Professional Documents
Culture Documents
CONTENTS
Chapter no.
Title
Executive Summary
General Introduction
Page no.
2
Company Profile
10
Research Methodology
32
38
64
Annexure:
a) Bibliography
68
b) Questionnaire
70
EXECUTIVE SUMMARY
Studying books and merely passing exams is not worth, the education, knowledge
and experience is incomplete without being exposed to what is happening in real.
In order to make students competent enough to face real world, there is a
requirement of course for undergoing training for six to eight weeks with some
reputed organization. This exposure to real life situation gives an insight to the
students the kind of pressure and problems they can expect to face during their
career.
For the requirement of undergoing training I sent my request for training to HDFC
BANK and fortunately it was accepted. I was assigned the project a study of
investment behavior of people in respect to demographic features i.e. Age and
Occupation.
There are lot many investment avenues are available these days to invest money
like Insurance, Bank Deposits, Equity Market etc. The report studies the various
investment avenues preferred by people and the various factors like Age and
Occupation that influence the investment behavior of people.
Chapter gives the introduction to investment. It provides information about the
various investment options available to the investor like mutual funds, bonds,
shares, real estate, bank deposits etc. Next chapter describes the industry profile
stating about investment management, investment banking & major players. Then
comes the turn of company profile where the History, Mission & the Products
offered by HDFC Bank are discussed. Some of the products offered are saving
account, current account, fixed deposit, anywhere banking, online broking,
insurance, lockers etc.
Series of steps were undertaken in order to study the investment behavior of people.
Descriptive research design & Non probability convenient sampling technique is
used.
INTRODUCT
ION
INTRODUCTION
The accumulation of huge non-performing assets in banks has assumed
great importance. The depth of the problem of bad debts was first realized only in
early 1990s. The magnitude of NPAs in banks and financial institutions is over
Rs.1,50,000 crores.
While gross NPA reflects the quality of the loans made by banks, net
NPA shows the actual burden of banks. Now it is increasingly evident that the
major defaulters are the big borrowers coming from the non-priority sector. The
banks and financial institutions have to take the initiative to reduce NPAs in a time
bound strategic approach.
Public sector banks figure prominently in the debate not only because
they dominate the banking industries, but also since they have much larger NPAs
compared with the private sector banks. This raises a concern in the industry and
academia because it is generally felt that NPAs reduce the profitability of a banks,
weaken its financial health and erode its solvency.
For the recovery of NPAs a broad framework has evolved for the
management of NPAs under which several options are provided for debt recovery
and restructuring. Banks and FIs have the freedom to design and implement their
own policies for recovery and write-off incorporating compromise and negotiated
settlements.
COMPANY
PROFILE
ABOUT HDFC
The Housing Development Finance Corporation Limited (HDFC) was
amongst the first to receive an 'in principle' approval from the
Reserve Bank of India (RBI) to set up a bank in the private sector, as
part of the RBI's liberalization of the Indian Banking Industry in 1994.
The bank was incorporated in August 1994 in the name of 'HDFC
Bank Limited', with its registered office in Mumbai, India. HDFC Bank
commenced operations as a Scheduled Commercial Bank in January
1995.
HDFC is India's premier housing finance company and enjoys an
impeccable track record in India as well as in international markets.
Since its inception in 1977, the Corporation has maintained a
consistent and healthy growth in its operations to remain the market
leader in mortgages. Its outstanding loan portfolio covers well over a
million dwelling units.
a strong market
PERSONAL BANKING
Loan Product
Auto Loan
Loan
Against
Security
Loan
Against
Property
Personal loan
Credit card
2-wheeler loan
Commercial
vehicles finance
Home loans
Deposit Product
Saving a/c
Current a/c
Fixed deposit
Demat a/c
Safe
Deposit
Lockers
Mutual Fund
Bonds
Knowledge Centre
Insurance
General and Health
Insurance
Equity
and
Derivatives
Mudra Gold Bar
Retail
business
banking
Tractor loan
Working
Capital
Finance
Construction
Equipment Finance
Health
Care
Finance
Education Loan
Gold Loan
Cards
Credit Card
Debit Card
Prepaid Card
-------------------------------Forex Services
------------------------------- Product & Services
Trade Services
Forex
service
Branch Locater
RBI Guidelines
Payment Services
NetSafe
Merchant
Prepaid Refill
Billpay
Visa Billpay
InstaPay
DirectPay
VisaMoney
Transfer
eMonies
Electronic
Funds Transfer
Online Payment
of Direct Tax
WHOLESALE BANKING
Access To Bank
NetBanking
OneView
InstaAlert
MobileBanking
ATM
Phone Banking
Email Statements
Branch Network
Corporate
Small and
Enterprises
Medium Financial
and Trusts
Institutions
Funded
Services
Non Funded
Services
Value Added
Services
Internet
Banking
BANKS
Funded Services
Sub Non
Funded Clearing
Membership
Services
HDFCs main goals are to :The primary objective of HDFC is to enhance residential housing stock and to
promote home ownership.
