comparative analysis of non performing assets of public sector private sector foreign banks

01/04/2011

A Project Report Submitted By

GAURAV S. GODWANI

In partial fulfillment for the award of the degree of

BACHELOR IN COMMERCE (HONOURS)

Under Dr. P. P. Ghosh of

ST. XAVIER’S COLLEGE (AUTONOMOUS)

Under University of Calcutta

ROLL NO: 3-01-08-0573

Comparative Analysis of Non Performing Assets of

Public Sector Banks, Private Sector Banks & Foreign Banks

PREFACE Granting of credit facilities for economic activities is the primary task of banking.

Apart from raising resources through fresh deposits, borrowings, etc. recycling of

funds received back from borrowers constitutes a major part of funding credit

dispensation activities. Non-recovery of installments as also interest on the loan

portfolio negates the effectiveness of this process of the 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. Avoidance of loan losses is one of the pre-occupations

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 advances, which, to a great extent, differentiates between a good

and a bad bank. Mounting NPAs may also have more widespread repercussions. To

avoid shock waves affecting the system, the salvaging exercise is done by the

Government or by the industry on t he behest of Government/ central bank of the

country putting pressure on the exchequer.

In India, the NPAs, which are considered to be at higher levels than those in other

countries, have, of late, attracted the attention of public as also of international

financial institutions. This has gained further prominence in the wake of

transparency and disclosure measures initiated by the RBI during recent years.

This project aims at providing an o ov erall view on t he existence of NPAs, their

treatment, the ways at resolving this issue and also a f ew reports on the recent

developments in this field.

ACKNOWLEDGEMENT

First of all I would like to take this opportunity to thank my College for having

projects as a part of the B.Com Curriculum.

I wish to express my heartfelt gratitude to the following individuals who have played

a crucial role in the research for this project. Without their active cooperation the

preparation of this project could not have been completed within the specified time

limit.

The first person I would like to acknowledge is my guide Dr. P. P. Ghosh, of

St. Xavier’s College Kolkata, who supported me throughout this project with

utmost co-operation and patience. I am very much thankful to you sir, for sparing

your precious and valuable time for me and for helping me in doing this project. I am

also thankful to the Vice Principal and Dean of Commerce, who gave us an

opportunity to make this project in our final year.

Finally, to all my friends who helped me in making this project. I want to thank

them for all their help, support, interest and valuable hints.

TABLE OF CONTENTS

Sr. No.

TOPICS Pg. No.

1. Introduction to NPA’s

Meaning of NPA

Asset Classification

Types of NPA

Reasons for an Account becoming an NPA

Impact of NPA

Early Symptoms

Preventive Measurement of NPA

Procedure of NPA Identification &

Resolutions in India

1-27

1

3

7

8

10

11

13

16

2. Objectives & Beneficiaries

28

3. Research Methodology

29

4. Analysis

31-58

5. Hypothesis Testing

59-64

6. Overall Findings

65

7. Conclusion

66

8. Suggestion

67

9. Bibliography

68

ST. XAVIER’S COLLEGE (AUTONOMOUS), KOLKATA Page 1

INTRODUCTION TO NPA

MEANING OF NPA: Non Performing Asset means an asset or account of borrower, which has been classified by a

bank or financial institution as sub-standard, doubtful or loss asset, in accordance with the

directions or guidelines relating to asset classification issued by RBI.

An amount due under any credit facility is treated as "past due" when it has not been paid

within 30 days from the due date. Due to the improvement in the payment and settlement

systems, recovery climate, up gradation of technology in the banking system, etc., it was

decided to dispense with 'past due' concept, with effect from March 31, 2001. Accordingly,

as from that date, a Non performing asset (NPA) shell be an advance where

i. Interest and /or installment of principal remain overdue for a period of more than 180

days in respect of a Term Loan,

ii. The account remains 'out of order' for a period of more than 180 days, in respect of an

overdraft/ cash Credit(OD/CC),

iii. The bill remains overdue for a period of more than 180 days in the case of bills

purchased and discounted,

iv. Interest and/ or installment of principal remains overdue for two harvest seasons but

for a period not exceeding two half years in the case of an advance granted for

agricultural purpose, and

v. Any amount to be received remains overdue for a period of more than 180 days in

respect of other accounts.

With a view to moving towards international best practices and to ensure greater

transparency, it has been decided to adopt the '90 days overdue' norm for identification of

NPAs, from the year ending March 31, 2004. Accordingly, with effect from March 31, 2004,

a non-performing asset (NPA) shell be a loan or an advance where;

i. Interest and /or installment of principal remain overdue for a period of more than 90

days in respect of a Term Loan,

ii. The account remains 'out of order' for a period of more than 90 days, in respect of an overdraft/ cash Credit(OD/CC),

1


iii. The bill remains overdue for a period of more than 90 days in the case of bills

purchased and discounted,

iv. Interest and/ or installment of principal remains overdue for two harvest seasons but

for a period not exceeding two half years in the case of an advance granted for

agricultural purpose, and

v. Any amount to be received remains overdue for a period of more than 90 days in

respect of other accounts.


ASSET CLASSIFICATION: AAsssseettss aarree ccllaassssiiffiieedd iinnttoo ffoolllloowwiinngg ffoouurr ccaatteeggoorriieess::

SSttaannddaarrdd AAsssseettss::

SSuubb--ssttaannddaarrdd AAsssseettss

DDoouubbttffuull AAsssseettss

LLoossss AAsssseettss

SSttaannddaarrdd AAsssseettss::

Standard assets are the ones in which the bank is receiving interest as well as the

principal amount of the loan regularly from the customer. Here it is also very important

that in this case the arrears of interest and the principal amount of loan do not exceed 90

days at the end of financial year. If asset fails to be in category of standard asset that is

amount due more than 90 days then it is NPA and NPAs are further need to classify in

sub categories.

PPrroovviissiioonniinngg NNoorrmmss::

From the year ending 31.03.2000, the banks should make a general provision of a

minimum of 0.40 percent on standard assets on global loan portfolio basis.

The provisions on standard assets should not be reckoned for arriving at net NPAs.

The provisions towards Standard Assets need not be netted from gross advances but

shown separately as 'Contingent Provisions against Standard Assets' under 'Other

Liabilities and Provisions - Others' in Schedule 5 of the balance sheet.

Banks are required to classify non-performing assets further into the following three

categories based on the period for which the asset has remained non-performing and the

reasonability of the dues:

11)) SSuubb--ssttaannddaarrdd AAsssseettss

22)) DDoouubbttffuull AAsssseettss

33)) LLoossss AAsssseettss


SSuubb--ssttaannddaarrdd AAsssseettss::

With effect from 31 March 2005, a substandard asset would be one, which has remained

NPA for a period less than or equal to 12 month. The following features are exhibited by

substandard assets: the current net worth of the borrowers / guarantor or the current

market value of the security charged is not enough to ensure recovery of the dues to the

banks in full; and the asset has well-defined credit weaknesses that jeopardize the

liquidation of the debt and are characterized by the distinct possibility that the banks will

sustain some loss, if deficiencies are not corrected.


A general provision of 10 percent on total outstanding should be made without making

any allowance for DICGC/ECGC guarantee cover and securities available.

DDoouubbttffuull AAsssseettss::

A loan classified as doubtful has all the weaknesses inherent in assets that were classified

as sub-standard, with the added characteristic that the weaknesses make collection or

liquidation in full, on the basis of currently known facts, conditions and values – highly

questionable and improbable.

With effect from March 31, 2005, an asset would be classified as doubtful if it remained

in the sub-standard category for 12 months.


100 percent of the extent to which the advance is not covered by the realisable value

of the security to which the bank has a valid recourse and the realisable value is

estimated on a realistic basis.

In regard to the secured portion, provision may be made on the following basis, at the

rates ranging from 20 percent to 50 percent of the secured portion depending upon the

period for which the asset has remained doubtful:


Period for which the advance has been

considered as doubtful

Provision

requirement (%)

Up to one year 20

One to three years 30

More than three years:

(1) Outstanding stock of NPAs as on

March 31, 2004.

(2) Advances classified as „doubtful‟

more than three years on or after

April 1, 2004.

60% with effect from March

31, 2005.

75% effect from March 31,

2006.

100% with effect from March

31, 2007.

Additional provisioning consequent upon the change in the definition of doubtful

assets effective from March 31, 2003 has to be made in phases as under:

i. As on31.03.2003, 50 percent of the additional provisioning requirement on the

assets which became doubtful on account of new norm of 18 months for transition

from sub-standard asset to doubtful category.

ii. As on 31.03.2002, balance of the provisions not made during the previous year, in

addition to the provisions needed, as on 31.03.2002.

Banks are permitted to phase the additional provisioning consequent upon the

reduction in the transition period from substandard to doubtful asset from 18 to 12

months over a four year period commencing from the year ending March 31, 2005,

with a minimum of 20 % each year.

LLoossss AAsssseettss::

A loss asset is one which considered uncollectible and of such little value that its

continuance as a bankable asset is not warranted- although there may be some salvage or

recovery value. Also, these assets would have been identified as “Loss assets” by t he

bank or internal or external auditors or the RBI inspection but the amount would not have

been written-off wholly.



The entire asset should be written off. If the assets are permitted to remain in the books

for any reason, 100 percent of the outstanding should be provided for.


