ORIGIN OF THE TERM BANK

The word BANK is derived from the Italian word Banco, the Latin word
Bancus and the French word Banque which means Bench. In olden days money
lenders used to exhibit the coins of different countries on separate bench and the business of
exchanging the coins were carried on through those money lenders, especially in Greece,
Italy and England. Whenever these money lenders were not in position to convert the
currency of one country into the currency of another, people virtually broke up their benches.
Hence the word Bankrupt. The word bank has also originated from the German word
banck which means joint stock fund or a common fund, collected from the public for the
purpose of financing the needy people.

DEFINITION OF BANK
It is very difficult to define the term bank or banker even the best authorities on
banking have failed to give the definition of this term.
The word bank is generally associated with an institution dealing in money raised
from the public.
In general terms, The Business activity of accepting and safeguarding money owned
by other individuals and entities, and then lending out this money in order to earn a Profit.
So we can say that banking is a company, which transacts the business of banking.
According to Indian Banking Regulation Act 1949, section1(b) defines Banking as
Accepting for the purpose of lending or investing of deposits of money from the public
repayable on demand or otherwise and withdrawal of cheques, drafts, orders or otherwise.

HISTORY OF BANKING IN INDIA

Banking is known in India since ancient times. It is originated in our country as early
600 B.C. References are found in the early Vedic literature of deposits, pledges, loans and
rate of interest.

However, banking in those days consisted mainly of money lending

activities. Banking in India originated in the last decades of the 18th century. Earlier in
British India, mainly the employees at the east India Company established banks and they
were called the Agency House. It is theses Agency Houses which paved the way for the
establishment of joint stock bank to be established in India. The bank of Hindustan was the

first joint stock bank to be established in India under European management. But soon it
failed. The first banks were The Central Bank of India which started in 1786, and The
Bank of Hindustan, both of which are now defunct. The oldest bank existence in India was
The State Bank of India, which originated in The Bank of Calcutta in June 1806, which
almost immediately became The Bank of Bengal. This was one of the three presidency
banks, the other two being The Bank of Bombay and The Bank of Madras, all three of
which were established under charter from The British East India Company. For many
years the Presidency banks acted as quasi-central banks, as did their successor. The three
banks merged in 1921 to form The Imperial Bank of India, which upon India's
independence, became the State Bank of India.

BANKING SYSTEM IN INDIA

The banking system plays an important role in the economic development of the
country. Indian banking system is characterized by wide variety of institutions. At the top of
the banking systems there is the Reserve Bank of India which is the central bank of the
country.
After India's independence in 1947, the Reserve Bank was nationalized and given
broader power. In 1969 the government nationalized the 14 largest commercial banks, the
government nationalized the six next largest in 1980.

After the independence, Reserve Bank of India was nationalized and given wide powers.
Currently, India has 96 Scheduled Commercial Banks, 27 public sector banks, 31 private
banks and 38 foreign banks.
Today, banks have diversified their activities and are getting into new products and services
that include opportunities in credit cards, consumer finance, wealth management, life and
general insurance, investment banking, mutual funds, pension fund regulation, stock broking
services, etc.
Further, most of the leading Indian banks are going global, setting up offices in foreign
countries, by themselves or through their subsidiaries.

BANKING STRUCTURE OR BANKING SYSTEM IN INDIA

Micro scenario of banking industry

The Indian banking sector is fragmented, with 46 commercial banks jostling for business with
dozens of foreign banks as well as rural and co-operative lenders. State banks control 80
percent of the market, leaving relatively small shares for private rivals.
At the end of February, 13.7 crore accounts had been opened under Pradhanmantri Jan Dhan
Yojna (PMJDY) and 12.2 crore RuPay debit cards were issued. These new accounts have
mobilised deposits of Rs 12,694 crore (US$ 2.01 billion).
Standard & Poors estimates that credit growth in Indias banking sector would improve to
12-13 per cent in FY16 from less than 10% in the second half of CY14.

Government Initiatives

There have been a lot of developments in the Indian banking sector.

The Government has announced a capital infusion of Rs 6,990 crore (US$ 1.1 billion)
in nine state run banks, including State Bank of India (SBI) and Punjab National Bank
(PNB), but based on new efficiency parameters such as return on assets and return on
equity. In a statement, the finance ministry said, This year, the Government of India
has adopted new criteria in which the banks which are more efficient would only be
rewarded with extra capital for their equity so that they can further strengthen their
position."

The Union cabinet has approved the establishment of the US$ 100 billion New
Development Bank (NDB) envisaged by the five-member BRICS group as well as the
BRICS contingent reserve arrangement (CRA).

The RBI has decided to allow nominated banks to import gold, including coins, on a
consignment basis, extending its clarification issued in November 2014, which had
eased certain categories of gold imports.

To help Micro Small and Medium Enterprises (MSME), RBI has permitted setting up
of an exchange-based trading platform to facilitate financing of bills raised by such
small entities to corporate and other buyers, including government departments and
PSUs.

MACRO SCENARIO
In 2014, the banking industry was confronted with huge operating pressure as a result of the
weak recovery of the world economy, and the operating results varied in different countries.
The banking industry in the US, UK and China performed well, while that in the Euro Zone
and Japan remained sluggish. In 2015, the banking industry in the US, the UK and China is
expected to maintain smooth growth, and that in the Euro Zone and Japan will still face huge
growth pressure.
An economy's financial markets are critical to its overall development. Banking systems and
stock markets enhance growth, the main factor in poverty reduction. Strong financial systems
provide reliable and accessible information that lowers transaction costs, which in turn
bolsters resource allocation and economic growth. Indicators here include the size and
liquidity of stock markets; the accessibility, stability, and efficiency of financial systems; and
international migration and workers\ remittances, which affect growth and social welfare in
both sending and receiving countries.

After several years of stalled progress, the newly-elected government has begun to implement
measures to cut red tape, raise infrastructure investment, deregulate key parts of the economy,
and shrink the role of government, the World Bank said in its Global Economic
Prospects report released Tuesday. Implementation stepped up during the fourth quarter,
with the opening up of the coal industry to private investors, a deregulation of diesel prices to
reduce the fiscal subsidy bill, a relaxation of labor market laws, and a linking of cash
transfers with efforts to increase financial inclusion were all cited by the report as helping in
Indias progress towards supercharged growth.
While China has held the title as hardest-hitting heavyweight economy for years, it has been
suffering through a slowdown and may have to give up the belt in 2017, according to World
Bank projections in the report.
India has been struggling to emerge from Chinas shadow for more than a decade but in 2017
it may at last outgrow its neighbor to the north, expanding 7.0% that calendar year while
Chinas growth slows to 6.9%. Some other economistsincluding those at Goldman Sachs
predict India could outpace China as early as next year.
The World Bank projects that a few smaller economiesBhutan, Mozambique and Myanmar
for example will experience larger growth in 2017 but Indias 7.0% expansion will be the
fastest among the worlds 50 largest economies.
In the calendar year 2017, the globes combined gross domestic product expansion will only
be 3.2% with high-income countries expanding only 2.2% and developing countries on
average growing 5.4%, the World Bank report predicted.
Of course the end of 2017 is still a long way away and a lot of things will likely change in the
interim to force economists to fix their forecasts. In India, they will be watching closely to
see if the country continues to tweak laws and regulations to give companies and consumers
more confidence to invest and help the economy expand.
The implementation of reforms and deregulation in India should lift FDI. Investment, which
accounts for about 30% of GDP, should strengthen, and help raise growth to 7%, the World
Bank report said. This is contingent on strong and sustained progress on reforms. Any