To acquire by purchase, lease, exchange, hire or otherwise lands & property or any
interest in the same in India.
To advance money to any person/ persons, company or corporation, society or
association either at interest without, and or with or without any security and in
particular to advance money to shareholders of the company or to oth4r persons to
enable the person to erect, or purchase, or enlarge, or repair any house or building
or any part or portions thereof or to purchase any freehold or leasehold or any lands
or estate or property in India upon the terms and conditions as laid by the company.
NONPERFORMIN
G ASSETS
10
ii.
The account remains out of order for a period of more than 180 days ,in
respect of an overdraft/cash credit (OD/CC)
iii.
The bill remains overdue for a period of more than 180 days in case of bill
purchased or discounted.
iv.
Interest and/or principal remains overdue for two harvest season but for a
period not exceeding two half years in case of an advance granted for
agricultural purpose ,and
v.
Any amount to be received remains overdue for a period of more than 180
days in respect of other accounts
With a view to moving towards international best practices and to ensure greater
transparency, it has been decided to adopt 90 days overdue norms for
identification of NPAs ,from the year ending March 31,2004,a non performing
asset shell be a loan or an advance where;
i.
11
ii.
The account remains out of order for a period of more than 90 days
,in respect of an overdraft/cash credit (OD/CC)
iii.
The bill remains overdue for a period of more than 90 days in case of
bill purchased or discounted.
iv.
Interest and/or principal remains overdue for two harvest season but
for a period not exceeding two half years in case of an advance granted
for agricultural purpose ,and
v.
Out of order
An account should be treated as out of order if the outstanding balance
remains continuously in excess of sanctioned limit /drawing power. in case where
the out standing balance in the principal operating account is less than the
sanctioned amount /drawing power, but there are no credits continuously for six
months as on the date of balance sheet or credit are not enough to cover the
interest debited during the same period ,these account should be treated as out of
order.
Overdue
Any amount due to the bank under any credit facility is overdue if it is not
paid on due date fixed by the bank.
12
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.
EXTERNAL FACTORS :--------------------------------- Ineffective recovery tribunal
The Govt. has set of numbers of recovery tribunals, which works for
recovery of loans and advances. Due to their negligence and ineffectiveness
in their work the bank suffers the consequence of non-recover, their by
reducing their profitability and liquidity.
Willful Defaults
There are borrowers who are able to payback loans but are
intentionally withdrawing it. These groups of people should be identified and
proper measures should be taken in order to get back the money extended to
them as advances and loans.
Natural calamities
This is the measure factor, which is creating alarming rise in NPAs of
the PSBs. every now and then India is hit by major natural calamities thus
making the borrowers unable to pay back there loans. Thus the bank has to
make large amount of provisions in order to compensate those loans, hence
end up the fiscal with a reduced profit.
Mainly ours farmers depends on rain fall for cropping. Due to
irregularities of rain fall the farmers are not to achieve the production level
thus they are not repaying the loans.
Industrial sickness
Improper project handling , ineffective management , lack of adequate
resources , lack of advance technology , day to day changing govt. Policies
give birth to industrial sickness. Hence the banks that finance those industries
ultimately end up with a low recovery of their loans reducing their profit and
liquidity.
13
Lack of demand
Entrepreneurs in India could not foresee their product demand and starts
production which ultimately piles up their product thus making them unable
to pay back the money they borrow to operate these activities. The banks
recover the amount by selling of their assets, which covers a minimum label.
Thus the banks record the non recovered part as NPAs and has to make
provision for it.
Change on Govt. policies
With every new govt. banking sector gets new policies for its
operation. Thus it has to cope with the changing principles and policies for
the regulation of the rising of NPAs.
The fallout of handloom sector is continuing as most of the weavers
Co-operative societies have become defunct largely due to withdrawal of
state patronage. The rehabilitation plan worked out by the Central
government to revive the handloom sector has not yet been implemented. So
the over dues due to the handloom sectors are becoming NPAs.
INTERNAL FACTORS :-------------------------------- Defective Lending process
There are three cardinal principles of bank lending that have been followed
by the commercial banks since long.
i.
Principles of safety
ii.
Principle of liquidity
iii. Principles of profitability
i.
