1. Non Performing Assets
CHAPTER: 1
EXECUTIVE
SUMMARY
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2. Non Performing Assets
Executive Summary
A project has been prepared under the title of ‘Non Performing Assets in
Surat’.
First of all the information regarding the banking industry is given. In that
various facts regarding the bank industry is being provided. Also the various
types of non performing assets.
The brief introduction of non performing assets is given. In this the definition,
various benefits, objective, limitation etc. are mentioned. Then a analysis of
data is made.
Then the objective of doing the project is mentioned.
After that analysis comes. At the last me find Conclusion & Suggestion. Then
comes “facts and finding” part. In this part first of all the details about the non
performing assets by me is given. Then a comparison is made among the three
companies selected by me on various parameters.
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3. Non Performing Assets
CHAPTER: 2
RESEARCH
METHODOLOGY
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5. Non Performing Assets
Hence it is an exploratory research their is not any dependence on primary
data.
Sources of secondary data
1. Annual report
2. Journals
3. Websites
4. Books
ANALYSIS AND REPORT WRITING
Here I have done ratio analysis and used various charts for analysis
purpose. And also I have written report on it.
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6. Non Performing Assets
CHAPTER: 3
OBJECTIVE
OF
PROJECT
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8. Non Performing Assets
CHAPTER: 4
LIMITATION
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9. Non Performing Assets
LIMITATION OF PROJECT
Some times bank officer was hesitant to give all data on NPA.
I have selected only one bank for NPA which is very small sample size.
I face difficulty in doing proper analysis as I don’t have prior experience
for making project report.
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10. Non Performing Assets
CHAPTER: 5
INTRODUCTION
OF
BANKING INDUSTRY
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11. Non Performing Assets
DEFINITION OF BANK
“An organization, usually a corporation, chartered by a state or federal
government, which does most or all of the following: receives demand
deposits and time deposits, honors instruments drawn on them, and pays
interest on them; discounts notes, makes loans, and invests in securities;
collects checks, drafts, and notes; certifies depositor's checks; and issues
drafts and cashier's checks.”
DEFINITION OF BANKING
In general terms, “The business activity of accepting and safeguarding
money owned by other individuals and entities, and then lending out this
money in order to earn a profit”
So we can say that Banking is a company,
which transacts the business of banking. The Banking
Regulations Acts defines the business as banking by
stating the essential function of a banker.
The term banking is defined as “Accepting for
the purpose of leading or investment, deposits of money
from the public, repayable on demand or otherwise and
withdrawal by cheque, draft, order or otherwise.”
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13. Non Performing Assets
more explanatory, we divide scenario in Phase I, Phase II and Phase III
PHASE I
The General Bank of India was set up in the year 1786. Next were
Bank of Hindustan and Bengal Bank. The East India Company established
Bank of Bengal (1809), Bank of Bombay (1840) and Bank of Madras (1843)
as independent units and called it Presidency Banks. These three banks were
amalgamated in 1920 and Imperial Bank of India was established which
started as private shareholders banks, mostly Europeans shareholders.
In 1865 Allahabad Bank was established and first time exclusively by
Indians, Punjab National Bank Ltd. was set up in 1894 with headquarters at
Lahore. Between 1906 and 1913, Bank of India, Central Bank of India, Bank
of Baroda, Canara Bank, Indian Bank, and Bank of Mysore were set up.
Reserve Bank of India came in 1935.
During the first phase the growth was very slow and banks also
experienced periodic failures between 1913 and 1948. There were
approximately 1100 banks, mostly small. To streamline the functioning and
activities of commercial banks, the Government of India came up with The
Banking Companies Act, 1949 which was later changed to Banking
Regulation Act 1949 as per amending Act of 1965 (Act No. 23 of 1965).
Reserve Bank of India was vested with extensive powers for the supervision
of banking in India as the Central Banking Authority.
PHASE II
Government took major steps in this Indian Banking Sector Reform
after independence. In 1955, it nationalized Imperial Bank of India with
extensive banking facilities on a large scale especially in rural and semi-urban
areas. It formed State Bank of India to act as the principal agent of RBI and to
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15. Non Performing Assets
Narasimham, a committee was set up by his name which worked for the
liberalization of banking practices.
The country is flooded with foreign banks and their ATM stations.
Efforts are being put to give a satisfactory service to customers. Phone
banking and net banking is introduced. The entire system became more
convenient and swift. Time is given more importance than money.
The financial system of India has shown a great deal of resilience. It is
sheltered from any crisis triggered by any external macroeconomics shock as
other East Asian Countries suffered. This is all due to a flexible exchange rate
regime, the foreign reserves are high, the capital account is not yet fully
convertible, and banks and their customers have limited foreign exchange
exposure.
