Aprojectreportpreparedinpartialfulfillmentoftheaward
ofthedegreeof
BACHELOROFBUSINESSMANAGEMENTOFMANAGMENETOFBANGLAORE
SUBMITTEDBY
R.ANURADHA
(RegNo.11780470)
Undertheguidanceof
Dr.D.Govindappa
MaharanisArtsCommerce&ManagementCollegeforWomen,
SheshadriRoad,Bangalore560001
201314
ACKNOWLEDGEMENT
ItsmydutytorendermysinceregratitudetoourPrincipalMr.Our
esteemedHODDr.&CoordinatorDr.Govindappa,MaharanisArts
Commerce&ManagementCollegeforWomen,fortheirsupportextended
thoughtoutthecourse.
MysincerethankstomyguideDr.Govindappa.CoordinatorinMaharanis
ArtsCommerce&ManagementCollegeforWomen,forspendingtheir
timelyadviceandsuggestionforcompletionofthisproject.
IwouldliketoextendmyprofoundgratitudetoSriHanumanthappa
ManagerofBashaveshwaracooperativeBankforhisenthusiastic
encouragementandcourtesyforthehelptheyrenderedmeforthehelp
theyrenderedmeforthesuccessfulcompletionoftheProject.
Finally,IamgratefultoMybelovedParentswhohaveconstantlysupportedme
andinspiredmeinthisproject,Itismyformostdutytothankallmy
respondentswhohelpedmetocompletemyfiledworkwithoutwhichthis
project.
Place:Bangalore
Date:
(RegNo.11780470)
R.Anuradha
DECLARATION
IR.AnuradhadeclarethatthisprojectreportentitledManagementof
NonperformingAssetshasbeenPreparedduringtheyear20132014,It
ismyoriginalworkdoneundertheguidanceofDr.Govindappa.,
CoordinatorofMaharanisArtsCommerce&ManagementCollegefor
Women,Bangalore
Ialsoherebydeclarethatthisprojectreporthasnotbeensubmittedtoany
otheruniversityorcollegefortheawardofanydegreeofdiploma.
Place:Bangalore
Date:
(Reg.No.11780470))
R.Anuradha
GUIDECERTIFICATE
ThisProjectreporthasnotbeenpreviouslyformedthebasisfortheaward
to the candidate of any Degree, Diploma, AssociateShip, Fellowship or
similartitleinthisUniversityorinanyotherUniversity.
Date:15.1.2013
Place:Bangalore
(Dr.Govindappa)
LISTOFCONTENETS
ChapterNo
ChapterName
PageNo.
Chapter1
Introduction
Chapter2
ResearchDesign
1827
Chapter3
Profile
2855
Chapter4
Analysis&Interpretation
5686
Chapter5
Findings,Conclusions&
8791
Suggestions
BIBILOGRAPHY
ANNEXURES
117
LISTOFTABLES
Sl.no.
Title
Page
AmountofTotalLoansandAdvance
57
59
3. CompositionofNonPerformingAssets
61
4.
63
5. NPASubClassestoTotalAdvances
65
6. TotalNPAtoTotalAssets
67
7. TotalNPAtoNetProfits
69
8. SectorWiseLoansandAdvances
71
9. NPAceilingandAchievements
73
10.
75
1.
2. CompositionofLoanAssets
TotalNPAtoTotalAdvances
IncrementalGrossNPA
11.IncrementalRatioofGrossNPAtoGrossAdvancesand
Assets
77
12.ClassificationofLoanAssets
79
13.ClassificationofRiskAssets
81
14.QualityofLoanAssetsSartorialAnalysis
83
15.AdvancestoprioritySector
85
LISTOFCHARTS
Sl.No.
Title
Page
1.
AmountofTotalLoansandAdvances
57
2.
CompositionofLoanAssets
58
3.
CompositionofNonperformingAssets
60
4.
TotalNPAtoTotalAdvances
62
5.
NPASubClassestoTotalAdvances
64
6. TotalNPAtoTotalAssets
66
7.
TotalNPAtoNetProfits
68
8.
SectorWiseLoansandAdvances
70
9.
NPACeilingandAchievements
72
10.
IncrementalGrossNPA
74
11.
IncrementalRatioofGrossNPAtoGross
AdvancesandTotalAssets
76
78
80
14.QualityofLoanAssetsSartorialAnalysis
82
15.AdvancestoPrioritySector
84
12.
ClassificationofLoanAssets
13.ClassificationofRiskAssets
Introduction
HISTORICALPERSPECTIVE
Bank of Hindustan set up in 1876 was the earliest Indian Bank.
Banking in India on modern lines started with the establishment of
the Presidency banks under Presidency Bank Act 1876 i.e., Bank of
Calcutta, Bank of Bombay and Bank of Madras. IN 1921, all
Presidency Banks were amalgamated for forming the Imperial Bank
of India. Imperial Bank performed all the central banking functions
priortoestablishmentofRBI.
RBIActwaspassedin1934andRBIwasconstitutedasaapexbank
withoutmajorgovernmentownership.
With the enactment of RBI Act the bank was bought under
Governmentcontrol.Laterundertheact,thebankgotwideranging
powers for supervision and control of banks. The act also vested
licensing Prowers and authority to conduct inspection of banks in
India.In1955,RBIacquiredcontrolofImperialBankofIndia,Which
was renamed as State Bank of India. In 1959, State of India took
control of 8 private banks floated in the erstwhile princely states,
makingthemasits100%subsidiary.
RBIwasempoweredin1960toforcecompulsorymergerofweak
banks with strong banks. The total number of banks was then
reduced from 566 in 1951 to 85 in 1969. In July 1969, the
governmentNationalized14banks,havingdepositsof50croresand
above. In 1980, government added 6 more banks with deposit of
more than 200 crores. Nationalization of banks was to make the
banks play the role of a catalyst agent for economic growth of the
country.TheNarasimhanCommitteein1992,suggestedwiderange
of reforms for banking sector to meet with international best
practices. With the amendment of Banking Regulation Act, the
bankingindustrywitnessedtheentryofnewprivatebanks.
DEVELOPMENTSINCOMERCIALBANKING
TheIndianbankingsystemcontinuedtorespondproactivelytothe
challenges in its operating environment during the year 200708.
There was a significant improvement in the performance of the
commercialbankingsystem,measuredintermsofbothoperatingas
wellasnetprofits.AsatendMarch2008,97commercialbanks,196
Regional Rural Banks, 52 scheduled urban cooperative banks were
operatinginIndiaasscheduledbanks.
The reform agenda in the second half of the nineties has focused on
structuralissuessuchasdiversificationofownershipofpublicsectorbanks,
strengtheningweakbanksandcorporategovernance.
Therehasbeenanumberofbeneficialimpactsofthereformprocessin
terms of a large and diversified institutional base, better price discovery,
largeravailabilityoffunds,newinfusionoftechnologyanddiversificationof
bankingservicesandgreatertransparency.Moreimportantprofitabilityof
public sector banks has increased while the Indian banking system has
shownresilienceandavoidedthecontagioneffectsoftheglobalcrises.The
introduction of better prudential norms has induced banks to reduce the
proportionofNPAsinthebankingsystem.TheRBIhasbeenmakingefforts
continuously to ensure the convergence of its supervisory norms and
practiceswithinternationalbestpractices.
SCHEDULEDBANKINGSTRUCTUREININDIA
Note:Figuresinthebracketsindicatenumberofbanksineachgroup
PARTB
GENERALINTRUCTIONTOTHEROPIC
NONPERFORMINGASSETS
The high level of NPAs in banks and financial institutions has been a
matterofgraveconcerntothepublic,asbankcreditisthecatalysttothe
economic growth of the country. Any bottleneck in the smooth flow of
credit, one cause for which is the mounting NPAs, is bound to create
adverserepercussionsintheeconomy.
NPAsurfacedsuddenlyintheIndianBankingscenarioaroundtheeighties,
in the midst of turbulent structural changes overtaking the international
bankinginstitutions,andwhentheglobalfinancialmarketswereundergoing
sweeping changes. After it had emerged, the problem of NPAs kept hidden
and gradually kept swelling unnoticed and unperceived, in the maze of
defective accounting standards and opaque balance sheets. Over a decade,
NPAs has posed an alarming threat to the Indian banking industry, sending
distressingsignalsonthesustainabilityandendurabilityoftheaffectedbanks.
Theilleffectsofthissurgingthreathaveneutralizedthepositiveresultsofthe
chainofmeasuresaffectedunderbankingreformsbytheGovernmentofIndia
and RBI in terms of the two Narasimhan Committee Reports in this
contemporary period. Despite various corrective steps administered to solve
andendthisproblem,concreteresultsareeluding.ThusNPAshasbecomea
sweeping and all pervasive virus, confronting universally on banking and
financialinstitutions.
CONCEPTOFNONPERFORMINGASSETS
Thecriticalfactorthatdecidestheperformanceofthebanksandfinancial
institutionsnowdaysisthespottingofnonperformingassets.Banksarenow
requiredtorecognizesuchloansperiodicallyandthenclassifytheassets.
Banks are not allowed to bookany income from NPAs. Also, they have to
make provision for the NPAS, which impacts profitability adversely. The
conceptofclassificationofbankadvancesinseveralcategoriesstartedinlate
1980sbutatthattimetheterminologyofNPAdidnotexist.Itwasintheearly
1990s when AngloAmerican models, which had several blocks of
categorizationsofbanksassets,theconceptofassetclassification,cameinto
existence.Priortotheintroductionofassetclassification,banksinIndiahada
system of their own. However, this accounting system is not in conformity
withinternationalstandards.
Nonperformingassetsareapartofbankingsystemthroughouttheworld.
ItispeculiartopublicsectorbanksandfinancialinstitutionsinIndia.Incidence
of NPAs is higher in public sector banks in comparison to private banks and
foreignbanksinIndia.
TRADITIONALCONCEPTOFNPA
Earlierin1991,therewasnosuchwordasNPAinIndianFinancialSystem.
Before1991,theIndianFinancialSystemfollowedtraditionwayofaccounting
procedures in respect of various accounts strictly or otherwise. The system
pertaining to payment of principal amount and periodical interest are as
under.