slackening in the reform momentum could result in a more modest or slower pace of
recovery.
THEORETICAL BACKGROUND OF THE TOPIC
The theoretical study provides the back ground and the tools for NPA. It explains the
method of analysis, advantages and disadvantages, scope and limitations of the various tools
used to analyze the companys financial position.
The focus of the financial analysis is on key figures on the financial statements and
the significant relationships that exist between them. The analysis of financial statements is a
process of evaluating relationships that exist between them.

The analysis of financial

statements is to obtain a better understanding of the companys position and performance.

The first task of the financial analyst is to select the information relevant to the decisions
under consideration from the total information contained in the financial statement. The
second step involved in financial analysis is to arrange the information in a way to highlight
significant relationships. The final step is interpretation and drawings of inferences and
conclusions. In brief, financial analysis is the process of selection, relation and evaluation.
The present data is devoted to an in depth analysis of financial statements use for decisionsmaking. The present data is mainly focused on NPA as the most widely used technique of
financial statement analysis, importance of NPA and limitations of NPA.
In today, banks have become a part of our life now banks offer access even a common
and their activities extend to areas which are untouched. Apart from their traditional business
oriented functions they have now come out to fulfill national responsibilities.

They

accelerate the economic growth of a country and steer the wheels of the economy towards its
goal of self reliance in all fields.

WHAT IS NON-PERFORMING ASSET?

Action for enforcement of security interest can be initiated only if the secured asset is
classified as Non-Performing Asset.

MEANING OF NON-PERFORMING ASSETS

An asset becomes non-performing when it ceases to generate income for the bank.
Earlier an asset was considered as non performing asset based on the concept of past due.

After an account has been classified as non-performing, a bank cannot charge interest
for current as well as previous years till it has been completely realized. Besides a bank
cannot look future interest till the account remains in the NPA category. Thus, according to
international practice income on NPA is not recognized on accrual basis but is booked
only when it is actually realized.

EVOLUTION OF THE NON-PERFORMING ASSETS CONCEPT

Problem of loans have existed since the inception of banking, but in India definite
steps were taken first in 1985, when the Reserve Bank of India (RBI) introduced the health
code system and then 1992-93, the NPA concept was introduced in accordance with Income
Recognition and Assets Classification (IRAC) norms.
Health code system in 1985-86, a comprehensive and uniform credit monitoring
system was introduced by way of the HEALTH CODE SYSTEM. This was introduced by
the RBI to help banks access the quality of their credit portfolio. This also helped in effective
monitoring of loan accounts.
Under The Health Code System, RBI was classifying loans in three broad categories i.e.
Advance classified as bad and doubtful by the bank (health code 8)
Advances where suits filed or decrees obtained (health code 6 and 7)
Advances with major undesirable features (health code 4 and 5)
Absence of an objective and transparent yard- stick for measuring problem loans was
a major problem of this system. Besides, the implementation of the health code system was
not done in the right earnest way and the banks used it to paint a rosy picture of their
operations. Further, the provisioning requirement had no bearing or linkage neither to the
financial performance nor the conduct of the loan accounts.

THE NON-PERFORMING ASSETS CONCEPT

According to Income Recognition and Assets Classification (IRAC) norms.
The present NPA concept introduced in 1933, by the RBI based on the
recommendations of the Narasimham Committee on Financial System Reforms with
internationally accepted norms. Unlike the health code system, banks were to classify certain
categories of loan based on the Income Recognition and Assets Classification (IRAC) norms.

With the introduction of the norms the Health Code System ceased to be a supervisory
requirement but could not be used as a management tool.
The policy of income recognition was thus made objective and based on record of
recovery rather than on subjective considerations. These norms have been implemented in a
phased manner since 1993.
With the implementation of the revised norms on asset classification, income
recognition as provisioning of NPAs many banks accumulated losses and many analysts
raised concern about their future. However they remain because outlined for the overnight
development was the erosion in the banks Profitability as result of their past actions. The
level of gross NPAs was valued at 23% of advances in 1993.
Some other factor that led to banks posting huge losses were Directed lending to priority sector
Deterioration on credit portfolio
Heavy investments in government securities to meet the requirement of Statutory Liquidity
Ratio (S.L.R) and the Cash Reserve Ratio (C.R.R) at unviable rates.
Massive expansion into unviable rural and semi-urban branches.
Outdated work technology and low productivity.
However most of the commercial banks have taken measures since then abide by the
spirit of the NPA concept and thus an increase in the performance of the banks is visible.
Thus, the problem of NPA became apparent on 1993 following the introduction of
internationally accepted prudential accounting norms.

PRUDENTIAL NORMS
The introduction of prudential norms, i.e., income recognition and asset classification
norms into the Indian banking industry has drastically changed the competition of the Indian
banks. Many awhile the profit and loss account until the same is actually received or
recovered. Therefore all assets (loans or banks started to appear weak as the impact of NonPerforming Assets were introduced in 1993, it resulted in a considerable increase in provision
affecting profitability of banks tremendously).

PRUDENTIAL NORMS WERE ADOPTED WITH REGARD TO

Income recognition.

 Assets classification.
Provision norms.
Capital adequacy.

SOME HIGHLIGHTS OF THE PRUDENTIAL NORMS

o The policy of Income Recognition on assets is based on the objective policy of RECORD OF
RECOVERY AND PERFORMANCE OF THE BORROWAL ACCOUNT rather than any
SUBJECTIVE CONSIDERATIONS.
o Classifications of assets are based on uniform and consistent application of norms.
o Standardization of provisioning requirements under the prudential accounting in comparison
to the arbitrary provision in the Health Code System.
RBI has tried to ensure International best practices to ensure greater transparency.

PRUDENTIAL NORMS ON INCOME RECOGNITION

Income Recognition norms are primarily on principle of RECORD RECOVERY.
Thus, while interest earned from a performing asset (one which generates income from
banks) is treated as income in the Profit & Loss account, interest accrued on a Nonperforming Asset cannot be taken treated as income under Advances can be classified as
follows-

CONCEPT OF NPA:
The crucial factor that decides the performance of the banks and financial institutions
now a day is the spotting of Non-Performing Assets. Banks and other financial institutions
are now required to recognize such loans periodically and then classify the assets.
Banks are not allowed to book any income from Non-Performing Assets. Also, they
have to make provision for the NPAs, which impacts Profitability.