RESERVE BANK OF INDIA (RBI)
The central bank of the country is the Reserve Bank of India (RBI). It
was established in April 1935 with a share capital of Rs. 5 crores on the basis
of the recommendations of the Hilton Young Commission. The share capital
was divided into shares of Rs. 100 each fully paid which was entirely owned
by private shareholders in the beginning. The Government held shares of
nominal value of Rs. 2, 20,000
Reserve Bank of India was nationalized in the year 1949. The general
superintendence and direction of the Bank is entrusted to Central Board of
Directors of 20 members, the Governor and four Deputy Governors, one
Government official from the Ministry of Finance, ten nominated Directors by
the Government to give representation to important elements in the economic
life of the country, and four nominated Directors by the Central Government
to represent the four local Boards with the headquarters at Mumbai, Kolkata,
Chennai and New Delhi. Local Boards consist of five members each Central
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17. Non Performing Assets
ORGANISATION STRUCTURE OF RBI
THE BANKING SYSTEM
Almost 80% of the business is still controlled by Public Sector Banks
(PSBs). PSBs are still dominating the commercial banking system. Shares of
the leading PSBs are already listed on the stock exchanges.
The RBI has given licenses to new private sector banks as part of the
liberalization process. The RBI has also been granting licenses to industrial
houses. Many banks are successfully running in the retail and consumer
segments but are yet to deliver services to industrial finance, retail trade, small
business and agricultural finance.
The PSBs will play an important role in the industry due to its number
of branches and foreign banks facing the constraint of limited number of
branches. Hence, in order to achieve an efficient banking system, the onus is
on the Government to encourage the PSBs to be run on professional lines.
BANKING SECTORS IN INDIA
BANKS
Public Private Co-operative Regional Rural Foreign
Sector bank sector bank bank bank bank
CO-OPERATIVE BANKS
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18. Non Performing Assets
The Co-operative banks have a history of almost 100 years. The Co-
operative banks are an important constituent of the Indian Financial System,
judging by the role assigned to them, the expectations they are supposed to
fulfill, their number, and the number of offices they operate. The co-operative
movement originated in the West, but the importance that such banks have
assumed in India is rarely paralleled anywhere else in the world. Their role in
rural financing continues to be important even today, and their business in the
urban areas also has increased phenomenally in recent years mainly due to the
sharp increase in the number of primary co-operative banks.
Some of the co-operative banks are quite forward looking and have
developed sufficient core competencies to
challenge state and private sector banks.
According to NAFCUB the total
deposits & landings of Co-operative Banks is
much more than Old Private Sector Banks &
also the New Private Sector Banks. This
exponential growth of Co-operative Banks is
attributed mainly to their much better local
reach, personal interaction with customers, and
their ability to catch the nerve of the local
clientele.
Though registered under the Co-
operative Societies Act of the Respective States
(where formed originally) the banking related activities of the co-operative
banks are also regulated by the Reserve Bank of India. They are governed by
the Banking Regulations Act 1949 and Banking Laws (Co-operative
Societies) Act, 1965.
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21. Non Performing Assets
CHAPTER: 6
INTRODUCTION
OF
CITY CO-OP. BANK
LTD
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22. Non Performing Assets
CITY
BANK
INTRODUCTION OF BANK
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23. Non Performing Assets
City is a name of the bank where the bank is ready to serve its banking
services to all customers.
The bank is governed by the Gujarat co-operative societies act, a
legislation enacted by the state of Gujarat in India.
The bank have follows continues “A” Grade Audit systems and it is
the Grade “A” bank till now.
The city co-operative bank was started in 1996.City co-operative bank
ltd was promoted by an experienced and visionary entrepreneur named Mr.
MANOJ PATEL; he is the Founder Chair person of the bank and continues to
supervise its growth and development.
The Bank started off with exemplary combination of talented Board &
potential staff team, stuffed with extreme professionalism and well designed
contours of working method. The bank started as a paperless unit employing
Tele-banking, Remote banking, Off-time banking, Sunday banking, Holiday
banking and many more allied methodologies from the very beginning right
from the D-day.
The bank emerged as an exemplary unit offering a wide range of
specialized services in various sectors. Unlike majority of the banks where
working timings are linked with employee-convenience, CITY BANK
decided to hold timings as per convenience of the cluster of clients whom it
caters.
In the line with the same philosophy some of their branches in the
residential area work all the seven days of the week, without a break. They
work on Sundays w/o any alternative drop during the week. Likewise to focus
special attention on the senior citizens the bank offers to credit monthly
interest in their account with any bank before 5th day of every month.
