Topic: A Critical Analysis On Non-Performing Assets of Public Sectore Bank

TOPIC: A CRITICAL ANALYSIS ON NON-
PERFORMING ASSETS OF PUBLIC SECTORE

BANK.
Aditya Institute of Management Studies and Research

Aditya Educational Campus, R. M. Bhattad Road, Ram Nagar,Borivali(West), Mumbai - 400092
Topic: A Critical Analysis on Non-Performing Assets of Public Sector Banks
A PROJECT REPORT ON
‘‘A Critical Analysis on Non-Performing Assets of Public Sector Banks’’
BY
Name: Mohil Rakesh Desai
MMS: SEM IV Specialization: Finance Roll No: 27
SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENT OF
MASTER OF MANAGEMENT STUDIES
ACADEMIC YEAR 2017-19
Submitted to Prof. Jyotsna Haran
ADITYA INSTITUTE OF MANAGEMENTSTUDIES AND RESEARCH
MUMBAI –400092
Copyright.2019@AIMSR Page 2 of 61
A PROJECT REPORT ON
‘‘A Critical Analysis on Non-Performing Assets of Public Sector Banks’’
BY
Name: Mohil Rakesh Desai
MMS: SEM IV Specialization: Finance Roll No: 27
SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENT OF
MASTER OF MANAGEMENT STUDIES
ACADEMIC YEAR 2017-19
Submitted to Prof. Jyotsna Haran
ADITYA INSTITUTE OF MANAGEMENTSTUDIES AND RESEARCH
MUMBAI –400092
CERTIFICATE
I, Mr. Mohil Rakesh Desai, hereby declare that the dissertation ‘‘A Critical Analysis on Non-Performing
Assets of Public Sector Banks’’ ’submitted for the MMS Degree at Aditya Institute of Management
Studies and Research is my original work and has not been submitted to any other University or Institute for
the award of any degree / diploma, etc.
Place: Mumbai
Date: ______________
Faculty Signature: _____________ Diretor Signature:________________
Prof. Jyotsna haran Dr.Sunita Srivastava
ACKNOWLEDGEMENT
Working on this project has presented with many insights and challenges. This project would not have been without the
guidance of mentor Mrs. Jyotsna Haran Lecturer, Aditya Institute of Management Studies and Research I thank her for
her support and patience.
This project is a synergistic product of many minds. Therein, I take this opportunity to express my profound appreciation
to everyone who has directly or indirectly helped me in the successful completion of this project.
The project would not have been completed without their support and guidance. Thanking them is a small gesture for the
generosity they showed. It was a great learning experience to work on such a project.
TABLE OF CONTENT
Sr. No. Topic Page No.

1 Introduction 7
1.1 1.1 HISTORY 8
1.2 1.2 TYPES OF BANKS 15
1.3 NUMBER OF PEOPLE WHO ARE AVAILABLE IN BANKING 19
INDUSTRY
1.4 OPPORTUNITIES OF BANKING INDUSTRY 19
1.5 CHALLENGES FACED BY INDIAN BANKS 19
1.6 MAJOR PLAYER IN INDIA 20
2 LITERATURE REVIEW 21
3 NON-PERFORMING ASSETS 24
4 RESEARCH METHOD 37
5 ANALYSIS AND INTERPRETATION 40
6 FINDINGS 53
7 RECOMMENDATIONS / SUGGESTIONS 54
CONCLUSION 59
BIBLIOGRAPHY 60
CHAPTER – 1
INTRODUCTION
In the present sense, it finds its origin in the previous decades of the 18th century. In the list of major banks, the Bank
of India acquired its existence, which was discovered in 1770 and liquidated between 1832 and 1832; And the General
Bank of India, created in 1786 but failed in 1791.
The oldest bank and bank to date still exists and is known as the State Bank of India (S.B.I). Initially, it was created in
June 1806 under the name Bank Calcutta. In 1809 was renamed the Bank of Bengal. It is considered one of the three
largest banks financed by a presidential government; The other two are the Bank of Bombay in 1840 and Bank Madras
in 1843. The three banks were merged in 1921 to find the Imperial Bank of India, which was later converted after the
independence of India. , In 1955, the State Bank of India. Many of the banks and their heirs have been almost central
banks for many years until the establishment of the Central Bank of India in 1935 under the Central Bank of India Act
1934.
State banks in India have been officially approved by eight banks that cooperate with the state in accordance with the
1959 Law on the State Bank of India (subsidiaries). Now they are known as associated banks. In 1969 the Indian
government nationalized 14 large private banks. One of the largest banks was the Bank of India. In 1980 nationalized
another 6 private banks. These nationalized banks are mainly owned by lenders of the Indian economy. They neglect
the banking sector because of their large size and extensive networks.
The Indian banking sector is classified mainly as scheduled and unplanned banks. The registered banks are those
incorporated in the Second Schedule of the Reserve Banks Act of India in 1934.
Nationalized banks; OSE and its partners, RRB; Foreign banks and some Indian banks in the private sector are
associated with classified banks. The commercial bank is known in the planned and unplanned commercial banks,
which are synchronized under the Banking Supervision Law of 1949.
The Indian economy is becoming one of the strongest economies in the world with GDP growth of more than 8% per
year, and a highly qualified banking sector is important in all countries and can greatly influence economic
development through efficient financial services.
The banking sector plays an important role in the growth and development of the Indian economy. After liberalization,
industry in Asia underwent profound changes. The liberalization process and the economic process have greatly
affected the Indian banking sector. A stable and efficient banking sector is an important precondition for increasing the
economic level of a rural country. A liberalization strategy announced in the banking sector of light emitting diodes of
the Asian nation to improve competition, allocate resources efficiently and develop innovative ways to raise savings.
The banks' ability to examine their monetary situation in order to improve their competitive position in the market.
Most banks in Asian countries are focusing their efforts on expanding their service network. Indian economy is
growing, increasing the number of its segments. When the recommendations of the Narshinham Committee inform
with the input of many personal players. The Indian banking sector has become a home based customer market. It
currently consists of several equipment and customers of basic products and many distribution channels. There is no
denying that an efficient and efficient sector is essential for the long-term growth and development of the economy.
Therefore, it is essential to conduct a thorough study of the banks in India.
Topic: A Critical
Analysis on Non-Performing Assets of Public Sector Banks
The banking sector has three main tasks in the economy, such as functioning of the payment system, raising
savings and allocating savings to investment products. The banking sector changed after the reform.
The government has made this sector a central priority and this service sector is different to meet current
needs. Reforms in the banking sector in India Efforts to reach the banking sector have changed after the
reform.
The government has made this sector a central priority and this service sector is different to meet current
needs. Reforms in the banking sector in India Efforts to reach the banking sector have changed after the
reform.
The government gave this division a priority and this sector services of the Indian banking industry changed
later than in the reform process. The government maintained the vanguard of this sector and changed the
service industry of today. The reforms of the banking sector in India aim to increase the efficiency and
profitability of banking institutions and to put banking institutions before global competition in the process of
globalization. The different banks differ in terms of activity, efficiency and productivity, profitability and
credit efficiency. The Indian banking sector is an important part of the Indian financial system. The banking
sector has played a vital role in promoting business in urban and rural areas in recent years. Without a solid
and efficient banking system, India can not be considered a healthy economy.
1.1 HISTORY
The Allahabad Bank, which won in 1865 and is still presented today, is the oldest bank in India. Even though
it was not the first. The highest bank in India, which was honored in 1863 and operated until 1913, pays tribute
to itself and fails, and some of its assets and liabilities were transferred to Shimla's Bank of America.
Foreign banks began to appear, especially in Calcutta, in the 1860s. HSBC was founded in Bengal in 1869.
Calcutta was the largest dynamic commercial port in India, mainly because of the Empire's trade. British, and
became a banking center.
Topic: A Critical
The first joint common Indian seller was Oudh Commercial Bank, a recognized institution in 1881 in
Faizabad. It failed in 1958. The National Bank of Punjab, established in Lahore in 1894, was subsequently
established. This bank is active and is one of the largest banks in India.
At the beginning of the 20th century, the Indian economy went through a period of relative stability. More
than five decades have passed since the Indian revolt and the social, industrial, and other infrastructure has
clearly improved. The Indians had small banks that worked mainly in ethnic and religious communities.
Presidential banks have challenged the banking sector in India, but some political parties called "currency
banks" and some Indian stock banks have resisted competition. All these banks worked in different sectors of
the economy. The currency of the banks, which apparently belong to the Europeans, focused on the financing
of foreign trade. Indian venture capital banks generally operated with little capital and less experience and
were known to fight with the presidential and currency banks. Lord Curzon noted that this segmentation was
as follows: In banking, we arrived late.
We look like old sailboats, divided into huge wooden partitions in separate sections,
In early 1906 to 1911, the creation of banks was influenced by the Swadeshi movement. The Swedish
movement led businessmen and politicians to look for banks within the Indian community. Some banks
established at the time survived, such as the Syrian Catholic Bank, South India Bank, Bank of India, Corporate
Bank, Bank of India, Baroda Bank, Canara Bank and Central Bank of India.
The dedication of the Swadeshi International Group focused on the opening of several private banks in
Dakshina Kannada and the Udope district, which were established at that time and were recognized as the
southern province of Canara (South Kinneret). Four nationalized banks and some of the central banks in the
private sector operate in this area. Therefore, the uninterrupted district of Kannada Dakshina is recognized as a
"cradle of Indian banks."
The owner of the apprenticeship continued to be British Sir Osborne Smith (April 1, 1935), while D. Dashmod
(August 11, 1943) was the first Indian governor. On September 4, 2016, Urjit R Patel began his journey as the
new governor of RBI, Rajhu Rajan turns.
During World War I (1914-1918) until the end of World War II (1939-1945), two years later, until the
independence of India, the banking sector of India was a challenge. . The first few centuries of World War I
Topic: A Critical
remained turbulent, and the banks simply failed despite the indirect assimilation of the Indian economy due to
war-related economic activity.
At least one bank in India failed between 1913 and 1918 as indicated below
Table:
1.1.1 Post-Independence:
In 1938-1946, the banks' branches tripled to 3,469 and deposits four times to ARI.962 However, the separation
wall of India in 1947 had a negative impact on the economies of Punjab and West Bengal, challenging the
banking forums for months. The Government of India has proposed several steps to play an active role in the
economic life of the country and the decision on industrial policy adopted by the government in 1948 created a
mixed economy.
This resulted in greater participation in various sectors of the economy, including banks and finance.
Topic: A CriticalAnalysis on Non-Performing Assets of Public Sector Banks
The best steps for banking regulation included:
 The Central Bank of India, the Indian Banking Center, was introduced in April 1935, but was
nationalized on January 1, 1949, with the following statements of the Central Bank of India Law
(Transfer to Public Ownership), 1948 (RBI, 2005).
 In 1949, the Banking Supervision Act was passed, authorizing the Central Bank of India (RBI) "to
regulate, supervise and inspect the banks in India."
 The Banking Supervision Law also stated that it was not possible to open the RBI license holder, and
two banks would not have collective directors.
1.1.2 Nationalizations in the 1960s
Despite the directives, regulator and guidelines of the Reserve Bank of India, Indian banks, with the exception
of the Central Bank of India (SBI), are kept and operated by individuals. In the 1960s, the Indian banking
sector developed an important instrument to simplify the expansion of the Indian economy. However, he was
found to be a major employer and was followed by a discussion of the nationalization of the banking sector.
Indian Prime Minister Indira Gandhi described the purpose of the Indian government at the annual meeting of
every congress in India and any document in the document entitled "Unanswered Visits to the Nationalization
of Banks".
After that, his change was quick and unexpected. The Government of India issued a decree (1969 Order
Concerning "Purchase and Transfer of Companies by Banking Companies") and nationalized the 14 major
commercial banks effective from July 19, 1969. He approved 85% of bank deposits in Israel. Jiaprakash
Narayan, India's national leader, defined the scene as "a real landing for the political wisdom of the party." In
the two weeks following the agreement, the Parliament approved the Banking Companies (Acquisition and
Transfer of Businesses) Law, which was approved by the President on August 9, 1969.
Topic: A Critical
A second step for the nationalization of six more commercial banks came in 1980. The exact reason for
nationalization was to subsidize the government's control over loans. With the second amount of
nationalization, the Indian government measured about 91% of India's banking activities. In 1993, the
government merged with the new Bank of India and the Punjab National Bank. It was the only merger
between the nationalized banks and resulted in a reduction in the number of nationalized banks 20-20 years.
Until 1990, nationalized nationalized banks around 4%, faster than the average growth rate of the Indian
economy.
1.1.3 Liberalization:
India's economic development takes 1991: liberalization, privatization, globalization policy. According to LPG
policy, all the maximum limits of the Indian economy have been completely eliminated and the most difficult
stage in the Indian banking system has been taken.This also changed the scenario of the macroeconomic
world.Repairments were made in the banking sector to improve the health operational standards and financial
financials of banks.
Liberalization in the banking sector in India was observed in the early 1990s, when India adopted a new
economic policy for the development of the country. The Narasima Rao government began its liberalization
policy, which grants licenses to a small number of private banks. For the first time in India, the new private
banks were authorized to provide banking services.
The first bank created in India after the adaptation of the new policy of liberalization of the banking sector was
the World Bank Trust. He later merged with the Eastern Bank of Commerce.
This move towards liberalization and rapid economic growth in India revives the Indian banking sector. Indian
banking sector is growing rapidly with a strong contribution from all sectors of banks: state banks, private
banks and foreign banks.
The next step for the Indian banking sector has been implemented with the proposal to facilitate standards for
foreign direct investment (FDI). All foreign investors in banks can be up to 74% with certain restrictions of the
company.
1.1.4 Current Scenario:
Progress in the banking industry in India is already more qualitative than digital and can be expected to
continue in the coming years. According to estimates made in India Vision 2020, which was prepared by the
Commission for the design of the tenth draft plan the report expects that the rate of expansion of the bank
balance should decrease.
Poor credit public sector (PSB) increased at the end of the second quarter to 9.62 lakh rupees, a large part of
them coming from the company is incomplete, according to the Central Bank. . With a share of 10.3%, India
ranks fifth in the list of countries with the largest number of non-performing assets and is on top of difficulties
between BRICS countries, as revealed by the CARE rating.
In contrast, non-performing assets of private sector banks were significantly lower than 1.9 rupees. Gross non-
performing assets of banks in the public and private sector in 2017 amounted to lakh Rs.9.62, or 1.9 lakh
rupees rupee.
The government said that large companies and companies accounted for about 77 percent of HBC's overall
gross national banking.
Among the largest public sector banks, the State Bank of India (SBI), which had the largest amount of SNAP
in more than Rs. (Rs.49307), Bank Broda (Rupee Rs.46307), Union Bank of India (Rs.38286 Rupee) and
Canara Bank (Rs.38286), Bank of India (Rupee Rs.49307) Rs 39164 crore). In private sector finance, ICICI
Bank had the highest volume of GNR on its books at Rs.44237 rupees, followed by the bank hinge (rs.22136
rupee), HDFC Bank (crore Rs.7644). 8,40,958 gross NPAS crore in December 2017, led by loans surveyed by
industry and agricultural services, government sectors.
There are 8,857 cases resolved in the National Union Court 264 of the Law and the Court of Appeals in the
Law Societies, through which banks seek to restore their debt.
The main function of the Reserve Bank of India (RBI) is to control the supply of money in the economy. To
do this, use tools such as cash reserve ratio (CRR), statutory liquidity ratio (SLR), repo rate and reverse rate of
relaxation. Bad loans increase when banks make bad supply decisions. CRR is planned in advance as a
percentage of net time and time obligations (NDTL).
CRR is the money that the banks must deposit in RBI, for which interest will not be paid. Currently, RBI has
set it at 4%. In this version, banks have to deposit part of their money in relatively safe assets that can be sold
Topic: A Critical
only in government bonds, securities or gold, to produce thickened money if run to the bank.The current SLR
camera is 19.5% .NPAs increase when banks pre-consumers who default on Their payment.
1.1.5 Which banks have the most NPAS?
The gross NPAs of public sector banks increased by 311.22% from Rs. 1, 55,890 crores in 2013 to Rs.6,
41,057 crores in 2017. The gross NPA ratio as a percentage of total assets rose from 3.84% to 12.47%.
Likewise, the gross NPAs of private banks witness an increase of 269.47% from Rs.19, 986 crores in 2013 to
Rs.73, 842 crores in 2017.
1.1.6 How has the government reacted to the NPA crisis?
The Financial Resolutions and the Deposit Insurance Act (FRDI) are the latest attempt to repair the bad debts
of banks. Previous attempts to this end have had moderate success. To recover the outstanding loans, laws
have been adopted, including the IBC Code (Insolvency and Bankruptcy Code), the SARFAESI Securitization
and Reconstruction of Financial Assets Act and Enforcement of Security Interest) Act, and the RDDBFI
(Recovery of Debts due to Banks and Financial Institutions) were instituted. Debt Recovery Tribunals (DBT)
were also set up to fast track proceedings.
1.1.7. What is the Financial Resolution and Deposit Insurance (FRDI) Bill?
The FRDI Bill is aimed at insuring the money of a bank's depositors in the case of an eventuality where the
bank would have to be liquidated. This Bill is similar to the Insolvency and Bankruptcy Code, 2016.
FRDI BILL, 2017 aims to protect customers of financial service providers in times of financial difficulty. It
also aims to inculcate discipline in financial service providers in the event of a financial crisis, limiting the use
of public funds to rescue troubled entities.
The bill would help maintain the financial stability of the economy by guaranteeing adequate preventive
measures and at the same time providing the necessary tools to deal with crises. The bill aims to strengthen
and rationalize the existing deposit guarantee framework for retail depositors. In addition, it aims to reduce the
time and costs associated with the resolution of financial institutions in difficulty.
1.2 TYPES OF BANKS
Private Sector Bank:
Private sector banks are those in which the majority of the capital is held by private shareholders and not by
the government. Private banking is the bank, assets and other monetary services provided by banks to high net
worth individuals (NACRS) with high levels of profits or large assets.
Public Sector Bank:
Public sector banks are banks in which the government has a significant interest. Public separation in the
banking sector is approaching through the nationalization of the Imperial Bank of India (1921) and the
creation of the State Bank of India (1955) as part of an integrated rural credit system proposed by the
Topic: A Critical
committee In the survey on Rural Credit throughout India (1951), public sector banks dominate 75% of
deposits and 71% of advances in the banking sector.
Commercial banks:
Commercial banks are the main types of banks. The word "commercial" means that the banking sector is a
business like any other business. In other words, commercial banks are basically for-profit institutions.
Commercial banks are recognized for the purpose of helping entrepreneurs. These banks raise money from the
general public and grant temporary loans to entrepreneurs in the form of credit overdrafts, etc. Commercial
banks offer a variety of services, such as checks receivable, bill changes and payments, from one place to
another. In India, commercial banks are recognized in the Companies Act of 1956. Policies on deposits, loans,
interest rates, etc. These banks are imposed by the Central Bank.
Development Banks:
Development banks are part of the capital market of a country. In India, they are called public monetary
institutions. These are private financial institutions that provide long-term financing to large and medium-sized
industries. They also perform various promotional functions to accelerate the pace of capital formation in the
country. Industrial / development banks raise cash by issuing shares and obligations and as long-term loans to
industries. The essence of this bank is to provide long-term loans for the growth and modernization of the
industry. In India, such banks are widely documented after independence.
Cooperative banks:
Cooperative banks are formed under the laws of the cooperative society of the country. In India, a bank of this
type was created to congratulate the main credit companies not developed at low interest rates. However, some
cooperative banks also operate in rural areas. . Most of the time they offer admiration facilities to small
farmers, paid employees, small industries, etc. Cooperative banks are accessible in rural and urban areas. The
functions of these banks are now similar to commercial banks.
Banks of territorial development:
These banks (called land mortgage banks in India) provide sustainable credit to farmers for land development.
They also provide long-term loans to farmers to acquire new land. . They also help the development of the
earth. In India, the government helped these banks. The government has some bonds issued by these banks.
Financing agriculture is a big risk and commercial banks are generally not very interested in financing the
agricultural sector.
Investment banks:
When a company wants to issue new shares or new claims, an investment bank acts as an intermediary. From
time to time they also make assets in these companies by buying equity shares.
Merchant banks:
A merchant bank helps a company sell its new shares to the general public. The main job of a vendor bank is
to raise money to lend to the industry. They do not lend money themselves, but help those who want to borrow
money to borrow.
Foreign banks:
There are many foreign banks in India, such as Citi Bank, Hong Kong and Sanghai Bank and Bank of
America. These are not public institutions like Indian commercial banks.
Central bank:
Topic: A Critical
The central bank is the banker's bank and it is also the government banker. He controls the entire banking
system of the country. The Reserve Bank of India (RBI) is the central bank of India and the Bank of England
is the Bank of England.
Regional rural banks:
Regional rural banks are publicly traded (state-owned) in different states of India. They were designed to
provide rural areas of India with basic banking and monetary services. But nevertheless,
The RRB may have established branches for the urban operation and its treatment area may also include urban
areas.
The treatment area of the RRB is not completed, as reported by the government of India, which covers one or
more districts of the state. RRBs also perform a variety of different functions.
RRBs perform various functions in following heads:
1) As long as banking amenities to rural and semi-urban areas.

