Professional Documents
Culture Documents
CHAPTER I
INTRODUCTION
The three letters “NPA” Strike terror in banking sector and business circle today. NPA is
short form of “Non Performing Asset”. The dreaded NPA rule says simply this: when interest
or other dues to a bank remains unpaid for more than 90 days, the entire bank loan
automatically turns to a non performing asset. The recovery of loan has always been problem
for banks and financial institution. An asset becomes NPA when:
Interest and/or instalment of principal remains overdue for two harvest seasons
but for a period not exceeding two half years in the case of an advance granted
for agricultural purposes, and
Any amount to be received remains overdue for a period of more than 90 days in
respect of other accounts.
For any nation, banking system plays a vital role in the development of its sound
economy. Banking is an important segment of the tertiary sector and acts as a back bone of
economic progress. Banks are supposed to be more directly and positively related to the
performance of the economy.
Banks act as a development agency and are the source of hope and aspirations of the
masses. Commercial banks are the major players to develop the economy. A major threat to
banking sector is prevalence of Non-Performing Assets (NPAs). NPAs reflect the
performance of banks.
A high level of NPAs suggests high probability of a large number of credit defaults
that affect the profitability and net-worth of banks and also erodes the value of the asset. The
NPA growth involves the necessity of provisions, which reduces the overall profits and
shareholders‟ value. In present scenario NPAs are at the core of financial problem of the
banks. Concrete efforts have to be made to improve recovery performance.
The main reasons of increasing NPAs are the target-oriented approach, which
deteriorates the qualitative aspect of lending by banks and wilful defaults, ineffective
supervision of loan accounts, lack of technical and managerial expertise on the part of
borrowers.
The purpose of the study is to identify the causes of loans becoming NPAs and to identify the
action plan to reduce the NPAs in Bank of Baroda.
DEFINITIONS:
A ‘Non-Performing Asset’ (NPA) was defined as a credit facility in respect of which the
interest and/ or instalment of principal has remained ‘past due’ for a specified period of time.
Interest and/or installment of principal remain overdue for a period of more than 90
days in respect of a term loan,
The account remains ‘out of order ‘ for a period of more than 90 days ,in respect of an
overdraft/cash credit (OD/CC),
The bill remains overdue for a period of more than 90 days in case of bill purchased
or discounted,
the installment of principal or interest thereon remains overdue for two crop seasons for short
duration crops,
the instalment of principal or interest thereon remains overdue for one crop season for
long duration crops,
The amount of liquidity facility remains outstanding for more than 90 days, in respect
of a securitisation transaction undertaken in terms of guidelines on securitisation
dated February 1, 2006.
in respect of derivative transactions, the overdue receivables representing positive
mark-to-market value of a derivative contract, if these remain unpaid for a period of
90 days from the specified due date for payment.
In case of interest payments, banks should, classify an account as NPA only if the
interest due and charged during any quarter is not serviced fully within 90 days from
the end of the quarter.
‘Overdue’:
Any amount due to the bank under any credit facility is ‘overdue’ if it is not paid
on the due date fixed by the bank.
1. Owners do not receive a market return on their capital .in the worst case, if the banks
fails, owners lose their assets. In modern times this may affect a broad pool of
shareholders.
2. Depositors do not receive a market return on saving. In the worst case if the bank
fails, depositors lose their assets or uninsured balance.
3. Banks redistribute losses to other borrowers by charging higher interest rates, lower
deposit rates and higher lending rates repress saving and financial market, which
hamper economic growth.
4. Nonperforming loans epitomize bad investment. They misallocate credit from good
projects, which do not receive funding, to failed projects. Bad investment ends up in
misallocation of capital, and by extension, labour and natural resources.
Non Performing Asset may spill over the banking system and contract the money stock,
which may lead to economic contraction. This spillover effect can channelize through
liquidity or bank insolvency:
When many borrowers fail to pay interest, banks may experience liquidity shortage.
This can jam payment across the country,
Illiquidity constraints bank in paying depositors
An undercapitalized bank exceeds the bank’s capital base.
Types of NPA
A] Gross NPA
B] Net NPA
A] Gross NPA:
Gross NPAs are the sum total of all loan assets that are classified as NPAs as per RBI
guidelines as on Balance Sheet date. Gross NPA reflects the quality of the loans made by
banks. It consists of all the non standard assets like as sub-standard, doubtful, and loss
assets.
Gross Advances
B] Net NPA:
Net NPAs are those type of NPAs in which the bank has deducted the provision regarding
NPAs. Net NPA shows the actual burden of banks. Since in India, bank balance sheets
contain a huge amount of NPAs and the process of recovery and write off of loans is very
time consuming, the provisions the banks have to make against the NPAs according to the
central bank guidelines, are quite significant. That is why the difference between gross and
net NPA is quite high.
CATEGORIES OF NPAS
Standard Assets:
Standard assets are the ones in which the bank is receiving interest as well as the principal
amount of the loan regularly from the customer. Here it is also very important that in this case
the arrears of interest and the principal amount of loan do not exceed 90 days at the end of
financial year. If asset fails to be in category of standard asset that is amount due more than
90 days then it is NPA and NPAs are further need to classify in sub categories.
Banks are required to classify non-performing assets further into the following
three categories based on the period for which the asset has remained non-performing and the
reliability of the dues:
o Sub-standard Assets
o Doubtful Assets
o Loss Assets
With effect from 31 March 2005, a sub standard asset would be one, which has remained
NPA for a period less than or equal to 12 month. The following features are exhibited by sub
standard assets: the current net worth of the borrowers / guarantor or the current market value
of the security charged is not enough to ensure recovery of the dues to the banks in full; and
the asset has well-defined credit weaknesses that jeopardise the liquidation of the debt and are
characterised by the distinct possibility that the banks will sustain some loss, if deficiencies
are not corrected.
A loan classified as doubtful has all the weaknesses inherent in assets that were classified as
sub-standard, with the added characteristic that the weaknesses make collection or liquidation
in full, – on the basis of currently known facts, conditions and values – highly questionable
and improbable.
With effect from March 31, 2005, an asset would be classified as doubtful if it remained in
the sub-standard category for 12 months.
Loss Assets:--
A loss asset is one which is considered as uncollectible and of such little value that its
continuance as a bankable asset is not warranted- although there may be some salvage or
recovery value. Also, these assets would have been identified as ‘loss assets’ by the bank or
internal or external auditors or the RBI inspection but the amount would not have been
written-off wholly.
Profitability:-
NPA means booking of money in terms of bad asset, which occurred due to wrong
choice of client. Because of the money getting blocked the prodigality of bank decreases not
only by the amount of NPA but NPA lead to opportunity cost also as that much of profit
invested in some return earning project/asset. So NPA not only affect current profit but also
future stream of profit, which may lead to loss of some long-term beneficial opportunity.
Another impact of reduction in profitability is low ROI (return on investment), which
adversely affect current earning of bank.
Liquidity:-
Money is getting blocked, decreased profit lead to lack of enough cash at hand which lead to
borrowing money for shot\rtes period of time which lead to additional cost to the company.
Difficulty in operating the functions of bank is another cause of NPA due to lack of money.
Involvement of management:-
Time and efforts of management is another indirect cost which bank has to bear due to NPA.
Time and efforts of management in handling and managing NPA would have diverted to
some fruitful activities, which would have given good returns. Now day’s banks have special
employees to deal and handle NPAs, which is additional cost to the bank.
Credit loss:-
Bank is facing problem of NPA then it adversely affect the value of bank in terms of market
credit. It will lose it’s goodwill and brand image and credit which have negative impact to the
people who are putting their money in the banks.
The banking industry has undergone a sea change after the first
phase of economic liberalization in 1991 and hence credit management.
While the primary function of banks is to lend funds as loans to various
sectors such as agriculture, industry, personal loans, housing loans etc., in
recent times the banks have become very cautious in extending loans,
The reason being mounting Non-Performing Assets
It's a known fact that the banks and financial institutions in India
face the problem of swelling Non-Performing Assets (NPAs) and the
issue is becoming more and more unmanageable. In order to bring the
situation under control, some steps have been taken recently. The
Securitization and Reconstruction of Financial Assets and Enforcement
of Security Interest Act, 2002 was passed by Parliament, which is an
important step towards elimination or reduction of NPAs
In liberalizing economy banking and financial sector get high
priority, Indian banking sector of having a serious problem due to non-
performing assets. The financial reforms have helped largely to clean
NPA was around Rs.90,170 crores in the year 2009. The earning capacity
and profitability of the bank are highly affected due to this.