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25. Non Performing Assets
Bank has tied with IFFCO-TOKIYO General Insurance. It is joint venture
between IFFCO a big fertilizer company in co-operative sector & TOKIYO
General Insurance – Japan’s No 1 & world’s No 5 General Insurance Co. All
the branches are offering all the products viz Mediclaim, Accident insurance,
Vehicle Insurance, House Insurance, factory & Shop keeping Insurance.
MUTUAL FUND
Bank has tied with Principal PNB Mutual Fund, UTI, Benchmark, ICICI
Prudential, SBI Mutual Fund, Lotus India, Reliance Mutual Fund, Kotak
Mahindra, Birla Sunlight, Sundram BNP Pari Bar Mutual.
LOCKERS
Rent free locker facilities are available in Baroda at Kareli Baug, at Bharuch,
Navsari & at following branches of Surat
1. Ring Road Branch
2. Abhishek Branch
3. City Light Branch
4. Puna Kumbharia Road Branch
5. Udhna Magdalla Branch
6. Ved Road(Katargam)Branch
7. Patel Park Branch(Adajan)
BOARD OF DIRECTORS
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26. Non Performing Assets
NO. NAME DESIGNATION
1 Shri. Piyushbahi Patel Chairman
2 Shri. Balvanbhai Patel Vice Chairman
3 Shri. Manojbhai Patel Director
4 Shri. Dharmeshbhai Patel Director
5 Shri. Anandbhai Kalgude Director
Shri. Amaratbhai
6 Director
Brachmabhatt
Shri. Dineshbhai
7 Director
Tamakuwala
Shri. Gaurang Rushi
8 Director
9 Shri. Jayshreeben Talati Director
10 Shri. Umeshabhai Patel Director
ORGANISATION STRUCTURE
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27. Non Performing Assets
(CHAIRMAN)
(DIRECTORS)
(CEO)
(CHIEF MANAGER)
(DIVISIONAL MANAGER)
(AREA MANAGER)
(BRANCH MANAGER)
(OFFICER/CLERK)
BALANCE SHEET
(Rs. in lacs)
Liabilities 2006 2007 Assets 2006 2007
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28. Non Performing Assets
Share 293.23 340.79 Cash & 1919.33 1822.38
Capital Bank
Reserve 1987.08 2282.11 Investment 9326.22 11106.55
Profit & 305.76 236.37 Advances 7093.63 10340.26
Loss a/c
Deposits 15449.44 19946.37 Fixed 154.86 284.70
Assets
Borrowing 0.11 69.38 Other 181.01 648.88
Assets
Other Liab. 639.43 1327.75
& Prov.
18675.05 24202.77 18675.05 24202.77
PROFIT & LOSS ACCOUNT
(Rs. in lacs)
Income 2006 2007 Expenses 2006 2007
Interest & Comm. 1443.1 1769.5 Interest paid 816.59 956.84
0 6
Other Income 129.04 109.45 Operating Exp. 390.48 526.34
Depreciation 46.45 46.52
Provisions 12.86 112.94
Profit for the year 305.76 236.37
1572.1 1879.0 1572.1 1879.01
4 1 4
BRANCHES
1 Main Branch
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29. Non Performing Assets
20, Belgium Chamber, Delhi Gate Ring Road Suart-3.
2. Rander Branch
11, Patel Park, Tadwadi,Rander Road, Surat-9.
3. Adajan Branch
2, River Park Row House, Adajan Surat-9.
4 Ved Katargam Branch
24 Ground Floor Parth Building,Singapoor (ved) Katargam, Surat.
5. Abhishak Branch
1,Balaji Market , Ring Road, Surat – 2.
6. Udhana Magdalla Branch
11,Udhana Magdalla Road, Surat – 7.
7. City Light Branch
UG-14 Hira Panna Shopping Mall, City Light Road Surat- 7.
8. Puna Kumbharia Branch
6,Trapti Plaza, Nr.Sahara Darwaja,Puna KumbhariaRoad Surat .
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35. Non Performing Assets
The first committee had made recommendations in 1991, which had
resulted in basic changes in the matter of treatment of income, assets
classification and provisioning norms, etc…it was considered necessary for
government to continue the improvement with striker rules in future also and
for that second committee was made to continue changes with certain
modifications.
The second committee includes the following points:
1. If bank is working in foreign countries at presently then for them the
“Capital Adequacy Norm” is 9% which was 8% earlier.
2. Banks can’t classify the account as NPA which are guaranteed by
the Central / State government, effective from the year 2000-2001.
3. As per the existing norms, no provisions for standard assets but
from March 31st 2000, there is a norm of 0.25 percent on standard
assets.
4. Banks have to make a provision of 2.5% on their investment in
Government securities with effect from the year ending 31st March,
2000. In future, this provision is likely to be raised to 5%.
5. The present norm is of 180 days for the account to be treated as
NPA but after 31st March, 2000, this period is reduced to 90 days only.