2) The government process like sum of salary of MGNREGA labour, sharing of departure fund etc.
3) Providing Para-Banking facilities like locker facilities, debit and credit cards.
4) Small man's bank
1.3 NUMBER OF PEOPLE WHO ARE AVAILABLE IN BANKING

INDUSTRY
99% of Indian households are covered by a bank account
Topic: A Critical
Since the government announced the elimination of high-value notes on November 8, there has been a great
deal of controversy over bank accounts opened in the last two years under JanDhanyojana (JDY). As the
government spokesman and his group cited the information of JDY to promote the universalization of the
banking sector in the country, he questioned the reliability of these figures, noting that many accounts can be a
false beneficiary worthy of this scheme. New data from a large-scale, self-contained national survey of agents
can help keep this argument off-guard. The review also shows that an important part of the family with access
to the immobile bank does not use a banking instrument to save or invest, which is also reliable with what the
official data shows.
1.4. OPPORTUNITIES OF BANKING INDUSTRY
 A rising economy.
 Banking deregulation.
 Increased client borrow.
 An increase in the number of banks.
 An increase in the money supply.
 Low government-set credit rates.
1.5. CHALLENGES FACED BY INDIAN BANKS
The bank division in India has made a rapid stride in reform & aligning itself to the new business
surroundings. One of the main challenges that Indian banks are opposite today is how to manage with spirited
forces in order to make stronger their balance sheet. Nowadays, banks are whimper with a load of Non-
Performing Assets. It is truly felt that these debts, if not healthier, will eat into the very vitals of banks.
1. High Transaction Costs:
Topic: A Critical
The high transaction cost of carrying non- performing property in the books is the main anxiety of the Indian
bank. The growth led to strains in the working competence& the build-up of non-performing assets in the loan
portfolio.
2. Revolution of Information Technology:
Banks in India are subject to great pressures to perform or else their very survival would be in jeopardy. The
application of Information Technology & e-banking is becoming the order of the day with the banking system
directing towards virtual banking.
3. Intense Competition:
The foreign banks were allowed to set up shop in India. Many new players have entered the market such as
foreign banks, private banks, non-banking finance companies, etc. For growth survival in the environment of
cut-throat competition, banks have to follow the procedure and resourceful customer service, which calls for
suitable customer-centric policy customer friendly procedures.
1.6 MAJOR PLAYER IN INDIA
1. CENTRAL BANK OF INDIA

2. HDFC BANK LTD
3. ICICI BANK LTD
4. STATE BANK OF INDIA LTS
5. PUNJAB NATIONAL BANK LTD
6. BANK OF BARODA LTD
7. FEDERAL BANK LTD
8. AXIS BANK LTD
9. ING VYSYA BANK LTD
10. IDBI BANK LTD
CHAPTER-2
LITERATURE REVIEW
Dutta. A (2014): This document uncovered the progress of the NPA in public and private sector banks and
analyzed unproductive assets by segment of commercial banks. To solve this study, information was collected
from secondary sources, such as a report on trends and growth of the banking sector in India, the RBI, the
Currency and Finance Report, the Economic Surveys and Banking Development. India.
Das S. (2010): In this article, the author has tried to analyze the parameters that are in fact the main reasons for
the NPA, and are mainly cheating in the market, deliberate evasion attempts, deficient supervision,
consequences, the refusal of the banks, the deficient legal framework. Lack of business skills and capital
deviation.
Ahmad, Z., Jegadeeshwaran & M. (2013): The current document is written in the NPA and the causes of the
NPA. The secondary data were collected over a period of five years and analyzed by average, CAGR,
ANOVA and bank classifications. Banks have been classified according to their presentation in the
management of the NPA. The effectiveness of the management of the NPA by the nationalized banks has been
verified.
Ranjan, R., Dhal, S.C. (2013): This document has revealed a realistic tactic for the study of unproductive loans
by commercial banks in India through regression analysis. The practical analysis shows how the three main
sets of economic and financial factors affect NPAs, namely credit conditions, bank size, risk preferences and
macroeconomic shocks.
Topic: A Critical
Reddy, P. K. (2002): This article presents the skills of other Asian countries in the management of NAPs. It
also appears as a consequence of the improvements in the NAPs and advises the mechanisms to handle the
difficulty taking advantage of the experiences of other countries.
Joseph, A. L. (2014): This paper focused on NPA trends in the banking sector: internal, external factors and
other factors that mainly subsidize the increase of the NPA in the banking sector and also suggest easing the
burden of the NPA.
Kamra, S.D. (2013): this document examines the situation of the NAPs in particular the nationalized banks,
such as the State Bank of India (SBI), the National Bank of Punjab (PNB) and the Central Bank of India. India
(CBI). It focuses on the policies followed by banks to carry out NPAs and suggests a plan for the rapid
recovery of NPAs.
Patidars Kataria, A. (2012): The study focused on the percentage of NPA as priority delivery mechanisms of
the sector; the virtual study was conducted between the SBI and the Associate, the former private bank and the
new banks, the bank Discover the substantial difference of the NPA and also discover the significant influence
of the priority segment that communicates with the total NPA of the banks using tools statistics Like the
regression analysis and the reason analysis.
Saddy, N.K. (2011): a study was discovered to find out the NPA, the factors responsible for its contribution to
the NPA, the level and reasons for the high rates of NPA and its effects on Indian banking operations.
Satpathy, I, Patnaik, B.C.M. (2010): the current document attempted to examine why the NPAs were
established in commercial real estate loans. For this non-payment, the loans were measured using
questionnaires that were intended to be solved and finally suggestions were given to solve the problem.
Topic: A Critical
Chaudhary, K., Sharma, M. (2011): This document has attempted to analyze the efficiency with which
banks in the public and private sectors have managed the PNAs. For the analysis, a statistical instrument was
used to forecast trends.
Patnaik, B.C.M., Satpathy, I. (2011): This document attempts to analyze the trend and digital design in the
development of the NPA by referring to the instruction of the loan system in Orissa. An effort was made to
find the reason, through a questionnaire, a survey among dropouts, students from different universities, and the
author also gave suggestions to overcome these problems.
Bhatia, B.S., Waraich and s., Gautam, V. (2013): This document was prepared by the Central Bank of
Cooperatives of the District of Punjab. Its objective was to analyze the effect of new product lines on non-
productive advances in cooperatives. Banks and trends in the NPA contradict credit systems. In conclusion, a
comparative analysis was carried out between the banking and sectoral sectors to identify the gaps and suggest
methods to improve the management of the NPA.
CHAPTER - 3 i i
NON-PERFORMING ASSETS i
3.1 iWhat iis iNon-Performing iAsset?
An iasset, iincluding ia ileased iasset, ibecomes inon-performing iwhen iit iceases ito igenerate iincome ifor ithe ibank.
A iNon-Performing iAsset i(NPA) iis ia iloan ior ian iadvance iwhere,
1) Interest iand/ ior iexpense iof imajor istay ibehind iunpaid ifor ia istage iof isupplementary ithan i90 idays iin
i admiration iof ia iphrase iloan,
2) The iaccount iremains' iout iof iorder' ias iindicated iat iparagraph i2.2 ibelow, iin irespect iof ian iOverdraft/Cash
i Credit i(OD/CC), i
3) The ibill iremains ioverdue ifor ia iperiod iof imore ithan i90 idays iin ithe icase iof ibills ipurchased iand idiscounted, i
4) The ipayment iof ileading ior icuriosity ito ihand ion ileftovers iworried ifor itwo icrop iseason ifor ismall idistance iend
i to iend icrops,
5) The iamount iof iliquidity iresource ileftovers iexceptional ifor imore ithan i90 idays, iin ihigh iopinion ito ia
i securitization ideal iundertake iin iconditions iof istrategy ion itop iof isecuritization iFebruary i1, i2006. i
6) In ihigh iopinion iof ilacking iin ioriginality itransactions, ithe iunpaid ireceivables irepresentative ihelpful imark-to-
market ivalue iof ia iplagiaristic icontract, iif ithese iremain iunpaid ifor ia iperiod iof i90 idays ifrom ithe iparticular idue
i appointment ifor iexpense.
7) Banks ishould, icategorize ian iaccount ias iNPA ionly iif ithe inotice idue iand iemotional ithroughout iany
i neighbourhood iis inot iservice ifully iwithin i90 idays ifrom ithe iend iof ithe isection. i
3.2 TYPES OF NON-PERFORMING ASSETS

