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Executive Summary: State Bank of India
Executive Summary: State Bank of India
EXECUTIVE SUMMARY
This project report has been undertaken in “State Bank Of India,” which highlights
the details study of “Non Performing Assets Management and Banking study of SBI”.
The objective of this project is to get the good knowledge banking and NPA
management.
This project report is divided into 4 parts
Part A ….origin, history
Part B…. Introduction about NPA, RBI guidelines, etc
Part C….case on SARFESI ACT
Part D…. SWOT analysis, conclusion.
Part A gives brief information regarding banks history, objectives, which help to
know the about the bank in detail.
Part B gives knowledge about NPA, which help to know about NPA , what and how
NPA is ascertained.
Part C gives information regarding case and how it dealt under SARFESI ACT.
Part D gives ideas about SWOT Analysis of the bank.
State Bank of India started its Origin on June 2nd 1806 as bank of Calcutta. In 1809 it
came out with the new name as bank of Bengal. With the changes in social and economic
conditions of the country in 1840 there was evolution of bank of Bombay and in 1843 bank
of Madras. Earlier these 3 banks of were called as presidency bank of India.
With the advent of independence and the nationalist fervor sweeping the country, the
demand for the nationalization of the imperial bank of India intensified. After 1955, the bank
in its avatar as he state bank of India has been able to reach out trough the wild network of its
branches to a majority of our rural masses.
Today, as we look forward into new century and witness the transformation of the
bank trough BPR and technological initiatives we find that the bank is drawing together the
various threads of its past to weave a new tapestry encompassing all aspects of banking with
its operations spanning not just our country but entire globe.
Now by the year 2009 it is celebrating its bicentennial year i.e. 204 years of
celebration. SBI is having nearly 11000 branches all over India and some of the branches are
also operating in countries
OBJECTIVE OF STUDY
4. To study the NPA amount under different categories over the years
Director under
section 19(f) of SBI Act Smt. Shyamala Gopinath
Shri R. Sridharan
Managing Director & Group Executive
(Associates & Subsidiaries)
Shri C. Narasimhan
Deputy Managing Director & Group Executive
(Global Markets)
Scheduled Banks
Scheduled Commercial
Banks Scheduled Co-operative Banks
Public Private
Sector Sector Foreign Regional
Banks Rural Banks
Banks Banks
RESPONSIBILITY STATEMENT
ii. That they have selected such accounting policies and applied them consistently
and made judgment and estimates that are reasonable and prudent so as to give a
true and fair view of the state of affairs of the bank as on 31 st march 2009,and of
the profit or loss of the bank for the year ended on that date;
iii. That they have taken proper and sufficient care for maintenance of adequate
accounting records in accordance with the provisions of the banking regulation
act, 1949 and state bank of India act, 1955 for safeguarding the assets of the bank
and preventing and detecting frauds and other irregularities; and
iv. That they have prepared the annual accounts on a going concern basis.
I. ATMs Projects:
The Bank, along with its Associate banks have a common ATM network which is the
largest in the country. It crossed the milestone of 10,000 ATMs in December 2008 and with
an addition of 2911 ATMs during the year, the Bank has now a network of more than 11300
ATMs. The Bank also has 33 Multi Currency Module enabled ATMs at 19 foreign centres in
6 countries. Functionalities available at our ATMs include Card to Card Transfer, Fee
Payments, Utility Bill Payments, and Donations to Temples/Trusts etc. The Bank is also in
the process of installing Biometric and low cost rural ATMs
V. Mobile Banking:
The Bank has launched its mobile banking facility which offers various features like
Funds Transfer using NEFT, Enquiry Services (balance enquiry / mini statement), Request
Services (cheque book request), m-commerce (Mobile Top Up, merchant payments, SBI Life
Insurance premium) and bill payment (utility bills, credit cards).
PART-B
With a view to move towards internationally accepted norms for asset classification
and income recognition, RBI has been “tightening” the definition of NPAs in a phased
manner. Thus, from the norm of classifying only those assets as non-performing which are
four quarters past due, which was applicable until 1993, RBI moved to the norm of three
quarters past due in 1994 and then to two quarters (90 days) past due in 1995. In 2001, RBI
tightened this further by removing the “past due” concept. As a result, NPAs are to be
recognized 30 days earlier than they were to be before 2001.
RBI has now advised banks to move to the 90 days norm for recognizing loans as non-
performing, with effect from March 31, 2004.
