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STXAVIERS COLLEGE RANCHI
(An autonomous college of Ranchi University)
XPRESS CREDIT HIGH NPA IN XPRESS CREDIT A CONCERN
Internship report submitted to SBI in completion of the requirement of summer
internship at State Bank of India
STATE BANK OF INDIA
RBO HAZARIBAGH
NAME OF THE STUDENT PROJECT MENTOR
REPORTING OFFICER
AT THE BANK
VIVEK KR GUPTA MR RAJESH KR JHA
JUNE 3RD 2013 TO AUGUST 2ND 2013
ACKNOWLEDGEMENT
It is a great pleasure for me in submitting the project report on lsquoXpress credit ndash High NPA in Xpress Credit a concern for the fulfillment of summer internship
I am much thankful and owe a deep debt gratitude to all those who have helped me in preparing this project report Words seem to be inadequate to express my sincere thanks to Mr Rajesh Kr Jha (project mentor) for his valuable guidance constructive criticism untiring efforts and immense encouragement during the entire course of study due to which my effort has been rewarded
I would also like to thanks Mr OP Singh( Regional manager RBO) Mr Ajay Pratap (manager LPC) Mr Shrwan Kr Singh(chief manager) Mr US Prasad (Deputive manager PB ) who gave me an opportunity to learn the recurring acknowledgement of what is working in our lives that can help us not only to survive but surmount our difficulties
I express my sincere thanks to whole SBI (Hazaribag branch) for giving me all facility during my project and guiding me during the whole internship period
I want to thank all those who have supported me and gave their timely guidance Last but not least I am very grateful to Mr TS Prasad (RetdAGM of SBI and presently a visiting faculty of St Xavierrsquos college Ranchi) who not only suggested me the right method of study in the project but also guided at every stage of my work
He was a philosopher and guide for me in the true sense
Vivek Kumar Gupta
CONTENTS
SLNO PARTICULARS PAGE NO 01 Executive summery 04-07 02 List of charts 08 03 List of tables 09 04 Student profile 10 05 Mentor profile 11 06 Branch profile 12-13 07 Nature of the project 14 08 Objective of the study 15 09 Main report Introduction 16-52 10 Analysis of questioner- questioner
of officials and borrowers 53-75
11 Comparative study 76-82 12 Case study 83-84 13 Special case study 85 14 Research operation 86 15 Objective of the project 87 16 Scope of the study 88 17 Limitation of the study 89 18 Research methodology 90-92 19 Findingsobservation 93 20 Conclusion 94 21 Suggestions 95 22 Analysis of questioner for
validation of the recommendation 96-98
23 Bibliography 99 24 Annexure 100-104
EXECUTIVE SUMMARY
OBJECTIVE
My project concerns Xpress credit high NPA under Xpress credit ndash a concern in which I need to
assist what is the total NPA under Xpress credit of different branches what are the reason for it who
is responsible for growing NPA and what are the steps to be taken to reduce NPA
Xpress credit
The Xpress Credit Scheme was formulated in April 2004 in the form of pre-approved loan to
employees of leading PSUs and Government organizations At present the scheme is open to
Employees of government semi-government profit making PSUs Educational Institutions of
national repute and companies of good standing (based on their CRA rating)
The scheme is built around the concept of check ndash off (the process by which the salary disbursing
officer undertakes to deduct loan installments from the salary of the borrower and remits the same to
the Bank for credit of the loan account)
ldquoXpress Creditrdquo has Legitimate personal purpose Expenses for Domestic or foreign travel
Medical Treatment Meeting any financial liabilities and many more
Employers Employees Person having minimum monthly income should satisfy the conditions of
Xpress Credit for being eligible for the loan
NON PEFORMING ASSETS (NPA) ndash CONCEPT
ldquoA NPA was defined as a credit facility in respect of which the interest or installment of principle as
remained ldquopast duerdquo for specific period of timerdquo
We can also understand by the other definition ie NPA means the debt which is given to the
doubtful customers by the Bank and is unable to recover is called Non Performing Assets
If any bank gives loan and is unpaid by the customer till 90 days that account is called as NPA
Account
ASSET - CLASSIFICATION
Assets can be categorized into four categories (a) standard (b) sub-standard (c) doubtful (d) loss
Standard assets the loan ac which are regular and do not carry more than normal risk are
known as standard assets
Sub- standard assets with effect from 3132005 a sub-standard assets is one which is
classified as NPA for a period not exceeding 12 months
Doubtful asset with effect from 3132005 an asset is to be classified as doubtful if it
remained NPA or sub-standard for a period exceeding 12 months
Loss assets a loss asset is one where loss has been identified by the bank or internal and
external auditors or the RBI inspection but the amount as not been written off wholly
IMPACTEFFECT OF NPA UPON BANKS
NPA are one of the major concerns of sector banks is increasing result in nonperforming
assets NPA do not generate interest income for the banks but the same time banks are
required to make provisions for such NPAs from their current profits
They result in reduced interest income
Adverse impact on capital adequacy ratio
Bad effect on goodwill amp on equity value
EARLY SYMPTOMS BY WHICH ONE CAN RECOGNIZE A PERFORMING ASSETS
TURNING TO A NON PERFORMING ASSET
1 FINANCIAL
a Non- payment of very first installment
b Bouncing of cheque due to insufficient balance in the ac
2 OPERATIONAL AND PHYSICAL
a If information is received that the borrower has either initiated the process of winding
up or not doing the business
b External non-controllable factor like natural calamities in the city where the borrower
lives
3) ATTITUDNAL CHANGE
a Avoidance of contact with bank
4) OTHER
a Change in govt policies
PREVENTIVE MEASUREMENT FOR NPA
Early recognition of the problem Identifying borrowers with genuine intent Timeliness and
adequacy of response Focus on cash flow Management effectiveness multiple financing
OBSERVATION FINDING
In my research I found that The NPA in Xpress credit is not very high as compared to other
segment
At some extent bank officials are responsible for NPA because bank is worried about mobilizing
more and more business but not concern about maintenance of accounts
Conclusions
To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit
2 NPAs represent high level of risk and low level of credit appraisal
3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA
4 There are some certain guidelines made by RBI for NPAs which are adopted by banks
5 NPA under Xpress credit is less as compare to other segment (education)
Recommendations suggestions
In my study I have found some limitation So I can suggest following suggestions or area of
improvement
Bank should create effectiveness in management of NPAs
Proper monitoring of ac should be adopted to control NPAs
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the
financial capacity of the borrower before than credit facility
This all is done after carefully evaluating the financials position of the borrower
personal interview with the borrower Case study of the borrower as well as personal
interview with the bank officials of different branches
CHART ndashNO PARTICULARS PAGE- NO
01 Loan procedure of retail loan 29
11 Awareness level of borrower regarding NPA 54
12 Bank officials questionnaire analysis 55
13 Bank officials questionnaire analysis 56
14 Bank officials questionnaire analysis 57
15 Bank officials questionnaire analysis 58
16 Bank officials questionnaire analysis 59
17 Bank officials questionnaire analysis 60
18 Bank officials questionnaire analysis 61
19 Bank officials questionnaire analysis 62
110 Bank officials questionnaire analysis 63
111 Bank officials questionnaire analysis 64
112 Bank officials questionnaire analysis 65
113 Bank officials questionnaire analysis 66
114 Bank officials questionnaire analysis 67
115 Bank officials questionnaire analysis 68
116 Borrowers question analysis 70
117 Borrowers question analysis 71
118 Borrowers question analysis 72
119 Borrowers question analysis 73
120 Borrowers question analysis 74
121 Borrower questione analysis 75
122 Last three years NPA comparison of SBI 76
123 Last 10 years overall NPA of hzbag branch 77
124 Last 10 years NPA in p-segment of hzbag branch 78
125 Reason for turning an ac into NPA 82
126 Method of data collection 89
127 Recommendation testing 96
LIST OF CHARTS