Non-Performing Asset means an asset in the Bank’s book or loan
account of borrower, which has been classified by a bank or financial
institution as sub-standard, doubtful or loss asset, in accordance with the
directions or guidelines relating to asset classification issued by the
Reserve Bank of India
Presently if monthly installment is pending beyond 30 days that
loan account is treated as watch category account. In this period, the
Bank will take all necessary steps to recover the dues to turn the loan
account as standard asset. If the monthly installment is due beyond 90
days, the banker treats the loan account as Non Performing Assets or
NPA.
In the beginning it will be substandard assets, depriving the bank
of interest on the loan and additionally, capital charge i.e., making
provision for the loan in their profit and loss account
PAs, from the year ending March 31, 2004. Accordingly, with effect from March
31, 2004, a non-performing asset (NPA) shall be a loan or an advance where;
The bill remains overdue for a period of more than 90 days in the
case of bills purchased and discounted,
The banking sector has been facing the serious problems of the
rising NPAs. But the problem of NPAs is more in public sector banks
when compared to private sector banks and foreign banks. The NPAs in
PSB are growing due to external as well as internal factors.
EXTERNAL FACTORS:
CANARA BANK
Canara Bank was founded in 1906 by Sri, Ammembal Subba Rao Pai. The bank was
initially named as Canara Bank Hindu Permanent Fund. It blossomed in to a limited company
in 1910 and was renamed as Canara Bank Ltd, in 1969 the bank was nationalised and
thereafter came to be known as Canara Bank.
Today Canara Bank is one of the premier Banks in the country with a network of
2,578 branches spread all over the country. The Bank has many distinctions to its name. It
was the first Bank to be conferred FICCI award for contribution to rural development Canara
Bank was the first among Banks to launch networked ATMs and obtain ISO certification.
Canara Bank has covered a niche for itself in providing IT based services with 100%
computerization of the branches .The Bank provides a wide array of services, such as
Networked ATMs Anywhere banking, Tele Banking, remote access terminals, internet and
mobile Banking, debit card etc. For the year 2004-05 Canara Bank clocked the highest net
profit (Rs1110 crore) among nationalized Banks, with significant improvement in capital
adequacy ratio (12.78%) and asset quality (net NPA ration of 1.88%).My sore Canara Bank
Regional Office (CBROM) was upgraded from Regional Office on April1998. The functions
of Circle Office have been laid down by the Bank. However, on account of changing times, a
review of these functions has been made, rather than replicating existing ones. Sections at
Regional Offices will look for policy support from Head Office. All operational and
administrative work relation to their functions shall be handled by the respective sections
within the policy parameters set out by Head Office. Mysore Canara Bank Regional Office
has a network of 111 level Branches scattered over 4 districts. Which Mysore, Mandy, C.H
nagar, Hassan. In addition to these 5 currencies chest are functioning in all four districts
catered to the cash requirements of these branches.
"A good bank is not only the financial heart of the community, but also
one with an obligation of helping in every possible manner to improve the economic
conditions of the common people" - A. Subba Rao Pai.
CORPORATE VISION:
To emerge as a world class Bank with best Practices in realms of asset portfolio,
Customer orientation, product innovation, Profitability and enhanced value to stake
holders.
CORPORATE MISSION:
Efficiency
Organisational Effectiveness.
Customer Centric
Hi-tech Banking
DEPOSIT SCHEMES:
SAVING DEPOSIT
CURRENT DEPOSITS
FIXED DEPOSIT
It is a safe way to solid returns method. Minimum deposit should be Rs. 1000/- and
Maximum no ceiling. Period deposit is given minimum 15 days and maximum 120 months,
7-14 days period for deposit of 5 lakh and above. Interest should be pay monthly, quarterly,
half-yearly or annual intervals at depositor’s choice.
KAMADHENU DEPOSIT
It is high returns deposit scheme interest will be compounded every quarter. Fixed
deposit should be deposit minimum of Rs. 1000 and maximum-no ceiling.
CANFLEXI DEPOSIT
ASHRAYA DEPOSIT
This scheme is available to all individuals. Who have completed the age of 60 years
and above, in single or joint names.
RECURRING DEPOSIT
It is monthly deposit minimum to Bank Rs. 50/- per month. Interest will be
compounded every quarter.
This Savings Account scheme is available to every common man. Its initial deposits
Rs. 25/- Account can be maintained even with zero balance. Here Bank has not restriction on
number of credits, and Bank will give free ATM-cum-Debit Card facility.
It is a safe way to solid returns. A term deposit scheme under the Fixed Deposit and
Kamadhenu streams of the Bank. The benefit of Deduction is get from income upto Rs. 1
lakh under sec.80C of the INCOME TAX Act1961, for individuals only.
CANRELAX
Deposit under the scheme can be opened by individuals. Minimum deposit amount
Rs.1,00,000/- and in the multiples of Rs.10,000/- thereafter. Rate of interest will be given of
interest 0.50% over the rate applicable
PRODUCT/SERVICE PROFILE
Home Improvement loan is available to who already own homes. Loan will be giving
to house hold furniture items, air conditioners, wardrobes, kitchen cabins etc. Loan is
available along with a housing loan or even independently.
Can Mobile vehicle loan is available to purchase any vehicle. It may be new vehicle
or a used vehicle. Repayment period is given to four wheelers up to 84 months and two
wheelers upto 60 months.
4. CANARA TECH
CANTECH loan facility is available only to IT/BT professional’s loans upto 6 months
gross salary with a maximum of Rs. 2 lakh. Higher quantum considered selectively.
Repayment period is given up to 56 months.
5. CANARA TRAVEL
6. CANARA RENT
CANRENT loan is available to who are owners of the property to meet their business
and personal needs.
7. CANARA MAHILA
This is an exclusive loan scheme for women who are working and non working persons are
able to get loan and fulfil their personal financial needs.
8. DOCTORS CHOICE
Doctor’s choice loan scheme is to fulfil the Doctor working capital and term loan
requirements. Loan is available only to qualified registered medical practitioners.
Loan is available to purchase of ready built house or flat construction of house or flat
purchase of site and construction there on, repairs and renovation and take over of the
liability from other Banks.
CANSITE loan is available to who are individuals aged upto 55 years of age at the
time availing the loan. Those people must have above 1 lakh annual income or more eligible.
This loan scheme is to meet the genuine personal needs of teaching or non teaching
staff of schools or colleges.
This loan scheme is available to pensioners for drawing their pension through Canara
Bank branches. Loans are for meeting medical expenses and other genuine personals needs.
This Loan scheme is available to Traders, Whole sale and Retail business, Business
Enterprises, Commission Agents, Service sector, Professionals and self employed persons. It
is fulfil the working capital of business.
16. CANCASH
CANCASH will get when we need it without selling our blue chip portfolios, to meet
the investments/domestic/personal needs (not to be utilized for speculative purposes)
quantum upto Rs. 5 lakhs.
17.SWARNA LOAN
SWARNA LOAN is available to any individuals against Gold Jewellery to meet the
medical expenses and other unforeseen commitments/ contingencies etc.
Educational loan is available to who are needy and meritorious students for pursuing
higher education in India and Abroad, and fulfil for payment of fees to school/college and for
purchase of books, hostel fees, examination fees etc.
NRI SERVICES:
a) NRE Accounts: This is term deposit scheme. Here customers are able to get saving,
current and term deposits scheme in Indian rupees.
2. REMITTANCE FACILITIES
Canara Bank has rupee drawing arrangements with 20 exchange Company’s and 18
Banks for remitting funds by NRI’s working in the Middle East to India.
NRIs are permitted to avail all types of retail rupee loan, international Credit Card
facility with the Bank, housing loan, financial services etc.
OTHER SERVICES:
1. DEPOSITORY SERVICES
This is the best way of holding Securities in electronic form. Purchase and sale of
securities can be through the account with very reasonable charges.
Canara Bank has National Electronic Fund Transfer system at minimum charges.
5. INSURANCE
Canara Bank has Life and Non life Insurance products also.
6. SAVINGS SURAKSHA
Group insurance has been availed to who are deposit account holders of Saving Bank
Accounts and Term deposit accounts.
7. CAN-MEDICLAIM
CANCARD is affiliated to VISA International and Master Card. Bank has been
distributed Domestic and International and Master Cards through cash withdrawal facility at
ATMs. Free accident Insurance, baggage insurance, purchase protections are availed to credit
card holders.
