Sbi Project Report

PREFACE
Loans have to be paid back one day. Had this been realized by all, how nice life would
have been on this Planet. It would not have prompted the poet to say Neither be a Lender,
nor a orrower e.! "las# $iven the realities in life, this could remain at best a wishful
thinkin%.
&o their business is to lend and lend more. 'heir proficiency( skill( competency are all
tested in how much they lend and how much they )*+,-*) and how .uickly. &uffice it
would be to state that this can be likened to the vi%our and stren%th with which one %oes
about after fully recoverin% from any ailment. It is a%reed by al beyond doubt )ecovery!
is essential and %et recovery! is very essential.
/e know ri%ht form the appraisal sta%e up to the actual repayment sta%e the banks need to
be careful. /e also know that once the money is in the hands of a borrower, attitudinal
chan%es take place. 'he borrower, with some few e0ceptions may be, feels a bit more
complacent as after all it is not this own money! which is at stake. 'herefore an attempt
is made here to put all that we know already proper perspective.
TNRCMS MAYANK SHAH 1

ACKNOWLEDGEMENT
"t outset, we would like to thank the institutions for havin% provided us with an
opportunity to carry out a pro2ect of this ma%nitude that helped me satisfy my curiosity as
far as my area of interest was concerned.
'he essence of this pro2ect, i.e. its contents have been compiled with help of varied
sources of secondary database, but we would specially like to acknowled%e the support,
su%%estions and feedback received from my Pro2ect $uide3

14 5r.6.P.&."rya
"$5, ,f )"&5*+++
&tate ank ,f India, )a2kot
74 5r.5.8. )aval
5ana%er of )"&5*+++,
&tate ank of India, )a2kot.
94 5rs.:yoti ; 5r."vinash &in%h
,fficer, )"&5*+++,
&tate ank ,f India, )a2kot.
"lso my faculty member 5r. "bhay )a2a %uide and su%%est me about the pro2ect. "
lot of other people have also contributed directly and indirectly to completion of this
pro2ect would not have seen li%ht of the day. ,ur hearts felt %ratitude to all of them.

DECLARATION
I the undersi%ned 5r.5ayank &. &hah, a student of 5" <=inance4 &emester3III,
hereby declare that the pro2 ect work presented in this report is my ori%inal work.
'his work has not been previousl y submit ted to any other universit y for any other
e0amination.
8ate> 1?
t h
:ul y, 7@@A
Place> )a2 kot
3333333333333333333333
<5ayank &. &hah4

EXECUTIVE SUMMARY
'he most important problem that the Indian banks are facin% is the problem of their NP"s.
It is only since a couple of years that this particular aspect has been %iven so much
importance. 'he banks have to overcome these difficulties properly in order to effectively
counter the competition faced by the forei%n banks. /ith the framin% of laws as per
international standards and settin% up of 8ebt recovery tribunal we can say that steps have
been taken in this direction.
anks in India have traditionally been saddled with very hi%h Non3Performin% "ssets. 'he
bankin% sector was headin% for a crisis in 7@@1 with NP"Bs crossin% a mammoth CD@@@
crores. anks burdened with hu%e NP"Bs faced uphill tasks in recoverin% then due to
archaic laws and procedures. )ealizin% the %ravity of the situation the %overnment was
.uick to implement the recommendations of the Narsimham +ommittee and "ndhuar2una
+ommittee leadin% to the enactment of the &)*&I "+' 7@@7.< &ecuritisation and
)econstruction of =inancial "ssets and *nforcement of &ecurity Interest "ct4.
'his "ct %ave the banks the much needed teeth to curb the menace of NP"Bs. 'he non
performin% assets <NP"s4 of banks have at last be%un shrinkin%. "s reported from
surveys, it is understood that there has been substantial improvements in non performin%
assets and this has been because of several measures such as formation of asset
reconstruction companies, debt restructurin% norms, securitization, provisionin% norms
and prudential norms for income reco%nition. 'he %ross NP"s of the bankin% system are
about 1C per cent of the total assets of the nationalized banks as of 7@@@3@1. 'his is a%ainst
a %lobal norm of about ?E. Hence there is a lon% way to %o before we can say that the
NP"Bs of our banks are under control. 'he improvements in NP"s of individual
nationalized banks have been in the order of 1@E to 7@E, thanks to the various schemes
and measures introduced. 'his paper addresses the results we have achieved so far since
TNRCMS MAYANK SHAH D

the measures have been implemented and the thrust on measures that need to be taken to
e0pedite recovery of NP"s. /e also %ive our su%%estions as to how NP" retrieval can be
made easy and in what way the NP" scenario is headed.
'he problem is no doubt about recovery mana%ement where the ob2ective is to find out
about the reasons behind NP"s and to create networks for recovery. anks of )a2kot have
been considered where 71 e0ecutive have been approached with a structured .uestion to
elicit information.
'he crucial factor that decides the performance of banks now days is the spottin% of non3
performin% assets <NP"4. NP"s are those loans %iven by a bank or financial institution
where the borrower defaults or delays interest or principal payments banks are now
re.uired to reco%nize such loans faster and then classify them as problem assts.
"s far as the study is concerned the followin% may be summarized.
Nearly 1@E of the banks in $u2arat responded within a month for loan applications
received by them from their corporate clients. If was also found that CF E of the banks
used to appraise loan proposals from their corporate clients with the viewpoint of
recovery. In $u2arat re%ion it was found that about C7 E of the banker opined that there
was a need to evaluate the loan applications critically.
'he respondents assi%ned hi%hest wei%ht to companyBs current performance and the
second hi%hest was assi%ned to companyBs past performance. "round 1@ E of the banks in
$u2arat recovered their dues on time from their corporate clients after maturity in $u2arat.
'he most preferred measures were pervasion and le%al action. 'he most common
su%%estion received for improvin% the recovery system in $u2arat was re%ardin%
improvin% the 2udicial system and dele%atin% more power and autonomy to the banks.
TNRCMS MAYANK SHAH ?

INDEX
Sr. Particular Page
No.
O Preface
O Acknowe!"#en$
O Decara$%on
O E&ec'$%(e S'##er)
*
+
,
-
*. In$ro!'c$%on
f *arly History of ank
f 'ype of ank
f &tatus wise bifurcation of anks
/0*1
1@
17
1D
+. A2o'$ S3I
f History
f "wards ; )eco%nition
f 5ission
f ,r%anization &tructure
,. S'r(e) 4 Re5earc6 on NPA5
f )esearch Plan
f Introduction
f 8ebt )ecovery Problem
f NP"s and 'heir *ffects
TNRCMS MAYANK SHAH C

f &teps to solve NP"s
f 'ools for 5ana%in% NP"s
f &trate%y for Prevention of NP"s
f Non Le%al 5easure
-. SWOT Ana)5%5
1. FUTURE PLAN
7. CONCLUSION
8. 3I3LIOGRAP9Y
/. ANNEXURE
TNRCMS MAYANK SHAH F

INTRODUCTION
TNRCMS MAYANK SHAH A

'he word GbankB it derived from the word GbancusB or Gban.ueB that is =rench.
'here was other of the opinion that the word GbankB is ori%inally derived from the $erman word
GbackB meanin% 2oint for which was Italianized into GbancoB. ut whatever be the ori%in of the
word bank as Prof. )ramchandra )ao says.! It would trace the history of bankin% in *urope from
middle a%es.!
$enerall y, banks do the business of money they take deposits of moneys from
client and %ive loan to the person who has need of money. ut in this a%e, for the
convenience of customer, banks provides some other services to their customer
such as bankers che.ue, overdraft, internet bankin%, "'5 facilit y, payi n% of
bills, credit card, tele%raphi c transfer, insurance, demat etc.
=or a people, it is difficult to keep a very bi% amount of money in his house
safely. &o, people save their money to bank. ank %ives loan to the person who
has need of money and %ets hi%her interest on it than the interest of deposit. 'he
mar%in between the interest of loan and interest of deposit is the income of bank.
TNRCMS MAYANK SHAH H

EARLY 9ISTORY OF 3ANKING
"s earl y as 7@@@ . +. the abyl onians had developed a bankin% system. 'here is
evidence to show the temples of abylon were used as banks. "fter a period of
time, there was a spread of irreli%ion, which soon destroyed the public sense of
securit y in depositin% money and valuable in temples. 'he priests were lon%er
actin% as financial a%ents. 'he )omans did minute re%ulations, as to conduct
private bankin% and to create confidence in it. Loan banks were also common in
)ome. =rom these the poor citizens received loans without payi n% interest,
a%ainst security of land for 9 or D years.
8urin% the earl y periods, althou%h private individual mostl y did the bankin%
business, many countries established public banks either for the purpose of
facilitatin% commerce or to serve the %overnment.
However, upon the revival of civili zat ion, %rowin% necessit y forced the issued in
the middl e of the 17
t h
century and banks were established at -enice and $enoa.
'he ank of -enice established in 11?F is supposed to be the most ancient bank.
,ri%inal l y, it was not a bank in the modern sense, durin% simpl y an office for the
transfer of the public debt.
In India, as earl y as the -edic Period, bankin%, in most crude from e0isted. 'he
books of 5anu contain references re%ardin% deposits, pled%es, policy of loans,
and rate of interest. 'rue, the bankin% in those days lar%el y mint money lendin%
and they did not know the compli cated mechanism of modern bankin%.
'his is true not only in the case of India but also of other countries. "lthou%h,
the business of bankin% is as old as authentic history, bankin% institutions have
TNRCMS MAYANK SHAH 1@

since than chan%ed in character and content very much. 'hey are developed from
a few simple operations involvin% the satisfaction of a few individual wants to
the complicated mechanism of modern bankin%, involvin% the satisfaction of
capital slowly seekin% employment and thus providin% the very life blood of
commerce.

TYPE OF 3ANKS
+ )e%ional )ural ank <))4
+ Nationalized ank
+ &tate ank $roup
+ +o3operative ank
+ Private ank
+ =orei%n ank
RESERVE 3ANK OF INDIA
'he Hilton3youn% commission, appointed in 1H7C has recommended the necessity
of centrall y empowered institution to have effective control over currency and
financial transaction in the county. "ccordin%l y, the $overnment had then passed
)eserve ank of India "ct, 1H9D and established the )eserve ank of India with
effect from 1
s t
"pril 1H9?. 'he principal ai m behind this was to or%anize proper
control over the currency mana%ement in the interest of country benefits and to
maintain financial stabilit y. /ith this, the )I mainl y looks after the followin%
import ant functions>
+ 'o keep effective control over creation of credits and currency suppl y
+ 'o control the ankin% transactions of +entral and &tate $overnments.
+ 'o act as +entral administered "uthorit y of all other anks in the country.
+ 'o or%anize control over =orei%n +urrency 'ransaction.
+ 'o assist for improvement in financial aspect of the country.
NATIONALISED 3ANKS

'he ankin% +ompany "ct establishes it in :ul y 1HCH by national ization of 1D
ma2 or banks of India. 'he sent percent ownership of the bank is of %overnment of
India.
STATE 3ANK GROUP
'he &tate ank of India was established under
the &tate ank of India "ct, 1H??, the subsidiary
banks under the &tate ank of India <subsidiary
anks4 "ct 1H?H. 'he )eserve ank of India
owns the &tate ank of India, to a lar%e e0tent,
and rest of the part is some private ownership in
the share capital of &tate ank of India. 'he &tate
ank of India owns the subsidiary anks.
OLD PRIVATE 3ANK
'hese banks are re%istered under +ompany "ct, 1H?C. asic 8ifference
between co3operative banks and private banks is its aim. +o3operative
banks work for its member and private banks work for earn profit.
NEW PRIVATE 3ANKS
'hese banks lead the market of Indian bankin% business in very
short period. ecause of its variety services and approach to handle
customer and also because of lon% workin% hours and speed of

services. 'his is also re%istered under the +ompany "ct. 1H?C. etween old and new private
sector bank, there is wide difference.
FOREIGN 3ANKS
=orei%n ank means multi3countries bank. In case of India =orei%n anks are such anks. /hich
open its branch office in India and their head office is outside of India.
TNRCMS MAYANK SHAH 1D

STATUS WISE 3IFURCATION OF
3ANKS
'hey are divided into two %roups>
+ &cheduled anks
+ Non &cheduled anks
SC9EDULED 3ANKS
In first schedule, %overnment of India notifies the Primary anks, which are licensed and whose
demand and time liability are not less than ?@ crores in 1HAF.
$overnment of India notify the Primary banks, which are licensed and whose demand and time
liability are not less than 1@@crores can only .ualify to be included in the second schedule since
1HH9.
" bank becomes scheduled when it fulfils the followin%s>
+ " %rade ratin% from )I
+ 8emand and 'ime Liabilit y over 1@@crores.
+ &atisfy the )I %uidelines related to +)) and &L)
+ "s per the norms Priorit y &ector wise landin% benefits of bein% a &cheduled
co3operative are described below>3
+ )I would provide )ediscountin% facilit y at nominal rate
+ )I %ives remi ttance facili t y at par
TNRCMS MAYANK SHAH 1?

'he demerits of becomin% a scheduled co3operative bank is that the bank will not %et @.?E
subsidy from )I
'he conferment of scheduled status on the banks has certain advanta%es like refinance facility,
directly industrial finance from )eserve ank of India. "vail of )eserve ank of India
)emittance facility scheme, accept deposits from local bodies, .uasi3%overnment or%anization,
reli%ious, and charitable institutions, %uarantees and che.ues issued by anks are accepted by
$overnment 8epartments. "t the same time, it casts %reater responsibility on the banks in the
maintenance of books of accounts and submissions of returns.
Sc6e!'e! 2ank5 %n In!%a
&cheduled +ommercial ank
&cheduled +o3operative ank
NON0SC9EDULED 3ANKS
'he banks, which are not applicable as per the criteria of &cheduled anks, are
called as a Non3scheduled anks. 'hese are very small banks.
TNRCMS MAYANK SHAH 1C

TNRCMS MAYANK SHAH 1F

STATE 3ANK OF INDIA
'he ori%in of the S$a$e 3ank of In!%a %oes back to the first decade of the nineteenth century with
the establishment of the ank of +alcutta in +alcutta on 7 :une 1A@C. 'hree years later the bank
received its charter and was re3desi%ned as the ank of en%al <7 :anuary 1A@H4. " uni.ue
institution, it was the first 2oint3stock bank of ritish India sponsored by the $overnment of
en%al. 'he ank of ombay <1? "pril 1AD@4 and the ank of 5adras <1 :uly 1AD94 followed the
ank of en%al. 'hese three banks remained at the ape0 of modern bankin% in India till their
amal%amation as the Imperial ank of India on 7F :anuary 1H71.
Primarily "n%lo3Indian creations, the three presidency banks came into e0istence either as a result
of the compulsions of imperial finance or by the felt needs of local *uropean commerce and were
not imposed from outside in an arbitrary manner to modernise IndiaIs economy. 'heir evolution
was, however, shaped by ideas culled from similar developments in *urope and *n%land, and was
influenced by chan%es occurrin% in the structure of both the local tradin% environment and those
in the relations of the Indian economy to the economy of *urope and the %lobal economic
framework.
3ank of 3en"a 9.O.
TNRCMS MAYANK SHAH 1A

E5$a2%56#en$
'he establishment of the ank of en%al marked the advent of limited liability, 2oint3stock
bankin% in India. &o was the associated innovation in bankin%, viz. the decision to allow the ank
of en%al to issue notes, which would be accepted for payment of public revenues within a
restricted %eo%raphical area. 'his ri%ht of note issue was very valuable not only for the ank of
en%al but also its two siblin%s, the anks of ombay and 5adras. It meant an accretion to the
capital of the banks, a capital on which the proprietors did not have to pay any interest. 'he
concept of deposit bankin% was also an innovation because the practice of acceptin% money for
safekeepin% <and in some cases, even investment on behalf of the clients4 by the indi%enous
bankers had not spread as a %eneral habit in most parts of India. ut, for a lon% time, and
especially up to the time that the three presidency banks had a ri%ht of note issue, bank notes and
%overnment balances made up the bulk of the invertible resources of the banks.
'he three banks were %overned by royal charters, which were revised from time to time. *ach
charter provided for a share capital, four3fifth of which were privately subscribed and the rest
owned by the provincial %overnment. 'he members of the board of directors, which mana%ed the
affairs of each bank, were mostly proprietary directors representin% the lar%e *uropean mana%in%
a%ency houses in India. 'he rest were %overnment nominees, invariably civil servants, one of
whom was elected as the president of the board.