This tightening of norms, coupled with the year of economic recession, resulted in an
increase in the recognized stock of NPAs in the Indian financial system. The same time, the
ratio of gross NPAs in to gross advances has shown a declining trend.
With a view to moving towards international best practices and to ensure greater
transparency, it has been decided to adopt the ’90 days’ overdue norm for identification of
NPAs, from the year ending March 31,2004. Accordingly, with the effects from March
31,2004,an advance will be classified as an NPA where in he case of:
i) Term Loan the interest and/or installment of principal remains overdue for a
period of more than 90 days.
ii) Overdraft/cash credit (OD/CC) the account remains out of order.
iii) Bills purchased and discounted the bill remains overdue for a period of more then
90 days.
iv) Advance granted for agricultural purposes interest and/or installment of principal
remain overdue for two harvest seasons but for a period not exceeding two half
years, and
v) Other accounts any amount to be received remains overdue for a period of more
than 90 days
Indian bank have, for a long time, treated all the sticky loan assets as Non-performing
Assets (NPAs). The accrual concept of accounting convention has also been followed
without reckoning the amount actually realized. The word “realized” is noteworthy, which is
distinct from the word “reliability”. It means that if a loan given by a bank fails to fetch a
return in the form of interest realized from the borrower, it (the
Bank) has no right debit the borrowal account with the interest chargeable following
the accrual principal. In that event, it then truly signifies that the asset is not performing i.e.,
not yielding any income to the bank. This is the essence of income recognition norms, based
on the recommendation of the Committee on Financial sector reforms (popularly known as
Narasimhan Committee), adopted by Indian banks.
An asset, which ceases to yield income for the bank, should be treated as NPA, and
any income from loan assets should not be booked as income until it is actually recovered.
So, banks, which charge interests to loan Accounts Park it in “Interest Not Collected
Account” (INCA) until recovery, and on recovery, reverse it from INCA and credit interest
account.
NPA ratio: - The net non-performing assets to loan (advances) ratios are used as a
measure of the overall quality of the banks. Net NPAs are calculated by reducing cumulative
balance of provisions outstanding at a period end from gross NPAs. Higher ratio reflects
rising bad quality of loans.
Reserve Bank of India (RBI) has issued guidelines on provisioning requirement with
respect to bank advances. In terms of these guidelines, bank advances are mainly. Classified
into: -
1. Standard Assets: Such an asset is not a non-performing asset. In other words, it carries
not more then normal risk attached to the business.
3. Doubtful Assets: Assets that has remained NPA for a period exceeding 18 months is a
doubtful asset.
4. Loss Assets: Here loss is identified by the bank concerned or by internal auditors or by
external auditor or by Reserve Bank India (RBI) inspection. In terms of RBI guidelines, as
and when an asset become a NPA, such advance would be first classified as a sub-standard
one for a period that should not exceed 18 months and subsequently as doubtful assets. It
should be not that the above classification is only for the purpose of computing the amount of
provision that should be made with respect to banks advance and certainly not for the
purpose of presentation of advance in the bank balance sheet.
2) Term Loans:
If interest/installments of principal remain unpaid for any 2 quarters of the year
ending 31st March the account will be NPA ‘Past Due’ – Grace period of 30 days is NOT to
be reckoned in your bank. Its means that quarter’s interest/Installments up to 31 st December
should be recovered before 31st March, as otherwise account will be treated as NPA.
Advance accounts against this securities need not be treated as NPAs and no
provisions made need be made even though interest there on as not been paid for 2 quarters
or more on a balance sheet date. Interest on such accounts may be taken to income account
on due date provided adequate margins is available in the accounts (i.e. the out standings,
after interest application, must be less than advance value of security).However, advance
against gold ornaments and government securities do not qualify for this relaxation.
OVERDUE INTEREST
Overdue interest should not be charged and taken to income account in respect f
overdue bills unless it is realized.
6) Other Accounts:
The account becomes NPA if the account remains unpaid for any 2 quarters or more
as on 31st march.
7) Consortium advance
Each member bank will classify the account in accordance with the conduct in its
books
4) Willful Defaulters: -
RBI has revised guidelines in respect of detection of willful default and diversion and
siphoning of funds. As per these guidelines a willful default occurs when a borrower
defaults in meeting its obligations to the leader when it has capacity to honor the
obligations or when funds have been utilized for the purposes other than those for which
finance was granted. RBI has advised the lenders to initiate legal measures including
criminal actions, wherever required, and undertake a proactive approach in change in
management, where appropriate.