Card holder customers are provided the convenience of accessing their accounts from
several locations like all ATMs Point of Sale Member Establishments (POS MEs) having
logo and avoids the risk of carrying cash, as Debit card is a combination of an ATM card as
well as a charge card.
Canara Bank has been giving services to customer through Online Banking in real-
time basis. It is catered to both Retail and Corporate Customers. Online give more facilities
like Online transfer of funds to own accounts or from third party accounts, Opening of Term
deposits, Loan account repayments, Initiation of standing instructions, Online stop payment
instructions etc.
Once customer have an account with any of Canara Bank designated branches
customer can operate it from any other designated branches, with AWB customers have a
host of facilities to make banking with banker pleasure.
Total 423 Canara Bank authorised branches across the country are handling Direct
Tax collections i.e., Corporate tax, Income Tax Wealth Tax, Fringe Benefit tax etc.
This facility is available to the customers of Core Banking Solution (CBS) branches,
who are registered with Canara Bank’s Internet and Mobile Banking.
These services are aimed at caring for the personal needs of the customer and
enhancing customer satisfaction. Courtesy and impartially, secrecy, safety and security are
available from Canara Bank.
19. ATTORNESHIP
Once customer have an account with any of Canara Bank designated branches
customer can operate it from any other designated branches, with AWB customers have a
host of facilities to make banking with banker pleasure.
21. ATTORNESHIP
Canara Bank power of attorney service is a specialized service to help both their non-
resident and resident customers, who find it difficult to operate/monitor their
accounts/investments personally. After the Bank obtains power of attorney from the customer
in their favour, bank executes customer’s instructions regarding customer’s investments
promptly and carefully.
Canara Bank has been introduced several deposit products during Financial Year
2007. Can Tax saver, a term deposit scheme, was introduced under the Kamadhenu and
fixed deposit mode with tax benefit under Section 80C. CanChamp- an exclusive SB deposit
product was launched for aspiring children upto the age of 12 years for inculcating the habit
pf savings, as well as making them eligible for education loans. A term deposit scheme,
namely, Canara Centenary Deposit was also introduced during the year, offering attractive
rate of interest for the depositors. During the year, the bank also launched a SB-Gold deposit
scheme, targeting the HNI clients.
In the sphere of new loan products, the Bank introduced ‘Kisan Tatkal’ for enabling
farmers to meet emergent requirements and ‘Kissan Mitra’ scheme for funding tenant
farmers. Gramin vikas Vahini, a vehicle for inclusive growth in rural areas was also
introduced during the year, to promote SME sector, the Bank launched SME Gold Card and
a Term Loan Scheme for reimbursement of their capital expenditure.
Mysore Canara Bank Regional Office was upgraded from Regional Office in April
1998. The functions of Regional Office have been laid down by the Bank. However, on
account of changing times, a review of these functions has been made, rather than replicating
existing ones. Sections at Circle Offices will look for policy support from Head Office.
Regional Wise Spread: According to CBROM Regional Office Mysore has 53 branches.
OWNERSHIP PATTERN
The Canara Bank is Mainly Public company minority of the shares which were held
by the general public, the remaining portion which will invests in the hands of Government of
India. Canara Bank shares are listed at Bangalore, Mumbai and National stock exchanges.
Ownership pattern is shown below;
COMPETITORS INFORMATION
There are many competitors in Mysore District viz., Nationalised Banks are State
Bank of India, Allahabad Bank, Bank of India, Punjab National Bank, Vijaya Bank,
Corporation Bank and Syndicate Bank. Private Banks are ICICI Bank, HDFC Bank, UTI
Bank, ING Vysya Bank. Co-operative Banks are HDCC Bank and KSCARD Bank. These
are all Banks offered similar product.
State Bank of Mysore is leading under deposits with Rs.400.94 crore which is
followed by Canara Bank with Rs. 302.94 crore.
ACHIEVEMENT/AWARDS
CBROM has achieved many targets apart from their strategic plan.
The primary activities are accepting deposits and lending loans and advances.
Accepting deposits by way of savings, Current account, fixed Deposit and Recurring
Deposits. The collected money will be safeguarded according to regulation of the RBI.
Besides these Canara Bank must concentrate on stationary control. The stationary
includes application Cheque Books, challans and some other stationery. It must maintain a
sound control on these to balance the activities and services.
The Circle will report to Head Office in respect of both functional and administrative
matters. The Circle shall handle credit proposals upto the delegated powers and also handle
other general administration and staff matters (including disciplinary matters) as the existing
Circles are doing now. The branches have been provided with adequate operational flexibility
and credit sanctioning powers by the policies/guidelines spelt out by Head Office.
The circle is fixes with targets by the Head Office in all business parameters.And in
term the circle has fixed the target to the branches under its administrative purview. The
performance will be reviewed periodically at various forums.Circle office before distributing
target to the branches. They should consider the size of the branches.
The service units like accounts section and currency chests attached to their base
branches and would continue to function under the same circle as the base branch circle will
report of both functional and administrative matters. Circle shall handle credit proposal up to
the delegated powers and also handle other general administration and staff matter (including
disciplinary matters). With this the bank will be broadly moving into a three-tier system of
administration of operation.
The Mysore Canara Bank circle has good scope for lending to agriculture sector and
improves Micro Finance. The District under the circle has large number of self help group
and they will avail substantial credit. Then out of 4 districts 3 districts are having substantial
cultivation.
The coffee price is firming up and improving with this Circle can increase exposure to coffee.
Mysore city has a special economic zone. Few big industries have already set up their units.
Here more units are likely to come up within few years. As the infrastructure is improving
and this will help to circle increasing Business substantially.
SBI BANK PROFILE
The origin of the State Bank of India goes back to the first decade of the nineteenth century
with the establishment of the Bank of Calcutta in Calcutta on 2 June 1806. Three years later
the bank received its charter and was re-designed as the Bank of Bengal (2 January 1809). A
unique institution, it was the first joint-stock bank of British India sponsored by the
Government of Bengal. The Bank of Bombay (15 April 1840) and the Bank of Madras (1
July 1843) followed the Bank of Bengal. These three banks remained at the apex of modern
banking in India till their amalgamation as the Imperial Bank of India on 27 January 1921.
Primarily Anglo-Indian creations, the three presidency banks came into existence either as a
result of the compulsions of imperial finance or by the felt needs of local European
commerce and were not imposed from outside in an arbitrary manner to modernise India's
economy. Their evolution was, however, shaped by ideas culled from similar developments
in Europe and England, and was influenced by changes occurring in the structure of both the
local trading environment and those in the relations of the Indian economy to the economy of
Europe and the global economic framework.
The State Bank of India, the country’s oldest Bank and a premier in terms of balance sheet
size, number of branches, market capitalization and profits is today going through a
momentous phase of Change and Transformation – the two hundred year old Public sector
behemoth is today stirring out of its Public Sector legacy and moving with an agility to give
the Private and Foreign Banks a run for their money.
The bank is entering into many new businesses with strategic tie ups – Pension Funds,
General Insurance, Custodial Services, Private Equity, Mobile Banking, Point of Sale
Merchant Acquisition, Advisory Services, structured products etc – each one of these
initiatives having a huge potential for growth.
The Bank is forging ahead with cutting edge technology and innovative new banking models,
to expand its Rural Banking base, looking at the vast untapped potential in the hinterland and
proposes to cover 100,000 villages in the next two years.
It is also focusing at the top end of the market, on whole sale banking capabilities to provide
India’s growing mid / large Corporate with a complete array of products and services. It is
consolidating its global treasury operations and entering into structured products and
derivative instruments. Today, the Bank is the largest provider of infrastructure debt and the
largest arranger of external commercial borrowings in the country. It is the only Indian bank
to feature in the Fortune 500 list.
The Bank is changing outdated front and back end processes to modern customer friendly
processes to help improve the total customer experience. With about 8500 of its own 10000
branches and another 5100 branches of its Associate Banks already networked, today it offers
the largest banking network to the Indian customer. The Bank is also in the process of
providing complete payment solution to its clientele with its over 8500 ATMs, and other
electronic channels such as Internet banking, debit cards, mobile banking, etc.
With four national level Apex Training Colleges and 54 learning Centres spread all over the
country the Bank is continuously engaged in skill enhancement of its employees. Some of the
training programes are attended by bankers from banks in other countries.
The bank is also looking at opportunities to grow in size in India as well as Internationally. It
presently has 82 foreign offices in 32 countries across the globe. It has also 7 Subsidiaries in
India – SBI Capital Markets, SBICAP Securities, SBI DFHI, SBI Factors, SBI Life and SBI
Cards - forming a formidable group in the Indian Banking scenario. It is in the process of
raising capital for its growth and also consolidating its various holdings.