The concept of

classification of bank advances in several categories started in the late 1980s scheme but at
that time the terminology of NPA did not exist. It was early 1990s schemes when AngloAmerican model had several block of categorization of bank assets. Prior to introduction of
assets classification, banks in India had system of their own. However this accounting is not
in conformity with international standards.

Non-Performing Assets are a part of the banking throughout the world. It is not
peculiar to public sector banks and financial institutions in India. Incidence of NPA is higher
in public sector in comparison to private sector banks and foreign banks in India.

TRADITIONAL CONCEPT
Earlier to 1991 there was no such in Indian financial system. Before 1991 the Indian
financial institution followed traditional way of accounting procedures in respect of various
accounts strictly or otherwise. The system pertaining to repayment of principal amounts and
periodical interest are under:
First the bank or financial institutions used to credit the interest accounts in a
particular date or given pre-specified period (monthly/quarterly/half yearly/yearly),
irrespective of whether the borrower paid the interest or not.
There was no prompt action during those days for recovery of principal / installment
and the interest. Recovery action for interest and principal amount normally initiated either
at the financial year or at the end of the financial year or at the time of expiry of documents.
The standards set up by concerned authority are not up to the level of international
standard (for financial institutions and banks Basle committee norms are internationally
accepted standard). 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
installment.

MODERN CONCEPT
NPAs came in to Indian financial system consequent to the introduction of prudential
accounting norms. An era of taking Profits (even unrealized) was changed to providing for
expected loss days of counting the chickens before eggs hatch are over.
From the financial year 1991-92 the new accounting system came into existence.
New accounting system classification of loans and interest were came in to effect. The
financial institutions and banks adopted income recognition rule. RBI also took keen interest
and laid several guidelines.

As a result the method of assets classification came in to force while introducing

these guidelines, internationally accepted standards of Basle committee recommendations
were taken into consideration. As per the norms of these standards income was recognized.
Steps were taken to debit the borrower/ capital only when the borrower pays the
outstanding interest and the installment. Actions and initiative were taken to recover as and
when the interest and installment becomes due. This becomes mandatory for banks and
financial institutions. Due to all these efforts the assets were classified as follows.

PERFORMING ASSETS/ STANDARD ASSETS.

NON-PERFORMING ASSETS
So it is very clear that many steps were taken towards the effective and efficient of
functioning of the financial institution for reducing the level of NPA to the maximum possible
extent.
The decades of 1990s heralded an era of economic and monetary policy change
brought about by the government of India and the RBI to globalize the Indian economy. The
wave of LPG that swept across the external trade sector of the world over was not without its
impact on the domestic sector, the investment policies and indeed the financial sector. The
implementation of the Narasimham committee ushered in the reformation of Indian banking
and financial industry. Indian banks have adopted international standards of accounting since
last six years. Prudential norms were adopted with regards to:

Income recognition
Assets classification
Provisions for bad and doubtful assets
Capital adequacy.
The origin of the problem of NPAs lies in the quality of managing credit risk by the
banks concerned, what is needed is having adequate preventive measures in place namely.
Fixing pre sanctioning appraisal responsibility and having an effective post-disbursement
supervision are essential. Banks concerned should continuously monitor loans to identify
accounts that have potential to become non-performing.

CLASSIFICATION OF ASSETS BASED ON INCOME RECOGNITION

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DEFINITION AS PER THE CLASSIFICATION OF ASSETS

Reserve Bank of India (RBI) has issued guidelines on provisioning requirement with
respect to bank advances. In terms of these guidelines, bank advances are mainly classified in
to following categories.

PERFORMING ASSETS OR STANDARD ASSETS

An account is classified as performing if it does not disclose any problems and does
not carry more than normal risk attached to the business.
All the current loans, agricultural and non-agricultural loans which have not become
NPA may be treated as standard asset.
Assets should be classified as performing even if certain deficiencies such as nonavailability of adequate drawing power, balance outstanding exceeding the limit, nonsubmission of stock statement etc.

NON-PERFORMING ASSETS

Assets including leased assets are treated as Non-Performing Assets if there is a threat
of loss or the recoverability of the dues are in doubt. A Non-Performing Assets (NPA) is
defined as a credit as a credit facility in which interest and/or installment of principal has
remained outstanding for a specific period of time.
An amount due under any credit facility is treated as past due when it has not been
paid within 30 days from the due date.

Due to the improvement in the payment and

settlement systems, recovery climate, up gradation of technology in the banking system, etc.,
it was decided to dispense with past due concept. Accordingly, a non-performing asset
(NPA) shall be an advance.

Interest and /or installment of principal remain overdue for a period of more than 180 days in

respect of a term loan.

The accounts remains out of order for a period of more than 180 days, in respect of an

overdraft/cash credit (OD/CC).

The bill remains overdue for a period of more the 180 days in the case of bills purchased and

discounted.
Interest and/or installment of principal remains overdue for two harvest seasons but for a
period not exceeding two half year in the case of an advance granted for agricultural purpose,

and
Any amount to be received remains overdue for a period of more than 180 days in respect of
other accounts.
With a view to moving towards international best practices and to ensure greater
transparency, it has been decided to adopt the 90 days overdue norm for identification of
NPAs from the year ending march 31,2009 were:

Interest and /or installment of principal remain overdue for a period of more than 90 days in

respect of a term.
The accounts 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 the 90 days in the case of bills purchased and

discounted.
Interest and/or installment of principal remains overdue for two harvest seasons but for a
period not exceeding two half years in the case of an advance granted for agricultural

purpose, and
In case of non-agricultural loans interest and /or installment of principal remain overdue for
more than 90 days.

Any amount to be received remains overdue for a period of more than 90 days in respect of
other accounts.

SUB STANDARD ASSETS

An asset which has remained overdue for a period not exceeding 3 years. In case of
all types of term loans, where installments are overdue for a period not exceeding 3 years.
An asset, where the terms and conditions of the loans regarding payments of interest
and repayment of principal have been renegotiated or rescheduled. After commencement of
production, and should remain so as sub standard for at least one year of satisfactory
performance under the renegotiated or rescheduled terms.
Sub standard assets are those which have a well defined credit weakness which if not
rectified will lead to problems in recovery of debt in the future. There is a high possibility
that the bank will sustain loss, if deficiencies are not corrected.
According to prudential norms, asset is classified as sub-standard if:
A sub standard asset is one, which has been classified as an NPA for a period not exceeding
18 months.(with effect from April 2005, this period is reduced to 12 months)
Current net-worth of borrower or the current market value of the security charged is not
sufficient for the recovery of the dues to the bank in full.
A sub-standard asset wherein the terms of the loan agreement regarding payment of interest
and principal have been rescheduled.

