shahid summar project

8/8/2019 Shahid Summar Project

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AREPORT ON

NPA MANAGEMENTAT

THE JAMMU AND KASHMIR BANK LTD

BY

SHAHID AMIN

ROLL No. 39

IN PARTIAL FULFILLMENT OF MBA(BA)

BHARTI VIDYAPEETH UNIVERSITY

INSTITUTE OF MANAGEMENT AND ENTREPRENEURSHIPDEVELOPMENTPUNE 2009

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PREFACE

This research project is a part of the Business

Administration Course being taken up at Deptt. of

Management Studies, Bharati Vidyapeeth University.

I was provided opportunity to undergo training at The

Jammu & Kashmir Bank Ltd. at its zonal office sopore Dist

Baramulla my field of interest was to study the:

NPA Management

OF

THE J&K BANK LTD.

This project has been of great help in providing me an

insight in to the real life working of an organization; it gave

me a chance to apply, all I had learnt to practical situations,

enhancing my understanding and image of the business world.

This experience in decision making and practical application of

knowledge has

Contributed greatly to my growth both as a person and trainee.

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STUDENT DECLERATION

I declare that project entitled NPA Management at THE

J&K BANK LTD.

A critical and comprehensive Study of NPA Management

of The Jammu and Kashmir bank is my own work. I also

undertake that the work is purely academic and no part has been

copied or taken from anywhere.

SHAHID AMINM.B.A (BA)

BHARATI VIDHYAPEETH UNIVERSITY

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ACKNOWLEDGMENT

It gives me immense pleasure to present the report of my

project titled NPA Management AT THE J&K BANK LTD.

This work would not have been possible without theassistance and guidance of a no. of people . I Would like to

take this opportunity to thank each and every one of them.

At first I would like to thank the management of the

Jammu & Kashmir Bank Ltd. for providing me an opportunity

to work as summer trainee with their Zonal Office sopore Disst

Baramulla.

I also express my sincere gratitude to my guide Mr. Riyaz

Ahmad Wani Sr. Executive Manager Zonal Office sopore and

Farooq Ahamad advance manager TP Baramulla for taking

keen interest in my training/project work and giving me

valuable guidance at every stage.

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SHAHID AMIN

MBA (BA-39)

Certificate

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This is to certify that Mr. SAHAHID AMIN is abonafide student of MBA (BA) 4Th trimester programin this institute for the year 2008-2010.

As a part of the university curriculum, the studenthas completed the project titled NPA MANAGEMENTOF J&K BANK.

The project report is prepared by the student underthe guidance of our course coordinator.(Programme coordinator)

Director

Date:Place:

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EXECUTIVE

SUMMARY

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EXECUTIVE SUMMARY

OBJECTIVE OF THE RESEARCH:

1. To know various types of Loan products and there Management Of

J&K Bank Ltd.

2. To Know the Non Performing Assets Of the bank

3. To know the methods of provisions regarding NPA.4. To know the methods employed by the bank to recover Non

Performing Assets.

5. To know about the management of NPA.

6. To get acquainted of banking activities.

SOURCE OF INFORMATION:

PRIMARY SOURCE: Through structured questions.

Face to face interview.

SECONDARY SOURCE:

Records maintained by the bank.

Websites.

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RESEARCH METHODOLOGY:

The study pertains to behavior aspects such as their perception,

attitude and expectations towards the Loan products and provided by Jammu& Kashmir bank Ltd. An exploratory research design was adopted to

conduct the study.

DATA USED:

Both primary and secondary data was used .Bank broaches, diaries, books,

other written material and banks website were used to collect secondary

data.

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RECOMMENDATIONS:

1. Marketing side of the bank needs improvement.

2. Much improvement is needed in HRD Department. The employees

should be trained about new business trends and their motivation levelshould be improved.

3. The bank should come out with new and innovative methods to

recovered NPA and should motivate customers to pay there dues in

time.

4. There should be no delay in customer service.

5. The bank should provide easy and quick financial facilities to small

scale industries, retailers.

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T ABLE OF CONTENTS

S.NO. Chapters Page

1. Introduction to the Bank 1O-15

2. Bank at Glance

16-18

3. Organizational Hierarchy& Board of Directors

19-22

4. Types of Loans And Advances

23-30

5. NPA Management

IntroductionAssets classification

Provisioning Norms

Recovery

Conclusion

31-43

6. Conclusion

44-45

7. Bibliography and References

46

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CHAPTER ONE

INTRODUCTIONTO

THE JAMMU &KASHMIR

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BANK LTD.

COMPANY PROFLE

Founded 1938Headquarters Jammu & Kashmir, India

No. of Locations> 500 branches/offices

IndustryFinancial, Commercial

banks

Employees 6833

Moneylenders have been part of Indian society since ancient times.

Modern banking in India began some 200 years ago. First Bank in India wasestablished under the name and style of bank of Calcutta in 1806(a

presidency Bank).In 1840 Bombay presidency Bank and in 1843 Madras

presidency Bank came into exisentance. In 1921, these three presidency

Banks were merged as imperial Bank of India. In 1955, imperial Bank was

renamed as State Bank of India.

13
http://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Industryhttp://en.wikipedia.org/wiki/Financialhttp://en.wikipedia.org/wiki/Commercial_bankshttp://en.wikipedia.org/wiki/Commercial_bankshttp://en.wikipedia.org/wiki/Employmenthttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Industryhttp://en.wikipedia.org/wiki/Financialhttp://en.wikipedia.org/wiki/Commercial_bankshttp://en.wikipedia.org/wiki/Commercial_bankshttp://en.wikipedia.org/wiki/Employment


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Aimed this scenario, entire banking in the State of Jammu and

Kashmir was performed by traditional moneylenders and that too at

exorbitant interest rates. At the same time some banks like Punjab National

Bank, Grindalays Bank and imperial Bank of India functioned in the State

to a limited extent. The role of these banks was reduced to the people of the

State owing to the statutory limitations.

Under this Scenario banks could not ameliorate the financial social

position of the people of the State.