TYPES OF NPA:

11.. GGrroossss NNPPAA

22.. NNeett NNPPAA

GGrroossss NNPPAA::

Gross NPAs are the sum total of all loan assets that are classified as NPAs as per RBI

guidelines as on Balance Sheet date. Gross NPA reflects the quality of the loans made

by banks. It consists of all the nonstandard assets like as sub-standard, doubtful, and loss

assets. It can be calculated with the help of following ratio:

Gross NPAs Ratio = Gross NPAs

Gross Advances

NNeett NNPPAA::

Net NPAs are those type of NPAs in which the bank has deducted the provision

regarding NPAs. Net NPA shows the actual burdenof banks. Since in India, bank

balance sheets contain a huge amount of NPAs and the process of recovery and write off

of loans is very time consuming, the provisions the banks have to make against the NPAs

according to the central bank guidelines, are quite significant. That is why the difference

between gross and net NPA is quite high.

It can be calculated by following:

Net NPAs = Gross NPAs – Provisions

Gross Advances - Provisions


REASONS FOR AN ACCOUNT BECOMING NPA:

1. Internal factors

2. External factors

Internal factors:

1) Funds borrowed for a particular purpose but not use for the said purpose.

2) Project not completed in time.

3) Poor recovery of receivables.

4) Excess capacities created on non-economic costs.

5) In-ability of the corporate to raise capital through the issue of equity or other debt

instrument from capital markets.

6) Business failures.

7) Diversion of funds for expansion\modernization\setting up new projects\ helping or

promoting sister concerns.

8) Willful defaults, siphoning of funds, fraud, disputes, management disputes, mis-

appropriation etc.

9) Deficiencies on the part of the banks viz. in credit appraisal, monitoring and follow-

ups, delaying settlement of payments\ subsidiaries by government bodies etc.,

External factors:

1) Sluggish legal system –

Long legal tangles

Changes that had taken place in labour laws

Lack of sincere effort.

2) Scarcity of raw material, power and other resources.

3) Industrial recession.

4) Shortage of raw material, raw material\input price escalation, power shortage,

industrial recession, excess capacity, natural calamities like floods, accidents.

5) Failures, nonpayment\ over dues in other countries, recession in other countries,

externalization problems, adverse exchange rates etc. 6) Government policies like excise duty changes, Import duty changes etc.,


The RBI has summarized the finer factors contributing to higher level of NPAs in the

Indian banking sector as: Diversion of funds, which is for expansion, diversification, modernization,

undertaking new projects and for helping associate concerns. This is also coupled

with recessionary trends and failures to tap funds in capital and debt markets. Business failures (such as product, marketing etc.), which are due to inefficient

management system, strained labour relations, inappropriate technology/ technical

problems, product obsolescence etc. Recession, which is due to input/ power shortage, price variation, accidents, natural

calamities etc. The externalization problems in other countries also lead to growth of

NPAs in Indian banking sector. Time/ cost overrun during project implementation stage.

Governmental policies such as changes in excise duties, pollution control orders etc.

Willful defaults, which are because of siphoning-off funds, fraud/ misappropriation,

promoters/ directors disputes etc. Deficiency on the part of banks, viz, delays in release of limits and payments/

subsidies by the Government of India.


IMPACT OF NPA:

PPrrooffiittaabbiilliittyy::

NPA means booking of money in terms of bad asset, which occurred due to wrong choice

of client. Because of the money getting blocked the prodigality of bank decreases not

only by the amount of NPA but NPA lead to opportunity cost also as that much of profit

invested in some return earning project/asset. So NPA doesn‟t affect current profit but

also future stream of profit, which may lead to loss of some long-term beneficial

opportunity. Another impact of reduction in profitability is low ROI (return on

investment), which adversely affect current earning of bank.

LLiiqquuiiddiittyy::

Money is getting blocked, decreased profit lead to lack of enough cash at hand which

lead to borrowing money for shortest period of time which lead to additional cost to the

company. Difficulty in operating the functions of bank is another cause of NPA due to

lack of money. Routine payments and dues.

IInnvvoollvveemmeenntt ooff mmaannaaggeemmeenntt::

Time and efforts of management is another indirect cost which bank has to bear due to

NPA. Time and efforts of management in handling and managing NPA would have

diverted to some fruitful activities, which would have given good returns. Now day‟s

banks have special employees to deal and handle NPAs, which is additional cost to the

bank.

CCrreeddiitt lloossss::

Bank is facing problem of NPA then it adversely affect the value of bank in terms of

market credit. It will lose its goodwill and brand image and credit which have negative

impact to the people who are putting their money in the banks.


EARLY SYMPTOMS:

By which one can recognize a performing asset turning in to non-

performing asset Four categories of early symptoms:-

1) Financial:

Non-payment of the very first installment in case of term loan.

Bouncing of cheque due to insufficient balance in the accounts.

Irregularity in installment.

Irregularity of operations in the accounts.

Unpaid overdue bills.

Declining Current Ratio.

Payment which does not cover the interest and principal amount of that installment.

While monitoring the accounts it is found that partial amount is diverted to sister concern or parent company.

2) Operational and Physical:

If information is received that the borrower has either initiated the process

of winding up or are not doing the business.

Overdue receivables. Stock statement not submitted on time.

External non-controllable factor like natural calamities in the city where

borrower conduct his business.

Frequent changes in plan. Nonpayment of wages.


3) Attitudinal Changes: Use for personal comfort, stocks and shares by borrower.

Avoidance of contact with bank.

Problem between partners.

4) Others: Changes in Government policies.

Death of borrower.

Competition in the market.


PREVENTIVE MEASUREMENT FOR NPA:

EEaarrllyy RReeccooggnniittiioonn ooff tthhee PPrroobblleemm::

Invariably, by the time banks start their efforts to get involved in a revival process, it‟s

too late to retrieve the situation- both in terms of rehabilitation of the project and

recovery of bank‟s dues. Identification of weakness in the very beginning that is : When

the account starts showing first signs of weakness regardless of the fact that it may not

have become NPA, is imperative. Assessment of the potential of revival may be done on

the basis of a techno-economic viability study. Restructuring should be attempted where,

after an objective assessment of the promoter‟s intention, banks are convinced of a

turnaround within a scheduled timeframe. In respect of totally unviable units as decided

by the bank, it is better to facilitate winding up/ selling of the unit earlier, so as to recover

whatever is possible through legal means before the security position becomes worse.

IIddeennttiiffyyiinngg BBoorrrroowweerrss wwiitthh GGeennuuiinnee IInntteenntt::

Identifying borrowers with genuine intent from those who are non- serious with no

commitment or stake in revival is a challenge confronting bankers. Here the role of

frontline officials at the branch level is paramount as they are the ones who have

intelligent inputs with regard to promoters‟ sincerity, and capability to achieve

turnaround. Based on this objective assessment, banks should decide as quickly as

possible whether it would be worthwhile to commit additional finance.

In this regard banks may consider having “Special Investigation” of all financial

transaction or business transaction, books of account in order to ascertain real factors that

contributed to sickness of the borrower. Banks may have penal of technical experts with

proven expertise and track record of preparing techno-economic study of the project of

the borrowers.

Borrowers having genuine problems due to temporary mismatch in fund flow or sudden

requirement of additional fund may be entertained at branch level, and for this purpose a

special limit to such type of cases should be decided. This will obviate the need to route

the additional funding through the controlling offices in deserving cases, and help avert

many accounts slipping into NPA category.


TTiimmeelliinneessss aanndd AAddeeqquuaaccyy ooff rreessppoonnssee::

Longer the delay in response, grater the injury to the account and the asset. Time is a

crucial element in any restructuring or rehabilitation activity. The response decided on

the basis of techno-economic study and promoter‟s commitment, has to be adequate in

terms of extend of additional funding and relaxations etc. under the restructuring

exercise. The package of assistance may be flexible and bank may look at the exit option.

FFooccuuss oonn CCaasshh FFlloowwss::

While financing, at the time of restructuring the banks may not be guided by the

conventional fund flow analysis only, which could yield a potentially misleading picture.

Appraisal for fresh credit requirements may be done by analyzing funds flow in

conjunction with the Cash Flow rather than only on the basis of Funds Flow.

MMaannaaggeemmeenntt EEffffeeccttiivveenneessss::

The general perception among borrower is that it is lack of finance that leads to sickness

and NPAs. But this may not be the case all the time. Management effectiveness in

tackling adverse business conditions is a very important aspect that affects a borrowing

unit‟s fortunes. A bank may commit additional finance to an aling unit only after basic

viability of the enterprise also in the context of quality of management is examined and

confirmed. Where the default is due to deeper malady, viability study or investigative

audit should be done – it will be useful to have consultant appointed as early as possible

to examine this aspect. A proper techno- economic viability study must thus become the

basis on which any future action can be considered.

MMuullttiippllee FFiinnaanncciinngg:: During the exercise for assessment of viability and restructuring, a Pragmatic and

unified approach by all the lending banks/ FIs as also sharing of all relevant

information on the borrower would go a long way toward overall success of

rehabilitation exercise, given the probability of success/failure.


In some default cases, where the unit is still working, the bank should make sure that

it captures the cash flows (there is a tendency on part of the borrowers to switch

bankers once they default, for fear of getting their cash flows forfeited), and ensure

that such cash flows are used for working capital purposes. Toward this end, there

should be regular flow of information among consortium members. A bank, which is

not part of the consortium, may not be allowed to offer credit facilities to such

defaulting clients. Current account facilities may also be denied at non-consortium

banks to such clients and violation may attract penal action. The Credit Information

Bureau of India Ltd.(CIBIL) may be very useful for meaningful information

exchange on defaulting borrowers once the setup becomes fully operational. In a forum of lenders, the priority of each lender will be different. While one set of

lenders may be willing to wait for a longer time to recover its dues, another lender

may have a much shorter timeframe in mind. So it is possible that the letter categories

of lenders may be willing to exit, even a t a cost – by a discounted settlement of the

exposure. Therefore, any plan for restructuring/rehabilitation may take this aspect into

account. Corporate Debt Restructuring mechanism has been institutionalized in 2001 t o

provide a timely and transparent system for restructuring of the corporate debt of Rs.