Firstthebankorfinancialinstitutionusedtocredittheinterestaccount
and debit the borrowers account on a particular date or a given pre
specified period (monthly / quarterly, half years / yearly), irrespective of
whethertheborrowerpaidtheinterestornot.
Therewasnopromptactionduringthosedaysforrecoveryofprincipal
and the interest. Recovery action for interest and principal amount
normallyinitiatedwereeitherattheendofthefinancialyearorattheend
of expiry of the loan documents. The standards set by the concerned
authority are also not up to the level of international standards. All
borrower accounts were treated in the same manner till recovery
procedures were initiated like filing the suits for recovery of outstanding
interest and loan installments. Once the recovery case/suit are filed, the
advanceswerecategorizedas:
ProtestantBillsaccounts(hereProtestantBillmeansalltheloanswhere
thesuitsarefiledforrecovery).Duetothisitbecomesverydifficulttofind
out the actual amount realized by the way of interest or principal for a
given period of time. Another problem in the traditional concept was
limitationperiodi.e.debtinstrumentoncein3years.Iftimelyactionsare
not taken, the financial institutions and banks have to incur the losses.
Traditionally,conceptofassetclassificationwasabsentbefore1991andas
aresultitaffectedthehealthofthefinancialinstitutionandthebanks.
MODERNCONCEPTOFNPA
Nonperforming assets came into the Indian Financial System consequent
to the introduction of prudential accounting norms. An era of taking profits
waschangedforprovidingforexpectedlosses.Daysofcountingthechickens
beforetheeggshatchareover.
From the financial year 199192, new system for accounting for the
classification of loan and interest came into effect. The financial institutions
andthebanksadoptedincomerecognitionrules.RBIalsotookkeeninterestin
thisregardandlaidtherequisiteguidelines.AsaresultthemethodofAsset
Classification came into force. While introducing these guidelines,
internationalacceptedstandardsofBasleCommitteeRecommendationswere
alsotakenintoconsideration.Asperthelaidnorms,thestandardincomewas
recognizedonlyinrespectofstandardloans.
Steps were taken to debit the borrower account only when the borrower
paystheoutstandinginterestandtheinstallment.Actionsandinitiativesare
taken to recover as and when the interest and the installment became due.
This became mandatory for banks and financial institutions. Due to all these
effortstheassetswereclassifiedasPerformingAssetsandNonPerforming
Assets.
By this method of asset classification, the concept of NPA came into
existenceandnowithasbecomethebuzzwordinthebankingsystem.Soitis
very clear that many steps were taken towards effective and efficient
functioningoffinancialinstitutionsandbanksforreducingthelevelofNPAs.
ASSETCYCLE
Assetcycledepictshowanassetmovestodifferentpositiondepending
upon the recovery, security and risk associated with it. Laxman Rekha of
NPA denotes the boundary line / dividing line between performing zone
and non performing zone of loan assets. If the due amount is recovered
before the next balance sheet date, it remains in the performing zone
otherwise it crosses the Laxman Rekha of NPA and slips into the Non
performingzoneasonthebalancesheetdate.
FIGURESHOWINGASSETCYCLE
PRUDENTIALACCOUNTINGNORMS
InlinewiththeInternationalpracticesandaspertherecommendations
made by the committee on the financial system (Chairman Shri. M.
Narasimhan)theRBIhasimplementedPrudentialAccountingNormssince
financial year 199293 (Circular No. BP.BC. 179/2104392, dated April 27,
1992).
The prudential accounting norm is based on the NPA concept. Non
PerformingAssetsleadstoNPAi.e.NNoincome,PProvisioningandA
Asset Classification. The prudential accounting norms comprises of the
followingthree:
1. Incomerecognition
2. AssetClassification.
3. Provisioning.
INCOMERECOGNITION
1. Forthepurposeofincomerecognition,banksarerequiredtoclassify
theirloanaccountsintotwocategoriesPerformingAssetsandNon
PerformingAssets.
2. If the asset is Performing, income can be recognized even on
accrual basis. If the assets is non performing, interest thereon can
berecognizedonlyoncashbasisi.e.whenitisactuallyrealized.
3. In case of NPAs where interest income has ceased to accrue; the
fees, commission and similar income should not be debited and
takenintoincomeaccount.Itshouldbereversedorprovidedforto
theextendtowhichitiscollected.
4. Ifgovernmentguaranteedadvancesbecomepastdueandthereby
NPA, the interest on such advances should not be taken to income
accountunlesstheinteresthasbecomerealized.
5. Any amount recovered even partially towards interest in case of a
NPAamount,itcanberecognizedasincome,providedsuchcreditin
theaccounttowardsinterestarenotoutoffresh/additionalfacility
sanctioned.
6. In case of rescheduling or negotiating of a loan, the fees, interest,
commission etc, should be recognized on accrual basis over the
period of time covered by the renegotiated or rescheduled
extensionofcredit.
IMPACTOFNPAONBANKSPROFITS7LENDINGPROWESS
The efficiency of a bank is not always reflected only by the size of its
balancesheetbutalsobythelevelofreturnonitsassets.NPAsdonot
generateinterestincomeforthebanks,butatthesametimebanksare
requiredtomakeprovisionsforsuchNPAsfromtheircurrentprofits.
NPAshaveadeleteriouseffectonthereturnonassetsinseveralways
Theyerodecurrentprofitsthroughprovisioningrequirements.
Theyresultinreducedinterestincome
They require higher provisioning requirements affecting profits,
accretion to capital funds and capacity to increase good quality
riskassetsinfuture.
Theylimitrecyclingoffundsandsetinassetliabilitymismatches.
STRATERGIES7MISFOREFFECTIVEMANAGEMENT
OFNONPERFORMINGASSETS
Inthepresentscenario,NPAsareatthecoreofthefinancialproblemsof
the banks and hence ceaseless efforts have to be made to improve the
recovery rate. The task is of twofold: one relates to the realization of
existing bad advances and the other relates to improve the recovery
performance on new lending. Advances which are not NPAs but on the
threshold,shouldbegivenspecialattentionbecauseotherwise,thesemay
become NPAs sooner or later. For the operating functionaries the line of
actioncanbesummarizedasunder.
1. A)DataBankofNPA
Amountwise
Accountwise
Agewise
Securitywise
After setting up the database, the next step is to prioritize the
typesofNPAstobeconsideredforrecovery.Initiallythebankmay
takeupNPAswithlargecreditoutstanding.SimilarlytheNPAswitha
fair chance of settlement compromise should be considered on
aprioritybasis.
B)EvolvesuitablemethodsmostappropriateforeachNPA.
C)Drawatimebondactionplaninvolvingallconcernedofficials.
2.CREDITANDNPAMANAGEMENTPOLICY
AcomprehensiveNPAmanagementpolicyshouldbeputinplacewiththe
viewofpreventingemergenceofNPAs.IntheeraofLPG(liberalization,
privatizationandglobalization)thepolicyshouldbevisionary,progressiveand
preactive.ThebankshouldformulateasuitableCreditDispensationand
RecoveryManagementPolicydependinguponthesizeandcomplexityofthe
existingcreditbusiness,riskphilosophy,existingNPAlevelandcapital.The
mainemphasisisthatthepolicyshouldbeonthemeasurestobetakenatpre
NPAlevel.Thebranchtothecontrollersshouldsubmitactionplanforeach
potentialsickunit,fortakingdecisioninatimebounddecisions.
3.FOCUSONHIGHVALUENPAACCOUNT
High value NPA accounts need pointed endeavors for up gradation /
recovery to bring down NPA level sizably. At the same time it has to be
recognizedthatwearefacingtheproblemofadverseselection.Improvingthe
assetqualityofourcreditappraisalsandpromptactiononcreditauditreports
assume great significance. Similarly effective Human Resource Development
interventionisnecessaryforupgradingtheskillsofoperatingfunctionariesin
creditandNPAmanagementareas.
CREDITMARKETING
Effective credit marketing is a important tool for preventing of NPAs. In
creditmarketingasthebankersarerequiredtogotothemarkettolocatethe
prospectiveborrowersandfinancethemforproductiveactivities,thereisless
incidenceofadvancesbecomingNPA.Thusthebanksarerequiredtodevelop
inhouseexpertisefordevelopingandmarketingofsuchcreditproductsata
competitivepricewithaminimumrisk.
STRATEGIESFORRECOVERYOFADVANCES
Which the norms are basically an accounting treatment for recognizing NPA
andprovidingforthem,thebanksinterestedintherecoveryandrecyclingof
funds has to go beyond that. The strategies that may be adopted for
improving the recovery on a step by step basis is highlighted and that these
arenotinsubstitutiontothewelllaidprocedureofthebankforrecoverybut
asanaidinthatdirection.
1. Establishcontactwiththeborrowerorchiefrepresentative.Understand
thereasonfortheirregularityandhisnotcomingtoyouearlier.
Donotstartwithrepayment.Understandtheproblem.Itcouldbe
withtheunitincludingtheindustrytowhichitbelongsoritcould
be with the individual. It could be or temporary nature or a
prolongedone.
Do something to mitigate the problem. It need not be financial
butcouldbetechnicalormarketingorsomethingelse.
Make the borrower come out with his problem openly that help
youtodevicesuitablestrategytoregularizetheaccount.
Donotlosscontact,askhimtogiveinwritingtheproblemfaced
by him and the help he needs from the bank well accepting his
liability.
They to get a fresh report about his business outside
commitments,borrowingfromothersourcesetc.
Ensuretheavailabilityofthesecurityandthevaluetocoverthe
indebtedness
2. Whenthecontactswiththeborrowersdonotyieldanyresults,the
next best practice is to have influence strategy (subject to the
requirement of secrecy) This may be through the person who
introduced the account or the guarantor who is responsible for
repaymentandotherpersonoflocalitywhocommandsrespect.
3. Ifthisalsofails,furthergrantoftimewillbeharmfultothebank.The
advancescanberecalled,givingspecifictimetoregularizetheaccount.
Whenthereisnoresponsefromtheborrower,thelegalrightavailable
to the bank should be used to enforce its right against the security
available.