Throughout all this change, the Bank is also attempting to change old mindsets, attitudes and
take all employees together on this exciting road to Transformation. In a recently concluded
mass internal communication programme termed ‘Parivartan’ the Bank rolled out over 3300
two day workshops across the country and covered over 130,000 employees in a period of
100 days using about 400 Trainers, to drive home the message of Change and inclusiveness.
The workshops fired the imagination of the employees with some other banks in India as well
as other Public Sector Organizations seeking to emulate the Program.
An important turning point in the history of State Bank of India is the launch of the first Five
Year Plan of independent India, in 1951. The Plan aimed at serving the Indian economy in
general and the rural sector of the country, in particular. Until the Plan, the commercial banks
of the country, including the Imperial Bank of India, confined their services to the urban
sector. Moreover, they were not equipped to respond to the growing needs of the economic
revival taking shape in the rural areas of the country. Therefore, in order to serve the
economy as a whole and rural sector in particular, the All India Rural Credit Survey
Committee recommended the formation of a state-partnered and state-sponsored bank.
The All India Rural Credit Survey Committee proposed the take over of the Imperial Bank of
India, and integrating with it, the former state-owned or state-associate banks. Subsequently,
an Act was passed in the Parliament of India in May 1955. As a result, the State Bank of
India (SBI) was established on 1 July 1955. This resulted in making the State Bank of India
more powerful, because as much as a quarter of the resources of the Indian banking system
were controlled directly by the State. Later on, the State Bank of India (Subsidiary Banks)
Act was passed in 1959. The Act enabled the State Bank of India to make the eight former
State-associated banks as its subsidiaries.
The State Bank of India emerged as a pacesetter, with its operations carried out by the 480
offices comprising branches, sub offices and three Local Head Offices, inherited from the
Imperial Bank. Instead of serving as mere repositories of the community's savings and
lending to creditworthy parties, the State Bank of India catered to the needs of the customers,
by banking purposefully. The bank served the heterogeneous financial needs of the planned
economic development.
BRANCHES
The corporate center of SBI is located in Mumbai. In order to cater to different functions,
there are several other establishments in and outside Mumbai, apart from the corporate
center. The bank boasts of having as many as 14 local head offices and 57 Zonal Offices,
located at major cities throughout India. It is recorded that SBI has about 10000 branches,
well networked to cater to its customers throughout India.
ATM SERVICES
SBI provides easy access to money to its customers through more than 8500 ATMs in India.
The Bank also facilitates the free transaction of money at the ATMs of State Bank Group,
which includes the ATMs of State Bank of India as well as the Associate Banks – State Bank
of Bikaner & Jaipur, State Bank of Hyderabad, State Bank of Indore, etc. You may also
transact money through SBI Commercial and International Bank Ltd by using the State Bank
ATM-cum-Debit (Cash Plus) card.
Subsidiaries
The State Bank Group includes a network of eight banking subsidiaries and several non-
banking subsidiaries. Through the establishments, it offers various services including
merchant banking services, fund management, factoring services, primary dealership in
government securities, credit cards and insurance.
Other Services
Agriculture/Rural Banking
NRI Services
ATM Services
Demat Services
Corporate Banking
Internet Banking
Mobile Banking
International Banking
The CNN IBN, Network 18 recognized this momentous transformation journey, the State
Bank of India is undertaking, and has awarded the prestigious Indian of the Year – Business,
to its Chairman, Mr. O. P. Bhatt in January 2008
INVESTMENT
The fund traces its lineage to SBI - India’s largest banking enterprise. The institution has
grown immensely since its inception and today it is India's largest bank, patronised by over
80% of the top corporate houses of the country.
SBI Mutual Fund is a joint venture between the State Bank of India and Société Générale
Asset Management, one of the world’s leading fund management companies that
manages over US$ 500 Billion worldwide.
Mumbai, August 26, 2008 – SBI Life Insurance has achieved a unique distinction of
ranking third globally in terms of number of Million Dollar Round Table (MDRT) members.
Of the 40,000 SBI Life Insurance Advisors, 1,662 have qualified for the prestigious MDRT
membership. Among these, 124 qualified for Court of Table (COTs) and 20 for Top of Table
(TOTs).
The bank has 14 directors on the Board and is responsible for the management of theBank’s
business. The board in addition to monitoring corporate performance also carries out
functions such as approving the business plan, reviewing and approving the annual budgets
and borrowing limits and fixing exposure limits. Mr. O. P. Bhatt is the Chairman of the bank.
The five-year term of Mr. Bhatt will expire in March 2011. Prior to this appointment, Mr.
Bhatt was Managing Director at State Bank of Travancore. Mr. Bhatt has more than 30 years
of experience in the Indian banking industry and is seen as futuristic leader in his approach
towards technology and customer service. Mr. Bhatt has had the best of foreign exposure in
SBI. We believe that the appointment of Mr. Bhatt would be a key to SBI’s future growth
momentum. Mr. T S Bhattacharya is the Managing Director of the bank and known for his
vast experience in the banking industry. Recently, the senior management of the bank has
been broadened considerably. The positions of CFO and the head of treasury have been
segregated, and new heads for rural banking and for corporate development and new business
banking have been appointed. The management’s thrust on growth of the bank in terms of
network and size would also ensure encouraging prospects in time to come.
BANK OVERVIEW
Not only many financial institution in the world today can claim the antiquity and majesty of
the State Bank Of India founded nearly two centuries ago with primarily intent of imparting
stability to the money market, the bank from its inception mobilized funds for supporting
both the public credit of the companies governments in the three presidencies of British India
and the private credit of the European and India merchants from about 1860s when the Indian
economy book a significant leap forward under the impulse of quickened world
communications and ingenious method of industrial and agricultural production the Bank
became intimately in valued in the financing of practically and mining activity of the Sub-
Continent Although large European and Indian merchants and manufacturers were
undoubtedly thee principal beneficiaries, the small man never ignored loans as low as Rs.100
were disbursed in agricultural districts against glad ornaments. Added to these the bank till
the creation of the Reserve Bank in 1935 carried out numerous Central – Banking functions.
Adaptation world and the needs of the hour has been one of the strengths of the Bank, In the
post depression exe. For instance – when business opportunities become extremely restricted,
rules laid down in the book of instructions were relined to ensure that good business did not
go post. Yet seldom did the bank contravenes its value as depart from sound banking
principles to retain as expand its business. An innovative array of office, unknown to the
world then, was devised in the form of branches, sub branches, treasury pay office, pay
office, sub pay office and out students to exploit the opportunities of an expanding economy.
New business strategy was also evaded way back in 1937 to render the best banking service
through prompt and courteous attention to customers.
Modern day management techniques were also very much evident in the good old days years
before corporate governance had become a puzzled the banks bound functioned with a high
degree of responsibility and concerns for the shareholders. An unbroken records of profits
and a fairly high rate of profit and fairly high rate of dividend all through ensured
satisfaction, prudential management and asset liability management not only protected the
interests of the Bank but also ensured that the obligations to customers were not met.
The traditions of the past continued to be upheld even to this day as the State Bank years
itself to meet the emerging challenges of the millennium.
ABOUT LOGO
THE PLACE TO SHARE THE NEWS ...……
Togetherness is the theme of this corporate loge of SBI where the world of banking services
meet the ever changing customers needs and establishes a link that is like a circle, it indicates
complete services towards customers. The logo also denotes a bank that it has prepared to do
anything to go to any lengths, for customers.
The blue pointer represent the philosophy of the bank that is always looking for the growth
and newer, more challenging, more promising direction. The key hole indicates safety and
security.
MISSION STATEMENT:
To retain the Bank’s position as premiere Indian Financial Service Group, with world class
standards and significant global committed to excellence in customer, shareholder and
employee satisfaction and to play a leading role in expanding and diversifying financial
service sectors while containing emphasis on its development banking rule.
VISION STATEMENT:
VALUES
Organization Structure
MANAGING DIRECTOR
Regional officers
CHAPTER II
REVIEW OF LITERATURE
REVIEW OF LITERATURE
1. Das (1990) has compared the various efficiency measures of public sector banks by
applying data envelopment analysis model and concluded that the level of NPAs
significant negative relationship with efficiency estimates.
2. Verma (1999) has concluded that high level of NPAs leads to operational failure of
the bank.