To overcome this crisis, the then Maharaja of the State, His Highness

Maharaja Hari Singh, conceived the idea to establish a bank to help people

of the State to come out of the economic backwardness. The scheme of

forming the bank was formulated by an eminent banker sir Sorabji

N.Pochkanwala, the then Managing Director of Central Bank of India. The

outcome of the efforts of Sir Sorabji resulted in the establishedment of theJammu & Kashmir Bank Limited on October 1, 1938.And the Bank formally

commenced its business on July 4, and 1939.The bank opened its first

branch at Residency Road, Srinagar. Encouraged by the support of public, it

opened its another branch at Jammu. By 1946, the number of branches of

the bank went up to 12.

Precisely, banking in the State of Jammu & Kashmir actually began in

1939, when Jammu & Kashmir Bank started its operation. Since then, with

the continuous changes taking place in the financial services scenario, the

banking in Jammu & Kashmir went under tremendous. Besides exhibiting its

Commercial character, the bank has been meeting the social obligation of the

people of the State too.

The Jammu & Kashmir Bank is the first of its nature and compositionas a State owned bank in the country. The State government besides

contributing half of the issued capital also appointed the bank as bankers for

general banking and treasury business of the State government. In its

formative years, the bank had to coup up several serious problems,

particularly around the time of independence, when two of its branches at

Muzaffarabad and Mirpur fell to the other side in 1947.However, the State

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government came with assistance of Rs 6.00 lacto meet the claims.

Following the extension of Central laws to the State of Jammu & Kashmir,

the Bank was defined as a government companies Act 1956.

The real growth of its operations and business started after 1969, the

area of nationalization of major banks, when the union government

announced control on banking. It began to emerge from its regional shell,

opening branches beyond the State boundaries and emerged as a leading

bank. In 1971, the bank was included in the second schedule of the RBI Act

1934.It had its first full time chairman following social control measures in

banks in the country. Five years later (in 1976) it was declared an A Class

bank. By the end of 1980, its branches numbered 212 with aggregate

deposits of Rs. 191.67 corer and advance of Rs. 61.67crores.

The bank became pioneer in the finance of road transport, horticulture

and hostels to promote tourism and extended finance to the artisans topromote traditional handicrafts. In fact the bank was the first commercial

Indian bank to introduce schemes for financing fruit crops on standing trees

in the State of Jammu & Kashmir, a policy that was subsequently emulated

by other banks elsewhere in the country.

The bank expanded its area of operation and widened its credit base

by financing schemes like integrated Rural Development Programmers

(IRDP), SEEDY, PMRY, NRY and other self-employed programmers

sponsored by the State and Central Governments. In 1976, Bank became the

first and the only bank, which was permitted by the Reserve Bank of India to

sponsor two regional banks, namely, Kamraz Rural Bank and Jammu Rural

bank. The bank has also been entrusted with lead bank responsibility in eight

of the fourteen districts and governorship of the State Level Bankers

committee in J&K State.

The bank has played a key role in the economic development of the

State in particular and the country in general. In the last ten turbulent years,

it was the only commercial bank to sustain economic and business activity as

most of the nationalized banks in the State downed their shutters. During thisdifficult period, it was the J&K Bank alone that supported various aimed at

alleviating poverty and generating self-employment opportunities.

With a substantial increase in its capital base, the bank participating more

extensively in financing of infrastructure projects. A number of leading

corporate and blue chip companies as well as prominent public sector

undertakings of the Indian

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Governments have become part of its clientele. The financial of the

bank are very strong. The banks debt instruments have been highly rated by

CRISIL (Credit Rating Information Service of India Limited), which has

reaffirmed its P1+rating of the banks certificate of deposits, including strong

degree of safety with regards to timely payments. The bank is governed by

the companies act and banking regulation act of India .It is regulated by the

Reserve Bank of India and Security and Exchange Board Of India (SEBI).At

the end of May 2006, the bank had 517 branches spread from Kashmir to

Kanyakumari with 98%of its business computerized. The bank has been

playing a vital role in the development of the economy of the state and

bolstering industry, trade, commerce and agriculture in the state. The bank

has put a commendable performance in all aspects of banking .The

performance of J&K Bank, its growth, profitability, diversification of

product portfolio, modernization of its operations and its achievements inother areas have made it one of top most banks of the country.

Sri Sohan Lal Kothari was the first manager of the bank and the then

chief Minister major general Roy Bahadur Dewan Bishan Das was appointed

as the foundation stone of the Residency road Srinagar branch building.

Since 1977 the bank has been responsible for payment of civil pension and

receipt of various states taxes. Findings overall performances of the bank

good, the RBI issued a license to the J&K Bank to deal in all types of

foreign exchange presence in 1980.

The bank installs first ATM in valley connected globally to all master

card networks ATMs.All the branches of the bank are connected through V-

SAT on 10-08-2001 the bank took over the Srinagar branch of standard

chattered Grindlays bank. The bank inaugurated its new corporate

headquarter building at M.A road Srinagar-on 2 september 2001.

J&K Bank is today one of the feasted grooving bank of India with a

network of 517 branches offices spread across the country offering world

class banking products and service to its customers. Today the bank has thestatus of value driven organization and is always working towards building

trust with shareholders, employees, customers, borrowers etc.for which it

has adopted strategy directed to developing a sound foundation of

relationship and trust aimed at achieving excellence which of course comes

from the womb of good corporate governance.

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The J&K Bank has recorded an outstanding achievement in the key

areas of operations. The total deposits as on 31-03-2008 were Rs. 28593.263

crores against Rs.25194.2947 crores for the fiscal year 2007-2008.

Thus deposits have shown a growth of 13.49%.The reserves and

surplus of the bank grove by 13.8% from Rs 2232.335 cr. of the previous

year to Rs 1960.241 cr. on

ending March 2007. Other borrowing of the bank increased from Rs.

620.189 Cr. To 751.78 Cr. Other liabilities for the fiscal year 2007-2008

ending 31 March stood at Rs 1102.015cr against Rs. 832.31 cr. for the

previous year.

The Bank has made the total investment of Rs. 857.766 cr. on 31 March

2008 the advances have increased from Rs.1707.799 cr. as on 31 March

2007 to Rs. 1888.26118 cr. as on 31 March 2008 showing a growth of 10.5%

over the previous year.

The fixed assets of the bank amount for Rs.19.2 cr. and other assets are

worth Rs 48.6 cr. The J&K Bank has the total cash and balance with RBI

Rs.321.996677 cr. and balance with banks and money at C&S notice is Rs.

121.727.cr as on 31-08-2008.