An internal study conducted by RBI shows that in order of prominence, the following
factor contribute to NPAs,
Internal Factors:-
1) Diversion of funds for expansion/diversification/modernization taking up new
projects, helping/promoting associate concerns.
2) Time/cost overrun during the project implementation stage.
3) Business (product, marketing, etc) failure
4) Inefficiency in management.
5) Slackness in credit management and monitoring.
6) Inappropriate technology/ technical problems.
7) Lack of co-ordination among leaders.
External Factor: -
1) Recession
2) Input / power shortage
3) Prince escalation
4) Exchange rate fluctuation
5) Accidents and natural calamities, etc
6) Changes in government polices in excise/import duties, pollution control
orders.
The above mentioned cause were reaffirmed, some other were also mentioned.
A brief discussion is provided below.
Promoters were often optimistic in Setting up large projects and in some cases were
not fully above board in their intentions. Screening procedures did not always
highlight these issues. Often projects where set up with the expectation that part of
funding would be arrange from that capital Market, which were booming at the time
of project appraisal. When the capital market subsequently
crashed, the requisite funds could never be raised, promoters often lost interest and
lenders were left stranded with incomplete/unviable projects.
d) Directs Lending: -
Government’s police rather than commercial imperatives dictated loans to some
segments.
h) Willful Defaulters: -
There are a number of borrowers who have strategically defaulted on their debt
service obligations realizing that the legal recourse available to creditors is slow
in achieving results.
Major policy decision was take externally by the Finance Ministry/RBI. Though directors
were to be appointed based on their possession of specialized knowledge in banking and
related discipline, the environment of receiving decisions from a political background as
distinguished from a professional outfit, prevented the best talents coming to occupy the
position as Directors of PSBs and taking part an active role in the deliberations of the
boards of these banks.
“Audit and Inspections” remained as functions under the control of the executive officers.
Which were not independent and were thus unable to correct the effects of serious flaws
in policies and directions of the higher us.
The quantum of credit extended by the PSBs increased by about 160times in the three
decades after nationalization (from around 3000 crore in 1970 to 475113 crore on
31.03.2000). The bank was not developed in terms of skills and expertise to regulate such
stupendous growth in the volume and manage the diverse risk that emerged in the
process. The need for organizing an effectives mechanism to gather and disseminate
credit information amongst the commercial banks was never felt or implemented. The
archaic laws of secrecy of customers-information that was binding banking India, disable
bank to publish names of defaulters for common knowledge of the other bank in the
system.
Effective recovery of defaulters and overdue of borrowers was “hampered”. But in India
Legal remedies were beset willful defaulters and the banks were left helpless. Effective
corporate management was a concept alien to the corporate houses then. In respect of
PSBs the board were ineffective and the only/main shareholder was the government of
India. Government exercised multiple role and concerns, and the instinct to act as a
watchful shareholder and increase the shareholders value of these corporate bodies
(banks & financial. Institution) was never felt/experienced by the government.
Credit management on the part of the leader to the borrower to secure their genuine and
bonfire interests was not based on pragmatically calculated anticipated cash flows of the
borrower concern, while recovery of installments of term Loan was not out of profit and
surplus generated but through recourses to the corpus of working capital of the borrower
concerns. This eventually led to the failure of the project financed leaving idle assets.
Functional inefficiency was also caused due to over-staffing, manual processing of over-
expanded operations and failure to computerize banks in India, when elsewhere
throughout the world the system was to switch over to computerization of operations.
PREVENTIVE MEASURES: -
b) The recovery work should be specifically entrusted to the identified loan officers/
clerks who will have regular contacts with the borrowers particularly at the time,
which is more suitable for recovery, like pre and post-harvest period in case of
agricultural advance.
c) The high value advance should be specifically monitored and in case of advance,
which displays signals of slipping to sub-standard category, intensive follow-up is
necessary.
e) In case where units are facing genuine difficulty in adhering to the repayment
schedule fixed while sanctioning the loan, the loan can be rescheduled so that the
advance does not turn out of order or past due.
f) Borrower should be counseled to route the sales proceeds through the account, which
will ensure that the account does not turn out of order merely on account of interest
application.
g) A written communication be sent to all borrowers advising them about the need to
ensure that there advance remain standard assets to enable the bank to consider
favorably their future request for financial assistance, if needs.
i) A system for settlement of goals for recovery of periodical loan installments and
quarterly interest and monitoring performance there against should be set up.