3. Berger and young (1997) has examined the relationship between problem loan and
bank efficiency by employing Granger-causality technique and found that high level
of problem loans cause banks of increase spending on monitoring, working out and /
or selling off these loans and possibly becomes more diligent in administering the
portion of their existing loan portfolio that is currently performing.
4. Gupta (1997) has also concluded that NPAs on protifability of banks and leads to
liquidity crunch and slow down in the growth in GDP etc.
5. Kaveri(1995) has also examined the impact of NPAs on profitability by taking profit
making and six loss making banks and concluded that loss making banks maintained
higher NPAs in the loan portfolio which led them to show losses.
6. Kwan and Eisenbeis (1994) also concluded that there is negative relationship
between efficiency and problem loans.
7. Toor (1994) analysed that poor recovery management leads to reduction in yield on
advanced that poor recovery management leads to reduction in yield on advances,
reduced productivity loss in the credibility and put detrimental impact on the policies
of the banks.
8. Murthy (1988) has examined that default bring down the return accruing and to them,
reduces effective rate of interest and reduces the funds’ recalculation and increase
their dependence on external sources thereby increasing the costs.
9. ACCORDING TO S, RAJ KUMAR (2002) the SARFAESI act and the could
primarily used as powerful bargaining tool while negotiating with defaulter. This puts
bank on stronger ground in salvaging sticky loan
10. Khedekar Pooja S. (2012) A strong Banking Sector is essential for a flourishing
economy. Indian banking sector emerged stronger during 2010-11 in the aftermath of
global financial meltdown of 2008-10 under the watchful eye of its regulator. The
level of NPA's act as an indicator showing the credit risks & efficiency of allocation
of resource. NPA involves the necessity of provisions, any increase in which bring
down the overall profitability of banks. An excessive rise in interest rates over the
past 18 months has led to a sharp increase in nonperforming assets. This not only
affects the banks but also the economy as a whole. This Abhinav International
Monthly Refereed Journal of Research In Management & Technology 63 ISSN –
2320-0073 Volume II, December’13 www.abhinavjournal.com paper deals with
understanding the concept of NPA, the causes and overview of different sectors in
India.
11. Selvarajan B. and Vadivalagan, G.(2012) Over the few years Indian banking,
attempts to integrate with the global banking has been facing lots of hurdles in its way
due to certain inherent weakness, despite its high sounding claims and lofty
achievements. In a developing country, banking is seen as an important instrument of
development, while with the demanding Non-Performing Assets (NPAs), banks have
become burden on the economy. Non-Performing Assets are not merely non
remunerative, but they add cost to the credit Management. The fear of Non-
Performing Assets permeates the psychology of bank managers in entertaining new
projects for credit expansion. Non-Performing Assets is not a dilemma facing
exclusively the bankers; it is in fact an all pervasive national scourge swaying the
entire Indian economy. Non Performing Asset is a sore throat of the Indian economy
as a whole. Non Performing Assets have affected the profitability, liquidity and
competitive functioning of banks and developmental of financial institutions and
finally the psychology of the bankers in respect of their disposition towards credit
delivery and credit expansion. NPAs do not generate any income for the banks, but at
the same time banks are required to make provisions for such NPAs from their current
profits. Apart from internal and external complexities, increases in NPAs directly
affects banks' profitability sometimes even their existence.
12. Meeker Larry G. and Gray Laura (1987) in 1983, the public was given its first
opportunity to review bank asset quality in the form of non-performing asset
information. The purpose of this study is to evaluate that information. A regression
analysis comparing the non-performing asset statistics with examiner classifications
of assets suggests that the non-performing asset information can be a useful aid in
analyzing the asset quality of banks, particularly when the information is timely.
13. PaulPurnendu , Bose,Swapan and Dhalla, Rizwan S.(2011) In this paper we
attempt to measure the relative efficiency of Indian PSU banks on overall financial
performances. Since, the financial industry in a developing country like India is
undergoing through a very dynamic pace of restructuring, it is imperative for a bank
to continuously monitor their efficiency on Non-Performing Assets, Capital Risk-
Weighted Asset Ratio, Business per Employee, Return on Assets and Profit per
Employee. Here, Non-Performing Assets is a negative financial indicator. To prove
empirically, we propose a framework to measure efficiency of Indian public sector
banks.
14. Veerakumar, K.(2012) The Indian banking sector has been facing serious problems
of raising Non-Performing Assets (NPAs). Like a canker worm, NPAs have been
eating the banking industries from within, since nationalization of banks in 1969.
NPAs have choked off quantum of credit, restriction the recycling of funds and leads
to asset-liability mismatches. It also affected profitability, liquidity and solvency
position of the Indian banking sector. One of the major reasons for NPAs in the
banking sector is the 'Direct Lending System' by the RBI under social banking motto
of the Government, under which scheduled commercial banks are required to lend
40% of their total credit to priority sector. The banks who have advanced to the
priority sector and reached the target suffocated on account of raising NPAs, since
long. The priority sector NPAs have registered higher growth both in percentage and
in absolute terms year after year. The present paper is an attempt to study the priority
sector advances by the public, private and foreign bank group-wise, target achieved
by them and a comparative study on priority and non-priority sector NPAs over the
Abhinav International Monthly Refereed Journal of Research In Management &
Technology 64 ISSN – 2320-0073 Volume II, December’13
www.abhinavjournal.com period of 10 years between 2001-02 and 2010-11. This
paper also aims to find out the categories of priority sector advances which contribute
to the growth of total priority sector NPAs during the period under study.
15. Murthy, K. V. Bhanu Gupta, Lovleen.(2012) One of the major reasons cited for this
state of health of banking industry has been the persistence of 'Non-performing
Assets' (NPAs). In this study the focus is on the impact of liberalization on the non-
performing assets of the four banking segments, namely, public sector, old private
sector, new private sector and foreign banks by studying the overall trends in NPAs.
We have used the Structure- Conduct Performance (S-C-P) approach that shows the
relationship between competition and conduct, concentration and growth in NPAS.
Our results show that on an average across the banking industry segments, average
non-performing assets in the past 11 years have been declining at the rate of 13% p.a.
compounded growth rate. The old private sector banks' nonperforming assets have
reduced at the rate of 11.98% and that of public sector banks have declined at the rate
of 18% and foreign banks at 11.4%. Though new private sector banks and the foreign
banks seem to be more efficient but their conduct does not show consistency and
stability
16. Joseph, Mabvure Tendai Edson, Gwangwava(2012) The purpose of the study was
to find out the causes of non-performing loans in Zimbabwe. Loans form a greater
portion of the total assets in banks. These assets generate huge interest income for
banks which to a large extent determines the financial performance of banks.
However, some of these loans usually fall into non-performing status and adversely
affect the performance of banks. In view of the critical role banks play in an economy,
it is essential to identify problems that affect the performance of these institutions.
This is because non-performing loans can affect the ability of banks to play their role
in the development of the economy. A case study research design of CBZ Bank
Limited was employed. Interviews and questionnaires were used to collect data for
the study. The paper revealed that external factors are more prevalent in causing non-
performing loans in CBZ Bank Limited. The major factors causing nonperforming
loans were natural disasters, government policy and the integrity of the borrower.
17. Toor N.S. (1994) stated that recovery of non-performing as-sets through the process
of compromise by direct talks rather than by the lengthy and costly procedure of
litigation. He suggested that by constant monitoring, it is possible to detect, the sticky
accounts, the incipient sickness of the early stages itself and an attempt could be made
to review the unit and put it back on the road to recovery S.N. Bidani (2002) Non-
performing Assets are the smoking gun threatening the very stability of Indian banks.
NPAs wreck a bank‟s profitability both through a loss of interest income and write-
off of the principal loan amount itself. This is definitive book which tackles the
subject of managing bank NPAs in it‟s entirely, starling right from the stage of their
identification till the recovery of dues in such ac-counts.
18. Debarsh and Sukanya Goyal (2012) emphasized on management of non-performing
assets in the perspective of the public sector banks in India under strict asset
classification norms, use of latest technological platform based on Core Banking
Solution, recovery procedures and other bank specific indicators in the context of
stringent regulatory framework of the RBI. Non-performing Asset is an important
parameter in the analysis of financial performance of a bank as it results in decreasing
margin and higher provisioning requirements for doubtful debts. The reduction of
non-per-forming asset is necessary to Abhinav International Monthly Refereed
Journal of Research In Management & Technology 65 ISSN – 2320-0073 Volume II,
December’13 www.abhinavjournal.com improve profitability of banks and comply
with the capital adequacy norms as per the Basel Accord.
