SUMMER TRAINING PROJECT REPORT

ON
NPA MANAGEMENT IN PUNJAB & SIND BANKS

Submitted in the pursuant to the ordinance

for the award of Degree of

MASTER OF BUSINESS ADMINISTRATION

1

Under the guidance of:

Dr. Mohd Anees
( Head of the Department)
(MBA Finance & Control)

Submitted by
Pranoy Shukla
Roll No.16001117037
MBA (Int. Business) 2015-17

INSTITUTE OF MANAGEMENT
SCIENCES
3

UNIVERSITY OF LUCKNOW,
LUCKNOW
DECLARATION

I Pranoy Shukla, student of MBA(Int. Business) 2 nd

Management Sciences, Lucknow

semester, Institute of

hereby declares that I have successfully completed my

summer training project report on NPA Management In Punjab & Sind Banks. I hereby

declare that all the information provided in this project report are true to the fullest of my
knowledge and it bear no resemblance to any other written material whatsoever.
In the event of any information provided in this report being found incorrect or misleading, I
shall be liable to any outcome at any at any given day.

Place: LUCKNOW
Date:
Pranoy Shukla
MBA ( Int. Business)
16001117037
5

ACKNOWLEDGEMENT
6

I would like to thank the almighty god for the blessing he has given to me to complete this
project work successfully. The objective of summer training is to provide us with as opportunity
to experience the aspect of management in an organization. I am deeply indebted to HOD Dr.
Mohd. Anees ( MBA- Finance & Control) and my Faculty guide ___________________ for
their guidance and support.
Who arranges and guides me in summer training. I would like to express my heart full gratitude
to Mr. ________________ (Branch Manager), who helped me in sharpening my thinking by
cheerfully providing challenging comments and questions. Without the individuals have
provided, this project would have lost much of its refreshing realism.
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Last but not the least I would like to thanks my parents for their blessings, which they always
showers upon me.

Pranoy Shukla
MBA ( Int. Business)
16001117037

TABLE OF CONTENT
CERTIFICATE OF THE COMPANY
ACKNOWLEDGE
PREFACE

Chapter 1:- Introduction: Executive summary of the

project
Chapter 2:- Industry Introduction
Industry introduction
Punjab & Sind Bank: All About
Industry/Bank performance
Correlation between Industry and Punjab & Sind Bank
Movement
Chapter 3:-Research Methodology
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Significance of the study

Objective of the study
Scope of the study
Tools & techniques used
Applied principles and concepts
Sources of primary and secondary data
Data collection
Statistical analysis
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IDBI BANK LTD.

Theoretical interpretations
Findings
Chapter 4:- Conclusions and Recommendations
Appendix 1: Questionnaire
Appendix 2: Bibliography

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13

PREFACE

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Decision making is a fundamental part of the research process. Decisions regarding that what
you want to do, how you want to do, What tools and techniques must be used for the successful
Completion of the project. In fact it is the researchers efficiency as a decision maker that makes
project fruitful for those who concern to the area of study.
Basically when we are playing with computer in every part of life, I Used it in my project not for
the ease of my but for the ease of result explanation to those who will read this project. The
project Presents the role of financial system in life of persons.

15

I had toiled to achieve the goals desired. Being a neophyte in this highly competitive world of
business, I had come across several difficulties to make the objectives a reality. I am presenting
this hand carved efforts in black and white. If anywhere something is Found not in tandem to the
theme then you are welcome with your Valuable suggestions.

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Chapter 1
Introduction: Executive summary of the project

After liberalization the Indian banking sector developed very appreciate. The RBI also
nationalized good amount of commercial banks proving socio economic services to the people of
the nation. The public Sector banks have shown very good performance as far as the financial

17

operations are concerned. If we look to the glance of the financial operation,

We may find that

deposit of public to the public sector Banks have increased from 859, 461, 95 crore to 1, 079,
393, 81 crore in 2016, the investments of the public sector Banks have increased from
349,107.81 crore to 545,509.00 crore , and however the advances have also been increased to
549,351.16crore from 414,989.36crore in 2016. The total income of the public sector banks has
also shown good performance since the last few years and currently it is 128,464.40crore.The
public sector Banks have also shown comparately good result. The gross profits of the public
sector Banks Currently29, 715,26crore which has been doubled to the last to last year, and the
net profit Of the public sector Banks is 12,295,47crore.However, the only problem of the public

18

sector Banks these days are the Increasing level of the non performing assets. The non
performing assets. The non performing assets of the public Sector banks have been increasing
regularly year by year. If we glance on the numbers of performing assets we may come to know
that in the year 1997 the NPAs were 437,300crore and reached to 80.24crore in 2015. The only
problem that hampers the possible financial performance of the public Sector Banks is the
increasing results of the non performing assets. The non performing assets impacts drastically to
the working of the banks .The efficiency of a bank is not always reflected only by the size of its
Balance sheet but buy the level of return on its assets. NPAs do not generate interest income for

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its Bank, but at the same time banks are required to make provisions for such NPAs from their
current profits.
NPAs have deleterious effect on the return on assets in several ways: --(1) They erode current profits through provisioning requirements
(2) They result in reduced interest income
(3) They require higher providing requirements affecting profits and accretion to Capital
funds recycling of funds, set in asset-liability mismatches, etc.

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The RBI has also tried to develop many schemes and tools to reduce the non Performing
assets the results are not up to the expectations. To improve NPAs each bank should be
motivated to introduce their own precautionary steps. Before lending the banks must
evaluate the feasible financial and operational prospective results of the borrowing
companies by keeping in Considerations the overall impacts all the factors that influence
the business.

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Chapter 2
Industry Introduction &Punjab & Sind Bank
INDUSTRY INTRODUCTION

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The Indian Banking industry, which is governed by the Banking Regulation Act of India, 1949
can be broadly classified into two major Categories, non-scheduled banks and scheduled banks.
Scheduled banks Comprise commercial banks and the co-operative banks. In terms of
Ownership, commercial banks can be further grouped into nationalized Banks, the State Bank of
India and its group banks, regional rural banks and private sector banks (the old/ new domestic
and foreign). These Banks have over 67,000 branches spread across the country in every city and
villages of all nook and corners of the land. The first phase of financial reforms resulted in the
nationalization of 14 major Banks in 1969 and resulted in a shift from Class banking to Mass
Banking. This in turn resulted in a significant growth in the geographical Coverage of banks.

23

Every bank had to earmark a minimum percentage of their loan portfolio to sectors identified as
priority sectors. The Manufacturing sector also grew during the 1970s in protected environs
the banking sector was a critical source. The next wave of reforms saw the nationalization of 6
more commercial banks in 1980. Since then the number of scheduled commercial banks
increased four-fold and the number of bank branches increased eight-fold. And that was not the
limit of growth.
After the second phase of financial sector reforms and liberalization of the sector in the early
nineties, the Public Sector Banks (PSB) s found it extremely difficult to compete with the new
private sector banks and the foreign banks. The new private sector banks first made their
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appearance after the guidelines permitting them were issued in January 1993. Eight New private
sector banks are presently in operation. These banks due to their late start has access to state-ofthe-art technology, which in turn helps them to save on manpower costs. During the year 2000,
the State Bank of India (SBI) and its 7 associates accounted for a 25 percent share in deposits
and 28.1 percent share in Credit. The 20 nationalized banks accounted for 53.2 percent of the
deposits and 47.5 percent of credit during the same period. The share of foreign banks
(numbering 42), regional rural banks and other scheduled Commercial banks accounted for 5.7
percent, 3.9 percent and 12.2 percent respectively in deposits and 8.41 percent, 3.14 percent and

25

B12.85 percent respectively in credit during the year 2000.about the detail Of the current
scenario we will go through the trends in modern economy Of the country.

Current Scenario:
The industry is currently in a transition phase. On the one hand, the PSBs, which are the
mainstay of the Indian Banking system are in the process of shedding their flab in terms of
excessive manpower, excessive non Performing Assets (NPAs) and excessive governmental
equity, while on the other hand the private sector banks are consolidating themselves through
26

mergers and acquisitions. PSBs, which currently account for more than 78 percent of total
banking industry assets are saddled with NPAs (a mind-boggling Rs 830 billion in 2000), falling
revenues from traditional sources, lack of modern technology and a massive workforce while the
new private sector banks are forging ahead and rewriting the traditional banking business model
by way of their sheer innovation and service. The PSBs are of course currently working out
challenging strategies even as 20 percent of their massive employee strength has dwindled in the
wake of the successful Voluntary Retirement Schemes (VRS) schemes. The private players
however cannot match the PSBs great reach, great size and access to low cost deposits.
Therefore one of the means for them to combat the PSBs has been through the merger and

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acquisition (M& A) route. Over the last two years, the industry has witnessed several such
instances. For instance, HDFC Banks merger with Times Bank ICICI Banks acquisition of ITC
Classic, Anagram Finance and Bank of Madurai. Centurion Bank, Indusind Bank, Bank of
Punjab, Vysya Bank are said to be on the lookout. The UTI bank- Global Trust Bank merger
however opened a Pandora s Box and brought about the realization that all was not well in the
functioning of many of the private sector banks.
Private sector Banks have pioneered internet banking, phone banking, anywhere banking, mobile
banking, debit cards, Automatic Teller Machines (ATMs) and combined various other services
and integrated them into the mainstream banking arena, while the PSBs are still grappling with
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disgruntled employees in the aftermath of successful VRS schemes. Also, following Indias
commitment to the W To agreement in respect of the services sector, foreign banks, including
both new and the existing ones, have been permitted to open up to 12 branches a year with effect
from 1998-99 as against the earlier stipulation of 8 branches.
Tasks of government diluting their equity from 51 percent to 33 percent in November 2000 has
also opened up a new opportunity for the takeover of even the PSBs. The FDI rules being more
rationalized in Q1FY02 may also pave the way for foreign banks taking the M& A route to
acquire willing Indian partners. Meanwhile the economic and corporate sector slowdown has led
to an increasing number of banks focusing on the retail segment. Many of them are also entering
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the new vistas of Insurance. Banks with their phenomenal reach and a regular interface with the
retail investor are the best placed to enter into the insurance sector. Banks in India have been
allowed to provide fee-based insurance services without risk participation, invest in an insurance
company for providing infrastructure and services support and set up of a separate joint venture
insurance company with risk participation.