Conclusion: -
The situation calls for an urgent action by all concerned for improvement. Based on
our experience we consider that the branches will have to constantly work to prevent
the NPA virus from contaminating the new credit portfolio. Also concurrently they
will have to reinforce effective strategies to remove the virus from the existing NPA
portfolio. The task although difficult is achievable. Monitoring and follow-up are the
key watchwords in the task of managing and reducing NPAs.
REMEDIAL MEASURES:
1. Regular meetings with the borrowers and interaction with them on their business
prospects and their position of their accounts should take place.
2. Periodical meetings with group of borrowers particularly those financed under
government-sponsored schemes and in rural areas should be held in which the need
for prompt payments of dues should be explained. It needs to be made clear to these
borrowers that there will not be any further debt relief scheme in future and that they
will benefit in the long run by paying the banks dues.
3. Recovery camps/recovery workshops can be organized in co-ordination with the
government authorities in rural areas or in respect of SBI advance under
government sponsored schemes.
4. In case of suck units, viability studies need to be conducted promptly and quick
dispensation of rehabilitation packages is essential so that the advance to them can
be upgraded.
5. Close monitoring of sick units, which are under nursing is important to ensure that
they abide by the stipulation made under the nursing program and thereby there
borrowal account are upgraded.
6. Target for recovery should be fixed for individual functionaries and their performance
should be closely is closely monitored.
7. Periodical inspection of the units financed and follow-up for recovery of the overdue
amount should be closely monitored.
8. Village level workers be instructed to maintain register for details of various
borrowers under the government sponsored schemes to ensure regular fallow-up.
9. For smaller advance, Lok Adalat is an effective avenue for on the spot settlement of
bank loan case and this mechanism should be used effectively.
10. As regards cases involving debt for over Rs.10 lakhs, the forum of Debt Recovery
Tribunal should be effectively used.
11. Periodical meetings should be held with the lawyers handling Bank’s cases to discuss
various issue connected with the ending loans case with a view to reducing the delays
in settlement of the cases.
12. Settling the cases out of court and entering into compromises, wherever considered
appropriate, may rove to be quicker and more e effective than legal action.
However, any tendency to get undue advantage from the bank should be guarded
against.
13. Realization of securities in cases of advances under litigation needs greater attention.
It should be our endeavor to obtain permission of the court for attachments and
disposal of securities charged to the bank before judgment. Where such permission is
granted or where suit is decreed in bank’s favors, the securities covered by the suit
should promptly realize.
14. The portfolio of the loss assets has to be critically examined to weed out all such
assets where there is no hope of any recovery. In such cases, the ultimate step of
writing off the advance needs to be taken and any delay in the matter is of no benefit.
15. The services of Non-Government Organizations (NGOs) may also be utilized in area
where these are active, for counseling the small borrowers. These borrowers may be
organized in-group and financed, if considered appropriate and prudent, through the
NGOs concerned.
TACKLING NPA’s
The major tools for tackling assets, which have already turned into non-performing assets,
are the following: -
1. Recovery through legal action including the forum of debt recovery
tribunals and lok adalats.
2. Utilizing the machinery of state government for recovery of rural death.
3. Entering into comprises through negotiations.
4. Rehabilitation packages for potentially viable sick units.
5. Rescheduling/ rephrasing of dues in case of irregular advances of viable
units.
6. Recovery of over due amount through persistent follow up and by
counseling / educating the borrowers.
FOCUSED STRATERGIES
1. Constant follow up and periodically dialogue with the borrower to know the prospects
of his business and difficulties, if any, faced. Case to case review of NPAs and
replacement of loan to suit the revised income generation pattern so that he is able to
repay dues of the bank has per his cash generation capacity.
2. Branch recovery team consisting of 2/3 resourceful staff members/ Officials, should
be formed (if not so) at each critical branch. The team member should be exhorted to
set up recovery endeavors and produce quick tangible results
3. Establishment of “district Recovery Team” at each District Headquarter with the help
of District headquarter with the help of district co-ordinate’s / lead bank
officers/Nodal officers of the concerned district to liaise with the local Government
functionaries/Lok Adalats/certificate Officers, etc. this team may co-ordinate the
activities of the “Branch Recovery Team” within the district.