DOUBTFUL ASSETS
Doubtful assets are those, which possess all the weakness of sub-standard assets in
addition to weakness that make collection or liquidation improbable.
According to the prudential norm, an asset is classified as doubtful if A doubtful asset is one, which has remained NPA for a period exceeding 18 months.
Erosion in value of security to the extent of more than 50% of value assessed by the bank or
accepted by RBI or existence of other facto such as frauds committed by borrower can be
classified by without waiting for the competition of 28 months as NPA under sub-standard
category.
Doubtful assets have been further classified as

DOUBTFUL CATEGORY I- those doubtful assets that last for a period from 3 to 4 years.
DOUBTFUL CATEGORY II-those doubtful assets that last for a period from 4 to 6 years
after the completion of doubtful category and before the doubtful III category.
DOUBTFUL CATEGORY III-those doubtful assets which continue as NPAs even after 6
years of being under doubtful I and doubtful II categories.

LOSS ASSETS
A loss asset is one, which is considered as uncollectible or irrevocable and has such
little chance of recovery that is continuance as an asset is not needed.
A loss asset is one, where loss has been identified by the bank or internal or external
auditor or by the co-operation department or by the RBI inspection but the amount has not
been written off wholly or partly.
If the realizable value of the security, as assessed by the bank is less than 10% of the
outstanding in the borrower accounts, the existence of the security should be ignored and the
assets should be classified as a loss asset. Such an asset can be classified as a loss asset even
without being categorized under sub-standard doubtful assets. It can be either written off or
fully provided by the banks.
For the purpose of application of income recognition norm, assets can be further sub
classified as

TERM LOANS: A term loan is sanctioned to a borrower for acquisition of block or

fixed assets are repayable over a fixed period of time.
A term loan is treated as NPA if, interest and/or installment of principal remain

overdue for a period of more than 90 days in respect of a term loan.

CASH CREDIT AND OVERDRAFT FACILITY: Cash credits are working

capital facilities that are usually sanctioned against of stocks or merchandise.

A cash credit can be treated as NPA, if it remains OUT OF ORDER.

An Account is treated as out of order if the outstanding balance remains constantly in
excess of the sanctioned limit or drawing power for a period 90 days

An account may be treated as out of order if outstanding balance in the account is

less than the sanctioned limit or drawing power, but there have been no credits continuously
for more than 90days or the credits are not sufficient to cover the interest charged during the
period. The identification of such accounts has to be done on the date of the balance sheet.

BILLS PURCHASED OR BILLS DISCOUNTED: loans and advances facilities

are given to borrower, against the bills drawn by them on their customer, covering goods
sold on credit.
The bills purchased or discounted should be treated as NPA of the bills remain
overdraft and unpaid for a period of more than 90 days in the financial year.

OTHER ACCOUNTS: RBI has specified that any other loan facility sanctioned by the
banks to their borrower, if any that remains overdue for a period of more than 90 days,
should also be treated as NPA.

AGRICULTURAL ADVANCES: The RBI has given special concession to the

agricultural sector for the purpose of classification of Non-Performing Assets.
A loan granted for short duration crops will be treated as NPA if the installment of the
principal or interest there on remaining unpaid for two crop seasons beyond the due date.
A loan granted for long duration crops will be treated as NPA if the installment of the
principal or interest there on remaining unpaid for one crop seasons beyond the due date.
For the purpose of these guidelines, Long Duration crops would be crops with crop
season longer than one year and crops which are not Long Duration crops would be treated
as Short Duration crops.
The crop season for each crop, which means the period up to harvesting of the crops
raised would be determined by the State Level Bankers Committee in each state.
Loans given for non-agricultural activities and allied activities identification of NPAs
would be 90 days delinquency norm from the year ending March 31, 2006.
Even in case there are temporary irregularities or deficiencies in the account, but there
is not risk of default of bank loans, the assets is treated as standard asset.

ADVANCES FOR ALLIED AGRCULTURAL ACTVITIES AND NON-FARM

SECTOR.
It should be treated as NPA if amounts of installments of principal and /or interest
remain outstanding for a period of one quarter from due date/ more than 90 days.

PROJECTS WHERE MORATORIUM IS GIVEN INDUSTRY PLANTATION,

HOUSING.
Projects where moratorium is given for payment, loan becomes due only after
moratorium or gestation period is over such a loan becomes overdue if installment is not paid
on due date.
Housing loans or similar advances granted to staff member where interest is payable
after recovery of principal, such loans should be classified as NPA when there is a default in
repayment of principal on due date of payment on overdue criteria will be the basis for
classification of assets.

CONSORTIUM ADVANCES
Each bank is required to classify the borrower accounts according to its own recovery,
i.e., on the record of recovery of the individual member banks.
The banks participating in the consortium to arrange to get their share of recovery
transferred from the lead bank of the consortium.

GUIDELINES FOR CLASSIFICATION OF ASSETS

The guidelines are as follows

1. BASIC CONSIDERATION:
In simple terms the classification of assets should be done by considering the well
defined credit weaknesses & extent of dependence on collateral security for realization of
dues.
In accounts where there is a potential threat to recovery on account and existence of
other factor such as fraud committed by borrower it will not be prudent for bank to classify
that account first as sub-standard and then as doubtful. Such account should be straight away

classified as doubtful asset or loss asset, as appropriate, irrespective of the period for which it
has remained as NPA.

2.

ADVANCES GRANTED UNDER REHABILITATION PACKAGES

Banks are not permitted to do classification of any advances in respect of which the

term have been re-negotiated unless the package of re-negotiated terms has worked
satisfactory for a period of one year.
A similar relaxation is also made in respect of SSI units which are identified as sick
by banks themselves and where rehabilitation packages programs have been drawn by the
banks themselves or under consortium arrangements.
3.

INTERNAL SYSTEM FOR CLASSIFICATION OF ASSETS AS NPA:

Banks should establish appropriate internal systems to eliminate the tendency to delay

or postpone the identification of NPAs, especially in respect of high value accounts. The
banks may fix a minimum cut-off point to decide what would constitute a high value account
depending upon their respective business levels. The cut-off point should be valid for the
entire accounting year.
Responsibility and validation level for proper assets classification may be fixed by bank.
The system should ensure that doubts in asset classification due to any reason are
settled through specified internal channels within one month from the date on which the
account would have been classified as NPA as per extant guidelines.