In the state of Jammu and Kashmir, the J&K Bank has been the major

contributor in providing credit to poor artisans, retailers, small business,

agriculture and other allied activities, small scale industries and technically

qualified entrepreneurs. In these sectors with Rs 137.89 cr. in agriculture

sector, Rs 145.38 cr. in industries sector and Rs 241.09 cr.in service sector.

J&K Bank having a strong network of 410 branches across the state has

made total advances of Rs 5941.02 cr in J&K State as on ending March 2006

as against its total deposits of Rs 12236.98 cr.Thus achieving a currentdeposit ratio of 48.55%.

Maintaining a progressive outlook, the J&K Bank is keeping pace with the

changing technology. The bank continues to leverage information

technology as strategic tool for its business operators.

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The IT strategy emphasizes enhanced level of customer service through

24x7 hours availability, multi channel banking and cost efficient through

optimal use of electronic channels, wider market reach and opportunities for

cross selling.

Currently more than 90.5% of the banks business is computerized. The J&K

Bank is the first bank to launch ATM cum debit card in Kashmir. The bank

launched ATM cum Debit card J&K Bank global access card in

collaboration with the master card international. The bank has grown the

number of ATMs to 182 at the end of March 2006.

The bank has launched the three variant types of credit cards with different

limits with an interest free credit facility for 20 to 50 days at accept at

125000 mercantile establishments across the globe. The customers have the

access to their money for all the 365 days of a year and 24 hours per day.The credit and debit cards of the bank are accept of cash with draws at 7000

ATMs in India and 1 million ATMs across the globe. To maximize value

to its customers, the innovation in products and improving the quality and

speed of the services in the Hall Mark of banks business strategy. The bank

has launched several unique financial and deposit products like education

loans, car loans, consumer loans,

Flexi deposit recurring plus and Mehandi deposits schemes to meet the

needs of customers. The bank has recently won the prestigious Asian

banking awards 2004 for

Customer convenience programmmes. The awards is given each to

recognize and honor the bank in Asia pacific region for outstanding

innovating and world-class products services, projects and programmers.

J&K Bank has embarked on brand strategy exercise and engaged removed

consultants to work on business development possibility and engaged over

all processes that could be improved in the future to enhance the overall

profitability of the bank.

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This would increase branding of the banks products in order to

increase the value for its customers. And now with the right kind of

leadership efforts of dedicated employees and State of art technology, the

J&K Bank is on the path of growth and success building trust profit, peace

and property.

CHAPER TWO

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BANK AT A

GLANCE

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BANK AT A GLANCE

PROFILE:-

Incorporated in 1938 as a limited liability company.

Governed by companies Act and Banking regulation Act of India.

Regulated by the Reserve bank of India and SEBI.

Listed on National Stock Exchange (NSE) and Bombay Stock

exchange (BSE).

53 per cent owned by the Govt. of J&K.

Rated P1+by standard and poor-CRISIL connecting highest degreeof safety.

Four decades of uninterrupted profitability and dividends.

SHAREHOLDING PATTERN (AS ON OCTOBER 24, 2008):

Unique characteristics: one of a kind

Private sector Bank despite Government holding 53% of equity.

Sole bankers and lender of last resort to the Govt.of J&K.

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Plan and non plan funds, taxes and non-taxes revenues, routed through

the bank.

Salaries of Govt officials disbursed by the bank.

Only Private sector designed as agent of RBI for banking business.

Collect taxes pertaining to Central Board of Direct Taxes in J&K.

INFRASTRUCTURE. GLOBAL STANDARDS

The fastest growing Bank with 510 branches across the country.

Over 98 per cent of the business computerized.

Banking, Tele-banking and SWIFT facilities available.

Internet Banking, SMS and Mobile Bank provided.

ATMs connected globally to all Master card Networked ATMs.

Mobile ATM Service available-first of its kind in Northern India.

J&K bank Global Access Debit card cirrus and Maestro enabled.

Own Credit card.

Live on RTGS System of RBI.

FINANCIAL SERVICES PORTFOLIO: ONE STOP FOR ALL

FINANCIAL

NEEDS.

Insurance joint venture with MetLife international.

Distributor of :

Life Insurance products of MetLife (India) Pvt. Ltd.

Non-life insurance products of Bajaj Allianz General InsuranceCo.Ltd

Providing depository Services.

Offering Stocks Barking Service.

Collection Agent for utility Services provided by State and private

sector.

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NEW BUSINESS INITIATIVES: SHAPING OURSELVES TO

SERVE

BETTER.

To meet the growing needs of the economy, in tune with the

competitive banking innovative financial products.

Monetizing the Banks branch network.

Third party products distribution.

Investment Banking.

Offshore Banking.

CHAPTER THREE

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ORGANISATIONA

L HIERARCHY&

BOARD OF

DIRECTORS

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BRIEF PROFILE OF DIRECTORS:

HASEEB AHAMD DRABOO (CHAIRMAN & CHIEF EXECUTIVE)

Haseeb Ahmad Draboo, Chairman and Chief Executive of the bank is

a professional economist who has been on the board of directors of the bank

since 11th July 2003.

Possessing a diverse skill set and wide ranging experience, he started

his professional career with a perspective planning division of the planning

commission. Later, he worked as consultant to the economic advisory of the

Prime Minister. His final stint with policy making was with the 10 th finance

commission.

At present, he continues to work as the economic advisor the

Government of Jammu and Kashmir, a position he has held January 2003. he

is credited with having conceptualized wide-ranging economic and physicalreforms of the Govt. he has been inducted by the planning commission to its

working group on resources for the 11th five year plan.

MS VERMA:

M.S. Verma serves on the Board of a number of a number of public

and private sector companies and is associated with several educational and

research institutions in a advisory capacity. He is Vice-President of the

governing body of the National Council of Applied Economic Research and

member of the Board of Governors of the Institution of Economic growth,

University of Delhi.

G.P. GUPTA:

G.P. Gupta a post graduate in commerce, having combined stints in

both academic and public sector, is also the Ex-Chairman and Managing

Director, IDBI, and has served on several distinguished positions such as

Chairman, UTI, Chairman, SIDBI, Chairman, National Stock Exchange of

India Ltd., Member Life Insurance corporation of India , Director, Export-Import Bank of India, Director, Infrastructure Development Finance

Company Ltd., Director, Indian Airlines Ltd., Director, Discount & Finance

House of India Ltd., Director, Securities Trading Corporation Of India Ltd.,

Council Member, Indian Institute of Bankers and President,

Entrepreneurship Development Institute of India Ahmadabad.