4. Compromise and settlement can be resorted subject to the
guidelineswhentheotheralternativeforrecoveryhasfailed.
5. Rehabilitation of sick units under BIFR schemes or otherwise to be
resortedtoonlywhenwarranted,basedonthelaiddownparameters.
6. Finallywherethereisnochanceofrecoverywriteoffisresortedas
thelastmeasure.
RECOVERYTHROUGHCOMPROMISESETTLEMENT
ofsecurity.
2.
Thenetworthoftheborrowerand/orguarantorismeager.
3.
Thereisadifficultyinthedisposalofsecurity.
4.
defectivedocument,legalentanglementsetc.
5.
Loansassetshavebeenclassifiedunderdoubtfulandlosscategories.
6.
Thebankhasalreadyprovidedforthesacrificialamount.
7.
problemsbeyondhiscontrolandthereislesschanceforrevival.
8. The borrower is sincere in liquidation of loan through reasonable
compromise.
ChapterII
DESIGNOFTHESTUDY
INTRODUCTION
The besetting sin of NPA has become a great peril to the creditability of
bankingindustry.TheIndianbankingindustrytoohasbeenthreatenedbythe
NPA menace. Among the various NPA causative factors, defective legal
systems as well as ineffective NPA management are the two prime factors.
Only the Government can bring effective legal system but it will take a long
time.Whereasthebankerscanthemselvesbringabouteffectivemanagement
ofNPAsanditdoesnottaketime.Butthatrequiresaclearunderstandingof
every aspect of NPA management and its implementation in true spirit.
Continuously increase in absolute NPA in the banking industry indicates that
thereislackofNPAmanagementskillsatthefiledlevel.
RESEARCHDESIGNUSED
Adescriptiveandanalyticalresearchdesignhasbeenusedtoidentifythequality,
quantum of loan assets and the techniques for arresting NPAs. The study is
basedonProjectiveTechniquesandDepthInterviews.
Toanalysistheobjective,casestudycouldhavebeenundertakenbutdue
to time constraint Depth Interview and Personal Discussion have been
adopted.Thepopulationforthedepthinterviewincludesprofessionalexperts
andgroupshandlingthecasesofNPAs.Themethodsofresearchutilizedfor
the evaluation and analysis includes comparative statements, ratio analysis,
flowchartsandtrendanalysis.
TITLEOFTHEPROJECT
MANAGEMENTOFNONPERFORMINGASSETS
ATDENABANK
STATEMENTOFTHEPROBLEM
Oneofthecrucialfactorsthatdecidetheperformanceofbanksistospot
and arrest NPAs. They have to make a provision for NPAs, which impacts
profitability adversely. Therefore better understanding and effective
monitoringofNPAisnecessary.FurtherthepresenceofNPAinthebooks
of the banks would mean erosion in the capital base, which affects the
profitabilityandnetworthoftheorganization.Thereforeastudyhasbeen
undertaken at DENA BANK to ascertain the Management of Non
performingAssetsandwaysforarrestingthem.
SCOPEOFTHESTUDY
1. ThestudyisexclusivelyconductedforDENABANK,Branchpatrenahalli,
2. Thestudyisconductedforthebankmentionedonthebasisofrecordsof
last4yearsonly.
3. The study focuses attention mainly on the level and the quality of loan
assetsandvariousmeasuresforarrestingNPAsatthebank.
The trend indicated may differ from year to year due to the changes in the
prudential norms as specified by Reserve Bank of India and other regulatory
authorities.
OBJECTIVESOFTHESTUDY
Primaryobjective
Theprimaryobjectiveofthisstudyistosuggesttechniquesandstrategiesthat
may be used to reduce the existing NPAs and prevent the reemergence of
freshNPAs.
Secondaryobjectives
1. TomeasurethemagnitudeofNPAsatthebank.
2. TostudytheimpactofNPAsonthebanksprofitability.
3. To ascertain the techniques and understand their effectiveness
forarrestingNPAsatthebank.
4. TocomparetheNPAstatusoverthelast4years.
5. In general, the secondary objective of the study is to analysis the
dimensions of NPAs for the last 4 years and with special reference to the
currentfinancialyeari.e.,200910,forfirstthreequarters.
OPERATIONALDEFINITIONOFTHECONCEPTS
NONPERFORMINGASSETS
AnassetincludingaleasedassetbecomesaNPAwhenitceases
togenerateanyincometothebank.NPAhasbeendefinedasacreditfacility
inrespectofwhichtheinterestand/orinstallmentofprincipalhasremained
pastdueforaspecifiedperiodoftime.
PASTDUE
Anamountistreatedaspastduewhenitremainsoutstandingorunpaidfor
30 days beyond the due date. Due to the improvement in payment and
settlement system, recovery climate, up gradation of technology in banking
system, it has been decided by RBI to dispense the past due concept with
effectfromMarch31,2001.HencetoalltheconceptstobecomeNPA,cutoff
dateisSeptember30thoftheyearunderaudit.
OUTOFORDER
Anaccountwillbetreatedasoutoforderiftheoutstandingbalanceremains
continuouslyinexcessofthesanctionedlimit/drawingpower.Incaseswhere
the outstanding balance in the principal operating account is less than the
sanctionedlimit/drawingpower,butthecreditsarenotenoughtocoverthe
interestdebitedduringthesameperiod,theseaccountistobetreatedasout
oforder
OVERDUE
Anyamountduetothebankundercreditfacilityisoverdueifitisnotpaid
ontheduedatefixedbythebank.
SUBSTANDARDASSET
A substandards asset is one that is classified as NPA for a period not
exceeding2years.
DOUBTFULASSET:
A doubtful asset one which has remained NPA for a period exceeding 2
years.
DOUBTFUL1STAGE:
If NPA exist for more than 2 years but does not exceed 3 years than the
assetissaidtobedoubtful1stage.
DOUBTFUL2STAGE:
IfNPAexistformorethan3yearsbutunto5yearsthentheassetissaidto
bedoubtful2stage
DOUBTFUL3STAGE:
If NPA exist for more than 5 years then asset is said to be in doubtful 3
stage.
LOSSASSET
AlossassetisonewherethebankorinternalorexternalauditorsortheRBI
inspectionhasidentifiedlossbuttheamounthasnotbeenwrittenoffwholly.
CREDITRISK
Itistheriskoftheborrowernotadheringtothetermsofrepaymentthat
leadstodelayedpaymentornopayment.
LIQUIDITYRISK
Thevariationinnetincomeandmarketvalueofbanksequitycausedbythe
banksdifficultyinobtainingimmediatefunds,eitherbyborrowingorselling
assets.
INSOLVENCYRISK
Alsoknowasbankruptcy,itistheriskthatthedebtorwillbeunabletopay
itsdebts.
DERVATIVE
Acontractorconvertiblesecuritythatchangesinvaluewithand/orobtains
much of its value from price movements in a related or underlying security,
futureorotherinstrumentsorindex.
CRITICALDUEAMOUNT
Itisthe minimumamountdueinastandardasset,whichif notrecovered
before 31st March of the current financial year, will result in the asset
becomingNPA.
POTENTIALNPA
Itisaloanassetwhichisgoingtobedeclared/classifiedasNPAasonthe
coming balance sheet date due to lacy of recovery of capital adequacy
amount.
CAPITALADEQUACYRATIO
Itistheratioofthecapitalofthebanktoitsriskweightedassets.Itindicates
thecapacityofthebankcapitaltoabsorbunanticipatedlossesthatmayarise
onaccountoftherisksthebankisexposedto.
METHODOLOGY
In this report, an analysis is made for knowing the position of NPAs.
Movement of NPAs, quality of loan assets, risk weightage for NPAs and
sectorialdeploymentofloanassets.
Thefollowingarethetechniquesusedforthesaidpurpose.
1. Trendanalysis.
2. Comparativestatementanalysis.
3. Flowchartanalysis.
4. Ratioanalysis.
SOURCESOFDATA
Primarydata
DepthInterviewandPersonalDiscussionwithbankpersonnelandstatutory
loanmonitoringgroup(SLMG)formedthemainsourcesofprimarydata.
Secondarydata
InternalSecondarydata:
Accounting records like NPA registers; annual records formed the sources
forinternalsecondarydata.
Externalsecondarydata:
RBIcirculars,manuals,journalsandmagazines,librariesandInternetarethe
mainsourcesofsecondarydata.
REFERENCEPERIOD
For the analysis the reference period is four years i.e. from 20062007,
20072008,200809,&200910.
LIMTATIONSOFTHESTUDY
1. Owing to the confidentiality enforced by the bank, variousprecise
informationcouldnotbeobtained.
2. The current trend may be slightly affected due to changes in financial
flexibilities.
3. Timeconstraintisalsooneofthemajorlimitations,furtherconstraintsdue
tofinancialyearending.
4.
PLANOFANALYSIS
Thedatacollectedwascompiled,classifiedandtabulatedforthepurposeof
thestudy.Thisdataisanalyzedandisrepresentedintheformsoftablesand
graphs,makinguseofstatisticaltechniquessuchasaveragesandpercentage
forabetterunderstanding.Basedontheanalysisandthefindingstherefrom,
suggestions and recommendations are provided to the bank for arresting
existingNPAsandpreventreemergenceoffreshNPAs.
Theexternalfactorssuchasfiscalpolicy,bankrate,governmentpolicyetc.,
are as applicable to previous years and this impact is to be professionally
changed.
OVERVIEWOFTHECHAPTERSCHEME
Thestudyreportwillbepresentedinfivechaptersasindicatedbelow:
CHAPTER1
Introductiontocreditmanagement:
PartA
PartB
ItdealswiththeGeneralintroductiontoNPA,ConceptsofNPA,AssetCycle,
Prudential Accounting Norms, Income recognition, Impact of NPA, Other
implications,Strategies&MISforNPAManagement,Strategiesforrecoveryof
advances
CHAPTER2
ResearchDesign:
It deals with design of the study, statement of the problem, scope of the
study,objectivesofthestudy,operationaldefinitiontocontent,methodology,
sources of data collection, limitations of the study, plan of analysis & an
overviewofchapterscheme.
