NPA Management of Indian Banks

Presented by Aravind

Prof. Anupam Chand

Objective

 To understand NPA concept

 Classification of NPA

 NPA in India

 Management of NPA
What is NPA?

 An asset is classified as Non-performing Asset (NPA)

if due in the form of principal and interest are not paid by
the borrower for a period of 180 days. However with effect
from March 2004, default status would be given to a borrower
if dues are not paid for 90 days
 Asset Classification—RBI

The RBI has issued guidelines to banks for classification of assets

into four categories.
 Standard Assets—These are loans which do not have any
problem or less risk. Less than 90 days
 Substandard Assets—These are assets which come under the
category of NPA for a period of less than twelve months
 Doubtful Assets—These are NPA exceeding twelve months
 Loss Assets—These NPA which are identified as unreliable
by internal inspector of bank or auditors or by RBI
NPA–Indian Banks

 Size of NPA portfolios reviewed

 Public sector Banks cover 55% of gross NPAs
 Private sector banks cover 11% of gross NPAs
 Foreign sector banks cover 3.02% of gross NPAs
 Financial institutions cover 29% of gross NPAs
 Possible increase in near future
 NPA Characteristics In India
Sectoral Segmentation 2002–03 Retal Borrower
2% Small Scale
Joint Sector
Industry
5%
Other 0%
Corporate
13%
Borrower
47%

State
Owned Co
14%

Agriculture
19%
 NPA Characteristics In India
State-wise Distribution 2002–03
Maharashtra
24%

Other
35%

`
Gujarat
11%

Tamil Nadu Delhi, Rajesthan

10% 10%
Andhra Pradesh
10%
 Gross and Net NPA in India

(Rs. In Crore)

Mar 08 Mar 09 Mar 10

Gross NPA 487 459 510

Net NPA 98 94 145

NPA Recovery 575 457 587

Gross NPA (%) 1.21 0.89 0.81

Net NPA (%) 0.24 0.18 0.23

NPA Management in India

 Lok Adalats
 The Securitisation and Reconstruction of
Financial Assets and Enforcement of Security
Interest Act (SARFAESI) 2002
 Reporting of Frauds to RBI
 Risk assessment and Risk management
Conclusion

 The Indian Banking sector is facing a serious problem of NPA.

The extent of NPA is comparatively higher in public sector
banks rather than private sector banks. To improve the
efficiency & profitability, the NPA has to be scheduled
 Various serious steps have been taken by the government to
reduce NPAs. It is highly impossible to reduce NPAs to zero.
But, at least, Indian Banks can try to compete with foreign
banks to maintain international standard