PRUDENTIAL NORMS ON PROVISIONING

Provisions are created to have a sufficient cushion or reserves against erosion in value
assets. Advances in a bank may go bad and it is essential to protect the interest of depositor
and other liabilities like capital and reserves by keeping aside predetermined amounts out of
annual Profits. In conformity with the prudential norms, provision should be made on the
Non-Performing Assets on the basis of classification of assets discussed earlier. Banks are
required to set aside the prescribed provision by debiting the Profit and loss account as per
RBI guidelines.

THE CRITERIA ADOPTED FOE THE PROVISIONING OF NPAS ARE AS

FOLLOWS Time lag between an account becoming doubtful of recovery, and its recognition as a
category of NPA.
The realization of the security.
Erosion over time in the value of security.
While arriving at NPAs the following balances have to be provided for
I.
II.
III.

Interest not collected account.

Interest suspense account, if any
Unrealized interest of previous year.

SOME KEY CONCEPTS

a. Gross Non-Performing Assets indicates the quality of the credit portfolio of banks. Gross
NPA refers to the credit facility on which the bank does not earn any income. Gross NPA is
the absolute amount of such assets before any adjustment for write offs or provision are
made.

ILLUSTRATION OF CONCEPTS OF GROSS AND NET NPA.

PARTICULARS
Opening Balance of Gross Non-Performing Assets
Less: Up Gradation
Less: Recoveries
Less: Write Off
Add: Fresh Additions
CLOSING BALANCE OF GROSS NON-

AMOUNT
xxx
xxx
xxx
xxx
xxx
xxx

PERFORMING ASSETS
Less: Provision/Sundry Suspense
NET NON-PERFORMING ASSETS

xxx
xxx

b. Net Non-Performing Assets indicate the degree of risk in the credit portfolio of banks. Net
nonperforming assets are arrived at by reducing provisions and suspense accounts (if any)
from gross Non-Performing Assets. High level of net NPAs indicates high quantity of risky
assets for which no provision has been made.

In light of the comparisons done in the report more emphasis has been given to gross
NPA levels as compared the Net NPAs as Gross NPAs do not high levels of provisioning and
are a better indicator of the extent of problem loans. Net NPAs on the other hand are a better
indicator of the overall financial soundless of the bank with respect to its NPAs.

RECOVERY TOOLS AND THEIR EFFECTIVENESS:

1. DEBT RECOVERY TRIBUNALS:
Lack of expeditious court remedies has been one of the major impediments
experienced by banks and financial institutions in the recovery of NPA. On the basis of the
recommendation of Tiwari committee (1981) and Narasimham committee on financial
systems (1991), which emphasized the need for the establishment of special tribunals for
banks and financial institutions, the recovery of debts due to banks and financial institutions
act was enacted in 1993.
The act applies only to cases where the amount of debt due to banks/ financial
institutions is `10 Lakhs or above. Filing of cases at the DRT has been a cause of concern for
almost every bank in the country today. One reason for the slow pace is the requisite
infrastructure at the respective DRT was inadequate to handle the huge number of cases
pending with it. There has been a decision to add about 7 more DRT to the existing 22 DRT
and 5 appellate authorities. This enables the banks to settle some of the pending NPAs.
2.

LOK ADALATS:
For recovery of smaller loans, the Lok Adalat has proved a very good agency for
quick justice and settlement of dues. The Gujarat state legal service authority and the DRT,
Ahmadabad have nominated and appointed conciliator to deal with the cases before the Lok
Adalat comprising of retired high court judge and two member from senior advocates/
industrialists/executives of the banks. This Adalats In the state of Gujarat has been found to
be useful as supplement to the efforts of the recovery by the DRTs. Such agencies should be
established in all the states.

3.

ASSET RECONSTRUCTION COMPANY:

The setting of asset Reconstruction Company may be another channel to discount the

NPAs of the bank to suck an agency and to developing the process if securitization of banks

loan assets for providing liquidity. Perhaps secondary market of derivatives based on
securitized assets could also be developed as in individual countries.

4. REVENUE RECOVERY ACT:

In some state, revenue recovery act has been made applicable to banks. Since this also
expeditious process of adjudicating claims, banks may be notified to cover under the act by
state.

DIFFICULTIES WITH THE NON-PERFORMING ASSETS.

1. Owners do not receive a market return on their capital. In the worst case is the bas fails,
owner lose their assets. In modern times, this may affect a broad pool of share holder.
2. Depositors do not receive a market return on savings. In the worst case if the bank fails,
depositor lose their assets or uninsured balance. Banks also redistribute losses to other
borrower by charging higher interest rates. Lower deposit rates and higher lending rates
repress saving and financial markets, which hamper economic growth.
3. Non-performing 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.

The economy

performs below its production potential.

4. Non-performing loans may spill over the banking system and contract the money stock,
which may lead to economic contraction.

This spillover effect can channelize through

illiquidity or bank insolvency:

a. When many borrowers fail to pay interest, banks may experience liquidity shortages; these
shortages can jam payments across the country.
b. Illiquidity constraints bank in paying depositor e.g. cashing their pay cheques. Banking panic
follows. A run on banks by depositor as part of the national money stock become inoperative.
The money stock contracts and economic contraction follows
c. Under capitalized banks exceeds the banks capital base
Lending by banks has been highly politicized. It is common knowledge that loans are given
to various industrial houses not on commercial considerations and viability of project but on
political considerations; some politician would ask the bank to extend the loan to a particular
corporate and the bank would oblige. In normal circumstances banks, before extending any
loan would make a thorough study of actual need of the party concerned, the prospects of the
business in which it is engaged, its track record, the quality of management and so on. Since
this is not looked in to, many of the loans become NPAs.

The loans for the weaker section of the society and the waiving of the loans to farmer are
another dimension of the politicization of bank lending.
Most of the depositors money has been frittered by the banks at the instance of politicians,
whale the same depositor are being made to pay through taxes to cover the losses of the bank.

PROBLEMS DUE TO NPA

a) Owner do not receive a market return on their capital .in the worst case, if the banks fails,
owner lose their assets. In modern times this may affect a broad pool of shareholder.
b) Depositors do not receive a market return on saving. In the worst case if the bank fails,
depositor lose their assets or uninsured balance.
c) Banks redistribute losses to other borrower by charging higher interest rates, lower
deposit rates and higher lending rates repress saving and financial market, which hamper
economic growth.
d) 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.
e) 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.
f) When many borrowers fail to pay interest, banks may experience liquidity shortage. This
can jam payment across the country.
g) Illiquidity constraints bank in paying depositor.
h) Undercapitalized banks exceed the banks capital base.