Principles of safety :By safety it means that the borrower is in a position to repay the loan both
principal and interest. The repayment of loan depends upon the borrowers:
14
a. Capacity to pay
b. Willingness to pay
Capacity to pay depends upon:
1. Tangible assets
2. Success in business
Willingness to pay depends on:
1. Character
2. Honest
3. Reputation of borrower
The banker should, there fore take utmost care in ensuring that the enterprise
or business for which a loan is sought is a sound one and the borrower is
capable of carrying it out successfully .he should be a person of integrity and
good character.
Inappropriate technology
Due to inappropriate technology and management information system,
market driven decisions on real time basis can not be taken. Proper MIS and
financial accounting system is not implemented in the banks, which leads to
poor credit collection, thus NPA. All the branches of the bank should be
computerized.
Improper SWOT analysis
The improper strength, weakness, opportunity and threat analysis is another
reason for rise in NPAs. While providing unsecured advances the banks
depend more on the honesty, integrity, and financial soundness and credit
worthiness of the borrower.
Banks should consider the borrowers own capital investment.
it should collect credit information of the borrowers from_
a. From bankers.
15
Like OSCB suffered loss due to the OTM Cuttack, and Orissa hand
loom industries. The biggest defaulters of OSCB are
the OTM
(117.77lakhs), and the handloom sector Orissa hand loom WCS ltd
(2439.60lakhs).
Absence of regular industrial visit
The
irregularities in spot visit also increases the NPAs. Absence of
regularly visit of bank officials to the customer point decreases the collection
of interest and principals on the loan. The NPAs due to willful defaulters can
be collected by regular visits.
Re loaning process
Non remittance of recoveries to higher financing agencies and re loaning of
the same have already affected the smooth operation of the credit cycle.
Due to re loaning to the defaulters and CCBs and PACs, the NPAs of OSCB
is increasing day by day.
17
liquidity
Impact of NPA
Profitability:NPA means booking of money in terms of bad asset, which
occurred due to wrong choice of client. Because of the money getting
blocked the prodigality of bank decreases not only by the amount of NPA but
NPA lead to opportunity cost also as that much of profit invested in
some
return earning project/asset. So NPA doesnt affect current profit but also
future stream of profit, which may lead to loss of some long-term beneficial
19
Credit loss:Bank is facing problem of NPA then it adversely affect the value of bank in terms of
market credit. It will lose its goodwill and brand image and credit which have
negative impact to the people who are putting their money in the banks .
REASONS FOR NPA:
Reasons can be divided in to two broad categories:A] Internal Factor
B] External Factor
20
[ A ] Internal Factors:Internal Factors are those, which are internal to the bank and are controllable by
banks.
Poor lending decision:
Non-Compliance to lending norms:
Lack of post credit supervision:
Failure to appreciate good payers:
Excessive overdraft lending:
Non Transparent accounting policy:
[ B ] External Factors:External factors are those, which are external to banks they are not controllable by
banks.
Socio political pressure:
Chang in industry environment:
Endangers macroeconomic disturbances:
21
Natural calamities
Industrial sickness
Diversion of funds and willful defaults
Time/ cost overrun in project implementation
Labour problems of borrowed firm
Business failure
Inefficient management
Obsolete technology
Product obsolete
Types of NPA
A] Gross NPA
B] Net NPA
A] 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
22
loans made by banks. It consists of all the non standard assets like as sub-standard,
doubtful, and loss assets.
It can be calculated with the help of following ratio:
Gross NPAs
Gross Advances
B] 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. Since in India, bank
balance sheets contain a huge amount of NPAs and the process of recovery and
write off of loans is very time consuming, the provisions the banks have to make
against the NPAs according to the central bank guidelines, are quite significant.
That is why the difference between gross and net NPA is quite high.
It can be calculated by following_
Net NPAs Gross NPAs Provisions
Gross Advances - Provisions
Early Recognition of the Problem:Invariably, by the time banks start their efforts to get involved in a revival process,
its too late to retrieve the situation- both in terms of rehabilitation of the project and
recovery of banks dues. Identification of weakness in the very beginning that is :
When the account starts showing first signs of weakness regardless of the fact that it
23
may not have become NPA, is imperative. Assessment of the potential of revival
may be done on the basis of a techno-economic viability study. Restructuring
should be attempted where, after an objective assessment of the promoters
intention, banks are convinced of a turnaround within a scheduled timeframe. In
respect of totally unviable units as decided by the bank, it is better to facilitate
winding up/ selling of the unit earlier, so as to recover whatever is possible through
legal means before the security position becomes worse.
Identifying Borrowers with Genuine Intent:Identifying
borrowers with genuine intent from those who are non- serious with no commitment
or stake in revival is a challenge confronting bankers. Here the role of frontline
officials at the branch level is paramount as they are the ones who has intelligent
inputs with regard to promoters sincerity, and capability to achieve turnaround.