5. Banks have been asked to reduce the level of NPA to 5% of their total
advances till 31st March, 2000. The percentage has to be brought down
to less than 3% with effect from 31st March, 2002.
ASSETS CLASSIFICATION
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37. Non Performing Assets
Reserve Bank of India (RBI) has issued guidelines on provisioning
requirement with respect to bank advances. In terms of these guidelines, bank
advances are mainly classified in to following categories:
1. STANDARD ASSETS:
Standard assets are one which does not carry any problems and which
does not carry more than normal risk attached to the business.Such assets
should not be an NPA.
2. SUB-STANDARD ASSETS:
These assets involved the two types of view as follows…
In respect to the norms of March 31, 2005 an asset would be classified as
Sub standard if it remained NPA for a period less than or equal to 12 months.
An assets where the terms of the loan agreement regarding interest &
principal have been regenerated or rescheduled after commencement of
production, should be classified as sub-standard and should remain in such
category for at least 12 months of satisfactory performance under the re-
negotiated terms.
3. DOUBTFUL ASSETS:
In respect to the norms of March 31, 2005 an asset is required to be
classified as doubtful, if it has remained NPA for more than 12 months.
A loan which is classified as doubtful has all the weaknesses inherent as that
classified as Sub-standard with the added characteristic that the weaknesses
make collection or liquidation in full, on the basis of the currently known
facts, conditions and values, highly questionable and improbable.
Some types of these assets are…
A. Less than 1 year
B. 1 to 3 year
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38. Non Performing Assets
C. 3 year and above
4. LOSS ASSETS
A loss asset is one where loss has been identified by the bank or internal
or external auditors or by the Co-operation department or by the RBI
inspection but the amount has not been written of, wholly or partly.
READY RECKONER FOR ASSET CLASSIFICATION
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39. Non Performing Assets
WHEN DATE OF NPA ASSET CLASSIFICATION
NO.
FALLS? AS ON 31-03-2007
Between 1-10-2006 &
1. Sub-Standard assets
31-03-2007
Between 1-10-2005 &
2. Doubtful up to 1 year
30-09-2006
Between 1-10-2003 & Doubtful asset of 1 year to 3
3.
30-09-2002 year
Doubtful asset of more than 3
4. On or before 30-09-2003
year
5. No NPA date Loss asset
No security or salvage value of
6.
security is less than 5%
Chance of realization of dues
7. from all available sources is
practically negligible or zero.
Account has been identified by
the bank or internal/external
8. auditors or RBI inspectors as
loss assets, which has not been
written off.
GUIDELINES FOR CLASSIFICATION OF ASSETS
The guidelines are as follows…
1. BASIC CONSIDERATION:
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40. Non Performing Assets
In simple terms the classification of assets should be done by considering
the well defined credit weaknesses & extent of dependence on collateral
security for realization of dues.
In accounts where there is a potential threat to recovery on account and
existence of other factor such as fraud committed by borrowers it will not be
prudent for bank to classify that account first as sub-standard and then as
doubtful. Such account should be straight away classified as doubtful asset or
loss asset, as appropriate, irrespective of the period for which it has remained
as NPA.
2. ADVANCES GRANTED UNDER REHABILITATION
PACKAGES:
Banks are not permitted to do classification of any advances in respect of
which the term have been re-negotiated unless the package of re-negotiated
terms has worked satisfactory for a period of one year.
A similar relaxation is also made in respect of SSI units which are
identified as sick by banks themselves and where rehabilitation packages
programs have been drawn by the banks themselves or under consortium
arrangements.
3. INTERNAL SYSTEM FOR CLASSIFICATION OF ASSETS AS
NPA:
Banks should establish appropriate internal systems to eliminate the
tendency to delay or postpone the identification of NPAs, especially in respect
of high value accounts. The banks may fix a minimum cut-off point to decide
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41. Non Performing Assets
what would constitute a high value account depending upon their respective
business levels. The cut-off point should be valid for the entire accounting
year.
Responsibility and validation level for proper assets classification may be
fixed by bank.
The system should ensure that doubts in asset classification due to any
reason are settled through specified internal channels with in one month from
the date on which the account would have been classified as NPA as per
extant guidelines.
INCOME RECOGNITION POLICY
According to the act of 1st April, 1992 the income recognition policy is
as follows…
The policy of income recognition has to be objective and based on the
record of recovery. Income from non-performing assets is not recognized on
accrual basis but is booked as income only when it is actually received.
Therefore, banks should not take to income account interest on non-
performing assets on accrual basis.
However, interest on advances against term deposits, NSCs, IVPs, KVPs,
and Life policies may be taken to income account on the due date, provided
adequate margin is available in the accounts.