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B.B. VYAS (IAS):

Bharat Bushan Vyas belongs to the 1986 batch of Indian Administrative

Services. During his probation he was awarded Gold Medal by Lal Bhadur

Shastri National Academy of Administration, Mussoorie for best all round

performance.Mr. Vyas has held several distinguished positions both in State and

Centeral Governments. In the Government of J&K, Mr. Vyas worked as

District Megistrate/ Deputy Commissioner of Poonch, Udhampur districts.

He is presently holding the position of Commissioner/ Secretary to

Government Finance Department.

EXECUTIVE DIRECTORS:

ABDUL RAUF FAZILI

MUSHTAQ AHMAD

B.L. DOGRA

UMAR KHURSHEED TRAMBOO

SECRETARY TO BOARD:

PARVEZ AHMAD

EXECUTIVE DIRECTORS:

A.R. FAZILI..(Business Operations)

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MUSHTAQ AHMAD(Corporate Functions)

PRESIDENTS:

ABDUL MAJID MIR(Chief Financial Officer)

ALOK KUMAR MEHTA.(Chief Peoples Officer)

MANZOOR AHAMD SHAH...(Chief Strategist/Chief

Tech. Officer)

NISAR AHAMD KOUL...(Chief Credit Officer)

AJIT SINGH..(Chief Regulatory Officer)

RAJ KUMAR(Chief Treasury

Consultant)

VICE PRESIDENTS:

GHULAM MOHAMMAD RESHI(Assist Monitoring and

Information)

GHULAM AHMAD REGOO... (Finance and Risk

Management)

GHULAM AHMAD BEIGH.(Strategy and Business

Development)

MOHAMMAD BASHIR-UL-ISLAM...(Treasury Operations)

SUMAN DURASWAL..(Retail Credit)

PARVEZ AHMAD(Company Secretary)

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MUKHTAR AHMAD KAWOOSA..(Insurance)

CHAPTER FOUR

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FINANCIAL

PRODUCTS

FINANCIAL PRODUCTS:

LOAN PRODUCTS:

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Purchase with construction of house/flat

renovation/additions/alterations of existing house, purchase of

land

Margin:

For construction/purchase of house: 15% For renovation: 25%

Repayment period: Upto 20 years including 9 months moratorium by

equal monthly installments.

Rate of interest:

RepaymentPeriod

Floating ROI Fixed ROIUpto

2 Lakh

Above

2 Lakh

Upto

2 Lakh

Above

2 Lakh

5 years 11.5% 13.25% 12% 14.25%

5 to 10 years 11.75% 14% 13% 15%

10 to15 years 12.75% 14.25% 13% 15%

Above 15 years 13% 14.75% 13% 15%

CAR LOAN:

Eligibility:

Employees of Govt./semi-Government departments,

autonomous bodies, public sector undertakings, individual,

firms, limited companies having a minimum 5 years active

service.

Security: Hypothecation of vehicle, third party guarantee of oneperson,

Quantum of Finance: Maximum 10 Lakh.

Margin: 20% of the cost of the vehicle.

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Repayment: 7 years in equal monthly installments

Rate of Interest:

12 % upto 4 Lakh

13.50 % above 4 Lakh

EDUCATION LOAN:

For bright students with a good academic background and

pursuing graduation/post graduation courses in Science/Arts/Commerce,

Medicine, Surgery, Hotel

Management, Design, Architecture, Biochemistry, VeterinaryScience, ICWA, CA, CFA, Computer Certificate Courses/leading to

Diploma/Degree, MCA, MBA, MS etc.

Eligibility: Should have secured admission to professional/technical

courses in domestic/foreign universities/institutions through entrance

test/selection process.

Margin:

Upto 5 Lakh: Nil

Above 5 Lakh

i) Studies in India: 5%

ii) Studies Abroad: 15

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Repayment:

Moratorium: Course period + one year or Six months after

getting Job

Whichever is earlier? The loan is to be repaid in 5 to 7 years after

moratorium period.

Rate of Interest:

2.5 to 5 Lakh 11.5%

5 to 10 Lakh 12.5%

10 to 20 Lakh 14.5%

J&K BANK DASTKAR FINANCE:

J&K Bank in its endeavor to promote trade, industry and to

preserve the traditional arts and crafts of the state devised a scheme aimed at

the financial needs of the artisan community aptly called JK Bank

Dastkaar Finance. The scheme provides easy and soft credit to craftsmen

engaged in the trade and helps them to set up their own ventures, weeding

out the middlemen responsible for their exploitation. Keeping in view the

specific production cycle associated with this trade the loan comprises of a

term loan and working capital components.

The disbursement is phased in quarterly installments and

aligned to the status of WIP (work in Progress). This ensures proper end use,

quality control and timely completion of work. The weavers/ artisans are

allowed a reasonable time for the

Repayment of the bank finance. To make the credit hassle free, no Collateral

/third party guarantee is required. The product has been designed on the

banks philosophy of confidence based lending as opposed to collateral

based lending. There is no requirement of any collateral security under this

product. The legal documentation has been kept atbare minimum with only two documents to be executed for disbursement of

the loan. In order to increase the reach of this product the database of the

weavers/ artisans available with various trade associations is being utilized

besides identification of people by concerned branches of the bank.

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JK BANK ZAFRAN FINANCE SCHEME:

Kashmiri Saffron the most expensive spice in the world has a

unique aroma and flavour. It is considered worlds best because of its

scientifically proven superior quality, hence commanding a price much

higher than the saffron from any other part of the world. Saffron is

extensively used for culinary and colouring purposes. Besides, because of its

medicinal qualities, it is an important ingredient for both traditional

(Ayurvedic and Unani) and allopathic medicines. Its demand in the markets,

both domestic and international, is growing. Saffron is a niche-economy,

involving hundreds of Kashmiri families. Still, the recent decline in saffron

production is going to affect this segment of state economy. In 2003-04,

around 6.98 metric tonne of saffron was exported while as the exports

declined to 5.19 metric tons in 2004-05.