LIST OF TABLES
TABLE- NO PARTICULARS PAGE ndash NO
01 Last three years NPAs76
02 Over all NPA over time of hzbag branch (10 years)
77
03 Last 10 years p-segment NPA of hzbag branch
78
04 Product wise NPA comparison of hzbag
branch
79
05 Branch wise comparison of NPA in Xpress
credit
80
06 Profession wise NPA comparison81
07 Reason for turning an ac into NPA as per the borrower
82
08 Validity testing of the recommendation(bank officers views)
96
STUDENT PROFILE
NAME Vivek Kumar gupta
Father name Rajendra Pd gupta
Gender Male
DOB 15081993
Academic qualification Pursuing BCom (insurance honors)
College St Xavierrsquos college Ranchi
At present Pursuing special diploma in Marine insurance
Contact no 7631011853
Email ID vivek7654595gmailcom
PROJECT MENTOR PROFILE
NAME Rajesh Kumar Jha
DESIGNATION Manager (PB) Hazaribag
WORK PLACE SBI Hazaribag
CONTACT NO 9931833473(personal) 9771458627(official)
EMAIL ID rajeshkjhasbicoin
SBI HAZARIBAG BRANCH PROFILE
BRANCH INFORMATION
Date of opening 17-10-55
Branch code 00090
Migration date 14-12-2006
Circle Patna
Network 2
Module name Dhanbad
Branch type Regular branch
MICR code 825002002
License date 17-10-1954
Controllers Email ID agm4zoransbiciin
COMMUNICATION ADDRESS
Address 1 State bank of India
Address 2 Ravindra path
Address 3 NH-33
City Hazaribag
Pin 825301
BRANCH MANAGER
Name Shrwan Kumar Singh
Designation Chief Manager
Contact no 9431140712
Email shrwansinghsbicoin
STAFF STRENGTH
Officers 15
Assistants 30
Messengers 12
Guards 03
ACCOUNTS
Total no of ac - 60720
SB ac ndash 46133
CA ac - 510
Advances ndash 7247 Lakhs
Deposits ndash 91408 Lakhs
Total no of ATMrsquoS ndash 08
NATURE OF THE PROJECT
Xpress credit is a form of personal loan devised to provide instant credit support to person in need It caters mainly salaried person who have their salary ac with the bank The loan is a very good source of increasing retail loan portfolio but also have inherent risk It is a clear loan without any security and hence attracts more provisioning also unexpected events like death of borrower creates problem of recovery Sometimes employers shift their salary to other bank intentionally to avoid repayment and sometime it is difficult to track their transfer and posting
Despite all positive factors of continuous income and benefit of recovery through department the bank is facing the problem of high NPA in Xpress credit
The study is an endeavor to search the cause of acrsquos turning into NPA analyzing the efforts of the bank to recover the dues and to suggest the measures to contain the NPA to minimum or to zero level
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the npa
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
COMPANY PROFILE OF SBI
The evolution of sbi can be traced back to the first decade of the 19th century It began with the
establishment of bank of culcutta in cuicutta on 2nd july 1806 The bank was redesined as the bank of
bangal three year later on 2nd january 1809 It was the first ever joint company of british india
established under the sponsorship of govt of bangal Subsiquently the bank of madras and bank of
bombay follwed the bank of bangal These banks were amalgamated to form imperial bank on 27th
jan 1921
An important turning point in the history of SBI is the launch of 1st five year plan of independence
india in 1951 The plan aimed to serving the indian economy in general and the rural sector of the
countryin particular There for in order to serve the economy as a whole and the rural sector in
particular all india rural credit survey committee recommended the formation of state ndash partnered
and state ndash sponsored bank An act was passed in the parliament of india in may 1955 As a result the
sbi was established on 1st july 1955this results in making SBI more powerful as much as quarter of
resourses of indian banking system was controlled by state later on state bank of india (subsidiary
banks) act was pessedin 1959 This act enabled the sbi to make the 8 state associated bank as its
subsidiaries
BRANCHES
The corporate centre of SBI is located in Mumbai In order to cater to different function There is several other
establishments in and outside Mumbai apart from corporate center The bank boasts of having as many as 14
local head office and 57 zonal offices located as major cities throughout India It is recorded that SBI has
more than 10000 branches will cater to its customer throughout India
ATM
SBI provides easy access to money to its customers through more than 90000 ATMs in India The
bank also facilitates the free transaction of money at ATMs of state bank group You may also
transect money through SBI commercial and international bank ltd by using the state bank ATM
CUM DEBIT CARD It the only banking company to open its ATM in region of kargil
Source SBIcoin
Xpress credit
INTRODUCTION-
The Xpress Credit Scheme was formulated in April 2004 in the form of pre-approved loan to
employees of leading PSUs and Government organizations At present the scheme is open to
Employees of government semi-government profit making PSUs Educational Institutions of
national repute and companies of good standing (based on their CRA rating) The scheme is built
around the concept of check ndash off (the process by which the salary disbursing officer undertakes to
deduct loan installments from the salary of the borrower and remits the same to the Bank for credit
of the loan account) Xpress Credit Loans may also be sanctioned in those cases where the borrower
gives sufficient PDCs (Post Dated Cheques) for entire tenure of the loan
Source Xpress credit circular
PURPOSE
The loan under the scheme is granted for any legitimate personal purpose (eg expenses for
domestic or foreign travel medical treatment of self or a family member meeting any financial
liability such as marriage of sondaughter defraying educational expenses of wards meeting
margins for purchase of assets etc)
Source Xpress credit circular
ELIGIBILITY
1 EMPLOYERS
Central and state Government
Quasi-Government
Profit making PSUs
Educational Institutions of National Repute
Companies with a CRA rating of SB1 to SB5
Companies with a CRA rating of SB6 and SB7 are also eligible if it satisfies take over norms
2 EMPLOYEES
Permanent employees with a minimum 1 yearrsquos length of service
He should have sufficient cash flows to repay the loan from salary as evidenced by 6 monthsrsquo
salary slipsincome tax returns of 2 years
He should provide proof of residence and proof of identity to satisfy KYC norms
He should produce 6 months satisfactory statement of bank account (at any bank)
Proof of Employment in the eligible company
Source Xpress credit circular
MINIMUM NET MONTHLY INCOME
The minimum Net Monthly Income (NMI) of the employee should beRs5000- It can
Be lowered to Rs3000- subject to the condition that the salary accounts of the entire enterprise are
with us The Branch will ensure to obtain an Undertaking from the borrower that there is no other
deduction from hisher salary which is not reflected in the salary slip [As per Annexure ndash (B) ndash (v)]
LOAN AMOUNT
a) Minimum Rs24000=
b) Maximum 24 Months NMI with a ceiling of Rs1500 lacs
TYPE OF LOAN
LoanD Term demand Loan (NO OVERDRAFT)
REPAYMENT PERIOD
Maximum 60 months
EMI NMI le 50
REVIEW
Review of loan will be done yearly
RENEWAL
Renewal of loans will be allowed after 24 months
CHECK OFF
The process by which the salary disbursing officer under takes to deduct the loan
installments from the salary of the borrower and remits the same to the Bank for credit to the loan
account
Or
The employer pays the borrowerrsquos salary into his SavingsCurrent Account with our Bank
The borrower gives an irrevocable Standing Instruction (SI) For recovery of the loan installments
from his aforesaid account with the SI being synchronized with the date of credit of salary in the
borrowerrsquos SavingsCurrent Account
AND
The employer undertakes to inform the Bank if and when there is a severance due to borrowerrsquos
transfer resignation retirement etc[ Branch will ensure to obtain the undertaking from the employer
and employee as per Annexure ndash B (I) B (ii) II or B (iii) ]
Source Xpress credit circular
CATEGORY I
FULL CHECK OFF
As given under the head CHECKOFF
AND
Undertaking from the employer to obtain a NOC from the Bank before settling the dues of the
borrower on transfer resignation retirement etc [As per Annexure ndash B (IV)]
This stipulation can be waived by the sanctioning authority incase of employees of Central State
Government PSUs Universities and Reputed Colleges In case of other employers the CGM of the