i i i i
1) iGross iNPA
2) iNet iNPA
Gross iNPA:
Gross iNPAs iare ithe itotting iup iof iall iloan ipossessions ithat iare isecret ias iNPAs ias iper iRBI iguide iopinion ias ion
i sense iof ibalance iSheet idate. iGross iNPA imirror ithe ireal iNPAS iand ithe iworth iof ithe iloans iended iby ibanks. iIt
i consists iof ievery isingle ione ithe iunusual iassets ilike ias isub-standard, idoubtful, iand ilossassets.
It ican ibe icalculated iwith ithe ihelp iof ifollowing iratio:
Formula: iGross iNPAs iRatio i= iGross iNPAs i/Gross iAdvances.
Net iNPA:
Network iNPAs iare ithose ikind iof iNPAs iin iwhich ithe ibank ihas ideduct ithe icondition iconcerning iNPAs. iNet iNPA
i is iobtain iby ireducing ithe irequirements ifrom iGross iNPAs iand ishow ithe idefinite iburden iof ibanks. iWhile iin iIndia,
i bank istability isheets icontain ia ihuge iamount iof iNPAs iand ithe iprocess iof idevelopment iand iwrite ioff iof iloans iis
i very itime iovershadowing, ithe iprovisions ithe ibanks ihave ito imake iagainst ithe iNPAs iaccording ito ithe icentral
i bank iguiding iprinciple, iare iquite isignificant. iThat iis iwhy ithe idistinction ibetween igross iand inet iNPA iis iquite
i high.
It ican ibe icalculated iby ifollowing:
Formula: iNet iNPAs i= iGross iNPAs i- iProvisions ion iGross iAdvances.
3.3 CATEGORIES OF NPAS:

i i i
Banks iare inecessary ito iclassify inonperforming iresources ifurther iinto ithe inext ithree icategories ibased ion ithe
i phase ifor iwhich ithe ibenefit ihas iremained inonperforming iand ithe idependability iof ithe idues:
1. iSubstandard iAssets i
2. iDoubtful iAssets i
3. iLoss iAssets
1. iSubstandard iAssets:
With iresult ifrom i31 iMarch i2005, ia iunsatisfactory iasset iwould ibe ione, iwhich ihas iremain iNPA ifor ia istage iless
i than ior iequivalent ito i12 imonths. iIn isuch isuitcases, ithe iexisting inet ivalue iof ithe iborrower/ isponsor ior ithe itopical
i market ivalue iof ithe iprotection iexciting iis inot ienough ito imake isure idevelopment iof ithe idues ito ithe ibank iin ifull.
i In ipreceding iwords, isuch i i iprofit iwill ihave iwell idefined icredit iweakness ithat iput iat irisk ithe iinsolvency iof ithe
i debt iand iare iconsidered iby ithe idistinct iopportunity ithat ithe ibanks iwill icontinue ia inumber iof iloss, iif ideficiency
i are inot icorrect.
2. iDoubtful iAssets:
With iresult ifrom iMarch i31, i2005, ia iadvantage iwould ibe itop isecret ias idoubtful iif iit ihas iremain iin ithe
i unsatisfactory icollection ifor ia istage iof i12 imonths. iA imove iforwards iconfidential ias idoubtful ihas iall ithe
i weaknesses iinherent iin iassets ithat iwere iclassified ias isubstandard, iwith ithe isupplementary iquality ithat ithe
i weakness imake icollection ior iinsolvency iin ifull, i- ion ithe ifoundation iof iCurrently irecognized ifacts,
i circumstances iand ivalues i- ihighly idoubtful iand iimplausible.
3. iLoss iAssets:
A ithrashing ibenefit iis ione iwhere iloss ihas ibeen irecognized iby ithe ibank ior iinterior ior ioutside iauditors ior ithe iRBI
i examination ibut ithe iamount ihas inot ibeen ion ipaper ioff iwholly. iIn iother iwords, isuch ian iasset iis icareful
i uncollectible iand iof isuch ilittle ivalue ithat iits icontinuation ias ia ibankable ibenefit iis inot inecessary ieven ithough
i there imay ibe isome irecover ior irecuperation ivalue.
3.4 IMPACT OF NPAS ON BANKING OPERATION

i i i i i i
The iefficiency iof ia ibank inot ialways ireflected ionly iby ithe isize iof iits ibalance isheets ibut ialso ithe
1) The iNPAs ido inot iproduce iprofits imeant ifor ibanks iother ithan ias ithe isame ioccasion ibanks iare inecessary
i to imake iavailable iprovisions ifor iNPAs ifrom itheir ipresent iprofits.
2) The iNPAs icontain iunhelpful ishock ion iarrival ion iresources.
3) The icurrent iprofits iof ithe ibanks iare ieroded ibecause ithe iproviding iof idoubtful idebts iand
4) Written ioff ias ibad idebts iand iit ilimits ithe irecycling ifunds.
5) Cost iof icapital iwill igo iup.
6) The ieconomic ivalue iaddition i(EVA) iby ibanks igets iupset ibecause iEVA iis iequal ito ithe inet ioperating
i profit iminus icost iof icapital.
7) The icapital iadequacy iratio iis idisturbed.
8) The iinterest iincome iof ibanks ireduced iis ito ibe iaccounted ionly ion ireceipt ibasis.
3.5 REASONS BEHIND THE FAILURE OF INDIA'S PUBLIC SECTOR BANKS (PSBS)
i i i i i i i i i i
Public isector ibanks i(PSBS) iwere ithe imainstay iof iIndia's ibanking iand ifinancial isystems. iSince ithe
i nationalization iof ithe iImperial iBank iof iIndia iand iits iconversion ito ithe iState iBank iof iIndia iin i1955, ithe ibanking
i system iof iIndia ihas ibeen ilargely icontrolled iby ithe igovernment.
They ipresent itheir ioffers ito ithe ibanking iforces, iaccording ito ithe isize iand iscope iof ithe icountry, ithey iintroduce ia
i bank iprinting ifor isuitcases iand inormal.
But iare ithe iPSBs iin iIndia ibleed itoday? iThe ianswer iseems ito ibe ia i"yes" iwithout iambiguity. iSeveral iindicators
i seem ito iallude ito ithis. iMany iPSBs iare inow iin idisrepair iand iothers iare ilosing iground ito iyoung iprivate ibanks.
At ifirst iglance, ithe ivery itangible iinefficiencies iof iBSPs iseem ito ibe ithe imain ireason ifor itheir iloss iof iland.
i However, ithere iare ideliberately ideeper ireasons ithat iaffect ithem, iwhich iexplains ithese iintrinsic iinefficiencies.
Lack iof iFresh iCapital iInjection:
The ipublic isector ibanks ihave ibeen iaggressive ito ilift iassets ifor ia ilong ioccasion. ieven ithough ithe iFinance
i Minister iannounce ian ishare iof iRs.7, i940 icrore ifor iPSU ibanks iin ithe inew ifinancial iplan, itheir iassets ineeds
i exceed i$50 ibillion. i iEven ithough iPSBs istay icash-strapped, isecret ibanks iare ireap irefund iby iattainment iimproved
i their imarket ideal iout iall ithrough ioverseas istraight isavings iand ioverseas iInstitutional iInvestments. iWith ithe
i merger iof i iFDI iand iFII, isome iprivate ibanks iare ilikely ito ireap irich idividends
Increasing iNon-Performing iAssets i(NPAs):
The igrowing iNPA iprogram iis ia iwake-up icall ifor iPSB iin iaddition ito ithe igovernment. iAdvanced imedia ireported
i last iyear ithat iPSBs ihad iaccumulated ialmost i86% iof ithe iNPAs iin ithe ibanking idivision icompared ito itheir iprofit
i base iof i75%. iIn ithis istate iof iaffairs, ia igeneral ichange iin ithe igovernance istructure iis ithe itime ifor iPSB, ito imake
i them imore icompetitive iand iincrease itheir imarket ivalue. iThe ireason imay ibe ithe islowdown iin ithe ieconomy, ibut
i the iRBI icalled ifor ibetter igovernance iof ithe iPSBs ilast iyear ito ireduce ithe ilevels iof iMPAs, iwhich iwould iotherwise
i affect isurvival ithe ibank.
3.6 Recovery Measures -Current Practices

i i i i i
Recovery iof iNPA ihas ibecome ithe icritical iperformance iarea i(CPA) ifor ibanks iin iIndia isince iNPA ireduces
i the iprofitability iof ia ibank, iweaken iits ifinancial ihealth iand ierode iits isolvency. iThe ifollowing iparagraph
i discusses ithe ivarious imeasures ithat ithe ibanks iadopt ito irecover ithe inon-performing iassets. i
1. Reminders iSystem i
This iis ithe isimplest iway ito ifollow-up idefault icases. iGenerally, ithe iresponse' ito ithis irecovery imeasure
i particularly ifrom ihonest iborrowers iis iencouraging. i
2. Personal iVisits i/ iContacts i

It iis ian ieffective iand isimple imode ifor irecovery. iBanks iexperience ihas ishown ithis ias ian ieffective
i measure iespecially iin ithe icase iof ismall iborrower iaccounts. iInvolvement iof istaff iat iall ilevels iin ithe ibank
i branch iis inecessary. iFrequent ivisits iare icalled ifor iin ithe icase iof ihardcore iborrowers. iOver ithe iyears iit iis
i observed ithat ithe inumber iof ivisits ito ithe iborrower iis igoing idown idue ito icut iin ithe iworkforce iin ibanks. i
3. Recovery iCamps i
In irespect iof iagricultural iadvances, irecovery icamps iare iorganized iduring ithe iharvest iseason. iIn
i organizing irecovery icamps, ibankers itake ithe ihelp iof ioutsiders, iparticularly irevenue iofficers iin ithe istate
i government, ilocal ipanchayat iofficials, ietc. iBanks igive ipublicity ito ithe irecovery icamp ito ibe iorganized iin
i the iarea. i
4. Recovery iAgents i
Banks iappoint ioutside iprofessional iagencies iwhose iservices iare iutilized ito iascertain ithe iwhereabouts iof
i the iborrowers iand ienforcement iof isecurities. iThere iis isome ihesitancy ion ithe ipart iof ipublic isector ibanks
i due ito ithe iunpleasant iexperience iof isome ifinancial iinstitutions iin icertain icases. i
5. Restructuring i/ iRehabilitation i
The irehabilitation iprogramme iis ifor iraising ithe iunit’s icapacity ito igenerate iadequate iinternal isurplus iso
i that ia icertain iportion iof ithe iinternal isurplus icould ithen ibe iused ifor ireducing ithe iirregularity iin ithe
i account. iThe ibank iundertakes ithe ifollowing iactions ias ipart iof ithis iprogramme i- ideveloping iinformation
i system, ireview iof iperformance, imonitoring iareas iof iweakness. i
6. Corporate iDebt iRestructuring i

For ilarge iborrowers ienjoying imultiple ibanking iaccounts iand iwith, icredit ifacilities iabove iRs.20 icrores,
i the iCorporate iDebt iRestructuring i(CDR) ibody ihas ibeen icreated ito ifacilitate idebt irestructuring. iCases iof
i DRT, iBIFR iand iwillful idefaults, idoubtful iand iloss iaccounts iand isuit ifiled icases iare ioutside ithe ipurview
i of ithe iCDR. iThus, istandard iand isub204 istandard iaccounts iare ionly ieligible ito iseek iCDR ishelter. iNo
i banker/ iborrower ican itake irecourse ito iany ilegal iaction iduring ithe i‘stand-still’ iperiod iof i90-180 idays. i
7. Loan iCompromise i
Once ia iNPA iunit iis ievaluated iand ifound ithat iit icannot ibe irevived, iit ibecomes iincumbent ion ithe ibranch
i to iinitiate irecovery iproceedings. iSince imoney ihas igot itime ivalue iwhatever irecovery imeans ia ibranch
i adopts ishould iresult iin iquick irepayment. iAs ia irecovery imeans, ithe, ibank ican ieither igo ito ia icourt ipraying
i for ia idecree ior inegotiate iwith ithe icustomer ifor ia icompromised isettlement. iIn igeneral, iit iis iexperienced
i that ifiling isuits iand irecovery iof idues iof ibanks ithrough ithe iprocess iof icourts iis icumbersome, iexpensive
i and itime iconsuming. iA icompromise iin ibank iloans imeans iagreeing ito iborrower’s irequest iof iaccepting ia
i part iof ioutstanding idues iin ithe ibooks iof ithe ibank ias ifull iand ifinal ipayment ior iallowing ifor ithe inon-
compliance iof ithe iterms iof ithe iloan, iafter ianalyzing ithe ialternative icourses iof iaction, igenuineness iand
i capacity iof ithe iborrower ito irepay. iIt iis ialso icalled ias ivoluntary idebt ireduction ior iscaling idown iof idues.
i Loan icompromise ihelps ithe ibank ito irecover idues iwith ileast ipassage iof itime iand iminimize ifurther ithe
i loss iof iearning iopportunities. i
8. Security iAdjustment ior iAppropriation iof iSubsidy i