CHAPTER3
ProfileoftheCompany:
It deals with the profile of the Nalanda credit Cooperative society limited.
History, Mission vision, Bank functions business performance of bank,
IntroductionofBranch,Majoradvancesofbranch,assetclassification,branch
profitabilitymodel,NPAcategories,NPAcausativefactors,NPAmanagement.
CHAPTER4
AnalysisandInterpretationofthedata:
Itdealswiththeanalysisandinterpretationofdatacollectedfrombank.
CHAPTER5
Summaryoffindings,conclusionandsuggestions:
Itpresentsthesummaryofallfindings,conclusionand,suggestions.
BIBLOGRAPHY
ANNEXURE
ChapterIII
NALANDACREDITCOOPERATIVESOCIETYPROFILE
HISTORY
NalandaCooperativesocietyisoneoftheleadingcooperativesocietiesin
Bangalore.Itwasstartedintheyear1995byShriM.Kyathaiah.Ithasbeen
registeredinthecooperativeregisteroffice,Chamarajpet,Bangalore.
FirstitwasstatedinasmallareabypayingRs.600rentpermonthwith
344 members and a Share Amout of Rs. 2,61,900. Over the years, the
Societyhasbeendeveloping,atpresenttheyleaveintheirownbuilding.
The purpose of Nalanda Cooperative society is to develop the SC/ST
category, handicapped people by providing loans which are given for the
domestic purpose like marriages, Children,s education, Loan deposits,
vehicle,suretyloan,Businessimprovementloanetc.
Itinitialstage,thesocietywasgiventhepermissiontooperateinonly6
selected areas i.e. Basveshwaranager, Mahalakshimi Layout, Peena, and
Vijanagar & Rajajinagar. At. Present they have got permission to include
membersfromthewholeBangalorecityfrom12.2.2004.
BOARDOFDIRECTORS
1. President
Chennidevaiah
2. VicePresident
C.Honnapa
3. Director
M.Kyathaiah
4. Director
B.S.Keerthikumar
5. Director
Annadanaiah
6. Director
Basavaraju
7. Director
H.M.Jayakumar
8. Director
Dr.M.K.Siddapa
9. Director
M.Veerabhadraiah
Milestones
OneamongsixPublicSectorsBanksselectedbytheWorldBankfor
sanctioning a loan of Rs. 72.3 crores for augmentation of TierII
Capital under Financial Sector Developmental project in the year
1995.
One among the few Banks to receive the World Bank loan for
technologicalupgradationandtraining.
LaunchedaBondIssueofRs.92.13croresinNov.1996
MaidenPublicIssueofRs.180croresinNov.1996.
IntroducedTelebankingfacilityofselectedmetropolitancenters.
NalandaBankhasbeenthefirstBanktointroduces:
MinorSavingsScheme.
CreditcardinruralIndiaknownasNalandaCreditCooperativeBank
CustomerratingsystemforratingthebankServices.
TypesofAccount
NonResidentExternalRupeeAccount(NRE)
NonResidentOrdinaryAccounts(NRO)
NRIs can open NRO accounts for the purpose of putting through
bonafied transactions denominated in Indian Rupees. NRO account
maybeopened/maintainedintheformofcurrent,Saving,Recurring
or Fixed deposit account. The requirements laid down in the
directives issue by Reserve Bank of India in regard to resident
accountshallapplytoNROaccounts.
ForeignCurrencyNonResidentAccount(FCNR)
UnderFCNRaccounts,term depositsareacceptedfrom NRIsinany
of the five designated currencies US Dollar, Pound, Sterling, EURO,
AustralianDollarandCanadianDolor.
BranchComputerization
100%Branchesarecomputerized
AllMetroandUrbanBranchesarecomputerized.
All6servicesbranchesarefullycomputerized
All branches handling Government business viz. Director Taxes etc.
arecomputerized.
88TBCbrancheshavebilingualdataprocessingcapabilities.
Kiosksatvariousbranchesprovidingthefollowingfacilities:Passbook
printing,accountsdetailsinquiry,inquiryaboutBanksdifferentetc,
Networking
Bank has set up its own network Nalanda using 470 leased lines, 116
VSATs., dialup lines and 216 ISDN backup for ATMs connecting more than
1035branchesand34officesspreadover100centers.
ATMInstallations
Morethan90ATMshavebeeninstalledbyBankalloverKarnataka.
All ATMs are connected through Nalanda Net and Electra ATM switch
enabling cardholders of any of these ATMS to transact through other
ATMS in the network., which in turn is connected to other domestic
andinternationalATMnetworks.
BankhastiedupwithCorporationBank,CashTreegroupofBanks,Cash
netgroupsofBanks,NationalFinancialswitchandSBI&itsassociates
forATMsharingarrangement.
BanksATMswitchisconnectedtoVISAnetwork,thusenablingthrough
VisaElectronDebitCardissuedbytheBank.
ATM/DEBITCards
) AtPresentmorethan120branches(includingATMbranchesandnon
atmbranches)coveringmorethan115ATMcentersaretechnologically
enabledtoissueATM&DebitCards
) Morethan2.25LacATMandVisaelectronDebitcardshavebeenissued
tothecustomerssofar.
NetworkbasedServices&Applications
DataTransfer
TheNalandanetisextensivelyusedfortransferofdatafromregionstoHO
andfrombranchestoregions.
RemoteSupport
Nalanda Net is also used for the purpose of troubleshooting form a remote
locationthusutilizingtheskilledmanpowermoreeffectivelyandoptimally.
RTGS
Bank is participating in Real Time Gross Settlement (RTGS) system for
interbankandcustomerfundstransfer.
NalandaBillpay
NalandaBillpayhasbeenpilotlaunchedinBangalorein15branches.Itisan
extremelyconvenientservicethatenableyoutopayyourvariousbillsdirectly
fromyourNalandaaccountwithouttheneedforstandinginlongqueues.
Theserviceprovidesforthreeconvenientpaymentmodes:
Autopaywhichactsasastandinginstructiontodebittheaccount
uptoaceiling.
PhonePaywhereinthecustomergetsSMSalertforbillsandissue
paymentinstructions.
/confirmspayment.
TheServiceisabsolutelyFree.
Nalandambanking
Nalandambankingofferscustomersaneasy,hasslefreemeanstoaccess
bankinginformationwiththehelpofMobilephones24hoursaday,7days
aweek.Nowourcustomercangettherequiredinformationregardingtheir
bankaccountbyusingSMSfacilityfromtheirmobilephones.Presentlym
bankingprovidesfacilitieslike.
a. BalanceInquiry,b.MiniStatementofaccounts
C. Statusofthechequesissued.
Presentlythisserviceisoperationalinmorethan30branches.
AnyBranchBanking(ABB)
Any Branch Banking facility enables customers to access their accounts from
differentcentersaspertheirneeds.Acustomercannowgetastatementof
his last 5 transaction, make balance inquires, cash deposits and cash
withdrawals, transfer funds, Cash Management Services, Multi City Check
fromhisaccounttoanotheraccountthroughmorethan139branches.
NalandaInternetBanking
Nalanda Internet Banking offers you an easy, hassle free means to access
bankinginformationbyafewkeystrokesonyourkeyboard.
Multicitychequefacility.:Byaavailingthisfacility,thecustomerwillget
theATPARchequebookswhereinchequescanbedrawnatparonanyof
theABBbranches.
InvestorRelations
InvestorrelationsCentre
BUSINESSOFTHEPERFORMANCEOFTHEBANK
TOTALBUSINESSMIX
During the Financial year 200910, the Bank achieved Business Mix of
Rs.38371croreasonMarch31,2010,ascomparedtotheBusinessMixof
Rs.32762croreasonMarch31,2009registeringagrowthof17.12%.
The deposite of the Bank ;have grown increased to Rs. 14748 crore as on
March 31, 2010 as compared tp Rs. 11,865 as on March 31, 2009
registeringagrowthof13.05%overthepreviousyearslevel.
The Gross Advanes of the Bank have increased ro Rs. 14748 crore as on
March 31, 2010 as compared to Rs. 11,865 crore as on March 31, 2009,
indicatinganincreaseof24.30%.
ThecompositionofTotalBusinessMixoftheBankforthelasttwoyearsis
asunder:
31stMarch31stMarch(Rupeesnincrore)
BusinessMixasat
2009
2010
TotalDeposit*
20897
23623
TotalAdvance
11865
14748
TotalBusinessMix
32762
38371
(*)Figuresregrouped
DEPOSITEMOBILISATION
The Deposites of the Bank stood at 23623 crore as on March 31, 2010 as
compared to Rs. 20897 crore as on March 31, registering an increase of
13.05%.ThecompositionofDepositsosasunder:
AsonMarch31,2009
AsonMarch31,2010
Deposit
(Rupeesin
Sharein
(Rupeesin
Share
Category
crore)
Total
crore)
Total
in
Deposits
Current
2123.61
10.16%
10.08%
2380.57
Saving
6660.06
31.87%
33.57%
7930.63
Term*
12112.88
57.97%
56.35%
13311.86
Total
20896.55
100.00%
100.00%
23623.06
Deposits
NETPROFIT:
Acomparisonofincome,expensesandprovisionsandcontingenciesofthe
Bankduring20092010and20082009ismgivenhereunder:
Particulars
20082009
20092010
InterestIncome
1725.18
1760.13
NonInterestIncome
311.18
458.99
TotalIncome
2036.36
2219.12
InterestExpended
1038.58
1037.46
OperatingExpenses
615.56
561.34
TotalExpenses
1654.14
1598.80
OperatingProfit
382.22
620.32
Provisions
321.18
547.33
61.00
72.99
Contingencies
NetProfit
BRANCHNETWORK:
During the year 200910, a branch (Metro Sector) was merged with a
nearby branch. 13 loss making branches were converted into Satellite
Offices.TheBankalsoopenedoneExtensioncounteratHyderabad.