MEASURES TAKEN TO DEAL WITH NPAS

1. Dismantling of controls and deregulation of working of commercial banks, permitting
entry of new private sector banks and permission for foreign banks to open more
branches. This had the effect of opening Indian banking to global standards by making
them function efficiently in a competitive environment. This was the initial step to create
a structural frame work for the PSBs to enable them to adjust to the new environment and
turn in to dynamic and self reliant operating units.
2. The process of deregulation freed the banks from the control of finance ministry and RBI.
The RBI, here after acts as a regulator. In the year 1994, RBI further fine-tuned the
process by constituting separate Board of Financial Supervision (BFS) with the objective
of segregating the supervisory role from the regulatory functions of RBI. Banks now

operate independently in a competitive financial market, but have to comply with

prudential norms and safeguards for essential for their well being.
3. RBI made prudential norms, as conveyed by the Basel Accord of 1988, applicable to
Indian banks. These included standards relating to capital adequacy, income recognition,
asset classification and provisioning for Non-Performing Asset. This had the effect of
providing much-needed transparency about the state of affair of each bank and enabled
instant corrective measures to be executed.
4. Banks were permitted to seek infusions of fresh equity from the public with the
government retaining a 51% share of equity capital. A number of PSBs entered the
market and raised tier 1 and tier 2 capitals accordingly. This has created a new class of
stake holder(albeit share holder) vitally interested in the well being of the banks and
qualified/ empowered to question the board of director at the appropriate forum.
5. Governance: RBI emphasized the paramount importance of accepting norms of good
corporate governance by banks. While the SEBI has a general set of norms applicable to
all companies including banking companies, RBI has further covered the special needs of
banking companies by bringing of an appropriate set of standards.
6. The Credit Information Bureau (India) Limited: in order to expedite credit and investment
decisions by banks and financial institutions, and curb the accretion of fresh NPAs, the
credit information (India) limited., (CIBIL) was set up by the state bank of India in
association with HDFC in august 2000.CIBIL was to be technology driven to ensure
speedy processing, periodic updating a and availability of error-free data at all times in
the system. As a first step towards activating the CIBIL, it was decided to initiate the
process of collection and dissemination of relevant information within the existing legal
frame work. The RBI accordingly decided to constitute a group drawing representation
from CIBIL, the Indian Banks Association (IBA), select banks and FIs to examine the
possibility of the CIBIL performing the role of collecting disseminating on the list of suitfiled accounts and the list of defaulter, including willful defaulter, which is presently
handled by the reserve bank. The group is also expected to examine the other aspects of
information collection dissemination, such as the extent, periodicity and coverage, and the
feasibility of supplying information on-line to member in the future.
7. Norms of lender liability: RBI has come out with broad guidelines for framing the Fair
Practices Code (FPC) with regard to lender liability to be followed by commercial banks
and financial institutions, emphasizing and proper assessment of borrower credit
requirements. RBI has issued a draft of the model code and has advised the individual
banks to adopt model guidelines for framing their respective fair practices codes with the

approval of their boards. This is balancing measure. It imposes a self disciplined on the
part of the banks, which will only indirectly prevent accounts turning into NPAs on
account of the banks own failures or wrong actions.
8. Risk assessment and risk management: since the year 1998, the RBI has been making
serious efforts towards evolving a suitable and comprehensive model for risk
management by the banks and to integrate this new discipline in the working systems of
banks. The BBI has identified risk-prone areas in asset- liability management, credit
management, changes in market conditions and counter-party and country risks and has
evolved suitable models for managing all such risks. RBI has also evolved system of
risk-based supervision of banks. It also advised banks on parallel schemes for carrying
out internal audit based on risk perception.
9. E-banking VRS: the influence if these areas of banking reforms may not appear directly
relevant to reduction of NPAs. However, computerization provides for data-accuracy and
operation efficiency and results in a better management information system (MIS). VRS
rationalizes the work force, which in turn results in better productivity and operational
efficiency.
10. RBI has also cautioned banks on the use of gains from the sale of investment: It has
advised banks to follow a more prudent policy for utilizing the gains realized on sale of
securities arising from a decline in interest rates and also for building up adequate
reserves to guard against any possible reveal of the interest rates environment due to
unexpected developments. Accordingly, Banks are required to build an Investment
Fluctuations Reserve (IFR) of a minimum of 5% of all investment in the held for
trading and available for sale categories within 5 years.
11. Circulation of information on defaulter: the RBI has put in place a system for periodic
circulation of details of willful defaults of borrower of banks and financial institutions.
This serves as a cautionary list while considering request for new or additional credit
limits form defaulting borrowing units and also from the director/ proprietor/ partner of
these entities. The RBI also publishes a list of borrower (with aggregate outstanding of
`1crore and above) against whom banks and FIs have filed suits for recovery of their
funds, as on 31 march every year. These measures serve as negative basket of steps
shutting off fresh loans to these defaulters.
12. Recovery actions against large NPAs : RBI advised public sector banks to examine all
cases of willful defaults of `1crore and above file suits in such cases, and file criminal
cases in regard to willful defaults are required to review NPA accounts of .1crore and
above with special reference of staff accountability.

13. Special mention accounts: in a recent circular, RBI has suggested to the banks to have a
new asset category or special mention accounts for early identification of bad debts.
This would be strictly for internal monitoring loans and advances overdue for less than
one quarter and two quarter would come under this category. Data regarding such
accounts will have to be submitted by the banks to the RBI. However, special mention
assets would not require provisioning, as they are not classified as NPAs. An asset may be
transferred to this category once the earliest science of sickness/ irregularities are
identified. This will help banks look at account with potential problems in focused
manner right from the onset of the problem, so that monitoring and remedial actions can
be more active. Once these accounts are categorized and reported, proper top
management attention would also be ensured. Borrower having genuine problems due to
temporary mismatch in funds flow or sudden requirements of additional funds may be
entertained at the branch level and for this purpose, a special limit to overcome such
contingencies may be built in to the sanctioned process itself.

MANAGEMENT OF NPA
It is very necessary for bank to keep the level of NPA as low as possible.
Because NPA is one kind of obstacle in the success of bank so, for that the management of
NPA in bank is necessary. And this management can be done by following way:

Framing reasonably well documented loan policy and rules.

Sound credit appraisal on well-settled banking norms.
Emphasizing reduction in Gross NPAs rather than Net NPAs
Pasting of sale notice/ wall poster on the house pledged as security.
Recovery effort starts from the month of default itself. Prompt legal action should be

taken.
Position of overdue accounts is reviewed on a weekly basis to arrest slippage of fresh
account to NPA.
Half yearly balance confirmation certificates are obtained from the borrower
regularly.
A committee is constituted at Head Office, to review irregular accounts.
Due to lower credit risk and consequent higher Profitability, greater encouragement is
given to small borrower.
Recovery competition system is extended among the staff member. The recovering
highest amount is felicitated.
Adopting the system of market intelligence for deciding the credibility of the
borrower

 Creation of a separate Recovery Department with Special Recovery Officer

appointed by the RCS.

FACTOR RESPONSIBLE FOR NPA

1.
2.
3.
4.
5.
6.