20 crore and above with the banks and FIs on a voluntary basis and outside the legal

framework. Under this system, banks may greatly benefit in terms of restructuring of

large standard accounts (potential NPAs) and viable sub-standard accounts with

consortium/multiple banking arrangements.


PROCEDURES FOR NPA IDENTIFICATION AND

RESOLUTION IN INDIA: 1. Internal Checks and Control

Since high level of NPAs dampens the performance of the banks identification of

potential problem accounts and their close monitoring assumes importance. Though most

banks have Early Warning Systems (EWS) for identification of potential NPAs, the

actual processes followed, however, differ from bank to bank. The EWS enable a bank to

identify the borrower accounts which show signs of credit deterioration and initiate

remedial action. Many banks have evolved and adopted an elaborate EWS, which allows

them to identify potential distress signals and plan their options beforehand, accordingly.

The early warning signals, indicative of potential problems in the accounts, viz. persistent

irregularity in accounts, delays in servicing of interest, frequent devolvement of L/Cs,

units' financial problems, market related problems, etc. are captured by the system. In

addition, some of these banks are reviewing their exposure to borrower accounts every

quarter based on published data which also serves as an important additional warning

system. These early warning signals used by banks are generally independent of risk

rating systems and asset classification norms prescribed by RBI.

The major components/processes of a EWS followed by banks in India as brought out by

a study conducted by Reserve Bank of India at the instance of the Board of Financial

Supervision are as follows:

Designating Relationship Manager/ Credit Officer for monitoring account/s

Preparation of `know your client' profile

Credit rating system

Identification of watch-list/special mention category accounts

Monitoring of early warning signals

Relationship Manager/Credit Officer

The Relationship Manager/Credit Officer is an official who is expected to have complete

knowledge of borrower, his business, his future plans, etc. The Relationship Manager has

to keep in constant touch with the borrower and report all developments impacting the


borrowable account. As a part of this contact he is also expected to conduct scrutiny and

activity inspections. In the credit monitoring process, the responsibility of monitoring a

corporate account is vested with Relationship Manager/Credit Officer.

Know your client' profile (KYC)

Most banks in India have a system of preparing `know your client' (KYC) profile/credit

report. As a part of `KYC' system, visits are made on clients and their places of

business/units. The frequency of such visits depends on the nature and needs of

relationship.

Credit Rating System

The credit rating system is essentially one point indicator of an individual credit exposure

and is used to identify measure and monitor the credit risk of individual proposal. At the

whole bank level, credit rating system enables tracking the health of banks entire credit

portfolio. Most banks in India have put in place the system of internal credit rating. While

most of the banks have developed their own models, a few banks have adopted credit

rating models designed by rating agencies. Credit rating models take into account various

types of risks viz. financial, industry and management, etc. associated with a borrowable

unit. The exercise is generally done at the time of sanction of new borrowable account

and at the time of review renewal of existing credit facilities.

Watch-list/Special Mention Category

The grading of the bank's risk assets is an important internal control tool. It serves the

need of the Management to identify and monitor potential risks of a loan asset. The

purpose of identification of potential NPAs is to ensure that appropriate preventive /

corrective steps could be initiated by the bank to protect against the loan asset becoming

non-performing. Most of the banks have a system to put certain borrowable accounts

under watch list or special mention category if performing advances operating under

adverse business or economic conditions are exhibiting certain distress signals. These

accounts generally exhibit weaknesses which are correctable but warrant banks' closer

attention. The categorization of such accounts in watch list or special mention category


provides early warning signals enabling Relationship Manager or Credit Officer to

anticipate credit deterioration and take necessary preventive steps to avoid their slippage

into non performing advances. Early Warning Signals It is important in any early warning

system, to be sensitive to signals of credit deterioration. A host of early warning signals

are used by different banks for identification of potential NPAs. Most banks in India have

laid down a series of operational, financial, transactional indicators that could serve to

identify emerging problems in credit exposures at an early stage. Further, it is revealed

that the indicators which may trigger early warning system depend not only on default in

payment of installment and interest but also other factors such as deterioration in

operating and financial performance of the borrower, weakening industry characteristics,

regulatory changes, general economic conditions, etc. Early warning signals can be

classified into five broad categories viz.

a) Financial

b) Operational

c) Banking

d) Management and

e) External factors.

Financial related warning signals generally emanate from the borrowers' balance sheet,

income expenditure statement, statement of cash flows, statement of receivables etc.

Following common warning signals are captured by some of the banks having relatively

developed EWS.

Financial warning signals

Persistent irregularity in the account

Default in repayment obligation

Devolvement of LC/invocation of guarantees

Deterioration in liquidity/working capital position

Substantial increase in long term debts in relation to equity

Declining sales

Operating losses/net losses


Rising sales and falling profits

Disproportionate increase in overheads relative to sales

Rising level of bad debt losses Operational warning signals

Low activity level in plant

Disorderly diversification/frequent changes in plan

Nonpayment of wages/power bills

Loss of critical customer/s

Frequent labor problems

Evidence of aged inventory/large level of inventory

Management related warning signals

Lack of co-operation from key personnel

Change in management, ownership, or key personnel

Desire to take undue risks

Family disputes

Poor financial controls

Fudging of financial statements

Diversion of funds

Banking related signals

Declining bank balances/declining operations in the account

Opening of account with other bank

Return of outward bills/dishonored cheques

Sales transactions not routed through the account

Frequent requests for loan

Frequent delays in submitting stock statements, financial data, etc.

Signals relating to external factors

Economic recession

Emergence of new competition

Emergence of new technology

Changes in government / regulatory policies

Natural calamities


2. Management/Resolution of NPAs

A reduction in the total gross and net NPAs in the Indian financial system indicates a

significant improvement in management of NPAs. This is also on account of various

resolution mechanisms introduced in the recent past which include the SRFAESI Act,

one time settlement schemes, setting up of the CDR mechanism, strengthening of DRTs.

From the data available of Public Sector Banks as on March 31, 2003, there were 1,522

numbers of NPAs as on March 31, 2003 which had gross value greater than Rs. 50

million in all the public sector banks in India. The total gross value of these NPAs

amounted to Rs. 215 billion. The total number of resolution approaches (including cases

where action is to be initiated) is greater than the number of NPAs, indicating some

double counting. As can be seen, suit filed and BIFR are the two most common

approaches to resolution of NPAs in public sector banks. Rehabilitation has been

considered/ adopted in only about 13% of the cases. Settlement has been considered only

in 9% of the cases. It is likely to have been adopted in even fewer cases. Data available

on resolution strategies adopted by public sector banks suggest that Compromise

settlement schemes with borrowers are found to be more effective than legal measures.

Many banks have come out with their own restructuring schemes for settlement of NPA

accounts. State Bank of India, HDFC Limited, M/s. Dun and Bradstreet Information

Services (India) Pvt. Ltd. and M/s. Trans Union to serve as a mechanism for exchange of

information between banks and FIs for curbing the growth of NPAs incorporated credit

Information Bureau (India) Limited (CIBIL) in January 2001. Pending the enactment of

CIB Regulation Bill, the RBI constituted a working group to examine the role of CIBs.

As per the recommendations of the working group, Banks and FIs are now required to

submit the list of suit-filed cases of Rs. 10 million and above and suit filed cases of

willful defaulters of Rs. 2.5 million and above to RBI as well as CIBIL. CIBIL will share

this information with commercial banks and FIs so as to help them minimize adverse

selection at appraisal stage. The CIBIL is in the process of getting operationalised.

3. Willful Defaulters

RBI has issued revised guidelines in respect of detection of willful default and diversion


and siphoning of funds. As per these guidelines a willful default occurs when a borrower

defaults in meeting its obligations to the lender when it has capacity to honor the

obligations or whenfunds have been utilized for purposes other than those for which

finance was granted. The list of willful defaulters is required to be submitted to SEBI and

RBI to prevent their access to capital markets. Sharing of information of this nature helps

banks in their due diligence exercise and helps in avoiding financing unscrupulous

elements. RBI has advised lenders to initiate legal measures including criminal actions,

wherever required, and undertake a proactive approach in change in management, where

appropriate. 4. Legal and Regulatory Regime

Debt Recovery Tribunals

DRTs were set up under the Recovery of Debts due to Banks and Financial Institutions

Act, 1993. Under the Act, two types of Tribunals were set up i.e. Debt Recovery Tribunal

(DRT) and Debt Recovery Appellate Tribunal (DRAT). The DRTs are vested with

competence to entertain cases referred to them, by the banks and FIs for recovery of debts

due to the same. The order passed by a DRT is appealable to the Appellate Tribunal but

no appeal shall be entertained by the DRAT unless the applicant deposits 75% of the

amount due from him as determined by it. However, the Affiliate Tribunal may, for

reasons to be received in writing, waive or reduce the amount of such deposit. Advances

of Rs. 1 million and above can be settled through DRT process. An important power

conferred on the Tribunal is that of making an interim order (whether by way of

injunction or stay) against the defendant to debar him from transferring, alienating or

otherwise dealing with or disposing of any property and the assets belonging to him

within prior permission of the Tribunal. This order can be passed even while the claim is

pending. DRTs are criticized in respect of recovery made considering the size of NPAs in

the Country. In general, it is observed that the defendants approach the High Country

challenging the verdict of the Appellate Tribunal which leads to further delays in

recovery. Validity of the Act is often challenged in the court which hinders the progress

of the DRTs. Lastly, many needs to be done for making the DRTs stronger in terms of

infrastructure.