TheSectorwisebreakupofbranchnetworkoftheBankason31stMarch
2010isasunder:
Sector
No.ofbranches
Percenttototal
Rural
491*
43.76%
SemiUrban
191
17.02%
Urban
236
21.03%
Metro
204
18.18*
Total
1122
100.00%
*include98SatelliteOffices
ASSETQUALITY&RECOVERYMANAGEMENT:
TheBankcontinueditsvigorouseffortsforimprovementinassetqualities
withdistinctreductioninnonperformingassets(NPAs).TheBankhasput
in place couple of initiative to arrest fresh slippages on one hand and to
reduce level of NPA on other hand. Aggressive actions were taken with
defaulters for settlement/payment of their dues under Banks One time
compromisesettlementscheme.Contactswithindividualborrowerswere
madeinpersonforrecovery/regularizationoftheirNPAaccounts.
NPARecoveryCellshavebeenconstitutedatalltheRegionalOffices.The
committees meet on weekly basis, to identify and pursue the potential
accountsforcompromisedsettlements.
ThelevelofGrossNPAswerereducedtoRs.949.40croresason31stMarch
2010 as compared to Rs.591.00 crores as of 31st March 2009. Thus, the
Bank slashed its Gross NPAs to 6.44% and Net NPAs to 3.04% during the
yearunderreview.
The reduction in Gross NPAs was facilitate by the Banks focus on cash
recoveries(includingrecoveryofRs.77.38.
Crore in written off accounts of impaired accounts. During the year 2009
10, total cash recoveries were effected to the extent of Rs. 304.46 crores
whileinthecorrespondingyeartotalrecoveriesweremadetothetuneof
Rs.252.71crores.Further,therewascashrecoveriesinwrittenoffNPAsof
Rs.77.38croresincreasedfromRs.26.89croresinpreviousyear.
TheBankhasmadeprovisionsforNPAsamountingtoRs.236.91crores
during financial year 200910 in comparison to Rs. 275.57 crores during
previous financial year. The total provisions for NPAs stood at Rs. 499.46
croresason31stMarch,2010.TheNPAcoverageratiowhichwasat46.72%
ason31stMarch,2009hasimprovedto52.61%ason31stMarch2010.
TheComparativepositionofGrossandNetNPAsisgivenbelow.
GrossAdvances
GrossNPAs
GrossNPAtoGross
Advances
NetAdvances
NetNPAs
NetNPAtoNet
Advances
ProvisionsCover
March2008
March2009
Rs.Incrores
March2010
10011.45
1484.01
14.82%
11865.13
1147.54
9.67%
14747.79
949.40
6.44%
9411.79
884.35
9.40%
11308.59
591.00
5.23%
14231.24
432.85
3.04%
39.05%
46.72%
52.61%
VISION2010:
The Bank during 20092010 embarked on an ambitions programme for
vision2010.TheVision2010hasrecasttheBanksMission(recognizingthat
customers are the very rationale of the Banks existence), Vision, Core
values and Guiding Principles for the entire staff of the Bank. The Vision
has identified key drivers of growth as Earning assets with focus on
Agriculture,SMEandRetail segments,noninterestincome, liabilities with
emphasisonlowcostdeposits,containingimpairmentinassets,recoveries
in impaired and writtenoff assets, containing operating expenses and
enhancement of customer service at all levels. The Vision 2010 was
simultaneouslylaunchedbyallofficesoftheBankon15thFeb.2010.
INTRODUCTIONTOPATRENHALLIBRANCH
MAJORADVANCESOFTHEBRANCH
1. PRIORITYSECTORADVANCES
Thesearemainlyconcernedwiththeprioritysectorofoureconomy.
These are the important sectors, which are essential for the
developmentofournation.Suchadvancesare
Loanstoagriculture.
Loanstosmallscaleindustries(SSIs)
Loanstoprofessionalandselfemployed.
Italsoincludesotherloans,whichareprescribedbytheRBIaccordingto
currentyeardirectives.
2. NONPRIORITYSECTORADVANCES
This constitutes a most important source of revenue to the modern
banking system. This is because only 40 percent of total advances are
meant for priority sector and the remaining 60 per cent can be used for
nonpriority sectors. Even the interest rates are very high in the case of
nonpriority sector compared to the priority sector. This sector comprises
of:
Goldloans
Educationalloans
Housingloans
Staffloans
Otherloans.
ASSETCLASSIFICATION
LoanassetsofabankarebroadlyclassifiedasPerformingAssetsand
NonPerformingAssets.TheNonPerformingAssetsarefurtherdividedinto
substandardassets,doubtfulassetsandlossassets.
STANDARDASSETS
Thisisaperformingasset.Itdoesnotdiscloseanyproblem
anddoesnotcarrymorethannormalrisk.
SUBSTANDARDASSET
ThisisaNPAforaperiodoflessthanorequalto18months.
Insuchcases,thecurrentnetworkoftheborrower/guarantoror
the current market value of the recovery of dues to the bank is
full.
DOUBTFULASSET
Category
StatusofDoubtfulasset StatusofNPA
Doubtful1(DF1)
Upto1year
Upto3years
Doubtful2(DF2)
Morethan13years
Morethan35years
Doubtfulo3(DF3)
Morethan3years
Morethan5years
LOSSASSET
ThisisaNPA,whichhasbeenidentifiedasalossassetbythebankor
internal or external auditors, or RBI inspectors, but the amount has not
beenwrittenoffwholly.
IDENTIFICATIONSOFNPAsASONMARCH31
CashCredit/
TermLoan
OverDraft
Billspurchased
Other
&Discounted
Accounts
Interestdueup
Installment
Billsdueupto
Installment
toSeptember
and/or
September30th
and/or
30thNot
interestdueup
Notcollected
interestdueup
collectedbefore
toSeptember
BeforeMarch
toSeptember
March31istof
30thNot
31st
30thNot
yearunder
collected
Oftheyear
collected
audit.The
beforeMarch
under
beforeMarch
accountremains 31stoftheyear
Audit.
31stoftheyear
outoforderfor
underaudit
underaudit.
morethan180
days.
Note:Adaptationof90daysnormsforassetclassification.Withaviewof
moving towards international best practices and to ensure greater
transparency, it has now been decided by RBI to adopt 90 days norms to
classifyaloanasNPAasagainst180daysfromtheyearending31March
2008.
ASSETPROVISIONING
Provisiontobemade
Assetcategory
0.25%
StandardAssets
10%
SubStandardAssets
(18Months)
DoubtfulAssets
1. Onsecuredportionofdoubtful
assetsupto1year(Non
20%
performing1830months
excluding)D1
30%
2. 1yearto3years
(3054monthsexcluding)D2
50%
3. Over3years
LossAssetsand
unsecuredportionof
100%
Doubtfulassets
BRANCHPROFITABILITYMODEL
The profitability model guides the staff and management to move in
therightdirection.Themodelisdependingonthetwotermscalled:
a) Burden
b) Spread
NPACATEGORIES
Dependinguponthechanceofupgradation,NPAcanbegroupedunder
thefollowingtwocategories.
a) FreshNPAs.
b) Hardcore/chronicNPAs.
FRESHNPAs
ThecharacteristicsoffreshNPAsare
1) TheseNPAscanbeboughtbacktothestandardcategorybyrecovering
certaincriticalamount.
2) TheirstatusasNPAsismorethan3years.
3) Thereisnofraudbutsufficientsecurityisavailableintheamount.
4) Thereisabetterchangeofupgradationoftheseassets.
5) SubstandardanddoubtfulIassetwillcomeunderthiscategory.
CHRONICNPAs
ThecharacteristicsofchronicNPAsare
1) These NPAs can be back to standard category by recovering a major
portionoftheNPAamount.
2) TheirstatusasNPAismorethan3years.
3) Thereislesschanceofupgradationoftheseassets.
4) Doubtful2(D2),Doubtful3(D3)andlossassetswillcomeunderthis
category.
NPACAUSATIVEFACTORS
NPAcausativefactorscanbegroupedunderthefollowingthreebroad
categoriesonthebasisofproblemsourcesandthecontrollabilityfrom
thebankerspointofview.
EXTERNALFACTORS
1) Naturalcalamitiesandclimaticconditions.
2) Vagariesingovernmentpoliciesandsociopoliticalpressures.
3) Lackofconductivelegalsystemforloanrecovery.
4) Changeincommerciallawsandpractices.
5) Adverse exchange rate, recession and nonpayment in other
countries.
6) Impact of LPG (liberalization), privatization, and globalization) on
industries.
BORROWALFACTORS
1) Improperchoiceofproject/activities.
2) Inefficientmanagement.
3) Adaptationofinappropriate/absolutetechnology.
4) Attitudeofdefaultwillfully.
5) Resourcecrunch.
6) Strainedlaborrelations.
INTERNATIONALFACTORS
1) Improperselectionoftheborrower.
2) LackofcreditappraisalaswellasNPAmanagementskills.
3) Underfinancingasweeasoverfinancing.
4) Lack of proper followup /post sanction supervision and
ineffectiveMIS.
5) Lackofprofessionalcreditpersonnel.
6) Lackoftransparencyincreditdeliveryandrecovery.
7) Malfeasanceincreditdelivery.
8) Directed lending under subsidy schemes without proper
deliverystream,infrastructureetc.
9) Stitch in time saves time time support or help may save a
genuine unit. Have a head and heart together for a human
approach.
IMPLICATIONSOFNPAs
1. Hamperabilitytorecyclefundscreditcreation.
2. Affectstheprofitabilityofthefinancialinstitution.
3. Time/effort/moneywasted.
4. Affectsviabilityoffewfinancialinstitutionserodingcapitalandreserves.
5. Affectsinvestorsconfidence.
6. Naturallossofapproximately3%ofGDP.
7. HigherlevelofNPAaffectsconfidencelevelofstaffandmanagement.
NPAMANAGEMENT
NPAmanagementmeansmanagingtheloanassetsofabank/financial
institutioninsuchamannerthatthequantumofNPAsarecontainedatthe
bare minimum or at least at the international prescribed level of 5% of
growNPAand2.5%ofnetNPA.
ObjectivesofNPAmanagementmaybe
Tomakemoreassetsperforming
ToreducequantumofNPAs
Tominimizetheamountofprovisioningrequirement.