With a view of preserving this prized spice, J&K Bank tailored a

specific product named JK Bank Zafran Finance. Its purpose is to provide

adequate, timely and need-based finance to saffron growers. The scheme is

for all saffron growers, especially the smaller and marginal ones including

even the contract farmers engaging in or intending to start its cultivation.

The quantum of finance is proportionate to the land holding of a grower. The

product also provides an additional finance for post harvest and packaging.

A Product that covers the entire plantation and production costs including

plant material, agricultural machinery, labour etc. this scheme is provided to

Saffron growers.

The disbursement is done in two phases; 60% in the first year and 40% in

the second, when the growers are in need of funds. The repayment of the

advance is scheduled within the four year growing cycle of saffron. Re-

financing facility can be availed for fresh plantation of the crop. The

documentation has been simplified and kept minimum to make it hassle-free.

With a view of preserving this prized spice, J&K Bank tailored a

specific product named JK Bank Saffron Finance. Its purpose is to provideadequate, timely and need-based finance to saffron growers. The scheme is

for all saffron growers, especially the smaller and marginal ones including

even the contract farmers engaging in or intending to start its cultivation.

The quantum of finance is proportionate to the land holding of a grower. The

product also provides an additional finance for post harvest and packaging.

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Other such products like Khatamband Craftsmen Finance for Khatamband

Craftsmen and Ghiri Finance for taking complete care of the expenses

involved in procurement processing sale and export of walnut kernels.

AGRICULTURE AND ALLIED FINANCE:

Agriculture is the mainstay of our economy but unfortunately being financed

mainly from outside of the banking sector.

Our rural finance strategy envisages extending the frontier of formal

finance ton incorporate agriculture along with other rural economies on

principles of sustainability, efficiency and significant outrage.

Rate of Interest:

Upto .50 Lakh: 12.5%

.50 to 2.00 Lakh 13.5%

2.00 to 5.00 Lakh 14.0%

5.00 to 20.00 Lakh 14.5%

J K BANK ALL - PURPOSE AGRI-TERM LOAN:

The product aptly named as All-Purpose Agri-Term Loan has been

designed in a way that lays special emphasis on small and marginal farmers

and provide sufficient and, more importantly, timely finances to the farmers

engaged in all types of agricultural and allied activities. The product aims to

cater to the needs of small farmers within very little land holdings in the

rural and semi-urban areas of the state.

The product is given to the people engaged in any kind agriculture and

allied activities. Horticulture, Sericulture, Animal Husbandry, Plantation and

Fisheries can be financed through this product.The objective has been to provide easy finance to needy farmers

through regular channels of finance and to wean them away from the

exploitative circle created by the non-banking intermediaries. For that

purpose, the product has been devised in such a way that hitherto un-banked

customers get an easy access to banking services through simple and

affordable documentation process. A maximum credit of Rs 1.00 Lakh,

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depending upon the Agri-activity to be financed is provided but multiple

activities can also be considered for finance. The product is offered at

affordable interest rates.

Rate of Interest:


Above .50 Lakh 14.0%

APPLE ADVANCE SCHEME:

Apple, the king of Kashmir fruit, lies at the heart of horticulturaleconomy of J&K state. Every year hundreds of truckloads of apple reach the

markets of Delhi, Punjab, Jaipur, Bangalore, Chennai and Ahmadabad. The

potential yearly returns on the fruit, as per some of the findings, stand at

somewhere between Rs. 2000 to 2500 crores. Almost 2.5 million people of

the state are directly or indirectly associated with the apple business.

J&K Banks specially designed product named as Apple Advance has

struck at the root of this exploitative system that thrived on scant or untimely

fund availability and at times even lack of finance through formal channels.

Last year, after a detailed study of the apple economy, a need-based, time

specific product was introduced. The product incorporated all the critical

inputs necessary to make our financial intervention effective and grower-

friendly. Apple Advance was introduced to meet the comprehensive

requirements of the apple growers with distinctive features like reduced

margins, higher scale of finance that includes production and post harvest

maintenance, auto renewal of limits and most importantly very easy and

hassle free documentation. With an effective product monitoring mechanism

in place, the scale of finance was increased from Rs 1.50 Lakh per acre from

Rs 40,000 per acre. Regular revision of scales of finance is carried out to

match the rising production and marketing costs.

The objectives that guided the customization of the product included

the easy access, simplified documentation, `avoiding redundancies,

shortened process time and flexible fund limit. Even for the growers who

have just leased orchards can avail finance under the scheme. With

hypothecation of fruit crop and Third Party Guarantee of 2 persons as

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security and no emphasis on collaterals, the borrower is also allowed

withdrawals up to 50% of the previous years limit till the bank renews the

sanction for the next year. The process has been made extremely easy and

hassle free to ensure that comprehensive requirements of Apple growers to

take care of Production & Marketing Costs are fulfilled adequately and in

time. Simplified legal documentation has been made to expedite the loan

processing.

Rate of Interest:


.50 to 2.00 Lakh 13.5%

2.00 to 5.00 Lakh 14.0%

5.00 to 20.00 Lakh 14.5%

BUSINESS LOAN:

Right from financing the contractors, providing credit to transporters,

funding the working capital of shopkeepers, providing financial solution

to business men to corporate, SME and infrastructure finance, our regular

loan products cater to all kinds of business of industrial activities in the

state and rest of country.

Rate of Interest:


.50 to 2.00 Lakh 14.0%

2.00 to 5.00 Lakh 14.5%5.00 to 20.00 Lakh 15.0%

MICRO-FINANCE:

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J&K Bank is working on empowering people and demonstrating that

people with lesser means can be reached profitably. For us, at J&K Bank,

empowerment is the process of enhancing the capacity of individuals or

groups make choices and to transform those choices into desired actions and

outcomes.

One of the many of such products is our craft development loan which

caters to the needs of our highly talented and skilled artisans engaged in

Wood Craving, Paper Mache, Namdasazi, Copper Smithy, Willow Wicker

and Kangri making etc.

Likewise all our other such products have been designed keeping in

view the seasonal and craft specific requirements.

CHAPTER FIVE

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NPA

MANAGEMENT

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Introduction

Banks derive their major source of income by way of interest on advances

and investments .Interest is charged to the asset and then recovered from theparty /borrower concerned. Thus income is booked initially on accrual basis.