Lokadalats

The institution of Lokadalat constituted under the Legal Services Authorities Act, 1987

helps in resolving disputes between the parties by conciliation, mediation, compromise or

amicable settlement. It is known for effecting mediation and counseling between the

parties and to reduce burden on the court, especially for small loans. Cases involving suit

claims up to Rs. l million can be brought before the Lokadalat and every award of the

Lokadalat shall be deemed to be a decree of a Civil Court and no appeal can lie to any

court against the award made by the Lokadalat. Several people of particular localities

various social organizations are approaching Lokadalats which are generally presided

over by two or three senior persons including retired senior civil servants, defense

personnel and judicial officers. They take up cases which are suitable for settlement of

debt for certain consideration. Parties are heard and they explain their legal position.

They are advised to reach to some settlement due to social pressure of senior bureaucrats

or judicial officers or social workers. If the compromise is arrived at, the parties to the

litigation sign a statement in presence of Lokadalats which is expected to be filed in court

to obtain a consent decree. Normally, if such settlement contains a clause that if the

compromise is not adhered to by the parties, the suits pending in the court will proceed in

accordance with the law and parties will have a right to get the decree from the court. In

general, it is observed that banks do not get the full advantage of the Lokadalats. It is

difficult to collect the concerned borrowers willing to go in for compromise on the day

when the Lokadalat meets. In any case, we should continue our efforts to seek the help of

the Lokadalat.

Enactment of SRFAESI Act

The "The Securitization and Reconstruction of Financial Assets and Enforcement of

Security Interest Act" (SRFAESI) provides the formal legal basis and regulatory

framework for setting up Asset Reconstruction Companies (ARCs) in India. In addition

to asset reconstruction and ARCs, the Act deals with the following largely aspects,

Securitization and Securitization Companies

Enforcement of Security Interest


Creation of a central registry in which all securitization and asset reconstruction

transactions as well as any creation of security interests has to be filed.

The Reserve Bank of India (RBI), the designated regulatory authority for ARCS has

issued Directions, Guidance Notes, Application Form and Guidelines to Banks in April

2003 for regulating functioning of the proposed ARCS and these Directions/ Guidance

Notes cover various aspects relating to registration, operations and funding of ARCS and

resolution of NPAs by ARCS. The RBI has also issued guidelines to banks and financial

institutions on issues relating to transfer of assets to ARCS, consideration for the same

and valuation of instruments issued by the ARCS. Additionally, the Central Government

has issued the security enforcement rules ("Enforcement Rules"), which lays down the

procedure to be followed by a secured creditor while enforcing its security interest

pursuant to the Act. The Act permits the secured creditors (if 75% of the secured

creditors agree) to enforce their security interest in relation to the underlying security

without reference to the Court after giving a 60 day notice to the defaulting borrower

upon classification of the corresponding financial assistance as a non-performing asset.

The Act permits the secured creditors to take any of the following measures:

Take over possession of the secured assets of the borrower including right to

transfer by way of lease, assignment or sale;

Take over the management of the secured assets including the right to transfer by

way of lease, assignment or sale;

Appoint any person as a manager of the secured asset (such person could be the

ARC if they do not accept any pecuniary liability); and

Recover receivables of the borrower in respect of any secured asset which has

been transferred. After taking over possession of the secured assets, the secured

creditors are required to obtain valuation of the assets. These secured assets may

be sold by using any of the following routes to obtain maximum value.

By obtaining quotations from persons dealing in such assets or otherwise

interested in buying the assets;

By inviting tenders from the public; By holding public auctions; or

By private treaty.


Lenders have seized collateral in some cases and while it has not yet been possible to

recover value from most such seizures due to certain legal hurdles, lenders are now

clearly in a much better bargaining position vis-a-vis defaulting borrowers than they were

before the enactment of SRFAESI Act. When the legal hurdles are removed, the

bargaining power of lenders is likely to improve further and one would expect to see a

large number of NPAs being resolved in quick time, either through security enforcement

or through settlements. Under the SRFAESI Act ARCS can be set up under the

Companies Act, 1956. The Act designates any person holding not less than 10% of the

paid-up equity capital of the ARC as a sponsor and prohibits any sponsor from holding a

controlling interest in, being the holding company of or being in control of the ARC. The

SRFAESI and SRFAESI Rules/ Guidelines require ARCS to have a minimum net-owned

fund of not less than Rs. 20,000,000. Further, the Directions require that an ARC should

maintain, on an ongoing basis, a minimum capital adequacy ratio of 15% of its risk

weighted assets. ARCS have been granted a maximum realization time frame of five

years from the date of acquisition of the assets. The Act stipulates several measures that

can be undertaken by ARCs for asset reconstruction. These include:

Enforcement of security interest;

Taking over or changing the management of the business of the borrower;

The sale or lease of the business of the borrower;

Settlement of the borrowers' dues; and

Restructuring or rescheduling of debt.

ARCS are also permitted to act as a manager of collateral assets taken over by t he lenders

under security enforcement rights available to them or as a recovery agent for any bank

or financial institution and to receive a fee for the discharge of these functions. They can

also be appointed to act as a receiver, if appointed by any Court or DRT.


Source: http://www.rbi.org.in

Institution of CDR Mechanism

The RBI has instituted the Corporate Debt Restructuring (CDR) mechanism for

resolution of NPAs of viable entities facing financial difficulties. The CDR mechanism

instituted in India is broadly along the lines of similar systems in the UK, Thailand,

Korea and Malaysia. The objective of the CDR mechanism has been to ensure timely and

transparent restructuring of corporate debt outside the purview of the Board for Industrial

and Financial Reconstruction (BIFR), DRTs or other legal proceedings. The framework is

intended to preserve viable corporate affected by certain internal/external factors and

minimize losses to creditors/other stakeholders through an orderly and coordinated

restructuring programme. RBI has issued revised guidelines in February 2003 with

respect to the CDR mechanism. Corporate borrowers with borrowings from the banking

system of Rs. 20crores and above under multiple banking arrangement are eligible under

the CDR mechanism. Accounts falling under standard, sub-standard or doubtful

categories can be considered for restructuring. CDR is a nonstatutory mechanism based

on debtor-creditor agreement and inter-creditor agreement. Restructuring helps in

aligning repayment obligations for bankers with the cash flow projections as reassessed at

the time of restructuring. Therefore it is critical to prepare a restructuring plan on the

lines of the expected business plan along with projected cash flows.

http://www.rbi.org.in/


The CDR process is being stabilized. Certain revisions are envisaged with respect to the

eligibility criteria (amount of borrowings) and time frame for restructuring. Foreign

banks are not members of the CDR forum, and it is expected that they would be signing

the agreements shortly. However they attend meetings. The first ARC to be operational in

India- Asset Reconstruction Company of India (ARGIL) is a member of the CDR forum.

Lenders in India prefer to resort to CDR mechanism to avoid unnecessary delays in

multiple lender arrangements and to increase transparency in the process. While in the

RBI guidelines it has been recommended to involve independent consultants, banks are

so far resorting to their internal teams for recommending restructuring programs.

Compromise Settlement Schemes

1) One Time Settlement Schemes

NPAs in all sectors, which have become doubtful or loss as on 31st March 2000. The

scheme also covers NPAs classified as sub-standard as on 31st March 2000, which

have subsequently become doubtful or loss. All cases on which the banks have

initiated action under the SRFAESI Act and also cases pending before

Courts/DRTs/BIFR, subject to consent decree being obtained from the

Courts/DRTs/BIFR are covered. However cases of willful default, fraud and

malfeasance are not covered. As per the OTS scheme, for NPAs up to Rs. 10crores,

the minimum amount that should be recovered should be 100% of the outstanding

balance in the account.

2) Negotiated Settlement Schemes

The RBI/Government has been encouraging banks to design and implement policies

for negotiated settlements, particularly for old and unresolved NPAs. The broad

framework for such settlements was put in place in July 1995. Specific guidelines

were issued in May 1999to public sector banks for one-time settlements of NPAs of

small scale sector. This scheme was valid until September 2000 and enabled banks to

recover Rs 6.7 billion from various accounts. Revised guidelines were issued in July

2000 for recovery of NPAs of Rs. 50 millionand less. These guidelines were effective

until June 2001 and helped banks recover Rs. 26 billion.


Increased Powers to NCLTs and the Proposed Repeal of BIFR

In India, companies whose net worth has been wiped out on account of accumulated

losses come under the purview of the Sick Industrial Companies Act (SICA) and need to

be referred to BIFR. Once a company is referred to the BIFR (and even if an enquiry is

pending as to whether it should be admitted to BIFR), it is afforded protection against

recovery proceedings from its creditors. BIFR is widely regarded as a stumbling block in

recovering value for NPAs. Promoters systematically take refuge in SICA - often there is

a scramble to file a reference in BIFR so as to obtain protection from debt recovery

proceedings. The recent amendments to the Companies Act vest powers for revival and

rehabilitation of companies with the National Company Law Tribunal (NCLT), in place

of BIFR, with modifications to address weaknesses experienced under the SICA

provisions. The NCLT would prepare a scheme for reconstruction of any sick company

and there is no bar on the lending institution of legal proceedings against such company

whilst the scheme is being prepared by the NCLT. Therefore, proceedings initiated by

any creditor seeking to recover monies from a sick company would not be suspended by

a reference to the NCLT and, therefore, the above provision of the Act may not have

much relevance any longer and probably does not extend to the tribunal for this reason.