Thesaidobjectivescanbeachievedby:
Firstlybyarrestingslippageofperformingassets.
Secondlybyupgradationofnonperformingassets.
Thirdlybyliquidatingofnonperformingassets.
INCEPTIONNPA
Sensitivitytopickingupofearlysignalsofsicknessandputtingthem
underclosescrutiny/monitoring.
Strictly abide by system, procedures and develop professionalism
inhandlingriskassets.
PeriodicallyundertakeSWOTanalysisandtimelyremedialmeasures
onwasfooting.
Earlyrehabilitationisgotsanctionedandimplementedifpotentially
viable.
ANALYSISANDINTERPRETATION
Inthischapterthedatacollectedkeepinginmindtheobjectiveofthestudy
isanalyzedandinterpretedsoastoarriveataconclusion.Themain
objectiveistosuggeststrategiesandtechniquesforarrestingexistingNPAs
andpreventreemergenceoffreshNPAs.
Thedatacollectedisanalyzedandpresentedintheformoftablesand
graphsmakinguseofstatisticaltechniquessuchasaverages,percentages
andratios.Forthepurposeofcollectingprimarydata,depthinterviewand
personaldiscussionwasheldwithprofessionalexpertsandbankofficials.
Forthepurposeofcollectingsecondarydataannualreports,circularsetc
wereused.
Thefirsteleventablesandgraphsinvolvestheanalysisthevarious
dimensionsofNPAsforlast4years.Therestfourtablesandgraphsinvolve
analysisforthecurrentfinancialyeari.e.200607dividedintothree
quartersforaclearunderstandingofNPAsduringthatperiod.
Thefollowingpageswillnowtakeusthroughtheanalysisofthestudy
undertakenforaclearunderstandingofNPAManagementatNalanda
Bank.
TABLE1
TABLESHOWINGAMOUNTOFTOTAL
LOANSANDADVANCES
YEAR
AMOUNT
%TOBASE
%TO
YEAR
PREVIOUS
YEAR
200607
102.76
100.00
200708
106.92
104.05
4.05
200809
111.11
108.12
4.07
200910
100.76
98.05
10.07
INTERPRETATION
TheabovetableportraystheamountofadvancesmadebyNalanda
Bank. For the last 4 years, i.e. 20072010. Keeping 2007 as the base year
and comparing the previous respective year, we can find the per cent
changeinadvancesmade.
From 100 per cent 200607, the quantum of loans sanctioned has
increased to 104.05 percent, 108.12 per cent and 98.05 per cent for the
year2008,2009and2010respectively.
CHARTNO.1
CHARTSHOWINGAMOUNTOFTOTALLOANSANDADVANCES
Source:TableNo1.
Inference:
Therehasbeennormaljumpinadvancesduring200809i.e.4.07percent
as against 4.05 per cent in 200708 However in the following subsequent
yeari.e.200910,thepercentageadvanceshasreducedto10.07.
TABLE2
TABLESHOWINGCOMPOSITIONOFLOANASSETS
YEAR
P.A.
%TO
%TO
BASE
YEAR
N.P.A.
%TO
%TO
PREVIOUS
BASE
PREVIOUS
YEAR
YEAR
YEAR
200607 94.53
100.00
8.23
100.00
200708 95.15
100.67
0.67
11.76
142.89
42.89
200809 98.33
104.02
3.35
12.78
155.28
12.39
200910 92.20
97.53
6.49
8.56
104.00
51.28
INTERPRETATION
Theabovetableshowsthecompositionofloanassetsasperformingassets
andnonperformingassets.
Considering200607asthebaseyear,wecanobservethatthepercentage
of performing assets is showing an increasing trend i.e. 100.67 percent,
104.02 percent and 97.53 percent for the year 2008, 2009 and 155.28
percentintheyear2010whichisquitesignificant.
Loanassetsintermsofpercentagewhencomparedtorespectiveprevious
year,wecanobservethattherehasbeendeclinei.e.42.19percent,12.39
percentand51.28for2008,2009and2010respectively.
CHARTNO:2
CHARTSHOWINGTHECOMPOSITIONOFLOANASSETS
Source:TableNo:2
Inference:Wecaninferthatthebankhassucceededinarrestingthelevel
ofNPAfrom200809onwardsveryeffectively.
TABLE3
TABLESHOWINGCOMPOSITIONOFNONPERFORMINGASSETS
YEAR
SUB.
%TO
DOUBTFUL %TO
STD
PREVIOUS
PREVIOUS
YEAR
YEAR
%TO
LOSS PREVIOUS
YEAR
200607 1.65
3.70
2.88
200708 2.35
142.42
5.29
142.97
4.12 143.05
200809 2.56
155.15
5.75
155.40
4.47 155.21
200910 1.71
103.64
3.85
104.05
3.00 104.17
INTERPRETATION:
TheabovetableshowsthecompositionofNPAi.e.SubStandard,doubtful
andlossAssets.
Takingtherespectivepreviousyearsasthebaseyearwecanfindthatper
centchangeinNPAs.WecanobservethatNPAinSubStandardcategory
hasshownaincreaseof142.42percentin200708and155.15percentin
200809. Thereafter the trend is decreasing i.e. 103.64 percent for the
year 200910 respectively. The NPA in Doubtful category the bank has
shown a declining trend of 143.05 per cent, 155.21 per cent and 104.17
percentin2008,2009and2010respectively.
CHARTNO:3
CHARTSHOWINGTHECOMPOSITIONOF
NONPERFORMINGASSETS
Source:TableNo:3.
Inference:OveralltheNPAisshowingadecreasingtrendduetorigorous
followupactiontakenbythebankatthefieldlevel.
TABLE4
TABLESHOWINGTOTALNPATOTOTALADVANCES
YEAR
TOTAL
TOTALNPA
ADVANCES
AMOUNT
PERCENT
200607
100.76
8.23
8.00
200708
106.92
11.76
11.00
200809
111.11
12.78
11.5
200910
100.76
8.56
8.5
INTERPRETATIONS
Theabovetableshowsnonperformingassetsaspercentagetototal
advances.Thepercentagetototaladvancesisshowingadecliningtrend
overthelast4yearsi.e.8.00percent,11.00percentand8.5percentfor
theyear2007,2008,2009and2010respectively.
TABLE4
CHARTSHOWINGTHETOTALNPAsTOTOTALADVANCES
Source:TableNo.4
Inference:
Fromtheanalyzeddatawecaninferthatthestrategiesadoptedbythe
bankforarrestingnonperformingassetsareworkingeffectively.
TABLE5
TABLESHOWINGNPASUBCLASSESTOTOTALADVANCES
NPASUBCLASSES
YEAR
TOTAL
SUB
ADVANCES SUB
DOUBTFUL
DOUBTFUL %
LOSS LOSS%
STD%
STD
200607 100.76
0.036
2.88
0.028
200708 106.92
0.049
4.12
0.038
200809 111.11
0.052
4.47
0.040
200910 100.76
0.038
3.00
0.030
INTERPRETATION
TheabovetableshowstheNPAsubclassespercentagetermsi.e.sub
standard,doubtfulandlossassetstototaladvances.Thisgivesusaclear
pictureastowhichofNPAbearamajorportionofburdenonthebank.
FromtheabovetablewecanobservethatDoubtfulcategoryholdsamajor
portionofNPAs.In2007,doubtfulassetsstoodat0.036percentasagainst
0.016percentofsubstandardand0.028oflossassets.Intheyear2010,
doubtfulassetsaccountedfor0.038percentasagainst0.017percentof
substandardand0.030percentoflossassets.
CHART5
CARTSHOWINGTHENPAsSUBCLASSESTOTOALADVANCES
Source:TableNo.5
Inference:
WecaninferthatthebankhastotakennecessarystepsforcurtailingNPAin
doubtfulcategory.Itshouldpreventdoubtfulassetsfrombecominghasassets
andtakenecessarymeasuresfortheirupgradation.
TABLE6
TABLESHOWINGTOTALNPATOTOTALASSETS
YEAR
200607
200708
200809
200910
TOTALASSETS
118.17
128.30
131.10
120.91
AMOUNT
8.23
11.76
12.78
8.56
TOTALNPA
PERENTAGE
6.96
9.17
9.76
7.08
INTERPRETATION
TheabovetablehelpsustodeterminetheimpactofNPAontotalassets
ofthebank.
Intheyear2007,thebank'stotalassetsareaffectedby6.96percent.
Similarlyintheyear2008,2009and2010thebankassetsareaffectedby
9.17percent,and7.08percentrespectively.
CHARTNO.6
CHARTSHOWINGTHEPERCENTAGEOF
TOTALNPAsTOTOTALASSETS
SourceTableNo.6
Inference:
ThetablethusportraysthatthoughtheNPAareincreasing&decreasingbutwhichisagood
sign,in2010thetotalassetsareshowingadecreasingtrendandthusneedsacautious
approach.
TABLE7
TABLESHOWINGTOTALNPATONETPROFITS
YEAR
TOTALN.P.A
NETPROFIT
AMOUNT
PERCENTAGE
200607
14.14
8.23
58.20
200708
14.87
11.76
79.08
200809
15.20
12.78
84.07
200910
14.84
8.56
57.68
INTERPRETATION
TheabovetablehelpsustodeterminetheimpactofNPAontheNet
profitofthebank.In2007thebanksprofitisaffectedby58.20percent
duetoaconsiderableamountofNPAs.Intheyear2009thebankprofitis
adverselyaffected,astotalNPAtonetprofitstandat84.07percentdueto
averyhighlevelofNPAs.
Intheyear2009wecanseeadecreaseinthelevelofNPAtoRs.12.78
lakhsandincreaseinthenetprofittoRs.15.20lakhsasagainst79.08per
centofthepreviousyear.
CHARTNO.7
CHARTSHOWINGTHEPERCENTAGEOF
TOTALNPA'STONETPROFITS
Source:Tableno7
Inference:
Wecanseethatthereisaquantumjumpinnetprofitandaconsiderable
low level NPAs, as a result of which the percentage of NPA to Net Profit
standat57.68percent.