However, if the bank is not able to get/recover interest from the counterparty

within reasonable time, then the income should not be accounted for or

recognized, till it is actually received. Thus, accounting for interest is

changed to a mercantile one. The interest in this situation becomes a non

performing one.

We are going to see the classification of assets into four main categories and

their sub-groups. We shall then proceed to discuss the provisioning normsbased on the classifications as well as provisioning have been made fairly

objective over a period of time.

ASSET CLASSIFICATION

In august 1991, a high level committee, headed by Mr M.Narsimham was

appointed to examine various aspects of our financial system. One of the

important recommendation of Narsimham committee was that balance sheet

of the banks should be transparent and comply with international accountingstandards .The committee recommended that banks should adopt uniform

accounting practices in regard to income recognition and bad debts

provisioning. In particular, income recognition of non- performing assets

should not be an accrual basis but on record of recovery. The committee also

suggested that provisioning should depend upon a proper classification of

assets, which in turn should be based on objective criteria.

Following these, the Reserve bank of India issued guidelines/instructions

to banks in April, 1992 for classifications of assets. Initially an advance was

treated as non-performing one, if the interest/installments remain unpaid for

90 days.Narsimham committee also recommended that the assets should be

classified into four broad categories and provisioning should be done based

on the classification of assets. The four categories are as follows (a)

standard assets (b) sub-standard assets, (c) Doubtful assets, and (d) loss

assets.

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A non per-forming asset causes two fold impact on the profitability of the

bank. On one hand, the bank ceases to interest on these assets and

thus is deprived of its legitimate income from the assets. On the other hand,

the bank is required to make provisions for this asset, depending on theclassification /category of the asset and

Value of security, if any. This makes a further dent in the profitability of the

bank. The Reserve Bank of India introduced the system of the asset

classifications and provisioning

In with international practices for the first time in 1993. The norms

underwent several changes during the last 12 years. We peruse the current

norms, which are applicable as on 31 march, 2005. Depending on the age of

a NPA, the classifications of the asset changes. With passage of time,

probability of recovery diminishes and hence requirement for provisioning

goes up. Some consideration / weight age is given to value of the security aswell as, while deciding the provision.

To begin with sub-standard assets are divided into two sub

classes viz. Secured and Unsecured ones. Unsecured asset are those, where

the realizable value of security is not more than 10% of the outstanding dues.

For sub-standard secured assets _ denotes by code 21 provision is to be

made at 10% of the outstanding dues. In the case of sub-standard unsecured

assets denoted by code 22 provision requirement would be 20% of the

outstanding dues.

As we have seen, doubtful category consists of three sub- categories

doubtful-I, doubtful-II and doubtful-III, based on the age in the doubtful

category. Doubtful-I category denoted by code 31- represents first 12

months in doubtful category. The provision category for this subcategory is

20% of realizable value of security (RVS) plus 100% Of the short of

security. We shall take one example to clarify the position . Suppose, there is

an asset of Rs 120 in the Doubtful I category and the realizable value of

security (RVS) is Rs 90. Then the provision requirement would be (20% ofRs 90 + (120-90) i.e. Rs (18+30). Thus, provision requirement for this asset

of Rs 120 in Doubtful-I category will be Rs 48.

Doubtful-II category- denoted by code 32- represents the period of

further 24 months in the doubtful category. This means, a NPA during 24

months to 48 months belongs to D-II category. Provisioning required in this

category is 30% of the realizable value of security (RVS) plus 100% 0f the

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shortfall in security. In the case of above mentioned example, if the asset

was to belong to D-II category, the provisioning requirements would be as

follows -30% of Rs 90 + (120-90) i.e. Rs (27+30). Thus provision

requirement for the asset of Rs 120 in D-II category, with RVS of Rs 90,

would be Rs 57.

Accounts which are NPA for over 48 months (i.e. doubtful category for

over 36 months) are classified under Doubtful-III- denoted by code 33-

category. Accounts in D-III category require 100% provisioning. In the

above mentioned example, a provisioning of entire Rs120/- will be required

in D-III category.

Loss assets denoted by code 41- are uncollectible asset which does not

have any security at all moves from sub-standard category to loss category.

Provisioning requirement for Doubtful-III asset and loss asset is the same

viz.100%.

CAUSES OF AN ASSET TURNING NPA

(A)Internal (within control of bank).

Improper selection of beneficiary.

Defective appraisal.

Lack of proper supervision.

Stress on quantity rather than quality.High volume of transaction.

Untrained staff.

Contigency approach.

Financing non-viable projects.

Unscientific repayment schedule.

(B) Reasons beyond control of bank but with in control of borrower.

Misutilisation.

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Diversion of income generated.

Delay in completion of project.

Disposal of asset.

Willful default.

Inadequate knowledge.

Misguidance by others.

(c) Reasons beyond control of bank as well as borrower.

Insufficent incremental income.

Natural calamities

Death/phy social disability.

Change in Govt policy.

Lack of Govt support.

Lack of cooridination among agencies.

Abject poverty/illiteracy.Social compulsion.

Competition.

Product obsolescence.

Technology obsolescence.

Illustrative Symptoms Of Business Failure(from

bankers view point)

* Non-Submission/delayed submission of stock/Receivable statement and

Quarterly/annual operating data.

* Unsatisfactory operation/ cash drawings/return of bills.

* Dishonor of bills, delay in retirement/return of bills.

* Reduction in credit summations- due to opening of account with another

bank.

* Delay in payment to creditors/ invoking of guarantees by beneficiaries.

* Constant use of c/c limit to the hilt.

* Slow turn over /pling up of inventory.

* Request for reduction of margin/stoppage of overvaluation of stock.* under-utilization of capacity/stoppage of production/closure of factory.

* Continuous cash losses resulting in erosion of Tangible Net Worth.

* Chronic default in payment of interest installments /statutory liabilities.

* Failure to funds (for promoting allied concerns).

* High rejection/scraps.

*Large number of law suits against the company.

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*Delay in implementation of the project.

*Any major change in management pattern/ share holding.

Ramifications Of NPAs

Reduced profitability: Provisioning to be made to cover default / credit risk

adversely affect.

Dividend to be paid to the investors.

Salary and other benefits to be given to the employees.

Investments to be made in technology, infrastructure etc.

Capital Adequacy Problem: only 1.25% of risk weight age Assets out of

the entire provisioning made by a bank is included in tier II capital leading to

. Reduced lending.