Circle has been permitted to waive the stipulation But in no case this can be waived for IT sector
employees
CATEGORY II
PARTIAL CHECK OFF
As given under the head CHECKOFF
CATEGORY III
WITH NO CHECK OFF
The employer pays the borrowerrsquos salary into his SavingsCurrent Account with our Bank
The borrower gives an irrevocable Standing Instruction (SI) for
recovery of the loan installments from his aforesaid account twitch the SI being synchronized with
the date of credit of salary in the borrowerrsquos SavingsCurrent Account
OR
Conditions as given under the head CHECKOFF is not fulfilled but the borrower provides monthly
PDCs (Post Dated Cheques) for entire tenure of the loan provided eligibility criteria are fulfilled
(Guidelines on Post Dated cheques is annexed as per Annexure A)
INTEREST RATE
The Interest rate is based on the category of Check off available
Category I
5 above the base rate ie - 970 +5 =1470 ( currently 1470 pa)
Category II
7 above the base rate (currently 1670 pa)
Note The GM of the Network is vested with powers to extend the Category II rate to a Category III
borrower only in case of employees of SB1 to SB5 rated companies who maintain their salary
accounts with us The Category III employees who do not maintain their salary accounts with us but
provide PDCs for the loan should be charged the card rate applicable to Category III and no
deviation should be permitted by Circle GMs
PENAL INTEREST
Penal interest should not be charged for loans up to Rs25000For Loans above Rs25000- if the
irregularity exceeds EMI or installment amount for a period of one month then penal interest would
be charged 2 pa(over and above the applicable interest
rate) on the overdue amount for the period of default If part installment or part EMI remains
overdue then penal interest should not be levied
This provision has been made to avoid application of penal interest on Personal Segment Loan
accounts where EMIs stipulated or installments are being paid regularly by the borrowers
Source Xpress credit circular
SECURITY
The loan is clean in nature and no security is required
PROCESSING FEE
11 of the loan amount including tax
PRE-SANCTION PROCESS
The following documents will be obtained before sanction-
I Application cum appraisal Form With a photograph of the borrower duly attested by the
authorized official
II It is proposed to put in place an arrangement for verification of the address of the borrower by an
outside agency A report duly signed by the verification agency (in places where an arrangement is
in place) or by our officerstaff in other places (where verification agency approved by Corporate
Centre is not available) should be complied based on the following verifications
I Verification of the borrowerrsquos residence address as given in the loan application
by actually visiting the residence of the borrower
II Verification of the borrowerrsquos office address as given in the loan application by
actually visiting the office of the borrower
Source Xpress credit circular
III Verification of the borrowerrsquos residence telephone number as given in the loan
application by actually calling the residence telephone number of the borrower
IV Verification of the borrowerrsquos office telephone number as given in the loan
Application by actually calling the office telephone number of the Borrower
V Verification of the IT return of the Borrower with IT department through a
person approved by the Regional OfficeZonal Office where feasible Where IT
return cannot be verified by the Bank statement of account of the borrower may
be scrutinized to verified income flows
Where the verification is not outsourced the Branch staff
Must do the verification and the report should be added with the loan documents
Flow chart of loan procedure of retail loan
Chart no 01
Disagree
NON PEFORMING ASSETS (NPA) ndash CONCEPT
The three letters ldquoNPArdquostrike terror in banking sector and business circle todayNPA is the short
Form of ldquoNon performing Assetsrdquo
Enquiry about loan
Agreeprovided with check list and
application
submission of documents and application dully
filled up
Documents taken
verification of application and
documebtsCIBIL report
Processing of loan
Sangtion of loan
Document
Control Disbursal of loan
phasewise lumpsum
In banking NPA are loans given to doubtful customers who may or may not repay the
loan on time There are two types of assets viz performing and non performing Performing loans
are standard loans on which both the principle and interest are secured and their return is guaranteed
NPA means the debt which is given by the bank is unable to recover is called
nonperforming assets A NPA account in the books of accounts is an asset as it indicates the amount
received from the defaulters It means if any bank gives loan and is not paid by the customers till 90
days than that account is called as NPA account
DEFINITION
An asset including leased assets becomes nonperforming when it ceases to generate income
for the bank
A NPA was defined as a credit facility in respect of which the interest or installment
of principle as remained ldquopast duerdquo for specific period of time
Source googlecoin
The specific period was reduced in a phased manner as under
wef ndash 31031993 four quarters
wef ndash 31 031994 three quarters
wef - 31031995 two quarters
wef - 31032001 180 days
wef - 31032004 90 days from past due
90 days delinquency is not applicable to agriculture segment
With effect from march 31 2004 NPA shall be a loan or an advance where
1) Term loan interest installment of principle remain over due for 90 days
2) Cash creditover draft an account remain ldquoout of orderrdquo for a period of more than 90 days
3) Bills The bills remain over due for a period more than 90 days
4) Agriculture loan
a The loan has been granted for short duration crop installments of the principle
remain over due for two crop season beyond the due date
b If the loan has been granted for long duration crop installment of the principle
remain over due for one crop season beyond the due date
Source Rbiorgin
CLASSIFICATION OF LOANS
In India loans are classified on following basis
Performing assets
Loans where the interest and or principle not remain overdue for more then 90 days
Non-performing assets
Any loan repayment remains over due for more than 90 days is considered as NPA
According to the securitization and re construction of financial assets and enforcement of
security interest ordinance2002 ldquonon performing assetsrdquo(NPA) means an assets or ac of
borrower which has been classified by the bank as sub-standard doubtful or loss asset in
accordance with the guidelines relating to asset classification issued by RBI
Source googlecoin
ASSET - CLASSIFICATION
Assets can be categorized into four categories (a) standard (b) sub-standard
(c) doubtful (d) loss The last three categories are classified as npa based on the the period for
which the asset has remained non-performing and the realisability of the dues
Standard assets the loan ac which are regular and do not carry more than normal risk are
known as standard assets there could be ac which though have not become npa but are
irregular Such ac are called special mention ac
Sub- standard assets with effect from 3132005 a sub-standard assets is one which is
classified as NPA for a period not exceeding 12 months
Doubtful asset with effect from 3132005 an asset is to be classified as doubtful if it
remained npa or sub-standard for a period exceeding 12 months
Loss assets a loss asset is one where loss has been identified by the bank or internal and
external auditors or the RBI inspection but the amount as not been written off wholly In
other words such an asset is considered uncollectable and such little value that its
continuance as a bankable asset is not warranted although there may be some salvage or
recoverable value
NPA IDENTIFICATION NORMS
With effect from 31st march 2004 a loan or advance become npa when
a Interest or installment of the principle remains overdue for a period more then 90
days in respect of term loan
b The ac remain out of order for a period more 90days in respect of over draft cash
cash credit
c The bill remains overdue for a period more than 90 days in case of bills purchased
and discounted
d With effect from Sept 2004 loan granted for short duration crops will be treated as
NPA if the installment of principle or interest there on remains overdue for two crop
season and loan granted for long duration will be treated as NPA if the installment