TABLE8
TABLESHOWINGSECTORWISELOANSANDADVANCES
YEAR
PRIORITYSECTOR
N0NPRIORITYSECTOR
200607
90.85
11.91
200708
79.32
27.6
200809
81.95
29.16
200910
89.30
11.46
Total
341.42
80.03
INTERPRETATION
Theabovetableshowssectorwiseloansandadvancesmadebythe
bankinthelast4years.
Thetotalloansandadvancesmadebythebankinlast4yeartoPriority
SectorstandatRs.341.42lakhswhichis1/3oftotaladvancesandthe
remaining2/3oftotaladvancesaremadetowardsNonPrioritysector.
CHARTNO.8
CHARTSHOWINGSECTORWISELOANSANDADVANCES
Source:TableNo.8
Inference:
Fromtheabovedataweconcludethatsectorwiseloansandadvances
hasbeenfluctuatingfromyeartoyear.
TABLE9
TABLESHOWINGNPACEILINGANDACHIEVEMENTS
Half
Year
ceiling
Amount
31.03.09
7.5
%of
Ceiling
Amount
2.56
30.09.09
31.03.10
7.5
7.0
2.55
2.74
Achievement
%of
Amount
Achievement
Amount
7.4
2.52
7.2
2.45
6.8
2.66
INTERPRETATION
Theabovetablegivesthedetailsofceilinglaidandachievementsmadeby
the bank for the year ended 31st March, 2010. As against ceiling limit of
2.56 per cent, 2.55 per cent and 2.74 per cent, the banks achievements
standat2.52percent,2.45percentand2.66percentrespectively.
CHARTNO.9
CHARTSHOWINGTHENPACELINGANDACHIEVEMENTS
SourceTableNO.9
Inference:
FromtheabovewecanconcludethattheNPAceilingandachievementhas
beengrowingyeartoyear.
TABLE10
TABLESHOWINGINCREMENTALGROSSNPA
YEAR
NPA
INCREMENTALNPA
200607
8.23
200708
11.76
3.53
200809
12.78
1.02
200910
8.56
4.22
INTERPRETATION
FromtheabovetablewecanobservethattheGrossNPAhasdeclined
considerably.TheNPAwhichstoodat3.53in2007,1.02intheyear2008,
2009andfurtherhasdrasticallydecreasedto4.22intheyear2010.
CHARTNO10
CHARTSHOWINGINCREMENTALGROSSNPA
Source:TableNo10
Inference:
ByobservingtheabovedataweconcludethatthegrossNPAhasbeendeclined
fromyeartoyear.
TABLE11
TABLESHOWINGINCREMENTALRATIOOFGROSSNPATO
GROSSADVANCESANDTOTALASSETS
INCREMENTAL
INCREMENTALRATIO
YEAR
OFNPAASSETS
N.P.A
Advances
Assets
Advances
Assets
20062007
20072008
3.53
4.16
5.97
0.85
0.59
20082009
1.02
4.19
1.39
0.24
0.73
20092010
4.22
10.35
0.16
0.41
26.37
INTERPRETATION
TheincrementalGrossNPAsaspercentagetoGrossAdvancesof
NalandaBankhasdecreasedfrom0.85to0.24intheyear2007
andthenfurtherdecreasedto0.41percentintheyear2008.
IncrementalNPAtototalassetsinpercentagetermsstandat0.59
andthenremained0.73&26.37forthesubsequentyears.\
CHARTNO.11
CHARTSHOWINGINCREMENTALRATIOOF
NPATOADVANCES&TOTALASSETS
Source:Tableno.11
Inference:
From the above data we came to conclude that the gross NPA as
percentagetoGrossAdvancesofNalandabankhasdecreasedfromyearto
year.
TABLE12
TABLESHOWINGCLASSIFICATIONOFLOANASSETS
PARTICULARS
1STQUARTER
2NDQUARTER 3RDQUARTER
Performingassets
93.14
92.26
95.37
Standardassets
93.14
92.26
95.37
Nonperformingassets
8.38
10.14
10.97
Substandardassets 1.68
2.03
2.19
Doubtfulassets
3.78
4.56
4.93
Lossassets
2.93
3.55
3.84
INTERPRETATION
The above table shows the classification of assets during 2010 for
threequarters.
Wecanobserverthatthestandardassetsarereducingoverthetwo
quartersi.e.Rs.93.14lakhs,Rs.92.26lakhsandinthethirdquarterit
alsoobservethattheamountofNPAclassesareincreasingoverthe
pastthreequarterswhichisasymptomofloansgoingbad.
CHARTNO.12
CHARTERSHOWINGTHECLASSIFCATIONOFLOANASSETS
Source:TableNo.12
Inference:
From the above, we can infer that while performing assets are
decreasing, the nonperforming asset is showing a increase in the
respectivequarterwhichneedsacautiousapproachandrigorousfollowup.
TABLE13
TABLESHOWINGCLASSIFICATIONOFRISKASSETS
Risk
Category
FirstQuarter
SecondQuarter
o/s
%of
Provision
Net
o/s
%of
Provision
Net
Amount
Total
Forloss
NPA
amount
Total
Forloss
NPA
93.14
91.74
92.16
90.09
1.68
1.65
0.34
1.34
2.03
1.98
0.41
1.62
3.78
3.73
1.70
2.08
4.56
4.45
2.05
2.51
LossAssets
2.93
2.88
2.93
3.55
3.47
3.55
Total
101.53
100.00
4.97
3.42
102.3
100.00
6.01
4.13
Standard
assets
Sub
Standard
Assets
Doubtful
assets
INTERPRETATION
Thetableshowstheclassificationofriskassetsbythedegreeofriskandvalue
impairment.Inthefirstquarter,wecanobservethatintheNPAcategory,doubtful
assetsconstituteamajorriskoftotaloutstandingamountofRs.3.78lakhsforwhicha
provisionofRs.1.70lakhsismadeandforlossassetswhichstandat2.93lakhsafull
provisionisprovided.
Inthesecondquarter,wecanseethattheloanassetsconstituteamajorportionof
NPAforwhichaprovisionofRs.3.55lakhsismade,followedbydoubtfulassetsfor
whichaprovisionofRs.2.05lakhshasbeenmade.
CHART13
CH
HARTSHO
OWINGC
CLASSFICA
ATIONOFFRISKASSSETS
bleno.13
Source:Tab
nference:
In
Fromtheab
bovestatissticsweco
oncludethaattheclasssificationo
ofriskasseets
b
bythedegr
reeofriskaandvalueimpartmenthasbeeenfluctuatiingfromyeear
to
oyear.
TABLE14
TABLESHOWINGQUALITYOFLOANASSETSSECTORIALANALYSIS
Sector
FirstQuarter
Secondquarter
Amount
Amount
Prioritysector
67.54
67.52
Nonprioritysector
11.68
12.27
Allothersectors
Totalloanassets
101.53
102.3
INTERPRETATION
Theabovetableshowssectorwiseanalysisofqualityofloanassetsfor
firsttwoquartersfortheyearended200910.
ThetotalloansmadebythebankinthefirstquarterstandatRs.101.53
lakhs of which priority Sector amount to Rs. 6754 Lakhs which is 66.52
per cent of total advances. Similarly int he second quarter a Pirority
SectoramountstoRs.67.52lakhsoftotalloansofRs.102.3lakhswhich
standat66.00percent.
CHARTT14
C
CHARTS
HOWING
GSECTO
ORIAL
OANASSSETS
ANALYSSISOFLO
Source
e:TableN
No.14
Inferen
nce:
We caan inter out of totaal loan asssets advaances to Priority Seector
amountttotwothirrdoftotalloanassetss.
TABLOE15
TABLESHOWINGADVANCESTOPRIORITYSECTOR
Priority
Firstquarter
Sector
Limit
Limit
Limit
Amount
Amount
Amount
sanctioned Outstanding sanctioned Outstanding sanctioned Outstanding
advances
SecondQuarter
ThirdQuarter
Agriculture 60
54.91
65
54.02
70
60.37
Small scale 15
13.47
18
13.50
20
9.58
30
22.46
35
22.50
35
23.22
105
89.84
118
90.02
125
92.87
industries
Other
priority
sectors
Total
Priority
Sector
Advances
INTERPRETATION
TheabovetableshowstheadvancestoPrioritySectorduringtheyear200607for
threequarters.
In the first quarter, out of total limit sanctioned of Rs. 105 lakhs, amount
outstandingstandatRs.89.84lakhs,whichis85.56percentoftotallimitsanctioned.
In the second quarter, out of total limit sanctioned of Rs. 118 lakhs amount
outstanding stand at Rs. 90.02 lakhs, which is 76.28 per cent of total sanctioned
amount.
In the third quarter out of the total amount sanctikoned of Rs. 125 lakhs amount
outstandingamountedtoRs.92.87lakhs,whichis7429.percentoftotalamount
sanctioned.
C
CHARTN
O15
CHARTSHOWINGA
ADVANCEESTOPRIORITYSEECTOR
Source:TTableNo1
15
Inference
e:
Weccaninferth
hatinallth
hequarterrstheamountoutstaanding
amounte
edforthreeefourthoffthesancttionedlimitt.
SUMMARYOFFINDING,CONCLUSION&SUGGESTIONS
FINDINGS
Inthischapterfindingsofthisstudyarehighlighted.Thesefindingsare
notedkeepinginviewthebelowsaidobjectives,theseare:
TomeasurethemagnitudeofNPAs
Toascertaintheassetquality
TostudytheimpactofNPAsonbanksprofit
TocomparetheNPAstatusoverthepast4years
ToanalysisthevariousdimensionsofNPAsforthelast4years
Tostudythetechniqueandunderstandtheireffectivenessfor
arrestingNPAsandsuggestnecessarystrategiesforthesame.
9 Wecanfindoutthatthequantumofloansandadvancesmade
duringthelast3yearsisshowingadecreasingtreadinpercentage.
9 Inthecompositionsofloanassets,wecanfindoutthatthe
performingassetsisshowinganincrease.
9 WecanfindthattheDoubtfulAssetsholdamajorityportionofNPAs.
However,thebankhasbeensuccessfulinarrestingfurtherNPAs
frombecomingDoubtfulandthusshowingadramaticdecreasefor
thelastfouryears.