Gro': P6o$o"ra:6 of Cen$ra 3oar! ;*<+*=
TNRCMS MAYANK SHAH 1H

3'5%ne55
'he business of the banks was initially confined to discountin% of bills of e0chan%e or other
ne%otiable private securities, keepin% cash accounts and receivin% deposits and issuin% and
circulatin% cash notes. Loans were restricted to )s.one lakh and the period of accommodation
confined to three months only. 'he security for such loans was public securities, commonly called
+ompanyIs Paper, bullion, treasure, plate, 2ewels, or %oods Inot of a perishable natureI and no
interest could be char%ed beyond a rate of twelve per cent. Loans a%ainst %oods like opium,
indi%o, salt woollens, cotton, cotton piece %oods, mule twist and silk %oods were also %ranted but
such finance by way of cash credits %ained momentum only from the third decade of the
nineteenth century. "ll commodities, includin% tea, su%ar and 2ute, which be%an to be financed
later, were either pled%ed or hypothecated to the bank. 8emand promissory notes were si%ned by
the borrower in favour of the %uarantor, which was in turn endorsed to the bank. Lendin% a%ainst
shares of the banks or on the mort%a%e of houses, land or other real property was, however,
forbidden.
Indians were the principal borrowers a%ainst deposit of +ompanyIs paper, while the business of
discounts on private as well as salary bills was almost the e0clusive monopoly of individuals
*uropeans and their partnership firms. ut the main function of the three banks, as far as the
%overnment was concerned, was to help the latter raise loans from time to time and also provide a
de%ree of stability to the prices of %overnment securities.

O! 3ank of 3en"a
Ma>or c6an"e %n $6e con!%$%on5
" ma2or chan%e in the conditions of operation of the anks of en%al, ombay and 5adras
occurred after 1AC@. /ith the passin% of the Paper +urrency "ct of 1AC1, the ri%ht of note issue of
the presidency banks was abolished and the $overnment of India assumed from 1 5arch 1AC7 the
sole power of issuin% paper currency within ritish India. 'he task of mana%ement and circulation
of the new currency notes was conferred on the presidency banks and the $overnment undertook
to transfer the 'reasury balances to the banks at places where the banks would open branches.
None of the three banks had till then any branches <e0cept the sole attempt and that too a short3
lived one by the ank of en%al at 5irzapore in 1A9H4 althou%h the charters had %iven them such
authority. ut as soon as the three presidency bands were assured of the free use of %overnment
'reasury balances at places where they would open branches, they embarked on branch e0pansion
at a rapid pace. y 1AFC, the branches, a%encies and sub a%encies of the three presidency banks
covered most of the ma2or parts and many of the inland trade centres in India. /hile the ank of
en%al had ei%hteen branches includin% its head office, seasonal branches and sub a%encies, the
anks of ombay and 5adras had fifteen each.

3ank of Ma!ra5 No$e Da$e! */7* for R5.*?
Pre5%!enc) 3ank5 Ac$
'he presidency anks "ct, which came into operation on 1 5ay 1AFC, brou%ht the three
presidency banks under a common statute with similar restrictions on business. 'he proprietary
connection of the $overnment was, however, terminated, thou%h the banks continued to hold
char%e of the public debt offices in the three presidency towns, and the custody of a part of the
%overnment balances. 'he "ct also stipulated the creation of )eserve 'reasuries at +alcutta,
ombay and 5adras into which sums above the specified minimum balances promised to the
presidency banks at only their head offices were to be lod%ed. 'he $overnment could lend to the
presidency banks from such )eserve 'reasuries but the latter could look upon them more as a
favour than as a ri%ht.

3ank of Ma!ra5
'he decision of the $overnment to keep the surplus balances in )eserve 'reasuries outside the
normal control of the presidency banks and the connected decision not to %uarantee minimum
%overnment balances at new places where branches were to be opened effectively checked the
%rowth of new branches after 1AFC. 'he pace of e0pansion witnessed in the previous decade fell
sharply althou%h, in the case of the ank of 5adras, it continued on a modest scale as the profits
of that bank were mainly derived from trade dispersed amon% a number of port towns and inland
centres of the presidency.
India witnessed rapid commercialisation in the last .uarter of the nineteenth century as its railway
network e0panded to cover all the ma2or re%ions of the country. New irri%ation networks in
5adras, Pun2ab and &ind accelerated the process of conversion of subsistence crops into cash
crops, a portion of which found its way into the forei%n markets. 'ea and coffee plantations
transformed lar%e areas
of the eastern 'erais, the hills of "ssam and the Nil%iris into re%ions of estate a%riculture par
e0cellence. "ll these resulted in the e0pansion of IndiaIs international trade more than si03fold.
'he three presidency banks were both beneficiaries and promoters of this commercialisation
process as they became involved in the financin% of practically every tradin%, manufacturin% and
minin% activity in the sub3continent. /hile the anks of en%al and ombay were en%a%ed in the
financin% of lar%e modern manufacturin% industries, the ank of 5adras went into the financin%

of lar%e modern manufacturin% industries, the ank of 5adras went into the financin% of small3
scale industries in a way which had no parallel elsewhere. ut the three banks were ri%orously
e0cluded from any business involvin% forei%n e0chan%e. Not only was such business considered
risky for these banks, which held %overnment deposits, it was also feared that these banks
en2oyin% %overnment patrona%e would offer unfair competition to the e0chan%e banks which had
by then arrived in India. 'his e0clusion continued till the creation of the )eserve ank of India in
1H9?.
3ank of 3o#2a)
Pre5%!enc) 3ank5 of 3en"a
'he Presidency anks of en%al, ombay and 5adras with their F@ branches were mer%ed in
1H71 to form the Imperial ank of India. 'he triad had been transformed into a monolith and a
%iant amon% Indian commercial banks had emer%ed. 'he new bank took on the triple role of a

commercial bank, a bankerIs bank and a banker to the %overnment.
ut this creation was preceded by years of deliberations on the need for a I&tate ank of IndiaI.
/hat eventually emer%ed was a Ihalf3way houseI combinin% the functions of a commercial bank
and a .uasi3central bank.
'he establishment of the )eserve ank of India as the central bank of the country in 1H9? ended
the .uasi3central bankin% role of the Imperial ank. 'he latter ceased to be bankers to the
$overnment of India and instead became a%ent of the )eserve ank for the transaction of
%overnment business at centres at which the central bank was not established. ut it continued to
maintain currency chests and small coin depots and operate the remittance facilities scheme for
other banks and the public on terms stipulated by the )eserve ank. It also acted as a bankersI
bank by holdin% their surplus cash and %rantin% them advances a%ainst authorised securities. 'he
mana%ement of the bank clearin% houses also continued with it at many places where the )eserve
ank did not have offices. 'he bank was also the bi%%est tendered at the 'reasury bill auctions
conducted by the )eserve ank on behalf of the $overnment.
'he establishment of the )eserve ank simultaneously saw important amendments bein% made to
the constitution of the Imperial ank convertin% it into a purely commercial bank. 'he earlier
restrictions on its business were removed and the bank was permitted to undertake forei%n
e0chan%e business and e0ecutor and trustee business for the first time.
I#:er%a 3ank
'he Imperial ank durin% the three and a half decades of its e0istence recorded an impressive
%rowth in terms of offices, reserves, deposits, investments and advances, the increases in some
cases amountin% to more than si03fold. 'he advances, the increases in some cases amountin% to
more than si03fold. 'he financial status and security inherited from its forerunners no doubt
provided a firm and durable platform. ut the lofty traditions of bankin% which the Imperial ank
consistently maintained and the hi%h standard of inte%rity it observed in its operations inspired

confidence in its depositors that no other bank in India could perhaps then e.ual. "ll these
enabled the Imperial ank to ac.uire a pre3eminent position in the Indian bankin% industry and
also secure a vital place in the countryIs economic life.
S$a#: of I#:er%a 3ank of In!%a
/hen India attained freedom, the Imperial ank had a capital base <includin% reserves4 of
)s.11.A? crores, deposits and advances of )s.7F?.1D crores and )s.F7.HD crores respectively and a
network of 1F7 branches and more than 7@@ sub offices e0tendin% all over the country.
F%r5$ F%(e Year Pan
In 1H?1, when the =irst =ive Jear Plan was launched, the development of rural India was %iven
the hi%hest priority. 'he commercial banks of the country includin% the Imperial ank of India
had till then confined their operations to the urban sector and were not e.uipped to respond to the
emer%ent needs of economic re%eneration of the rural areas. In order, therefore, to serve the
economy in %eneral and the rural sector in particular, the "ll India )ural +redit &urvey

+ommittee recommended the creation of a state3partnered and state3sponsored bank by takin%
over the Imperial ank of India, and inte%ratin% with it, the former state3owned or state3associate
banks. "n act was accordin%ly passed in Parliament in 5ay 1H?? and the &tate ank of India was
constituted on 1 :uly 1H??. 5ore than a .uarter of the resources of the Indian bankin% system thus
passed under the direct control of the &tate. Later, the &tate ank of India <&ubsidiary anks4 "ct
was passed in 1H?H, enablin% the &tate ank of India to take over ei%ht former &tate3associated
banks as its subsidiaries <later named "ssociates4.
'he &tate ank of India was thus born with a new sense of social purpose aided by the DA@ offices
comprisin% branches, sub offices and three Local Head ,ffices inherited from the Imperial ank.
'he concept of bankin% as mere repositories of the communityIs savin%s and lenders to
creditworthy parties was soon to %ive way to the concept of purposeful bankin% sub servin% the
%rowin% and diversified financial needs of planned economic development. 'he &tate ank of
India was destined to act as the pacesetter in this respect and lead the Indian bankin% system into
the e0citin% field of national development
'he ank is actively involved since 1HF9 in non3profit activity called +ommunity &ervices
ankin%. "ll &I branches and administrative offices throu%hout the country sponsor and
participate in lar%e number of welfare activities and social causes. &I business is more than
bankin% because we touch the lives of people anywhere in many ways. &I commitment to
nation3buildin% is complete ; comprehensive.
TEC9NOLOGY UPGRADATION
&IBs Information 'echnolo%y Pro%ramme aims at achievin% efficiency in operations, meetin%
customer and market e0pectations and facin% competition. &I achievements are summarized
below>


FULL 3RANC9 COMPUTERISATION ;FC35=@ "ll the branches of the ank are now fully
computerised. 'his strate%y has contributed to improvement in customer service.

ATM SERVICES@ 'here are ?7H@ "'5s on the "'5 Network. 'hese "'5s are located in 1F71
centers spread across the len%th and breadth of the country, thereby creatin% a truly national
network of "'5s with an unparalleled reach. -alue added services like "'5 locator, payment of
fees for colle%e students, multilin%ual screens, voice over and drawl of cash advance by &I credit
card holders have been introduced.
INTERNET 3ANKING ;IN3=@ 'his on3line channel enables customers to access their account
information and initiate transactions on a 7D0F, boundary less basis. 777? branches, coverin% ???
centers are e0tendin% IN service to their customers. "ll functionalities other than +ash and
+learin% have been e0tended to individual retail customers. " separate Internet ankin% 5odule
for +orporate customers has been launched and available at 19@? branches. ulk upload of data
for +orporate, Inter3branch funds transfer for )etail customers, ,nline payment of +ustoms duty
and $ovt. ta0, *lectronic ill Payment, &5& "lerts, *3Poll, II' $"'* =ee +ollection, ,ff3line
+ustomer )e%istration Process and )ailway 'icket ookin% are the new features deployed.
GOVT. 3USINESS @ &oftware has been developed and rolled out at FFA? fully computerised
branches. *lectronic %eneration of all reports for reportin%, settlement and reconciliation of $ovt.
funds is available.

STEPS@ Knder &'*P&, the bankIs electronic funds transfer system, the Products offered are
e'ransfer <e'4, e)ealisation <e)4, e8ebit <+5P4 and "'5 reconciliation. &'*P& handles
payment messa%es and reconciliation simultaneously.

TNRCMS MAYANK SHAH 7A

SEFT@ &I has launched the &pecial *lectronic =und 'ransfer <&*='4 &cheme of )I, to
facilitate efficient and e0peditious Inter3bank transfer of funds. 7D1 branches of our ank in
various LH, +entres are participatin% in the scheme. &ecurity of messa%e transmission has been
enhanced.

MICR Cen$re@ 5I+) +he.ue Processin% systems are operational at 1C centre viz. 5umbai, New
8elhi, +hennai, 6olkata, -adodara, &urat, Patna, :abalpur, $walior, :odhpur, 'richur, +alicut,
Nasik, )aipur, hubaneswar and 8ehradun.

Core 3ank%n"@ 'he +ore ankin% &olution provides the state3of3the3art anywhere anytime bankin%
for our customers. 'he facility is available at 1@17 branches.

Tra!e F%nance @ 'he solution has been implemented, providin% efficiency in handlin% 'rade
=inance transactions with Internet access to customers and %reatly enhances the bankIs services to
+orporate and +ommercial Network branches. 'his new 'rade =inance solution, *LI5ILL&,
will be implemented at all domestic branches as well as at =orei%n offices en%a%ed in trade
finance business durin% the year.
WAN @ 'he bank has set up a /ide "rea Network, known as &I connect, which provides
connectivity to DA1H branchesMoffices of &I $roup across 9A? cities as at 91st 5arch 7@@A. 'his
network provides across the board benefits by providin% nationwide connectivity for its business
applications
D%rec$or5 on $6e 3ankA5 Cen$ra 3oar!
a5 on ,*5$ Dece#2er +??/

3OARD OF DIRECTORS
Cen$ra 3oar! Of S$a$e 3ank Of In!%a ;A5 on *5$ A:r% +??/=
S.No. Na#e of D%rec$or Sec. of S3I Ac$B *<11
1.
&hri ,.P. hatt
+hairman
1H<a4
7.
&hri &.6.hattacharyya
58 ; ++;),
1H<b4
9. &hri &uman 6umar ery 1H<c4
D. 8r. "shok :hun2hunwala 1H<c4
.? 8r. 8eva Nand alodhi 1H<d4
C. Prof. 5ohd. &alahuddin "nsari 1H<d4
F. 8r.<5rs.4 -asantha harucha 1H<d4
A. &hri "run )amanathan 1H<e4
H. &mt. &hyamala $opinath 1H<f4
ASSOCIATE 3ANKS
S$a$e 3ank of In!%a has the followin% seven "ssociate anks <"s4 with controllin% interest
ran%in% from F?E to 1@@E.
1. &tate ank of ikaner and :aipur <&:4
7. &tate ank of Hyderabad <&H4
9. &tate ank of Indore <&Ir4
D. &tate ank of 5ysore <&54
?. &tate ank of Patiala <&P4
C. &tate ank of &aurashtra <&&4
F. &tate ank of 'ravancore <&'4
"s on 91
st
march, 7@@A the financial information of &tate bank of India is %iven as under

F%nanc%a De$a%5 RS ;%n crore=
Ca:%$a 7,*.-8
3orrow%n"5 1*B8+8.-*
De:o5%$5 1B,8B-?,.<-
In(e5$#en$5 *B/<B,?*.+8
A!(ance5 -B*7B87/.*<
Prof%$ 7B8+<.11
&ource > balance sheet and profit and loss accounts schedule of state bank of
India from annual reports of year endin% 91
st
march, 7@@A
Genera S6are6o!er Infor#a$%on

Number of shareholders as on 9@.H.7@@D was ?.C1 lacs. 'he shareholdin% pattern was as under.
SHARE HOLDERS SHARE HOLDERS PERCENTAGES PERCENTAGES
Reserve Bank of India 59.73 %
Non-residens !"IIs# $CBs# NRIs% &9.'3 %
Banks# "Is in()*din+ ins*ran(e (o,-anies ../& %
M**a) f*nds01TI ..27 %
3o,esi( (o,-anies0-rivae (or-orae 4odies0r*ss &.79 %
Resident individuals 5.97 %
59.73%
19.83%
6.21%
6.47%
1.79%
5.97%
Reserve Bank of India
Non-residents (FIIs !"Bs NRIs#
Banks FIs in$%&din' ins&ran$e $o()anies
*&t&a% f&nds+,-I
.o(esti$ $o()anies+)rivate $or)orate /odies+tr&sts
Resident individ&a%s

5I&&I,N 5I&&I,N
To retain the Banks Position as the Premier Indian Financial Services
Group, with world class standards and significant Global business,
committed to ecellence in customer, shareholder and emplo!ee
satisfaction and to pla! a leading role in the epanding and diversif!ing
financial services sector while continuing emphasis, on its development
banking role"
+ DR. KALAM TALKS A3OUT S3I PLAN AND MISSON
*/ 8*LHI > President ".P.:. "bdul 6alam on 'uesday chalked out a seven3point action plan for
the &tate ank of India <&I4 while ur%in% the countryIs premier bank to create a )s. ?,@@@3crore
venture capital fund and hike lendin% to the farm sector.
In his address at the &IIs icentennial +elebrations here, 5r. 6alam noted that within the ne0t
three years, the bank should raise the credit to the farm and a%ro3processin% sector from 1@ to 7@
per cent of its total loan disbursal.
"%ricultural %rowth, he said, was la%%in% behind while sectors such as manufacturin% and
services were showin% robust increases. " hi%her credit disbursal, he said, was essential to hike
farm %rowth to over four per cent as it was a vital re.uirement for increasin% the overall $ross
8omestic Product %rowth to 1@ per cent.
Knveilin% his plan, 5r. 6alam asked the &I to allocate )s. ?,@@@ crores as venture capital from
7@@F3@A for the purposes of fundin% innovative scientists and technolo%ists for speedier societal
transformation. 'his would include the development of I+' products, software development and
software services.
'he President also advised the bank to create and nurture five rural development pro2ects, on the
lines of the bio3fuel pro2ect and seaweed pro2ect, as it had the potential to provide employment to
?@ lakh persons in the rural areas at the least.