Fees and commissions earned by the banks as a result of re-negotiations or
rescheduling of outstanding debt should be recognized on an accrual basis
over the period of time covered by the re-negotiated or rescheduled extension
of credit.
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42. Non Performing Assets
If Government guaranteed advances becomes ‘overdue’ and there by NPA,
the interest on such advances should not be taken to income account unless
the interest has been realized.
PROVISIONING NORMS
According to the norms the provisions should be made on the
nonperforming assets on the basis of classification of assets as we have
already discussed.
Taking in to account this provisioning norms the banks have to make
provision on different assets like Loss Assets, Doubtful Assets and Standard
Assets as below :->
( | ). LOSS ASSETS
The entire assets should be written off after obtaining necessary approval
from the competent authority and as per the provisions act of C0-operative
society Act. If the assets are permitted to remain in the books for any reason,
100% of the outstanding should be provided for.
If expected salvage value of the loss asset is negligible then 100%
provision should be made on it.
( || ). SUB-STANDARD ASSETS
A general provision of 10% on the total outstanding should be made on the
advances given.
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43. Non Performing Assets
( ||| ). DOUBTFUL ASSETS
On doubtful assets provision is made from 20% to 100% as
per the period of asset. The table below shows the provision on
doubtful assets.
Period for which the advance has
Provision Requirement
remained in ‘doubtful’ category
Up to one year 20%
One to Three year 30%
- 50% as on March 31, 2007
More than Three year - 60% as on March 31, 2008
( | ) Outstanding NPA as on March 31,2007 - 75% as on March 31, 2009
- 100% as on March 31, 2010
( || ) Advances classified as ‘doubtful for
more than three years’ on or after April1, -100%
2007
( |V ). STANDARD ASSETS
From the year ended March 31, 2000, the banks should make a general
provision of a minimum of 0.25% on the standard assets.
However, Tier 2 banks are required to do higher provisioning on standard
assets as under:-
A. General provisioning requirement is 0.40% from the present level of
0.25%. But incase of agriculture or in SME investors the provisioning rate
is required to be 0.25%.
( V| ). HIGHER PROVISIONS
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52. Non Performing Assets
1. On installation of machineries branch to inspect the unit and to ensure that
machineries as per sanction is received & place the inspection report on
record.
2. At least twice a year, branch to inspect the unit to ensure that machineries
financed by the bank are in running condition.
B. WORKING CAPITAL
1. No finance to be considered against inter-firm receivable and for the
receivables of more than 90 days.
2. Drawing power to be arrived at regularly every month on the basis of stock
statement/book debt statement submitted by the party.
3. Branch to ensure that receipt and payment through CC/OD accounts
represent genuine business transactions.
4. Branch to carry out inspection of the unit at least on quarterly basis.
@. Renewal of working capital facility
1. Personal balance sheet of proprietor/partner/directors is also to be obtained.
2. Branch to submit the renewal papers along with memorandum for renewal
to higher authority for renewal, with its comments on performance with the
bank, financial performance viz. sales, profit etc…
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55. Non Performing Assets
4. If the branch does not get any favorable response, during personal
visit, they should write a notice letter to borrower.
5. If borrower still behaves irresponsible, they should meet the
guarantor and ask guarantor to peruse the borrower. Guarantor
must be informed about legal complication to arise if borrower
fails to repay the dues.
6. On failure of all the recovery steps, branch to contact Area
office/Control centre.
7. Area office/Control centre to call the borrower along with
guarantor and try to find out the reason for overdue. If borrower is
in genuine difficulty, problem to be resolved in a mutually
acceptable and in an orderly manner.
8. If party behaves indifferent, legal actions must be initiated. In such
case prompt legal action and seizure action to be taken. Preference
to be given for steps under Securitization Act rather than go for
filling a case in the court of Board of Nominees.
9. Reasonable notice would be given before Repossession of Security
and its realization, unless the borrower is about to dispose
of/remove the whole or any part of the security from the locality
where it ordinarily remained or by whom it is used or caused to be
remained or used, as the case may be, at the time of creation of
security.
10. The aim of possession under Securitization or State co-op. Act will
be to recover the dues and will not be aimed at whimsical
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56. Non Performing Assets
deprivation of the property. The bank shall resort to repossession
of the security only when the collection/recovery of dues is not
forthcoming in spite of request made and the policy for
repossession shall be in accordance with the terms and conditions
of the loan documents and with in the legal framework. The policy
fairness and transparency in repossession, valuation and realization
of security.