Aggregate Performance of the Banking Industry

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Aggregate deposits of scheduled commercial banks increased at a compounded annual average

growth rate (Cagr) of 17.8 percent during 1969-99, while bank credit expanded at a Cagr of 16.3
percent per annum. Banks investments in government and other approved securities recorded a
Cagr of 18.8 percent per annum during the same period. In FY01 the economic slowdown
resulted in a Gross Domestic Product (GDP) growth of only 6.0 percent as against the previous
years 6.4 percent. The WPI Index (a measure of inflation) increased by 7.1 percent against 3.3
percent in FY00. Similarly, money supply (M3) grew by around 16.2 percent as against 14.6
percent a year ago. The growth in aggregate deposits of the scheduled commercial banks at 15.4

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percent in FY01 percent was lower than that of 19.3 percent in the previous year, while the
growth in credit by SCBs slowed down to 15.6 percent in FY01 against 23 percent a year ago.
The industrial slowdown also affected the earnings of listed banks. The net profits of 20 listed
banks dropped by 34.43 percent in the quarter ended March 2014. Net profits grew by 40.75
percent in the first quarter of 2000-2014, but dropped to 4.56 percent in the fourth quarter of
2000-2014.
IDBI BANK LTD.

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On the Capital Adequacy Ratio (CAR) front while most banks managed to fulfill the norms, it
was a feat achieved with its own share of difficulties.
The CAR, which at present is 9.0 percent, is likely to be hiked to 12.0 percent by the year 2004
based on the Basle Committee recommendations. Any bank that wishes to grow its assets needs
to also shore up its capital at the same time so that its capital as a percentage of the risk-weighted
assets is maintained at the stipulated rate. While the IPO route was a much-fancied one in the
early 90s, the current scenario doesnt look too attractive for bank majors.

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Consequently, banks have been forced to explore other avenues to shore up their capital base.
While some are wooing foreign partners to add to the capital others are employing the M& A
route. Many are also going in for right issues at prices considerably lower than the market prices
to woo the investors.

Interest Rate Scene

The two years, post the East Asian crises in 1997-98 saw a climb in the global interest rates. It
was only in the later half of FY01 that the US Fed cut interest rates. India has however remained
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more or less insulated. The past 2 years in our country was characterized by a mounting intention
of the Reserve Bank Of India (RBI) to steadily reduce interest rates resulting in a narrowing
differential between global and domestic rates.
The RBI has been affecting bank rate and CRR cuts at regular intervals to improve liquidity and
reduce rates. The only exception was in July 2000 when the RBI increased the Cash Reserve
Ratio (CRR) to stem the fall in the rupee against the dollar. The steady fall in the interest rates
resulted in squeezed margins for the banks in general.
Governmental Policy:

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After the first phase and second phase of financial reforms, in the 1980s commercial banks began
to function in a highly regulated environment, with administered interest rate structure,
quantitative restrictions on credit flows, high reserve requirements and reservation of a
significant proportion of lendable resources for the priority and the government sectors. The
restrictive regulatory norms led to the credit rationing for the private sector and the interest rate
controls led to the unproductive use of credit and low levels of investment and growth. The
resultant financial repression led to decline in productivity and efficiency and erosion of
profitability of the banking sector in general.

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This was when the need to develop a sound commercial banking system was felt. This was
worked out mainly with the help of the recommendations of the Committee on the Financial
System (Chairman: Shri M. Narasimham), 1991. The resultant financial sector reforms called for
interest rate flexibility for banks, reduction in reserve requirements, and a number of structural
measures. Interest rates have thus been steadily deregulated in the past few years with banks
being free to fix their Prime Lending Rates(PLRs) and deposit rates for most banking products.
Credit market reforms included introduction of new instruments of credit, changes in the credit
delivery system and integration of functional roles of diverse players, such as, banks, financial
institutions and non-banking financial companies (Nbfcs).

37

Domestic Private Sector Banks were allowed to be set up, PSBs were allowed to access the
markets to shore up their Cars.

Implications Of Some Recent Policy Measures:

The allowing of PSBs to shed manpower and dilution of equity are moves that will lend greater
autonomy to the industry. In order to lend more depth to the capital markets the RBI had in
November 2000 also changed the capital market exposure norms from 5 percent of banks
incremental deposits of the previous year to 5 percent of the banks total domestic credit in the
38

previous year. But this move did not have the desired effect, as in, while most banks kept away
almost completely from the capital markets, a few private sector banks went overboard and
exceeded limits and indulged in dubious stock market deals. The chances of seeing banks making
a comeback to the stock markets are therefore quite unlikely in the near future.
The move to increase Foreign Direct Investment FDI limits to 49 percent from 20 percent during
the first quarter of this fiscal came as a welcome announcement to foreign players wanting to get
a foot hold in the Indian Markets by investing in willing Indian partners who are starved of net
worth to meet CAR norms. Ceiling for FII investment in companies was also increased from
24.0 percent to 49.0 percent and have been included within the ambit of FDI investment.
39

BANK & MANAGEMENT

HISTORY & BACKGROUND OF THE BANK

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It was in the year 1908, when a humble idea to uplift the poorest of poor of the land culminated
in the birth of Punjab & Sind Bank with the far-sighted vision of luminaries like Bhai Vir Singh,
Sir Sunder Singh Majitha and Sardar Tarlochan Singh. They enjoyed the highest respect with the
people of Punjab.

The bank was founded on the principle of social commitment to help the weaker section of the
society in their economic endeavours to raise their standard of life.

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Decades have gone by, even today Punjab & Sind Bank stands committed to honor the social
commitments of the founding fathers.

VISION & MISSION

Corporate Vision
We envision to emerge as a strong vibrant Bank through the implementation of effective Risk
Management and Internal Control Systems through syncronization of the human, financial and

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technological resources.

Corporate Mission
To put in place the effective Risk Management and Internal Control Systems.
To adopt and operationalise high-level technology standards.
To strive to achieve excellence in Customer Service.
To achieve the highest standards of transparency and accountability in the conduct of banking
business.
To adopt professional approach in effectively managing financial as well as non-financial risks.
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To maximize profitability and profits of the Bank with due compliance of prudential guidelines.
To maximize competitive risk adjusted return on capital, through planned reduction in the
average cost of funds, increased yield on advances and investments besides reduction in cost of
operations.

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MANAGEMENT

45

46

SARDAR R.P. SINGH, I.A.S

CHAIRMAN & MANAGING DIRECTOR

SARDAR G.S.MATTA
EXECUTIVE DIRECTOR

DIRECTORS
SHRI R. SADANANDAM (RBI NOMINEE DIRECTOR)
SARDAR AVTAR SINGH MANN (Officer's Director)
SARDAR MOHAN SINGH SEKHON (Workman Employee Director)
MAJOR MISS KRISHNA MOHINI
SHRI HARCHARAN SINGH JOSH
47

SHRI UMESH KUMAR SHARMA

NON- OFFICIAL DIRECTORS
SHRI K.K. SHARMA
MRS. KAMAL MANN
BRANCH NETWORK

The corporate office of the bank is situated at Rajendra Place, New Delhi with 19 zonal offices
(as on 30.09.2004) scattered in various states controlling the branches.

48

The Bank has a vast network of 813 branches and 76 extension counters (as on 31.03.2006)
spread all over India catering to the needs to all section of society irrespective of their social and
economic strata. These branches are manned by a dedicated work force of 9778 personnel.

In line with the spirit of liberalisation, the Bank is laying special stress on International Banking
Divisions, Merchant Banking, Hire Purchase and Leasing, Telebanking & Credit Card.
Deposit Accounts

49

You may open different type of accounts with us such as, savings accounts, term deposits,
current accounts including 'No Frills' Account etc with us. You may open such accounts in the
following stylesi)
i.

Single

ii.

Joint

iii.

Joint (Either or Survivor)

iv.

Joint (Former or Survivor)

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v.
vi.

Joint (Latter or Survivor)

Or in any other style

The above may be opened by you with or without nomination facility. We will explain the
implications of the foregoing accounts as also the nomination facilities at the time of opening of
the account.
We will also inform you about liquid deposit facility, sweep account and similar types of
products offered by us and their implications and procedures involved, at the time of opening of
account.
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'No Frills' Account

We will make available a basic banking 'No Frills' Account either with 'nil' or very low
minimum balances. The charges applicable for various services/ products in such an account will
be indicated in a separate Tariff Schedule. The nature and number of transactions in such
accounts may be restricted, which will be made known to you at the time of opening of the
account in a transparent manner.
Special Accounts

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We will make our best efforts to make it easy and convenient for our special customers like
senior citizens, physically challenged persons and illiterate persons to bank with us. This will
include making convenient policies, products and services for such applicants and customers.
We will inform the procedure for opening of the account and other terms and conditions to
blind /other physically challenged persons provided he/she calls on the Bank personally along
with a witness who is known to both such person and the bank.

53

Normally no cheque book facility is provided to illiterate persons and blind persons. However, to
meet periodic repayment of retail loans, utility bills etc. we will consider issuing of cheque book
with safeguards to protect your interest.
Dormant/ Inoperative Accounts
We will
a. tell you when you open your account, what period of inoperation of the account would
render your account being classified as dormant/ inoperative account. You will also be
informed three months before your account is classified as dormant, inoperative or

54

treated as unclaimed account and the consequences including the charges for reactivation
thereof as per the Tariff Schedule;
b. tell you the procedure to be followed if you want to activate the account .
Closing Your Account
Under normal circumstances, we will not close your account without giving you at least 30 days
notice. Examples of circumstances, which are not 'normal', include improper conduct of account
etc. In all such cases, you will be required to make alternate arrangements for cheques already
issued by you and desist from issuing any fresh cheques on such account.
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Clearing Cycle / Collection Services

We will
a. tell you about the clearing cycle for local instruments and the outstation instruments
including details such as when you can withdraw money after lodging collection
instruments and when you will be entitled to earn delayed interest as per our Cheque
Collection Policy.