5r. 6alam also asked the &I to adopt and innovatively fund at least one lakh sick units in the
small3scale sector to infuse the latest technolo%y and turn them into profitable ventures.
"nother sector with %reat potential, 5r. 6alam said, was medical tourism in which the bank could
e0tend funds at competitive interest rates for settin% up corporate hospitals which would also
serve the rural areas. Likewise, yet another sector for the bankIs participation, he said, was
infrastructure development, includin% provision of ?@ million .uality houses with basic
infrastructure in rural areas in association with state and +entral entities.
'urnin% to the pli%ht of villa%ers cau%ht in the NNvicious cycle of borrowin%,II 5r. 6alam asked the
&I to adopt a NNvilla%er3friendlyII bankin% system to free them from the clutches of money3
lenders.
5r. 6alam also lamented that hassle3free loans were bein% e0tended by the &I to students of
only the best en%ineerin% colle%es, medical colle%es and business schools. NNI would re.uest the
&I to e0amine the possibility of providin% loans to students who would like to pursue science
and commerce as a career,O he said.
esides, ways should be found to fund the education of those meritorious students who could not
%et admission to top en%ineerin%, medical and 3schools owin% to strin%ent competition, 5r.
6alam said.


&I has ba%%ed
the awards for
5ost Preferred
ank! and 5ost
preferred brand!
for home Loan in
CN3C AwaaC
+onsumer
"wards in
"u%ust 7@@F
&I has ba%%ed
the awards for
5ost Preferred
ank! and 5ost
preferred brand!
for home Loan in
CN3C AwaaC
+onsumer
"wards in
"u%ust 7@@F
SBI is placed at
70
th
in Top
1000 Banks
Survey by
Banker
Magazine, J uly
007, !up " ro#
107 last year$
SBI is placed at
70
th
in Top
1000 Banks
Survey by
Banker
Magazine, J uly
007, !up " ro#
107 last year$
SBI ranked %
th

in the
&cono#ics
Ti#es Market
'ap (ist, !up
" ro# )0 last
year$
SBI ranked %
th

in the
&cono#ics
Ti#es Market
'ap (ist, !up
" ro# )0 last
year$
Today,
SBI * SBI '+, is
the -o.1
syndicator o"
do#estic debt
in Asia Pacif ic
REGI ON.
Today,
SBI * SBI '+, is
the -o.1
syndicator o"
do#estic debt
in Asia Pacif ic
REGI ON.
-o.1 in
#ergers /
+c0uisition
1eals !21
1eals o" 3S 4
15.6bn$
.
-o.1 in
#ergers /
+c0uisition
1eals !21
1eals o" 3S 4
15.6bn$
.
The only
I ndian Bank
to " ind a
place in the
Fortune
Global )00
(ist
The only
I ndian Bank
to " ind a
place in the
Fortune
Global )00
(ist

SBI is No 1
provider of
AGRI Finance
and No. 1 in
Credit in!in"
of Rs #. $%
lacs S&GS
SBI is No 1
provider of
AGRI Finance
and No. 1 in
Credit in!in"
of Rs #. $%
lacs S&GS
SBI is #arket
(eader in
" inancing
SSI s 7ith a
#arket share
o" 58
SBI is #arket
(eader in
" inancing
SSI s 7ith a
#arket share
o" 58
Readers
di"est 'a(
)* Golden
A+ard f or
bein" a,on"
t-e t+o ,ost
trusted ban!s
in I ndia
Readers
di"est 'a(
)* Golden
A+ard f or
bein" a,on"
t-e t+o ,ost
trusted ban!s
in I ndia
Kp %radation of
ratin%s by citi
%roupM 5or%an
&tanley
5oodysBs &;P
Kp %radation of
ratin%s by citi
%roupM 5or%an
&tanley
5oodysBs &;P
9
rd
in the
Econo#%c
T%#e5 brand
*.uity )ankin%
'op ?@ most
trusted service
brands in the
service sector
9
rd
in the
Econo#%c
T%#e5 brand
*.uity )ankin%
'op ?@ most
trusted service
brands in the
service sector
3'5%ne55
S$an!ar! 6a5
Awar!e! the
est anker of
the Jear "ward
to &hri
,.P.hatt for his
initiative to
reener%ize the
ank
3'5%ne55
S$an!ar! 6a5
Awar!e! the
est anker of
the Jear "ward
to &hri
,.P.hatt for his
initiative to
reener%ize the
ank

CNN I BN net7ork
16 has selected
shri. 9.,.Bhatt as
I ndian o" the :ear
Business 007 " or
sho7ing ho7 a
public sector
behe#oth can " le;
its #uscle in the
" erociously
co#petitive
Banking sector
CNN I BN net7ork
16 has selected
shri. 9.,.Bhatt as
I ndian o" the :ear
Business 007 " or
sho7ing ho7 a
public sector
behe#oth can " le;
its #uscle in the
" erociously
co#petitive
Banking sector
Asian centre for
corporate Governance &
Sustainability and
Indian Merchants
Chamber has awarded
the Transformational
Leader Award 2! to
Shri "#$#%hatt for
leadership& charisma&
inspiration and
intellectual sti,ulation
f or t-e entire SBI
tea,
Asian centre for
corporate Governance &
Sustainability and
Indian Merchants
Chamber has awarded
the Transformational
Leader Award 2! to
Shri "#$#%hatt for
leadership& charisma&
inspiration and
intellectual sti,ulation
f or t-e entire SBI
tea,

CHAIRMAN
.'./ DEPUTY MANAGING CCO/ CHIEF CORPORATE DIRECTOR
OFFICER
CFO/ CHIEF FINANE CB/ CORE BANKING
OFFICER
TNRCMS MAYANK SHAH
DMD 4 CCO
DMD 4 CCO
DMD 4 CFO
DMD 4 CFO
DMD 4 CDO
DMD 4 CDO
DMD CORPORATE
STRATEGY 4 NEW
3USINESS
DMD CORPORATE
STRATEGY 4 NEW
3USINESS
DMD ;IT=
DMD ;IT=
C9IF ECONOMIC
ADVISOR
C9IF ECONOMIC
ADVISOR
CVO
CVO
DMD RURAL 4 AGRI
3USINESS GROUP
DMD RURAL 4 AGRI
3USINESS GROUP
9A
MD 4 GE
;C3=
MD 4 GE
;N3=
DMD 4 GE
;TRESASURY
4 MARKETS
DMD 4 GE
;ASSOCIATES
4 &K&I8I")I*&
DMD ;I 4 MA=
;Loca$e! a$ 9)!era2a!=

NB/ NON BANKING IB/ INTERNATIONAL BANKING
&tate bank of India has been facin% %reat rivalry and ma2or competition with other public sector
banks and some of private commercial banks. &tate bank of India has many banks as art rival.
&ome of its art rival.
L%5$ of #a>or co#:e$%$or5 of S3I
I. I+I+I ank
II. ank of aroda
III. +anara ank
IV. Pun2ab National ank
V. ank of India
VI. Knion ank of India
VII. +entral ank of India
VIII. H8=+ ank
IX. ,riental ank of +ommerce.
Here especially some of the public sector and private sector banks are %ivin% hardcore
competition to the state bank of India. &o let us have some of the best banks which is also
mentioned above and mentioned below in detail.
ICICI 3ANK

I+I+I bank stands for Industrial +redit and Investment +orporation of India. 'his I+I+I
bank is one of the heavywei%ht banks of private sector of India. It is providin% the core
competition to the state bank of India. *specially in lendin% money, Investment.
ut in profit makin% state bank of India is standin% ahead. "nd when and where social
responsibility of concern state bank of India is headin% hi%h than any other banks in India
9DFC 3ANK
H8=+ stands for Housin% 8evelopment and =inance +orporation ltd. 'his is also one of
the leadin% banks of India in private sector. 'his bank is also providin% hardcore
competition to all the banks as well as state bank of India
ut we mention earlier that state bank of India is ahead in bankin% India. &o H8=+ bank
has to work hard to reach at the milestone achieved by state bank of India.
3ANK OF 3ARODA
ank of aroda is also one of the leadin% public sector banks in India. ank of aroda is
known as ,. 'his P&K bank is also providin% the tou%h competition to all other banks
in India. 'he , bank is very renowned banks of India today. It is very chan%ed and
very professionally workin% public sector banks
, has %ot professional in recent time so. It has to work very hard to achieve position
and reputation which are achieved by &tate &ank of India.
TNRCMS MAYANK SHAH D@
MARKET SHARE
31%
3%
3%
3%
4%
5% 5%
6%
7%
10%
23%
1-2-3 B2N4 !F
IN.I2
5.F" B2N4
,"! B2N4
"3N-R2 B2N4 !F
IN.I2
,NI!N B2N4 !F
IN.I2
B2N4 !F B2R!.2
B2N4 !F IN.I2
6,N72B N2-I!N28
B2N4

#$%&
'F
B$#(
%$)(&T S*$)& I# +&'PSITS $#+
$+,$#-&S ./0
ST$T& B$#( 'F I#+I$ 12"13 /
*+F- B$#( 1"24 /
5-' B$#( 1"26/
-&#T)$ B$#( 'F I#+I$ 1"76 /
5#I'# B$#( 'F I#+I$ 7"31 /
B$#( 'F B$)'+$ 6"42 /
B$#( 'F I#+I$ 6"38 /
P5#9$B #$TI'#$: B$#( ;"76 /
-$#$)$ B$#( ;"64 /
I-I-I B$#( 42"11 /
'T*&) B$#(S 33"3< /
T'T$: 422/
TNRCMS MAYANK SHAH D1

9OUSING LOAN@
Home is where the heart is# "t &I, we understand this better than most P the toil and sweat that %oes into
buildin%M buyin% a house and the subse.uent pride and 2oy of ownin% one. 'his is why our Housin% loan
schemes are desi%ned to make it simple for you to make a choice at least as far as financin% %oes#
E%"%2%%$)
5inimum a%e 71 years as on the date of sanction
&teady source of income
Loan A#o'n$
"pplicantM any one of the applicants are a%ed over 71 years and upto D? years P C@ times Net 5onthly
Income <N5I4 or ? times Net "nnual Income <N"I4, sub2ect to a%%re%ate repayment obli%ations not
*0ceedin% ?F.?@E of N5IM N"I
"pplicant<s4 a%ed over D? years of a%e P DA times N5I or D times N"I, sub2ect to a%%re%ate
repayment obli%ations not e0ceedin% ?@Eof N5IM N"I
Mar"%n
PurchaseM +onstruction of a new HouseM =latM Plot of land> 1?E
Purchase of an e0istin% HouseM =lat> 1?E
)epairsM )enovation of an e0istin% HouseM =lat> 7@E
TNRCMS MAYANK SHAH D7

9OUSING LOAN D INTEREST RATES@
In$ere5$ ra$e5
Foa$%n" %n$ere5$ ra$e5 ;%nke! $o S$a$e 3ank A!(ance Ra$e D S3AR=@
;S3AR@ *+.81E=
Ten're Ra$e of In$ere5$ ;:.a.=
Kpto ? years 7.@@E below &") 5inimum 1@.F?E
"bove ? and upto 1@ years 1.?@E below &") 5inimum 11.7?E
"bove 1@ and upto 1? years 1.?@E below &") 5inimum 11.7?E
"bove 1? and upto 7@ years 1.@@E below &") 5inimum 11.F?E
Ten're Ra$e of In$ere5$ ;:.a.=F
Kpto ? years 11.?@E
"bove ? and upto 1@ years 11.F?E
Ma&%#'# Re:a)#en$ Per%o!
=or applicants upto D? years of a%e> 7@ years
=or applicants over D? years of a%e> 1? years
TNRCMS MAYANK SHAH
F%&e! %n$ere5$ ra$e5@
D9

CAR LOAN
5ove ahead in life with &I +ar Loans# If you have been puttin% off purchasin% that car, we invite you to
%o throu%h our +ar Loans scheme.
Low interest rates, easy repayment options, total transparency, Low processin% char%es, finance to include
vehicle re%istration char%es, insurance and one time road ta0.
/ell, what are you waitin% forQ :ust step in to any of our branches <more than C@@@4 that offer +ar Loans
or our Personal ankin% ranches and %ive wheels to your desire#
Jou can apply for an &I +ar Loan to purchase>
" new car, 2eep, 5ulti Ktility -ehicle <5K-4 or &K- <any make or model4
"n old car M 2eep M 5K- M&K- <not more than ? years old4. <any make or model4
E%"%2%%$)
'o avail an &I +ar Loan, you should be
Individual between the a%e of 713C? years of a%e.
" Permanent employee of &tateM+entral $overnment, Public &ector Kndertakin%,
Private company or a reputed establishment
" Professionals or self3employed individual who is an income ta0 assesses or
" Person en%a%ed in a%riculture and allied activities.
Net "nnual Income )s. F?,@@@M3 and above.
Sa%en$ Fea$'re5
Loan A#o'n$
'here is no upper limit for the amount of a car loan. It is limited only by your repayin% capacity. " ma0imum
loan amount of 7.? times the net annual income can be sanctioned. If married, your spouseBs income could
also be considered provided the spouse %uarantees the loan 'he loan amount includes finance for one3time road
ta0, re%istration and insurance#
TNRCMS MAYANK SHAH DD

Mar"%n
NewG'5e! (e6%ce5 1@31?E when loan is upto )s.C lacs
7@39@E when loan e0ceeds )s.C lacs
Re:a)#en$
Jou en2oy the lon%est repayment period in the industry with us. )epayment period for new vehicles>
Ma&%#'# of /- #on$65
)epayment period for old vehicles> Kp to AD months from the date of ori%inal purchase of the vehicle.
SC9EME FOR LOAN FOR TWO W9EELERS
E&%5$%n" In$ere5$ Ra$e
S$r'c$'re w.e.f. ,*.?,.+??/
Re(%5e! In$ere5$ Ra$e
S$r'c$'re w.e.f. +8.?7.+??/
Foa$%n" Ra$e of In$ere5$ 17.7?E p.a. 17.F?E p.a.
F%&e! Ra$e of In$ere5$ 17.?@E p.a. 19.@@E p.a.
NOTE@ A $6e5e %n$ere5$ ra$e5 are 5'2>ec$ $o c6an"eB w%$6o'$ no$%ce .
T6e re(%5e! %n$ere5$ ra$e5 are a::%ca2e on) on fre56 !e:o5%$5 an! renewa of #a$'r%n" !e:o5%$5.
TNRCMS MAYANK SHAH D?