Base don this objective assessment, banks should decide as quickly as possible
whether it would be worthwhile to commit additional finance.
In this regard banks may consider having Special Investigation of all financial
transaction or business transaction, books of account in order to ascertain real
factors that contributed to sickness of the borrower. Banks may have penal of
technical experts with proven expertise and track record of preparing technoeconomic study of the project of the borrowers.
Borrowers having genuine problems due to temporary mismatch in fund
flow or sudden requirement of additional fund may be entertained at branch level,
and for this purpose a special limit to such type of cases should be decided. This
will obviate the need to route the additional funding through the controlling offices
in deserving cases, and help avert many accounts slipping into NPA category.
24
Timeliness and Adequacy of response:Longer the delay in response, grater the injury to the account and the asset. Time is
a crucial element in any restructuring or rehabilitation activity. The response
decided on the basis of techno-economic study and promoters commitment, has to
be adequate in terms of extend of additional funding and relaxations etc. under the
restructuring exercise. The package of assistance may be flexible and bank may
look at the exit option.
Focus on Cash Flows:While financing, at the time of restructuring the banks may not be guided by the
conventional fund flow analysis only, which could yield a potentially misleading
picture. Appraisal for fresh credit requirements may be done by analyzing funds
flow in conjunction with the Cash Flow rather than only on the basis of Funds Flow.
Management Effectiveness:The general perception among borrower is that it is lack of finance that leads to
sickness and NPAs. But this may not be the case all the time. Management
effectiveness in tackling adverse business conditions is a very important aspect that
affects a borrowing units fortunes. A bank may commit additional finance to an
aling unit only after basic viability of the enterprise also in the context of quality of
management is examined and confirmed. Where the default is due to deeper
malady, viability study or investigative audit should be done it will be useful to
have consultant appointed as early as possible to examine this aspect. A proper
techno- economic viability study must thus become the basis on which any future
action can be considered.
Multiple Financing:25
26
voluntary basis and outside the legal framework. Under this system, banks
may greatly benefit in terms of restructuring of large standard accounts
(potential NPAs) and viable sub-standard accounts with consortium/multiple
banking arrangements.
Credit Default
Inability to Pay
Unviable
Willful default
Viable
Rehabilitation
Lok
Adalat
27
Debt Recovery
Tribunals
Securitization
Act
Compromise
Sole Banker
Consortium Finance
Asset
Reconstruction
Fresh Issue
of Term
Loan
Conversion
into WCTL
Fresh WC
Limit
Rephasement of
Repayment Period
Once NPA occurred, one must come out of it or it should be managed in most
efficient manner. Legal ways and means are there to over come and manage NPAs.
We will look into each one of it.
Willful Default :A] Lok Adalat and Debt Recovery Tribunal
B] Securitization Act
C] Asset Reconstruction
28
Lok Adalat:
Lok Adalat institutions help banks to settle disputes involving account in
doubtful and loss category, with outstanding balance of Rs. 5 lakh for
compromise settlement under Lok Adalat. Debt recovery tribunals have been
empowered to organize Lok Adalat to decide on cases of NPAs of Rs. 10 lakh and
above. This mechanism has proved to be quite effective for speedy justice and
recovery of small loans. The progress through this channel is expected to pick up in
the coming years.
Debt Recovery Tribunals(DRT):
The recovery of debts due to banks and
financial institution passed in March 2000 has helped in strengthening the function
of DRTs. Provision for placement of more than one recovery officer, power to attach
defendants property/assets before judgment, penal provision for disobedience of
tribunals order or for breach of any terms of order and appointment of receiver with
power of realization, management, protection and preservation of property are
expected to provide necessary teeth to the DRTs and speed up the recovery of NPAs
in the times to come. DRTs which have been set up by the Government to facilitate
speedy recovery by banks/DFIs, have not been able make much impact on loan
recovery due to variety of reasons like inadequate number, lack of infrastructure,
under staffing and frequent adjournment of cases. It is essential that DRT
mechanism is strengthened and vested with a proper enforcement mechanism to
enforce their orders. Non observation of any order passed by the tribunal should
amount to contempt of court, the DRT should have right to initiate contempt
proceedings. The DRT should empowered to sell asset of the debtor companies and
forward the proceed to the winding up court for distribution among the lenders
29
Inability to Pay
Consortium arrangements:
Asset classification of accounts under consortium should be
based on the record of recovery of the individual member banks and other aspects having a bearing on
the recoverability of the advances. Where the remittances by the borrower under consortium lending
arrangements are pooled with one bank and/or where the bank receiving remittances is not parting with the
share of other member banks, the account will be treated as not serviced in the books of the other member
banks and therefore, be treated as NPA. The banks participating in the consortium should, therefore,
arrange to get their share of recovery transferred from the lead bank or get an express consent from the
lead bank for the transfer of their share of recovery, to ensure proper asset classification in their respective
books.