19. Kavitha. N (2012), emphasized on the assessment of non-performing assets on
profitability its magnitude and impact. Credit of total advances was in the form of
doubtful assets in the past and has an adverse impact on profitability of all Public
Sector Banks affected at very large extent when non-performing assets work with
other banking and also affect productivity and efficiency of the banking groups. The
study observed that there is increase in advances over the period of the study
20. Prashanth K Reddy (research paper)(From article-International Journal of
Economic Practices and Theories, Vol. 1, No. 2, 2011 (October), e-ISSN 2247 –
7225)
Prashanth K. Reddy (2002) in his research paper on the topic, “A comparative
study of Nonperforming Assets in India in the Global context” examined the
similarities and dissimilarities, remedial measures. Financial sector reform in India
has progressed rapidly on aspects like interest rate deregulation, reduction in reserve
requirements, barriers to entry, prudential norms and risk-based supervision. The
study reveals that the sheltering of weak institutions while liberalizing operational
rules of the game is making implementation of operational changes difficult and
ineffective. Changes required to tackle the NPA problem would have to span the
entire gamut of judiciary, polity and the bureaucracy to be truly effective. This paper
deals with the experiences of other Asian countries in handling of NPAs. It further
looks into the effect of the reforms on the level of NPAs and suggests mechanisms to
handle the problem by drawing on experiences from other countries.
21. RBI turns heat on banks to check bad loans. (news paper article.)(from
Hindustan Times (New Delhi, India) October 13, 2011)
State-owned banks have witnessed a surge in the level of bad assets (loans) or
NPAs in recent times. The gross non-performing assets (NPA) of public sector banks
stood at Rs. 71,047 crores for the period ended March, 2011. A loan that stops earning
interest after 90 days is defined as an NPA.
Findings of the study indicated that Indian banking sector is facing a serious problem of
NPA is comparatively higher in public sector banks. To improve the efficiency and
profitability, various steps have been taken by the government to reduce the NPA. It is highly
impossible to have zero percentage NPA. But at least Indian banks can try competing with
foreign banks to maintain international standard.
23. Siraj.K.K and Prof. (Dr). P. Sudarsanan Pillai (research paper) (From article-
International Journal of Marketing, Financial Services & Management
Research-ISSN 2277- 3622 Vol.2, No. 9, September (2013))
The researchers found that Non Performing Assets endangered negative impact on
banking stability and growth. Issue of NPA and its impact on erosion of profit and quality of
asset was not seriously considered in Indian banking prior to 1991.
There are many reasons cited for the alarming level of NPA in Indian banking sector.
Asset quality was not prime concern in Indian banking sector till 1991, but was mainly
focused on performance objectives such as opening wide networks/branches, development of
rural areas, priority sector lending, higher employment generation, etc.
CHAPTER III
RESEARCH METHODOLOGY
STATEMENT OF PROBLEM:
NPAs always affect the profit & also the prestige of bank, so here the research problem is to
identify the causes for the NPA and to identify the action plan to reduce the NPA.
NPAs always have adverse effect on the profitability of the bank & thereby increasing the
level of sub-standard assets. Banks have to take adequate measures to reduce NPA levels
since banks have responsibility to the various stake holders. This in turn would provide
chances of recovery from NPAs.
To examine the gross NPAs and net NPAs of SBI& canara bank .
This study is only restricted to State Bank of India & Canara Bank Only.
The result of the study may not be applicable to any other banks.
Since the part of the study is based on their perceptions, the findings may change over
the years in keeping with changes in environmental factor.
The present study does not ascertain the views from the borrowers who are not
directly concerned with management of non-performing asset
RESEARCH DESIGN:
Research is a process in which the researcher wishes to find out the end result for a given
problem and thus the solution helps in future course of action. The research has been defined
as “A careful investigation or enquiry especially through search for new facts in branch of
knowledge”
The study has been done in one of the leading Public sector bank. This study is based on
secondary data, which have been obtained from published sources i.e. Annual report for the
period of 5years (i.e. from 2013-2017).
DESCRIPTIVE RESEARCH
UNIVERSE
In this study the universe is finite and will take into the consideration related
news and events that have happened in last fIVE year.
SAMPLING UNIT: -
As this study revolves around NPA impact on SBI AND CANARA BANK
SAMPLING TECHNIQUE: -
HYPOTHESIS:
Ten years data was collected with respect to gross NPAs & net profit & 6 years data was
obtained with respect to Standard, sub-standard, Doubtful & loss assets.
TYPE OF STUDY:
PRIMARY:
Primary data is a type of information that is obtained directly from first-hand sources by
means of surveys, observation or experimentation. It is a data that has not been previously
published and is derived from a new or original research study and collected at the source.
SECONDARY:
Secondary data is all the information collected for purposes other than the completion of a
research project and it is used to gain initial insight into the research problem. It is classified
in terms of its source – either internal or external.
The data for the current study was collected mainly from secondary sources like Company’s
annual reports & records, Newspapers/Magazines were all used to collect information.
Comparative analysis
Ratio analysis
CHAPTER IV
TABLE 4.1
INFERENCE:
The comparative balance sheet of the year 2013-2014 is as follows.
The share capital of the sbi bank is has in the year of 2013-2014 by 8.3 % and canara bank is
has in the year of 2013-2014 by 3.9 % . The net worth of the sbi bank has increased the
reserves and surplus by 91.5% and canara bank has decreased the reserves and surplus by
5.6% .the total assets of the increased by canara bank is in 15.64 %. And total assets of the
decreased by sbi bank is in 12.60%.the cash position of the company has fluctuating increase
or decreases. The current liability and provisions of the company is fluctuating year after year.
Table 4.2
INFERENCE:
The comparative balance sheet of the year 2014-2015 is as follows.
The depositions of the sbi bank is has in the year of 2014-2015 by 11.56% and canara bank
is has in the year of 2014-2015 by 11.20% . The net worth of the sbi bank has increased the
other liabilities & provisions by 29.98% and canara bank has decreased the other
liabilities & provisions by 13.71 % .the total assets of the decreased by canara bank is in
10.35%. And total assets of the increased by sbi bank is in 12.49%.. The current liability sbi
bank has decreased the by 18.8% and canara bank has increased the by 19.49% .
TABLE 4.3
Cash & 129,629.3 115,883 13745.49 10.60 20,664. 21,971.95 1307.95 5.95
balances with 3 .84 05
rbi
Balance with 37,838.33 58,977. 21139.13 35.84 36,069. 26,669.14 9400.47 2.60
banks, money 46 61
at call
Advances 1,463,700 1,300,0 163674.0 11.1 324,71 330,035.5 5320.69 1.61
.42 26.39 3 4.82 1
Investments 477,097.2 495,027 17930.12 3.62 142,30 145,346.1 3036.88 2.08
8 .40 9.30 8
Gross block 9,819.16 9,329.1 490 4.9 7,198.1 6,949.45 248.65 3.45
6 0
Revaluation 0.00 0.00 0 0 5,444.6 5,405.85 38.81 0.71
reserves 6
Net block 9,819.16 9,329.1 490 4.9 1,753.4 1,543.60 209.84 11.96
6 4
Other assets 140,408.4 68,835. 71572086 50.9 22,004. 17,028.32 4976.57 22.6
1 55 89
Total assets 2,259,063 2,048,0 210883.2 9.33 547,51 542,594.7 4921.41 0.89
.05 79.80 5 6.11 0
Contingent 1,064,167 1,093,4 29254.86 2.67 314,50 297,258.6 17249.87 5.48
liabilities .65 22.51 8.56 9
Book value 185.85 172.04 13.81 7.43 481.75 556.68 74.93 13.46
(rs)
INFERENCE:
the comparative balance sheet of the year 2015-2016 is as follows.
The total share capital of the sbi bank is has decreased in the year of 2015-2016 by 3.8 %
and canara bank is has increased in the year of 2015-2016 by 12.48 % . The net worth of
the sbi bank has increased the other liabilities & provisions by 9.33 % and canara bank has
decreased the other liabilities & provisions by 0.8% .the total assets of the decreased by
canara bank is in 0.89 %. And total assets of the increased by sbi bank is in 9.33%.. The
current liability sbi bank has decreased the by 2.67 % and canara bank has increased the by
5.48% .
TABLE 4.4
INFERENCE:
the comparative balance sheet of the year 2016-2017is as follows.