56

b. provide details, if we offer immediate credit for outstation cheques, including the
applicable terms and conditions, such as the limit up to which instruments tendered by
you can be credited, operating accounts satisfactorily, etc.
c. proceed as per our cheque collection policy and provide all assistance for you to obtain a
duplicate cheque/instrument in case a cheque instrument tendered by you is lost in transit
d. give the above information when you open your account and whenever you ask us. If
there is any change in our policy, the revised policy will be displayed on our website and
at all our branches.

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Cash Transactions
We will accept cheques/ cash and dispense cash at counters wherever your account is maintained.
We will exchange soiled/mutilated notes and/ or small coins at such of our branches as per RBI
Directives.
For transactions above a specified amount we may require you to furnish your PAN Number.

Product and Services

58

(1)Saral Savings Scheme

Under the RBI direction to achieve greater financial inclusion Bank has since introduced a no
frill deposit account named as "_SARAL SAVINGS SCHEME", that would make accessible
banking to vast section of society, which has been deprived of the banking facilities till date. .
Basic feature of the account shall be as under:Such accounts shall remain operative even when these have Zero balance & can be opened
in any branch of the bank
"Saral Savings Account" can be opened with the initial deposit of Rs100/- and thereafter the

59

balance may go below Rs 100/- and will continue to be operative with even zero balance, unless
the account holder request to close the account. No charges shall be levied in this regard.
CURRENT ACCOUNT
i) Current Accounts can be opened by individuals, partnership firms, private and public limited
companies, HUFs/specified associates, trusts, etc.
ii) As required by law, while opening this account, we satisfy ourselves about the identity,
including
verification of address, of a person(s) seeking to open an account to assist in protecting the right
60

of customer(s) and ourselves against fraud and other misuses of the banking system.
iii) We also require a satisfactory introduction of the person(s) opening the account by a person
acceptable to the Bank and will require to obtain two recent photographs of the person(s)
opening/operating the account, as per RBI directives.
RECURRING DEPOSIT SCHEME
Who can open an account
+ An individual who is not insolvent or insane, can open an account singly or jointly.
+ A minor can open Saving bank Account and the same can be ope rated by the natural guardian
61

or by minor himself / herself, if he / she is above the age of 10 years. The account can also be
opened jointly.
+ On attaining majority, the erstwhile minor should confirm the balance in his / her account and
if the account is operated by the natural guardian / guardian, fresh specimen signature of
erstwhile minor duly verified by the natural guardian / guardian would be obtained and kept on
record for all operational purpose.
FIXED DEPOSIT
Who can open an account
* An individual who is not insolvent or insane, can open an account singly or jointly.

62

* A minor can open Saving bank Account and the same can be ope rated by the natural guardian
or by minor himself / herself, if he / she is above the age of 10 years. The account can also be
opened jointly.
* On attaining majority, the erstwhile minor should confirm the balance in his / her account and
if the account is operated by the natural guardian / guardian, fresh specimen signature of
erstwhile minor duly verified by the natural guardian / guardian would be obtained and kept on
record for all operational purpose.

63

Structure of Indian Banking Industry

64

RC
SO
R
EP
BO
NR
KA
OT
I
DV
AE

E
E
V
A

F
N
I

65

A
N
K

The formal banking system in India comprises the Reserve Bank of India, commercial banks,
regional rural banks and the cooperative banks. In the recent past, private non-banking finance
companies also have been active in the financial system, and are being regulated by the RBI.
Today the overall Commercial banking system in india may be distinguished into:

66

(1)
(2)
(3)
(4)

Public Sector Banks

Private Sector Banks
Co-operative Sector Banks
Development Banks

PUBLIC SECTOR BANKS

a. State Bank of India and its associate banks called the state Bank group.
b. 20 nationalized banks
c. Regional Rural Banks mainly sponsored by Public Banks
PRIVATE SECTOR BANKS

67

a.
b.
c.
d.
e.

Old generation private banks

New generation private banks
Foreign banks in India
Scheduled Co-operative Banks
Non-scheduled Banks

CO-OPERATIVE SECTOR

The Co-operative banking sector has been developed in the country to the
supplement the village money lender. The co-operative banking sector in india is divided into 4
components.
68

1.
2.
3.
4.
5.
6.
7.
8.

State Co-operative Banks

Central Co-operative Banks
Primary Agriculture Credit societies
Land Development Banks
Urban Co-operative Banks
Primary Agricultural Development Banks
Primary Land Development Banks
State Land Development Banks

DEVELOPMENT BANKS

69

1.
2.
3.
4.
5.
6.
7.
8.
9.

Industrial Finance Corporation India (IFCI)

Industrial Development Bank of India (IDBI)
Industrial Credit and Investment Corporation of India (ICICI)
Industrial Investment Bank of India (IIBI)
Small Industries Development Bank of India(SIDBI)
SCICI Ltd.
National Bank for Agriculture and Rural Development(NABARD)
Export Import Bank of India
National Housing Bank
PUBLIC SECTOR BANKS
1. Punjab & Sind Bank
2. Andhra Bank
3. Bank of Baroda
70

4. Bank of India
5. Bank of Maharashtra
6. Canara Bank
7. Central Bank of India
8. Corporation Bank
9. Dena Bank
10. Indian Bank
11. Indian Overseas Bank
12. Punjab National Bank
13. Punjab and Sind Bank
14. Vijaya Bank
15. United Bank of India
16. Union Bank of India
17. Syndicate Bank
18. Oriental Bank of commerce
19. Uco Bank
20. State Bank of India
21. State Bank of India &Associate
71

1.State Bank of Hyderabad

2.State Bank of Bikaner&Jaipur
3.State Bank of Saurashtra
4. State Bank of Indore
5.State Bank of Mysore
6.State bank Of Patila
7.State Bank of Travancore

MAIN OBJECTS OF THE BANK

72

The main object and business of the Bank, as laid down in the Bank Nationalization Act is as
under:
The main object of the Banking Companies (Acquisition and Transfer of Undertakings) Act,
1970 under which the undertaking of the Bank was taken over by the Central Government is as
under: An Act to provide for the acquisition and transfer of the undertakings of certain Banking
Companies, having regard to their size, resources, coverage and organization, in order to control
the heights of the economy and to meet progressively, and serve better, the needs of the
development of the economy, in conformity with national policy and objectives and for matters
connected therewith or incidental thereto.
73

The Main Object of the Bank enables it to undertake the activities for which the funds are being
raised and the activities, which it has been carrying on till date.
Business Sphere of the Bank

The Bank shall carry on and transact the business of Banking as defined in Clause (b) of Section
5 of the Banking Regulation Act, 1949, and may engage in one or more of the other forms of
business specified in Sub-Section (1) of Section 6 of that Act.

74

Clause (b) of Section 5 of the Banking Regulation Act, 1949 defines Banking as "the accepting
for the purpose of lending or investment, of deposits of money from the public, repayable on
demand or otherwise, and withdraw able by cheque, draft, order or otherwise."

Other Business that the Bank may undertake (Section 3 (7))

Sections 3 (7) of Chapter II of the Banking Companies (Acquisition) Act 1970 provides for the
Bank to act as Agent of Reserve Bank.

75

1. The Bank shall, if so required by the Reserve Bank of India, act as agent of the Reserve
Bank at all places in India where it has a branch:
a. Paying, receiving, collecting and remitting money, bullion and securities on behalf of the
Government of India
b. Undertaking and transacting any other business which the Reserve Bank may from time to
time entrust to it .

76

2. The terms and conditions on which any such agency business shall be carried on by the
corresponding new Bank on behalf of the Reserve Bank shall be such as may be agreed
upon.
3. If no agreement can be reached on any matter referred to in Clause (2) above, or if a
dispute arises between the corresponding new Bank and the Reserve Bank as to the
interpretation of any agreement between them, the matter shall be referred to the Central
Government and the decision of the Central Government, thereon, shall be final.

77

4. The corresponding new Bank may transact any business or perform any function entrusted
to it under Clause (1) by itself or through any agent approved by the Reserve Bank.

78

CORPORATE STRATEGY

79

The globalization of the economy and financial sector reforms have resulted in increased
competition and thin margins. To achieve the corporate goal, the following strategies have been
planned:
1. Proliferate the Banks business
2. Increase the banks' non-fund and non-interest income
3. Offer affable customer service

80

4. Open more specialized branches and expand personal banking, quick collection service, retail
banking, forex banking, small scale
industrial finance etc.
5. Use technology to boost credit off-take
6. Sharpen efficiency and efficacy
7. Reduction of non-performing assets

81

MISSION & VISION OF THE BANK

MISSION

82

To ensure anywhere and anytime Banking for the customer with latest state- of- art technology
and by developing effective customer centric relationship and to emerge as a world-class service
provider through efficient utilization of human resources and Product innovation.

VISION
To put the Bank on higher growth path by building a strong customer-base through Talent
Management, Induction of State of art Technology and through Structural Reorganization.