EDUCATION LOAN@
" term loan %ranted to Indian Nationals for pursuin% hi%her education in India or abroad where admission
has been secured.
E%"%2e Co'r5e5
"ll courses havin% employment prospects are eli%ible.
$raduation coursesM Post %raduation coursesM Professional courses
,ther courses approved by K$+M$overnmentM"I+'* etc.
A#o'n$ of Loan
=or studies in India, ma0imum )s. 1@ lacs
&tudies abroad, ma0imum )s. 7@ lacs
In$ere5$ Ra$e
=or loans upto )s. D lakh 1@.?@E p.a.
=or loans above )s. D lakh 11.?@E p.a.
Re:a)#en$ Ten're
)epayment will commence one year after completion of course or C months after securin% a 2ob, whichever is
earlier.
Pace of S$'!) Loan A#o'n$
Re:a)#en$ Per%o!
%n Year5
In India
Kp to )s. F.? lacs ?3F
"bove )s. F.? lacs ?31@
"broad
Kp to )s. 1? lacs ?3F
"bove )s. 1? lacs ?31@
TNRCMS MAYANK SHAH DC

Sec'r%$)
A#o'n$ S$'!%e5 In In!%a S$'!%e5 A2roa!
Kpto )s. D lacs No &ecurity No &ecurity
"bove )s. D lacs to )s. F.?@ lacs
'hird Party
$uarantee
'hird Party $uarantee
"bove )s. F.?@ lacs to )s. 1@ lacs<India4M
)s. 1? lacs<"broad4
'an%ible +ollateral
security for full
value of loan
'an%ible +ollateral security of suitable
value of loan or third party %uarantee
)s 1? lacs to )s. 7@ lacs RRR
'an%ible +ollateral security for full
value of loan
Mar"%n
=or loans up to )s.D.@ lacs > No 5ar%in
=or loans above )s.D.@ lacs>
o &tudies in India> ?E
o &tudies "broad> 1?E
TNRCMS MAYANK SHAH DF

;*= Learn%n" 4 De(eo:#en$
ank has taken up several key initiatives to motivate and retain its manpower. In order to
channelize the ener%y created by the Parivartan campai%n, the ank has launched a Landmark
e0ercise for creation of the new -ision 5ission ; -alues statement which will be in place
shortly. Joun% officers are bein% encoura%ed to take3up mana%ement education by way of
sponsorship tie3up with the &. P. :ain Institute of 5ana%ement. ?@ officers have been enrolled in
the pro%ramme on a trial basis. ank is stron% in the areas of trainin% ; development throu%h D
ape0 level trainin% colle%es and D? learnin% centres across the country. Ge3learnin%B pro2ect has
been launched to enable any where, anytime learnin%.
;+= 9RMS
=or levera%in% technolo%y in employee mana%ement area, the ank has started automation of its
H) processes throu%h &"P3*)P3H)5& software. ,nce fully implemented, it will not only create
a central repository of all employees data but also will make available a variety of services, like
online re.uest submission and viewin% of individual data etc. to all the employees across the &tate
ank %roup on an online Greal timeB basis. H)5& will brin% efficiency in H) operations and help
the 5ana%ement in makin% employee related decisions faster. Pensioners of &I, II and
"ssociate anks will also form a part of this initiative and their pension will be processed throu%h
H)5&.
;,= Per5onne Mana"e#en$
'he ank has launched Performance Linked Incentive &cheme for the ranch
mana%ersM"$5s<)e%ion4M 8$5s<5odule4 and 'eam Incentive &cheme for the staff members of
the ranch. 'he incentive scheme was launched with the aim of enthusin% and motivatin% the
staff members of the ranch so that the bank is placed in a position to face the competition
unleashed due to liberalization of economy and maintain its lead over others. 'he scheme has
been successful in enthusin% the staff and %arnerin% usiness for the ank.
;-= E#:o)ee5 S6are P'rc6a5e Sc6e#e ;S3I ESPS0+??/=
TNRCMS MAYANK SHAH DA

'he ank also launched *mployees &hare Purchase &cheme alon% with the )i%hts issue with the
,b2ective of providin% incentive to *li%ible *mployees, to stimulate their efforts towards the
continued success of the ank and to provide a 5eans to attract, reward and retain talent in the
ank, to reward eli%ible employees as also to encoura%e e.uity ownership by them. 'he price was
fi0ed at )s.1?H@M3 <the face value of 1 share is )s.1@M34 per e.uity share. 'he &cheme ,pened on
7A.@9.7@@A and closed on 9@.@D.7@@A.
;1= In!'5$r%a Rea$%on5
f " number of H) initiatives such a payment of Performance linked incentives to staff,
rationalisation of promotion policies and improvement in various staff loan schemes were
taken up durin% the year. &uch initiatives have helped in increasin% the motivation level of
staff si%nificantly.
f 'o meet re.uirement of staff for an on%oin% branch e0pansion pro%ramme, separate
recruitment e0ercises were undertaken to recruit clerical staff for metroMurban centers,
ruralMsemi urban centers and also for marketin%. 'his also helped in reducin% the a%e
profile of staff and postin% of youn%er staff at the front line.
f 'he process of consultation and discussion with both the staff and officers federations
continued durin% the year.
f 'he industrial relations climate of the ank remained cordial durin% the year.
;7= S$aff S$ren"$6
'he ank had a total stren%th of 1,FH,7@? on the 91
st
5arch, 7@@A. ,f this, 97.79E are officers,
D7.AFE clerical staff and the remainin% 7D.H@E were sub3staff.
;8= I#:e#en$a$%on of Per5on5 w%$6 !%5a2%%$%e5 ;PWD= Ac$ *<<1
,ur ank provides reservation to persons with disabilities <P/8s4 as per the %uidelines of the
$overnment of India and section 99 of the P/8 "ct 1HH?. 'he total number of persons with
disabilities who were employed as on 91.@9.7@@A was as follows>
;/= Re:re5en$a$%on of Sc6e!'e! Ca5$e5 an! Sc6e!'e! Tr%2e5
"s on the 91st 5arch, 7@@A, 9DA@7 <1H.D7E4 of the ankBs total staff stren%th, belon%ed to
&cheduled +aste and 11DC@ <C.9@E4 belon%ed to &cheduled 'ribes. In order to effectively redress
the %rievances of the &+M&' employees, Liaison ,fficers have been desi%nated at all
administrative offices of the ank. &enior officials of the ank hold re%ular meetin%s at periodic
intervals with the representatives of &+M&' /elfare =ederation and &+M&' /elfare "ssociation at
TNRCMS MAYANK SHAH DH

+orporate +entre, LH,s and Sonal ,ffices. 'he ank conducts workshops on reservation policy
for &+sM&'sM,+s. &o also, pre recruitment and pre3promotion trainin% pro%rammes are
conducted by the ank to enable &+M&'candidates to achieve the prescribed standards to
effectively compete with other candidates.
TNRCMS MAYANK SHAH ?@

Re5earc6 Pan
;A= Def%n%n" $6e Pro2e#@
HNon :erfor#%n" A55e$5 %n 2ank%n" In!'5$r)I has become a subject of intense
importance and discussion. It has assumed greater significance in the
world of banking and banks. It has become a barometer of the health
of banks and discussions on any bank is incomplete without the
mention of NPA, NPA has now become heart of the banking Industry,
which in turn, is the heart of finance and economy of a nation.
"ssets of a bank, %enerally, consist of cash investment, loans and advances, fi0ed assets and
miscellaneous assets. 'he resources of a bank are deployed in these assets. 'he resources
consist of capital and reserves, deposits, borrowin%s and other liabilities. 'hese liabilities are
carried at a cost and hence its deployments into various assets should %enerate enou%h income
to service the cost of the liabilities. In other words, the assets in which the liabilities are
deployed should perform in such a way that it %enerate income to cover the cost of resources
and also a surplus, which is a profit of the bank, 'hus the performance of assets reflects the
health of the bankin% industry.
*arlier, the buzzword in the bankin% industry was deposits as it is the basic raw material for
the bankin% industry. 'he status of the bank was, determined on the volume and size of its
TNRCMS MAYANK SHAH ?1

deposits. 'he career of bankers used to depend on the level of deposits achieved by him.
anks were not bothered about the performance of their assets. ut from 1HH1, a sea chan%e
was made in the way income of banks was reco%nized. /ith the first %eneration economic and
finance sector reforms comin% into bein%, the method of income reco%nition in
the bankin% sector was chan%ed from accrual basis to cash basis. "n income will be carried to
profit and loss account only of it is realized in cash in H@ days. 'his was like a bolt from blue
for deposit P happy bankers. "ll alon%, they were simply doin% an accountin% e0ercise in
debitin% a loan account and credit the income account without botherin% to see whether it is
actually paid by the borrower or not. 'hus the performance of an asset was defined for the first
time in Indian ankin% Industry.
'his chan%e of income reco%nition compelled the banks to unreco%nized the income if the
interest is not received in cash from the borrowers. Not only is this, dependin% upon the
.uality of the assets, various provisions now re.uired to be made on such non performin%
assets. 'his had compelled many lar%e banks to declare loss for the first time in history of
bankin%. 'his had ominous portents for the entire bankin% industry. 'his also resulted in
dwindlin% flow of credit of trade and industry.
'hus NP" has the potential to directly affect the economy of the country. 5any bi% nations
like :apan are sufferin% from this disease of hi%h NP"Bs. ,ur country also now havin% a lar%e
portion of bank credit locked in NP"Bs and hence NP" is receivin% %reater importance of
NP"Bs , that we thou%ht to select it as a sub2ect for $rand Pro2ect.

* Re5earc6 Pro2e#

'o study the state of recovery mana%ement.
+ Re5earc6 O2>ec$%(e
+ 'o identify reasons that lead to &tandard assets of the bank becomin% NP"s
+ 'o &u%%estin% &trate%y to recovery Non Performin% "ssets and prevention of
further NP"s
, Re5earc6 Me$6o!oo"%e5
;*= Sa#:e De5%"n
'he tar%et population consists of &tate bank of India of )a2kot.
'he sample size comprise of 'wenty one *0ecutives of &tate bank of India of
)a2kot.
;+= Coec$%on of Da$a
" structured .uestionnaire was prepared to elicit information form the respondents.
&econdary data collection was done throu%h data available from ooks, ank
)e%ister and ank system.
;,= Sa#:%n" Me$6o!
'he research was done usin% &imple )andom &amplin%.
;-= Da$a Ana)5%5
'he analysis of primary data is done with the help of computerized statistical tools.

In$ro!'c$%on

'he crucial factor that decides the performance of banks nowadays is the spottin% of non3
performin% assets <NP"4. NP"s are those loans %iven by a bank of financial institution
where the borrower defaults of delays interest of principal payments.
anks are now re.uired to reco%nize such loans faster and then classify them as problem
assets. +lose to 1C percent of loans made by Indian banks are NP"s3very hi%h compared to
? percent in advanced countries.
anks are not allowed to book any income from NP"s. "lso, they have to provide for these
NP"s, or keep money aside in case they canBt collect from the borrower, which affects their
profitability adversely.
Ca55%f%ca$%on of NPA5
In "pril 1HH7, it was decided to implement the Narsimham +ommitteeBs recommendations
on financial sector reforms in a phased manner over a three3year period commencin% from
the financial year 1HH73H9. Income )eco%nition, "ssets +lassification and Provisionin%
<I)"+4 norms were introduced with a view to reflect a true picture of financials of anks
on the basis of their bookin% the income on actual basis than on accrual basis and also
classify assets accordin% to the level of risks attached to them. 'he criteria for classification
is >
Perfor#%n"GS$an!ar!5 A55e$5@ Loan assets in respect of which interest and principal are
received re%ularly are called standard or performin% assets. &tandard assets also include
loans where arrears of interest and M or of principal do not e0ceed H@ days as at the end of a
financial year. No provisionin% is re.uired for such loans.
TNRCMS MAYANK SHAH ?D

Accor!%n" $o R3I <NP"s4 >3 "ny loan repayment or interest thereof that is delayed
beyond H@ days has to be identified as an NP". NP"s are further sub3classified into sub3
standard, doubtful and loss assets>
S'205$an!ar! A55e$5@ &ub3standard assets are those that are non3performin% for a period
not e0ceedin% two years. "lso, in cases where the loan repayment is rescheduled, )I has
asked banks to reco%nize the loans as sub3standard at least for one year.
Do'2$f' A55e$5@ Loans which have remained non3performin% for a period e0ceedin% two
years and which are not considered as loss assets are known as doubtful assets. 5a2or
portions of assets under this cate%ory relate to GsickB companies referred to the oard for
Industrial and =inancial )econstruction <I=)4 and waitin% finalization of rehabilitation
packa%es.
Lo55 A55e$5@ " loss asset is one where loss has been identified but the amount has not been
written off wholly or partly. In other words, such an asset is considered uncollectible. 'here
may be some salva%e value.
Pro(%5%on for NPA5
'he )I has also laid down provisionin% rules for the non3performin% assets. 'his means
that banks have to set aside a portion of their funds to safe%uard a%ainst any losses incurred
on impaired loans. anks have to set aside 1@ percent of sub3standard assets as provisions.
'he provisionin% for doubtful assets is 7@ percent and for loss assets it is 1@@ percent.
TNRCMS MAYANK SHAH ??

De2$ Reco(er) Pro2e#5
<14 'o identify assets and properties of borrowers and %uarantors is a difficult e0ercise. *ven
when banks %et the decrees, e0ecution may be difficult as the e0act position of borrowerBsM
%uarantorBs properties may not be known .i.e. whether it is unencumbered, in %ood
physical and financial condition etc.
<74 +onstraints of time and ade.uate staff to supervise and follow3up the lar%e number of
accounts that are often scattered over wide areas, also hinders recovery effort. "t times
inade.uate transport and roads also hinders recovery effort. "t times inade.uate transport
and roads also make it difficult to reach borrowers.
<94 8espite the %ood intentions, it will depend on how fast the measures are implemented.
&ince their introduction in 1HHD, 8)'s have not been able to make a sound impact due to
the lethar%y on the implementation front. Knless the $overnment takes concrete and
speedy measures to stren%then the 'ribunals and streamline the le%al systems, the 8)'s
will amount to deferrin% the NP" problem.
<D4 "s a%ainst ?@ to C@ :ud%es in Hi%h +ourts, the "ct provides for only one presidin% ,fficer
for each 'ribunal. 'he appellate 'ribunal has su%%ested that when the number of pendin%
cases e0ceeds 7@@@, $overnment should appoint another Presidin% ,fficer. 'his
su%%estion needs to be acted upon .uickly to prevent further delay in the settlement of
cases. =urther, the 'ribunals need to have their own permanent staff instead of dependin%
mainly on persons who are on deputation.
TNRCMS MAYANK SHAH ?C

<?4 Le"a Me$6o!50:re5en$ 5cenar%o
8elay in disposin% of the cases <1@ to 7@ years4 are prohibitive and e0pensive appeals
further delay the process of awardin% decree. "lso the interest is only CE p.a. simple on
principal.
S'""e5$%on5
<a4 Need for a time frame for disposal of cases.
<b4 =or non payment of bank decretal dues parties to be put in civil imprisonment
without fail.
<c4 5isuse of hypothecated securities to be treated as an offence punishable on the lines
of &ec 19A of N.I. "ct with 7 years ri%orous imprisonment.
<C4 S$a$'$or) :ower5
*mpowerin% banks to ac.uire assets for disposal without intervention of courts. <sec. 7H
of &tate =inancial "ct.4 'his would work as deterrent a%ainst intentional defaulters.
<F4 Lok A!aa$5
;a= *stablishin% Lok "dalats in all &tates.
TNRCMS MAYANK SHAH ?F

;2= 'o be made compulsory for both borrowers and banks for settlement of smaller
loans <present limit ?. Lac4
<A4 3IFR ;3oar! of Infra5$r'c$'re an! f%nance recon5$r'c$%on =
;a= )elook into functionin% of I=)3 whether ob2ectives achieved since the ratio of
cases re%istered and cases dismissedMwindin% up was only DHE in 1HHC.
;2= Increase in number of benches3Housin% separate benches for ma2or cities like
5umbai, +hennai.
;c= 'ime frame for rehabilitation <C months4.
;!= )eference to I=) should be prero%ative of banks.
;e= Prevent unscrupulousMdishonest promoters takin% shelter under I=).
<H4 In the case of immovable property, recovery continues to be a problem even where the
court decree of certificate has been passed. /hile the "ct provides for attachment and sale
of property after the court decree has been issued there is no provision to prevent a
borrower from disposin% off the property while the suit is still on. 8)' "ct empowers
)ecovery ,fficers to recover the debt throu%h attachment and sale of movable or
immovable property of the defendant but does not e0plicitly mention how to enforce
hypothecation, mort%a%e, etc.
<1@4 'here are instances where the borrower has mort%a%ed the same property to
&everal banks and availed facilities with predetermined criminal intention to
TNRCMS MAYANK SHAH ?A