The total share capital of the sbi bank is has increased in the year of 2016-2017 by 21.07
% and canara bank is has decreased in the year of 2016-2017by 9.09% . The net worth of
the sbi bank has increased the total liabilities & provisions by 74.58% and canara bank has
decreased the other liabilities & provisions by 5.9 % .the total assets of the decreased by
canara bank is 5.2 %. And total assets of the increased by sbi bank is in 15.52%.. The
current liability sbi bank has decreased the by 4.30% and canara bank has increased the by
31.57%
RATIO ANALYSIS
Gross NPA Ratio is the 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 the RBI guidelines. The ratio is to be
counted in terms of percentage and the formula for GNPA is as follows:
*100
Gross advances
TABLE 4.5
INTERPRETATION
The above table and graph makes it very clear that the average gross NPA of all the banking
under study is very satisfactory. It is seen that the gross NPA which was 6.36 at canarabank
and 6.2 % at SBI in years of 2013 increased the marginally every year and finally reached
7.3 % at canarabank in 2014 and 8.9 % of the GNPA increased by the SBI compared to the
canara bank which is much lower than the average gross NPA (5.8 %) at canara bank in the
years of 2017.. It goes without saying that the banking are taking good care and following
ideal norms of granting advances, so that the recovery is satisfactory leading to lower gross
NPA. It is very encouraging that the gross NPA ratio in the last three years is very much
lower than the average 6.36% at canara bank in the years of 2013,2015,2016 and very much
increase than the average 8.8% at SBI bank in the years of 2015,2016 and 2017 .
CHART 4.1
7.30% 5.80%
10.00% 6.36%
8.00% CANARA BANK
6.00% SBI
8.90% 8.80% 8.10%
4.00% 7.00%
6.20%
2.00%
0.00%
2013 2014 2015 2016 2017
year
TABLE 4.6
INTERPRETATION
The above graph presents the net NPA ratio of all the selected banking taken together. it can
be noticed that net NPA ratio has resulted in the five years of study i.e. from 2013-2017.
The net NPA ratio during these years can be ascribed to the high net NPA position of the
state bank of india. The bank had failed to make sufficient provisions against NPA in these
years. however, they succeeded in making provisions and thus they could bring the net NPA
ratio is SBI bank in year of 2013,2014,2015,2016,,2017 through is 3.11%,1.02%,1.87%,2.3
% and 1.9%.the net NPA ratio of the canara bank in the year 2013,2014,2015,2016,and 2017
is decrease the ratio from 1.76%, 2.72 %,1.70%,1.92% and 1.48 %improvement of the above
bank. it is to be seen that the position of all other banks has been very good net NPA ratio. It
is therefore, evident that banks have been able to make enough provisions against their gross
NPA which is a very satisfactory position. The management of all these banks have taken
enough care in granting advances and they have been very meticulous in recovering from
defaulters. Another observation is that the above banks have strictly followed the RBI
guidelines by making provisions against NPAS.
CHART 4.6
4.00%
3.50% 1.92%
3.00%
1.70% 1.48%
2.50% 2.72% CANARA BANK
2.00%
3.11% SBI
1.50%
2.30%
1.00% 1.87% 1.90%
0.50% 1.02%
0.00%
2013 2014 2015 2016 2017
YEAR
It is the ratio of gross NPA to total asset of the bank. It has been direct bearing on return
on assets as well as liquidity risk management of the bank. The formula for that is:
TOTAL ASSETS
TABLE 4.7
INTERPRETATION
The Problem assets ratio shows the proportion of Gross NPA to total assets and the table &
graph given above shows that the percentage of all selected banking is SBI and canarabank
the problem assets ration increased from the SBI at 5.73 % from years of 2016 and decreased
from the 4.2% at years of 2013.and average propel assets ratio from SBI at 4.7 % in the years
of 20 14 and 2015.The percentage Shown is, however not stable. It was reducing from PA
ratio from canarabank at 2014 and 2015 as 4.55% and 4.05% but it went slightly down in
the year 2013,2016,2017 through ratio is 3.70% ,3.72 % and 3.44%. It seems that much
attention has been given by the management to the proportion of Gross NPA and total assets
of the bank. The gross NPA is on the rise due to the increase in advances.
CHART 4.7
PERCENTAGE OF RATIO
8.00% 4.04% 3.72%
7.00% 4.55%
3.44%
6.00% 3.70%
5.00%
4.00% CANARABANK
3.00% 5.60% 5.73% SBI
4.20% 4.74% 4.76%
2.00%
1.00%
0.00%
2013 2014 2015 2016 2017
YEAR
Provisions are to be made for to keep safety against the NPA, & it directly affect on the gross
profit of the Banks. The provision Ratio is nothing but total provision held for NPA to gross
NPA of the Banks.
The formula for that is,
INTERPRETATION
The above table and graph makes it very clear that the average total provision ratio of all the
banking under study is very satisfactory. It is seen that the total provision ratio which was
39.11% at canarabank years of 2017 and 25.69 % at SBI in years of 2016 increased the
marginally every year and finally reached 48.1 % at canarabank in 2016 and 31.53% of the
total provision ratio decreased by the SBI compared to the canara bank which is much lower
than the average total provision ratio (19.33%) at canara bank in the years of 2015.. It goes
without saying that the banking are taking good care and following ideal norms of granting
advances, so that the recovery is satisfactory leading to lower total provision ratio. It is very
encouraging that total provision ratio in the last three years is very much lower than the
average 19.6% at canara bank in the years of 2013,2014,2015 and very much increase than
the average 25.78% at SBI bank in the years of 2013,2015 and 2016.
CHART 4.8
60.00%
50.00% 48.10% 39.11%
40.00%
19.58% 19.67%
19.33% CANARABANK
30.00%
SBI
20.00% 31.53%
25.78% 24.97% 22.27% 25.69%
10.00%
0.00%
2013 2014 2015 2016 2017
YEAR
CAPITAL ADEQUACY RATIO
Capital Adequacy Ratio (CAR) is also known as Capital to Risk (Weighted) Assets
Ratio (CRAR), is the ratio of a bank's capital to its risk. National regulators track a
bank's CAR to ensure that it can absorb a reasonable amount of loss and complies with
statutory Capital requirements.
Definition: Capital Adequacy Ratio (CAR) is the ratio of a bank's capital in relation to
its risk weighted assets and current liabilities. It is decided by central banks and bank
regulators to prevent commercial banks from taking excess leverage and becoming
insolvent in the process.
Description: It is measured as
Capital Adequacy Ratio = (Tier I + Tier II + Tier III (Capital funds)) /Risk weighted
assets
The risk weighted assets take into account credit risk, market risk and operational risk.
The Basel III norms stipulated a capital to risk weighted assets of 8%. However, as per
RBI norms, Indian scheduled commercial banks are required to maintain a CAR of 9%
while Indian public sector banks are emphasized to maintain a CAR of 12%.
Capital adequacy ratios (CARs) are a measure of the amount of a bank's core
capital expressed as a percentage of its risk-weighted asset.
Two types of capital are measured: tier one capital ({\displaystyle T_{1}}
above), which can absorb losses without a bank being required to cease trading,
and tier two capital ({\displaystyle T_{2}} above), which can absorb losses in
the event of a winding-up and so provides a lesser degree of protection to
depositors
TABLE 4.9
INTERPRETATION
The capital adequacy ratio indicates the scope for improvement in NPA. The higher the ratio,
the better is position of recovering the advances. From the above table and graph it is found
that capital adequacy ratio average form the every years of SBI 0.4% and capital adequacy
ratio average form the every years of canara bank 0.1 % ratio has been decreasing in the first
five years of study and increased a little in the last three years. The variations in the capital
adequacy ratio are caused by the higher percentage of doubtful assets over capital adequacy
ratio in some of the banks. The management should take necessary Measures to reduce
capital adequacy ratio.