4. “Lawyer Meet” may be organized at all district headquarters by the concerned Asst.
general Manager and AGM (Law) where other officials from local head office may
also participate. Suit field case of high value loan amount should be reviewed
individually to expedite the recovery process. Involvement of law officers in follow
up recovery efforts through debt recovery tribunals is necessary.
5. To ensure that “Target of Recovery” has been allotted to all the critical branches for
reducing NPAs/INC/AUC by their respective controlling authorities and the
controllers concerned monitor their performance. The Dy. General manager should
oversee the position on monthly basis.
6. One time settlement (OTS) has been found to be another method whereby the bank
would finally recover its due depending upon the repayment capacity of the borrower
from all sources.
7. To consider, in consultation with controllers, on selective basis in decreed cases, the
need for biding in bank’s name for sale of mortgaged properties (secured for our
loans) in auction with the permission of court for expediting the recovery process.
PART-C
ix) Seasonal activities-monitor the recovery in the account and ensure recovery effort
coincides with the time of revenue inflow.
x) Be aware of the danger signals received from the borrowers about the problem
loans. Preventive and curative action should be taken immediately.
xi) Do not be just satisfied and let lose the good borrowers. Complacency towards
existing good borrowers may lead to account turning NPAs later.
SUBSTANDARD ASSETS:-
DOUBTFUL ASSETS
i) Experience in the previous years indicate that there has been steady slippage in the
quality of assets in the NPA categories from sub standard to doubtful assets and then
to loss assets. One reason could be that appropriate action as mentioned above is not
taken in case of sub standard assets. Secondly suit field accounts in various civil
courts\ debts recovery tribunal is not followed up in the manner required ad or are
getting very little attention. These accounts particularly suit field /decreed account
required constant review at the operating level so that appropriate steps like enforcing
decree, facilitating compromises or write off if need be initiated instead of holding
such un-remunerative accounts on long term basis in your books as NPAs.
ii) Issues raised by advocates should be tackled to get the suits disposed of and executive
the decreased so obtained to reduced the NPAs.
iii) Where branches have got backlog in settlement to DICGC claims such claims should
followed up rigorously. For this purpose dealing official at the branch should explore
the possibilities of getting the claim settled at an earliest in consideration with the
DICGC Chennai / Mumbai.
iv) Compromise as a strategy for reducing NPAs is receiving attention of branch
functionaries. Encourage compromise proposal selectively without giving wrong
signals to the other good borrowers. Branches should view such compromise
proposals based on the net present value, nature and value of value of assets presently
available to us.
LOSS ASSETS
i) Write off Doubtful and loss assets was initiated by branches from the first quarter of
the year itself.
ii) High value doubtful and loss assets where DICGC has settled the claims and / or
rejected the such case should be first dealt with write-off proposals with additional
information should be submitted immediately where ever assets are not available.
iii) Identify all loss assets where full provision is available to write off. Where ever suits
are pending and prospect of recovery exists such account can be parked in advance
under collections accounts.
iv) Recommendation to write up file value loss asset should be sent on priority basis.
v) Write off out standings where provision is short up to Rs 25000 may be sent
immediately without further loss of time
vi) Where ever compromises are / where entertained earlier and write-off the balance
still exist arrange to sent such write-off proposals and ensure that the account does not
appear in balance sheet of the bank.
i) Few branch operating functionaries are still not aware of the IRAC norms. Even
though account is classified as NPA interest is being applied blindly with out
thinking of consequence of such application of interest. It inflates the INCA
figures.
ii) Serious efforts in upgrading the assets from NPA category will results in
reduction of INCA. Pressurize induce the borrowers to bring down their
outstanding levels compared to the previous year. This will enable the bank to
book income on partial recovery basis.
i) The number of advance under collection account and out standings there in is the rise.
ii) Due to the policy decision taken to write-off loss assets irrespective of suit position
may add a few more account to advance under collection account.
iv) Review all accounts parked in advance under collection account on priority basis and
efforts should be made to recover full dues and remove such accounts from advance
under collection account.
vi) Regular view of the recovery prospects and removal of such accounts from advance
under collection account does not appear to be receiving level of attention.