CHAPTER: 9
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62. Non Performing Assets
NPA OF YEAR 2007
LOSS ASSETS 1.54
DOUBTFUL ASSETS 2.5
ASSETS-->
%of Total
SUB-STANDARD ASSETS 1.16
STANDARD ASSETS 94.78
0 20 40 60 80 100
VALUES-->
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63. Non Performing Assets
SEGMENTWISE CLASSIFICATION OF NPA
(RS. IN LACS)
2005 2006 2007
SEGMENT
NO AMOUNT NO AMOUNT NO AMOUNT
OF OF OF
TOTAL TOTAL TOTAL
A/C NPA A/C NPA A/C NPA
ADVANCES ADVANCES ADVANCES
RETAIL TRADE 267 752.63 17.69 248 641.90 20.21 343 802.03 76.81
SMALL BUSINESS 31 46.48 4.38 25 44.17 20.15 122 88.02 50.93
SMALL SCALE IND 582 4021.55 210.74 642 3832.29 44.88 975 6323.86 180.86
CONSTRUCTION &
246 323.43 21.02 231 343.86 2.70 345 459.76 22.43
REPAIRS
AGRICULTURE 2 3.72 0.00 0 0.00 0.00 517 115.64 0.12
SMALL ROAD &
10 5.23 0.00 0 0.00 0.00 34 8.18 1.90
TRANSPORTATION
PROFESSIONAL 84 89.81 5.00 2 7.33 0.00 80 72.52 3.10
EDUCATION 2 10.71 0.00 8 3.41 0.00 3 7.26 0.00
OTHER PRIORITY
SECTOR 0 0.00 0.00 55 41.82 3.47 326 68.05 16.42
OTHE NON
375 2454.16 177.26 285 2178.85 134.41 310 2394.94 186.20
PRIORITY SECTOR
TOTAL 1599 7707.72 436.09 1496 7093.63 225.82 3055 10340.26 538.77
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64. Non Performing Assets
RATIO ANALYSIS
To analyzed the NPA situation in bank and from that to know about the
banks credit appraisal system and level of risk in bank I have done the ratio analysis.
Ratio analysis is the tool which will help us to do financial analysis of bank.
Some names of ratio are as follows:
1. GROSS NPA RATIO.
2. NET NPA RATIO.
3. PROBLEM ASSETS RATIO.
4. SHAREHOLDER’S RISK RATIO.
5. PROVISION RATIO.
6. SUB-STANDARD ASSETS RATIO.
7. DOUBTFUL ASSETS RATIO.
8. LOSS ASSETS RATIO.
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65. Non Performing Assets
1. GROSS NPA RATIO
Gross NPA is the sum of the total assets which are classified as the NPA by bank
at the end of every year. Gross NPA is the ratio of Gross NPA to Gross Advances. It is
expressed in percentage form.
Gross NPA Ratio = Gross NPA * 100
Gross Advances
(RS. IN LACS)
GROSS NPA
GROSS
YEAR GROSS NPA RATIO
ADVANCES
(%)
2003 521.08 6433.75 8.10%
2004 445.44 7369.18 6.04%
2005 436.09 7707.72 5.68%
2006 225.82 7093.63 3.18%
2007 538.77 10340.26 5.21%
GROSS NPA RATIO
9.00% 8.10%
8.00%
7.00% 6.04%
5.68%
PERCENTAGES-->
6.00% 5.21%
5.00%
RATIO
4.00% 3.18%
3.00%
2.00%
1.00%
0.00%
2003 2004 2005 2006 2007
YEAR-->
B.M. Collage of Business Administration Page 65
68. Non Performing Assets
Net NPA ratio shows the degree of risk in portfolio of bank. High net NPA ratio
means banks don’t have enough fund to do provision against the Gross NPA.
In City Bank Net NPA ratio was 4.82% in year March-2003 which shows that in
that year bank had not enough fund for provisions. But after that from March-2004 to
March-2007 Net NPA ratio is 0.00% which shows that bank has now enough provision
capacity. So, here the degree of risk is less.
City bank has done more provision every year which is good at one side but at other
side it also reduces the profit of bank. And shareholder will get fewer dividends.
When all bank will do provision then Net NPA will become zero but if we want to
know the true and fair situation of bank we must consider the Gross NPA of bank.
3. PROBLEM ASSETS RATIO
This ratio is also known as the Gross NPA to Total Assets ratio. This ratio shows
the percentage of risk on the total assets of the bank. High ratio means high risk for bank.
Problem Assets Ratio = Gross NPA *100
Total Assets
(RS. IN LACS)
PROBLEM
YEAR GROSS NPA TOTAL ASSETS ASSETS RATIO
(%)
2003 521.08 13381.91 3.89%
2004 445.44 15935.97 2.80%
B.M. Collage of Business Administration Page 68
70. Non Performing Assets
4. SHAREHOLDER’S RISK RATIO
It is the ratio of Net NPA to Total capital and reserve of bank.