Improper selection of borrowers activities

Weak credit appraisal system.
Industrial problem.
Inefficiency in management and monitoring.
Lack of proper follow up by bank.
Recession in the market.
7. Due to natural calamities and other uncertainties.

THE EFFECT OF NPA

1.
2.
3.
4.

They decrease Profitability.

They reduce capital assets and lending limits.
They increase loan loss reserves.
They bring unwanted attention from government regulator.

RECOVERY OF NPA
IMPORTANCE OF RECOVERY:
I.
II.
III.
IV.

Increase in the income of bank.

Increase in the trust of share holder in bank.
Level of NPA reduces as the recovery done.
Decrease in provisioning requirements

CHAPTER 2
COMPANY PROFILE
SBI- STATE BANK OF INDIA
COMPANY OVERVIEW
STATE BANK OF INDIA

Type

Public

Traded as

NSE: SBIN
BSE: 500112
LSE: SBID
BSE SENSEX Constituent

CNX Nifty Constituent

Industry

Banking, Financial Services

Founded

27 January 1921
As Imperial Bank of India
2 June 1956 , Nationalization , 1 July 1955[1]

Headquarters Mumbai, Maharashtra, India

Area served

Worldwide

Key people

Arundhati Bhattacharya
(Chairperson)

Products

consumer banking, corporate banking, finance and insurance, investment

banking, mortgage loans, private banking, private equity, savings,
Securities, asset management, wealth management, Credit cards,

Revenue

210736 crore (US$33 billion) (2013)[2][3]

Profit

17916 crore (US$2.8 billion) (2013)[2][3]

Total assets

2374839 crore (US$380 billion) (2013)[2][3]

Total equity

98884 crore (US$16 billion) (2012)[2][3]

Owner

Government of India

Number of

222,033 (2014)

employees
Slogan

The Banker to Every Indian

Website

www.sbi.co.in

NAME OF THE COMPANY AND ITS HISTORY

STATE BANK OF INDIA

EVOLUTION OF SBI
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 modernize 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.

Bank of Bengal H.O.

Establishment
The establishment of the Bank of Bengal marked the advent of limited liability, joint-stock
banking in India. So was the associated innovation in banking, viz. the decision to allow the
Bank of Bengal to issue notes, which would be accepted for payment of public revenues
within a restricted geographical area. This right of note issue was very valuable not only for
the Bank of Bengal but also its two siblings, the Banks of Bombay and Madras. It meant an
accretion to the capital of the banks, a capital on which the proprietors did not have to pay
any interest. The concept of deposit banking was also an innovation because the practice of
accepting money for safekeeping (and in some cases, even investment on behalf of the

clients) by the indigenous bankers had not spread as a general habit in most parts of India.
But, for a long time, and especially up to

the time that the three presidency banks had a

right of note issue, bank notes and government balances made up the bulk of the investible
resources of the banks.
The three banks were governed by royal charters, which were revised from time to time. Each
charter provided for a share capital, four-fifth of which were privately subscribed and the rest
owned by the provincial government. The members of the board of directors, which managed
the affairs of each bank, were mostly proprietary directors representing the large European
managing agency houses in India. The rest were government nominees, invariably civil
servants, one of whom was elected as the president of the board.

Group Photograph of Central Board (1921)

EMPLOYEES
SBI is one of the largest employers in the country having 222,033 employees as on 31 March
2014, out of which there were 45,132 female employees (20%) and 2,610 (1%) employees
with disabilities. On the same date, SBI had 42,744 Schedule Caste (19%) and 17,243
Schedule Tribe (8%) employees. The percentage of Officers, Assistants and Sub-staff was
36%, 46% and 18% respectively on the same date Hiring drive: 1,776 Assistants and 1,394
Officers joined the Bank in FY 2013-14, for expansion of the branch network and to mitigate
staff shortage, particularly at rural and semi-urban branches. Staff productivity: As per its
Annual Report for FY 2013-14, each employee contributed net profit of INR 4.85 lakhs.

Associate banks

Main Branch of SBI in Mumbai.

SBI now has five associate banks, down from the eight that it originally acquired in 1959. All
use the State Bank of India logo, which is a blue circle, and all use the "State Bank of" name,
followed by the regional headquarters' name:

State Bank of Bikaner & Jaipur

State Bank of Hyderabad

State Bank of Mysore

State Bank of Patiala

State Bank of Travancore

The State Bank of India and all its associate banks are identified by the same
blue keyhole logo. The State Bank of India wordmark usually has one standard typeface, but
also utilises other typefaces.

MISSION, VISION & VALUES

VISION

My SBI.

My Customer first.

My SBI: First in customer satisfaction

MISSION

We will be prompt, polite and proactive with our customers.

We will speak the language of young India.

We will create products and services that help our customers achieve
their goals.

We will go beyond the call of duty to make our customers feel valued.

We will be of service even in the remotest part of our country.

We will offer excellence in services to those abroad as much as we do to

those in India.

We will imbibe state of the art technology to drive excellence.

VALUES

We will always be honest, transparent and ethical.

We will respect our customers and fellow associates.

We will be knowledge driven.

We will learn and we will share our learning.

We will never take the easy way out.

We will do everything we can to contribute to the community we work in.

We will nurture pride in India.

PRODUCTS & SERVICES PROFILE

PAYMENTS/TRANSFER

1. Funds Transfer
You can now avail a bouquet of funds transfer services through Internet banking

Transfer funds within your own accounts

Transfer funds to third party account held in the same bank
Make an Inter bank funds transfer to any account held in any bank including State

Bank Group
Pay any VISA credit card bill
Transfer funds to religious and Charitable institutions
Record standing instructions to transfer a fixed amount at a scheduled frequency for

a period not exceeding one year

Transfer funds to NRE PIS accounts to facilitate online trading
2. Intra-Bank Transfer
Inter Bank Transfer enables electronic transfer of funds from the account of the remitter
in one Bank to the account of the beneficiary maintained with any other Bank branch.
There are two systems of Inter Bank Transfer - RTGS and NEFT. Both these systems are
maintained by Reserve Bank of India....
3. RTGS/NEFT
RTGS - Real Time Gross Settlement - This is a system where the processing of funds
transfer instructions takes place at the time they are received (real time). Also the
settlement of funds transfer instructions occurs individually on an instruction by
instruction basis (gross settlement). RTGS is the fastest possible interbank money transfer
facility available through secure banking channels in India.
NEFT - National Electronic Fund Transfer - This system of fund transfer operates on a
Deferred Net Settlement basis. Fund transfer transactions are settled in batches as
opposed to the continuous, individual settlement in RTGS. Presently, NEFT operates in
hourly batches from 8 am to 7 pm on week days and 8 am to 1 pm on Saturdays.

The above mentioned facilities are available to both Retail and Corporate Internet
Banking users of SBI (provided they have availed transaction rights).