and need for a similar mechanism in India, a Corporate Debt Restructuring System
has been evolved, as under :
Objective
The objective of the Corporate Debt Restructuring (CDR) framework is to
ensure timely and transparent mechanism for restructuring of the corporate debts of
viable entities facing problems, outside the purview of BIFR, DRT and other legal
proceedings, for the benefit of all concerned. In particular, the framework will aim
at preserving viable corporate that are affected by certain internal and external
factors and minimize the losses to the creditors and other stakeholders through an
orderly and coordinated restructuring programme.
RESEARCH
METHODOLOGY
31
RESEARCH METHODOLOGY
Research methodology is a way to systematically solve the research problem.
Research methodology constitutes of research methods, selection criterion of
research methods, used in context of research study and explanation of using of a
particular method or technique so that research results are capable of being
evaluated either by researcher himself or by others
TITLE:
PROCEDURE TO REDUCE NON-PERFORMING ASSETS IN BANKS .
32
33
The scope of the study refers to the job that to know about the activities of the
organization. The study means that the analysis of the products of the company on
which he/she has to focus.
Scope of the Study
Concept of Non Performing Asset
Guidelines
Impact of NPAs
Reasons for NPAs
Preventive Measures
Tools to manage NPAs
During the summer training the volunteer need to find out the corporate strategies
of the running company and The mile stone which the company has covered during
its journey. In the summer training, it is necessary for the student that he /she
involve with the experience guys to get the knowledge about the company. That is
how the company has got the success, Or if it is going in the loss, why.
RESEARCH DESIGN
NON-PROBABILITY
34
Primary data is basically the live data which I collected on field while doing
cold calls with the Distributor and shopkeeper, customers, I shown them list of
question for which I had required their responses. In some cases I got no
response form their side and than on the basis of my previous experiences I
filled those fields.
Source: Main source for the primary data for the project was questionnaires
which I got filled by the customers or some times filled myself on the basis of
discussion with the customers.
Secondary Data:
1
Internet ,
Books
Journals ,
Newspaper,
5 Annual report,
6
bar charts and pie charts are really useful tools for every research to show the result
in a well clear, ease and simple way. Because I used bar charts and pie charts in
project for showing data in a systematic way, so it need not necessary for any
observer to read all the theoretical detail, simple on seeing the charts any body
could know that what is being said.
Technological Tools
Ms-Access
Ms-Word
Above application software of Microsoft helped me a lot in making project more
interactive and productive.
Microsoft-Excel had a great role in my project, it created for me a situation of you
sit and get. I provided it simply all the detail of data and in return it given me all
the relevant information..
SAMPLING METHODOLOGY
Sampling Technique:
Initially, a rough draft was prepared keeping in mind the objective of the research. A
pilot study was done in order to know the accuracy of the Questionnaire.
The final Questionnaire was arrived only after certain important changes were done.
Thus my sampling came out to be judgment and convenient
Sampling Unit:
36
The respondent who were asked to fill out questionnaires are the sampling units.
These comprise of employees of MNC, Govt. Employees, Self Employed etc.
Sample size:
The sample size was restricted to only 100, which comprised of mainly peoples
from different regions of BHOPAL due to time constraints.
Sampling Area :
The area of the research was Bhopal.
DATA
ANALYSIS
37
&
ON
Gender:
Classification of Customers Based On Sex
Sex
No. of respondents
Percentage %
Male
Female
total
35
65
100
35
65
100
38
Interpretation:
35% of the respondents are male and 65% of the respondents are female.
From the above table we can conclude that, the majority of the respondents were
belongs to female group.
Occupation:
Analysis of Occupation of the Respondents
Occupation
Business
Employee
House wife
Others
Percentage
20
10
65
05
%
20
10
65
05
39
Total
100
100
Interpretation:
20% of the respondents are business, 10% of the respondents are employees,
and 65% of the respondents are house wives, 05% of the respondents are others
group.
Income:
Analysis of Monthly Income of the Respondents
Monthly income
No. of respondents
Percentage %
Below 5000
5001-10000
10001-15000
15001 & above
Total
38
30
21
11
100
38
30
21
11
100
40
Interpretation:
As per the data 38% of the respondents earn per month below 5000, 30% of the
respondents earn 5001 to 10000, 21% of the respondents earn above 10001 to
15000. 11% of the respondents earn 15000 & above. From the above table we can
conclude that majority of the respondents monthly income group of below 5000
and more than 5000 to 10000.