83

COMPETITIVE STRENGTHS

Many new banks, both private and foreign, have entered the industry and offer new and
innovative products at competitive rates. In this scenario, Punjab & Sind Bank believes that its
competitive advantages are:
a) Rich tradition of more than 142 years

84

b) Large and loyal customer base

c) Wide branch network
d) Specialized branches to cope with modern demand pattern
e) Diversified product portfolio
f) Committed and experienced work force
g) Technology

85

Punjab & Sind Bank

CORPORATE FOCUS
The corporate focus of the Bank is:
a) To improve efficiency to face competition especially in metropolitan and urban centers
b) To increase productivity

86

c) To augment its market share of banking system deposits

d) To develop its management information system
e) To reduce NPAs
f) To improve systems and control
g) To upgrade products and services
h) To provide adequate credit support to industry, trade and priority sector

87

BUSINESS OF THE BANK & ITS PRODUCTS AND SERVICES

Other than the offering traditional banking products such as corporate loans, the Bank has made
its presence felt by introducing certain new products and value added services while continuing
to popularize the existing products. Some of these new products are:

88

(a) Retail Banking Boutiques: In the year 2000, Punjab & Sind Bank came out with a unique
strategy for marketing its retail loans by putting in place dedicated Retail Banking Boutiques at
potential centers across the country to act as exclusive delivery channels of various Retail
Finance Schemes. The Bank posted young & dynamic officers in these boutiques and delegated
them with adequate authority to sanction loan proposals related to the various schemes on the
spot. These officers were also exposed to specialized training not only to serve the customer
better but also to sell the retail products, if need be, by adopting door to door campaign. Total
number of Boutiques was 127 with an outstanding of Rs. 2561.18 crores as on June 30, 2007.

89

During the quarter ended June 2007,the total disbursement under the various retail finance
schemes was Rs. 211.77 crores.
Brief description of the Banks retail schemes is as under

Sr.

Scheme

Details

90

Punjab & Sind Bank Personal Loan Loan for purchase of entire range of consumer
scheme
durable, purchase of two wheeler any other
tangible items.

Punjab & Sind Bank personal loan Loan for meeting personal needs without
scheme for pensioners
assigning any specific purpose.

Punjab & Sind Bank personal

Loan for any personal purpose including purpose

91

Loan scheme for doctors

including purpose for meeting expenses of

professional requirement.

Punjab & Sind Bank Housing Loan for construction of residential house on land
Finance Scheme
already owned.

Punjab & Sind Bank car Finance For purchase of new as well as pre owned
Scheme
multi utility vehicle for personal use.

92

Punjab & Sind Bank Loan against Loan against NSC/ KVP for any business/ personal purpose
NSC/ KVP

other than speculative purpose.

Overdraft Facility in Savings Bank To meet immediate exigencies of salaried

A/Cs
Persons

Punjab & Sind Bank Educational To provide financial assistance on reasonable

Loan
terms to the poor and needy to undertake

93

Scheme

basic education and to meritorious students to

pursue higher/professional / technical education.

All Bank-Property Scheme

Loan for meeting credit needs of business by

offering building as security in the form of
equitable mortgage .

10

All Bank Gold Loan Scheme

Loan for any purpose for meeting credit needs by

94

offering Gold ornaments as security.

(b) Loans on Internet: The Bank sanctions educational loans and car loans via Internet. The
educational loan facility granted by the Bank was launched in 1997 and was subsequently made
possible via Internet during 1999. Facility to apply for educational loan on Internet for education
loan is available to the students of leading institutions like IIMs, IITs, Indian Institute of Science

95

Bangalore, Jamunalal Bajaj Institute of Management Mumbai, XLRI Jamshedpur & Indian
School of Mines Dhanbad. Bank has so far sanctioned 1014 educational loans amounting to
more than Rs. 29.28 crore through Internet.

(d) Kisan Credit Card: The card aims to provide adequate and timely financial assistance to the
farmers for their agricultural activities amongst other requirements. During the year 2006-07, the
Bank issued 176876 cards. The cumulative KCC numbered 940799 with a credit limit of Rs.
3393.08 crores as on 31-03-2007 The Bank is also providing Group/Personal Accident insurance

96

cover to the holders of the Kisan Credit Card. Also on 140th foundation day of Bank (April 24,
2004) new scheme by name of Kisan Shakti Yojana (KSY) was launched. The scheme allowed
the farmers to have flexibility and choice in regards to selection of credit for agriculture, allied
activities and domestic and personnel purpose.

Punjab & Sind Bank

97

The Bank had extended credit facility under the scheme to 43719 Kisan credit cardholders
involving credit limit of Rs. 574.96 crores as on March 31,2007. Cumulative number of Kishan
Credit cardholders financed under the scheme was 138937 involving 1809.28
Crore as on 31-03-2007.

(e) Depository Services: The Bank has had the distinction of being the first nationalized Bank in
the eastern region to be a depository participant of NSDL at Kolkata to offer Demat and other
related services to its customers in 1998. . The Bank had further spread its DP services to its
98

customers by opening DP at Luck now, Kanpur and Varanasi under agreement with CDSL. The
bank also opened its first Branch DP at Mumbai with main DP at Kolkata Main Branch.
The Bank earned an income of Rs. 80.37 lacks from 23913 accounts in financial year 2006-07
and Rs. 60.08 lacks from 19720 accounts during quarter ending June 2007.
The Bank is going to start a Branch DP at New Delhi very soon, which will be connected
through Back Office software at Kolkata Main DP.

99

(f) Flexi- Fix Deposit Scheme: This scheme was launched to provide liquidity of a savings bank
account and higher yield of a fixed deposit.

(g) Banc-assurance: The Bank has entered into tie up arrangement with Life Insurance
Corporation of India for Life Insurance and with National Insurance Company Limited and
ECGC for Non-life Insurance and Export Credit Insurance for selling of their products through
its branches. The Bank is also providing life insurance cover to the extent of Rs. 1.00 lacks to its

100

depositors in association with LICI on payment of a very nominal premium. The Bank also has
tie up arrangements with LICI for coverage of housing loans and
Educational loans being provided by our branches. The Bank is providing free group personal
accidental coverage of Rs. 1.00 lacks to SB Account holders maintaining an average monthly
balance of Rs. 5000/- as well as to all its ATM cardholders.

The bank has earned an income of Rs. 767 lacks from Ban assurance during FY a 2006-07 and
Rs. 100 lacks in the first quarter of current FY i.e. June 2007.
101

The Bank has entered into tie up arrangement with UTI-AMC, Principal-PNB AMC, KotakMahindra AMC and Reliance Capital Asset Management Ltd. for selling of their Mutual Fund
Products through our branches. This has generated an income of Rs. 62.09 lacks during FY 200607 and Rs. 38.19 lacks during first quarter of current FY.

(h) Other Services: The Bank has also been providing Cash Management services through its
QCS Branches/Centers at Kolkata, New Delhi, Mumbai, Luck now and Chennai. Under CMS
activities, the Bank is providing Local Cheque collection service, Collect and pay service,

102

assured credit up to day 7 to various private and other Banks as well as to corporate clients. The
bank has earned an income of Rs. 355.19 lacks during FY 2006-07 and Rs. 94.12 lacks in the
first quarter of current FY.For expansion of CMS business, the Bank is in the process of opening
of Local Cheque Collection Hubs at 18 strategic locations, which will be linked with existing
QCS Branches/Centres.

BRANCH NETWORK OF THE BANK

103

The Bank has 44 zonal offices, controlling 2107 branches and 105 extension counters as on June
30, 2007, including 52 specialized branches.
The population group wise break up of branches of the Bank in India is as under:

Population Group

Number of Branches

% Share to

Rural

979

46.46

Semi-Urban

389

18.45

Urban

441

20.93

Metropolitan

298

14.15
104

Total

2107

100.00

Geographical distribution of the branches of the Bank as under:-

State/union Territory

Number of Branches

% Share To

Andaman& Nicobar Island

0.05

Andhra Pradesh

31

1.47
105

Assam

62

2.94

Bihar

151

7.17

Chandigarh

0.19

Chhattisgarh

28

1.33

Delhi

49

2.33

Goa

0.05

Gujarat

27

1.28

Haryana

30

1.42

Himachal Pradesh

0.28
106

Jammu &Kashmir

0.19

Jharkhand

100

4.75

Karnataka

19

0.90

Kerala

0.28

Madhya Pradesh

150

0.19

Maharashtra

86

4.08

Manipur

0.05

Meghalaya

0.05
107

Nagaland

0.19

Orissa

68

3.23

Pondicherry

0.05

Punjab

46

2.18

Rajasthan

48

2.28

Sikkim

0.05

Tamil Nadu

32

1.52

Tripura

0.05

Uttar Pradesh

673

31.93
108

Uttaranchal

20

0.95

West Bengal

456

21.64

TOTAL

2107

100.00

Performance of Punjab & Sind Bank (2008-2009)

109

Business
(1)

The business of Punjab & Sind Bank stood as RS 144415 crore as on 31.03.2009 as
against RS 1,21,929 crore as on 31.3.2009 as against Rs. 1,21,929 crore

(2)

corresponding previous year registering a growth 18.44% year- on year.

Deposit of the Bank went up to Rs 84972 crore as on 31.03.2009 from Rs 71616

(3)

crore as on 31.3.2008.year on year basis, Total Deposits grew by 18.65%.

Deposits under Differential Rate and certificate of deposits have been reduced to Rs
16635 crore from Rs 19976 crore as on 31.03.2008.

110

(4)

Gross credit to total Deposit ratio stood as 69.96% as March 2009 as against 70.25%

(5)

as on 31.03.2008.
Priority sector advances increased from Rs 18774 crore as on 31.032008 to Rs 20435

(6)
(7)

crore as on 31.03.2009
Agriculture credit was Rs 9,568 crore as on 31.03.2009
Business per employee rose from Rs 6.04 crore as on 31.03.2008 to Rs 7.06 crore as

(8)

on 31.03,2009.
Business per Branch improved from Rs 56.61 crore as on 31.03.2008 to Rs 63.90
crore during the period.

111

Asset Quality Of Punjab & Sind Bank

(1)
(2)
(3)
(4)
(5)
(6)
(7)

Gross NPA declined to Rs 1.81% from 2.00% at March 08.

Gross NPA stood at RS 1078.25 crore.
Net NPA at Rs at .072% amounting Rs 422.11 crore.
Book value per share was Rs 131.00.
Return on Asset was 0.90%.
Earnings per share (EPS) was Rs 17.21
Capital Adequacy Ratio was Rs 13.11% as at March 09 against the stipulated norm of
9% speculated norms of RBI.
112

Technological Development

(1)
(2)
(3)

Total CBS Branch 922 as 31.03.2009.