+heat the banks with false and fabricated documents.
<114 -aluation reports of properties are inflated to suit the needs of the borrowers.
<174 &everal problems have been faced by the banks while obtainin% shares as
+ollateral security. "s the shares are not transferred in the name of the
ank, Kltimately the matter has to be taken to the +ompany Law oard
<+L4 for )edressed, which, not to mention, consumes very much time.
+ W6) a55e$5 2eco#e NPA5J
" several factors are responsible forever increasin% size of NP"s in P&s. 'he Indian
bankin% industry has one of the hi%hest percent of NP"s compared to international
levels. " few prominent reasons for assets becomin% NP"s are as under>
Poor credit appraisal system. Lack of visionMfore sli%htness while
sanctionin%Mreviewin% or enhancin% credit limits.
Lack of proper monitorin% and follow up measures.
)eckless advances to achieve the bud%etary tar%ets.
Lack of sincere corporate culture. Inade.uate le%al provisions on foreclosure and
bankruptcy.
+han%e in economic policiesMenvironment.
Non transparent accountin% policy and poor auditin% practices.
Lack of coordination between anksM=Is.
8irected lendin% to certain sectors.
=ailure on part of the promoters to brin% in their portion of e.uity from their own
sources or public issue due to market turnin% unfavorable.
"bolition of license ra2 and tou%h competition in the liberalized Indian economy.
TNRCMS MAYANK SHAH ?H

+ NPA5 an! I$5 Effec$5
NP"s are dra% on profitability of anks because besides provisionin%, anks are
also re.uired to meet the cost of fundin% these unproductive assets.
NP"s reduce earnin% power of assets. )eturn on assets <),"4 also %ets affected.
NP"s carry risk wei%hts of 1@@E <to the e0tent it is uncovered4. Hence, they
block capital for maintainin% capital ade.uacy.
"s NP"s do not earn any income, they adversely affect capital ade.uacy ratio
<+")4.
No recyclin% of funds.
NP"s also attract cost of capital for maintainin% capital ade.uacy ratio. +apital
cost involves dividend for 'ier I capital and Interest for 'ier II capital.
+arryin% NP"s re.uire incurrin% of cost of capital ade.uacy and cost of funds
blocked in NP"s. P&s are incurrin% around as hi%h as 11E of their earnin%s as
operatin% cost for monitorin% and recoverin% NP"s every year.
NP"s demoralizes the operatin% staff.
)e%ulatory and credit ratin% a%encies abroad are also not comfortable with the
hi%h level of NP"s of Indian anks.
New ranch license are also not %iven to the anks that have hi%h level of
NP"s.
TNRCMS MAYANK SHAH C@

Infor#a$%on of Coec$%n" $6e Da$a
8etail of orrower
)eason of 8ue amount
)eason for become NP"s
+ommitment of orrowers
Ktilisation of =und
"wareness of Loan
8etail of Loan
/e personally contact to each and every defaulter and collect the whole data which mention here
for more information we attach Tuestionnaire here.
+ollection of data is the essential part of the research. "s possible as we collect the more data,
view of customer, their opinion their problem and analysis those thin%s and try %ive them better
satisfaction bank as well as customer.
TNRCMS MAYANK SHAH C1

8ata collect and bifurcate in different cate%ory as per their loan, which I mentioned earlier, Home
loan, Personal Loan, *ducation Loan, -ehicle Loan and &=.
=or our &ummer Pro2ect we %ot permission in )"&5*+++ 8epartment of &tate ank of India,
)a2kot. ,ur department is a Process department. ut our main work is to &urvey and )ecovery
the NP"s.
'his is a Head ,ffice and they provide us 8ata of NP"s account. &tate ank of India have a C
ranch in )a2kot. /e %ot a +ombine data of whole branch
S%& 3ranc6
:a%nath Plot.
haktina%ar.
5arketin% Jard
+ommercial ranch
5ain ranch
Lakha2i )a2
O'r S'r(e) on P0 Se"#en$ of Loan
3d& 8oan
29 19%
5o(e 8oan
48 32%
6er.8oan
44 29%
9e:i$%es
8oan 17
11%
1BF 13 9%
3d& 8oan 5o(e 8oan 6er.8oan 9e:i$%es 8oan 1BF

*ducation Loan
Personal Loan
Home Loan
-ehicle Loan
&=
I have provided near about 250 Account but only 150 NPAs account person can cover and their list are
under.
#o"'f
Borrowers
&du":oan *ome :oan Personal
:oan
,ehicle :oan SBF
151 29 48 44 17 1
LOAN PROFILES

!ere" As per above chart i# $e see that $e #ind that !o%e loan havin& %ore 'e#aulter. No. o# (orro$er in
*ome :oan is 78 and Percenta&e is 13 /.
$mount of :oan
#o"'f Borrowers Total $mount 'f
:oan
Total $mount of '=S )ecover!
151 )"07"89"228 1"17"9)"07) 0"88"72
Total O/S,
11796076
Recovery,
3088732
0
2000000
4000000
6000000
8000000
10000000
12000000
Total O/S Recovery
Total O/S
Recovery
TNRCMS MAYANK SHAH CD

'urin& %y *u%%er Pro+ect I recovered )s"12,88,<13 and it,s a 3; / o# the total 'ebt.
$ccount Become )egular
NO. of Defa'$er Re"'ar E
151 ) 42-
)&-',&)> F)'% B'))'?&)S
E!'.Loan Per.Loan 9o#e Loan Ve6%ce
Loan
S3F To$a
19,A@,H@@ 119.A@@ F,F7,??@ 9,H@,?17 D,9@,HF@
,?B//B8,+
TNRCMS MAYANK SHAH C?

Amo!t Recover
3d&.8oan
44%
5o(e 8oan
25%
6er.8oan 4%
9e:i$%es
8oan 13%
1BF 14%
3d&.8oan 5o(e 8oan 6er.8oan 9e:i$%es 8oan 1BF
Here, as per above chart more amount in E!'ca$%on oan amount is R5.*,B/?B<?? and
percenta%e is --E.
EDUCATION LOAN
No. of
3orrower5
Loan A#$. OG5 A#$. Reco(er A#$. E
TNRCMS MAYANK SHAH CC

7H 7,CF,D1,?99 7F,CH,@DC 19,A@,H@@ DH.ACE
9OME LOAN
No. of
3orrower5
Loan A#$. OGS A#$. Reco(er A#$. E
DA 1,HD,D9,C7D C?,C9,H9C F,F7,??@ 11.FCE
PERSONAL LOAN
No. of
3orrower5
DD 91,HC,@@@ 11,7A,ADD 119,A@@ 1@.@AE
S3F
No. of
3orrower5
Loan A#$. OG5 A#$. Reco(er A#$. E
19 CH,9F,7?@ 11,@9,7FC D,9@,HF@ 9H.@CE
VE9ICLE LOAN
No. of
3orrower5
1F 9?,CH,A71 F,C9,F?A 9,H@,?17 ?1.11E
"s per above show that more amount is recovery from E!'ca$%on Loan R5.*,B/?B<?? but if
we see the recover by more share from (e6%ce5 oan that 1*.** E.
+ W6a$ 5$e:5 6a(e 2een $aken 5o far $o 5o(e NPA5
Pro2e#5J

TNRCMS MAYANK SHAH CF

anks need to have better credit appraisal systems so as to prevent new NP"s from
occurrin%. However, once NP"s do come into e0istence, the problem can be solved only if
there is enablin% le%al structure, since recovery of NP"s often re.uires liti%ation and court
orders to recover stuck loans. /ith lon%3winded liti%ation in India, debt recovery takes very
lon% time.
anks are now workin% on utilizin% the services of 8ebt )ecovery 'ribunals to solve this
problem. 'he %overnment has also mooted the su%%estion of an "sset )econstruction
+ompany, which will be specialized a%ency set up for rehabilitatin% revivable NP"s <say,
salva%in% pro2ects which are inherently sound4 and recoverin% funds out of unrevivable
NP"s.
O$6er S$ra$e"%e5
- =i0in% up of bud%ets for profits and recovery rather than for advances. ud%et
oriented approach, at times leads to release of credit facilities without ensurin%
compliance of covenants of sanction. " suitable mechanism could be drawn at each
ank level to provide monetary benefitsMreco%nition to the operatin% staff
particularly for recovery in NP"sMwrite off cases.
- Pro2ect with old technolo%y should not be considered for finance.
- Lar%e e0posure on bi% corporateMsin%le pro2ect should avoid.
- 'here is a need to shift in P&s approach from collateral security to viability of the
pro2ect and intrinsic stren%th of promoters.
- Kp %radation of credit skills of the operatin% staff workin% in advances department.
- 'imely sanctionMrelease to avoid time and cost overruns.
A fre56 ook a$ Reco(er) Pro2e#
TNRCMS MAYANK SHAH CA

asically each branch en%a%ed in lendin% has to plan for recovery of loans disbursed
by it. 'he mana%er should be familiar with the prospects of recovery throu%h internal
and e0ternal factors. 6nowled%e about willful defaulters is e.ually important. 'hus
three pron%ed strate%y is necessary.
;A= RECOVERY @ INTERNAL SOURCES

;a= Co#:'$a$%on of !e#an!
$uidelines su%%est that repayment of installments of loans should be fi0ed in such
manner, which will coincide with the harvestin% of crops or sale of milk or any other
farm output proposed to be produced throu%h the bank loan. 'he demand for crop
loans or for installment of term loans should therefore be computed in a manner
conducive to the income flow.
;2= A::ra%5a of oan a::%ca$%on an! :re05anc$%on 5'r(e)5

8urin% the initial processin% of the proposal, it has to be ensured that the repayment
pro%ram for an itemUe.uipment is fi0ed in accordance with the %uidelines prescribed
by )..I. "wareness about )..I. %uidelines should be increased at the branch level.
;c= Reco(er) ca#:5

'he central idea of recovery camp is to brin% a ma0imum number of persons to%ether
at one place and repay the loans. 'he recovery camps in addition to effectin% recovery
create a proper climate for recovery.
;!= Non02ank%n" 2'5%ne55 !a)
'his day should be utilized fully for field visits and contact with the borrowers
TNRCMS MAYANK SHAH CH

;e= Co#:ro#%5e :ro:o5a5

In %enuine cases, the banks can consider compromise proposal and a lot depends upon
the initiative of the branch mana%er in utilizin% this facility.
;f= Con(er5%on5Gre5c6e!'%n" of oan5

'here are %uidelines for the operatin% staff of the banks for conversion.Mreschedulin%
of loans in the areas affected by natural calamities. +rop loans can be made repayable
over period of one year in the event of crop loss.
;"= In$e"ra$%on of reco(er) %n 2ranc6 2'!"e$%n"

)ecovery tar%ets should be fi0ed at the time of settlement of branch business bud%et.
;3= RECOVERY@ EXTERNAL SOURCES
/herever the states have enacted laws on the pattern of the 'alwar 5odel ill, support
of the %overnment machinery can be enlisted accordin%ly.
If the branches prepare villa%e3wise action plans in this re%ard, it will be still
appropriate for the a%encies to have a concerted effort towards recovery.
'he branches may also compile detailed position of defaulters and share the same with
the convener banks and %overnment authorities periodically.
TNRCMS MAYANK SHAH F@

;C= TACKLING DEFAULTERS
'o prevent willful default, comprehensive and discrete en.uiries, therefore, should be
made before disbursin% loans to farmers. &ome of the banks have already devised
systems of maintainin% villa%e dossiers, which comprise names of farmers who do not
have %ood reputation. " non3willful defaulter is one who %enerally follows a %ood
croppin% pattern and is co3operative to developmental functionaries. He %enerally
cares for his own farmin% business. ,n the other hand, a willful defaulter has an
attitude of non3co3operation to developmental functionaries.
In present times, when willful default has %ained social acceptability, the branches can
initiate steps for devisin% schemes for %ivin% reco%nition to %ood borrowers in various
meetin%s or functions or%anized by the branches. =urther the problems of %ood
borrowers can be studied and their credit needs immediately met. y doin% so, a
culture of prompt repayment may develop in the villa%es and doin% so would
simultaneously discoura%e willful default.
TNRCMS MAYANK SHAH F1

*= 9EALT9 CODE SYSTEM
'he )I introduced H+& in banks in 1HA?3AC, this system provide the followin%
information>3
- )e%ardin% the Health of individual advances.
- 'he .uality of credit portfolio and
- 'he e0tent of doubtful or bad advances in relation to total advances.
'he )I, since 1HA?, re.uires all commercial banks in India to provide information
indicator the .uality of individual advances in the followin% ei%ht cate%ories>
*= Sa$%5fac$or)@ +onduct is satisfactory the account of the borrowin% firm is in order in all
respect and its safety is not in doubt.
+= Irre"'ar@ ,ccasional irre%ularity is observed but the safety of the loan is not in
.uestion.
,= S%ck V%a2e> Loan to sick units that are under nursin% throu%h the revival pro%rammed.
'he units, thou%h currently sick, are viable.
-= S%ck Non V%a2e@ 'he irre%ularities continue to persist and there are no immediate
chances of accounts becomin% re%ular.
1= A!(ance5 Recae!@ &uch loan accounts where repayment is hi%hly doubtful and
nursin% is not considered worthwhile, in case of such advances decision is taken to recall
them.
7= S'%$ F%e! acco'n$@ Loan account where the recovery proceedin%s have been initiated.
8= Decree! De2$5@ Loan accounts where the recovery proceedin% have been completed.

/= 3a! an! Do'2$f'@ Loan accounts where the recovery of dues debts has become
doubtful on accounts of shortfall in value of security.
'he )I has classified problem loans with the banks in three cate%ories.
<i4 "dvances classified as ad and 8oubtful by the bank V Health +ode No. AW
<ii4 "dvances where suits were filedM decrees obtained. VH+ No.C ; FW.
<iii4 'hose advances with 5a2or undesirable features VH+ No.D ; ? W.
EVALUATION OF 9CS
'hou%h the H+& provide for classification of assets it does not provide what action to take
re%ardin% the improvement of .uality of such assets.
f 8iversion of funds Vas in 1 aboveW is the sin%le most prominent reason. 5oreover,
reversionary trends developin% durin% e0pansionMdiversification phase and failure to raise
capitalMdebt from public issue is also an important factor.
f Internals factors VNo.D aboveW of business failure, inefficient mana%ement etc., are ne0t
important in the creation of NP".
f *0ternal factors VNo.9 aboveW are the ne0t in importance,
f 'imeMcost overrun durin% the pro2ect implementation sta%e leadin% to li.uidity strain.
f ,ther factors in their order of prominence are %overnment policy chan%es, willful default,
fraud etc. and lastly deficiencies on the part of banks in the form of delay in release of
limits etc.

+= SETTLEMENT ADVISORY COMMITTEES@
'o tackle chronic NP"Bs in priority sector )I had come out with a one time measure
constitution of &ettlement "dvisory +ommittees <&"+s4 by banks. 'his was to promote
compromise settlement in small sector viz., &&I small business includin% trades,
a%ricultural and personal se%ments, ankers need to appreciate the fact that compromise
settlement is an effective and accepted non le%al remedy for recovery in chronic NP".
"ccordin% the scheme, applicable to NP" accounts which are at least 9 years old at 913@93
1HHH, was effective up to 9@ sept. 7@@@. 'here is a case for e0tendin% the deadline and
matchin% these %uidelines applicable for compromise settlement in medium and lar%e
sectors.
EVALUATION
ADVANTAGES TO 3ORROWER
14 &ettlin% for a lower payout than the contracted one, scalin% down of dues.
74 )eleasin% assets char%ed to the bank
94 &avin% time, ener%y and e0pense on defendin% the inevitable le%al case.
D4 6eepin% avenues of bank finance open for further development needs.
?4 )estorin% statusMposition in the marketMsociety, avoidin% sti%ma of bein% branded as a
borrower who is liti%ant type.
TNRCMS MAYANK SHAH FD

ADVANTAGES TO T9E 3ANK
14 +oncept of time value of money i.e. a bird in hand is worth two in bush!. 'he money
realized early could be investedMlent to earn.
74 )ealisation of securities is difficult stocks, machinery have hi%h incidence of
depreciation and obsolescence on takin% possession, stora%e, safety thereof poses a
problem and also involves cost for a lon%er period. *ven in cases where court
receiverMcommissioner is appointed, assets do not realized fast value of mort%a%ed
a%ricultural land properties located in rural, semi3urban areas is difficult to realize and no
bidder comes forward when the property is put to auction. 'his is precisely the reason why
many decrees obtained by the banks have merely remained on paper for want of effective
e0ecution thereof.
94 'o maintain the ima%e of development banker!, compromises, which involve
sacrifices, can be pursued only if both the parties to the settlement perceive latent %ain in
the process of bar%ain.
,= CORPORATE DE3T RESTRUCTURING ;CDR= @
" need was felt to create a special a%ency to facilitate debt restructurin% because there has
been some hesitancy on the part of banks and financial institutions to implement )I
%uidelines on debt restructurin%. )ecently a three3tier body, viz., +8) has been set up to
coordinate corporate debt restructurin% pro%ramme. It is yet to be operationalised +8)
consists of =orum, %roup and +ell. /hile the forum evolves broad policy3%uidelines the
TNRCMS MAYANK SHAH F?

