons inin casecase of of sh

ortsh

ortdurationduration cropscrops andand forforoneone cropcrop seasonseason inin

casecase ofof longlong durationduration cropscrops


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Classification of AssetsClassification of Assets

1.1. Standard Assets:Standard Assets:

2.2. SubSub--standard Asset:standard Asset:

3.3. Doubtful Assets:Doubtful Assets:

DD--I Doubtful up to one yearI Doubtful up to one year

DD--II Doubtful for further two yearsII Doubtful for further two years DD--III Doubtful beyond three yearsIII Doubtful beyond three years

4.4. Loss AssetsLoss Assets::


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Provisioning

AssetAsset

ClassificationClassification

ProvisionProvision requirementsrequirements

StandardStandard assetsassets ((a)a) directdirect advancesadvances toto agriculturalagricultural && SMESME sectorssectors atat 00..2525 perpercentcent;;

(b)(b) residentialresidential housinghousing loansloans beyondbeyond RsRs.. 2020 lakhlakh atat 11 perper centcent;;

(c)(c) advancesadvances toto specificspecific sectors,sectors, ii..ee..,, personalpersonal loansloans (including(including

creditcredit cardcard receivables),receivables), loansloans andand advancesadvances qualifyingqualifying asasCapitalCapital MarketMarket exposures,exposures, CommercialCommercial RealReal EstateEstate loansloans etcetc..

atat 22 perper centcent

(d)(d) allall otherother advancesadvances notnot includedincluded inin (a),(a), (b)(b) andand (c)(c) above,above, atat

00..4040 percentpercent..

SubstandardSubstandard

assetsassets 1010 perper centcent ofof thethe totaltotal outout standingsstandings forfor substandardsubstandard

assetsassets..


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Asset ClassificationAsset Classification Provision requirementsProvision requirements

DoubtfulDoubtful assetsassets 2020%% -- 5050%% ofof thethe securedsecured portionportion dependingdepending onon thethe

ageage ofof NPA,NPA, andand 100100%% ofof thethe unsecuredunsecured portionportion..

LossLoss assetsassets ItIt maymay bebe eithereither writtenwritten offoff oror fullyfully providedprovided byby thethe

bankbank.. TheThe entireentire assetasset shouldshould bebe writtenwritten offoff

IfIf thethe assetsassets areare permittedpermitted toto remainremain inin thethe booksbooks forfor

anyany reason,reason, 100100 %% ofof thethe outstandingoutstanding shouldshould bebe

providedprovided forfor..


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Factors for rise in NPAsFactors for rise in NPAs

External FactorsExternal Factors

Internal FactorsInternal Factors


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External FactorsExternal Factors

Ineffective recovery tribunalIneffective recovery tribunal

Wilful DefaultsWilful Defaults

Natural calamitiesNatural calamities

Industrial sicknessIndustrial sickness

Change on Govt. policiesChange on Govt. policies

Lack of demandLack of demand


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Internal FactorsInternal Factors

Defective Lending processDefective Lending process

Inappropriate technologyInappropriate technology

Improper swot analysisImproper swot analysis

Re loaning processRe loaning process

Absence of regular industrial visitAbsence of regular industrial visit

Poor credit appraisal systemPoor credit appraisal system

Managerial deficienciesManagerial deficiencies


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Impact of NPA

PROFITABILITYPROFITABILITY

LIQUIDITYLIQUIDITY

INVOLVEMENT OF MANAGEMENTINVOLVEMENT OF MANAGEMENT

CREDIT LOSSCREDIT LOSS


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Preventive Measures For NPAPreventive Measures For NPA

EARLY RECOGNITION OF THE PROBLEMEARLY RECOGNITION OF THE PROBLEM

IDENTIFYING BORROWERS WITH GENUINEIDENTIFYING BORROWERS WITH GENUINE

INTENTINTENT

TIMELINESS AND ADEQUACY OFTIMELINESS AND ADEQUACY OF

RESPONSERESPONSE


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NPA MANAGEMENTNPA MANAGEMENT -- RESOLUTIONRESOLUTION

DebtDebt RecoveryRecovery TribunalsTribunals

LokLok AdalatsAdalats

CompromiseCompromise SettlementSettlement SchemesSchemes

EnactmentEnactment ofof SARFAESISARFAESI ActAct

CorporateCorporate DebtDebt RestructuringRestructuring CellCell


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NPA MANAGEMENTNPA MANAGEMENT -- RESOLUTIONRESOLUTION

IncreasedIncreased PowersPowers toto NationalNational CompanyCompany LawLawTribunalTribunal

(( NCLTNCLT ))

ProposedProposed RepealRepeal ofof BoardBoard forfor IndustrialIndustrial &&FinancialFinancial ReconstructionReconstruction (( BIFRBIFR ))

SaleSale ofof NPANPA toto otherother banksbanks

LiquidationLiquidation


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2003-04 2004-05 2005-06 2006-07 2007-08

Public Sector 2.99 2.06 1.32 1.05 0.99

Old Pvt. Sector 3.85 2.74 1.65 0.91 0.66

New Pvt. Sector 2.36 1.85 0.78 0.97 1.21

Foreign Banks 1.48 0.86 0.83 0.97 1.21

Scheduled Com. 2.9 2 1.22 1.01 1

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

NPA Rati s as % of Net Advances


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2003-04 2004-05 2005-06 2006-07 2007-08

Public Sector 1.28 0.95 0.72 0.62 0.59

Old Pvt. Sector 3.64 3.15 2.51 1.85 1.31

New Pvt. Sector 2.42 1.56 0.96 1.07 1.4

Foreign 0.66 0.42 0.41 0.34 0.34

Sch. Comm. 1.2 0.92 0.67 0.58 0.57

0

0.5

1

1.5

2

2.5

3

3.5

4

Net NPA Ratio as % ofTotal Assets


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14 npa - an overview

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