remains overdue for one crop season
Out of order
An account will be treated as out as out of order if the outstanding balance remain
continuously in excess of the sanctioned limitdrawing power In cases where the
outstanding balance in the principle operating ac is less than the sanctioned limit but
there are no credit continuously for 90 days as on the date of balance sheet or the
credit are not enough to cover the interest debited during the same period
Overdue
An amount due to the bank under any credit facility is overdue it is not paid on the due
date fixed by the bank
The date of npa will be actual date on which sippage occurred as mentioned below
For term and demand loan ac
The date on which the installment of the principle have
remaine overdue for a period more then 90 days
For over draft and cash credit ac
The date on which the ac completed period of more than 90
days of being continuously out of order
Source wwwRBI Org in
PROVISING NORMS
There is time lag between an ac becoming doubtful for recovery the realization of security and
erosion over a loan period of time in its value So RBI directives now requiresthe banks to make
provisions in their balance sheet for all non- standard loan asset Provisioning is made on all types of
assets ie Standard sub-standard doubtful and loss assets
1 Standard assets RBI vides its circular dated 151108 revised the provisioning requirements
For all type of standard assets it has been reduced to a uniform level of 040of outstanding
at global basis except in the case of direct advance to agriculture and SME sector which
shall continue to attract a provisioning of 025 The provision toward standard assets need
not to be netted from gross advances but shown separately as ldquo contigent provisionsrdquo against
standard assets under other liquidities and provisions others in schedule 5 of the balance
sheet
2 Sub-standard assets- In respect of sub-standard assets the rate of provision is 10 of
outstanding balance without considering ECGC guarantee cover or securities available
However if the loan was unsecured from the begining there would be additional provision of
10 ie total provision would be 20 of the outstanding balance Unsecured exposure is
defined as an exposure where the realizable value of the security as assessed by the
bankreserve banks inspecting officers is not more than 10 ab-intio of the outstanding
exposure
3 Doubtful assets In case of doubtful assets while making provision realizable value of
security is to be considered 100 provision is made for unsecured portion In case of
secured portion the rate of provision depend on age of doubtful assets as under
Age of doubtful assets Provision as of secured portion
Doubtful up to 1 year D1 20 of RVS( realizable value of security)
Doubtful for more than 1 year D2 30 of RVS
Doubtful for more than 3 years D2 100 of RVS
Thus if an ac is doubtful for more than 3 years than 100 of the provision is to be made
both from secured and unsecured portion If an advance has been guaranteed by DICGC
CGFTECGC and is doubtful than provision on secured portion will be as in other cases but
provision on unsecured portion will be made after deducting the claim value
4 LOSS ASSET 100 of the outstanding amount while making provision on NPAs amount
lying in suspense ac and derecognized interest should be deducted from gross advance and
provision be made on balance amount
5 OVERALL PROVISION With a view to improving the improving the provisioning cover
and enhancing the soundness of the individual banks RBI has proposed in oct- 09 policy that
bank should augment their provisions and ensure that their total provisioning coverage ratio
including floating provisions is not less than 70
Source wwwRBIorgin
IMPACTEFFECT OF NPA UPON BANKS
A strong banking sector is important for flourishing economy The failure of banking sector
may have an adverse impact on other sector NPA are one of the major concerns of sector
banks is increasing result in nonperforming assets The NPA impact drastically to the
working of banks The efficiency of bank not always reflected by the size of its balance sheet
but by the level of return on its assetsNPA do not generate interest income for the banks but
the same time banks are required to make provisions for such NPAs from their current
profits
They erode current profits through provisioning requirement
They result in reduced interest income
They require higher provisioning requirements effecting profits and accretion to capital
Adverse impact on capital adequacy ratio
Roe and Roa goes down because NPA do not earn
Banks rating gets effect
Banks cost of raising funds goes up
Bad effect on goodwill
Bad effect on equity value
EARLY SYMPTOMS BY WHICH ONE CAN RECOGNIZE A PERFORMING
ASSETS TURNING TO A NON PERFORMING ASSET
Four categories of early symptoms
1) FINANCIAL
(a) Non- payment of very first installment
(b) Bouncing of cheque due to insufficient balance in the ac
(c) Irregularity in installment
(d) Irregularity of operations in ac
(e) Unpaid overdue bill
(f) Declining current ratio
2) OPERATIONAL AND PHYSICAL
(a) If information is received that the borrower has either initiated the process of winding up or not doing the business
(b) Over-due receivable
(c) Stock statement not submitted on time
(d) External non-controllable factor like natural calamities in the city where the borrower lives
(e) Non- payment of salary
(3) ATTITUDNAL CHANGE
(a) Use for personal comfort stocks and shares by borrowers
(b) Avoidance of contact with bank
(c) Problem between partners
(4) OTHER
(a) Change in govt policies
(b) Death of the borrower
(c) Delay in salary
PREVENTIVE MEASUREMENT FOR NPA
Early recognition of the problem
Invariably by the time banks start their efforts to get involved
in a revival process its too late to retrieve the situation ndash both in terms of rehabilitation of the
project and the recovery of banks dues Identification of the weakness regardless of the fact
that it may not have become NPA is imperative Assessment of the potential of revival may
be done on the basis of a techno-economic viability study Restructuring should be attempted
where after an objective assessment of the promoterrsquos intention banks are convinced of a
turn around with in a scheduled facilitate winding upselling of units earlier so as to recover
whatever is possible through means before the security position becomes worse
Identifying borrowers with genuine intent
Identifying borrower with genuine intent from those who
are non-serious with commitment or stake in revival is a challenge confronting bankers Here
the role of front line officials at branch level is paramount as they are the ones who have
intelligent inputs with regard to promoters lsquo sincerity and capability to achieve turnaround
Based on this objective assessment bank should decide as quickly as possible whether it
would be worthwhile to commit additional finance
In this regard banks may consider having
ldquospecial investigationrdquo of all financial transaction or business transaction books of account
order to ascertain real factor that contributed to sickness of borrower Bank may have panel
of technical experts with proven expertise and task record of preparing techno-economic
study of the project of the borrowers
Borrowers having genuine problems due to temporary mismatch in find flow or sudden
requirement of additional fund may entertained at branch level for this purpose a special
limit to such type of cases should be decided This will obviate the need to route the
additional funding through the controlling officers in deserving cases and avert many
accounts sleeping into NPA category
Timeliness and adequacy of response
Longer the delay in response greater the enjury to the
account and the asset Time is a crucial element in any restructuring or rehabilitation activity
The response decided on the basis of techno- economic study and promoterrsquos commitment
has to be adequate in terms of extend of additional funding and relaxations etc under the
restructuring exercise The package of assistance may be flexible and bank may look at the
exit option
Focus on cash flow
While financing at the time of restructuring the banks may not be guided
by the conventional fund flow analysis only which could yield a potentially misleading
picture Appraisal for fresh credit requirement may be done by analyzing fond flow in
conjunction with the cash flow rather than only on the basis of fund flow
Source wwwAskcom
Management effectiveness
The general perception among the borrower is lack of finance that