Where ireadily iencashable isecurities isuch ias iFixed ideposits, iLIC iPolicies, iGovernment iSecurities, ietc.
i are iavailable iand iif iborrowers iare inot iresponding ito irequest ifor iregularization iof iaccounts, isuch
i securities iare iencashed iafter igiving idue inotice ito ithe iborrowers, iguarantors, ietc. iIn icase iof isponsored
i schemes, ithe isubsidy iamount iis ikept iin ideposit iaccounts iof ithe ibank ifor iappropriation iafter ia ispecified
i lock-in iperiod. iIn isuch icases iwhere isubsidy iis iavailable iand ithe iaccount iis ilikely ito ibecome iNPA, ithe
i subsidy iamount iis iappropriated iin ithe iloan iaccount. i
9. Recalling iof iAdvances i

When irigorous ifollow-up iefforts ido inot iyield iany ifruitful iresult, ia ifinal irecall inotice iis iusually iserved
i asking ithe iparty ito irectify ithe iirregularity iin ithe iaccount iimmediately. iRecall inotice ishould ibe isent ionly
i if ithe iborrower iis ia iwillful idefaulter, ibank iliability iis isignificantly iuncovered, iborrower irefusing ito
i renew ithe icredit ilimit, ietc. iThe iexercise iof irecalling iof iadvances iis ione iof ithe irecovery istrategies iwhich
i have ibeen ifound ieffective iin irespect iof igenuine iborrowers iwho iwould iavoid ifacing ilegal iaction ithrough
i the icourts
10. Sarfaesi i
Topic: A Critical
The iSecuritization iand iReconstruction iof iFinancial' iassets iand iEnforcement iof iSecurity iInterest iAct
i 2002 i(SARFAESI) icame ihandy ifor ibanks ito iaccelerate ithe irecovery iprocess. iThe iAct iempowers ithe
i banks ito itake ipossession, imanage iand isell isecurities iwithout ithe iintervention iof ia icourt/ itribunal. i
11. Filing iSuits

Filing iof isuit iis ithe ilast iresort iavailable ito ia ibank ifor irecovery iconsidering ithe idisadvantages iof ifiling
i suit. iIt iinvolves iincurring icourt ifees iand iexpenses ifor iproviding ithe iwitness iof ithe ibank. iThe ilong idrawn
i process iof ilegal iproceedings iresults iin idelay iin idisposal iof isecurities, iby iwhich itime, ithe ivalue iand
i conditions iof ithe isame imay ideteriorate. iGenerally, iit imay itake i6-7 iyears ito iget ithe isuits idecreed. iThe
i money ivalue iwould ihave ieroded isubstantially iby ithat itime. iSale ithrough icourt iturns iout ito ibe idistress
i sale ion iaccount iof ilack iof ibidders iand ihence ino ifair ireturn iis iguaranteed. iAfter ifiling ithe isuit, iborrowers/
i guarantors istart idisposing iof itheir ipersonal iassets iand ihence irecovery iof ibank idues iis ilikely ito iprove
i difficult. iMoreover, ithe irealized ivalue isometimes idoes inot imeet ieven ithe iexpenses itowards
i maintenance, isafe ikeeping iof ithe isecurities iand iliquidator’s/ iCommissioner’s iexpense/ ifees. i(Canara
i Bank, i2001). iIn ithis ilight, ithe iissue ithat ineeds ideliberation iis ithat idespite ibanks iresorting ito ifiling iof
i suits, iwhether ithe ilegal iprocess ihas ibeen ibeneficial iin irecovery iof idues iof ibanks iand ienforcement iof
i credit idiscipline i(RBI, i1999).
12. Write-off i
If iit iis iun-remunerative ieither ito ifile isuit iand i/ ior icontinue ithe iaccount iin ithe ibank’s ibooks, ibanks iwaive
i off ilegal iaction iand/ ior iwrite-off ioutstanding idues. iBy iwaiver iof ilegal iaction, ibanks imay itake ia idecision
i not ito ipursue irecovery ithrough icourt iof ilaw. iBut ifor iwrite-off, ithe ibanks idecide ito iclose ithe iaccount iby
i transfer iof ifunds ifrom itheir iprofits ito ithe iloan iaccount.
i
Write-off iis iproposed iunder icertain icircumstance isuch ias: i

(i) Borrowers iare iadjudicated ias iinsolvents.
(ii) Revenue iauthorities iunder ithe iState iPublic iRecovery iAct ihave irecovered isome iamount iand ithere
i is ino ifurther ichances iof iany irecovery.
(iii) Both iborrower iand iguarantor iare iuntraceable iafter iselling itheir iassets. i
(iv) Decrees iremain iunexecuted iseveral itimes idue ito ireasons ibeyond ithe icontrol iof ithe ibank. i
However, ieven iafter iwrite-offs, ia ibank icontinues iits irecovery iefforts.
3.7 MEASURES TO CONTROL NPAS
i i i i
It iis iproved ibeyond idoubt ithat iNPAs iin ibank iought ito ibe ikept iat ithe ilowest ilevel.
This iwould ibe ipossible ionly iif itwo ipronged iapproaches iviz.
A) iPreventive imanagement
B) iCurative imanagement
A. Preventive iManagement:
Credit iAssessment iand iRisk iManagement iMechanism:
A ipermanent isolution ito ithe idifficulty iof ithe iNPA ican ionly ibe iachieved iwith ia igood icredit iassessment
i and ia irisk imanagement imechanism. iThe idocumentation iof ithe icredit ipolicy iand ithe icredit iaudit
i immediately iafter ithe isanction iare inecessary ito iimprove ithe iexcellence iof ithe icredit ievaluation iin ithe
i banks. iIn ithe icase iof ia iliquidity iproject, ithe ibanking isystem iis ienthusiastic iabout ithe iidea iof istimulating
i concessional iloans ifor ithe iquality iof iassets, iwhich iraises iconcerns iabout iunfavorable iselection iand ithe
i possible idanger iof ian iaddition ito ithe iasset. iAPN iactions. iIt iis imandatory ithat ithe ibanking isystem ican
i reduce, iif inot iavoid, ithe irisk iof isupplementing iwith iPrudential's istandards.
Organizational irestructuring:
With irespect ito ithe imost iimportant idomestic ifactors ifor ithe iANP, iit iis iup ito ithe ibank ito icontain ithe isame
i problem. iThese iwill ibe iincorporated iinto ithe idevelopment iof ithe imanagement irestructuring iin ithe iarea
i of imanagement, iwhich iwill iallow ito iadequately ievaluate ithe imerit iof ithe icredit iand ichange ithe ifocus iof
ithe ibanks ito ithe iofficially iauthorized imeasures, iwhich iis igenerally iconsidered ia icalculation iof ilast
i resort.
Reduce idependence ion iinterest:
Indian ibanks idepend iheavily ion iloans iand iinvestments. iBanks iin ideveloped icountries ido inot idepend ion
i this iincome, iwhile i86% iof ithe iincome iof iIndian ibanks irepresented iinterest iand ithe irest iof ithe iincome
i was ifree. iThe ibanker ican igenerate ia icompetent inet imargin iby iinvesting iin isafer isecurities ibut inot ihigh
i rates. iThis ifacilitates ithe iprogressive ilimitation iof ithe ihigh inumber iof iAPNs. iIt iis ipossible ithat ithe
i performance iof ithe istandard iloan iadvances ithe inet icost iof ithe ipredetermined isupplies iand iservices iin ino
i more ithan ithe iaverage iperformance ion itelevision, ibecause ithe irisk iand ithe icost iof ithe iservices iare inot
i taken iinto iaccount.
APM ipotential iand ilimits ito icheck:
The iaccounts iand ipotential ilimits irequire ia iquick ianalysis iand ia icorrective imethod iso ithat ithey ido inot
i fall iinto ithe icategory iof iNPA. iThe ibanking icompany iauditor imust iobserve iall iexceptional ifinancial
i records, iwhile iadmiring ithe irecords iwith icredit ilimits ithat iexceed ithe ithresholds, iso ithat ithe inew inon-
standard iassets ican ibe ikept iunder icontrol.
B. Curative iManagement:
LokAdalats:
The iLok iAdalats iinstitution ihelps ibanks iresolve itheir idifferences ibetween iuncertain imonetary iaccounts
i and iloss igroups. iThese iare iproving ito ibe ia iwinning iorganization iin iresolving ipremiums ifor ismaller
i loans. iThe iLokAdalats iand ithe iDebt iRecovery iCourts ihave ibeen ienabled ito iunravel iLokAdalats ito
i decide ithe iNPAs iof iRs. i10 ilakhs iand imore. iThe iorganization iof iLokAdalats iconstitutes, iin iaccordance
i with ithe i1987 ilaw ion ithe ilegal ipower iof iservices, iassistance iin ithe isettlement iof idisputes ibetween ithe
i parties ithrough iconciliation, itrial, iarbitration ior ifriendly isettlement.
Asset iReconstruction iCorporation i(ARC):
The iNarasimham iCommittee ion ithe iFinancial iSystem i(1991) irecommended ithe icreation iof
i reconstruction ifunds i(ARF). iThe ifollowing iconcerns iwere iexpressed iby ithe icommittee. iAccording ito
i the iNarasimham iAsset iReconstruction, ithe icrisis ithat iwould icentralize iall ifunds iin iIndia iwould iseverely
i hamper itheir irecovery iefforts idue ito ithe ilack iof igeographical iscope iof ieach ibank iand ilarge ibudget
i deficits. iThere iwill ibe ia iproblem iof iFRA ifunding. iSubsequently, ithe iNarasimham iCommittee ion
i Banking iSector iReforms irecommended ithe itransfer iof ifixed iassets ifrom ibanks ito ithe iCRA.
i Subsequently, ithe iVarma iCommittee ion ithe iRestructuring iof iPublic iSector iBanks iin iDifficulty ialso
i considered ithe iseparation iof ithe iNPAs iand itheir isubsequent itransfer ito ithe iARF iis ian iimportant ielement
i of ia igeneral irestructuring istrategy ifor ibanks iin idifficulty. i. iIn irecognition iof ithe isame iARC, ia ibill iwas
i approved ito iregulate ithe isecuritization iand ireconstruction iof ifinancial iassets iand ithe istrengthening iof
i guarantees. iICICI iBANK, ithe iState iBank iof iIndia iand iIDBI ihave ipromoted ithe icountry's ifirst iasset
i renewal icompany. iThe icompany iis idedicated ito iasset irecovery iand iinsolvency. iBanks ican iassign ithe
i NPAs ito ithe iARC iat ia ifavorable iprice. iThe igoal iof iARC iis ito ipromote ithe ibonds iand igo ithrough ithe
i essential isteps ito idirectly irevitalize ithe iborrowers' iNAPs. iThis iprovides ian ioverview iof ibanks' ibalance
i sheet ifor iterm iloans. iIn iaddition ito irenewing iassets iand iARCs, ithe iAct ideal iwith ithe isubsequent imainly
i aspects:
1) iSecuritization iand iSecuritization icompany
2) iEnforcement iof iSecurity iInterest
3) iformation iof ia icentral iregistry iin iwhich iall isecuritization iand ibenefit irebuildingdealings ias
i well ias iany iconfiguration iof iprotection ihappiness ihas ito ibe ifiled.
The icorporate idebt irestructuring:
The icorporate idebt irestructuring iis ione iof ithe imethods ioptional ifor ithe idecrease iof iNPA i.Its ipurpose iis
i to iensure ia iappropriate iand itransparent iapparatus ifor ireorganize iof icorporate idebts iofcorporate ientity
iaffected iby ithe icausal ifactors ioutside ithe ipurview iof iBIFR, iURTother ilegal ievents ifor ithe ibenefit iof
i concerned.
The iCDR ihas ithree itier istructures:
1. iCDR istanding iforum i
2. iCDR iempowered igroup i
3. iCDR icell.
The iMechanism iof ithe iCDR:
It iis ia ivoluntary iorganization ibased ion idebtors iand icreditors icontract. iIt iwill inot iapply ito iaccounts
i Involving ione imonetary iinstitution ior ione ihave ian iaccount iinstead iit icovers imultiple ibanking iaccounts,
i syndication, igrouping iaccounts iwith iexceptional iexposure iof iRs i20 icrores iand iabove iby iBanks iand
i institutions.
The iCDR isystem iis iappropriate ito icriterion iand isub- istandard iaccounts iwith ipotential icases iof
i NPAs igetting ia ipriority. iIn iadding iup ito ithe isteps itaken iby ithe iRBI iand iGovernment iof iIndia ifor
i impressive ithe i185 ifrequency iof inew iNPAs iand icreating ilegal iand iregulatory isurroundings ito ifacilitate
i for ithe iimprovement iof iexisting iNPAs iof ibanks, ithe ifollowing imethod iwere iinitiate ifor idecrease iof
i NPAs.
Circulation iof iInformation iof iDefaulters:
The iRBI ihas iput iin iplace ia isystem ifor ibulletin icirculation iof idetails iof iwilful idefaulter iof ibanks iand
i monetary iinstitutions. iThe iRBI ialso ipublish ia ilist iof iborrowers i(with iexceptional iaggregate irupees ione
i crore iand iabove) inext ito iwhom ibanks iand imonetary iinstitutions iin iRecuperation iof ifunds ihas ifiled isuits
i as ion i31st iMarch ievery iyear. iIt iwill iserve ias ia ican imaking ian iallowance ifor ia irequest ifor inew ior
iadditional icredit ilimits ifrom ifailure ito ipay iborrow iunit iand ialso ifrom ithe idirectors, iproprietor iand
i partner iof ithese ientity.
Recovery iAction iAgainst iLarge iNPAS:
The iRBI ihas iconcentrating ithe iPSBs ito iexamine iall icases iof iwilful iDefault iof iRs.1 icrore iand iabove ifile
i criminal icases inext ito iwilful idefaulter. iThe iboard iof idirector ireconsider iNPAs ifinancial irecords iof icrore
i and iabove iwith iparticular iorientation ito ifix istaff iaccountability iin iseparately.
Credit iInformation iBureau:
The iinstitution iof iin iorder isharing iagreement iis inow ipossible ithrough ithe inewly iformed iCredit
i Information iBureau iof iIndia iLimited i(CIBIL) iit iwas iset iup iin iJanuary i2001 iby iSBI, iHDFC, iand itwo
i foreign iskill ipartners. iThis iwill istop ithose iwho itake ibenefit iof ilack iof ischeme iof iin iorder isharing iin ithe
i middle iof ileading iinstitution ito iborrow ilarge iamount iagainst isame iassets iand ipossessions, iwhich ihas iin
i no imeasures icontribute ito ithe iincremental iof iNPAs iof ibanks.
CHAPTER- 4 i
RESEARCH METHODOLOGY
i
4.1 Research Methodology:

i i
Research iidentifies ithe ifacts iessential ito iaddress ithese iproject iand ithe imethod ifor icollecting iinformation,
i manage iand iimplemented, ithe idata iGathering iprocess, istudy ithe iconsequences iand icommunicate ithe ifindings
i and itheir iimplication. iI iprepared imy iproject ias idescriptive itype ias ithe iobjective iof ithe istudy idemands ithe
i responses iof ithe iquestion irelated ito ifinding ithe ipotential iof ia istudy iof inon-performing iassets iin ithe iIndian
i public isector.
4.1.1 Research Gap:

i i
In ipast ireports ithey ihad itaken iestimated imargin ito imean iis iof iyear-wise, ibut iwe ihave itaken ian iestimated imargin
i means iwhich iis iof ibank-wise.
4.1.2 Problem Statement:

i i i
NPA iproblem iin ipublic isector ibank
4.2 Objectives of the Study:

i i i i
The iproject iis ito idetermine ihow ito imanage ithe iNon-Performing iAssets iin ithe ibanking isector iand iwhat iis ithe
i trend iof iNPAs ifrom ithe ipast iyears. iTo icarry iout ithe istudy iregarding iNPAs ithis iis iof iGreat iconcern iin itoday's
i scenario, ia ivery isimple iapproach iis ifollowed ito idraw ia iconclusion. iThe icomparison iis idone ibetween ithe idata iof
i public isector ibanks. iSince ithis ibeing ia idescriptive iresearch imuch iemphasis iwill ibe igiven ion icomparative
i analysis iof ivarious iyears' isecondary idata ito icarry iout ian iinference,
1) To iunderstand iwhat iis iNon-Performing iAssets iand ito iknow ithe ivarious icategories i i i i i i iand iprovisions iof
i NPA.
2) To ianalyse ithe iperformance iof ithe ibanks ion ithe ibasis iof itheir iefficiency iof i i i i imaintain ithe iNPAs.
3) To iknow iwhy iassets ibecome iNPAs?
4) To istudy ithe ivarious imethods iof irecovering iNPAS
5) To isuggest ivarious ipreventive imeasures iof iNPA imanagement
4.3 Steps of Research Design:

i i i i
Define iThe iInformation iNeeded:
This i i iis ithe ifirst istep istates ithat iwhat ithe iinformation ithat iis iactually irequired. iInformation iin ithis icase iwe
i require ito istudy inon-performing iassets iin ipublic ibanks. iSo, ithe iinformation isought iand iinformation igenerated iis
i only ipossible iafter idefining ithe iinformation ineeded.
4.4 Research Design:

i i
A iresearch idesign iis ia istructure ior iproposal ifor iaccompanying ithe istudy iproject. iIt ispecifics ithe iactions iessential
i for ifinding ithe istatistics ineeded ito iresolve iresearch icomplications. iIn ithis iproject, ithe iresearch idesign iis
i expressive iin inature. i
4.4.1 Data Collection:

i i
After ithe iresearch imethodology, iresearch iproblem iin imarketing ihas ibeen iidentified iand iselected. iThe
i next istep iis itogether ithe irequisite idata. iThere iare itwo itypes iof idata icollection imethod:
• iPrimary iData.
• iSecondary iData.
In iour iproject iwe idecided isecondary idata icollection imethod ibecause iour istudy inature idoes inot ipermit ito iapply
i primary idata icollection.
Secondary iSources:
The isecondary isource iof idata iwere itaken ifrom ithe ivarious ibanks iwebsites, ie-newspaper ietc. iThis imainly
i provided iinformation iabout ithe iNPA iand idifferent iPublic iBanks iin iIndia.
Websites:
• www.rbi.org.in
• www.bankofbaroda.com
• WMA/W iCanarabank.com
• www.sbi.com.in
• www.pnbindian
• www.idbi.com
E-Newspaper:
• The iHindu iBusiness iLine

• Financial iExpress
• The iEconomic iTimes
Research Design: i
Descriptive iResearch iDesign:
It iseeks ito idetermine ithe ianswers ito iwho, iwhat, iwhere, iwhen iand ihow iquestions. iIt iis ibased ion isome iprevious
i understanding iof ithe imatter. iDescriptive iresearch idesign iis iused iin ithis istudy ibecause iit iwill iensure ithe
i minimization iof ithe ibias iand imaximization iof ireliability iof idata icollected. iResearch idesign ihas igot ia ivery
i specific iobjective iand iclear icut idata irequirements. iWe ihave itaken idescriptive iresearch idesign ito istudy iin-depth
i of ivarious ibanks iNPAs.
Research Approach i i
Any imethodology iincludes ithe ioverall iresearch idesign, ithe isampling iprocedure iand idata icollection imethod.
4.5 Limitations of the Study:

i i i i
Limitations ithat iwe ifelt iin iour istudy iare:
• It iwas icritical ifor ius igather ithe ifinancial idata iof iall ithe ipublic ibanks iso ithe ibetter ievaluations iof ithe
i performance iof ithe ibanks iare inot ipossible,
• Since iour istudy iis ibased ion ithe isecondary idata, ithe ipractical ioperations iare irelated ito ithe inon-
performing iassets iare iadopted iby ithe ibanks iare inot ilearned.
• The iscope iof ithe ireport imainly idepends ion ithe iinformation iextracted ifrom isecondary isources iso: ilack iof
i the iavailability iof ithe ifirst-hand iinformation imay iact ias ia ilimitation ito ithe iproject ireport.
• To icollect ithe iprimary idata ifrom ithe icompany iis idifficult itask iand iit iis iconfidential imatter ito ithe ibank iso
i we idecided ion isecondary idata.
CHAPTER-5
ANALYSIS AND INTERPRETATION i i
5.1 iCASE iSTUDY iOF iPNB iFRAUD
i i i i i i i i i i i
How Rs 11,400 cr was been syphoned off from Punjab National Bank?
i i i i i i i i i i i i i i i i i i i
The multi-crore banking scam came to the light, on 14 February and since then it has undergone to become the
i i i i i i i i i i i i i i i i i i i i
largest banking scam in Indian history. With more plans coming out of PNB closets, the story, it seems, is far-off
i i i i i i i i i i i
from over. Here's a brief on what has happened so far
i
Now, iPNB ihas isaid ithat idue ito istructure iupgrade iprocess, iits iCBS iwas inot ibasically iunited iwith iSWIFT ifor
i several iyears. iThe icurrent iscenario iis ithat iPNB ihas icased ia ifraud iof i1.8 ibillion ior iRs.11400 icrore.
Who iare ithe ipeople, icompanies iaccused iof iinvolvement, iwhat ithey isaid?
PNB ibank ihave ianticipate ithree icompany:

1) Solar iExports,
2) Stellar iDiamonds i
3) Diamond iR iUS i
i It isupposed ito iNirav iModi, i i ia ihigh-end ijeweller iwho iturn ihis ieponymous iNirav iModi iprovisions ithat ispread
i from iNew iYork ito iHong iKong. iModi iis iworth i$1.73 ibillion iaccording ito iinternational irating iagency iForbes.
i Modi’s icompanies ishared ithe idetails iwith i, iPNB isaid, iadding iup ithat iit isuspected ia inumber iof iexecutive iat
i foreign idivision iof iother iIndian ibanks ithat iprolonged icredit iwere ialso icaught iup iin ithis.
It ialso ibaptized ias ithe iGitanjali iGems, iGili iIndia iand iNakshatra i– icompanies iwhich iis ibeen ipromoted iby ianother
i jeweler, iMehul iChoksi, iwho iis iknown ias ithe iModi’s iuncle. iGitanjali ilast iweek ideprived ithat iChoksi ihad iany
i association iwith ithe ialleged ifraud, isaying ihe iwould itake i“essential ilegal isteps” ito iget ihis iname iremoved ifrom
i the iCBI icase.
WHY iPNB iFAILED iTO iDETECT iNIRAV iMODI i iFRAUD?

From iwhat iis iavailable iin ipublic idomain iwith iregard ito iPNB ifraud, iit ican ibe isurmised ithat ithe iPunjab iNational
i Bank ifaltered iat ivarious ilevels iin inot ionly ifollowing ithe ibasic ibanking iprinciples iof iloans iand iadvances ibut ialso
i on ithe ifront iof imaintaining ichecks iand ibalances.
WHERE iPNB iFAILED

1) Full iintegration iand ireconciliation iof iSWIFT i(short ifor isociety ifor iWorldwide iInterbank iFinancial
i Telecommunication) itransactions iwith ithe icore ibanking isolution isoftware iwas inot idone ineither isought.
i Audit ireports idid inot ifind iit ia igrave ipotential irisk izone.
2) Rotation iof iemployees iin ievery ithree iyears i- ia istandard ipractice iin ibanks iand ielsewhere i- iwas inot idone.
i One iparticular ibank iofficer, iwho iis ian iaccused, istayed iposted ion ithe isame idesk iin ithe isame idepartment
i for iseven iyears.
3) Every iprobationary iofficer iof ithe ibank iis iasked iduring ithe iorientation iand itraining iprogrammes ithat
i sharing iof ipasswords iis iprohibited ieven iwith ithe icolleagues. iIn ithe i2016 iadvisory, ithe iRBI ihad iwarned
i that iunauthorised isharing iuser iIDs iand ipasswords imight iput iSWIFT itransactions iat irisk. iIn iPNB ifraud
i case, ione iemployee iused itwo ior iat itimes ithree iofficers' ipasswords.
4) The imaker-verifier-approver irestraint ithat iit iwas inot ifollowed iin iissuing ithe iLetter iof iUndertakings ito
i firms ilinked iwith idiamond imerchants iNirav iModi iand iMehul iChoksi. iLoUs iwere idelivered ito icustomers
i having ino iauthorized icredit ilimits. iThe ifollow iup ion ithese iLoUs iwas inot idone ias imany iof ithem iwere inot
i repayed ieven iafter iexpiry iof iagreed iperiod iof i90 idays.
5) No icommunication iwas irecorded ifor iissue iof iLoUs iand iend itransactions icaused iby ithe icredit iassurances.
i Inter-bank icommunication iinvolving ithe ilending ioverseas ibranch iwas inot imaintained. iReconciliation
i and iconfirmation iprocesses iwere inot ifollowed.
i
CAN iFUTURE iBANK iFRAUDS iBE iPREVENTED?

i
There iis ian iRBI iadvisory ion ialmost iall ikinds iof ipossible ibank ifrauds. iYet, ibanks iand icustomers iare iroutinely
i cheated ibut ito icause ia ifraud iof ione ithat iis istill iunraveling iat ithe iPNB irequires ibigger inetworking iof iconniving
i individuals iwho iplay iaround ithe irules iand ibanking isystems.
RBI ihas iconstituted ian iexpert ipanel ito iexamine iwhat iis iailing ibanking ioperations iresulting iin iincreasing icases
i of ibig ifrauds. iThe ipanel ihas ibeen itasked ito irecommend imeasures ito ifix ithe isystemic iloopholes. iThe iCentre iis
i also ianalysing ithe irisk imanagement iframework ifor ibanking isector.
However, iwith ithe iexisting irules iand ilaid idown iprocedures imost iof ibanking ifrauds ican ibe iprevented.
i
WHAT iBANKS iMAY iDO?