. Reduced Profitability.

. Overall reduced growth.

Capital Account Convertibility: Tavapore committee recommended that

CAC should not be introduced unless the NPAs of banks come down to less

5%.

Asset Liability Management: sub standard Assets are taken in 3 to5 years

time bucket and Doubtful/loss assets in more than 5years time bucket

creating mismatch in the earlier (e.g. 29d- 3 m, 3 m- 6 m-1 year-3 year)

Both for liquidity and an interest rate risks management

Overall Image and Rating of the bank:

. Increased risk perception about the bank relating to investment, lending,

Refinance etc. Leading to increased cost of borrowing and

reduced profitability.

. Attracting penal action by RBI including refusal of license to open

branches in India.

. Difficulty in obtaining license to do business overseas.

. CAMELSC Rating by Reserve Bank of India.

Capital AdequacyAsset Quality

Management

Earnings

Liquidity

Systems

Control & Compliance

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Illustrative strategies For Reducing NPAs

1 Replacement /Rescheduling of Loans

2 Rehabilitation of Potentially viable units

3 Acquisition of sick units

4 Compromise and settlement with borrowers

5 Debt restructuring of corporate and SME Accounts

6 Enforcement of securities under SARFAESI ACT, 2002

7 Sale of financial assistance to assets reconstruction securitiesation

companies

8 Sale of NPAs9 Settlement of claims with DIGC/ECGC

10 Establishment of special loan Recovery Branches and posting competent

staff to these branches

11 Legal Actions

A Recovery through Debt Recovery Tribunals/lok Adalats

B Certified Proceeding under State Recovery Acts

C Filling of suits including summary suits in civil courts

D criminal action against willful Defaulters

12 Write off

MISELLANEOUS

1 Improving credit Appraisal, Monitoring supervision and Follow-up

2 Appointment of agents

3 Efficient credit information systems

4 Greater Accountability on the part of Borrower Particularly Corporate

ILLUSTRATIVE STEPS WHICH MAY BE TAKEN BY THE

CONTROLLING OFFICES OF COMMERCIAL BANKS FORREDUCING NPAS

Step 1 Study the problem of NPAs: Branch-wise, amount-wise and age-wise

Step 2 Formulate a loan recovery policy and several strategies for reducing

NPAs

Step 3 Create special recovery cells at HO/ZO/RO/ other controlling offices

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Step 4 Identify Critical branches for recovery

Step 5 Fix branch-wise and region/zone-wise targets for recovery and draw

time bound action programmers for the branches/ROs/ZOs etc to enable

them to achieve their respective targets

Step 6 Select proper strategy (including combination of strategy) and

techniques for solving the problem of each critical NPA on a case to case

basis and common strategy and technique for other NPAs.

Step7 Monitor implementation of the time bound action plan drawn

Step8 Take corrective steps wherever necessary and change/modify the

original plan, if necessary.

THE SECURITISATION AND RECONSTRUCATION OF

FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY

INYEREST ACT,2002

A) Important Provision of the ACT

Chapter 1: Preliminary Definition

1 Asset Reconstruction means acquisition by any securitization

company or reconstruction company of any right or interest of any

bank or financial institution for the purpose of realization of such

financial assistance;

2 Borrower means any person who has been granted financial assistance

by any bank or FI or who has given any guarantee or created any mortgage

or pledge as

Security for the financial assistance granted by any bank or FI and

includes a person who becomes borrower of a securitization company

or reconstruction company consequent upon acquisition by it of any

rights or interest of any bank or FI in relation to such financial

assistance3 Debt has the same meaning as in sec 2(g) of RDDBFI Act1993.

4 Default means nonpayment of any principal debt or interest there

on or any other amount payable by a borrower in any secured creditor

consequent upon which the account of such borrower is classified as

nonperforming assets. Sec2 (I) (j)

5 Financial Asset means debt or receivable and includes

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(i) A claim to any debt or receivable or part thereof whether

secured or un secured.

(ii) An debt or receivables secured by , mortgage of or charge on ,

immovable property;

(iii) A mortgage charge ,hypothecation or pledge of immovable

property;

(iv) Any right or interest in the security , whether full or part under

lying such debtor receivable

(v) Any beneficial interest In property whether movable or

immovable or in such debt receivables whether such interest is

exiting , future, accruing, conditional or contingent

(vi) Any financial assistance

6 Hypothecation means a charge in or upon any movable property ,

existing or future created by a borrower in favor of a secured creditor with

delivery of position of the movable property to such creditor as a security forfinancial assistance and includes floating charges and crystallization of such

charge into fixed charge on movable property

7 Non performing Assets means an asset or account of a borrower which

has been classified by a bank or financial institution as sub standard

,doubtful or loss assets, in accordance with the directions or guidelines

relating to asset classification issued by the regulatory /administering

authority/body or by Reserve Bank as the case may be.

8 Obligor means a person liable to the originator whether under a contract

or other wise to pay a financial asset or to discharge any obligation in respect

of a financial asset, whether existing future, conditional or contingent and

includes a borrower;

9 originator means the owner of the financial asset which is acquired by a

securitization company or reconstruction company for the purpose of

securitization or asset reconstruction

10 Securitization means acquisition of financial assets by any

securitization company or reconstruction company from qualified

institutional buyers by issue of security receipts representing undivided

interest in such financial assets or otherwise;

11secured creditor means any bank or FI or group of banks or FIs andincludes:

(i)Debenture trustee appointed by any bank or financial institution

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(ii) Securitization company (sc) or reconstruction company (Rc) whether

acting as such or its managing a trust set up for securitization

/reconstruction;

(iii) any other trustee holding securities on behalf of a bank or FI I whose

favor security interest is created for due repayment by any borrower of any

financial assistance.

Chapter II:

1 Registration of securitization/ Reconstruction companies

2 Acquisition of right or interest in financial assets

3 Issue of Security By Security Reconstruction Company

4 Measures for asset reconstruction

5 other functions of security Reconstruction Company

6 Regulation of disputes.

Chapter III: Enforcement of security interest1 Notwithstanding anything u/s 69A in TPA 1882 without intervention of

any court tribunal the secured creditor may enforce the security interest.