However, there is a possibility of conflict between the activities that may be undertaken

by the ARC, e.g. change in management, and the role of the NCLT in restructuring sick

companies. The Bill to repeal SICA is currently pending in Parliament and the process of

staffing of NCLTs has been initiated


OBJECTIVES I. Problem statement/Objective of the research

To study of the concept of Non Performing Asset in Indian perspective.

To study NPA standard of RBI

To study the Reasons for & Impact of NPAs

To evaluate the efficiency in managing Non Performing Asset of different types of banks

(Public, Private & Foreign banks) using NPA ratios & comparing NPA with profits.

To check the proportion of NPA of different types of banks in different categories. II. Beneficiaries of the study

The outcomes analyzed from this study would be beneficial to various sections such as:

Banks: This study would definitely benefit the banks in a way that directs them as to which sector should be given priority for lending money.

Further Researchers: The major beneficiaries from the project would be the researchers themselves as this study would enhance their knowledge about the topic. They get an insight of the present scenario of this industry as this is the emerging industry in the financial sector of the economy.

Student: To get the understanding of NPA concept as a whole.


RESEARCH METHODOLOGY

I. Research Design

The research design that will be use is Descriptive Research.

Involves gathering data that describe events and then organizes, tabulates, depicts,

and describes the data.

Uses description as a tool to organize data into patterns that emerge during analysis.

Often uses visual aids such as graphs and charts to aid the reader.

Using of hypothesis testing.

Test of Correlation:

a) H0: There is no significant correlation between profits & NPAs of Public Sector

Banks for last 9 years

H1: There is correlation between profits & NPAs of Public Sector Banks for last 9

years

b) H0: There is no significant correlation between profits & NPAs of Private Sector

Banks for last 9 years

H1: There is correlation between profits & NPAs of Private Sector Banks for last

9 years

c) H0: There is no significant correlation between profits & NPAs of Foreign Banks

for last 9 years

H1: There is correlation between profits & NPAs of Foreign Banks for last 9 years

II. Data Collection Sources

Secondary Data

Secondary data refers to the data which has already been generated and is available for

use. The data about NPAs & its composition, classification of loan assets, profits (net &

gross) & advances of different banks is taken from Reserve Bank of India website and

indiastat.com.


III. Scope of the study

To understand the concept of NPA in Indian Banking industry.

To understand the causes & effects of NPA

To analyze the past trends of NPA of Public, Private & Foreign banks in different

sector. IV. Expected contribution of the study

The analysis made as a part of this study may contribute in a way analysis of strength

and weakness of the banking sector as whole with regard to Non Performing Asset of

banks. Various banks from different categories together may make efforts to overcome

limitations for lending money to different sectors like agricultural, SSI, Priority sector,

non-priority sector, public sector & others.

V. Limitation There are some data which are available for just 3 years while the same data for

its counterparts were available for 9 years. So exact comparison was not possible.


ANALYSIS OVERALL ANALYSIS:

Scheduled Commercial banks (SCBs) in India remained robust against the backdrop of

global financial crisis. It is noteworthy that contrary to the trend in some advanced countries,

the leverage ratio (Tier I capital to total assets ratio) in India has remained high reflecting the

strength of the Indian banking system. However, the Indian banking sector was not

completely insulated from the effects of the slowdown of the India economy. The consolidated balance sheets of SCBs, expanded by 21.2 per cent as at end-March 2010

as compared with 25.0 per cent in the previous year. While the balance sheet of public sector

banks maintained their growth momentum, the private sector banks and foreign banks

registered a deceleration in growth rate. During 2009-10, the growth rate of banks‟ lending to industries, personal loans and services

sector witnessed a deceleration, while growth rate of banks‟ lending to agriculture and allied

activities increased substantially. Overall, the incremental Credit–Deposit (C-D) ratio

declined sharply reflecting the slowdown in credit growth, as corporates deferred their

investments against the backdrop of widespread uncertainty. It is noteworthy that contrary to the trend in some advanced countries, the leverage ratio in

India has remained high reflecting the strength of the Indian banking system. For instance, as

observed by the World Bank , the leverage ratio of banks in the UK witnessed a decline

throughout 1990s, which was accentuated after 2000 to reach a level of about 3 per cent by

2009 from around 5 per cent in the 1990s. On the other hand, the leverage ratio for Indian

banks has risen from about 4.1 per cent in March 2002 to reach a level of 6.3 per cent by

March 2010.

The balance sheets of public sector banks maintained their growth momentum, the private

sector banks and foreign banks registered a deceleration in growth rate. Furthermore, the old


private sector banks, which had been registering a significantly lower growth rate than their

newer counterparts in the recent past, managed a better performance this year. NET NPAs OF BANKS: 2001-02 to 2009-10

Graph: 1 Source: http://www.rbi.org.in

Interpretation:

From the above it is observed that net NPA of public sector banks has a declining

trend up to year 2006-07 and after that it has a rising trend till 2009-10. The same

trend has been observed in both Private and Foreign Sector Banks. The declining

trend from 2004 to 2007 of NPA was due to the implementation of Securitization Act

(2002).



But the increase in NPA was increasing in absolute term, as NPA as per percent of

advance shows a declining trend in Public Sector Banks while that of in Private and

Foreign Sector Banks shows an upward trend that is increase in NPA as per percent

of advance after 2007.

The increase in NPA as per percent of advance of Private and Foreign Sector Banks is

because of they have a major proportion of lending in non- priority sectors includes

Medium and large scale industries which was highly affected by global financial

crisis.


SOUNDNESS INDICATORS:

1. Capital Quality

2. Asset Quality

Capital Quality:

A sound and efficient banking system is end product for maintaining financial stability.

Therefore, considerable emphasis has been placed on strengthening the capital requirements

in recent years. The Capital to Risk-weighted Assets Ratio (CRAR) of SCBs, a

measure of the capacity of the banking system to absorb unexpected losses, improved

further to 13.2 per cent at end-March 2010 from 13.0 per cent at end-March

2009. The asset quality of banks in India has been improving over the past few years as

reflected in the declining NPA to advances ratio. It is especially noteworthy that

notwithstanding the pressures of a slowdown in the economy and an atmosphere of

uncertainty, the net NPA to net advances ratio increased only marginally to 1.1 per cent

as at end March 2010 from 1.0 per cent as at end March 2009. Significantly, gross NPA

to gross advances ratio remained constant at 2.3 per cent. Thus, in terms of the two

crucial soundness indicators, viz., capital and asset quality, the Indian banking sector has

exhibited resilience amidst testing times.




Asset Quality:

Movements in Non-performing Assets – Bank Group-wise

Public

Sector

Banks

Nationalized

Banks

State

Bank

Group

Old

Private

Sector

Banks

New

Private

Sector

Banks

Foreign

Banks

Gross NPAs

As at end-March 2009 40089 23410 15303 2557 9901 2872

Addition during the

year

31338

17822

12879

2094

10520

8430

Recovered during the

year

26271

15863

9829

1579

6510

2954

Written off during the

year

0

0

0

0

0

1514

As at end-March 2010 45156 25368 18352 3072 13911 6833

Net NPAs

As at end-March 2009 17726 8245 8398 740 4640 1247

As at end-March 2010 21033 9339 10745 1165 6253 2973

Gross NPAs/Gross

Advances Ratio

End-March 2009 2.2 2.1 2.6 2.3 2.4 1.8

End-March 2010 2 1.8 2.5 2.3 2.8 4

Net NPAs/Net

Advances Ratio

End-March 2009 0.8 0.7 1.4 0.7 1.1 0.9

End-March 2010 0.7 0.7 1.5 0.9 1.3 1.7

Source: http://www.rbi.org.in



Interpretation: The trend of improvement in the asset quality of banks continued during the year.

Indian banks recovered a higher amount of NPAs during 2009-10 than that during the

previous year. Though the total amount recovered and written-off at Rs.38,828 in

2009-10 was higher than Rs.28,283 crore in 2008-09, it was lower than fresh addition of

NPAs (Rs.52,382 crore) during the year. As a result, the gross NPAs of SCBs increased

across all the bank groups. In this context, it may be noted that in the present

context of financial turmoil, some slippage in NPAs could be expected.

Nevertheless, it may be noted that this slippage was moderate as compared to the

problems faced by banks all over the world. The hardening of interest rates might

have made the repayment of loans difficult for some borrowers, resulting in some

increase in NPAs in this sector. It may be noted that the increase in gross NPAs was

more noticeable in respect of new private sector and foreign banks, which have been

more active in the real estate and housing loans segments.

Gross NPAs (in absolute terms) increased for all the banks. The gross NPAs to gross

advances of foreign banks increased significantly during the year, while that of

private sector banks increased marginally. The NPAs ratio of all other bank groups

declined. While net NPAs to net advances ratio of all the banks increased over the

previous year except that of nationalized banks.