More than 38000 ATMs across the country
E-Payment for Direct and Indirect Taxes made available to customers all CBS
branches.
Human Resources of Punjab & Sind Bank
(1)
(2)

Total manpower as the strength of the Bank was 20,457 as 31.03.2009.

11828 personnel were imparted training during the year.

113

PUNJAB & SIND BANK

UNAUDITED FINANCIAL RESULTS
For Nine Months ended 31st December 2008
(RS IN LAKH)

PARTICULARS

Quarter
(Reviewed)

Ended Quarter
(Reviewed)

Ended Nine

Months Nine Months Year

Ended

Ended

(Reviewed)

(Reviewed)

(Audited)

ended

31.12.2008

31.12.2007

31.12.2008

31.12.2007

31.03.2008

Interest Ended (a)+(b) 189804.45

155623.33

544962.25

455985.72

617121.59

+(c)+(d)

Interest/discount

on 145118.85

112953.62

404916.66

322785.35

446983.03

on 44230.27

42064.72

138298.60

129466.11

166946.96

advances/ bill
B

Income

investments
C

Interest on balances 117.28

with RBI and other

513.05

715.82

3615.47

4062.67

inter bank funds

D

Others

338.04

91.94

1031.11

128.78

128.93

Other Income

40840.47

40017.73

68365.53

59616.09

713597.32

Total Income(1)+(2)

129390.46

195641.06

613327.78

515580.81

713597.32

Interest Expended

129390.46

113821.39

388346.14

322142.05

449887.95

Operating Expenses (a) 34648.49

29707.49

96281.23

82483.94

115758.34

+(b)
(a)

Employee cost

23002.97

18002.56

60176.61

49438.63

68988.06

(b)

Other

operating 11645.52

11704.93

36104.62

33045.31

46770.28

expences
6

Tax expenses

Capital

19361.22
Adeqacy 12.20

3106.28

21076.12

12296.53

14740.05

12.84

12.20

12.84

11.99

ratio(%)
8

Earnings per share (a) 8.27

Basic and diluted EPS

8.17

11.29

18.03

21.82

NPA Ratios (1) Gross NPA

101601.00

94225.00

101601.00

94225.00

101051.00

(2) Net NPA

42920.00

30384.00

`42920.00

30384.00

39981.00

(3)% of gross NPA

1.93

2.06

1.93

2.06

2.00

(4)% Net NPA

0.82

0.67

0.82

0.67

0.80

1.78

1.93

0.81

1.50

1.3

(4)Return on Assets

10

Public Shareholding
(a)Number of Shares
(b) % of share holding

200000000

200000000

200000000

200000000

200000000

44.77

44.77

44.77

44.77

44.77

Chapter 3
Research operation
Significance of the study
The main aim of any person is utilization money in the best manner since the India is country
were more than half of the population has problem of running the family in the most efficient
manner. However Indian people faced large number of problem till the development of the fullfledged banking sector. The Indian banking sector came into the developing nature mostly after

128

the 1991 government policy. The banking sector has really helped the Indian people to utilize the
single money in the best manner as they want. People now have started investing their money in
the banks and banks also provide good returns on the deposited amount. The people now have at
the most understood that banks provide them good security to their deposits and so excess
amount are invested in the banks. Thus, banks have helped the people you achieve their socio
economic objectives.
The banks not only accept the deposits of the people but also provide them credit Facility for
their development. Indian banking sector has the nation in developing the business and service
sectors. But recently the banks are facing the problem of credit risk.It is found that many general
129

people and business people borrow from the banks but due to some genuine or other reasons are
not able to repay back the amount drawn to the banks. The amount which is not given back to the
banks is known as non- performing assets which hamper the business of the banks. Due to NPAs
the income of the bank is reduced and the banks have to make large number of the provisions
that would curtail the profit of the bank and debtor that the financial performance of the banks
not shows good results.
The main aim behind making this report is to know how public sector Banks are operating their
business and how NPAs play its role to the operations of the public sector Banks. The report
NPAs are classified according to the sector, industry, and state wise. The present study also
130

focuses on the existing system in India to solve the problem of NPAs and comparative analysis to
understand which bank is playing what role with concerned to NPAs.Thus, the study would help
the decision makers to understand the financial performance and growth of public sectors banks
are compared to the NPAs.

131

132

Objective of the study

Primary objective:

133

The primary objective of the making report is:

To know why NPAs are great challenge to the public sector banks.
Secondary objectives:
The secondary objectives of preparing this report are:

To understand what is Non performing Assets and what are the underlying reasons for

the emergence of the NPAs.

To understand the impacts of NPAs on the operations of the public sector Banks.
To know what steps are being taken by the Indian banking sector to reduce the NPAs?
To evaluate the comparative ratios of the public sector banks with concerned to the NPAs.

134

Research methodology

The research methodology means the way in which we would complete our prospected task.
Before undertaking any task. Before undertaking any task it becomes very essential for anyone to
135

determine the problem of study. I have adopted the following procedure in completing my report
study.
(1)
(2)
(3)
(4)
(5)
(6)

Formulating the problem

Research design
Determine the data sources
Analyzing the data
Interpretation
Preparing research report
(1)

Formulating the problem

I am interested in the banking sector and I want to my future in banking sector
so decided to make my research study on banking sector. I analyzed first the

136

factors that are important for the banking sector and I came to know that
providing credit facility to the borrower is one of the important factors as far
as the banking sector is concerned. On the basis of the analyzed factor, I felt
that the important issue right now as far as the credit facilities are provided by
the bank is non performing assets. I started knowing about the basics of the
NPAs and decide to the study on the NPAs. So, I chose the topic NON
performing Assets the great challenge before the public sector banks.
(2)

Research Design

137

The research design tells about the mode with which the entire project is
prepared.
My research design for the study is basically analytical. Because I have
utilized the large number of data of the public sector banks.
(3)

Determining the data source

The data source can be primary or secondary. The primary data are those data
which are used for the first time in the study. However such data take place
much time and are also expensive. Whereas the secondary data are those data
which are already available in the market. These data are easy to search and
are not expensive too for my study I have utilized totally the secondary data.
138

(4)

Analyzing the data

The primary data would not be useful until and unless they are well edited and
tabulated. When the person receives the primary data many unuseful data
would also be there. So, I analyzed the data and edited them and turned them
in the unuseful data would also be there. So, I analyzed the data and edited
them and turned them in the useful tabulations. So, that can become useful in
my report study.

(5)

Interpretation of the data

139

With use of analyzed data I managed to prepare my project report. But the
analyzing of data would not help the study to reach towards its objectives.
The interpretation of the data is required so that the others can understand the
crux of the study in more simple way without any problem so I have added the
chapter of analysis That would explain others to understand my study in
simple way.
(6)

Project writing
This is the last step in preparing the project report. The objective of the report
writing was to report the findings of the study to the concerned authorities.
Tools and Techniques
140

As no study could be successfully completed without proper tools and

techniques, same with my project. For the better presentation and right
explanation I used tools of statistics and computer very frequently. And I am
very thankful to all those tools for helping me a lot. Basic tools which I used
for project from statistics are

Bar Charts
Pie charts
Tables
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

141

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 anybody could know that
what is being said.
Applied Principles and concepts
While I started to do the project the main thing which was the matter
of concern was that around what principles I have to revolve my
project. Because without having any hypothesis and objective we
cannot determine that what output or result we are expecting from the

142

project. And second thing is that having only tools and techniques for
the purpose of project is not relevant until unless we have the
principals for which we have to use those tools and techniques.
Mathematical Averages
Standard Deviation
Correlation
Sources of primary and Secondary data:
For the purpose of project data is very much required which works as a
food for process which will ultimately give output in the form of
information. So before mentioning the source of data for the project I

143

would like to mention the source of data for the project I would like to
mention that what type of data I have collected for the purpose of
project and what is exactly.
1. Primary Data:
Primary data is basically the live data which I collected on field while doing cold
calls with the customers and I shown them list of question for which I had required their
responses. In some cases I got no response from their side and then on the basis of my previous
experiences I filled those fields.

144

Source: Main source of primary data for the project was Questionnaires which I got filled by the
customers or sometimes filled myself on the basis of discussion with the customers.
2. Secondary Data:

Secondary data for the base of the project I collected from intranet of the Bank and from
internet, RBI Bulletin, Journal by ICFAI University.

Limitation of the study

145

The limitations that left in my side are:

It was critical for me to gather the financial data of the every bank of the public sector
Banks so the better evaluations of the performance of the banks are not possible.

Since my study is based on the secondary data, the practical operations as related to the
NPAs are adopted by the banks are not learned.

146

 Since the Indian banking sector is so wide so it was not possible for me to cover all the
banks of the Indian banking sector.
NON-PERFORMING ASSETS
The world is going faster in terms of services and physical products. However it has
been researched that physical products are available because of service industries. In
the nation economy also service industry plays vital role in the boosting up of the
economy. The nations like US, UK, and Japan have service industries more than
55%.The banking sector is one of appreciated service industry. The banking sector
plays large role in channelizing money from one end to other end. It helps almost
147

every person in utilizing the money at their best. The banking sector accepts the
deposits of the people and provides fruitful return to people on the invested money.
But for providing the better returns plus principle amounts to the clients; it becomes
important for the bank to earn the main source of income for banks are the interest
that they earn on the loans that have been disbursed general person, businessman, or
any industry for development. Thus, we may find the input-output system in the
banking sector. Banks first, accepts the deposits from the people and secondly they
lend this money to people who are in the need of it. By the way of channelizing
money from one end to another end, Banks earn their profits.