2 The secured creditor may issue a notice in writing to the borrower of NPA

account with details of amount payable by him and the securities intended to

be enforced in case of his failure to pay by the stipulated date and giving him

60days time to adjust his dues in full.

3 If the borrower makes any representation /raises any objection on receipt

of notice the secured creditor shall communicate with in one week the

reasons for its non acceptance

Provided that such reasons communicated /likely to be

communicated shall not confer any right upon the borrower to prefer an

application to the DRT/ court of dist judge

4 If the borrower fails to repay in full within the specified period the creditor

may do one or more of the followings:

(i)Take possession of the secured assets of the borrower including the right

to lease/assign/sell to realize the secured asset

(ii) Take over the management of the business of borrower including the

right to lease/assign/sell to realize the secured asset

5 All costs, charges and expenses incurred with connection of action takenu/s 13(4) shall be recovered first and the balance shall be paid to the entitled

person from the money received by the secured creditor.

Chapter IV: Central Registry

1 setting up central registry for registration of securitization and

reconstruction of financial assets and creation of security interest S. 20

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2 Filling of transactions of securitization and reconstruction of financial

assets and creation of security interest S. 23

3 modification of security interest

4 Securitization Company or Reconstruction Company or secured creditor to

report satisfaction of security interest.

5 Chapter: Offences and Penalties

1 Penalties: penalties upto Rs 5000 per day for every company secured

creditor /their every officer in default in filling particulars u/s 23 or sending

particulars u/s 24 or giving intimation u/s 25.2 Penalties for non-compliance of directives of RBI by any securitization

company/reconstruction company: Finance up to Rs 5lakhs and in case of a

continuing offence with an additional fine, which may extend to Rs 10,000

per day during the period of default-s.no 28

3 Offence: Imprisonment upto 1 year or fine or both for contravening or

attempting to contravening or a betting the contravention of the provisions of

the ACT or of any rules made there under. S.no 29.

ChapterVI: Miscellaneous

1 Provisions of the Act not apply in case of:

(a) Lien on any good/money/ security.

(b) Pledge of movables.

(c) Creation of security in any aircraft/ vessel

(d) Any conditional sale/ hire-purchase/lease/any other contract. Where no

security interest has been created

(e) Any right of unpaid seller.

(F) Any properties not liable to attachment (excluding the properties

specially charged with the debt recoverable under this Act) or sale under the

first provision to S.no 60 (1) of CPC(g) Repayment of loans not exceeding Rs1lakh.

(h) Agriculture land and

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CONCLUSION

In the above we discussed the norms for assets classification and

provisioning. In India, the process of globalization liberalization andderegulation commenced in the early 90s. In the banking arena, this process

was initiated with the report committee. The Reserve Bank of India adopted

the suggestion of this committee and recommended objective norms for asset

classification, income recognition, and provisioning in line with international

practices. An asset was classified as non-performing one aced on the sole

criterion of non recovery of installment /interest within stipulated time .

Subjective factors such as health of the borrower, potential of recovery,

perception about the activity etc are

Not given consideration. Similarly, asset classification is based on the age of

the asset in NPA category. We discussed four categories of assets viz.

standard, sub-standard,

Doubtful and Loss. The provisioning is again based on the category and sub-

category of the asset and the value of realizable security .Value of security

would play some part in the determination of provision, in Doubtful-I and

Doubtful-II categories .The exercise of asset classification and provisioning

is largely made objective and arithmetical nom

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NPA FIGURES FOR FINANCIAL YEAR ENDING 31

MARCH 2008-2009:

Particulars FY 08-

09

FY 07-08 Year

ended

mar

2009

Year

ended

mar 2008

Gross NPA

(in millions)

5592.7 4852.3 5592.7 4852.3

Net NPAs(in millions)

2875.1 2035.5 2875.1 2035.5

Gross NPA

ratio(%)

2.64 2.53 2.64 2.53

Net NPA ratio

(%)

1.37 1.08 1.37 1.08

NPA

Coverage ratio(%)

48.59 58.05 48.59 58.05

Net NPAs as a percentage of net advances, declinefrom1.13%as on

31march 2007to1.08%as on 31march 2008.

NPA coverage ratio is 58.05% against 61.43% as on march31, 2007.

The gross NPA and net NPA as proportion of gross and net customer assets

for quarter year ending June 2009 were at 2.44% and0.77% respectively.

The NPA coverage ratio which is an indicator of safety and shows the level

of provision a bank has for its bad assets has gone up to 68.79%from59.53%

as year ago. It is now among the highest in industry. As a result of efficient

leveraging of its assets. The bank has been able to bring down its cost to

income ratio to32.77% from 37.66% a year ago. The return on assets has

improved to 1.29 %( annualized) compared to 1.16%a year ago.

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CHAPTER SIX

CONCLUSION

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CONCLUSION

It is good to see that the J&K Bank has introduced giving all its major

services to the customers such as ATM debit card, credit card, anywhere

banking and online banking facilities to capture the market share of around

80% in the town which is very high in spite of its tough competitors like

SBI, ICICI, HDFC, State Co-operative bank etc. from this research I came to

conclusion that the bank has succeeded in satisfying its majority of customer

by its financial products and services. The bank is also able to boost up its

financial strength and position in the market, the bank records net profit of

Rs117.05crores an increase of 24%over Rs 94.56 pertains to the

corresponding period the previous year. The asset has also been increased to

15.07% and the banks reserve with the RBI as on 31-03-2009 is 73%. The

bank is also able to satisfying the interest of share holders in the bank by

giving 169% dividend i.e. (sixteen rupees and ninety paisa per share).0n 01-06-2009. But still much is to be done especially for the customer

satisfaction, because what matter most is the customer satisfaction. For any

business establishment, its advertisement is the satisfied customer.

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BIBLIOGRAPHY AND REFERENCES

During the completion of this project work I have taken

references from various sources which include:

Annual report of The Jammu and Kashmir Bank Ltd.

Magazines such as Business Economics, newspapers such asGreater Kashmir (Corporate Section), bank dairy, bank

magazine, catalogue etc.

Yearly journals of The Jammu and Kashmir Bank Ltd.

Websites of the bank.

www.Rbi.org.in

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Books

Financial Management by I. M. Panday

Marketing Management by Philli Kotler

Financial Accounting by S.P. Jain

Risk Management by Indian institute of banking and finance.

(Macmillan)

shahid summar project

Documents