PSB

Pvt.S

B FB

PSB

Pvt.S

B FB

PSB

Pvt.S

B FB

PSB

Pvt.S

B FB

PSB

Pvt.S

B FB

FREQUENCY DISTRIBUTION OF BANKS ACCORDING TO

LEVEL OF NPAs:

Frequency Distribution of Banks according to level of NPAs

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

> 10%

5% to 10%

2% to 5%

< 2%

2005-06 2006-07 2007-08 2008-09 2009-10


Interpretation:

In the year 2005-06, the Public sector banks (PSBs) had around 60% of their NPA profile

in the < 2% category which increased 75% in 2006-07, 90% in 2007-08 - 2008-09 &

100% in 2009-10. PSBs 30% NPA profile in the year 2005-06 belongs to 2% to 5%

category which reduced over the years and has been totally eliminated in 2009-10. PSBs

did not have any of its banks in > 10% category.

Private sector banks (Pvt.SBs) was having the worst situation in 2005-06 where 50% of

its bank was in 2% to 5% category. While this ratio is declining over the years 2008-09

this is compensated by the rise in number of banks in < 2%. 5 Pvt. SB‟s banks were in



5% to10% category in 2005-06 which was totally eliminated in 2008-09. But due to poor

financial condition in 2009-10, there is increase in number of banks in higher NPA

category. Foreign banks (FB) were comparatively in good position compare to privat e sector banks

in the initial years. 70% of its NPA profile belongs to < 2% category. The number of

banks increased in < 2% category. So among all three sectors, public sector banks

managed to reduce NPAs over the years.


2002

2003

2004

2005

2006

2007

2008

2009

2010

Priority Sector 24156 25150 24939 23841 21926 22374 22954 25287 24318 Non-priority Sector 27307 28405 26781 25698 23249 18664 15158 14163 19251 Public Sector 1711 903 1087 610 444 341 490 299 474

Amou

nt in

Rs.

Cro

re

COMPOSITION OF NPAs OF BANK SECTOR WISE:

COMPOSITION OF NPAs OF PUBLIC SECTOR BANKS - 2002 TO 2010

30000

25000

20000

15000

10000

5000

0 Graph: 4.1 Source: http://www.indiastat.com/

Interpretation:

From the above chart it is observed that public sector category is the least contributor

towards the NPA of public sector bank. In the initial years from 2002 to 2006, Non-

priority sector contributes more towards NPA than priority sector. But in later years

from 2007 it‟s other way round, where priority sector contributes more than Non-

priority sector. Priority sector consist of advance given to agriculture, SSI, & other priority sector

advances. Non priority sector consist of large industries, medium industries & other

non priority sectors.


In case of priority sector, it started falling from 2004 up to 2006 over previous year.

But in the later years i.e. from 2007 there is rise NPA because of defaults on the loan

given to the farmers. It was highest in 2009. In order to reduce that, waiver package

was announced in union budget of 2009.It may also be noted that the increase in NPAs

was more noticeable in priority sector, which have been more active in the real estate and

housing loans segments. NPA in non priority sector is reducing constantly from 2003 to 2009 i.e. by

50%.Though the advance given to non-priority sector was higher than priority sector, NPAs

of non-priority sector is comparatively.


2002

2003

2004

2005

2006

2007

2008

2009

2010

Priority Sector 1835 2546 2445 2482 2188 2284 2884 3419 3640 Non-Priority Sector 4452 9090 9327 7796 6569 5541 6353 9558 13172 Public Sector 123 31 95 75 42 4 3 0 75

Amou

nt in

Rs.

Cro

re

COMPOSITION OF NPAs OF PRIVATE SECTOR BANKS - 2002 TO 2010

14000

12000

10000

8000

6000

4000

2000

0 Graph: 4.2 Source: http://www.indiastat.com/

Interpretation:

From the above graph it is observed that public sector contributes very negligible

towards the overall NPA of foreign banks. The major reason for this is that on an

average only 3.5% of total advance is made towards public sector category. Priority sector category on an average constitutes almost 34% of the total advances

made by the private sector banks. While average NPA of priority sector constitutes of

25% of total NPA. In later years from 2008 to 2010 there is increase in NPA of

priority sector. In these years more advances was given to agriculture & housing

sector. In the year 2007-08, the real estate market was on boom, which encouraged people to

take more loans. But after the subprime crisis there was sudden fall in real estate

market & people became default to pay the loan.


In case of non-priority sector, the average advances made are 60.5% of total advance

made by private sector banks. But the average NPA of non-priority sector is almost

74% which is highest amongst the entire category. We can see the declining trend in

NPA of non-priority sector from 2004 to 2007. This as a result of securitization Act,

2002.


2008

2009

2010 Priority Sector 331 402 649 Non-Priority Sector 2,120 2712.0 6506 Public Sector 0 0 0

Amou

nt in

Rs.

Cro

re

COMPOSITION OF NPAs OF FORIEGN BANKS - 2008 TO 2010

7000

6000

5000

4000

3000

2000

1000

0 Graph: 4.3 Source: http://www.indiastat.com//

Interpretation: It is observed from the chart there is no NPA in public sector category in all the three

years because there was no advance made to public sector category. Non-priority sector contributes highest towards the NPA of foreign banks because

non-priority sector constitute approximately 65% of the total advances made by

foreign banks. So NPA will also be more in non-priority sector. NPA is low in priority sector because very few advances are made in priority sector

& that too are made to SSI. The advances are made to medium & large scale industries in non-priority sector. As

foreign banks are having global presence they are more affected by the global

meltdown & financial crisis of 2008. So its effect is seen by sudden rise in NPA in

2009.


COMPARISON OF NET NPA OF OLD AND NEW PRIVATE

SECTOR BANKS: 2001-02 to 2009-10

Graph: 5 Compiled from: http://www.rbi.org.in

Interpretation:

From the above chart it is clearly observed that net NPA of old private sector banks

has a declining trend over the years on the contrary new private sector banks has an

upward trend.

Old private sector banks which is passing from lower growth rate in recent past, starts

performing better than their new counterparts. Old private sector banks are more

efficient than that of new private sector banks in managing NPA.



NPA

as %

of A

dvan

ce

NET NPAs AS PERCENTAGE OF ADVANCES OF BANKS:

2.5

Net NPAs/Net Advances

2

1.5

1

0.5

0 2005-06 2006-07 2007-08 2008-09 2009-10

Public Sector 2.1 1.3 1.1 0.8 0.7 Private Sector 1.9 1 1 1.2 1.5

Foriegn Sector 0.9 0.8 1 0.9 1.7

Graph: 6 Source: http://www.indiastat.com/

Interpretation:

From the above it is clearly observed that only public sector banks have succeeded in

reducing net NPA against net advances made over the period of time. It is constantly

reducing each year, whereas in case of private sector bank it has reduced in 2006-07

then it got stable and started rising from 2008-09 onwards. In case of foreign banks it is fluctuating over the years. Public sector banks have been

able to reduce this ratio by 66.7% from 2006 to 2010. Public sector banks as a result

of stringent checks & control able to manage low ratio compare to other banks. Also

the ratio increased by 89% for foreign banks where the foreign banks were badly

affected by the global meltdown. Even for private sector bank the ratio increased

by 25% in 2010 due to financial crises & also for public sector bank the

reduction in 2010 was the lowest i.e. 12.5%


CLASSIFICATION OF LOAN ASSET OF BANKS:

Classification of Loan Asset of Public Sector Banks

Standard Asset Sub-Standard Asset Doubtful Asset Loss Asset

0.9 0.7 0.5 0.3 0.2 0.2 1.5 1.1 1.0

4.3

2.3 3.4

1.1

1.2

1.0 1.0 0.9

2.6

92.2

94.6

96.1 97.2 97.7

97.9

2005 2006 2007 2008 2009 2010

Graph: 7.1 Compiled from: http://www.rbi.org.in

Interpretation:

The above frequency distribution chart states that standard asset is increasing every

year & on the contrary all the other types of asset i.e. Sub-standard, Doubtful & Loss

Asset are decreasing every asset. This proves that public sector banks have succeeded

in reducing NPA over the years.

Public sector banks have taken various measures to reduce NPA also convert Sub-

Standard, Doubtful & loss asset into the above category Standard, Sub-Standard &

Doubtful asset. The rise in sub standard ratio has major proportion indicates that there

is a high scope of up gradation or improvement in NPA recovery in initial stage

because it will be very easy to recover the loan as minimum duration of default.



Classification of Loan Asset of Private Sector Banks


0.5 0.4 0.3 0.2 0.3 0.3 1.5 1.0 0.9 1.0

3.6

2.5 1.0

0.8 1.1 1.5 2.0

1.8

94.2

96.1

97.4 97.6 97.3 96.8

2005 2006 2007 2008 2009 2010 Graph: 7.2 Compiled from: http://www.rbi.org.in

Interpretation:

The above chart clearly states that the rise in the standard assets over the years

compensates the fall in the other three types of assets. But in the year 2010, the

percentage of Sub-Standard asset is highest among all the year. In 2010 percentage of

standard asset has reduced by 0.5% which is compensated by increase in Sub-

Standard & doubtful assets. This increase is due to interest & principle amount unpaid

due to financial crisis in 2009. The percentage of doubtful asset has reduced to a

great extent amongst all. So the private sector banks have managed to reduce the

doubtful asset.