leads to sickness and NPAs but this may not be the case all the time Management effectiveness
advance business condition is a very important aspect that affects a borrowing units fortunes A bank
may commit a multiple finance to an align unit only after basic viability of the enterprise also in the
context of quality of management is examined and confirmed It will be useful to have consultant
appointed as early as possible to examine this aspect A proper techno-economic viability study thus
become the basis on which any future action can be considered
Multiple financing
A) During the exercise for assessment of viability and restructuring a pragmatic and unified
approach by all the leading banks as also sharing of all relevant information on the
borrower would go a long way toward overall success of rehabilitation exercise given the
probability of successfailure
B) In some default cases Where the unit is still working The bank should make sure that it
captures the cash flow and insure that such cash are used for working capital purpose
Toward this end there should be a continuous flow of information among consortium
member A bank which is not a part of consortium may not be allowed to offer credit
facility to such defaulting clients Current account facility may also be denied at non-
consortium banks to such clients and violation may attract penal action The credit
information bureau of india (CIBIL) may be very useful for meaningful information
exchange on defaulting borrowers once the setup become fully operational
C) In a forum of lenders the priority of each lender will be different While one set of lender
may be willing to wait for longer time to recover its dues another lender may have a much
shorter timeframe in mind So it is possible that the letter categories of lenders may be
willing to exit even at a cost by a discounted settlement of the exposure There for any plan
for restructuringrehabilitation may takes into account
D) Corporate debt restructuring it has been institutionalized in 2001 to provide a timely and
transparent system for restructuring the corporate debt of RS 20 crores and above with the
banks on a voluntary basis and outside a legal framework Under this system bank are
greatly benefit in terms of restructuring of large standard accounts (potential NPAs) and
viable sub-standard account with multiple banking arrangement
NPA MANAGEMENT- RESOLUTION
Compromise settlement schemes
Restructuringrescheduling
Lok adalat
Corporate debt restructuring cell
Debt recovery Tribunals (DRT)
Proceeding under the code of civil procedure
Board of industrial and financial reconstruction
National company law Tribunal (NCLT)
Sale of NPA to other bank
Sale of NPA to ARCSC under securitization and reconstruction of financial assets for
enforcement of security interest Act 2000 (SRFAESI)
Liquidation
Source wwwRBIorgin
NPA MANAGEMENT IN INDIA
Formation of the credit information bureau (India) limited (CIBIL)
Release of willful defaulterrsquos listRBI also releases a list of borrowers with aggregate
outstanding of RS 1 crore and above against whom bank have filed suit for recovery of their
fund
Reporting of frauds to RBI
Norms of lenders labiality- framing of fair practices code with regard to lenders lability to
be followed by banks
Risk assessment and Risk management
RBI has advised banks to all cases of willful defaulters in case of 1 crore and above and
files suits in such cases
Responding quick mortality cases
Special mention accounts for early identification for bad debt loans and advances over due
for less than one or two quarters would come under this category However these accounts do
not need provisioning
INTERNATIONAL PRACTICES ON NPA MANAGEMENT
Subsequent to the Asian currency crisis which severely crippled the financial system In
addition to the above some of the more recent and aggressive step to NPAs have been taken
by Taiwan Taiwanese financial institution have been encouraged to merge and form bank
based AMCs through the recent introduction of financial holding company act and financial
institution Asian countries the magnitude of NPAs in Asian financial institution was brought
to light Driven by the need to proactively tackle the soaring NPAs level the respective govt
embarked upon a program of substantial reform This involves setting up processes for early
identification and resolution of NPAs The table below provides a cross country comparison
of approaches used for NPA resolution Mergers Act A long side the ministry of finance has
followed a carrot and strict policy of specifying the required NPA ratio for banks while also
providing flexibility in modes of NPA assets resolution and a conduct
ive regulatory and tax environment Deferred loss write-off provisions have been instituted to
provide breathing space for lenders to absorb NPA write-off While it is too early to
comment on success of NPA resolution process in Taiwan the early sign are encouraging
Detailed below are some key NPA management approaches adopted by banks in South East
Asian countries
1 Credit risk mitigation
2 Early warning systems
3 Assets management companies
Increasing willingness to sell NPAs to AMCs
Effective resolution strategy
Appointment of special administrators
4 Out of court restructuring
Source wwwgooglecom
DIFFICULTIES WITH NON PERFORMING ASSETS
I Owners do not receive a market return on their capital In the worst case if the bank
fails owner lose their assets
II Depositors do not receive a market return on savings In the worst case if the bank
fails depositors lose their assets or uninsured balance Banks also redistribute losses
to other borrowers by charging higher rate of interest
III Non-performing loans epitomize bad investors They misallocate credit from good
projects which do not receive funding to failed project
IV 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
shortage the shortage can jam payments across the country
b Illiquidity constraints banks in paying depositors eg cashing their paychecks
c Undercapitalized banks exceed the bank capital base
Lending by bank has been politicized It is common knowledge
that loans are given to various industrial houses on common consideration and
viability of project but on political consideration In normal circumstances banks
before extending any loan would make a thorough study of the actual need of the
party considered the prospect of the business in which it is engaged Since it is
not looked into many of the loans becomes NPA
REASONS F0R AN ACCOUNT BECOMING NPA
Those attribute to borrower
Failure to bring in required capital
Lack of proper planning
Unwanted expenses
Lack of expertise
Poor credit collection
Miss management
Heavy borrowing
Lack of knowledge regarding NPA
Willful defaulters
Death of the borrower
Those attribute to banks
Wrong selection of borrower
Poor credit appraisal
Unhelpful in supervision
Too inflexible attitude
System overload
Lack of motivation
Delay in sanction
Lack of trained staff
Lack of commitment to recovery
Lack of personal visit to the borrower office
Lack of personal visit to the borrowerrsquos residence
Other
Fast changing technology
Unhelpful attitude of govt
Increase in material cost
Government policies
Taxation law
Political hostility
INDIAN ECONOMY AND NPA
Undoubtedly the world economy has slowed down recession is at its peak globally stock markets
have tumbled and business itself getting hard to do The Indian economy has been much affected due
to high fiscal deficit poor infrastructure facilities sticky legal system cutting of exposures to
emerging market by FIIs etc
Further international rating agencies like standard and poor
have lowered Indiarsquos credit rating to sub- investment grade Such negative aspects have often
outweighed positive such as increasing for reserve and a manageable inflation rate
Under such situation I go without saying that banks are no exception
and are bound to face the heat of global down turn One would be surprise to know that banks and
financial institution in India holds non-performing assets worth Rs 1 10000 crores Bankers have
realized that unless the level of NPA is reduced drastically they will find it difficult to survive
The actual level of NPA in India is around $ 40 billion much higher than govt estimation of $16
billion This difference is largely due to the discrepancy in accounting the NPAs followed by India
and rest of the world The accounting norms of India are less stringent than those of the developed
economies The Indian banks also have the tendency to extend the past due Considering the GDP