148

However, Indian banking sector has recently faced the serious problem of Non
performing Assets. This problem has been emerged largely in Indian banking sector
since three decade. Due to this problem many public sector Banks have been
adversely affected to their performance and operations. In simple words Non
Performing Assets problem is one where banks are not able to recollect their landed
money from the clients or clients have been in such a condition that they are not in
the position to provide the borrowed money to the banks.
The problem of NPAs is danger to the banks because it destroys the
healthy financial conditions of the them. The trust of the people would not be any
more if the banks have the higher NPAs. So, the problem of NPAs must be tackled out
149

in such a way that would not destroy the operational, financial conditions and would
not affect the image of the banks, recently,RBI has taken number steps to reduce
NPAS of the Indian banks. And it is also found that the many banks have shown
positive figures in reducing NPAs as compared to the past years.
MEANING OF NPAS
An asset is classified as non performing assets (NPAs) if the borrower does not pay
dues in the form of principle and interest for a period of 180 days. However with
effect from March 2004, default status would be given to a borrower if dues were not
paid for 90 days. If any advance or credit facilities granted by bank to a borrower
become non-performing, then the bank will have to treat all the advances/credit
150

facilities granted to that borrower as non-performing without having any regard to the
fact that there may still exist certain advances/credit facilities having performing
status.
WHAT IS NPAs (NON PERFORMING ASSETS)
Action for enforcement of security interest can be initiated only if the secured asset is
classified as Nonperforming Assets means an assets or account of borrower, which
has been classified by a bank or financial institutions as substandard doubtful or loss
asset, in accordance with the directions or guidelines relating to asset classification
issued by RBI.
151

 An amount due under any credit facility is treated as past due when it has
not been paid within 30 days from the due date. Due to the improvement in
the payment and settlement systems, recovery climate, up gradation of
technology in the banking system etc, it was decided to dispense with past
due concept, with effect from March 31, 2014. Accordingly, as from that
date, a Non performing assets(NPA) shell be an advance where interest and/
or installment of principal remain overdue for a period of more than 180 days
in respect of a Term loan,

152

 The account remains out of order for a period of more than 180 days, in
respect of an overdraft/cash credit(OD/OC) .
The bill remains overdue for a period of more than 180 days in case of bills
purchased and discounted.
Interest and/ or installment of principle remains overdue for two harvest
seasons but for a period not exceeding two half years in case of an advance
granted for agricultural purpose, and
Any amount to be received remains overdue for a period of more than 180
days in respect of other accounts.
153

With a view to moving towards international best practices and to ensure

greater transparency, it has been decided to adopt the 90 days overdue norm
for identification of NPAs, form the year ending March 31, 2004
.Accordingly, with effect form March 31, 2004, a non- performing
assets(NPA) shell be a loan or advance where;
Interest and/or installment of principal remain overdue for a period of
more than 90 days in respect of a Term Loan,
The account be remains out of order for a period of more than 90
days, in respect of an overdraft /cash credit (OD/OC),
154

 The bill remains overdue for a period of more than 90 days in case of
bills purchased and discounted,
Interest and/ or installment of principal remains overdue for two
harvest seasons but for a period not exceeding two half years in case
of an advance granted for agricultural purpose, and
Any amount to be received remains overdue for a period of more than
90 days in respect of other accounts.
CLASSIFICATION OF LOANS
In India the bank loans are classified on the following basis.
155

Performing Assets:

Loans where interest and /or principle are repayable regularly as term and
conditions sanction letter.

Non- Performing Assets:

Any loan the interest and/or installment of the principle are overdue
more than 90 days, the account becomes NPA. According to the

156

securitization and reconstruction of financial assets and enforcement

of security interest ordinance, 2015 non- performing assets (NPA)
means an assets or account of a borrower, which has been classified
by a bank or financial institutions as sub-standard, doubtful or loss
asset, in accordance with the directions or guidelines relating to asset
classifications issued by the Reserve Bank
Internationally, income from non-performing assets is not recognized
on accrual basis, but is taken into account as income only when it is
actually received. It has been

157

Decided to adopt similar practice in our country also. Banks have

been advised that they should not charge and take to income account
the interest on all Non- performing assets. An asset becomes nonperforming for a bank when it ceases to generate income.

158

INCOME RECOGNITION:

S.N

Nature of credit Basis for treating as NPA

facility

Term Loans

A term loan is to be treated as NPA if interest remains past due for a

period of 4 quarters for the year ended 31-3-1993,3 quarters for the year

ended 31-3-1995 and onwards.

2

Cash

Credit

overdrafts

& A cash credit or overdraft account should be treated as NPA if the

account remains out or order for a period of four quarters during the
years ended 31-3-1993, three quarters during the year ended 31-3-1994
and two quarters during the year ended 31-3-1995 and onwards.

OR
There are some credits but the credits are not enough to cover the interest debited to the account during the same period

Bill

purchased An account should be treated as NPA if the bill remains overdue and

and Discounted

unpaid for a period of four quarters during the year ended31st March,
1995 and onwards.

Other Accounts

Any other credit facility should be treated as NPA if any amount to be

received in respect of that facility remains past due for a period of four
quarters during the year ended 31st March 1993. Three quarters during

the year ended 31st March 1994 and two quarters during the year ended
31st March 1995 and onwards.

CLASSIFICATION:

S.N

Category of assets

Basis for Deciding the category

Standard Assets

An asset, which does not disclose any

more than normal risk attached to the
the category o NPA.

Sub- standard Assets

An asset, which has been identified as

two years.
In the case of term loan, if the installm
166

more than one year but not exceeding t

standard asset.
3

Doubtful Assets

An asset, which remains NPA for more

Loss Assets

An asset where loss has been identifie

auditors or by RBI inspection but the
wholly or parity.

167

Potential NPA:- Standard assets which disclose problem/irregularities

beyond 45 days but less than 90 days.
Provisioning Requirement as per Asset classification
Banks are required to make provision against each of the NPA
account. The minimum extent of provision to be made against Substandard, doubtful and loss is different and the same is indicated
below:

168

Classification

Pro

Standard
Agriculture&SME accounts
0.25
Residential housing Loan beyond RS 20 lakh
1.00
Loan and advances to capital market, personal loan, credit cards, commercial 2.00
rate state &NBFCS
Other

0.40

Sub-Standard (Secured)
Sub-Standard (Sanctioned originally as secured)

10%
20%

Doubtful(Unsecured

portion) 100
20%
30%
100

Doubtful-1(Secured)
Doubtful-2(Secured)
169

Doubtful-3(Secured)
Loss asset

100

Notes on provisioning
(1)

No provision should be made against non-founded exposures

(2)

in case of NPA accounts.

Treatment of back ended subsidy/ recoveries etc against
NPAs held in separate account- provision requirement would
be calculated on the outstanding ledger balance less credit
balance held in separate account.
170

Implication of NPA account

(1)
(2)
(3)

NO interest income on NPA accounts.

Provision on gross NPA accounts
If one account of the borrower is NPA, his all account

(4)

would be NPA.
Reputation loss to bank.

REASONS FOR NPAs IN INDIA

The following factors contribute to NPAs --171

Internal Factors

Diversion of funds for

o Expansion/ diversification/ modernization
o Taking up new projects
o Helping /promoting associate concerns time / cost overrun during the project

implementation stage
Business (Product, marketing, etc) failure
Inefficiency in management
172

Slackness in credit management and monitoring

Inappropriate technology/ technical problems
Lack of co-ordination among lenders
External factors

Recession
Input/ power shortage
Price escalation
Exchange rate fluctuations
Accidents and natural calamities, etc\
Changes in government policies in excise /import duties ,pollution control

orders, etc.
Liberalization of economy /removal of restrictions/ reduction of tariffs

173

A large number of NPA borrowers were unable to compete in a competitive

market in which lower prices and greater choices were available to consumers.
Further, borrowers operating in specific industries have suffered due to political
, fiscal and social compulsions, compounding pressure from liberalization (e.g.,
sugar and fertilizer industries) .
Over optimistic promoters
Promoters were often optimistic in setting up large projects and in some cases
were not fully above board in their intentions. Screnning procedures did not
always highlight these issues. Often projects were set up with the expectations
that part of the funding would be arranged from the capital markets, which

174

were booming at the time of project appraisal. When the capital markets
subsequently crashed, the requisite funds could never be raised, promoters
often lost interest and lenders were left standard with incomplete /unavailable
projects.
Funding mismatch
There are said to be many cases where loans granted for short terms were used
fund long term transactions.
High cost of funds
Interest rates as high as 20% were not uncommon. Coupled with falling
demand, borrowers could not continue to service high cost debt.

175

Highly leveraged borrowers

Some borrowers were under capitalized and over burdened with debt to absorb
the changing economic situation in the country.

176

NPA MANAGEMENT

(A)

Non-legal Measures:-

(1)
(2)
(3)
(4)
(5)
(6)
(7)

Reminder system
Seasonal/ Area based recovery drive
Follow up of Potential NPA
Review of NPA account
Preparation of village wise /Area wise list
Visit to Borrowers business premise/Residence
Allotment of NPA account to staff

177

(8)
(9)
(10)
(11)
(12)
(13)
(14)
(15)
(16)
(17)
(18)
(19)
(20)
(21)
(22)
(23)

Recovery camps/Settlement camp

Road shows
Appointment of professional Recovery Agents.
Rehabilitation of sick units
Corporate debt Restructuring
Lok adalat /lok nayalaya
Circulation of list of defaulters
Recalling of advances
Recovery through Recovery Branches
Up gradation of NPA
Cash Recovery
Recovery through compromise cases
Revival of failed compromise cases
Recovery of written-off cases
Restructuring / Rescheduling
Sale of financial Assets (Asset Reconstruction
companies)
178

(24)

Write-off
Legal Measures
(1)
(2)

Recovery certificate (Tehsil office)

Recovery through Judicial process

(3)
(4)
(5)

(Filing of suit)
Execution of decreed cases
Debt Recovery Tribunals (DRT)
Securitization and Reconstruction of
Financial assets and Enforceability of

(6)

security interest Act 2015 (SARFAESI)

Other legal measures

179

INDIAN ECONOMY AND NPAS

undoubtedly the world economy has slowed down, recession is at its peak, globally stock
180

markets have tumbled and business itself is getting hard to do. The Indian economy has been
much affected due to high fiscal deficit, poor infrastructure facilities, sticky legal system, cutting
of exposures to emerging market by FIIs, etc.
Further, international rating agencies like, standard & poor have lowered Indias credit rating
to sub-investment grade. Such negative aspects have often outweighed positive such as
increasing forex reserve and a manageable inflation rate.
Under such a situation, it goes without saying the banks are no exception and are
bound to face the heat of global downturn. One would be surprised to know that the banks and

181

financial institutions in India hold non- performing assets worth Rs 1, 10,000 crore. Bankers
have realized that unless the level of NPAs is reduced drastically, they will find it difficult to
survive.
The actual level of Non Performing Assets in India is around $ 40
billion much higher than governments estimation of $ 16 billion. This difference is largely due
to the discrepancy in accounting the NPAs followed by India and rest of the world. The
Accounting norms of the India are less stringent that those of the developed economies.