Classification of Loan Asset of Foriegn Banks


0.8 1.5

1.3

0.5 0.4 0.2 0.2 0.7 0.5 0.5 0.6

1.0 1.1 1.2

1.8 0.9

3.5

1.6

95.2

97.0

97.9 98.1 98.1

95.7

2005 2006 2007 2008 2009 2010 Graph: 7.3 Compiled from: http://www.rbi.org.in

Interpretation:

The proportion of Standard Asset is increasing from 2005 and started getting stable in

2008 & 2009. But it has fallen in 2010. The proportion of other three types of assets

is falling over the years, but in 2010 there is great increase in the proportion of Sub-

Standard asset which is as a result of decrease in proportion of Standard asset. This

increase in Sub-Standard asset is because of interest & principle amount unpaid, due

to poor global conditions, for the loan provided in a 2009. The interest & principle

amount remained unpaid for period of more than 180 days but less than 1 year.



Amou

nt in

Rs.

Cro

re

COMPARISON OF NET PROFIT AND NET NPA OF BANKS:

40000

Comparison of Net Profit And Net NPA - Public Sector Banks

35000

30000

25000

20000

15000

10000

5000

0

2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

Net NPA 27977 27958 24877 19335 16904 14566 15145 17726 21033 Net Profit 4317 8301 12295 16546 15784 16539 20152 26592 34394

Graph: 8.1 Source: http://www.indiastat.com/ Interpretation:

It is observed from the above graph there exist no particular relationship between net

profit & net NPA of public sector banks. There is constant increase in net profit from

2001-02 to 2004-05 & from 2006-07 to 2009-10. The average of percentage increase

in net profit YOY basis comes to 32.3% On the contrary public sector banks have managed to reduce net NPA constantly from

2002-03 to 2006-07. Although the percentage of reduction over the previous year is

low compared to percentage of rise in profit over previous year. The average of

percentage decrease in net NPA YOY basis comes to 2.5%


Amou

nt in

Rs.

Cro

re

12000

Comparison of Net Profit And Net NPA - Private Sector Banks

10000

8000

6000

4000

2000

0

2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

Net NPA 3700 6676 3963 4128 4212 3171 4028 5380 7418 Net Profit 1142 1779 2958 3481 3533 4975 6465 9522 10868

Graph: 8.2 Source: http://www.indiastat.com/

Interpretation: It is clearly observed from the line graph that there is continuous rise in net profit of

private sector banks over the years. The average of percentage increase in net profits

of private sector banks comes to approximately 34%.

On the contrary there is no continuous rise/fall in net NPA. But overall there is rise in

net NPA from 2001-02 to 2009-10. The average of percentage rise in net NPA comes

to almost 15%.


Amou

nt in

Rs.

Cro

re

9000

8000

7000

6000

5000

4000

3000

2000

1000

0

Comparison of Net Profit And Net NPA - Foreign Banks

2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

Net NPA 785 920 903 933 639 808 927 1247 2973

Net Profit 945 1492 1824 2243 3098 4109 5343 7544 8459

Graph: 8.3 Source: http://www.indiastat.com/

Interpretation:

The above line graph shows net profit of foreign banks is increasing throughout the

period from 2001-02 to 2009-10. The average of percentage increase in net profit

YOY basis comes to 32%. Whereas in case of net profit there is no continuous

upward or downward movement.

But overall there is rise in net NPA of foreign banks. The average of percentage

increase in net NPA YOY basis comes to approximately 25%. So this shows there is

positive relationship between net NPA & net profit of foreign banks.


NPA TO ADVANCE RATIO OF BANK:

6

5.5 5

Comparison of NPA with Advances- Public Sector Banks

4

3

2 2.1

3.6

2.7

2.2 2

Gross NPAs/Gross Advances


1 1.3

1.1

0.8 0.7

0

2005-06 2006-07 2007-08 2008-09 2009-10 Graph: 9.1 Compiled from: http://www.rbi.org.in/

Interpretation:

The percentage in reduction of gross NPA to gross advances ratio is decreasing year

on year i.e. it has reduced by 34.5% from 2005-06 to 2006-07. Similarly it has

reduced by 25%, 18.5% & 9% respectively from 2006-07 to 2007-08, from

2007-08 to 2008-09 & 2008-09 to 2009-10. While in case of net NPA to net advances ratio, the percentage change is varying. It

has reduced by 38% from 2005-06 to 2006-07. Similarly it has reduced by 15.38%,

27.27% & 12.5% respectively from 2006-07 to 2007-08, from 2007-08 to 2008-09

& 2008-09 to 2009-10.



The above calculated figure states that the provisions made for NPA & other items

like interest due but not recovered, part payment received and kept in suspense

account, etc which is deducted from Gross NPA is changing over the years. It is not

decreasing in same proportion as gross NPA. The difference in gross NPA/ gross advances & net NPA/net advances is highest in

2006-07 [67%] & lowest in 2007-08 [59%]. In other years it near to 63%. This gap

is highest in 2007 because in 2007 advances have increased tremendously over 2006.

Due to which NPA also increased & so provisions also increased. The line graph clearly states that the ratio of gross NPA to gross advances & net NPA

to net advances is decreasing over the years. In all the public sector bank has

succeeded to reduce the non performing assets against the advances made over the

years.


4

3.5

3

3.8

Comparison of NPA with Advances- Private Sector Banks

2.9

2.5

2

1.5

1.9

2.5 2.2

2.5 1.2

1.5


1 1 1

0.5


0

2005-06 2006-07 2007-08 2008-09 2009-10 Graph: 9.2 Compiled from: http://www.rbi.org.in

Interpretation:

The percentage change in of gross NPA to gross advances ratio is decreasing initially

& thereafter started rising from 2007-08. It has reduced by 34.2% from 2005-06 to

2006-07. Similarly it has reduced by 12% from 2006-07 to 2007-08 & thereafter

increased by 18.5% & 9% respectively from 2007-08 to 2008-09 & 2008-09 to 2009-

10. While in case of net NPA to net advances ratio, the percentage change is var ying

drastically. It has reduced by 47% from 2005-06 to 2006-07. It is unchanged from

2006-07 to 2007-08. It has increased by 20% & 25% respectively from 2007-08 to

2008-09 & 2008-09 to 2009-10. The percentage change in gross NPA to gross advances ratio & net NPA to net

advances ratio over the years states that private sector banks makes more provisions

in gross NPA & gross advances.



The difference in gross NPA/ gross advances & net NPA/net advances is highest in

2006-07 [60%] & lowest in 2009-10 [48%]. In other years it near to 54%. In 2007

there is highest increase in advances over previous year amongst all the year.

This resulted increase in NPA which in turn increased the provisions and

unrecognized interest income.

Private sector banks have not succeeded to reduce NPA as against the advances made

over the years as both the ratios are increasing in later years.


4.5

Comparison of NPA with Advances- Foreign Banks

4 4

3.5

3

2.5

2

1.5

2.8

2

1.8 1.8

1.7



1

0.5

0.9 0.8 1 0.9

0

2005-06 2006-07 2007-08 2008-09 2009-10 Graph: 9.3 Compiled from: http://www.rbi.org.in

Interpretation:

The gross NPA to gross advances ratio is decreasing till 2007-08.It is unchanged in

2008-09 & then increased in 2009-10. It has reduced by 28.5% & 10% respectively

from 2005-06 to 2006-07 & from 2006-07 to 2007-08. It has increased tremendously

by 122% from 2008-09 to 2009-10. While in case of net NPA to net advances ratio, there is great volatility. It has reduced

by 11% from 2005-06 to 2006-07. Thereafter it increased by 25% in 2007-08. Again

it reduced by 10% in 2009 and finally increased by 89% in 2009-10. The steep rise in gross NPA & net NPA 2009-10 is due to poor global conditions.



The difference in gross NPA/ gross advances & net NPA/net advances is highest in

2005-06 & lowest in 2007-08. In 2005-06 provisions & unrecognized interest income

was highest compare to other years while it was lowest in 2007-08. The line graph clearly states that the ratio of gross NPA to gross advances & net NPA

to net advances is decreasing over the years. In all the public sector bank has

succeeded to reduce the non performing assets against the advances made over the

years. Thus in foreign banks gross NPA to gross advances ratio & net NPA to net advances

ratio are not having parallel movement throughout the period. The change in net NPA

to net advances is quite higher than gross NPA to gross advances.


Graph: 9.4 Source: http://www.rbi.org.in Interpretation: From the above chart it is clearly observed that old private sector banks are constantly

improving in terms of net NPA to net advances ratio which is represented by

declining trend from 2001-02 to 2009-10. While on the other hand for new private

sector banks net NPA to net advances ratio is fluctuating over the years.



HYPOTHESIS TESTING

TEST OF CO-RELATION

The test of co-relation is used to identify the co-relation between two

variables. The variable in our study is Net NPA and Net profit. This test

researcher has applied to identify the co-relation between two variables i.e.