India nearly $ 470 billion the NPA are 8 of the total GDP which was better than many Asian
countries The NPA of china was 45 of the GDP While Japan had NPAs of 25 of the GDP
The aggregate level of NPAs in Asia has increased from $ 25 billion in 2007 to
$ 34 billion on 2009 looking to such overall pictures of the market we can say that India is doing
well and the steps taken are looking favorable
Source googlecoin
DATA ANALYZING THE QUETIONNAIRE
Two set of questionnaire were prepared to collect the feedback One set of questionnaire was meant for branches and other set of questionnaire was meant for borrowers
The set of questionnaire were given to the branches under hazaribag (RBO) and collected the feedback of the bankers of P segment and the branch manager
The questionnaire prepared for branch contained 15 questions and the questionnaire prepared for borrower contains 10 questions
The data was collected from 50 bankers and the data analysis of the branch questionnaire is as follows
Question number 1
Does not require any data analysis and information was sought to know the business level of the branches for the purpose of whether particular branch is actively engaged in xpress credit portfolio
Question number 2
Do you think that the borrowers are aware about NPA
Answer
32 of the respondent feel that the borrowers are not aware about NPA and 18 respondents feel that borrowers are aware about NPA
Chart no 11
yes
no
0
5
10
15
20
25
30
35
1832 Column1
Conclusion
Majority of the bank officials feels that the borrowers are not aware about NPA
Question number 3
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Answer
Out of 32 respondent 22 respondents is fully satisfied that lack of knowledge among the borrower regarding NPA is one of the reason for NPA 08 respondent were partially satisfied with it and 02 respondent were not satisfied with it
Chart no 12
fully satisfied(22)69
partially satisfied(8)25
not satisfied(2)6
Sales
Conclusion
Majority of the borrowers feels that lack of knowledge among the borrower regarding NPA is one of the reasons for NPA
Question number 4 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Answer
Out of 50 respondent 30 of the respondent strongly satisfied that these external factors contribute to NPA 10 respondent were partially satisfied with it 5 were not satisfied where as 5 were fully dissatisfied with it
Chart no 13
6020
10
10
fully satisfied(30) partially satisfied(10) not satisfiec(5) fully desatisfied(5)
Conclusion
Most of the respondent thinks that external factrs like willful defaulter change in govt policy contribute to NPA
Question number 5
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Answer
Chart no 14
feedback
fully satisfied(20)partially satisfied(12)not satisfied(12)fully dissatisfied(6)
Conclusion
As per the response of the officials most of the officials feel that internal factors are also responsible for NPA
Question number 6
Do you think that inflation is one of the reasons for NPA
Answer
Out f 50 responses 22 were strongly satisfied 18 were partially satisfied 8 were not satisfied and 2 were fully dissatisfied
Chart no 15
fully satisfied(20)44
partially satisfied(18)36
not satisfied(5)10
fullt dissatisfied(5)10
Conclusion
Growing inflation increasing goods rate is also one of the reason for NPA
Question number 7
Do you think that lack of PSS is also contributed to NPA
Answer
Out of 50 responses 30 were fully satisfied with it 12 were partially satisfied and 8 were fully dissatisfied
Chart no 16
6024
16
Open
fully satisfied(30)Partially satisfied(12)not satisfied(0)fully dissatisfied(8)
Conclusion
Majority of the officiais feels that lack of PSS is one of the reason for NPA This means that the PSS carried out by the bank is not sufficient or not carried out properly
Question number 8
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Answer
Most of the respondent feels that increase in unwanted expenses of the borrwer ls contribute to NPA
Chart no 17
56
12
28
4
FULLY SATISFIED(28)PARTIALLY SATISFIED(6)NOT SATISFIED(14)FULLY DISSATISFIED(2)
Conclusion
As per response of the officials increasing inflation have an adverse effect on the financial sector its working performance as well as on NPA
Question number 9
Do you think that high rate of interest under Xpress credit also contributes to NPA
Answer
Out of 50 respondent 25 respondent were not satisfied 10 were partially satisfied 10 were strongly dissatisfied where as only 5 out of 50 were fully satisfied with it
Chart no 18
strongly satisfied(5)partially satisfied(10)not satisfied(25)fully dissatisfied(10)
Conclusion
Most of the respondents are not satisfied with it They feel that the rate of interest charged by SBI under Xpress credit is not high and it will not contribute to NPS
Question number 10
Do you think that lack of proper planning of the borrower is one of the reason for NPA
Answer
Out of 70 respondent 35 were fully satisfied 5 were not satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 19
fully satisfied(35)70
partially satisfied(10)20
not satisfied(5)10
Conclusion
Most of the respondent feels that the borrowers borrow money from the bank without any proper planning which is one of the most important reason for NPA
Question number 11
Is heavy borrowing also contribute to NPA
Answer
Out of 50 respondent 25 respondent were fully satisfied 12 were partially satisfied 8 were not satisfied were as 5 were fully dissatisfied
Chart no 110
50
24
16
10
fully satisfied(25) partially satisfied(12) not satisfied(8) fully dissatisfied(5)
Question number 12
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Answer
As per the response of the officials 20 were fully satisfied 66were partially satisfied 4 were not satisfied with it were as 10 respondent were fully dissatisfied
Chart no 111
fully satisfied(10)20
partially satisfied(33)66
not satisfied(2)4
fullydissatisfied(5)10
Conclusion
As per the response given by the officials most of the officials were partially satisfied that wrong selection of borrower also contribute to NPA which means that selection process carried out by the bank is not appropriate or there is some difficulties in implementing them
Question number 13
Do you think that poor credit appraisal also contribute to NPA
Answer
Out of 50 respondent 5 were fully satisfied 10 were fully satisfied 30 were not satisfied were as only 5 were fully dissatisfied
Chart no 112
fully satisfied(5)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 14
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Answer
Out of 50 responses 3 were fully satisfied 15 were partially satisfied 25 were not satisfied where as 7 were full dissatisfied
Chart no 113
fully satisfied(3)partiallt satisfied(15)not satisfied(25)fully dissatisfied(7)
Conclusion
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not contribute to NPA This means that the attitude of bank toward the borrower is not inflexible
Question number 15
Do you think that system over load is also one of the causes of NPA
Answer
Out of 50 respondent 28 were fully satisfied 12 were partially satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 114
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
ACKNOWLEDGEMENT
It is a great pleasure for me in submitting the project report on lsquoXpress credit ndash High NPA in Xpress Credit a concern for the fulfillment of summer internship
I am much thankful and owe a deep debt gratitude to all those who have helped me in preparing this project report Words seem to be inadequate to express my sincere thanks to Mr Rajesh Kr Jha (project mentor) for his valuable guidance constructive criticism untiring efforts and immense encouragement during the entire course of study due to which my effort has been rewarded
I would also like to thanks Mr OP Singh( Regional manager RBO) Mr Ajay Pratap (manager LPC) Mr Shrwan Kr Singh(chief manager) Mr US Prasad (Deputive manager PB ) who gave me an opportunity to learn the recurring acknowledgement of what is working in our lives that can help us not only to survive but surmount our difficulties
I express my sincere thanks to whole SBI (Hazaribag branch) for giving me all facility during my project and guiding me during the whole internship period
I want to thank all those who have supported me and gave their timely guidance Last but not least I am very grateful to Mr TS Prasad (RetdAGM of SBI and presently a visiting faculty of St Xavierrsquos college Ranchi) who not only suggested me the right method of study in the project but also guided at every stage of my work