182

The Indian banks also have the tendency to extend the past dues. Considering the GDP of India
nearly $470 billion the NPAs are 8% of the total GDP which Was better than many Asian
countries, the NPA of china was 45% of the GDP< while JAPAN had NPAs of 25% of the GDP
and Malaysia had 42%.
The aggregate level of the NPAs in Asia has increased from $1.5 billion in
2000 to $2 billion in 2015, looking to such overall picture of the market, we can say that India is
performing well and the steps taken are looking favorable.

183

NPA CHARACTERISTICS IN INDIA

(1)

Size of NPA Portfolios Reviewed

On an overall, in comparison to the gross NPA portfolio of the financial sector in
India for the year ended March 31,2016, approximately Rs 452 billion from the total
gross NPAs of Indian banking sectors

Public Sector Banks cover 55% of gross NPAs

Private Sector banks cover 11% of gross NPAs
Foreign Sector banks cover 3.02% and
Financial Institutions cover 29%
184

(2)

Sect oral Segmentation

Banks in India are required to reserve a part of their lending for the priority sector.
Broadly this comprises the sub-sector such as Agriculture, Small scale Industries, and
other activities such as small business, retail trade, small transport operators,
professional and self employed persons, education loans, micro-credit etc. In addition,
certain investments in bonds issued by state finance corporations (SFCs), state
Industrial Development corporations (SIDCs), etc are recognized as priority sector
activities.

185

As seen from the chart below, around 23% of the NPA portfolio is in the priority
sector including agriculture, small scale and others. The balance 77% belongs to
NPAs in the non-Priority sector which includes NPAs pertaining to public sector
undertakings, corporate and retail borrowers. Within the priority sector, a large
proportion of NPAs (more than 96%) by gross value are in the corporate segment.
The largest proportion among the corporate borrowers is private sector corporate
borrowers.
Since the sect oral segmentation norms are applicable to banks only the above
graph is somewhat skewed (participant lenders included financial institutions). Given
below is the sect oral segmentation in public sector banks only.
186

Priority sector NPAs constitutes 46% of the NPA portfolio of Participant public
sector banks by value. In the non-priority sector corporate borrowers from the largest
portion of NPAS.

187

Sectoral segmentation
Agriculture

Retail Borrower 12%

0%
16%
Corporate
Borrower

SmallScaleindustry

16%
4%
Joint sector

11%
State owned industry

40%
Other

188

(3) INDUSTRY SEGMENTATION

Most of the participant lenders have provided us with detailed NPA profile for large NPAs.The
remainder of our analysis for NPA profiling, therefore, focuses on the large NPA portfolio. The
total large NPA (individual gross value above Rs 10 million) portfolio of the participating
banks amounts to Rs 357 billion approximately.
The top 5 industries with maximum large NPAs (by gross value) for the participant lenders
included in the study are textiles, iron & steel, chemicals, Engineering and (non ferrous)Metals.
The large NPAs of these industries alone comprise approximately half of the total large NPA
189

portfolio (by gross value) of the participating lenders. At 15%, the textiles industry is the single
largest contributor to the gross large NPAs of the participating lenders. It is followed by Iron&
steel with 14% chemicals with 9%, Engineering with8% and Metals with 5%.
The participant lenders provided loan grading segmentation of the large NPAs in the top 5
industries viz. textiles, iron steel, chemicals, engineering and metals. Only about 20% of the
large NPA portfolio by gross value in sub-standard assets. This indicates that the rehabilitation
potential of, about 80% of the large NPA portfolio in each of the top 5 industries is somewhat
limited.
Nearly 68% of the gross NPAs by gross value are in the doubtful category. Within this, 28%
by gross value are in the c3 subcategory. It might be worth nothing that c3 category comprises
190

assets that have been non-performing for at least 5 years and that there is no upper time limit on
holding assets in the c3 category if the lenders are able to provide evidence that collateral exists.
Also nearly 15% to 18% of the large NPAs in each of the top industries (other
than chemicals) are loss assets.

191

Industry Classification
15%

Textiles

49%
Iron & steel

14%
Chemicals

Engineering

Metals

Other

9%
5%

8%

192

Ratio Analysis
The relationship between the related items of financial statements is known as ratio. A ratio is
just one number expressed in terms of another. The ratio is customarily expressed in three
different ways. It may be expressed as a proportion between the two fig. second items is
expressed in terms of percentage. Third, it may be expressed in terms of rates.
The use of ratio has become increasingly popular during the last
few years only. Originally, the bankers used the current ratio to judge the capacity of the
borrowing business enterprises to repay the loan and make regular interest payments.

193

(1)

Gross NPA ratio:-Gross NPA ratio of gross NPA to gross advances of the bank. Gross NPA is
the sum of all loan assets that are classified as NPA as per RBI guidelines .The ratio is to be
counted in terms of percentage and formula for GNPA is as follows:Gross NPA
Gross NPA ratio = ---------------------- * 100
Gross advances

S.No

Name of bank

Gross NPA to Gross

advances
2014

20
194

Punjab & Sind Bank

17.66

16

Andhra bank

6.13

5.2

Bank of Baroda

14.11

12

PNB

18.45

18

IOB

11.81

11

Indian bank

21.76

17

CB of India

16.05

14

195

Corporation Bank

5.40

5.1

Dena bank

25.34

24

10

Syndicate bank

7.84

8.3

11

Union bank of India

21.84

18

12

United bank of India

21.84

18

13

Vijay a Bank

10.0

9.3

14

SBI

12.93

11

15

Uco bank

11.64

9.5

16

Syndicate bank

7.87

8.3
196

17

Indian bank

21.76

17

18

Canara bank

7.48

6.2

19

Bank of India

10.25

9.3

20

Bank of Maharashtra

12.35

10

The table above indicates the quality of credit portfolio of the banks. High gross NPA ratio
indicates the low credit portfolio of banks and vice-versa. We can see from the above table the
PNB and Sind Bank has the higher gross NPA ratio of 19.25% followed by Dena Bank with
17.86%.

197

(2)

Net NPA ratio: --- The net NPA percentage is the ratio of net NPA to net advances in which the
provision is to be deducted from the gross advances. The provision is to be made for NPA
account. The formula for that is

Gross NPA-Provision
NPA ratio= ------------------------------ * 100
Gross advances- Provision

198

S.NO

Name of Bank

Net

NPA+Net

advances
2014

20

Punjab & Sind Bank

11.23

11

Andhra Bank

2.95

2.

Bank of Baroda

6.77

4.

Bank of India

6.72

6.

Bank of Maharashtra

7.41

5.

Canara Bank

4.84

3.
199

CBI

9.72

7.

Corporation Bank

1.98

2.

Dena Bank

18.37

16

10

IOB

7.01

6.

11

OBC

3.60

3.

12

PNB

6.74

5.

13

SBI

6.03

5.

14

Uco Bank

6.35

5.

15

Punjab and Sind Bank

12.27

11
200

The ratio indicates the degree of risk in the portfolio of the Banks. High NPA ratio indicates the
high quality of risky assets in the banks for which no provision is to be made. From the table it
becomes that the clear NPA ratio of almost all Banks have been improved quite well as
compared to the provision year.
(3)

Provision Ratio-: Provision ratio are to be made for to keep safety against the NPA & directly
affected on the gross profit of the bank to gross of the banks. The formula is that:Total Provision
Provision ratio= ------------------------- * 100
Gross NPAs

201

(4)

Problem Asset Ratio: - It is the ratio of gross NPA to total asset of the banks. The formula for
that is:Gross NPAs
Problem Asset Ratio= ---------------------*100
Total Assets

S.NO

Name of Bank

Punjab & Sind Bank

Problem Asset Ratio

2014

2015

.082576

.080836

202

Andhra Bank

.023056

.025034

BOB

.066102

.06331

BOI

.05765

.053319

BOM

.046022

.042217

Canara Bank

.024602

.022329

Dena Bank

.107672

.105934

PNB

.059473

.056773

SBI

.025513

.04447

203

It has been direct bearing on return on asset as well as liquidity risk management of the bank.
High problem asset ratio, which means high liquid from the above table it, becomes clear. Dena
bank have high ratio of 8.0% thats ratio implies that the Banks have liquid asset through which
they will be able to repay their liabilities of deposits quickly as compared to other banks.
(5)

Capital Adequacy Ratio:- It can be defined as ratio of the capital of the banks to its assets
which are weighted/ adjusted accounting to risk attached to them I.e.
Capital
Capital Adequacy Ratio = ---------------------- *100
Risk weighted assets

204

As per prudent Norms Banks were required to achieve 8% CAR, increased to 9% by march
2000. For the purpose of capital adequacy Achievement the capital base I.e. Tire1+ Tire2 should
not be less than the prescribed % of total risk weighted assets of the Bank.