Net NPA and Net profit of Public, Private and Foreign Sector Banks. Public Sector Banks: H0: There is no significant correlation between NPA and Profit of Public

Sector Banks for last 9 years

H1: There is correlation between NPA and Profit of Public Sector Banks

for last 9 years

Net NPA

Net Profit

Year

X

Y

X

Y

X- X

Y-Y

(X-X)2

(Y-Y)2

(X-X)*(Y-Y)

2001-02 27977 4317 20,613 17,213 7,364 -12896 54228496 166308364 -94966586 2002-03 27958 8301 20,613 17,213 7,345 -8912 53949025 79419466 -65456877 2003-04 24877 12295 20,613 17,213 4,264 -4918 18181696 24182200 -20968391 2004-05 19335 16546 20,613 17,213 -1,278 -667 1633284 444396 851953 2005-06 16904 15784 20,613 17,213 -3,709 -1429 13756681 2040898 5298677 2006-07 14566 16539 20,613 17,213 -6,047 -674 36566209 454734 4077734 2007-08 15145 20152 20,613 17,213 -5,468 2939 29899024 8638779 -16071436 2008-09 17726 26592 20,613 17,213 -2,887 9379 8337541 87965641 -27081675 2009-10 21033 34394 20,613 17,213 420 17181 176383 295186761 7215676

Total 185521 154921 216728339 664641238 -207100924 Mean 20,613 17,213


r = ∑(X-X) *(Y-Y)

∑[(X-X)2*(Y-Y)2] 1/2

r = -207100923.9

379534704

r = - 0.54567

H0 (Null Hypothesis) is rejected


Private Sector Banks:

H0: There is no significant correlation between NPA and Profit of Private


H1: There is correlation between NPA and Profit of Private Sector Banks for

last 9 years

Year

X

Y

X

Y

X-X

Y-Y

(X-X)2

(Y-Y)2

(X-X)*(Y-Y) 2001-02 3700 1142 4742 4969 -1042 -3828 1085326 14651015 3987621 2002-03 6676 1779 4742 4969 1934 -3190 3741170 10176830 -6170352 2003-04 3963 2958 4742 4969 -779 -2012 606513 4046150 1566539 2004-05 4128 3481 4742 4969 -614 -1488 376738 2213384 913162 2005-06 4212 3533 4742 4969 -530 -1436 280677 2061678 760701 2006-07 3171 4975 4742 4969 -1571 5 2467380 28 -8302 2007-08 4028 6465 4742 4969 -714 1496 509496 2238152 -1067862 2008-09 5380 9522 4742 4969 638 4553 407606 20727765 2906676 2009-10 7418 10868 4742 4969 2676 5899 7161443 34795553 15785639

Total 42676 44723 16636349 90910555 18673821 Average 4742 4969

r = ∑(X-X) *(Y-Y)

∑[(X-X)2*(Y-Y)2] 1/2

r = 18673820.57

38889840.77

r = 0.480172



Foreign Sector Banks: H0: There is no significant correlation between NPA and Profit of Foreign


H1: There is correlation between NPA and Profit of private Sector Banks

for last 9 years

Year

X

Y

X

Y

X-X

Y-Y

(X-X)2

(Y-Y)2

(X-X)*(Y-Y)

2001-02 785 945 1126 3365 -341 -2420 116350 5855077 825373 2002-03 920 1492 1126 3365 -206 -1873 42478 3506618 385945 2003-04 903 1824 1126 3365 -223 -1541 49774 2373654 343725 2004-05 933 2243 1126 3365 -193 -1122 37288 1258046 216588 2005-06 639 2002 1126 3365 -487 -1362 237268 1855907 663587 2006-07 808 3069 1126 3365 -318 -296 101189 87679 94192 2007-08 927 4585 1126 3365 -199 1220 39642 1489506 -242994 2008-09 1247 6612 1126 3365 121 3247 14522 10544914 391326 2009-10 2973 7510 1126 3365 1847 4145 3412162 17183457 7657202

Total 10135 30282 4050674 44154859 10334944 Average 1126 3365

r = ∑(X-X) *(Y-Y)

∑[(X-X)2*(Y-Y)2] 1/2

r = 10334943.88

13373740.04

r = 0.772778883



Interpretation: There is negative correlation between net profit & net NPA of public sector banks

while it is positive for private sector & foreign banks. Net profit consists of income earned by the banks. Income is divided into two parts

interest income & other income. Interest income includes Interest/Discount on

advances/bill, Income on investments, Interest on balances with RBI and other inter-

bank funds, others. While non-interest income includes fee income components such

as commission, brokerage and exchange transactions, sale of investments, corporate

finance transactions, M&A deals; and any other income other than the interest income

generated by the bank. But in interest income, income from Interest/Discount on

advances/bill is the major contributor towards NPA. Average 75% of total earning of public sector bank comes from Interest/Discount on

advances/bill which is 55% & 43% for private sector banks & foreign banks. If we

consider the last six years average of percentage increase in income from

Interest/Discount on advances/bill YOY basis then public sector bank records only

18% increase while its 33% for both private sector & foreign banks. But for private

sector & foreign banks rise in income from Interest/Discount on advances/bill

contributes minimal to the rise in overall income. The income other than Interest/Discount on advances/bill income for all the banks

together i.e. public sector, private sector and foreign banks on an average stood at

32.8% of the total income, but it is highest in foreign banks i.e. 57% & 45% for

private sector banks.

The last six years average of percentage increase in income other than

Interest/Discount on advances/bill income YOY basis was highest for foreign banks

i.e. 26% which is 15% & 19% for public sector bank & private sector banks

respectively. 101


PSBs

Pvt.S

Bs

FBs

PSBs

Pvt.S

Bs

FBs

PSBs

Pvt.S

Bs

FBs

PSBs

Pvt.S

Bs

FBs

PSBs

Pvt.S

Bs

FBs

PSBs

Pvt.S

Bs

FBs

Frequency Distribution of Banks Income

100%

80%

60%

40%

20%

0%

Non-interest Income Interest Income

2005 2006 2007 2008 2009 2010

Graph: 10 Compiled from: http://www.rbi.org.in

Public sector banks depend excessively on their interest income as compared to their

peers in the private sector and their fee-based earnings coming from services remain

quite low.

The higher proportion of non-interest income in private sector & foreign banks is due

to the value added services offered by these banks. There are some services which are

offered by private sector banks but not by public sector banks. These include Forex

Desk, Derivatives Desk, Technology Finance, Syndication Services, Real Time Gross

Settlement, Channel Financing, Corporate Salary Account, Bankers to Right/Public

Issue. Foreign banks offers some more services other than the above mentioned

services like Global Trade Solutions, Factoring Solutions, Derivatives Clearing, asset

management, private equity placement. So the private sector & foreign banks earn

higher non-interest income because of such value added services. 102


http://www.online.citibank.co.in/portal/newgen/corporate/product_services/derivatives_clearing.htm


OVERALL FINDINGS NPAs were more noticeable in respect of new private sector and foreign banks, which have

been more active in the real estate and housing loans segments. It shows a upward trends

over the years as compared to others The old private sector banks, which had been registering a significantly lower growth rate

than their newer counterparts in the recent past, managed a better performance this year. Among all three sectors, public sector banks have managed to reduce NPAs over the years.

NPA profile in the < 2% category of public sector banks was reached to 100% in 2009-10 as

compared to Private and Foreign sector banks which was around 80% Net NPA against net advances increased more in Foreign and Private sector banks in 2009-10

while Public sector banks have succeeded in reducing net NPA against net advances made

over the period of time Public sector banks have managed to increase the standard assets over the years. The

proportion of standard assets in Private sector banks reduced in 2009 and 2010 which was

compensated by increase in sub-standard and doubtful assets. In Foreign sectors banks the

proportion of sub-standard asset has increased tremendously by 3.5% of loan assets in 2010

which was 1.2% of loan assets in 2009. The percentage change in gross NPA to gross advances ratio & net NPA to net advances ratio

over the years states that public sector banks makes more provisions in gross NPA & gross

advances as compared to private and foreign banks. Public sector banks almost 75% of income comes from Interest/Discount on advances/bill.

Whereas it is just 55% & 43% for private sector banks & foreign banks. 106


CONCLUSION The NPA is one of the biggest problems that the Indian Banks are facing today. If the proper

management of the NPAs is not undertaken it would hamper the business of the banks. If the

concept of NPAs is taken very lightly it would be dangerous for the Indian banking sector.

The NPAs would destroy the current profit, interest income due to large provisions of t he

NPAs, and would affect the smooth functioning of the recycling of the funds Banks also redistribute losses to other borrowers by charging higher interest rates. Lower

deposit rates and higher lending rates repress savings and financial markets, which hampers

economic growth. Public sector banks are more efficient than private sector & foreign banks with regard to the

management of nonperforming assets. Even among private sector bank, old private sector

banks are more efficient than new private sector banks. But efficient management of NPA is

not the sole factor that determines the overall efficiency of banks


SUGGESTIONS New body like Debt Recovery Tribunal should be established & capacity of DRTs should

be enhanced. All banks should keep stringent check on advance being made to real estate &

housing segment as these segment contributed highly towards the NPA in 2009 & 2010. Uneven scale of repayment schedule with higher repayment in the initial years

normally should be preferred. Private sector & Foreign banks should focus more on recovery of sub-standard &

doubtful assets.

Public sector banks should increase their non-interest income, as rise in NPA due to

default in interest income may affect the profits drastically. .


BIBLIOGRAPHY

I. Books

Management Of Non-Performing Assets In Banks by Sugan C Jain

Managing Non-performing Assets in Banks S. N. Bidani

II. Magazines

Investor

Business India

III. e-Newspapers

The Economic Times

The Business Standard

I V. Published Material

RBI Guidelines Circulars on Income Recognition and Asset Classification

Report on Trend and Progress of Banking in India 2009-10

Statistical Tables Relating to Banks of India

Master Circular

V. Other Sources Internet Websites


http://www.indiastat.com/ 110

http://www.flipkart.com/author/sugan-c-jain/

http://www.visionbooksindia.com/authors.asp?n=49

http://rbi.org.in/scripts/AnnualPublications.aspx?head=Statistical

comparative analysis of non performing assets of public sector private sector foreign banks

Documents

asset npa shell

npameaning of npa

days overdue norm

loss asset

identification of npas

existence of npas

mounting npas

avoidance of loan losses