9 ThepercentageofNPAtoTotalAdvanceswecanfindthatthereisa
decliningtrend
9 ThepercentageofNPAsubclassestoTotaladvanceswefindin
absolutetermsthatassetsintheDoubtfulcategoryformamajor
partofNPAs.
9 NPAtoTotaladvancesbeginningfrom2007,Wecanfindthatthere
hasbeenanincreaseanddecreaserespectively.
9 ThepercentageofNPAtoNetProfitforthepast4yearsithasbeen
fluctuatingineveryyear.
9 Thereisasteadyincreaseinloansandadvancesinbothpriority
SectorandNonPrioritySector.
9 IntheCeilingandAchievementsfigures,wecanfindoutthatthe
banksachievementagainstceilingfortheyearended20092010.
9 WecanfindthattheIncrementalGrossNPAisshowingadeclining
trendrespectively.
9 TheGrossNPAasapercentageofIncrementalGrossAdvancesis
showingadecliningtrendwhereasGrossNPAasapercentageof
IncrementalTotalAssetshasincreased.
9 TheNonPerformingassetsisshowingaincreasingtrenddueto
recessionintheeconomyandseverecompetitioninthemarket.
9 WecanfindtheClassificationofRiskAssetsbasedonthedegreeof
rskandvalueimpairment.AlossassetholdsamajorportionofRisk,
bothin1stand2ndquarters.
9 Wecanfindoutthequalityofloanassetssectorwisefor2quarterin
theyear200607
9 Againstthelimitsanctionedtheamountoutstandingintheentire
threequartersstandat3/4thofthesanctionedlimit
CONCLUSION:
Severalinitiativeshavealreadybeentakenbothatthepolicyformulation
tier as well as at the functional tiers of the bank, by the regulatory
authoritiestocurbthealarminggrowthintheabsoluteNPAfigures.Some
of the policies and regulations are still in process of implementation and
require several modifications in the existing framework. These initiatives
haveproducedimpressiveresultinshortspanoftime.Theabsolutefigures
ofNPAshaveincreasedovertheyears.Hence,itisimportantforthebanks
and financial institutions to understand the causes of NPAs, strategies for
arresting NPAs and adopt appropriate measures to prevent them. For
reducing the NPAs and curbing its growth further, one must recover old
NPAs,atleastpartiallyandadoptedpracticesforpreventingreemergence
offreshNPAs.
Onlyastronglegalframework,effectiveprudentialnorms,establishment
of Asset Management Company, loan securitization, debt recovery
tribunals, setting advisory committees and a strict recovery policy at the
strategic level of banking system can achieve these objectives. Further in
theeraofLPCi.e.liberalization,privatizationandglobalization,adaptation
of an appropriate Management information System and Human Resource
Management for better credit appraisal, higher differential and
specializationincreditaspectisofprimeimportance.Alltheseactionscan
leadtodeclineinNPAstomeetinternationalstandards.
SUGGESTIONS:
DuringthecourseofthisprojectitwasclearthatNPAshavevisibleimpact
on the loan portfolio of the Bank affecting their balance sheet, which
ultimatelyaffectstheirprofits.Butitisalsoseenthatbankistryingitsbest
toreducethepercentageofNPAs.
A Humber effort has been made to provide few suggestions to DENA
Bank.Theseareasfollows:
DENABANKneedstostrengtheninternalsystemofriskjudgmentto
eliminate the tendency of delay or postpone the identification of
NPAs,especiallyinrespectofhighvalueaccounts.Thebankmayfixa
minimumcutoffpointtodecidewhatwouldconstituteahighvalue
accountdependingupontheirbusinesslevel.
The bank should strengthen the system for credit risk
evaluation/judgment and finetune their norms of debt equity,
currentratiotoimprovetheborrowersstakeforfacingcyclicalups
anddowns.
Primitive interaction with the borrowers with relatively large dues
should be held at various levels to ascertain their true financial
positionandtotakenecessarycorrectiveaction.
Bank should substantially upgrade their existing Management
Information System for collecting data on loans where the interest
and/orprincipalinstallmentsremainoverdue.
Timelyreview/renewalofborrowedaccounttobegivenprominence
so that these are undertaken before the expiry of their respective
accounts.Fullprovisioningtowardsalreadyimpairedassetsneedsto
beaprioritygoal.
Theloanreviewmechanismistobestrengthened,asatooltobring
about improvement in credit administration. Officials should visit
personallytheborrowerspremisesnotonlyfortherecoveryofloans
but also for guiding and counseling the borrowers for smooth
operationsofbusiness.
Segregate the NPA account into fresh as well as chronic NPAs and
make branch level task force/committee. In case of fresh NPAs,
identifypastdue/overdueamountineachcaseandrecoverthesame
by vigorous follow up In case of genuine fresh NPAs,
rephrase/rescheduleofloanrepaymentfacilitybeprovided.
Additional security / securities be obtained to strengthen the loan
assetandtoreducetheprovisionrequirements.
Thebaddebts,whichareunrecoverable,shouldbewrittenofffrom
thebankbalancesheetbecausemaintenanceofthedeadweightin
thelongrunisveryexpensive.Forthem100percentprovisioningis
providing.
Goforloansecuritization,toraisecapitalfromthemarketifthevaluation
ofthescriptistoolowandifthebankisnotinthepositiontoraiseTierII
capital.Thishastwofoldbenefits:onethebankwillgenerateincremental
profitsandthesecondtheborrowerswillsaveoncost.
BIBELOGRAPHY
REFERENCES:
1) Banks drowned in liquidity Dr. Satish PP. 23.30 (Chartered Financial
AnalystMagazine,Oct.2010)
2) Let the weak banks die: Sevan Commandants pp. 1820 (Business
StandardAnnualBanking,Feb2007)
3) Bankingtheory&PracticeK.D.Basava,P.No.16.2,12theeditionyearof
Publication2009,VidyaVahini,Hubli
4) Money, Banking and Finance Special Statistics pp. 831848
(EconomicalandPoliticalWeekly,Feb22.2007)
5) ICRA (2202 Rating of Structured Obligations Indian Credit Rating
Agency2002http://icraindia.com/services/rating/structurer.htm.
6) RBI(2010c)FinancialInstitutionshttp://www.rbi.org.in,2010
7) CanarabankCreditplanof200809&200910
8) JournalofIndianInstituteBankersBankingPresent&Future
Dr.RakeshMohan,DeputygovernorReserveBankofIndia
9) www.Denabank.com
ANNEXURE
BALANCESHEETASAT31STMARCH2010
Rs.000s,Omitted
Asat
Asat
31.03.2010
31.03.2009
Rs.
Rs.
SCHEDULE
CAPITALANDLIABILITES
CAPITAL
2868232
2868232
1
RESERVESANDSURPLUS
10524155
8169166
2
DEPOSITS
236230589
208965528
3
BORROWINGS
9934
3349823
4
OTHERLIABILITESANDPROVISIONS
15820423
16933123
5
TOTAL
240285872
26543333
ASSETS
14900440
16864496
6
CASHANDBALANCEWITHRESERVE
BANKOFINDIA
2919375
BALACESWITHBANKSANDMONEYAT
7
8171347
CALLANDSHORTNOTICE
INVESTMENTS
8
96969519
85706682
ADVANCES
9
113085870
142312370
FIXEDASSETS
10
2932722
4605276
OTHERASSETS
11
9477946
7793162
240285872
265453333
TOTAL
63877966
71410477
12
CONTENGENTLIABILITIES
17468962
20632133
BELLSFORCOLLECTION
17
SignificantAccountingPolicies
18
NotesformingPartofAccounts
SchedulesreferredtoaboveformanintegralpartofBalancesheet
SCHEDULESFORMINGPARTOFPROFIT&LOSSACCOUNTFORTHEYEARENDED31STMARCH2010
Rs.000s,Omitted
Yearended
31.03.2009
Rs.
8563667
Yearended
31.03.2010
Rs.
9848462
Schedule13INTERSTEARNED
I.
Interest/Discounton
Advance/Bills
7140941
II.
IncomeonInvestments
III.
Interest on Balance with
Reserve
BankofIndiaandotherinter
Bankfunds
IV.
others
TOTAL
SCHEDULE14OTHERINCOME
874431
I.Commission,Exchangeand
Brokerage
1177998
1256007
IIProfitonsaleofInvestmentsless
1253299
2708
0
lossonsaleofinvestments
III.ProfitonSaleoflandBuildings
563221
Andotherassets
IV.ProfitonForeignExchange
252610
Transactions(net)
V.IncomeEarnedbywayof
Dividendsetc
Fromsubsidiaries/companiesand/
15999
orJointventuresabroad/inIndia
1630358
VI.MiscellaneousIncome
Total
4589918
SCHEDULE15INTERESTEXPENDED
I.
InterestonDeposit
II.
Interestonreservebank
ofIndia/Inter
Bankborrowings
III.
Others
Total
8109949
208965528
452458
125684
17251758
858661
848661
1177998
1316
239891
31764
814806
311804
9733828
9795027
172785
89158
467946
501600
10374559
10385785
SCHEDULE16OPERATINGEXPENSES
I.PAYMENTSTOANDPROVISIONSFOREMPLOYEES
3542506
4204129
II.RENT,TAXESANDLIGHTING
455609
421212
III.PRINTINGANDSTATIONERY
84518
73171
IV.ADVERTISEMENTANDPUBLICITY
127663
116587
V.DEPRECIATINONBANKSPROPERTY
324108
310170
VI.DIRECTORSFEESALLOWANCESANDEXPENSES
6088
5053
VII.AUDITORSFEESANDEXPENSES(INCLUDINGBR.AUDITORS)
53746
45063
VIII.LAWCHARGES
24037
32457
IX.POSTAGE,TELEGRAMS,TELEPHONESETC.,
94522
105242
X.REPAIRSANDMAINTENANCE
XI.INSURANCE
XII.OTHEREXPENDITURE
172951
153021
249795
191757
477880
498146
5613423
6156008
TOTAL
THANKINGYOU