Shareholder’s risk Ratio = Net NPA *100
Total Capital & Reserve
(RS. IN LACS)
TOTAL SHAREHOLDER’S
YEAR NET NPA CAPITAL & RISK RATIO
RESERVE (%)
2003 299.13 1793.76 16.68%
2004 0.00 2075.06 0.00%
B.M. Collage of Business Administration Page 70
72. Non Performing Assets
5. PROVISION RATIO
Provisions are to be made against the Gross NPA of bank. As bank make
provision for NPA it directly affects the profit of bank. This ratio shows the relation of
total provision to Gross NPA.
Provision Ratio = Total Provision *100
Gross NPA
(RS. IN LACS)
PROVISION
TOTAL
YEAR GROSS NPA RATIO
PROVISION
(%)
B.M. Collage of Business Administration Page 72
74. Non Performing Assets
NPA but in March-2006 the provision ratio reach at 208.59% which indicate that it is the
very over provision. And again in March-2007 it is 112.60% which is fair ratio.
City bank should make the provision in the range of 100% to 115%. The
provision in March-2006 which is 208.59% is very high and it is not necessary to do that.
6. SUB-STANDARD ASSETS RATIO
Sub-standard Assets Ratio = Total Sub-standard Assets *100
Gross NPA
(RS. IN LACS)
SUB-STANDARD
SUB-STANDARD
YEAR GROSS NPA ASSETS RATIO
ASSETS
(%)
2003 189.75 521.08 36.41%
2004 143.60 445.44 32.24%
2005 156.65 436.06 35.92%
B.M. Collage of Business Administration Page 74
76. Non Performing Assets
7. DOUBTFUL ASSETS RATIO
It is the ratio of total doubtful assets to Gross NPA of the bank.
Doubtful Asset Ratio = Total Doubtful Assets *100
Gross NPA
(RS. IN LACS)
TOTAL DOUBTFUL
YEAR DOUBTFUL GROSS NPA ASSETS RATIO
ASSETS (%)
2003 316.69 521.08 60.78%
2004 291.00 445.44 65.33%
2005 278.40 436.09 63.84%
B.M. Collage of Business Administration Page 76
78. Non Performing Assets
In City Co. Bank this ratio is in between from 60.00% to 65.00% in year from
March-2003 to March-2005 but in March-2006 this ratio reach at 94.58% which indicate
that bank must take some necessary action to recover it. And again in March-2007 this
ratio decrease to 48.03% which is good for bank.
8. LOSS ASSETS RATIO
It is the ratio of Total loss assets to Gross NPA of bank.
Loss Assets Ratio = Total loss Assets *100
Gross NPA
(RS. IN LACS)
LOSS ASSETS
TOTAL LOSS
YEAR GROSS NPA RATIO
ASSETS
(%)
2003 14.64 521.08 2.81%
2004 10.84 445.44 2.43%
2005 1.04 436.09 0.24%
2006 0.00 225.82 0.00%
2007 159.85 538.77 29.67%
B.M. Collage of Business Administration Page 78
80. Non Performing Assets
FINDINGS FROM RATIO
As I have already analyze the ratio and from that I can say that bank’s financial
condition is good. Hence, there is correction in the ratio of year 2007. And this correction
is because of City bank was merged with Baroda Industrial co-op bank in year 2007. So,
this effect of merging can be showing from the ratio of year 2007.
From ratio I am able to find the following findings…
1. The Gross NPA ratio of bank is 8.10% in the year 2003 after then it reaches to
5.21% in the year 2007. Hence, the idle gross NPA ratio is 5.00% and bank have
5.21%. So, we can say that bank’s financial condition is good.
2. Bank’s Net NPA ratio is 4.82% in the year 2003 and from 2004 to 2007 it remains
0.00% which is positive for bank.
3. The Problem assets ratio was 3.89% in the year 2003 which was the highest ratio
and from that year it is decrease to 1.21% in the year 2006 which is good for
bank. And this ratio is 2.23% in the year 2007.
B.M. Collage of Business Administration Page 80
81. Non Performing Assets
4. Provision ratio for the year 2003 is 42.59% which show that their was under
provision in that year but in year 2007 this ratio is 112.60% which shows that
bank have enough profit for the provision.
5. It will be considered good if the Sub-standard assets ratio is high. For City bank
this ratio is 36.41% in the year 2003 which is good but it reaches to 5.42% in the
year 2006 which is very bad for bank’s health.
6. Doubtful assets ratio should be low for the good health of bank and in City bank
this ratio is 94.58% in the year 2006 which is very bad but in year 2007 this ratio
decrease to 48.03% which is positive for bank.
7. Loss assets ratio should be zero and bank have 0.00% in the year 2006 which is
good but in year 2007 this ratio reaches to 29.67% which is very rapid change
with in a one year. And it is also bad for bank.