1) All ithe ibanks ishould ireview itheir icritical isystems iand iprocesses iincluding ithe iIT isegment iregularly.
i Ethical ibanking ipractices ishould ibe ipreferred. iDisclosures ito iRBI, iSEBI iand iother iregulators ishould ibe
i made iwith iconsistent iperiodicity.
2) Banks ishould iensure ithat ithere iare iadequate isystems iand icontrols iin iplace ito iidentify ipotential irisks iand
i that ithey iare ibeing ifollowed iat iall irelevant ibranches. iSWIFT-CBS ilinking iis imade iobligatory ifor iall
i LoUs. icorroboration ifrom ilending ioverseas itwigs imust ibe idone ifor ieach iof ithe iLoUs.
3) All iinternal iand iexternal iaudits imust ibe icompleted ion itime iat ibranch ilevel. iThe iaudit ireports ishould ibe
i shared iwith ithe igovernment's iauditors iand iexamined iby ithe iRBI, iwhich ishould iconduct ia iseparate iaudit
i every iyear. iIn ithe iPNB ifraud icase, ithe ibank ihas itold ithe ifinance iministry ithat ithe ilast iaudit iby iRBI iwas
i done iin iMarch i2009.
4) Training iof ibank istaff ishould ibe iundertaken ifor iskill iupgradation iand icreating iawareness iabout ithe
i possible imodes iof ibanking ifraud. iUse iof itechnology ifor ipreventing ifraud ishould ibe iencouraged iwithin
i banking iecosystem.
5) New itechnology ilike iblockchain ican ibe iused ito irecord iall ibanking itransactions. iSome ispecialists ihave
i said ithat iblockchain imight idetect ithe ifirst iof ithe iseries iof iscams iin ithe iPNB. iAnd, ionce ia ifraud iis
i detected, iit ishould ibe iimmediately iflagged iby ithe ibank iand iconcerned iagencies iroped iin ifor iprobe.
i
RBI iguidelines iafter iPNB ifraud iare ias iunder.

i
1) The iRBI ion iMonday ihad ireduced ithe itenure iof iguarantees iand istandby iLCs ito ione iyear ifrom ithree iyears
i earlier iand ihad isaid ibanks ishould iensure ithat ithese iguarantees iare iused iby itheir iclients ifor ithe iintended
i purposes ionly.
2) The iRBI ion iTuesday iended iissuance iof iletters iof iundertaking i(LoUs) iand ithe iletters iof icomfort i(LoCs)
i for iimporters iwith ian iinstant ieffect, iin ian iattempt ito iavert ifraud isuch ias ithe ione iapparently icarried iout iby
i Nirav iModi iand iMehul iChoksi.
3) Importers iwould inot ihave ito ibuy ia idollars ifrom ithe imarket.
i
5.2 Gross NPAs to Advance Ratio:

i i i i i
This iratio ishows irelation ibetween iamounts iof iGross iNPA ito iAdvances iin iterms iof ipercentage. iThis iis inegative
i ratio. i iIf ithis iratio iis ihigher, iit ishows ithat ithe ifinancial icapacity iof ithe ibank iis ipoor iand ivice-or ivice-versa. iSo
i the ibanks ishould itry ito iminimize ithis iratio. iHere, ithe iresearcher ihas imade ithe ianalysis iof ithis iratio ifor ithe
i sample iunits ifor ithe iperiod iof i10 iyears ii.e., i2008 ito i2017.
Table iShowing iGross iNPAs ito iAdvance iRatios iin iSelected iNationalized iBanks iin iIndia i(in i%)
YEAR SBI BOB CANARA IDBI PNB

2017 4.9 1.89 1.75 2.57 3.15
2016 3.48 1.62 1.47 1.79 1.79
2015 3.28 1.64 1.53 1.54 1.71
2014 2.98 1.27 1.56 1.38 1.77
2013 3.04 1.84 1.32 1.87 2.74
2012 6.9 10.46 9.63 21.25 12.53
2011 6.5 9.99 9.4 10.98 12.9
2010 4.25 3.72 3.89 5.88 6.55
2009 4.95 2.94 2.49 4.9 5.25
2008 4.75 2.4 2.57 3.22 4.27
iiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiii
Analysis iof ithe iPerformance:
Estimated iMarginal iMeans: iBank iWise iAnalysis i(In i%)
NAME iOF MEAN STANDARD LOWER iBOUND UPPER iBOUND
i BANK i ERROR
SBI 4.503 0.437394 3.513546 5.492454
BOB 3.777 1.098893 1.29113 6.26287
CANARA 3.561 1.021802 1.249524 5.872476
IDBI 5.538 1.977549 1.064472 10.01153
PNB 5.266 1.339537 2.235756 8.296244
5.2.1Interpretation iof ithe iAnalysis:
 The iabove itable ishows ithat ifor ithe iyear i2017 iBOB iand iCANARA iare ithe ibest iperformers ibecause
i there iratio iis1.89 iand i1.75 irespectively. i
 If ithe iyear i2016 iis iconsidered iCANARA iand iBOB iare ithe ibest iperformers ibecause ithere iratio iis1.47
i and i1.62 irespectively.
 2015 ihas idifferent ipicture ithen ihe iabove ifigure ias iin ithis iparticular iyear iBOB, iCANARA, iIDBI iand
i PNB iare ithe ibest iperformers ias ithey ihave ithe ilowest iratio iwhich iis i1.64 i, i1.53,1.54. i1.71.
 If iwe iconsider ithe iyear i2014 ithe iratio iof iBOB iis ileast iwhich iis i1.27 iwhich ishows ithat ithe ifinancial
i capacity iof ithe ibank iis igood.
 The iratio iturns ito ibe ihighest iin ithe iyar i2012 ifor iIDBI ibank ibecause iit iis i21.25. ithis ishows ithat ithe
i financial icapacity iof ithe ibank iis ivery ipoor.
 The iyear i2008 ishows ithat iBOB iand iCANARA iposses ithe ilowest iratio ithat iis i2.4 iand i2.57 ithat ishows
i financial icapacity iof ithis iboth ibank iis igood.
5.3. iGross iNPAs iWrite-off iand iReduced iTo iGross iNPAs iRatios:
As iper ithe irules idecided iby ithe iReserve iBank iof iIndia i(RBI), ithe ibanks ihave ito icontrol ieliminate ithe
i amount iof iGross iNPAs ifrom ithe ifinancial istatements ithe ibanks. iTo ieliminate isuch iamount ithere iare ithree
idifferent icourses iof iactions iimplemented iby ibanks iviz. ito irecover ithe iamount ifrom idefaulters, ito iwrite-off ithe
i amount iagainst iprovision imade ifor iit iand ito ireduce ithe iamount iof iNPA isubject ito iprovisions ilaid idown iby iRBI
i for irestructuring ithe iloan iand iAdvances.
This iratio ishows irelation ibetween ithe iamount iof iGross iNPAs iWrite-off iand iReduced ito ithe iamount iof iGross
i NPAs iin iterms iof ipercentage. iHere iit iis iassumed ithat ibecause iof irecovery iof iNDAs iits iwriting-off ior ithe
i reduction iof iamount iof iGross iNPAs, ithe iamount iof iNPAs iof ithe ibank.
Reduces iand iit iresults iinto iimproved ifinancial istrength iof ithe ibanks. iSo, iit iis ipositive iratio ifor ithe
i banks.Formula: iGross iNPAs iWrite-Off/ iReduced ix i100 iGross iNPAS
Table ishowing iGross iNPAs iWrite-Off/Reduced ito iGross iNPAs iRatios iin
Selected iNationalized iBanks iin iIndia i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i (In icrore)

2017 1123430 45156 342020 447526 553705
2016 981728 405210 316378 248751 558183
2015 567253 162614 2130400 126850 256949
2014 616054 118759 75702 99602 188801
2013 511894 79826 62602 64500 134658
2012 396765 44648 40318 45514 87196
2011 253263 31525 31374 27847 43794
2010 195349 24007 25903 21294 32144
2009 157140 18429 21680 14357 25069
2008 128373 19814 12726 15647 33193
iiiiiiiiiiiiii Estimated iMarginal iMeans: iBank iWise iAnalysis i(In icrore)
NAME iOF iBANK MEAN STANDARD LOWER iBOUND UPPER iBOUND

i ERROR
SBI 493124.9 108443.3 247809.1 738440.7
BOB 94998.8 37594.55 9954.018 1843.6
CANARA 305910.3 37594.55 -1609595 772779.5
IDBI 11188.8 43773.43 12166.42 210211.2
PNB 191369.2 65321.57 43601.54 339136.9
5.3.1 iInterpretation iof ithe iAnalysis:
i Gross iNPAs iwrite-off iand ireduced ito iGross iNPAs iin iSBI iis iconsidered ipositive. iOn ithe ibasis iof ithis
i consideration i, ithe iabove igiven itable ishows ithe iperformance iof ivarious ibanks.
• The iGross iNPAs iwrite-off iand ireduced ito iGross iNPAs iin ithe iyear i2008 iwas ihighest iby iRs. i128373 icrore
i in iSBI, iRs.19814 icrore iin iBOB, iRs.12726 icrore iin iCanara, iRs.15647 icrore iin iIDBI, iRs.33193 icrore iin
i PNB. iThis ishow iSBI ibank iis ithe ibest iperformer iwith iRs.128373 iwhereas iother ibanks iare ithe ipoor
i performer.
• The iGross iNPAs iWrite-off iand iReduced ito iGross iNPAs iRatios iin ibank iwise ianalysis iit ican ibe
i interpreted ithat iSBI ihas ithe ihighest imean iof iRs.493124.9 iand ieven ithe istandard ierror iis ihighest iwith iRs.
i 108443.3. iAnd ibecause iof ithis ieven ithe ilower iand iupper ibound iis ihighest iby iRs.247809.1 iand
i Rs.738440.7 irespectively.
• In ibank iwise ianalysis ithe iBOB iwas ihaving ithe ilowest imean iand istandard ierror. iIt ishowed ia igood
i performance iin ithe icomparison iof iall ithe iother ibanks.
• In ithe iyear i2009 ithe iperformance iof iSBI iwas igood ibecause iit ireduced itheir igross iNPA ito i157140
i whereas ithe iperformance iof iall iother ibanks iwas ipoor.
• In ithe iyear i2010 iperformance iof iall ithe ibanks ias icompared ito iits iprevious iyear ihas iimproved islightly.
• In ithe iyear i2016 iPNB imade ia idrastic iimprovement ifrom ithe ipoor iperformance ito ithe ibest iperformance.
i But iin ithe isame iyear ithe iperformance iof iBOB ihas ialso iincreased ias icompare ito iits iprevious iyear.
5.4 iNet iNPAs ito iAdvance iRatio:
This iratio ishows ithe irelation ibetween ithe iamounts iof iNet iNPAs ito iAdvances iin iterms ipercentage i(%).
i This iis iadverse iratio. iIf ithis iratio iis ihigher, iit ishows ithat ithe ifinancial istrength iof ibank iis ipoor iand ivice-versa. iSo
i the ibanks ishould itry ito icontrol ithis iratio. iHere, ithe iresearcher ihas imade iefforts ito ianalyze ithis iratio ifor ithe
i selected ibanks ifor ithe iperiod iof istudy ii.e., i2008 ito i2017.
Table iShowing iNet iNPAs ito iAdvance iRatios iin iSelected iNationalized iBanks iin iIndia i(In i%)

2017 3.17 4.72 6.33 13.21 7.81
2016 3.81 5.06 2.86 6.78 8.61
2015 2.12 1.47 2.01 2.88 3.92
2014 2.57 0.91 2.18 2.48 2.77
2013 2.1 1.31 1.46 1.58 2.72
2012 1.82 0.44 1.1 1.61 1.52
2011 1.63 0.52 1.11 1.06 0.85
2010 1.72 0.95 1.09 1.2 0.53
2009 1.79 1.49 0.84 0.92 0.17
2008 1.78 2.8 0.94 1.3 0.64
iiiiiiiiiiiiiiiiiiiiiiiiii Estimated iMarginal iMeans: iBank iWise iAnalysis i(In i%)

i ERROR
SBI 2.251 0.228631 1.733801 2.768199
BOB 1.967 0.530438 -0.39329 3.166934
CANARA 1.992 0.523995 0.806641 3.177359
IDBI 3.302 1.229606 0.520438 6.083562
PNB 2.954 0.954853 0.793972 5.114028
• The iNet iNPAs iWrite-Off iand iReduced ito iNet iNPAs iRatios iin ithe iyear i2008 iin iSBL iwas i1.78%, iBOB
i was i2.8%, iCanara iwas i0.94%, iIDBI iwas i1.3% iand iPNB iwas i0.64% irespectively.
• In iIDBI ibank ithere iwas ia idrastic ichange iin ithe iyear i2017 iby i13.21% iand iin i2016 iby i6.78% iwhich iwas
i ranging ito i1.35 ito i2.88% iin iall ithe iother iprevious iyear.
• Even iin ithe iyear i2017 ithe iCanara ibank's iNet iNPAs iWrite-Off iand iReduced ito iNPAs iwas i6.33%. iIn iall
i the iprevious iyears iit iwas iranging ifrom i0.94% ito i2.86% irespectively.
• In ibank iwise ianalysis ithe iBOB iand iCanara iBank ihas ithe ilowest imean iof iRs.1.967 iand iRs.1.992
i respectively.
• SBI ihas imean iof i2.251 iand ithe ilower iand iupper ibound iof iRs.1.733801 iand iRs.2.768199 irespectively
i while icompared ito iall ithe iother ibanks.
5.5 iNET iNPAS iWrite-off iand iReduced iTo iNet iNPAs iRatios:
The iformula ifor ithe iNet iNPAs iWrite-off iand iReduced ito iNet iNPAs iratios iis ibeen igiven ibelow.
A iTable ishowing iNet iNPAs iWrite-Off/Reduced ito iGross iNPAs iRatios iin iSelected iNationalized iBanks iin iIndia
i (In icrore)