He was a philosopher and guide for me in the true sense
Vivek Kumar Gupta
CONTENTS
SLNO PARTICULARS PAGE NO 01 Executive summery 04-07 02 List of charts 08 03 List of tables 09 04 Student profile 10 05 Mentor profile 11 06 Branch profile 12-13 07 Nature of the project 14 08 Objective of the study 15 09 Main report Introduction 16-52 10 Analysis of questioner- questioner
of officials and borrowers 53-75
11 Comparative study 76-82 12 Case study 83-84 13 Special case study 85 14 Research operation 86 15 Objective of the project 87 16 Scope of the study 88 17 Limitation of the study 89 18 Research methodology 90-92 19 Findingsobservation 93 20 Conclusion 94 21 Suggestions 95 22 Analysis of questioner for
validation of the recommendation 96-98
23 Bibliography 99 24 Annexure 100-104
EXECUTIVE SUMMARY
OBJECTIVE
My project concerns Xpress credit high NPA under Xpress credit ndash a concern in which I need to
assist what is the total NPA under Xpress credit of different branches what are the reason for it who
is responsible for growing NPA and what are the steps to be taken to reduce NPA
Xpress credit
The Xpress Credit Scheme was formulated in April 2004 in the form of pre-approved loan to
employees of leading PSUs and Government organizations At present the scheme is open to
Employees of government semi-government profit making PSUs Educational Institutions of
national repute and companies of good standing (based on their CRA rating)
The scheme is built around the concept of check ndash off (the process by which the salary disbursing
officer undertakes to deduct loan installments from the salary of the borrower and remits the same to
the Bank for credit of the loan account)
ldquoXpress Creditrdquo has Legitimate personal purpose Expenses for Domestic or foreign travel
Medical Treatment Meeting any financial liabilities and many more
Employers Employees Person having minimum monthly income should satisfy the conditions of
Xpress Credit for being eligible for the loan
NON PEFORMING ASSETS (NPA) ndash CONCEPT
ldquoA NPA was defined as a credit facility in respect of which the interest or installment of principle as
remained ldquopast duerdquo for specific period of timerdquo
We can also understand by the other definition ie NPA means the debt which is given to the
doubtful customers by the Bank and is unable to recover is called Non Performing Assets
If any bank gives loan and is unpaid by the customer till 90 days that account is called as NPA
Account
ASSET - CLASSIFICATION
Assets can be categorized into four categories (a) standard (b) sub-standard (c) doubtful (d) loss
Standard assets the loan ac which are regular and do not carry more than normal risk are
known as standard assets
Sub- standard assets with effect from 3132005 a sub-standard assets is one which is
classified as NPA for a period not exceeding 12 months
Doubtful asset with effect from 3132005 an asset is to be classified as doubtful if it
remained NPA or sub-standard for a period exceeding 12 months
Loss assets a loss asset is one where loss has been identified by the bank or internal and
external auditors or the RBI inspection but the amount as not been written off wholly
IMPACTEFFECT OF NPA UPON BANKS
NPA are one of the major concerns of sector banks is increasing result in nonperforming
assets NPA do not generate interest income for the banks but the same time banks are
required to make provisions for such NPAs from their current profits
They result in reduced interest income
Adverse impact on capital adequacy ratio
Bad effect on goodwill amp on equity value
EARLY SYMPTOMS BY WHICH ONE CAN RECOGNIZE A PERFORMING ASSETS
TURNING TO A NON PERFORMING ASSET
1 FINANCIAL
a Non- payment of very first installment
b Bouncing of cheque due to insufficient balance in the ac
2 OPERATIONAL AND PHYSICAL
a If information is received that the borrower has either initiated the process of winding
up or not doing the business
b External non-controllable factor like natural calamities in the city where the borrower
lives
3) ATTITUDNAL CHANGE
a Avoidance of contact with bank
4) OTHER
a Change in govt policies
PREVENTIVE MEASUREMENT FOR NPA
Early recognition of the problem Identifying borrowers with genuine intent Timeliness and
adequacy of response Focus on cash flow Management effectiveness multiple financing
OBSERVATION FINDING
In my research I found that The NPA in Xpress credit is not very high as compared to other
segment
At some extent bank officials are responsible for NPA because bank is worried about mobilizing
more and more business but not concern about maintenance of accounts
Conclusions
To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit
2 NPAs represent high level of risk and low level of credit appraisal
3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA
4 There are some certain guidelines made by RBI for NPAs which are adopted by banks
5 NPA under Xpress credit is less as compare to other segment (education)
Recommendations suggestions
In my study I have found some limitation So I can suggest following suggestions or area of
improvement
Bank should create effectiveness in management of NPAs
Proper monitoring of ac should be adopted to control NPAs
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the
financial capacity of the borrower before than credit facility
This all is done after carefully evaluating the financials position of the borrower
personal interview with the borrower Case study of the borrower as well as personal
interview with the bank officials of different branches
CHART ndashNO PARTICULARS PAGE- NO
01 Loan procedure of retail loan 29
11 Awareness level of borrower regarding NPA 54
12 Bank officials questionnaire analysis 55
13 Bank officials questionnaire analysis 56
14 Bank officials questionnaire analysis 57
15 Bank officials questionnaire analysis 58
16 Bank officials questionnaire analysis 59
17 Bank officials questionnaire analysis 60
18 Bank officials questionnaire analysis 61
19 Bank officials questionnaire analysis 62
110 Bank officials questionnaire analysis 63
111 Bank officials questionnaire analysis 64
112 Bank officials questionnaire analysis 65
113 Bank officials questionnaire analysis 66
114 Bank officials questionnaire analysis 67
115 Bank officials questionnaire analysis 68
116 Borrowers question analysis 70
117 Borrowers question analysis 71
118 Borrowers question analysis 72
119 Borrowers question analysis 73
120 Borrowers question analysis 74
121 Borrower questione analysis 75
122 Last three years NPA comparison of SBI 76
123 Last 10 years overall NPA of hzbag branch 77
124 Last 10 years NPA in p-segment of hzbag branch 78
125 Reason for turning an ac into NPA 82
126 Method of data collection 89
127 Recommendation testing 96
LIST OF CHARTS
LIST OF TABLES
TABLE- NO PARTICULARS PAGE ndash NO
01 Last three years NPAs76
02 Over all NPA over time of hzbag branch (10 years)
77
03 Last 10 years p-segment NPA of hzbag branch
78
04 Product wise NPA comparison of hzbag
branch
79
05 Branch wise comparison of NPA in Xpress
credit
80
06 Profession wise NPA comparison81
07 Reason for turning an ac into NPA as per the borrower
82
08 Validity testing of the recommendation(bank officers views)
96
STUDENT PROFILE
NAME Vivek Kumar gupta
Father name Rajendra Pd gupta
Gender Male
DOB 15081993
Academic qualification Pursuing BCom (insurance honors)
College St Xavierrsquos college Ranchi
At present Pursuing special diploma in Marine insurance
Contact no 7631011853
Email ID vivek7654595gmailcom
PROJECT MENTOR PROFILE
NAME Rajesh Kumar Jha
DESIGNATION Manager (PB) Hazaribag
WORK PLACE SBI Hazaribag
CONTACT NO 9931833473(personal) 9771458627(official)
EMAIL ID rajeshkjhasbicoin
SBI HAZARIBAG BRANCH PROFILE
BRANCH INFORMATION
Date of opening 17-10-55
Branch code 00090
Migration date 14-12-2006
Circle Patna
Network 2
Module name Dhanbad
Branch type Regular branch
MICR code 825002002
License date 17-10-1954
Controllers Email ID agm4zoransbiciin
COMMUNICATION ADDRESS
Address 1 State bank of India
Address 2 Ravindra path
Address 3 NH-33
City Hazaribag
Pin 825301
BRANCH MANAGER
Name Shrwan Kumar Singh
Designation Chief Manager
Contact no 9431140712
Email shrwansinghsbicoin
STAFF STRENGTH
Officers 15
Assistants 30
Messengers 12
Guards 03
ACCOUNTS
Total no of ac - 60720
SB ac ndash 46133
CA ac - 510
Advances ndash 7247 Lakhs
Deposits ndash 91408 Lakhs
Total no of ATMrsquoS ndash 08
NATURE OF THE PROJECT