1. DO YOU KNOW THE NON PERFORMING ASSETS OF BANK
Opinions
Yes
No
Total
No. of Respondents
10
90
100
41
Percentage (%)
10
90
100
Interpretation:
Only 10% of the respondents said that they know about NON
PERFORMING ASSETS while 90% dont know about NON PERFORMING
ASSETS
No. of Respondents
95
05
100
42
Percentage (%)
95
05
100
Interpretation:
Out of 100 respondent , 95% of the respondents were recommended It is
possible to eliminate totally the npas in the banking business while only 5% told It
is not
Option
Percentage of respondents
Yes
64
No
36
43
INTERPRETATION
Out of 100 respondent 64 % respondent were satisfied with effective inspection
system should be implemented while 36% told no.
Percentage of respondents
Yes
78
No
22
44
INTERPRETATION
Out of 100 respondent 78 % respondent are satisfied with the statement that
operating staff should scrutinize the level of inventories/receivables regularly
while only 22% were not satisfied.
Percentage of respondents
Yes
24
No
76
45
INTERPRETATION
Out of 100 respondent only 24% think large exposure on big corporate or single
project should be avoided
While 76% dont think about that.
RESPONSE
NO. OF
RESPONDENT
S
SHARE (%)
Satisfied
45
45%
Not satisfied
55
55%
46
Not Responded
Total
0.0%
100
100%
45.00%
55.00%
Satisfied
Not satisfied
INTERPRETATION
45% of the respondents are satisfied with uneven scale of repayment schedule with
higher repayment in the initial years normally is preferred
55% of the respondents are not satisfied with that statement.
RESPONSE
Satisfied
NO. OF
RESPONDENT
S
SHARE (%)
60
60%
47
Not satisfied
40
40%
Not Responded
0.0%
100
100%
Total
0%
40%
60%
Satisfied
Not satisfied
Not Responded
INTERPRETATION
60% of the respondents were think the banks should not only take steps for reducing
present NPAs, but necessary precaution should also be taken to avoid future NPAs .
40% of the respondents are not satisfied with that statement.
48
NO. OF
RESPONDENT
S
SHARE (%)
Yes
70
70%
No
30
30%
Total
100
100%
30%
70%
Yes
No
INTERPRETATION
Out Of the sample size of 100 surveyed respondents 70% of the respondents think
that necessary precaution should also be taken to avoid future NPA 30% dont think
that.
49
RESPONSE
NO. OF
RESPONDENTS
SHARE (%)
Yes
87
87%
no
13
13%
Total
100
100%
13.0%
87.0%
yes
no
INTERPRETATION
Out of 100 respondent 87% think there is significant relationship between gross
NPA of a bank to its operating profit only 13% dont think there is significant
relationship between gross npa of a bank to its operating profit.
50
10. DO YOU THINK THE BANK WILL ALWAYS FACE THE PROBLEM OF
NPA BECAUSE OF POOR RECOVERY OF ADVANCES GRANTED BY THE
BANK
RESPONSE
NO. OF
RESPONDENT
S
SHARE (%)
YES
45
45%
NO
55
55%
Not Responded
0.0%
100
100%
Total
45.00%
55.00%
YES
NO
INTERPRETATION
Out of 100 respondent 55% respondent think the bank will always face the problem
of npa because of poor recovery of advances granted by the bank while 45% dont
think.
51
ANALYSIS
For the purpose of analysis and comparison between private sector and public sector
banks, we take five-five banks in both sector to compare the non performing assets
of banks. For understanding we further bifurcate the non performing assets in
priority sector and non priority sector, gross NPA and net NPA in percentage as well
as in rupees, deposit investment advances.
Deposit Investment Advances is the first in the analysis because due to these we
can understand the where the bank stands in the competitive market. As at end of
march 2008, in private sector ICICI Bank is the highest deposit-investmentadvances figures in rupees crore, second is HDFC Bank and KOTAK Bank has least
figures.
In public sector banks Punjab National Bank has highest deposit-investmentadvances but when we look at graph first three means Bank of Baroda and Bank of
India are almost the similar in numbers and Dena Bank is stands for last in public
sector bank. When we compare the private sector banks with public sector banks
among these banks, we can understand the more number of people prefer to choose
public sector banks for deposit-investment.
But when we compare the private sector bank ICICI Bank with the public sector
banks ICICI Bank is more deposit-investment figures and first in the all banks.