2017 582774 180802 216490 2520258 327021
2016 558070 194065 208329 146434 354226
2015 275906 80695 87401 59925 153965
2014 310961 60348 59655 49023 99170
2013 219565 41920 52781 31004 72365
2012 158189 15436 33863 29109 44542
2011 123469 7909 23299 16779 2038
2010 108702 6023 17979 14063 9817
2009 96774 4490 15073 9490 2639
2008 74243 4936 8990 10829 7538
Analysis iof iPerformance:
Estimated iMarginal iMeans: iBank iWise iAnalysis i(in iCrore)

i ERROR
SBI 250865.3 58663.36 118159.6 383571
BOB 59662.4 22863.62 7941.309 111383.5
CANARA 72386 24534.75 16884.54 127887.5
IDBI 288691.4 248287.6 -272974 850357
PNB 107332.1 41918.16 12506.63 202157.6
• When ithe iresearcher ianalysed ithe iNet iNPAs iWrite-Off/Reduced ito iGross iNPAs iRatios iin iSelected
i Nationalized iBanks iin iIndia iSBI iwas iRs.74243 icrore, iBOB iwas iRs.4936 icrore, iCanara iwas iRs.8990
i crore, iIDBI iwas iRs. i10829 icrore, iand iPNB iwas iRs.7538 icrore.
• In ithe iyear i2017 ithe iSBI iwas ihaving ithe iNet iNPAs ito iadvance iratio iof iRs.582774 icrore, iBOB iof
i Rs.180802 icrore, iCanara iof iRs.216490, iIDBI iof iRs. i2520258 icrore, iPNB iof iRs. i327021 icrore.
• The iNet iNPAs iWrite-off iand iReduced ito iNet iNPAs iRatios iwhich iis imade ibank iwise ianalysis ican ibe
i interpreted ithat ithe iSBI iand iIDBI iare ihaving ithe ihighest ilevel iof imean ialong iwith ithat ieven ithe istandard
i error iis imore.
• Bank iof iBaroda iis ihaving ithe ilowest iwith iRs.59662.4 iwhich iis igood iwhile icomparison iwith iall ithe iother
i banks,
5.6 iGroup-Wise iClassification iof iLoan iAssets iof iPublic iSector iBanks
The iloan iassets iare ibeen iclassified iinto i4 itypes:
• Standard iAdvance i
• Sub-Standard iAdvance i
• Doubtful iAdvance
• Loss iAdvance
All ithese iloan iadvances idata iare ibeen icollected iyearly iwise ifrom ithe iyear i2008 ito i2017
Table ishowing ithe iGroup-wise iClassification iof iLoan iAssets iof iPublic iSector ibanks
YEAR STANDARD SUB-STANDARD DOUBTFUL LOSS iADVANCE

i ADVANCE i ADVANCE i ADVANCE
2017 88.3 3.0 8.4 0.4
2016 90.7 3.4 5.5 0.3
2015 95 1.9 2.9 0.2
2014 95.6 1.8 2.3 0.2
2013 96.4 1.8 1.7 0.2
2012 97.0 1.6 1.2 0.2
2011 97.8 1.1 1.0 0.2
2010 97.8 1.1 0.9 0.2
2009 98.0 0.9 0.9 0.2
2008 97.8 1.0 1.1 0.2
• In ithe iyear i2008 ithe istandard iadvance iwas i97.8%, isub-standard iadvance iwas i1%, idoubtful iadvance iof
i 1.1%, iand iloss iadvance iof i0.2%.
• From i2008 ito i2015 ithe iloss iadvance iwas ihaving ithe isame irange iof i2% ievery iyear. iBut ifrom i2016
i onwards iit igot ichanged iand iit iwas i0.3%.
• In i2017 ithe istandard iadvance iwas i88.3%, isub-standard iadvance iwas i3%, iand idoubtful iadvance iwas
i 8.4% iwith ia iloss iadvance iof i0.4%.
• From ithe iyear i2008 ito i2015 ithe istandard iadvance iwas iranging ifrom i97.8% ito i95%, ilater ion iin ithe inext
i year ii.e., i2016 iit igot idecreased ito i90.7% iand istill igot ireduced ito i88.3% iin ithe iyear i2017.
• At ithe isame itime iin ithe iyear i2016 ithe idoubtful iadvance igot iincreased ito i5.5% iand iin i2017 iagain igot
i increased ito i8.4%. iIn iall ithe iprevious iyear iit iwas iranging ifrom i1.1% ito i2.9%.
• In ithe isame iway ithe isub-standard iadvance iwas iin ithe irange iof i1% ito i1.9% iwhich ifurther igot iincreased ito
i 3.4% iand i3% iin ithe iyear i2016 iand i2017.
• Overall ianalysis ican ibe imade ithat ifrom ithe iyear i2008 ito i2015 iall ithe istandard, isub-standard, idoubtful
i and iloss iadvance iwas iin isame irange ibut ifrom i2016 iand i2017 iit igot idrastically iincreased.
CHAPTER – 6
FINDINGS
• From this project we have found that all banks do not similar efficiency of managing .GROSS NPAS
to Advances. Study shows that BOB and Canara is a good at managing this ratio because its
performance is the most consistent.
• The researcher formulated the analysis that the Gross NPA Write-Off/Reduced to Gross NPAS, shows
that BOB has performed well for this ratio. Whereas the SBI bank has not performed well as it goes on
increasing year on year.
• Net NPAS to Advances Ratio of selected nationalized banks during the period of study. The analysis
shows that BOB has performed well for managing this ratio.
• The analysis, Net NPAs Write-off and Reduced to Net NPAs Ratios of selected nationalized banks
during the period of study. The analysis shows that BOB is the most consistent performer during the
study period. It means that this bank has a good capacity of managing this ratio.
• The standard Advance was decreased in the recent years.
• From the Group Wise Classification of Loan Assets of Public Sector Banks can be found that the Sub-
Standard Advance was increased and along with that Doubtful Advance was also raised
• Gross NPAS Recovered/Write-Off/Reduced to Gross NPA ratios in selected Nationalized Banks
during the period of study. In case of this ratio PNB was not good performer among the sampled unit.
CHAPTER 7 i
RECOMMENDATIONS/SUGGESTIONS
1. Government ito iPump iMore iCapital iInto iPublic iSector iBanks i(PSB):
The igovernment ihas idecided ito iinject imore icapital iinto istate-owned ibanks ito istrengthen ithe iking isystem iand
i Spur ieconomic igrowth. iGovernment ihas iinjected ian iadditional iof iRs.8.000 icrore iinto ithe icash-starved ipublic
i sector iLooks. iThe igovernment ihas ialready iinfused iRs i22.915 icrore iinto i13 ipublic isector ibanks, iwhich iinclude
i the iState iBank iof iIndia, iPunjab iNational iBank iand iIndian iOverseas iBank. iThe ifinance iministry ihas ibeen
i regularly ireviewing ithe icapital ineeds iof ithese ibanks. iPublic isector ibanks iwere igiven iRs. i25,000 icrore iin i2015-
16, iand isimilar iamount ihas ibeen iearmarked ifor ithe ifollowing iyears. iBesides, iRs. i10,000 icrore ieach ione iwould
i be iimbued iin i2017-18 iand i2018-19.
The igovernment iproclaimed ian ihostile iRs.2.11 ilakh icrore ifunds idistillation ifor ithe iNPA ihit ipublic isector ibanks
i finished ia iperiod iof itwo icenturies. iOn iview iof ithis, iRs.35 ilakh icrore iresolve ibe ithrough ithe irecapitalisation ities,
i while iremaining iRs.76,000 icrore ifrom ithe ifinancial iprovision, iFinancial iServices. iThe istate iowned ibanks
i require ian iamount iof iRs.1.8 ilakh icrore iby i2018-19, iof iwhich ithe igovernment ihas icommitted ito iprovide
i Rs.70,000 icrore iin ithe inext ifour iyears. iA ifew ibanks imay ialso ihit ithe imarket iin ithe inext ifinancial iyear,
i depending ion itheir iperformance. iThe igross inon-performing iasset ilevel iloans ithat ihave iturned iunproductive
i increased ito iRs.6.3 ilakh icrore ias ion iSeptember iend ifrom iRs.5.5 ilakh icrore iat ithe iend iof ithe iJune iquarter ian
i increase iof iRs.79,977 icrore ion ia iquarter ion iquarter ibasis. iIn ithe ifinancial iyear i2016, iRs.58, i000 icrore iwas
iinfused iinto ipublic isector ibanks iand ianother iRs. i66, i624 icrore ifrom ifinancial iyear i2011 ito ifinancial iyear i2015.
i The imoney, ipumped ithe iUPA iand ithen ithe iNDA iGovernments, ihas ibeen igiven ito ithe ibanks, ithat iis, ito imake
i good ithe ilosses ithey ihave imade iby igiving iloans ito iIndustry ithat ihave iturned iinto iNPAS. iPSU ibanks itend ihave ia
i higher iproportion iof iNPAS, ipartly ibecause ithey ilent imore ito iindustry iWHEN iPrime iMinister iNarendra iModi
i came ito ipower, iPSU ibanks ihad ia imarket icapitalisation iof i453, i442 icrore ior iaround i43% ithat iof ithe ientire
i banking isector i(graphic). iBy iFebruary i23 ithis iyear, ithe iPSU ibanks ihad ilost ia ibit iof ithis ivalue iand ihad ia imarket
i capitalisation iof iRs.439,413 icrore. iPrivate isector ibanks, ihowever, isaw itheir imarket icapitalisation izoom ifrom
i Rs.602,680 icrore ito iRs.1,268,997 icrore iover ithe isame iperiod, ias ia iresult iof iwhich ithe ishare iof iPSU ibanks iin
i total ibank imarket icapitalisation ifell ifrom i42.9% ito ijust i25.7%.
Since iModi icame ito ipower, ithe ishare iof iPSU ibanks iin itotal ideposits iis idown ifrom i79.8% ito i75.7%, ibut ithe
i share iin iloans iwhich iis iwhere ibanks imake ithe ibulk iof itheir imoney ifrom iis idown ifrom ijust i78.8% ito i70.8%.
i From ithe iwe iwould itell ithat igovernment iis ipumping ifunds ito iPublic iSector iBarks i(PSB) ito ireduce ithe iNon-
Performing iAssets. iAnd ithis iis ia iwrong imethod. iInstead iGovernment ifocus ion ithe ireasons iof iNPA. iDue ito ithe
i manipulation iof idocuments iand iprocedure ithere iis ian ioccurrence iof iNPA.
Government ishould ihelp ithe ibanks iin igetting ithe iloans ifrom iother iforeign icountries iwere ithe iInterest irate iis ilow
i (US- i1.75%, iAustralia- i1.50, iCanada- i1.25%, iJapan- i-0.10) iwhich iis itoo imuch iless iwhen icompared ito iIndia.
i After ithe ibanks igets iloans ifrom ithese icountries iit ishould ilend ithis ifund ias ia iloan ito iIndian ipublic iand iearn ithe
i profit iout iof iit iand iby ithis iit ican irecover iNPA iThe iliabilities iand ithe iresponsibilities ishould ibe ifixed iby ithe
i banks ito ievery iperson.
2) iInfrastructure, iMetals iand iTextile iSector iHave iContributed iMost ito ithe iStressed iLoans:
In iIndia, ipower, isteel, iroad iinfrastructure iand itextiles isectors iare ithe ibiggest iloan idefaulters. iThe isteel isector iis
i the ione iof ithe ilargest icontributors ito irising inon-performing iassets i(NPAs) ior ibad iloans iwith ibanks, iaccounting
i for iRs.3,13,411 icrore ias iadvance ioutstanding, iout iof iaround iRs.5 ilakh icrore itotal iNPAs. iThe icapital-intensive
i steel iindustry iis iconsidered ito ibe ithe ilargest icontributor ito ithe ioverall iNPAs, iwhich iis iover i9.6 iper icent iof ithe
i system. iThe itop ifive itroubled isteel icompanies- iEssar iSteel, iBhushan iSteel, iMonnet iIspat, iElectro isteel iand
i JSPL iare iseen ito ihave imaximum iNPA iProblems.
According ito ithe i iRBI, ijust i12 icompanies iare iestimated ito iaccount ifor i25% iof ithe igross iNPAS, iand iwere
i identified ifor iimmediate ibankruptcy iproceedings, iwhile ithere iare i488 iothers iwhich ihave ibeen igiven isix imonths
itime ito irestructure itheir idebt ior ibe idraped ito iNational iCompany iLaw iTribunal i(NCLT), iHere iare ithe icompanies
i identified iby iRBI ifor iimmediate ibankruptcy iproceedings
Bhushan iSteel iLtd: iBhushan iSteel, ithe ilargest imanufacturer iof iauto-grade isteel iin iIndia, ihas iloan idefault iof
i Rs.44, i478 icrore. iThe iState iBank iof iIndia i(SBI), ithe ilead ibank iof ithe iconsortium iof ilenders, ihad imoved ithe
i NCLT ifor irecovery iof iits iloan. iThe iNCLT ihas ireserved iits iorder ion ithe iplea.
Lanco iInfratech iLtd: iLanco iInfratech: ionce ilisted iamong ifastest igrowing iin ithe iworld, ihas ia iloan idefault iof
i Rs. i44,364 icrore. iIDBI ihas ialready iinitiated ithe iprocess iunder ithe iInsolvency iand iBankruptcy iCode iagainst
i company's iloan idefaults.
Essar iSteel iLtd: iEssar iLtd, ione iof ithe ibiggest iin iIndia iand iabroad iin ithe isteel isector, ihas ia iloan idefault iof
i Rs.37, i284 icrore. iWhile ithere iwere i11 iother icompanies istaring iat isame ifate ias iEssar iSteel, iit ichose ito ichallenge
i RBI's idirection iin ithe iGujarat iHigh iCourt, iwhich iwas ilater idismissed. iEssar iclaimed iit ibelonged ito i488
i companies iwhich iwere igiven isix imonths' itime ito irestructure itheir idebt.
Bhushan iPower i& iSteel iLtd: iBhushan iPower iand iSteel, ia isister icompany iof iBhushan iSteel, ialso ihas ia iloan
i default iof iRs.37, i248 icrore. iBhushan iPower iand iSteel iwas idragged ito ithe iNCLT iby ithe iPunjab iNational iBank.
i The iNCLT ihas ialso ireserved iits iorder ion ithe iplea.
Alok iIndustries: iAlok iIndustries, iwhich iis ia iMumbai-based itextile imanufacturing icompany, ihas ia iloan idefault
i of iRs.22, i075 icrore. iThe iNCLT, iin iJuly, iadmitted iinsolvency iproceedings iagainst ithe icompany ifiled iby iState
i Bank iof iIndia ifor irecovery iof iits iRs.3, i772 icrore iloan. iOther ilenders iinclude iPunjab iNational iBank, iBank iof
i Baroda, iand iIDBI iBank, iStandard iChartered iBank ietc.
i Amtek i i iAuto iLtd: i iAmtek iAuto, ione iof ithe ilargest iintegrated icomponent imanufacturers iin iIndia, ihas ia iloan
i default iof iRs.14, i074 icrore. iSBI ihad imoved ithe iNCLT ifor ibankruptcy iproceedings iagainst ithe ibank, iwhich iwas
i admitted iby ithe iChandigarh ibench.
Monnet iIspat iand iEnergy iLtd: iMonnet iIspat iand iEnergy, ione iof iIndia's isteel iproducers ihave ia iloan idefault iof
i Rs. i12,115 icrore. iThe ibankruptcy iproceeding iagainst ithe icompany iwas iapproved iby iNCLT iin iJuly.
Electro isteel iSteels iLtd: iElectro isteel iSteels iis ian iIndian iwater iinfrastructure icompany ibased iin iKhardah inear
i Kolkata. iThe iloan idefault iby ithe icompany istands iat iRs.10, i273 icrore. iConsortium ileader iSBI ihad iinitiated
i insolvency iproceedings, iwhich iwas iadmitted iby iNCLT.
Era iinfra iengineering iltd: i iera iinfra iengineering, ione iof ithe iIndia’s iinfrastructure icompanies, ihas ia iloan
i default iof iRS i10,065 icrore. iUnion ibank ihad imoved ithe iNCLT iagainst ithe icompany, ibut ithe iTribunal ireserved
i its iorder iover ijurisdiction iissues. iThere iare imany iwinding-up ipetitions ipending iin ithe iDelhi iHigh iCourt iagainst
i the icompany iwhich ihas isuperior ijurisdiction iover iNCLI.
Jaypee iInfratech iLtd: iJaypee iInfratech iis ia isubsidiary iof iconglomerate iJaypee iGroup ifounded iby iJaiprakash
i Gaur. iIt ihas ia iloan idefault iof iRs.9,635 icrore. iIn iAugust, iNCLT ihad iadmitted iinsolvency ipetition ifiled iby iIDBI
i bank, ibut ithe iSupreme iCourt istayed ithe iorder iafter ihome ibuyers ifiled ipetitions iagainst ithe imove. iThe icompany
i is inow iseeking ito isell iYamuna iExpressway ito iraise iRs i2,500 icrore ito icompensate ihomebuyers.
Topic: A Critical
ABG iShipyard iLtd: iABG iShipyard, ian iAhmadabad-based ishipbuilding icompany, ihas ia iloan idefault iof
i Rs.6,953 icrore. iThe icompany iis ione iof ithe itwo icompanies iamong ithe i12 iwhich ihas iagreed ito iloan idefault iand
i bankruptcy iproceedings iinitiated iby ithe ibanks
Jyoti iStructures iLtd: i ijyoti iStructures, ia ipower itransmission iand idistribution icompany, ihas ia iloan idefault iof
i Rs.5, i165 icrore. iThe icompany ibecame ithe ifirst iamong ithe i12 icompanies ito iface ithe ibankruptcy iproceedings.
i The ipetition ifor iinsolvency iwas ifiled iby iits ilead ilender iSBI. iLike iABG iShipyard, iJyoti iStructures idid inot
i oppose ithe ibankruptcy iproceedings iagainst iit.
The iindustries ishould ibe igiven ithe ifair itime ito isave itheir ibusiness. iAfter ithe iGoods iand iService iTax i(GST), ithe
i refunds iof imost iof ithe ibusinessmen ihas ibeen iblocked iin ithe isystem, iresulting iin ia icrisis iof icash iliquidity. iSuch
i factors iplay ia ivital irole iin irepaying ia iloan. iThe irepayment iperiod ifrom i90 idays ito i180 idays ifor ia iunit ito ibe
i declared ias ian iNPA.
3) iPSU iBank iMerger
As ifixing ithe ibanking iCRISIS iseems ito ibe ia itop iagenda ithe iGovernment iannounce ithe imerger.
The icapital iinfusion iof iRs.7, i577 icrore iin isix iweak iPublic iSector iBanks i(PSB) ias ipart iof iits iIndradhanush ibank
i recapitalisation iplan ito iboost itheir icapital iadequacy iratio. iAll ithe isix ibanks iare ithose ibanks ithat ibeen iput iunder
i Reserve iBank iof iIndia's iwatch ifor ihigh inon-performing iassets i(NPA). iThese ibanks iare iBank iof iIndia, iIDBI
i Bank, iand iCentral iBank iof iIndia, iDena iBank, iBank iof iMaharashtra iand iUCO iBank.
Under ithe iIndradhanush iPlan, ithe igovernment iallocated iRs.70, i000 icrore ifor ifour iyears, iRs. i25, i000 icrore ieach
i for ifinancial iyear i2015-2016 iand i2016-2017 iand iRs.10, i000 icrore ieach ifor i20172018 iand i2018-2019.
The icentral igovernment ihas istarted ian iinternal iexercise ito iascertain imerger icandidates ifrom iamong ithe ipublic
i sector ibanks i(PSBs). iThe imerger ihas ito ibe idone iin iphases. iAs idata iare iintegrated, ithe inew ipassbook iand icheque
i books iwould ibe iissued. iThe icomplete iintegration iof ivarious ibanks ishould itake i3 imonths iPost-merger, ihe isaid
i about i1,500 ibranches ito ibe ishut ibecause iof iduplication. iThere iare imany iduplication iand ithey ineed ito ibe
i rationalised. iAbout i1,500-1,600 ibranches ihave ito ibe irationalised.The igovernment ihas ialready igiven iapproval
i for imerger iof iState iBank iof iBikaner i& iJaipur i(SBBJ), iState iBank iof iMysore i(SBM), iState iBank iof iTravancore
i (SBT), iState iBank iof iPatiala i(SBP), iState iBank iof iHyderabad i(SBH) iand iBMB. i(Refer itable) iWith ithe imerger
i of iall ithe iFive iassociates, iSBL iis iexpected ito ibecome ia ilender iof igrow iportions iwith ian iasset ibase iof iRs.37
itrillion i(Rs. i37 ilakh icrore) ior iover iUSD i555 ibillion, i22,500 ibranches iand i58,000 iATMs. i iIt iwill ihave iover i50
i crore icustomers.
NAME i OF i THE i BANKS NAME iOF iTHE iBANKS iGOT YEAR i OF i MERGING
i ACQUIRED i MERGED i HAPPENED
State ibank iof iIndia Bharatiya iMahila iBank i(BMB) 2017
State ibank iof iIndia State ibank iof iTravancore i(SBT) 2017
State ibank iof iIndia State ibank iof iBikaner iand iJaipur 2017
i (SBBJ)
State ibank iof iIndia State ibank iof iHyderabad i(SBH) 2017
State ibank iof iIndia State ibank iof iMysore i(SBM) 2017
State ibank iof iIndia State ibank iof iPatiala i(SBP) 2017
From ithe iabove iwe ihave imade isuggestion ithat igovernment ishould inot imerge ithe ibanks. iThe ireason ibehind ithis
i is ithat imerge iof ipoor iand istrong ibanks iwill iaffect ithe iperformance iof ithe istrong ibanks. iInstead ithe ipoor ibanks
i should imake ithe irules iand iregulations ifor istopping ithe imanipulation iand iduplication iof ifrom iaccounts iwhich
i results iin inon-performing iassets. iBanks ishould imake iclusters iand ithe iresponsibilities ishould ibe iassigned ito ithe
i whole imanagement. iAuditing imust ibe iperformed iwithout iany imanipulations.
CONCLUSION
The iexhaustive ianalysis iof inon-representative iarts iin ithe iselected inationalized ibank ileads ito ithe iconclusion ithat
i the iNPA iis ithe imain iproblem ithat ibanks imust ideal iwith iseriously. iIf ibanks ido inot itake itimely iaction, ithe
i situation iof iunproductive iassets iworsens.
During ithe istudy, iit iwas idiscovered ithat ithe iReserve iBank iof iIndia ihad ibecome ia iserious iSNAP iproblem ifor
i public isector ibanks. iThe iRBI ihas iissued iseveral iguidelines ito ilimit ithe iNPAs iof ipublic isector ibanks. iFrom
i there, ithe ibanks iprepare ithe icontrol ipolicies iof ithe iNPA, ibut ithe ikey iquestion iis ito iimplement ithese ipolicies.
We iobserve ithat ibanks ifollow ipolicies, ibut isometimes ithey iare inot iimplemented iseriously. iThe imain ireason iis
i that ithe irecovery iprocess iis imuch ilonger iand, ias ia iresult, ithe iresult iof ithe iNPA ibecomes iincreasingly iimportant.
It ican ialso ibe iconcluded ithat ipublic isector ibanks imust iadopt ia istrict ipolicy iand imanagement iguidelines ito
i control ithe iANP iproblem.
The ipublic isector ibanks imust iwake iup iand itake iserious imeasures ito ireduce iand icontrol ithe iproblem iof ithe iANP.
i If ithe isame isituation icontinues, ithe iproblem iof ithe iNPA iwill ihave ia inegative iimpact ion ithe ieconomy iin igeneral.
On ithe iother ihand, iit iwill ieven iaffect ithe iflow iof imoney iinto ithe ieconomy. iTherefore, iit iis isuggested ithat
i effective imeasures ibe itaken ias isoon ias ipossible ito icontrol iMPAs.
BIBLOGRAPHY
• https://www.google.co.in/amp/s/www.liverint.com/Specials/wXbQOMmiNbdwolta Z4N/99-Indian-
households-are-covered-by-a-bank account.html%3ffacet=amp&utm_source=googleamp&utm
medium=referral&utm_campaign=googleamp
• https://www.google.co.in/amp/s/www.porteranalysis.com/porter-five-forces analysis of-banking-
industry/amp/
• https://www.google.co.in/amp/s/m.jagranjosh.com/general knowledge/amp/indian banking-industry-
challenges-and-opportunities-1414662532-1
• https://m.rbi.org.in//scripts/Publications View.aspx?id=17739
• https://m.rbi.org.in//scripts/Notification User.aspx?id=899&Mode=0
• https://www.google.co.in/amp/www.thehindu.com/business/Economy/new-rb norms-to-spur-surge-in-
npas/article22745297.ece/amp/
• https://dbie.rbi.org.in/DBIE/dbie.rbi?site=publications#14
• https://m.rbi.org.in//scripts/BS_ViewMasCirculardetails.aspx?id=7357#gs
• https://bankofbaroda.com/financial-results-for-93-31-december-2017.htm
• https://sbi.co.in/portal/web/corporate governance/financial-results
• "State Bank of India Consolidated Yearly Results, State Bank of India Financial Statement &
Accounts". www.moneycontrol.com. Retrieved 2017-06-26. "State Bank of India Yearly Results, State
Bank of India Financial Statement & Accounts". www.moneycontrol.com. Retrieved 2017-06-26.
• http://www.bankofbaroda.co.in/download/Full-AR-2015-16.pd
• https://www.financialexpress.com/industry/banking-finance/indias-bad-loans-here-isthe-list-of-12-
сompanies-constituting-25-of-total npa/903396/
• https://www.google.co.in/amp/s/m.economictimes.com/industry/indigoods/svs/steel/nparesolution-to-
help-resume-lending-to-steel-sector-report/amp_articleshow/60211848.cm
• Bank Of Baroda: India's International Bank - About Us - the Heritage". Www.bankofbaroda.com.
Retrieved 2017-06-26.