In conformity with the prudential norms, provisions should be made on the NPA on
the basis of classification of assets into prescribed categories as mentioned above .Taking
into account the time lag between doubtful of recovery, it’s recognition as such, the
realization of security and the erosion over time in the value of securities charged to the
bank, the provisions against sub-standard assets, doubtful assets and loss assets are provided
as below:
Sub-standard(secured)(21) 10%
Doubtful
• Being alive to this imperative, efforts are on hand to enhance the degree of awareness at the
operating level in alignment with better risk management practices, Basel II requirements
and the overarching aim of the conservation and optimum use of capital.
• Keeping in view the changes which the Bank’s portfolios may undergo in stressed
situations, the Bank has in place a policy which provides a framework for conducting Stress
Tests at periodic intervals and initiating remedial measures wherever warranted. The scope of
the tests is constantly reviewed to include more stringent scenarios.
• Risk Management is perceived as an enabler for business growth and in strategic business
planning, by aligning business strategy to the underlying risks. This is achieved by constantly
reassessing the interdependencies / interfaces amongst each silo of Risk and business
functions.
Where any borrower makes any default in repayment of secured debt or nay
installment there of, and his account in respect of such debt has been classified by the
secured creditor as non-performing asset, then, the secured creditor may call upon the
borrower by way of a written legal; notice to discharge in full, his liabilities within sixty days
from the date of the notice failing which the secured creditor would be entitled to exercise all
or any of the rights set out under SARFESI. The notice must contain details of debt and
secured assets.
The provision of SARFESI relating to security of interest can be invoked by any bank
or public financial institution under section 4A of the Companies Act, 1956 or any institution
specified by central government under sub clause (ii) of clause (h) of section 2 of recovery of
debt due to banks and financial institutions Act, 1993 or any other institution or non banking
financial company as specified by central government or international finance corporation or
a consortium thereof.
ANALYSIS
Assets No. Total Net o/s Value OF Balance o/s Gross Net Net
of O/s Balance of
Category Provision Provision NPA
Balance
a/c’s security Secured Unsecured
Assets
Assets
Assets No. Total O/s Net o/s Value OF Balance o/s Gross Net Net
Assets
Doubtful III 0 0 0 0 0 0 0 0 0
Loss Assets 18 1274 1274 Nil Nil 1274 1274 1274 Nil
NPA A/c 63 27381 27381 36234 25856 1525 4862 4862 22518
TOTAL
Assets No. Total Net o/s Value Of Balance o/s Gross Net Net
of O/s Balance of
Category Secured Unsecured Provision Provision NPA
a/cs Balance security
17281
Sub-Std. 26 19201 19201 28845 19201 0 1920 1920
Secured
Assets
Assets
Doubtful 0 0 0 0 0 0 0 0 0
III
NPA A/c 78 31815 31815 41758 30000 1815 5850 5850 25965
TOTAL
N e t NP A a s % o f N e t A d v a n c e s
3 6 .4 1 %
4 0 .0 0 %
3 0 .0 0 % 2 1 .4 3 % 1 8 .5 2 %
Ratios
2 0 .0 0 % Ra tio
1 0 .0 0 %
0 .0 0 %
2007 2008 2009
Ye ar
Interpretation:
From the above chart we come to know that even though the NPA ratio is in decreasing trend
but it is not according to the standard NPA norms (i.e.10%). When we compared 3 years data
i.e. 2007, 2008, & 2009 it has been decreased by 36.41% to 18.52%.
20.00% 17.27%
14.99%
15.00% 12.37%
Ratios
10.00% Ratio
5.00%
0.00%
2007 2008 2009
Year
Interpretation:
By seeing the above chart we can conclude that the % of NPA to the Net Assets is
decreased in 2009 as compared to 2007 & 2008. Which shows Branch is getting more return
on their assets.
50 44.6
40
30 23.95
Ratio
22.41
Ratio
20
10
0
2007 2008 2009
Year
Interpretation:
In the above chart the gross NPA is decreasing, it shows, the branch is providing
better quality of loans.
25.00%
21.17%
20.00% 18.23%
16.24%
15.00%
Ratio
Ratio
10.00%
5.00%
0.00%
1 2 3
Year
Interpretation:
By seeing the above chart we can conclude that the % of NPA to the Total Assets is
decreased in 2009 as compared to 2007 & 2008. Which shows Branch is getting more return
on their assets.