52
BANK
AXIS
HDFC
ICICI
KOTAK
INDUSIND
TOTAL
DEPOSIT
87626
100769
244431
16424
19037
468287
INVESTMENT
33705
49394
111454
9142
6630
210325
ADVANCES
59661
63427
225616
15552
12795
377051
BANK
DEPOSIT
INVESTMENT
ADVANCES
53
BOB
BOI
DENA
PNB
UBI
TOTAL
152034
150012
33943
166457
103859
606305
43870
41803
10282
53992
33823
183770
106701
113476
23024
119502
74348
437051
DEPOSIT
INVESTMENT
54
ADVANCES
ICICI BANK
PNB
244431
166457
111454
53992
225616
119502
There are two concepts related to non-performing assets_ gross and net. Gross
refers to all NPAs on a banks balance sheet irrespective of the provisions made. It
consists of all the non standard assets, viz. sub standard, doubtful, and loss assets.
A loan asset is classified as sub standard if it remains NPA up to a period of 18
months; doubtful if it remains NPA for more than 18 months; and loss, without
any waiting period, where the dues are considered not collectible or marginally
collectible.
Net NPA is gross NPA less provisions. Since in India, bank balance sheets contains
a huge amount of NPAs and the process of recovery and write off of loans is very
time consuming, the provisions the banks have to make against the NPA according
to the central bank guidelines, are quite significant.
55
Here, we can see that there are huge difference between gross and net NPA. While
gross NPA reflects the quality of the loans made by banks, net NPA shows the
actual burden of banks. The requirements for provisions are :
100% for loss assets
100% of the unsecured portion plus 20-50% of the secured portion,
depending on the period for which the account has remained in the doubtful
category
10% general provision on the outstanding balance under the sub standard
category.
Here, there are gross and net NPA data for 2006-07 and 2007-08 we taken for
comparison among banks. These data are NPA AS PERCENTAGE OF TOTAL
ASSETS. As we discuss earlier that gross NPA reflects the quality of the loans
made by banks. Among all the ten banks Dena Banks has highest gross NPA as a
percentage of total assets in the year 2006-07 and also net NPA. Punjab National
Bank shows vast difference between gross and net NPA. There is almost same
figures between BOI and BOB.
YEAR 2007-08
BANK
GROSS NPA
56
NET NPA
BOB
BOI
DENA
PNB
UBI
1.46
1.48
2.37
2.09
1.82
0.35
0.45
1.16
0.45
0.59
2007-08
BANK
GROSS NPA
NET NPA
BOB
BOI
DENA
PNB
1.10
1.08
1.48
1.67
0.27
0.33
0.56
0.38
57
UBI
1.34
0.10
2006-07
BANK
GROSS NPA
NET NPA
AXIS
HDFC
ICICI
KOTAK
INDUSIND
0.57
0.72
1.20
1.39
1.64
0.36
0.22
0.58
1.09
1.31
2007-08
58
BANK
GROSS NPA
NET NPA
AXIS
HDFC
ICICI
KOTAK
INDUSIND
0.45
0.68
1.90
1.55
1.69
0.23
0.22
0.87
0.98
1.25
COMPARISON OF NET NPA WITH ALL BANKS FOR THE YEAR 200708. Average of these ten banks net NPA is 0.56. And in the public sector
banks all these five banks are below this. But in private sector banks there are
three banks are above average. The difference between private and public
banks average is also vast. Private sector banks net NPA average is 0.71 and
in public sector banks it is 0.41 as percentage of total assets. As we know
that net NPA shows actual burden of banks. IndusInd bank has highest net
NPA figure and HDFC Bank has lowest in comparison.
60
around 78% in non priority sector. We can see that in private sector banks , banks
has more NPA in non priority sector than priority sector.
BANK
AGRI
(1)
AXIS
109.12
HDFC
36.12
ICICI
981.85
KOTAK
10.00
INDUSIND 30.44
TOTAL
1167.53
BANK
(3)
SECTOR
PRIORITY
86.71
47.70
354.13
4.04
30.02
522.60
( 1+2+3 )
210.59
194.41
1359.34
47.87
63.64
1875.85
275.06
709.23
6211.12
405.20
328.67
7929.28
PRIORITY SECTOR
NPA
(ADVANCED
BOB
BOI
DENA
PNB
UBI
NON-
RS.CRORE )
5469
3269
1160
3772
1924
61
350
325
106
443
197
When we talk about public sector banks they are more in priority sector and they
given advanced to weaker sector or industries. Public sector banks give more loans
to Agriculture , small scale and others units and as a result we see that there are
more number of NPA in public sector banks than in private sector banks. BOB
given more advanced to priority sector in 2007-08 than other four banks and Dena
Bank is in least.