CHART 4.9
0.25%
0.20%
0.30% CANARABANK
0.15%
SBI
0.10% 0.10% 0.09% 0.09% 0.10%
0.05%
0.04% 0.04% 0.03% 0.02%
0.00%
2013 2014 2015 2016 2017
year
CHAPTER V
FINDING
It is seen that the gross NPA which was 6.36 at canarabank and 6.2 % at SBI in years
of 2013 increased the marginally every year and finally reached 7.3 % at canarabank
in 2014 and 8.9 % of the GNPA increased by the SBI compared to the canara bank
which is much lower than the average gross NPA (5.8 %) at canara bank in the years
of 2017.. It goes without saying that the banking are taking good care and following
ideal norms of granting advances, so that the recovery is satisfactory leading to lower
gross NPA. It is very encouraging that the gross NPA ratio in the last three years is
very much lower than the average 6.36% at canara bank in the years of
2013,2015,2016 and very much increase than the average 8.8% at SBI bank in the
years of 2015,2016 and 2017
The net NPA ratio during these years can be ascribed to the high net NPA position of
the state bank of india. The bank had failed to make sufficient provisions against NPA
in these years. however, they succeeded in making provisions and thus they could
bring the net NPA ratio is SBI bank in year of 2013,2014,2015,2016,,2017 through is
3.11%,1.02%,1.87%,2.3 % and 1.9%.the net NPA ratio of the canara bank in the year
2013,2014,2015,2016,and 2017 is decrease the ratio from 1.76%, 2.72
%,1.70%,1.92% and 1.48 %improvement of the above bank. it is to be seen that the
position of all other banks has been very good net NPA ratio
The Problem assets ratio shows the proportion of Gross NPA to total assets and the
table & graph given above shows that the percentage of all selected banking is SBI
and canarabank the problem assets ration increased from the SBI at 5.73 % from years
of 2016 and decreased from the 4.2% at years of 2013.and average propel assets ratio
from SBI at 4.7 % in the years of 20 14 and 2015.The percentage Shown is, however
not stable. It was reducing from PA ratio from canarabank at 2014 and 2015 as
4.55% and 4.05% but it went slightly down in the year 2013,2016,2017 through ratio
is 3.70% ,3.72 % and 3.44%. It seems that much attention has been given by the
management to the proportion of Gross NPA and total assets of the bank. The gross
NPA is on the rise due to the increase in advances.
The above table and graph makes it very clear that the average total provision ratio of
all the banking under study is very satisfactory. It is seen that the total provision ratio
which was 39.11% at canarabank years of 2017 and 25.69 % at SBI in years of 2016
increased the marginally every year and finally reached 48.1 % at canarabank in 2016
and 31.53% of the total provision ratio decreased by the SBI compared to the canara
bank which is much lower than the average total provision ratio (19.33%) at canara
bank in the years of 2015.. It goes without saying that the banking are taking good
care and following ideal norms of granting advances, so that the recovery is
satisfactory leading to lower total provision ratio. It is very encouraging that total
provision ratio in the last three years is very much lower than the average 19.6% at
canara bank in the years of 2013,2014,2015 and very much increase than the average
25.78% at SBI bank in the years of 2013,2015 and 2016
The capital adequacy ratio indicates the scope for improvement in NPA. The higher
the ratio, the better is position of recovering the advances. From the above table and
graph it is found that capital adequacy ratio average form the every years of SBI 0.4%
and capital adequacy ratio average form the every years of canara bank 0.1 % ratio
has been decreasing in the first five years of study and increased a little in the last
three years. The variations in the capital adequacy ratio are caused by the higher
percentage of doubtful assets over capital adequacy ratio in some of the banks. The
management should take necessary Measures to reduce capital adequacy ratio.
SUGESSTION
Through RBI has introduced number of measures to reduce the problem of increasing
NPAs of the banks such as CDR mechanism. A lot of measures are desired in terms of
effectiveness of these measures. What I would like to suggest for reducing the
evolutions of the NPAs of Bank of India as under
The bank before providing the credit facilities to the borrower company should
analyze the major heads of the income and expenditure based on the financial
performance of the comparable companies in the industry to identify significant
variances and seek explanation for the same from the company management. They
should also analyze the current financial position of the major assets and liabilities.
Bank should evaluate the SWOT analysis of the borrowing companies i.e. how they
would face the environmental threats and opportunities with the use of their strength
and weakness, and what will be their possible future growth in concerned to financial
and operational performance
Proper training is important to the staff of the bank at the appropriate level with on
going process. That how they should deal the problem of NPAs, and what continues
steps they should take to reduce the NPAs.
Bank should have its own independent credit rating agency which should evaluate the
financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the
clients.
The Bank should have an external auditor / internal auditor and should check the
banks of accounts on regular basis or a monthly basis as they well be aware of the
company’s financial position and take the necessary precautions at an early stage
CONCLUSION
The only problem that the Banks are facing today is the problem of non-performing assets.
The non performing assets means those assets which are classified as bad assets which are
not possibly be returned back to the banks by the borrowers. If the proper management of the
NPAs is not undertaken it would hamper the business of the banks. The NPAs would destroy
the current profit, interest income due to large provisions of the NPAs, and would affect the
smooth functioning of the recycling of the funds.
The RBI has also 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 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.
BIBLIOGRAPHY
REFERENCE
http://en.wikipedia.org/wiki/State_Bank_of_India
http://en.wikipedia.org/wiki/Bank_of_Baroda
http://www.moneycontrol.com/financials/statebankofIndia/balance-sheet/SBI
http://www.moneycontrol.com/financials/bankofbaroda/balance-
sheet/canarabank
http://www.moneycontrol.com/financials/bankofbaroda/profit&loss/canarabank
http://www.moneycontrol.com/financials/bankofbaroda/profit&loss/SBI
www.google.com
www.capitaline.com
www.sbi.com
www.investopedia.com
ANNEXURE
BALANCE SHEET OF SBI ,CANARA BANK AND PROFIT AND LOSS ACCOUNT
profit & Loss account of Canara Bank ------------------- in Rs. Cr. -------------------
Mar 17 Mar 16 Mar 15 Mar 14
12 mths 12 mths 12 mths 12 mths 12 mths
INCOME
Interest / Discount on Advances / Bills 29,585.67 31,377.25 32,066.12 28,457.33 24,379.91
Income from Investments 10,711.29 11,407.79 10,923.75 10,251.08 9,112.42
Interest on Balance with RBI and Other 768.20 879.50 759.79 730.82 585.23
Inter-Bank funds
Others 322.49 357.60 0.38 108.39 0.38
Total Interest Earned 41,387.64 44,022.14 43,750.04 39,547.61 34,077.94
Other Income 7,554.40 4,875.23 4,550.25 3,932.76 3,153.01
Total Income 48,942.04 48,897.36 48,300.29 43,480.37 37,230.94
EXPENDITURE
Interest Expended 31,515.87 34,258.77 34,086.37 30,603.17 26,198.94
Payments to and Provisions for 4,915.09 4,445.88 4,274.26 3,672.38 3,253.56
Employees
Depreciation 327.54 169.96 427.06 228.47 189.69
Operating Expenses (excludes Employee 3,269.65 2,876.09 2,562.23 2,180.16 1,698.74
Cost & Depreciation)
Total Operating Expenses 8,512.28 7,491.93 7,263.55 6,081.01 5,141.99
Provision Towards Income Tax 520.00 -372.95 795.00 625.00 800.00
Other Provisions and Contingencies 7,271.97 10,332.43 3,452.74 3,733.00 2,217.91
Total Provisions and Contingencies 7,791.97 9,959.48 4,247.74 4,358.00 3,017.91
Total Expenditure 47,820.12 51,710.19 45,597.67 41,042.17 34,358.84
Net Profit / Loss for The Year 1,121.92 -2,812.82 2,702.62 2,438.19 2,872.10
Net Profit / Loss After EI & Prior Year 1,121.92 -2,812.82 2,702.62 2,438.19 2,872.10
Items
Total Profit / Loss available for 1,121.92 -2,812.82 2,702.62 2,438.19 2,872.10
Appropriations
APPROPRIATIONS
Transfer To / From Statutory Reserve 281.00 0.00 680.00 650.00 720.00
Transfer To / From Special Reserve 0.00 0.00 500.00 0.00 700.00
Transfer To / From Capital Reserve 777.00 0.00 122.40 87.50 43.07
Transfer To / From Investment Reserve 0.00 0.00 360.80 0.00 205.00
Transfer To / From Revenue And Other 0.00 0.00 387.70 1,107.08 530.03
Reserves
Equity Share Dividend 0.00 0.00 540.97 507.38 576.00
Tax On Dividend 0.00 0.00 110.76 86.23 98.00
Balance Carried Over To Balance Sheet 63.92 -2,812.82 0.00 0.00 0.00
Total Appropriations 1,121.92 -2,812.82 2,702.62 2,438.19 2,872.10
OTHER INFORMATION
EARNINGS PER SHARE
Basic EPS (Rs.) 20.63 -53.61 58.59 54.48 64.83
Diluted EPS (Rs.) 20.63 -53.61 58.59 54.48 64.83
DIVIDEND PERCENTAGE
Equity Dividend Rate (%) 10.00 0.00 105.00 110.00 130.0