DR RAFIQ ZAKARIA CAMPUS

MILLENNIUM INSTITUTE OF
MANAGEMENT

Peresentation on
STUDY OF NON-PERFORMING
ASSETS MANAGEMENT

By: Shaikh Abdul Hadi

Guide:Khaled Hashmi Sir

INTRODUCTION
DEFINITIONS:
Non ­Performing Assets
1 An asset, including a leased asset, becomes non-
performing when it ceases to generate income for the bank.
2   Banks should, classify an account as NPA only if the
interest due and charged during any quarter is not serviced
fully within 90 days from the end of the quarter.
STATEMENT OF PROBLEM

The bank always faces the problem of

NPA because of poor recovery of
advances granted and due to inefficient
recovery strategies, so these un-recovered
advances have became NPAs and reduced
the net profit. Hence the NPA
management is required.
OBJECTIVES
 To Study The Concept Of Non Performing Asset
Management.
 To Study the Causes & Effects of NPA on Financial
position of the Bank.
 To suggest the Remedies to Reduce the NPA and prevent
the account from Becoming the NPA.
 To Analysis of NPA Accounts According to Category
wise of Assets.
SCOPE
 This project is limited to of Bank of Maharashtra only.
 Project work is focused on only non-performing assets
management.
 The data of last three years is considered for Analysis.
(I.e.2006-07, 2007-08, 2008-09)
 The scope of the project is wide enough to study the
Causes & Effects of NPA on Financial position of the
Bank.
 Further the scope includes the feasible solutions and
remedial action for the problem.
LIMITATIONS
 The Present study is based on the secondary data only.
 The practical operations related to NPAs are adopted by
the bank are not learned.
 As a financial project and the nature of data are
confidential, there is restriction from the bank to disclose
the actual data.
 This project work is limited to the past three years.
 (I.e.2006-07, 2007-08, 2008-09)
CONCEPT OF GROSS NPA AND NET NPA

Gross NPA:
Gross NPAs are the sum total of all loan assets that are classified as NPAs as per
RBI guidelines as on Balance Sheet date. Gross NPA reflects the quality of
the loans made by banks. It consists of all the non standard assets like as sub-
standard, doubtful, and loss assets.
Gross NPA
Gross NPA Ratio: ____________________
Gross Advances
Net NPA:
Net NPAs are those type of NPAs in which
the bank has deducted the provision
regarding NPAs. Net NPA shows the actual
burden of banks.
It can be calculated with the help of
following ratio:
Gross NPA - Provision
Net NPA: _______________________
Gross Advances - Provisions
CAUSES FOR NPA
The banking sector has been facing the serious problems of the rising
NPAs. But the problem of NPAs is more in public sector banks when
compared to private sector banks and foreign banks. The NPAs in PSB are
growing due to external as well as internal factors.

INTERNAL FACTORS:
1. Defective lending process
2. Inappropriate technology
3. Poor Credit appraisal System
4. Improper SWOT analysis
5. Managerial deficiencies
6. Lake of Follow up
EXTARNAL FACTORS:
1. Willful Default
2. Natural Calamities
3. Changing Government
Policies
4. Industrial Sickness
5. Ineffective Recovery
Tribunal
EFFECTS OF NPA ON THE BANK

1. Effect on Profitability
2. Effect on the Image
3. Effect on Autonomy
4. Effect on Interest Rates
5. Effect on Restructure of Capital
6. Effect on productivity
7. Effect on Recycling of the Funds
8. Effect on Rating of the Bank
9. Effect on Working
FINDINGS
 Data analysis and the interpretation of the comparative figures
for the bank of Maharashtra, it is observed and found that, in
the year 2009-10 , there is maximum No. of accounts in the
category of up to Rs.25000.
 In case of provision made on advances, in the year 2009-10
there is maximum provision made on the doubtful asset as
compared to other types of assets.
 From this study it was found that NPA is having impact on
Banks profitability and Liquidity position.
 Around 70% loan where distributed to the borrower as a Term
Loan. As there is security available against term loan and if
customer fails to pay the loan amount, bank can sale the
security and recover their dues.
CONCLUSION
 The study has revealed that the major causes of NPA as willful
default, diversion of funds, reasons beyond the control of
borrowers.
 Due to NPA the people related with bank as employees, as
shareholders, or as stakeholder and last but not least the
customers of the bank get adversely affected. Their relation
with the bank becomes weaker which is very hazardous for the
bank.
 From above we can conclude that measures taken at the early
stages by segmenting the problem in different categories will
definitely help the bank in reducing its NPA resulting in
increased profitability and image as well as the market share.