100.00%
82.39% 83.51%
80.00% 66.56%
60.00%
Ratio
Ratio
40.00%
20.00%
0.00%
2007 2008 2009
Year
Interpretation:
From the above chart we can find that the contribution of sub- standard assets (Secured) to
Net NPA has been increased in 2009 as compare to 2007 & 2008. This may be because of the
recession.
Un-secured
5.00% 4.44%
4.00%
3.00%
Ratio
1.84% Ratio
2.00%
0.87%
1.00%
0.00%
2007 2008 2009
Year
Interpretation:
From the above chart we can find that the contribution of sub- standard assets (Unsecured) to
Net NPA is high in 2007 & 2009 it may be due to reckless advances and poor recovery
management. Here there is high scope for the advance up-gradation or improvement because
it will be very easy to recover the loan as minimum duration of default.
35.00%
29.00%
30.00%
25.00%
20.00% 16.74%
Ratio
14.64% Ratio
15.00%
10.00%
5.00%
0.00%
2007 2008 2009
Year
Interpretation:
In the above chart there has been reduction in doubtful assets in 2009 it is because of increase
in Sub-standard Asset Ratio. But also the contribution of Doubtful Assets to NPA is low,
because of compromising measures from the Branch.
Interpretation:
When we compare 3 years data we can interpreted that, the Sub-Standard Assets are
contributing more to the Total NPA.
Sub-Standard assets 37 30 26
Doubtful Assets 35 19 18
Loss Assets 5 18 16
Interpretation:
In the above chart we can see that the numbers of Accounts in the Sub-standard Asset
category are more in all 3 years as compare to other category of assets.
FINDINGS
1. The net NPA ratio is decreasing continuously over the three years, but it is not in the
standard norm. It shows the poor NPA management.
2. The reason for reduction in Net NPA ratio is due to recovery in NPA accounts and the
provisions made by the Branch.
3. The branch’s gross NPA ratio is decreasing it shows, the branch is providing better
quality of loans.
4. The contribution of sub- standard assets (Secured) to Net NPA has been increased in
2009 as compare to 2007 & 2008. This may be because of the recession.
5. The contribution of sub- standard assets (Unsecured) to Net NPA is high in 2007 &
2008 it may be due to reckless advances and poor recovery management
7. The numbers of Accounts in the Sub-Standard Asset category are more in all 3 years as
compare to other category of assets.
8. The amount in loss asset category is low in all the 3 years as compared to other category
of assets.
SUGGESTIONS
1. The Branch has to increase in the quality of assets which adds value to its profitability.
The quality of assets can be increased by scouting the best Borrowers and by increasing
the quality of advances. The percentage of NPAs to Net Advances can be brought down
by increasing the standard assets. .
3. The Credit section should carefully watch the warning signals viz. non-payment of
quarterly interest, dishonor of check etc.
6. The branch should take compromising measures for settlement of NPA accounts
8. Even though there is 100% provision for loss assets there should be proper control and
better recovery management in order to bring down the loss assets
CONCLUSION
The provisions are to be made on the NPA accounts which will reduce the profits of the
Bank. The bank must adopt structured NPAs management policy for elimination or reducing
the NPAs in the Bank
PART-D
SWOT ANALYSIS
STRENGTHS: -
i) SBI has an experience of more that 204 years of service in the banking sector.
ii) It is working with the new project of CORE BANKING SOUTIONS (CBS).
iii) It is a public sector undertaking with the GOV and RBI share of 53%
iv) Wider network more than 10,000 with other associated banks.
v) Skilled staff is considered best in financial sector.
WEAKNESS:-
i) Delay in decision making and implementation approved decisions because of
large hierarchy.
ii) Delay in settlement of NPAs.
iii) Compromise settlements are time consuming process.
OPPORTUNITIES:-
1. SBI should advertise more about their products and services.
2. It has the more opportunity to have more customers in rural areas as of the
agriculturists.
3. By the introduction of CBS, SBI has the opportunity to compete with other foreign
banks.
THREATS:-
i) SBI has already been the largest bank in INDIA with the control of RBI but also it
should face competition from the private banks such as ICICI, HDFC, IDBI,
CENTURIAN, INDUSIND and many other banks because of opening up of
Indian economy of globalization and Liberalization.
By the vision of SWOT analysis we can come to the conclusion that SBI is strong in
financial sector with more experience in banking sector. Application of latest
technology is a key to success in the competitive global economy. Positively the new
era beckons the SBI as “Customer Delight” and builds up a new banking world in the
future days to come.
BIBLIOGRAPHY