%roup takes decisions on the proposals recommended by the +ell. Initially the borrower
approaches his Lead ankM =I with a re.uest to restructure debt, which in then puts up the
proposal to the cell. 'he +8) covers only multiple bankin% accounts en2oyin% credit
facilities e0ceedin% )s. 7@ crore. +ases of 8)' I=) and willful defaults, doubtful and
loss accounts and suit filed cases are outside the purview of the +8). 'hus, standard and
&ub3
standard accounts are only eli%ible to seek +8) &helter. If F?E of the secured creditors
a%ree to the rehabitation plan, it is lendin% on the other banksM=Is.
'he +8) is a voluntary system on debtor creditor a%reement and inter3creditors
a%reement. No bankerM borrower can take recourse to any le%al action durin% the stand3still
period of H@31A@ days. Lastly +8) will observe the )I $uidelines on 8ebt )estructurin%
issued in 5arch 7@@1. /hile the arran%ements under +8) seem to be feasible from the
debt restructurin% perspective, its success depends upon the cooperation e0tended by
borrowers and bankers, on one hand, and understandin% amon% banks and =Is on the other.
8oubts are raised about the implementation of these a%reements takin% into the present
workin% of the loan consortium arran%ement.
+8) thou%h is not directly linked with NP" recovery, is aimin% at preservin% viable
corporate affected by certain internal and e0ternal factors, and minimizin% the losses to the
creditors and other stakeholders throu%h a restructurin% pro%ramme. *ven thou%h the +8)
system will be applicable only to standard and sub3standard accounts potentially viable
cases of NP", are also to %et priority.
EVALUATION@
'he mechanism will be more effective if accepted by F? E of term lendin% institution and
F? E of bank, which provide workin% capital instead of F? E of total lenders.
TNRCMS MAYANK SHAH FC

;-= LOKADALATS

'hese are voluntary a%encies created by the state %overnment to assist in matter of loan
compromise cases involvin% an amount upto )s. ? lakhs may be referred Lok "dalat. 'he
scheme includes all NP" aMcs. oth suit filed and mensuit filled 5+& Lokadalats meet at
different places for the convenience if banks and borrowers on the %iven date of the
lokadalats meetin%, both the banker and borrower should be present. "fter lookin% into the
evidence and listenin% to both parties, the lokadalats works out an acceptable compromise.
'hereafter, lokadalat issues a recover certificate, which will enable the bank in obtainin%
decree from the concerned court. 'his arran%ement shortens the period in obtainin% a court
decree, which is normally awarded after takin% a much lon%er period. "lon% with this,
efforts should be made to %ive wide publicity to the scheme, besides educatin% both banks
and borrowers about Lokadalats.
EVALUATION
Mer%$50
'here are no court fees involved when fresh disputes are referred to it.
It can take co%nizance of any e0istin% suit in the court as well as look into and
ad2udicate upon fresh dispute
If no settlement is arrived at the parties can continue with the court proceedin%s
Its decree has le%al status and is bindin%.
In view of this uni.ue advanta%e the %overnment is thinkin% of stren%thenin% them and
raisin% the monetary limit set for referred cases
TNRCMS MAYANK SHAH FF

De#er%$50
It is observed that banks have not taken ade.uate advanta%e of Lokadalats for
compromise settlement of their NP"s
No cut off date is su%%ested since Lokadalat is an on %oin% process. ut this may
contribute to increasin% delays in settlement of cases.
5ost Lokadalats should be set up in different parts of country to set up the recovery
procedures.
;1= DE3T RECOVERY TRI3UNALS
'he 5,= has taken a number of steps to stren%then the 8)'s. anks and =Is now can
nominate one nodal officer for each 8)P. 'here is a su%%estion for settin% up co3
ordination committees for 8)'s a 8ebt )ecovery "ppellate 'ribunal with representations
from ma2or banks and financial institutions.

In the conte0t of recovery from NP"s, 8)'s are assumin% %reat importance since efforts
are to set up mere 8)'s durin% this year and also to stren%then them. 'hou%h the recovery
throu%h 8)'s is at present less than two percent of the claim amount, banks =Is have to
depend heavily on them, efforts are as to amend the recovery "ct to assi%n more power to
8)'. 5ore importantly, the borrowers tendency to challen%e the verdict of the "ppellate
tribunal in the Hi%h court to seek natural 2ustice needs to be checked. ,therwise, early
recovery efforts throu%h 8)'s would be futile. &econdly, trainin% of residin% officers of
'ribunals about the intricacies of bankin% practices is very essential. =urther, the number
TNRCMS MAYANK SHAH FA

of )ecovery officer has to be enhanced in every 8)' for effective recovery. =inally,
banker and =Is have to come forward to provide liberal help to 8)'s to e.uip them in
terms of infrastructure, manpower,etc.

It has been announced in the Knion ud%et for 7@@13@7 that the $ovt. has decided to set
up F more 8)'s durin% 7@@13@7 in addition to the e0istin% 77 8)'s, ? "ppellate
'ribunals to facilitate bank to .uickly recover their dues from borrowers. esides, the
$ovt. has proposed to brin% in le%islation for facilitatin% foreclosure and enforcement of
securities in case o default so as to enable banks and financial institutions to realize their
dues.
EVALUATION
+ 11 new 8)'s are bein% opened over the last 7 years
+ F more 8)'s are in pipeline
+ 8)'s are facin% an uphill task with the number of cases
+ 'he amount involved is increasin% at alarmin% rate in the value of bur%eonin% NP".
'he cases involvin% )s. FF@?.97 crore are still pendin%. In 5umbai 8)'s out of the
total amount of )s. 1CFF.C@ crore involved only )s. 9HF.D9 crore was recovered.
+ 'here is a hu%e demand supply mismatch amon% the 8)'s. 'he re.uirement is far
hi%her than the number of 8)'s available. 'he number of settlement cases is hi%h in
5umbai and there is shorta%e of man power in 5umbai 8)'s.
+ 'he )I %uidelines, which stipulates that apresidin% officer in a 8)' cannot settle
more than A@@ cases in a year, constraints the operations of 8)'s.
+ 'here is inade.uacy of trained staff and their lack of e0posure to the 2udicial system
acts as a hindrance.
TNRCMS MAYANK SHAH FH

+ 'here needs speedin% up of recovery procedures.
7= CIRCULATION OF INFORMATION ON DEFAULTERS
'he )I has put in place a system for periodical circulation of details of willful defaults of
borrowers of banks and financial institutions. 'his serves as a caution list while
considerin% re.uests for new or additional credit limits from defaultin% borrowin% units
and also from the directors Mproprietors M partners of these entities. )I also publishes a list
of borrowers <with outstandin% a%%re%atin% )s. 1 crore and above4 a%ainst whom suits
have been filed by banks and =Is for recovery of their funds, as on 91st 5arch every year.
It is our e0perience that these measures had not contributed to any perceptible recoveries
from the defaultin% entities. However, they serve as ne%ative basket of steps shuttin% off
fresh loans to these defaulters. I stron%ly believe that a real breakthrou%h can come only if
there is a chan%e in the repayment psyche of the Indian borrowers.
8= RECOVERY ACTION AGAINST LARGE NPAS
"fter a review of tendency in re%ard to NP"s by the HonIble =inance 5inister, )I had
advised the public sector banks to e0amine all cases of willful default of )s 1 crore and
above and file suits in such cases, and file criminal cases in re%ard to willful defaults.
oard of 8irectors are re.uired to review NP" accounts of )s.1 crore and above with
special reference to fi0in% of staff accountability.
,n their part )I and the $overnment are contemplatin% several supportin% measures
includin% le%al reforms, some of them I would like to hi%hli%ht.
TNRCMS MAYANK SHAH A@

/= ASSET RECONSTRUCTION COMPANY@
"n "sset )econstruction +ompany with an authorised capital of )s.7@@@ crore and initial
paid up capital )s.1D@@ crore is to be set up as a trust for undertakin% activities relatin% to
asset reconstruction. It would ne%otiate with banks and financial institutions for ac.uirin%
distressed assets and develop markets for such assets.. $overnment of India proposes to %o
in for le%al reforms to facilitate the functionin% of ")+ mechanism.
EVALUATION
+ 'he ")+s will assist in cleansin% the alance &heet of the weaker as well as potential
weak banks.
+ It will also try to identify possible conceptual %litches and le%al infirmities in the
arran%ement.
+ It is to be noted that %iven the inade.uacies of &I+", I=), 8)'Bs foreclosures and
other recovery processes, an ")+ may find it difficult to lead a viable e0istence.
'herefore, simultaneously it is re.uired to make radical chan%es in bankruptcy and
recovery laws and procedures.
+ Knder this scheme the banks liabilities will %et transferred from one bank to another.
'he total liability to the bankin% system would remain unchan%ed.
<= CREDIT INFORMATION 3UREAU
Institutionalisation of information sharin% arran%ements throu%h the newly formed +redit
Information ureau of India Ltd. <+IIL4 is under way. )I is considerin% the
recommendations of the &.).Iyer $roup <+hairman of +IIL4 to operationalise the
scheme of information dissemination on defaults to the financial system. 'he main
recommendations of the $roup include dissemination of information relatin% to suit3filed
accounts re%ardless of the amount claimed in the suit or amount of credit %ranted by a
TNRCMS MAYANK SHAH A1

credit institution as also such irre%ular accounts where the borrower has %iven consent for
disclosure. 'his, I hope, would prevent those who take advanta%e of lack of system of
information sharin% amon%st lendin% institutions to borrow lar%e amounts a%ainst same
assets and property, which had in no small measure contributed to the incremental NP"s
of banks.
*?= PROPOSED GUIDELINES ON WILLFUL DEFAULTSGDIVERSION
OF FUNDS
)I is e0aminin% the recommendation of 6ohli $roup on willful defaulters. It is workin%
out a proper definition coverin% such classes of defaulters so that credit denials to this
%roup of borrowers can be made effective and criminal prosecution can be made
demonstrative a%ainst willful defaulters.
**= CORPORATE GOVERNANCE
" +onsultative $roup under the chairmanship of 8r. ".&.$an%uly was set up by the
)eserve ank to review the supervisory role of oards of banks and financial institutions
and to obtain feedback on the functionin% of the oards vis3X3vis compliance,
transparency, disclosures, audit committees etc. and make recommendations for makin%
the role of oard of 8irectors more effective with a view to minimizin% risks and over3
e0posure. 'he $roup is finalizin% its recommendations shortly and may come out with
%uidelines for effective control and supervision by bank boards over credit mana%ement
and NP" prevention measures. 'he report of the %roup is now published and discussed in
another pa%e.
*+= SPECIAL MENTION ACCOUNTS 0 ADDITIONAL PRECAUTION
AT T9E OPERATING LEVEL

In a recent circular, )I has su%%ested to the banks to have a new asset cate%ory 3 Nspecial
mention accountsI 3 for early identification of bad debts. 'his would be strictly for internal
monitorin%. Loans and advances overdue for less than one .uarter and two .uarters would
come under this cate%ory. 8ata re%ardin% such accounts will have to be submitted by
banks to )I.
However, special mention assets would not re.uire provisionin%, as they are not classified
as NP"s. Nor are these proposed to be brou%ht under re%ulatory oversi%ht and prudential
reportin% immediately. 'he step is mainly with a view to alertin% mana%ement to the
prospects of such an account turnin% bad, and thus takin% preventive action well in time.
"n asset may be transferred to this cate%ory once the earliest si%ns of
sicknessMirre%ularities are identified. 'his will help banks look at accounts with potential
problems in a focused manner ri%ht from the onset of the problem, so that monitorin% and
remedial actions can be more effective. ,nce these accounts are cate%orised and reported
as such, proper top mana%ement attention would also be ensured.
orrowers havin% %enuine problems due to temporary mismatch in funds flow or sudden
re.uirements of additional funds may be entertained at the branch level, and for this
purpose a special limit to tide over such contin%encies may be built into the sanction
process itself. 'his will prevent the need to route the additional fundin% re.uest throu%h
the controllin% offices in deservin% cases, and help avert many accounts slippin% into NP"
cate%ory.
Introducin% a Nspecial mentionI cate%ory as part of )IIs NIncome )eco%nition and "sset
+lassification normsI <I)"+ norms4 would be considered in due course.
*,= ONE TIME SETTLEMENT POLICY ;OTS= @
INTRODUCTION@

'he +orporation has been providin% financial assistance to small and medium scale units.
/hile sufficient precaution is bein% taken at the time of appraisal of pro2ects,
disbursement of loans and follow3up, yet some pro2ects fail to %enerate ade.uate resources
to repay dues and lead to defaults. &ome of these units can be revived and rehabilitated
with need base relief and concessions by the +orporation. However, at times, units are not
in a position to revive due to, lon% term problems and structural deficiencies. It would be
appropriate for +orporation to find an e0it route as early as possible. +ompromiseM ,ne
'ime &ettlement has been found to be an effective tool of recovery in such stressed cases.
;*= O.T.S. POLICY0 AN OVERVIEW
" comprehensive policy of ,ne 'ime &ettlement was approved by the oard of 8irectors
in 5arch, 1HHH and the same was implemented by +orporation with effect from 1st "pril,
1HHH vide circular No."31 dated 91
st
5arch,1HHH, which contained detailed %uidelines and
formats. 'he main purpose of the policy was to li.uidate NP"s in time bound manner,
which had %rown to )s.?HF +rores, and constituted D?.?CE of the total loan outstandin% of
+orporation. &ubse.uently, a need was felt to revise the policy based on the feed back
received from the field functionaries and in order to further accelerate the pace of
reduction in NP"s throu%h compromiseM settlement. 'he policy did not have the
provisions for settlement especially in the cases where disbursement was made after 91st
5arch 1HH?. " revised ,'& policy was considered and approved by the oard of
8irectors in its meetin% held on 1?th &eptember 7@@1. 'he duly approved ,'& policy was
implemented by the +orporation vide +ircular No.9FM 7@@13@7 dated Hth ,ctober, 7@@1.
;+= O3KECTIVE OF NEW OTS POLICY@
TNRCMS MAYANK SHAH AD

f 'he revised policy is desi%ned to provide an effective frame work to tackle old and more
chronic cases of 837 and Loss assets cate%ories, which have been the %rowin% cause of
concern for the +orporation.
f 'he total NP"s in831, 837 and Loss assets cate%ories are )s.?AH.19 +rores, therefore, the
tar%et of settlin% cases of )s.1?@ +rores per year for ne0t three years would be the main
ob2ective of this ,'& policy.
f 'he criteriaM basis of calculation of ,'& amount in old and chronic cases of 831, 837
"ssets cate%ories have been revised to encoura%e the staff to settle more cases under ,'&
than sale KMs 7H of the &=+sI "ct.,. 'his will considerably reduce the fresh accretion of
loss assets, which have shown an increasin% trend in last 7 years.
f 'he revised policy will provide an effective tool to settle lar%e number of cases under ,'&
with special emphasis on settlin% cases which are in possession of the +orporation for
more than ? years.
f 'he operational procedure have been streamlined to remove unnecessary hassles and
delays in settlin% cases. 'he policy provides more dele%ation of power to operatin% staff
and to brin% transparency in decision makin% at all levels.

Is evaluatin% Indian anks performance a rather strai%htforward issueQ 'he answer is an
absolute No. 'he anks performance can 2ud%e from the followin% parameters.
ehaviour of their stock prices.
NP"Bs.
+M8 )atios
),I+
),+*
PM* )atio
),*
ook -alue
),N/.
TNRCMS MAYANK SHAH A?

