ORIGIN OF THE TERM BANKThe 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 INDIABanking 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 INDIAThe 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 industryThe 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 InitiativesThere 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 SCENARIOIn 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
Prospectsreport 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
beenstruggling 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 Sachspredict
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 TOPICThe 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
decisions-making. 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 ASSETSAn 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
CONCEPTProblem 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 CONCEPTAccording 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 NORMSThe 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 Non-Performing
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 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. Classifications of assets are
based on uniform and consistent application of norms.
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
RECOGNITIONIncome 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
Non-performing 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 Anglo-American 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 CONCEPTEarlier 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 CONCEPTNPAs 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 ASSETSSo 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 NORMS
DEFINITION AS PER THE CLASSIFICATION OF ASSETSReserve 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 ASSETSAn 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
non-availability of adequate drawing power, balance outstanding
exceeding the limit, non-submission 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 ASSETSAn 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 ASSETSDoubtful 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 asDOUBTFUL 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 ASSETSA 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 daysAn
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 ADVANCESEach 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 ASSETSThe guidelines
are as follows1. 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
PROVISIONINGProvisions 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. Interest not
collected account.II. Interest suspense account, if anyIII.
Unrealized interest of previous year.SOME KEY CONCEPTSa. 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.PARTICULARSAMOUNT
Opening Balance of Gross Non-Performing Assetsxxx
Less: Up Gradationxxx
Less: Recoveriesxxx
Less: Write Offxxx
Add: Fresh Additionsxxx
CLOSING BALANCE OF GROSS NON-PERFORMING ASSETSxxx
Less: Provision/Sundry Suspense xxx
NET NON-PERFORMING ASSETSxxx
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 followsc. 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 NPAS1. 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 suit-filed 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 NPAIt 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 NPA1. Improper selection of borrowers
activities2. Weak credit appraisal system.3. Industrial problem.4.
Inefficiency in management and monitoring. 5. Lack of proper follow
up by bank.6. Recession in the market.7. Due to natural calamities
and other uncertainties. THE EFFECT OF NPA1. They decrease
Profitability.2. They reduce capital assets and lending limits.3.
They increase loan loss reserves.4. They bring unwanted attention
from government regulator.RECOVERY OF NPAIMPORTANCE OF RECOVERY:I.
Increase in the income of bank.II. Increase in the trust of share
holder in bank.III. Level of NPA reduces as the recovery done.IV.
Decrease in provisioning requirements
CHAPTER 2COMPANY PROFILESBI- STATE BANK OF INDIACOMPANY
OVERVIEWSTATE BANK OF INDIA
TypePublic
TradedasNSE:SBINBSE:500112LSE:SBIDBSE SENSEX ConstituentCNX
Nifty Constituent
IndustryBanking,Financial Services
Founded27 January 1921AsImperial Bank of India2 June 1956 ,
Nationalization , 1 July 1955[1]
HeadquartersMumbai,Maharashtra,India
Area servedWorldwide
Key peopleArundhati Bhattacharya(Chairperson)
Productsconsumer banking,corporate banking,finance and
insurance,investment banking,mortgage loans,private banking,private
equity,savings, Securities,asset management,wealth
management,Credit cards,
Revenue210736crore(US$33billion) (2013)[2][3]
Profit17916crore(US$2.8billion) (2013)[2][3]
Total assets2374839crore(US$380billion) (2013)[2][3]
Total equity98884crore(US$16billion) (2012)[2][3]
OwnerGovernment of India
Number of employees222,033 (2014)
SloganThe Banker to Every Indian
Websitewww.sbi.co.in
NAME OF THE COMPANY AND ITS HISTORYSTATE BANK OF INDIAEVOLUTION
OF SBIThe origin of theState Bank of Indiagoes 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.EstablishmentThe 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)EMPLOYEESSBI 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 dateHiring 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 bluekeyholelogo. The State Bank of
Indiawordmarkusually has one standard typeface, but also utilises
other typefaces.
MISSION, VISION & VALUESVISION My SBI. My Customer first. My
SBI: First in customer satisfactionMISSION 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 PROFILEPAYMENTS/TRANSFER1. Funds TransferYou 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
trading2. Intra-Bank TransferInter 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/NEFTRTGS - 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 from8 amto7 pmon week days and8 amto1
pmon 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 PaymentsImmediate 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 DEPOSITS1. E-TDR/e-STDRAs a general rule the minimum tenure
for a term deposit is7 daysand the maximum is10 years. However Both
TDR and STDR are bound by the following minimum and maximum
tenures. Minimum tenure is7 daysfor TDR and180 daysfor STDR and
Maximum tenure is3650 daysfor TDR and STDR.
2. E-TDR/e-STDR under Income Tax Savings SchemeThe 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 DepositUnlike 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 SchemeUnder 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
DepositsThe period of deposit shall be minimum 12 months and
maximum 120 months.Smart Cards1. Gift Card2. State Bank Virtual
Card3. Smart Pay-out CardState Bank CollectBill PaymentsWestern
Union ServiceNPS ContributionPower 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 COMPETITORSSome of the major competitors for SBI in the
banking sector areAxis Bank,ICICI Bank,HDFC Bank,Punjab National
Bank,Bank of Baroda,IndusInd Bank,Canara Bank,Bank of IndiaandUnion
Bank of India. However in terms of average market share, SBI is by
far the largest player in the market.
MARKET SHAREAs on 31 March 2014, Government of India held around
58.59% equity shares in SBI.Life Insurance Corporation of Indiais
the largest non-promoter shareholder in the company with 14.99%
shareholding.ShareholdersShareholding
Promoters: Government of India58.60%
Banks & Insurance Companies16.79%
FIIs/GDRs/OCBs/NRIs12.04%
Mutual Funds & UTI03.78%
Private Corporate Bodies02.87%
Others5.92%
Total100.0%
The equity shares of SBI are listed on theBombay Stock
Exchange,where it is a constituent of theBSE SENSEXindex,and
theNational Stock Exchange of India,where it is a constituent of
theCNX Nifty. ItsGlobal Depository Receipts(GDRs) are listed on
theLondon 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 ontier 1
capitalbyThe Bankermagazine in a 2014 ranking. SBI was ranked 298th
in theFortune Global 500rankings of the world's biggest
corporations for the year 2012. SBI won "Best Public Sector Bank"
award in theD&BIndia'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 byBrand FinanceandThe
Economic Timesin 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 toForbes2009 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 theBrand Trust Report2013, an annual study conducted by
Trust Research Advisory, a brand analytics company and
subsequently, in theBrand Trust Report 2014, SBI finished as
India's 19th Most Trusted Brand in India.CORPORATE SOCIAL
RESPONSIBILITYCSR 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 ASSESSMENTSWOT Analysis
Strength1. The biggest bank in the country2. Has a separate act
for itself. Thus, a special privilege.3. Biggest branch network in
the country4. First public sector to move to CBS
Weakness1. Huge amount of staff2. Expected to experience high
level of attrition due to retirement of its top management3. Still
carries the image of the old Govt. sector bank
Opportunity1. Pool in talent to replace the going top management
to serve the next generation2. Make better use of its CRM3.
Expansion into rural areas
Threats1. Consolidation among private banks2. New bank licenses
by RBI3. Foreign banks that have sophisticated products
ICICIHDFC