S.NO

Name of Bank

Capital

adequacy

Ratio
2014

20

Punjab & Sind Bank

10.5

10

Andhra Bank

13.4

12
205

Bank of Baroda

12.8

11

Canara Bank

9.84

11

CBI

10.02

9.5

Uco Bank

9.05

9.6

PNB

11.42

10

SBI

12.79

13

Indian Bank

-12.77

1.7

10

Corporation Bank

13.43

15

206

The capital adequacy Ratio is important for the maintain as per the Banking regulations, As far
as this ratio is concerned the corporation bank has shown much appreciated result by acquiring
the ratio of 18.50% followed by the united bank of India. But one remarkable performance done
by the Indian bank which had CAR is negative is -12.77% in 2014 but improved its
performance in 2016 by acquiring CAR 10.85%.
Tire 1:- Paid up capital, statutory Reserve, Revenue capital reserves and other undisclosed
reserve less accumulated other intangible assets.
Tire2:- Property Revaluation Discounted by 55%, subordinate fluctuations Reserve, provisions
on standard assets & Capital should not exceed Tire-1

207

(6)

Sub- standard Assets Ratio:-It is the ratio of total substandard Assets to gross NPA of the Bank.
Sub-standard Asset Ratio
Total Sub-Standard Asset
= ..*100
Gross NPA
The ratio calculated below is for the entire public Sector Banks:(RS IN CRORE)

Year

2014

2015

Sub-standard Assets

14745

15788
208

Gross NPAs

54674.47

56476.13

Calculations of ratio

2014

2015

26.96%

27.95%

209

It indicates Scope of up gradation/ improvement of NPA. Higher Sub-Standard Asset ratio

means that in whole NPA the Sub-Standard Ratio has major proportion which indicates that
there is a higher scope of advances up gradation or improvement because it will be very easy to
recover the loan as minimum duration.
(7)

Doubtful Asset Ratio:- It is the ratio of total doubtful Assets to gross NPAs of the bank.
Total doubtful assets
Doubtful Asset Ratio = -------------------------*100
Gross NPAs

Year

2014
210

Doubtful Asset

33485

Gross NPAs

54674.47

The ratio calculated below are for the entire public sector banks:-

Year

2014

2015

61.24%

59.59%

211

It indicates the scope of compromise for Npa reduction .Above table shows the doubtful asset
ratio of PSB, which is quite that the banks will have to go through compromise measure for
increasingly number of times as its Sub- Standard Ratio has decreased in recent years.
(8)

Loss Asset Ratio: - It is the ratio of total loss asset to Gross NPA of the bank.
Total Loss Assets
Loss Asset Ratio= -------------------------- * 100
Gross NPA

Year

2014

2015

Loss Asset

6544

7061
212

Gross NPAs

54674.47

56476.

The ratio below entire public sector banks are:-

Year

2014

2015

11.96%

12.50%

It indicates the proportion of bad loans in the bank. Above table shows loss Asset Ratio, which
indicates that the banks have maintained lower Asset Ratio, which indicates that the bank has

213

lower bad loans. The bank must take necessary steps to control this ratio, as its the indication
that there in necessary steps to control this ratio, as its the securities loan Accounts in the bank.
Recommendations for reducing NPAs
(1)

Effective and regular follow-up of the end use of the funds sanctioned is required to ascertain
any embezzlement or diversion of funds

(2)

A healthy Bankers- Borrower relationship should be developed. Many instances have been
reported about forceful recovery by the banks, which is against corporate ethics. Debt recovery

(3)

will be much easier in a congenial environment.

Assisting the borrowers in developing his entrepreneurial skills will not only establish a good
relationship between borrowers but also help the bankers to keep a track of their funds.
214

(4)

Some tax incentive like capital gain tax exemption ,carry forward the losses to set off the same
with other income of the qualified Institutions Borrowers (QIBs) should be granted so as to
ensure their active participation by way of investing sizeable amount in distressed assets of
banks and financial institutions.

(5)

So far the Public Sector Banks have done well as far as lending to the priority sector is
concerned. However, it is not enough to make lending to this sector mandatory, it must be
profitable by sharply reducing the transactions costs. This entails faster embracing of
technology and minimizing documentation.

215

(6)

Commercial Banks should be allowed to come up their own measures to address the problem of
NPAs. This may include waiving and reducing the principal and interest on such loans, or
extending the loans, or settling the loan accounts. They should be fully authorized and they
should be able to apply all the preferential policies granted to the asset management companies.

216

Chapter 4
Conclusions and Recommendations

Conclusion to the problem

217

A report is not said to be completed unless and until the conclusion is given to the reports. A
conclusion reveals the explanations about what the report has covered and what is the essence of
the study. What my project report cover is concluded below.
The problem on which I focused my study is NPAs the big challenge before the public
sector banks .The Indian Banking sector is the important service sector that helps the people of
the India to achieve the socio economic objective. The Indian banking sector is developing with
good appreciate as compared to the global benchmark banks. The Indian banking system is

218

classified into schedule and non schedule banks. The public sector banks play very important
role in developing the nation in terms of providing good financial service. The public sector
banks have also shown good performance in the last few years.
The only problem is that the public sector banks are facing today is the problem of
nonperforming assets. The non performing assets means those assets which are classified as bad
assets which are not possibly by return back to the banks by the borrowers. If the proper
management of the NPAs is not undertaken it would be hampers the business of the banks. The
NPAs would as try the current profit, interest income due to large provisions of the NPAs and
would affect the smooth functioning of the recycling of the funds.
219

If we analyze the past years data, we may come to know

that the NPAs have increased very drastically after 2014, in 1997 the gross NPAs of the Indian
banking sector was47,300 crore where as in 2014 the fig was63,883 and which increase at faster
rate in 2016 with 94,905 crore. The public sector banks involve its nearly 50% of share in the
NPAs .The RBI has been trying to take number of measures but the ratio of NPAs is not
decreasing of the banks. The banks must find out the measures to reduce the evolving problem of
the NPAs. If the concept of NPAs is taken very lightly it would be dangerous for the Indian
banking sector. The reduction of the NPAs would help the banks to boost up their profits, smooth

220

recycling of funds in the nation. This would help the nation to develop more banking branches
and developing the economy by providing the better financial services to the nation
Punjab & Sind Bank has set a target to bring down its net non-performing asset
(NPA) to below 1% by the end of current fiscal and expects its balance sheet size to double
during the next two-three years if it managed to maintain the existing growth rate of 30-35%.
The bank is also planning to put in place the centralized banking solution (CBS) by December
this year. According to ON Singh, chairman and managing director, Punjab & Sind Bank: We

221

are going to be one of the best in the industry in terms of NPA management. We are targeting
gross NPA of 5% and net npa of less than 1% by March, 2016.
Incidentally, the net NPA of the bank has already come down to 1.7% or Rs 299.8 crore as in
September from a high of 5.2% or Rs 683.4 crore as in September, 2016. Mr. Singh said the bank
was focusing on NPA provision coverage, the ratio of which went up to 76.6% as in September
from 73.8% as in March and 60% as in September, 2016.

222

The bank has already crossed the Rs 55,000 crore business mark at Rs 55,330 crore during the
second quarter of the current financial year and is confident of crossing Rs 61,000 crore marks
by the end of the fiscal. In March 2008 gross npa declined to 1.8% from 2.00% .

223

224

Recommendations
Through RBI has introduced number of measures to reduce the problem of increasing NPAS of
the bank such as CDR mechanism. One time settlement schemes, enacted of SRFAESI ACT etc.
A lot of measures desired in terms of effectiveness of these measures. What I should suggest for
introducing. The evolutions of the NPAs of public sector banks as under:-

Each bank should have its own independence credit rating agency which should evaluate
the financial capacity of the borrower before than credit facility.
225

The credit rating agencies should regularly evaluate the financial condition of the clients.

Special accounts should be made of the clients where monthly loan concentration report
should be made.

It is also wise for the banks to carry out special investigation audit of all financial and
business truncations and books account of the borrower company when there is
possibility of the diversion on the funds and mismanagement.

.Bank should evaluate the swot analysis of the borrower companies.ie how they would
face the environmental threats and opportunities with the use of their strength and
226

weakness, and what will be their possible future growth in concerned to financial and
operation performance.

There should be proper monitoring of the restructuring accounts because there is every
possibility os the loan slipping into NPAs category again.

Proper training is important to the staff of the banks at the appropriate level either
ongoing process. That hoe they should deal the problem of NPAs and what continues
steps should take to reduce the NPAs.

Willful default of bank loans should be made a criminal offence.

227

No loan is to be given to a group whose one or the other undertaking became a defaulter.

There should be proper monitoring of the restructured accounts because there is every
possibility of the loans slipping into NPAs category again.

Independent settlement procedure should be more strict and faster and the decision made
by the settlement committee should be binding both borrowers and lenders and any one
of them failing to follow the decision of the settlement committee should be punished
severely.

228

229

QUESTIONNAIRE

NAME .
AGE SEX: MALE/ FEMALE

230

ADDRESS ..

CITY .. CONTACT NO

1. Do you know about Punjab & Sind Bank ?

Yes
NO
2. Punjab & Sind Bank is a
Private Bank
Public Bank
231

 Other
3. What is the current NPA of Punjab & Sind Bank?
1.7%
3.7%
4. What are the steps taken by Punjab & Sind Bank to reduce NPA?
5. Name the Bank which comes in your mind at very first AND why?
6. Do you think Punjab & Sind Bank is a safe place for your money?

Yes
No

7. Your level of satisfaction with Punjab & Sind Bank--8. If you will have option against Punjab & Sind Bank you will go for SBI
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 PNB
Other
9. What is the current EPS of Punjab & Sind Bank?
10. What are the total branches of Punjab & Sind Bank?

233

Bibliography
Banking Finance (FEB 2016)
IBA Bulletin(JAN2016)
My khan and public sector banks k Jain managers Accounting Tata Mc Grawhill publishing company ltd.
www.rbi-org.com
www.google.com

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