'hese parameters can be applied after the bank has posted its financial performance ; hence
are not preventive or proactive measures. "s the traditional tools of NP" mana%ement have
not proved to be satisfactory on the parameters of credit monitorin%, follow up procedures,
preventin% an assets from becomin% non performin% as well as timely settlement ; recovery
of non performin% loans, an attempt is made to brin% out some untraditional techni.ues as well
as to reen%ineer the e0istin% practices and improvin% them so as to brin% the performance of
Indian anks in tune with the international practices.
*= SLIPPAGE MANAGEMENT
A= Proce55 of S%::a"e
"ny performin% assets does not turn into non3performin% overni%ht. 'he Performin%
"sset! passes throu%h a relatively len%thier period of 7 .uarters, in some cases seven3
months, after becomin% due but before slippin% down to the dan%erous red band of non
performin% assets. 8urin% this 2ourney, every asset is %ivin% out certain si%nals for
warnin% the banker that somethin% bad is about to happen.
3= S%::a"e 5%"na5.
8ependin% upon the type of credit facility and nature of business these distress si%nals
may look like>
C Non Payment of the very first installment in case of term loans.
C Non3submission of stock statements in time.
C +he.ue drawn on the account are bouncin%.
TNRCMS MAYANK SHAH AC

C +redits into the cash credit account are not sufficient to meet the debits in the account.
C 'he overdue bill is lyin% unpaid(
C Installments are irre%ular.
C "mount paid is not fully coverin% the principal and interest debited.
C No re%ular operations in the cash credit account.
C ank has information that party is not doin% the business(
C Post3sanction inspection report speaks of diversion and misutilization(
C 'here has been a natural calamity in the borrowerBs villa%e.
C= 9ow $o ac$ on $6e S%::a"e S%"na5J
,nce there si%nals start to come in, the banker is supposed to act immediately. 'here is no
point in waitin% with the feelin% that there are few more months for the 7 .uarter cut3off
and thin%s may turn all ri%ht before that, any symptom unattended would lead to ma2or
complications. &teps taken at the initial sta%e itself would help to keep the accounts
performin% and the costly slippa%e would never happen. 'he NP" reduction techni.ues
like re:ace#en$L n'r5%n" may be attempted while the accounts are still in the performin%
basket by continuous monitorin% of the individual assets. 'his type of constant ;
continuous surveillance re.uires co3operation ; attention from all concerned in a branch.
"ny one3shot measure like Hreco(er ca#:5! can at best be of supplementary native and
may never be a permanent solution.
84 Ko'rne) fro# NPA $o PA
TNRCMS MAYANK SHAH AF

/hile the 2ourney, from the C3month bottom but within the P" basket3 to the top would be
easier it would certainly be costly, difficult and time consumin% form of NP" to P". T6%5
':6% $a5k '5'a) %5 (er) !%ff%c'$ an! 5'c6 a55e$5 canno$ 2e 2ro'"6$ 2ack $o $6e PA
2a5ke$ %##e!%a$e)L there needs to be an GisolationB period of one year after which only
the asset will become eli%ible for classification under P" cate%ory. 8urin% this critical
period it has to perform continuously. 'his is like a patient who has been admitted to the
intensive care unit <I+K4 is not sent back home immediately after brin%in% him out of
I+K( he will be kept in the non3 critical area for further observation, before his final
dischar%e. Hence, the action before &lippa%e assumes further si%nificance in cases of
brin%in% back the NP" to P".
E= W6a$ %f HS%::a"e Mana"e#en$I Fa%5J
*ven after careful mana%ement of assets before &lippa%e, if some assets cross the band to
become NP", then there is no other alternative e0cept to arran%e for fire3fi%htin%!. 'his
post3incidence measure, a%ain, needs to be undertaken on war footin%. It will not be
prudent to wait any further at this sta%e as any time la% is %oin% to cost the bank very
dearly because some of these assets may become doubtful invitin% a more provisionin%.
+= INCREASED PROPORTION OF NON0FUND 3ASED 3USINESS
/hen dere%ulation is thinnin% the mar%ins, it is necessary to %o in for non3fund based
business, which will increase the non3interest income of the branch. Non3fund based
business involves no fund at all but a %ood service and a marketin% strate%y to capture the
customers is needed. It also helps the branch in promotin% fund3based business. Non3fund
based business activities %enerally include followin% services.
- &afe custody of customerBs valuables
- Issuin% letters of creditM%uarantee
- )emittance of funds> 5ail transfer
- +redit card related service
- $ift +he.ueM 'ravelersB +he.ue
TNRCMS MAYANK SHAH AA

- Locker service
'here are other services also like underwritin%, %uarantee, merchant bankin% and other
a%ency services, etc. but for small branches and rural branches increase in volume of these
facilities can boost their profile. 'he problem is that the rural people are not aware of these
services but by creatin% awareness the branch can reap the benefit. "t present the non3
interest income of the rural branches forms a very insi%nificant proportion of total income.
'his can be increased with little efforts.
,= TURNAROUND STRATEGIES FOR LOSS MAKING 3RANC9ES
'his will need a well3desi%ned profit plan. It must be ensured that each and every branch
of the bank is viable on its won and that is possible when each and every branch starts
evaluatin% each business transaction from profit an%le.
;A= DEPOSITS
'he main source of profit comes from remunerative deposits. 'he deposit portfolio
includes savin%s bank current and time deposits. 'he deposit mi0 decides the cost of
funds. It is found that in some of the branches the deposit %rowth is either sta%nant or it
has a deposit of )s. ?@MC@ lacs over a period of ? to C years. 'o keep the cost of funds low,
TNRCMS MAYANK SHAH AH

the efforts should be to canvas low cost current and savin%s bank deposits. In rural
branches a%riculture income is seasonal and most of the a%riculture based customers keep
the money idle and spend only in specific e0i%encies. If this sector is approached 2ust in
time then the savin%s bank deposits can be mobilized in lar%e volumes. In this contest, one
home one account has been a successful strate%y to woo the customer. /hat is more
important is the timin% for deposit mobilization. ut the best way to au%ment the deposits
is by improvin% customer service. " satisfied customer is the best ambassador of a branch.
'he customer meets! can be utilized to popularize the various deposits schemes so that
they could su%%est suitable schemes to customers. In addition, special letters cab be sent to
customers on re%ular basis invitin% their help to improve the business %rowth.
;3= MANAGEMENT OF ADVANCES PORTFOLIO
"dvances portfolio is another vital area for makin% the branch profitable. 'he branch has
to find out the industry3wise e0posure to determine the e0tent of NP"s in different
cate%ory. 'his will help them in concentratin% their efforts in the area s where the
percenta%e of NP"s is on the low side. 5oreover, it is observed that the advances of ank
are not pickin% up to the desired level. 'he branch should concentrate on retail lendin% i.e.
canvassin% car loans, consumer durables and housin% finance, etc. *arlier the banks were
%ivin% small loans for middleMupper class people. Housin% finance is one such area where
there is tremendous scope and the percenta%e of NP"s in this sector is ne%li%ible.
5oreover, the rate of interest is .uite attractive which will increase the yields on advances
and hence would enhance the profitability. ,n the whole branch should analyses its credit
portfolio and %radually increase credit delivery to earn better profits. It is in the interest of
both and banks to stimulate credit delivery.
-= A3C ANALYSIS
'he deposit mobilization and credit e0pansion takes place simultaneously. ut at the same
time credit administration to keep NP"s under control has to be effective. "+ analysis of
the over dues by cate%orizin% the overdue accounts should be done accordin% to the
.uantum of overdue whereby more attention can be paid on such chronic accounts.
TNRCMS MAYANK SHAH H@

&e%re%ation of over dues where the .uantum of e0pected recovery is hi%h and the branch
is willin%.
1= 3ANKS S9OULD ADOPT U.S. GAAP FOR NPA5
'he )I has permitted stron% banks to adopt the K.&. $""P mode of accountin% to dial
with NP"s. 'he K.&. $""P follows 8iscounted +ash flow approach towards valuation of
securities while Indian anks follow 5arket -alue approach in makin% valuation of
secured part of loans. Primary reasons for the differences between K.&. $""P and Indian
method is in provisionin% aspects for NP"s .)I re.uires banks to determine and report
NP"s at book value net of all write3offs and provisions. Knder K.&. $""P norms, banks
are re.uire to determine NP"s based on the evaluation of the willin%ness and ability of the
borrower to repay and estimate the realizable part thereof, based on the underlyin%
collateral and Mor the underlyin% cash flows of the borrower. In a move towards
internationally best accountin% practices and to ensure %reater transparency )I has
adopted H@ days NP" norms. 'herefore banks are su%%ested to make provisions for this
and chalk out an action plan for this.
7= CREDIT RISK MANAGEMENT
'his is an approach to mana%e the credit portfolio and is a proactive approach to
re.uirement of lower +") as risk wei%hted assets are reduced. 'his will reduce the need
recapitalization of Indian P&s and pourin% of doles of funds which would otherwise be
applied by the $ovt. for developmental purpose.
NP"s are the le%acy of the past and credit risk mana%ement is action in the present for the
future, it is concerned more with the .uantity of the credit portfolio before default. It
involves
- &election3orrowers financial condition, profitability cash flows, industry,
collateral, etc.
- Limitation3It ensures that individual or %roup borrower concentrated is not very
lar%e and the re%ulations or the banks themselves prescribe e0posure limits.
TNRCMS MAYANK SHAH H1

- 8iversification3 It is related to limitation and is based on the a%e3old principle of
not puttin% all the e%%s in one basket.
=ollowin% formula is evolved

EL M PD X LGDX EAD
EL M e0pected loss
PD M probability of default
LGD M loss %iven default
EAD M e0posure at default
&uppose there is a bank L which has only """ obli%ators and a bank J with
obli%ators in its portfolio. 'he """ obli%ator does not default within a year horizon, so the
P8Y@ whereas the avera%e P8 for a bond issued by a obli%or is @.7?E for bank L, the
*L are zero for one year. =or bank J, assumin% the loss %iven default to be ?@E and the
*"8 to be )s. 1@@ crore, the *L would be 1@@ 0 @.@@7? 0 @.? Y )s. 17?@@@. 'he level of
*L could vary from @ to 7?@@@@ on an identical portfolio size dependin% on the .uality of
obli%ators. 'hus *L can be viewed as normal cost of doin% business and it indicates the
avera%e or mean loss on the credit portfolio.
MERITS@
- 'he above approach represents international best practices.
- It is a more disciplined way of analyzin% credit risk.
- Helps in .uantifyin% risk.
- It captures the risk of entire credit portfolio as contrasted with the "sset by asset or
standalone approach.

- It measures additional risk arisin% due to increased e0posure to a borrowerMs.
- 'his forces the bank to adopt internal ratin%s based approach to credit risk
/= CREDIT DERIVATIVES
" more risk sensitive standardized approach towards capital ade.uacy of anks is credit
derivatives, credit derivatives allow the transfer of risk between the markets participate
without the underlyin% transaction chan%in% hands " credit derivative works much like an
insurance policy. If a bank thinks it itBs over e0posed to a particular borrower or to a
particular industry it can transfer the credit risk by, purchasin% a credit risk derivative. 'he
main credit derivatives products are swaps, options and forwards. In a credit default swap
one party <protection seller4 receives a premium at pre3set intervals in consideration for
%uaranteein% defaults in payments as envisa%ed in the credit contract.
" credit3spread option is and option on the spread between the yields earned on the assets.
'he option provides a pay off whenever the spread e0ceeds some level <the strike
spread4." credit spread forward is obtained by combinin% a call option and a put option. It
is similar to a normal forward e0cept that the underlyin% is the spread.
In addition to the above financial en%ineerin% is used to structure more complicated deals
on these basic buildin% blocks. 'hese allow the credit risk mana%er to achieve specific
return profiles and %ain value by takin% on unlikely risk scenarios.
EVALUATION
Mer%$50
It ensures safety and soundness of banks.
anks can fort the first time earmark e0plicit capital to cover operational risk.

It is possible to unbundled the credit risk from loans, bonds and derivatives and sell
different form in market
+redit derivative instruments facilitate li.uidity, transparency and price discovery of the
underlyin% assets
It can open up new business opportunities for the players like credit ratin% a%encies and
insurance firms, provides new investments options for institutional investors like mutual
funds, investment banksMcorporate <both as hed%ers and speculators4, optimize risk return
and capital allocation functions.

De#er%$50
Hi%hly comple0 and sophisticated approach restricts its universal application in the
emer%in% and developin% markets kike India where the banks continue to be the ma2or
se%ment in financial intermediaries and would be facin% considerable challen%es in
adoptin% all the proposals.
Non availability of past default data.
8ifficulties in measurin% default probabilities and pricin% the derivatives products.
Lack of li.uid secondary market for audit derivatives.
Knresolved re%ulatory, nettin% and capital ade.uacy issues
RENUIREMENTS
- *asy availability of skilled personnel in both finance and information technolo%y
sectors.
- *0periments with various credit risk modelin% techni.ues for Indian banks.
TNRCMS MAYANK SHAH HD

- In a nutshell, it is difficult to conceive an inte%rated risk mana%ement framework
for Indian banks without derivative product to hed%e a%ainst credit risk. 'he
introduction of credit derivatives could make hitherto dormant credit market li.uid,
vibrant and broad based. /hether or not our banks are able to implement the
international norms within the prescribe timeframe <7@@D@, its essential to know
the nature and ma%nitude of credit risks that Indian banks ate now e0posed to and
the risk capital re.uirement thereof.
<= LEGAL RECOURSE@
- U:!a$%n" of cer$a%n 5$a$'e5@ 'he le%al framework within which banks have to operate
and particularly mana%e the recovery of their dues from the borrowers is far from
ade.uate. =or understandable reasons many le%al provisions have, infect a positive
bias favorin% the debtor who has been seen as the weaker party and therefore in need
of protection. Knfortunately, these very well intentioned provisions cause an immense
load <and backlo% of cases4 on le%al system, makin% lendin% a hazardous operation for
banks. 'hese provisions need to be amended ur%ently and some new enactment is
called for in order to cater to the re.uirements of the chan%ed and far more comple0
current economic and business environment.
- Le"a%Ca$%on5 on 2ankr':$c) or foreco5're@ Le%islation to empower banks to
realize the property char%ed without court intimation, as in case of &tate =inancial
Institutions.
- Cre!%$or5 r%"6$ $o c6an"e $6e #ana"e#en$ $o co#:an%e5 %n $6e e(en$ of
!efa'$Gwarr%n" 5%"na5 @ 'hou%h this re.uires certain amendments to e0istin% statues,
such a notification should be made to have a far3reachin% impact on the health of the
industry, as it will enable re3orientation of the mana%ement towards the ri%ht
perspective for turnin% around the company.
- O:en%n" #ore DRTO5 an! DRATO5
TNRCMS MAYANK SHAH H?

- S$ren"$6en%n" DRT 5e$0': @ ench of presidin% officers, more recovery officers with
ade.uate infrastructure.
- Man!a$or) 6onor of co##%$#en$ 2) Go(ern#en$ %n re5:ec$ of a!(ance5
"'aran$ee! 2) $6e#.
*?= CIRCULATION AND PU3LIS9ING OF LIST OF DEFAULTERS@
+urrently the )I circulars amon% banks and financial institution the list of defaulters,
which is found useful in avoidin% willful defaulters. 'he )I has defined a willful
defaulter for the first time. It has provided the broad parameters for identification of
willful defaulters whose list will be circulated amon% banks and financial institutions.
"uditors of companies have to report in their certificate about diversion of funds if any. In
addition, on :an 9@, 7@@1, credit information ureau <+I4 was set up to provide critical
data re.uired by any credit institution before arrivin% at credit decision. &tate ank ,f
India, H8=+, 8un and radstreet and 'rans Knion set up +I 2ointly, It will collect
information from its members and make it available to any credit institution on demand.
+I is yet to be operationalised. Its success depends upon cooperation e0tended by the
members in supplyin% the re.uired information on timely basis.
5oreover it is also su%%ested that the banks should publish the list of defaulters in the
news paper or blacklist them and circulate the list to all other banks so that no other banks
would %ive any sort of advance to the blacklisted customer. "lso this action will %enerate
prompt payment amon% the defaulters as the information is made public.
TNRCMS MAYANK SHAH HC

TNRCMS MAYANK SHAH HF

=& &tren%th
=/ /eakness
=, ,pportunity
=' 'hreat
fS$ren"$6
Jears of *0perienceZZZZ..+entury
*0perienced *mployee
Lar%e Network
Hu%e "'5 Network
$overnment &upport
&afety and &ecurity of 5oney
'ransparency in +har%es
Lar%e income from Loan interest
Less interest rate of loan with low char%es
TNRCMS MAYANK SHAH HA

fWeakne55
Lake of Joun% *mployee
)i%id work culture
Physical environment ; "mbience
*0cessive 8ocumentation
ureaucracy
Less knowled%eable employee
Less control on employee
Poor technolo%y
Poor recovery system
fO::or$'n%$)
+onstant fear in the minds of customers towards private bank.
*ven e0pandin% rural, urban ; International 5arket.
=raud and cheatin% with customer from private bankin%.
8issatisfy from private bankin%.
TNRCMS MAYANK SHAH HH

&o much hidden char%es of private banks.
Nationalizes bank more reliable and trustworthy.
f T6rea$5
&hiftin% customerBs preference towards private banks.
Private bank providin% more facilities at lower char%es.
Tuick 8ynamic employees and %reater technolo%ical product.
Joun% stare are attract towards private bank because of speedy and
up%rade technolo%y.