B.M. Collage of Business Administration Page 81
82. Non Performing Assets
CLASSIFICATION OF TOTAL NPA
(RS. IN LACS)
2005 2006 2007
YEAR
SUB-
STANDARD 156.65 12.24 120.12
ASSETS
DOUBTFUL
278.40 213.58 258.80
ASSETS
LOSS
1.04 0.00 159.85
ASSETS
TOTAL
436.09 225.82 538.77
NPA
B.M. Collage of Business Administration Page 82
83. Non Performing Assets
CLASSIFICATION OF NPA
600
500 PERCENTAGE-->
400 SUB-STANDARD ASSETS
DOUBTFUL ASSETS
300
LOSS ASSETS
200 TOTAL NPA
100
0
2003 2004 2005 2006 2007
YEAR-->
CLASSIFICATION OF TOTAL ADVANCES
(RS. IN LACS)
YEAR 2003 2004 2005 2006 2007
TOTAL
521.08 445.44 436.09 225.82 538.77
NPA
STANDARD
5912.67 6923.74 7266.63 6867.81 9801.49
ASSETS
TOTAL
6433.75 7369.18 7707.72 7093.63 10340.26
ADVANCES
B.M. Collage of Business Administration Page 83
84. Non Performing Assets
CLASSIFICATION OF TOTAL ADVANCES
12000
10000
8000 TOTAL NPA
RS IN LACS-->
6000 STANDARD ASSETS
4000 TOTAL ADVANCES
2000
0
2003 2004 2005 2006 2007
YEAR-->
CHAPTER: 10
B.M. Collage of Business Administration Page 84
85. Non Performing Assets
CONCLUSION
&
SUGGESTION
CONCLUSION
Now as we know that NON-PERFORMING ASSETS is like a black spot on
diamond. They affect the profit of bank and also the financial health of bank. This NPA
have number of effects on banks working.
During my training in bank I gathered as much as possible information about
NPA from bank and on the basis my experience I conclude the following points:
City Co. bank’s NPA level is decreasing year by year which good for bank.
B.M. Collage of Business Administration Page 85
86. Non Performing Assets
In year 2007 City bank’s own NPA is very low but because of merger with Baroda
industrial co-op bank the level of NPA was increase.
The Gross NPA ratio of bank is 8.10% in the year 2003 after then it reaches to 5.21%
in the year 2007. Hence, the idle gross NPA ratio is 5.00% and bank have 5.21%. So, we
can say that bank’s financial condition is good.
Bank’s Net NPA ratio is 4.82% in the year 2003 and from 2004 to 2007 it remains
0.00% which is positive for bank.
Loss assets ratio should be zero and bank have 0.00% in the year 2006 which is good
but in year 2007 this ratio reaches to 29.67% which is very rapid change with in a one
year. And it is also bad for bank.
City Co. Bank has sound credit appraisal system and also sound recovery policy.
City Co. Bank’s NPA level is decreasing year by year and because of that City Co.
Bank is being considered very good bank by citizens of Surat.
Hence in present time the position of NPA in bank is much better then the past
position. In year 1997 in India the Gross NPA was 15.7% but now it is 3.00% in the year
2007. This is very favorable to Indian economy and also banking sector of India.
Government’s act and also the Narsimhan committee on NPA are very useful to
reduce the level of NPA.
So, I can conclude that level NPA in any bank is important parameter to analyze the
health of bank.
SUGGSTIONS
B.M. Collage of Business Administration Page 86
87. Non Performing Assets
1. City Co. bank’s NPA level is decreasing year by year which good for bank but
bank should follow the recovery policy strictly.
2. In year 2007 City Co. bank’s own NPA is very low but because of merger with
Baroda industrial co-op bank the level of NPA increase so City Co. bank should
have consider the NPA situation of that bank before merger.
3. In City Co. bank there is no any special recovery department so bank should
develop the department for the fastest recovery of NPA.
4. Bank should motivate the staff to do fast recovery NPA.
5. Bank have more NPA in Small Scale Industry so, they should try to reduce that
level of NPA.
CHAPTER: 11
B.M. Collage of Business Administration Page 87
88. Non Performing Assets
BIBILIOGRAPHY
JOURNALS
• Co-Operative Banker’s Diary 2008
-by John D’salve
• Annual Report of City Co-Operative Bank
-year, 2003, 2004,2005,2006,2007
• Periodical circular and statement of RBI regarding to NPA managing and UCB’s
WEBSITES
• http://finance.indiamart.com/investment_in_india/banking_in_india.html
B.M. Collage of Business Administration Page 88
89. Non Performing Assets
• http://www.rbi.org.in/Home.aspx
• http://www.banknetindia.com/banking/cintro.htm
• http://www.investorwords.com/
• http://www.indiabankassociation.com/
B.M. Collage of Business Administration Page 89