But when there are comparison between private bank and public sector bank still
ICICI Bank has more NPA in both priority and non priority sector with the
comparison of public sector banks. Large NPA in ICICI Bank because the strategy
of bank that risk-reward attitude and initiative in each sector. Above we also
discuss that ICICI Bank has highest deposit-investment-advance than other banks.
Now, when we compare the all public sector banks and public sector banks on
priority and non-priority sector than the figures are really shocking. Because in
compare of private sector banks, public sector banks numbers are very large.
SECTOR
PRIORITY
PUBLIC
NON PRT
TOTAL
PUBLIC SECTOR
2006-07
2007-08
22954
490
15158
38602
25287
299
14163
39749
NEW PRIVATE
2006-07
2007-08
1468
3
4800
6271
62
2080
0
8339
10419
Here, there are huge difference between private and public sector banks NPA.
There is increase in new private sector banks NPA of Rs.4148 cr in 2007-08 which
is almost 66% rise than previous year. In public sector banks the numbers are not
increased like private sector banks.
FINDING
SUGGESTION
CONCLUSION
63
FINDING
For the purpose of analysis and comparison between private sector and public sector
banks, we take five-five banks in both sector to compare the non performing assets
of banks. For understanding we further bifurcate the non performing assets in
priority sector and non priority sector, gross NPA and net NPA in percentage as well
as in rupees, deposit investment advances.
55% respondent think the bank will always face the problem of npa because of poor
recovery of advances granted by the bank while 45% dont think.
45% of the respondents are satisfied with uneven scale of repayment schedule with
higher repayment in the initial years normally is preferred
55% of the respondents are not satisfied with that statement
60% of the respondents were think the banks should not only take steps for reducing
present NPAs, but necessary precaution should also be taken to avoid future NPAs .
40% of the respondents are not satisfied with that statement.
Deposit Investment Advances is the first in the analysis because due to these we
can understand the where the bank stands in the competitive market. As at end of
march 2008, in private sector ICICI Bank is the highest deposit-investment-
64
advances figures in rupees crore, second is HDFC Bank and KOTAK Bank has least
figures.
In public sector banks Punjab National Bank has highest deposit-investmentadvances but when we look at graph first three means Bank of Baroda and Bank of
India are almost the similar in numbers and Dena Bank is stands for last in public
sector bank. When we compare the private sector banks with public sector banks
among these banks, we can understand the more number of people prefer to choose
public sector banks for deposit-investment. comparison of net npa with all banks for
the year 2007-08. Average of these ten banks net NPA is 0.56. And in the public
sector banks all these five banks are below this. But in private sector banks there are
three banks are above average
SUGGESTION
Effective inspection system should be implemented.
Operating staff should scrutinize the level of inventories/receivables
regularly.
Large exposure on big corporate or single project should be avoided.
Uneven scale of repayment schedule with higher repayment in the initial
years normally is preferred.
Large exposure on big corporate or single project should be avoided
65
CONCLUSION
It is not possible to eliminate totally the NPAs in the banking business but can
only be minimized. It is always wise it follow the proper policy appraisal,
supervision and follow-up of advances to avoid NPAs.
The banks should not only take steps for reducing present NPAs, but
necessary precaution should also be taken to avoid future NPAs.
The bank has achieved its target because the net profit is also increased and
there is a decrease in NPAs. So it is in better position compared to last year
66
BIBLIOGRAPH
67
BIBLIOGRAPHY
Marketing Management Philip Kotler, The Millennium Edition, Prentice Hall
Of India Private Limited, New Delhi.
Marketing Research:
Periodical:
Business Word
68
www.scribed.com
www.googlesearch.com
QUESTIONNAI
RE
69
QUESTIONNIRE
I am student of first year MBA of the G.G.I.T.M. Bhopal, I am doing project on
Procedure to reduce non performing assets in banks as a part of study. I request
you to provide the required information for the completion of my study.
Promise that the information is used exclusively for academic purpose only.
1. personal profile: A. Name:
B. Address:
C: Sex: Male:
G: Age: [
70
] Female [
YES
2)
NO
YES
2)
NO
YES
2)
NO
YES
2)
NO
YES
2)
NO
YES
2)
NO
7.DO YOU THINKTHE BANKS SHOULD NOT ONLY TAKE STEPS FOR
REDUCING PRESENT NPAS, BUT NECESSARY PRECAUTION SHOULD
ALSO BE TAKEN TO AVOID FUTURE NPAS
1)
YES
2)
NO
YES
2)
NO
1)
YES
2)
NO
YES
2)
NO
........................................
13.WHAT IS THE CRITERIA TO RECOVER THE ADVANCES FROM THE
BANK
....
72