TNRCMS MAYANK SHAH 1@@

f Proper +o ,rdination and +ommunication between ank and +ustomer
f 'ime to time follow up to customer and their $uarantors
f Properly check all the documents
f Proper -aluation of their "ssets
f &trict to recovery &teps
f /hen first installment will be due at that time ank have to inform to
customer re%ardin% his due installment
f /hole 'erms and +ondition e0plain to customer at the time of sanction the
loan
f "dvance reminder for repayment to customer
f $ive tar%et to recover the debt amount.
f Provide +ommission as a motivation to employee who put there effort for
reduce the NP"s.
TNRCMS MAYANK SHAH 1@1

NPA Re!'c$%on Man$ra
3ank5 @
8o not %ive money, lend it.
/hat matter is what for you finance and not what a%ainstQ
orrower accounts need real time monitorin%, not post mortem.
"n NP" account need out necessarily mean that the borrowin% company is Knviable
or sick.
'ry to identify and brid%e viability %aps of industrial units.
5any sick units need nourishment in the form of fresh dose of loans to re%ain health.
,ne time &ettlement with willful defaulters may be %ood mathematics but bad
ankin%.
"lways follow basic lendin% norms.
Put credit decisions on fast track.
R3I GGo(ern#en$@
Loans failures due to mollified credit decisions warrant fi0ation of
"ccountability.adical le%al reforms to e0pedite proceedin%s.
&ay no loan waivers.

If a unit canBt e0ist let it e0its.
=acilitate mer%ers and ac.uisition involvin% sick units.
'he banks also need to conduct a comprehensive review of their advances portfolio
and desi%nate all branches which have more than ?@ E of their total advances as NP"s
as e0clusive recovery branches and freeze further lendin% until the NP"s are salva%ed.

TNRCMS MAYANK SHAH 1@D

FUTURE PLAN
INNOVATIONS & INITIATIVES:

ank has successfully initiated various measures toward widenin% its &H$ network. 'o list a few
e0amples>

A)Sen5%$%5a$%on of 5$aff> ankBs aim is to sensitise the entire staff from 5ana%er to
5essen%er workin% in rural and semi3urban branches towards the pro%ramme.
B)S:ec%a $ra%n%n" :ro"ra##e5 %n S9G5 are bein% conducted at ?D trainin% centres of
the ank in the country apart from &tate ank Institute of )ural 8evelopment,
Hyderabad.
C)Co5e %a%5on w%$6 NGO5> ,peratin% functionaries at branch level and re%ion
level are in close contact with N$,s in their area to take the movement ahead. =or
the purpose, re%ular meetin%s are arran%ed with the N$,s and their support is
solicited.
D)S9G ce5> &pecial &H$ cells have been opened at ma2or branches.
E)Len!%n" $o NGO5 G Fe!era$%on5 of S9G5> Lendin% to credible N$,sM =ederations
of &H$s on selective basis for on lendin% to &H$s is bein% encoura%ed.
F)Sa6a)o" N%wa5> &I has launched its Housin% Loan product G&"H"J,$ NI/"&B
meant for &H$ members. Knder the scheme formulated keepin% the socio
economic conditions of villa%es insi%ht, housin% loans are %iven to the &H$
members without any mort%a%e of house M land. )esponse to this product is very
encoura%in%.
G)S3I L%fe0 S6ak$%> &I Life, our insurance subsidiary, is the first to introduce a life
insurance scheme, especially desi%ned for &H$ members. &pecial feature of the
scheme is that entire premium amount paid by the member is refunded after
maturity, i.e., 1@ years.
H)R'ra $ra%n%n" %n5$%$'$e5> 'o help the rural youth to stand on their feet, two
)K8&*'I type trainin% institutes have been established at $ulbar%a and $ada% in
6arnataka &tate, to impart trainin% in self employment to youth free of cost.
TNRCMS MAYANK SHAH 1@?

I)S3I 5$aff a5 S9PI> 'he main role of formation and nurturin% of &H$s have been
played by N$,s who, apart from their fundamental role of social service, also aim
to make the poor economically self sufficient. ut in &I, our committed work
force is not la%%in% behind and a number of committed staff members have worked
hard to form and nurture &H$s on their own.
J)A::rec%a$%on 2) Go(ern#en$> " number of our branches M +ircles have also received
commendation and appreciation from various &tate $overnments for doin%
e0cellent 2ob in &H$3ank +redit Linka%e pro%ramme.
K)N"")8 felicitated 1? &H$s at a function or%anized in New 8elhi on 19
th
&eptember
7@@?.'he function was presided over by the HonBble Knion =inance 5inister. ,ut
of total 1? &H$s felicitated, D were financed by our branches, one each from
,rissa, :harkhand, 5adhya Pradesh and Kttaranchal.
L)Sa#anw%$a> ank has sponsored and financially supported N$, G&"5"N/I'"B in
collaboration with $overnment of ,rissa for supplementin% the process of socio
economic upliftment of the tribals and the downtrodden in the poorest and most
backward 6andhamal district of ,rissa &tate where ?7E of the population is that
of tribals. +ore activities performed by &amanwita are empowerment of people
throu%h promotion of &H$s, especially women &H$s and development of human
resources.
)S9PI 5$a$'5> &tate ank of India is the first +ommercial ank to which N"")8 has
recently %iven &HPI status.
TNRCMS MAYANK SHAH 1@C

FUTURE PLANS

&I has set for itself an ambitious tar%et of credit linkin% 1 million &H$s up to 5arch 7@@A.

'he ank has started to levera%e our vast &H$ network for various services beyond credit
delivery.
=IN"N+I"L IN+LK&I,N =K'K)*& P),&P*+'
Sc6e#e for F%nanc%a Inc'5%on 2) e&$en5%on of 2ank%n" 5er(%ce5 $6ro'"6 3'5%ne55
Fac%%$a$or5G 3'5%ne55 Corre5:on!en$5
O2>ec$%(e
1 'o e0tend 5icro =inance services for upliftin% the poor.
1 'o e0tend bankin% facilities in untapped M unbanked areas throu%h the use of e0istin%
branch network and new technolo%y in combination with outsourcin%.
+. E%"%2e en$%$%e5
a= 3'5%ne55 Fac%%$a$or Mo!e@
1 N$,s
1 =armerBs +lubs
1 =unctional cooperatives
1 +ommunity based or%anizations
1 I.'. enabled rural outlets of corporate entities
1 /ell functionin% Panchayats
1 )ural 5ultipurpose 6iosks M -illa%e 6nowled%e +enters
1 "%ri +linics M "%ri usiness +enters
1 6rishi -i%yan 6endras
1 6-I+ M 6-I units
1 Post ,ffices
1 Insurance a%ents
1 &ocial or%anizations
1 "ny other entity, as may be specified by )I from time to time.

TNRCMS MAYANK SHAH 1@F

However, it would be desirable to identify such entities which have presence and activity
throu%hout the +ircleM&tate.

2= 3'5%ne55 Corre5:on!en$ Mo!e@

1 N$,s M 5=Is set up under the Indian &ocieties M 'rust "cts
1 &ocieties re%istered under 5utually "ided +ooperative &ocieties<5"+&4 "ct or the
+ooperative &ocieties "cts of &tates
1 &ection 7? companies
1 Post ,ffices

,. Sco:e of ac$%(%$%e5
a= 3'5%ne55 Fac%%$a$or Mo!e@
'he scope of activities to be undertaken by the usiness =acilitator will include>
1 Identification of potential customers and activities
1 +ollection and preliminary processin% of loan applications M account openin% forms
includin% verification of primary information M data
1 Processin% and submission of loan applications M account openin% forms to the ank
1 +ross3sellin% of our other financial products <Insurance, etc.4
1 Post3sanction monitorin% and follow3up for recovery
1 Promotin% and nurturin% &elf Help $roups <&H$s4 M :oint Liability $roups <:L$s4
1 +reatin% awareness about savin%s and other products and education and advice on
mana%in% money and debt counselin%

2= 3'5%ne55 Corre5:on!en$ Mo!e@

In addition to the activities listed under the usiness =acilitators 5odel, the scope of activities to
be undertaken by the usiness +orrespondents will include>

1 ,penin% of deposit accounts.
1 +ollection and payment of small value deposits and withdrawals <not e0ceedin%
)s.1@,@@@M3 in each case4.
TNRCMS MAYANK SHAH 1@A

1 8isbursal of small value loans <not e0ceedin% )s.1@,@@@M34 and obtainin% prescribed
documents.
1 )ecovery of principal M collection of interest.
1 =urnishin% of mini account statements and account information.
1 &ellin% insurance M mutual fund products M pension products M any other third party
product.
1 )eceipt and delivery of small value remittances M other payment instruments <not
e0ceedin% )s.1@,@@@M34.
1 Payment M )eceipt in respect of e3%overnance activities
1 )ailway ticketin% and
1 "ny other service on behalf of the ank, duly authorized by the appropriate authority
FUTURE PLANS AND STRATEGIES @

*= New 3'5%ne55e5@

'he +orporate strate%y and New usiness $roup has been created to focus on emer%in%
opportunities. 'he ank plans to enter into the areas of merchant ac.uisition, payment
solutions, Private *.uity, Infrastructure =und, -enture +apital, Pension =unds
5ana%ement, $eneral Insurance and =inancial Plannin% ; /ealth 5ana%ement.
74 )ural 3'5%ne55 >

1 Plan to credit3link 7.C9 lac &H$s thus surpassin% our mission of credit3 linkin% 1
million &H$s by 5arch 7@@A.
1 'ie3up with around 7@,@@@ internet kiosks durin% ne0t 7D months.
1 Knder =inancial Inclusion initiatives, to cover 1 lac villa%es in 7D months.
1 /e plan to issue 1@ million &I 'iny +ards by 5arch 7@@H.
1 8evelopin% alternate delivery channel throu%h>
1 usiness =acilitators
1 usiness +orrespondents

,= Cor:ora$e Acco'n$5 Gro': ;CAG=@

1 +"$ will be focusin% more on the fee3based income in future.
1 Institutional "ccounts $roup formed for focusin% on anks and =inancial Institutions.
1 +"$ to offer more technolo%y3supported products to meet the market
e0pectations and offer total ran%e of products and services to our corporate customers,
under one roof.

-= Trea5'r) Gro':@
TNRCMS MAYANK SHAH 1@H

ank in its pursuit to provide better returns to its customers and shareholders is in the process of
launchin% derivative embedded products to help customers utilise the new )I dispensation to
mana%e their risks and earnin%s more effectively.

'he need and demand for these products is e0pected to %row as more and more sectors become
e0posed to the %lobal economy. 'he ank is in readiness to brin% home to its customers the
benefit of the new products and opportunities.

Note> "s re.uired by )I vide circular dated 7@.D.7@@F, the ank has deducted the Loss on
)evaluation of Investments from ,ther Income. 'his was earlier included in Provisions ;
+ontin%encies. "ccordin%ly, previous year fi%ures have been re%rouped wherever necessary.

CONCLUSION
/e are happy to %ettin% opportunity to part of &tate ank of India and also %et
opportunity to tackle the NP"s "ccount.
8urin% ,ur &ummer 'rainin% we meet 1?@ clients of bank and %et their opinion the their
problems. &o, "ccordin% to that duration we would like to conclude that, "ccount become
NP"s in many way sometimes, &ometimes technical problem, &ome times personal
problem but these all problem will be solved by few precautions which earlier we
mentioned.
In any financial institution, NP"s are inevitable in the loan portfolio. ut efforts should be
made to maintain a reasonable level of NP"s. 6eepin% in mind the )I plan to introduce
the concept of ,ne .uarter! for identification of NP"s by 7@@D, it is a hi%h time to %o in
for recovery drive on a war3footin%. /hile doin% so, prevention of NP"s should not be

for%otten. 'hese are the ma2or challen%es before banks which have %one in for -)&. ut
sincerity and hard work alon% with professional approach on the part of bank mana%ement
may help in the fulfillment of challen%es. 'owards this end, banks have to %o lon% way.
If the nationalized commercial banks desire to stand in competition with the private sector
banks and the forei%n banks, they should over a period of time, be in a position to brin%
down NP"s to mana%eable proportion. 5oreover, the %overnment should take measures to
facilitate the efforts of the banks in the recovery of the loans which currently taken
inordinately lon% time. If willful defaulters to delay the repayment of the loan use the
I=) proceedin%s the relevant le%al provision should be appropriately amended. 'he fact
that the NP"s are %radually %oin% down %enerates hope about the future of the banks,
thou%h we should keep in mind another simple fact that in absolute amount, this has not
happened.

We2 S%$e5@0
- www.sbi.co.in <8ate39@MCM@A4
- www.rbi.or%.in <8ate 3 1MFM@A4
- www.%oo%le.com <8ate 3 1MFM@A4
3ook5@0
- N$ usiness bulletin <8ate31@MFM@A4
- Indian =inancial &ystem <8ate317MFM@A4

Ma"aC%ne 4 Ko'rna5 @0
- T6e F%nanc%a E&:re55 <8ate3 ?MFM@A4
<IndiaBs est anks4
- Ta$a Mc Graw 9% <8ate3 CMFM@A4
<"ccountin% ; =inance 7@@F3@A4


Questionnaire
Genera Infor#a$%on
14 Name of the orrower>3RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR
74 Loan "M+ No. >3RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR
94 "ddress >3RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR

RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR

RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR

Ph.No. <)4RRRRRRRRRRRRRRRRRRRRR<,4RRRRRRRRRRRRRRRRRRRRRR
D4 *ducation > 3 [ $raduate
[ Knder $raduate
[ Post $raduate

[ ,thers
?4 ,ccupation > 3 [ usiness
[ Professional
[ *mployee $ovt M Non $ovt.
[ ,thers
C4 $uarantorBs Name ; "dd.>3
RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR


F4 "mount of Loan >3RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR
A4 "nnual Income >3RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR
H4 Name of &alary 8isbursin%
"uthority >3
RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR
1@4 ,ther +redit >3
114 8ate of Loan >3
174 Purpose of Loan >3

Fac$or5 of 2eco#%n" AGc NPA
;*= 3orrowerO5 Rea$e! Fac$or5
194 Installment "mount
>3RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR
1D4 /hen )epayment +ommence>3
JesMNoRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR
1?4 How many Installment >3RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR

1C4 8ue date of Installment
1F4 )eason for 8ue date of
"mount
1A4 8iscuss when your =irst
Installment 8efault >3Jes M No.RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR
U$%%Ca$%on of 2ank oan
1H4 "ny Notice received for
)ecovery >3RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR
7@4 Personal contribution >3 [ 'elephonic contact
[ Personal visit
Awarene55 of I#:%ca$%on5 of Non Pa)#en$ of In5$a#en$5
714 8o you 6now the penal Interest will be
+har%ed for non3payment of installments on 8ue date >3
RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR
774 8o you know that the bank can recover the loan by resortin% to>
[ ankBs ri%ht to enforce criminal proceedin%s. J*&MN,
[ 8o you know that bank can initiate recovery by sale of mort%a%ed
Property without filin% a suit J*&MN,
[ "ttachment of salary> J*&MN,
[ Publication of your name as defaulter> J*&MN,
[ sharin% of the information amon% other banks which will affect >
your credibility J*&MN,
Pan of Ac$%on $o Re"'ar%Ce $6e Loan
794 /hen /ill you meet "sset verification official )"&5*++
[ /eek
[ 5onth
[ 5ore then 5onth

7D4 /hen will you )epay the due amount
[ /eek
[ 5onth
[ 5ore then 5onth
;+= Fac$or5 Rea$e! $o 3ank
7?4 Pro2ect cost >3
7C4 'ime taken in sanction
; 8istribution of
Loan >3
7F4 /hether "sset
+reated from bank
Loan > 3 Jes MNo
7A4 Income %eneration
=rom the pro2ect >3
7H4 /hether reminder &end by bank for the Non payment >3 JesMNo, If yes then
,
[ Notice
[ 'elephonic call
[ Personal visit
9@4 /hether %uarantor is Inform about the 8efault >3 JesMno
;,= O$6er fac$or5
914 Natural calamities >3RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR
974 $ovt. Policy >3 RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR
994 Personal Hazards >3RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR RR

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