4. Credit Card (VISA)

Credit Card (Visa) Bill Pay is a special service that allows you to transfer money online
from your SBI account to any VISA Credit Card issued in India. Credit Card (Visa) Bill
Pay is so quick, simple and a convenient alternative to Demand Drafts, cheques or pay
orders.
5. IMPS Payments
Immediate Payment Service (IMPS) is an instant interbank electronic fund transfer service
through mobile phones. It is also being extended through other channels such as ATM,
Internet Banking, etc.
6. NRI eZ Trade Funds Transfer

E DEPOSITS
1. E-TDR/e-STDR
As a general rule the minimum tenure for a term deposit is 7 days and the maximum is 10
years. However Both TDR and STDR are bound by the following minimum and maximum
tenures.

Minimum

tenure

is 7

days for

TDR

and

180 days for STDR and Maximum tenure is 3650 days for TDR and STDR.

2. E-TDR/e-STDR under Income Tax Savings Scheme

The name(s), mode of operation and home branch of newly generated deposit a/c will be
same as in debit a/c, from which term deposit a/c is funded. However in case of Joint
Accounts only the first holder shall be eligible for deduction from income under section
80C of Income Tax Act.
3. SBI Flexi Deposit

Unlike Recurring Deposit account, SBI Flexi Deposit offers flexibility in choosing the
deposit amount within the minimum and maximum limits per financial year. he Minimum
deposit amount is Rs. 5,000/- per Financial Year. Higher amounts in multiples of Rs. 500/may be deposited with minimum of Rs. 500/- at any one instance. Deposits can be made
anytime during a month and any number of times. The Maximum deposit amount is
Rs.50,000/- in a Financial Year.
4. E-Annuity Deposit Scheme
Under this scheme, a lump sum amount is deposited by a customer which is repaid to the
customer over a period in equated monthly installment which comprises part of principle
amount and interest on the reducing principle amount as well. Using the scheme customer
can have fixed monthly amount against his one time deposit. Payment will start on
anniversary date of the month. If date is non-existent (29th, 30th and 31st), it will be paid
on 1st day of next month.
5. E- Recurring Deposits
The period of deposit shall be minimum 12 months and maximum 120 months.
Smart Cards
1. Gift Card
2. State Bank Virtual Card
3. Smart Pay-out Card
State Bank Collect
Bill Payments
Western Union Service
NPS Contribution
Power Jyoti Fee Collection (PUL)
Loan against Shares

Services offered by the company:

NRI Services

Personal Banking

International Banking

Agriculture / Rural

Corporate Banking

SME

Government Business

Domestic Treasury

MAJOR COMPETITORS
Some of the major competitors for SBI in the banking sector are Axis
Bank, ICICI

Bank, HDFC

Bank, Punjab

National

Bank, Bank

of

Baroda, IndusInd Bank, Canara Bank, Bank of India and Union Bank of
India. However in terms of average market share, SBI is by far the largest
player in the market.

MARKET SHARE

As on 31 March 2014, Government of India held around 58.59% equity shares in SBI. Life
Insurance Corporation of India is the largest non-promoter shareholder in the company with
14.99% shareholding.

Shareholders

Shareholding

Promoters: Government of India

58.60%

Banks & Insurance Companies

16.79%

FIIs/GDRs/OCBs/NRIs

12.04%

Mutual Funds & UTI

03.78%

Private Corporate Bodies

02.87%

Others

5.92%

Total

100.0%

The equity shares of SBI are listed on the Bombay Stock Exchange, where it is a constituent
of the BSE SENSEX index, and the National Stock Exchange of India, where it is a
constituent of the CNX Nifty. Its Global Depository Receipts (GDRs) are listed on
the London Stock Exchange.

AWARDS RECEIVED

SBI was ranked 73rd largest bank in the world, according to 2014 SNL financial
data.

SBI won the Best Bank award in the 'ASIAMONEY FX POLL OF POLLS 2014 for
best overall performance as domestic provider of Forex services over the last 10
years.

SBI was ranked as the top bank in India based on tier 1 capital by The
Banker magazine in a 2014 ranking.

SBI was ranked 298th in the Fortune Global 500 rankings of the world's biggest
corporations for the year 2012.

SBI won "Best Public Sector Bank" award in the D&B India's study on 'India's Top
Banks 2013'.

State Bank of India won three IDRBT Banking Technology Excellence Awards 2013
for Electronic Payment Systems, Best use of technology for Financial Inclusion,
and Customer Management & Business Intelligence in the large bank category.

SBI won National Award for its performance in the implementation of Prime
Ministers Employment Generation Programme (PMEGP) scheme for the year 2012.

Best Online Banking Award, Best Customer Initiative Award & Best Risk
Management Award (Runner Up) by IBA Banking Technology Awards 2010.

SKOCH Award 2010 for Virtual corporation Category for its e-payment solution

SBI was the only bank featured in the "top 10 brands of India" list in an annual
survey conducted by Brand Finance and The Economic Times in 2010.

The Bank of the year 2009, India (won the second year in a row) by The Banker
Magazine.

Best Bank Large and Most Socially Responsible Bank by the Business Bank
Awards 2009.

Best Bank 2009 by Business India.

The Most Trusted Brand 2009 by The Economic Times.

SBI was named the 29th most reputed company in the world according
to Forbes 2009 rankings.

Most Preferred Bank & Most preferred Home loan provider by CNBC

Visionaries of Financial Inclusion By FINO

Technology Bank of the Year by IBA Banking Technology Awards

SBI was 50th Most Trusted brand in India as per the Brand Trust Report 2013, an
annual study conducted by Trust Research Advisory, a brand analytics company and
subsequently, in the Brand Trust Report 2014, SBI finished as India's 19th Most
Trusted Brand in India.

CORPORATE SOCIAL RESPONSIBILITY

CSR Philosophy:
The Bank is a corporate citizen, with resources at its command and

benefits which it derives from operating in society in general. It therefore owes a

solemn duty to the less fortunate and under-privileged members of the same
society.
Staff

members

are

encouraged

to

make

their

contribution

by

understanding the aspirations of the public around them and by endeavouring

to evolve measures to remove indisputable social and developmental lacunae.

SWOT ASSESSMENT
SWOT Analysis

Strength

1.
2.
3.
4.

Weakness

1. Huge amount of staff

2. Expected to experience high level of attrition due to retirement of its
top management
3. Still carries the image of the old Govt. sector bank

Opportunity

The biggest bank in the country

Has a separate act for itself. Thus, a special privilege.
Biggest branch network in the country
First public sector to move to CBS

1. Pool in talent to replace the going top management to serve the next
generation

2. Make better use of its CRM

3. Expansion into rural areas

Threats

ICICI
HDFC

1. Consolidation among private banks

2. New bank licenses by RBI
3. Foreign banks that have sophisticated products