Topic: A Critical Analysis On Non-Performing Assets of Public Sectore Bank

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Topic: A Critical Analysis On Non-Performing Assets of Public Sectore Bank

Uploaded by

Copyright:

Available Formats

TOPIC: A CRITICAL ANALYSIS ON NON-

PERFORMING ASSETS OF PUBLIC SECTORE

Aditya Institute of Management Studies and Research

‘‘A Critical Analysis on Non-Performing Assets of Public Sector Banks’’

Name: Mohil Rakesh Desai

MMS: SEM IV Specialization: Finance Roll No: 27

SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENT OF

MASTER OF MANAGEMENT STUDIES

ACADEMIC YEAR 2017-19

Submitted to Prof. Jyotsna Haran

ADITYA INSTITUTE OF MANAGEMENTSTUDIES AND RESEARCH

‘‘A Critical Analysis on Non-Performing Assets of Public Sector Banks’’

Name: Mohil Rakesh Desai

MMS: SEM IV Specialization: Finance Roll No: 27

SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENT OF

MASTER OF MANAGEMENT STUDIES

ACADEMIC YEAR 2017-19

Submitted to Prof. Jyotsna Haran

ADITYA INSTITUTE OF MANAGEMENTSTUDIES AND RESEARCH

Faculty Signature: _____________ Diretor Signature:________________

Prof. Jyotsna haran Dr.Sunita Srivastava

Sr. No. Topic Page No.

1.1.2 Nationalizations in the 1960s

1.1.5 Which banks have the most NPAS?

1.1.6 How has the government reacted to the NPA crisis?

1.2 TYPES OF BANKS

Private Sector Bank:

Public Sector Bank:

Banks of territorial development:

Regional rural banks:

RRBs perform various functions in following heads:

1) As long as banking amenities to rural and semi-urban areas.

1.3 NUMBER OF PEOPLE WHO ARE AVAILABLE IN BANKING

99% of Indian households are covered by a bank account

1.4. OPPORTUNITIES OF BANKING INDUSTRY

1.5. CHALLENGES FACED BY INDIAN BANKS

1. High Transaction Costs:

2. Revolution of Information Technology:

1.6 MAJOR PLAYER IN INDIA

1. CENTRAL BANK OF INDIA

3.1 iWhat iis iNon-Performing iAsset?

A iNon-Performing iAsset i(NPA) iis ia iloan ior ian iadvance iwhere,

3.2 TYPES OF NON-PERFORMING ASSETS

It ican ibe icalculated iwith ithe ihelp iof ifollowing iratio:

Formula: iGross iNPAs iRatio i= iGross iNPAs i/Gross iAdvances.

It ican ibe icalculated iby ifollowing:

Formula: iNet iNPAs i= iGross iNPAs i- iProvisions ion iGross iAdvances.

3.3 CATEGORIES OF NPAS:

3.4 IMPACT OF NPAS ON BANKING OPERATION

Lack iof iFresh iCapital iInjection:

Increasing iNon-Performing iAssets i(NPAs):

3.6 Recovery Measures -Current Practices

2. Personal iVisits i/ iContacts i

6. Corporate iDebt iRestructuring i

8. Security iAdjustment ior iAppropriation iof iSubsidy i

9. Recalling iof iAdvances i

11. Filing iSuits

Write-off iis iproposed iunder icertain icircumstance isuch ias: i

However, ieven iafter iwrite-offs, ia ibank icontinues iits irecovery iefforts.

Credit iAssessment iand iRisk iManagement iMechanism:

Reduce idependence ion iinterest:

APM ipotential iand ilimits ito icheck:

Asset iReconstruction iCorporation i(ARC):

Faculty Signature: _ Diretor Signature:____