Xpress credit is a form of personal loan devised to provide instant credit support to person in need It caters mainly salaried person who have their salary ac with the bank The loan is a very good source of increasing retail loan portfolio but also have inherent risk It is a clear loan without any security and hence attracts more provisioning also unexpected events like death of borrower creates problem of recovery Sometimes employers shift their salary to other bank intentionally to avoid repayment and sometime it is difficult to track their transfer and posting
Despite all positive factors of continuous income and benefit of recovery through department the bank is facing the problem of high NPA in Xpress credit
The study is an endeavor to search the cause of acrsquos turning into NPA analyzing the efforts of the bank to recover the dues and to suggest the measures to contain the NPA to minimum or to zero level
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the npa
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
COMPANY PROFILE OF SBI
The evolution of sbi can be traced back to the first decade of the 19th century It began with the
establishment of bank of culcutta in cuicutta on 2nd july 1806 The bank was redesined as the bank of
bangal three year later on 2nd january 1809 It was the first ever joint company of british india
established under the sponsorship of govt of bangal Subsiquently the bank of madras and bank of
bombay follwed the bank of bangal These banks were amalgamated to form imperial bank on 27th
jan 1921
An important turning point in the history of SBI is the launch of 1st five year plan of independence
india in 1951 The plan aimed to serving the indian economy in general and the rural sector of the
countryin particular There for in order to serve the economy as a whole and the rural sector in
particular all india rural credit survey committee recommended the formation of state ndash partnered
and state ndash sponsored bank An act was passed in the parliament of india in may 1955 As a result the
sbi was established on 1st july 1955this results in making SBI more powerful as much as quarter of
resourses of indian banking system was controlled by state later on state bank of india (subsidiary
banks) act was pessedin 1959 This act enabled the sbi to make the 8 state associated bank as its
subsidiaries
BRANCHES
The corporate centre of SBI is located in Mumbai In order to cater to different function There is several other
establishments in and outside Mumbai apart from corporate center The bank boasts of having as many as 14
local head office and 57 zonal offices located as major cities throughout India It is recorded that SBI has
more than 10000 branches will cater to its customer throughout India
ATM
SBI provides easy access to money to its customers through more than 90000 ATMs in India The
bank also facilitates the free transaction of money at ATMs of state bank group You may also
transect money through SBI commercial and international bank ltd by using the state bank ATM
CUM DEBIT CARD It the only banking company to open its ATM in region of kargil
Source SBIcoin
Xpress credit
INTRODUCTION-
The Xpress Credit Scheme was formulated in April 2004 in the form of pre-approved loan to
employees of leading PSUs and Government organizations At present the scheme is open to
Employees of government semi-government profit making PSUs Educational Institutions of
national repute and companies of good standing (based on their CRA rating) The scheme is built
around the concept of check ndash off (the process by which the salary disbursing officer undertakes to
deduct loan installments from the salary of the borrower and remits the same to the Bank for credit
of the loan account) Xpress Credit Loans may also be sanctioned in those cases where the borrower
gives sufficient PDCs (Post Dated Cheques) for entire tenure of the loan
Source Xpress credit circular
PURPOSE
The loan under the scheme is granted for any legitimate personal purpose (eg expenses for
domestic or foreign travel medical treatment of self or a family member meeting any financial
liability such as marriage of sondaughter defraying educational expenses of wards meeting
margins for purchase of assets etc)
Source Xpress credit circular
ELIGIBILITY
1 EMPLOYERS
Central and state Government
Quasi-Government
Profit making PSUs
Educational Institutions of National Repute
Companies with a CRA rating of SB1 to SB5
Companies with a CRA rating of SB6 and SB7 are also eligible if it satisfies take over norms
2 EMPLOYEES
Permanent employees with a minimum 1 yearrsquos length of service
He should have sufficient cash flows to repay the loan from salary as evidenced by 6 monthsrsquo
salary slipsincome tax returns of 2 years
He should provide proof of residence and proof of identity to satisfy KYC norms
He should produce 6 months satisfactory statement of bank account (at any bank)
Proof of Employment in the eligible company
Source Xpress credit circular
MINIMUM NET MONTHLY INCOME
The minimum Net Monthly Income (NMI) of the employee should beRs5000- It can
Be lowered to Rs3000- subject to the condition that the salary accounts of the entire enterprise are
with us The Branch will ensure to obtain an Undertaking from the borrower that there is no other
deduction from hisher salary which is not reflected in the salary slip [As per Annexure ndash (B) ndash (v)]
LOAN AMOUNT
a) Minimum Rs24000=
b) Maximum 24 Months NMI with a ceiling of Rs1500 lacs
TYPE OF LOAN
LoanD Term demand Loan (NO OVERDRAFT)
REPAYMENT PERIOD
Maximum 60 months
EMI NMI le 50
REVIEW
Review of loan will be done yearly
RENEWAL
Renewal of loans will be allowed after 24 months
CHECK OFF
The process by which the salary disbursing officer under takes to deduct the loan
installments from the salary of the borrower and remits the same to the Bank for credit to the loan
account
Or
The employer pays the borrowerrsquos salary into his SavingsCurrent Account with our Bank
The borrower gives an irrevocable Standing Instruction (SI) For recovery of the loan installments
from his aforesaid account with the SI being synchronized with the date of credit of salary in the
borrowerrsquos SavingsCurrent Account
AND
The employer undertakes to inform the Bank if and when there is a severance due to borrowerrsquos
transfer resignation retirement etc[ Branch will ensure to obtain the undertaking from the employer
and employee as per Annexure ndash B (I) B (ii) II or B (iii) ]
Source Xpress credit circular
CATEGORY I
FULL CHECK OFF
As given under the head CHECKOFF
AND
Undertaking from the employer to obtain a NOC from the Bank before settling the dues of the
borrower on transfer resignation retirement etc [As per Annexure ndash B (IV)]
This stipulation can be waived by the sanctioning authority incase of employees of Central State
Government PSUs Universities and Reputed Colleges In case of other employers the CGM of the
Circle has been permitted to waive the stipulation But in no case this can be waived for IT sector
employees
CATEGORY II
PARTIAL CHECK OFF
As given under the head CHECKOFF
CATEGORY III
WITH NO CHECK OFF
The employer pays the borrowerrsquos salary into his SavingsCurrent Account with our Bank
The borrower gives an irrevocable Standing Instruction (SI) for
recovery of the loan installments from his aforesaid account twitch the SI being synchronized with
the date of credit of salary in the borrowerrsquos SavingsCurrent Account
OR
Conditions as given under the head CHECKOFF is not fulfilled but the borrower provides monthly
PDCs (Post Dated Cheques) for entire tenure of the loan provided eligibility criteria are fulfilled
(Guidelines on Post Dated cheques is annexed as per Annexure A)
INTEREST RATE
The Interest rate is based on the category of Check off available
Category I
5 above the base rate ie - 970 +5 =1470 ( currently 1470 pa)
Category II
7 above the base rate (currently 1670 pa)
Note The GM of the Network is vested with powers to extend the Category II rate to a Category III
borrower only in case of employees of SB1 to SB5 rated companies who maintain their salary
accounts with us The Category III employees who do not maintain their salary accounts with us but
provide PDCs for the loan should be charged the card rate applicable to Category III and no
deviation should be permitted by Circle GMs
PENAL INTEREST
Penal interest should not be charged for loans up to Rs25000For Loans above Rs25000- if the
irregularity exceeds EMI or installment amount for a period of one month then penal interest would
be charged 2 pa(over and above the applicable interest
rate) on the overdue amount for the period of default If part installment or part EMI remains
overdue then penal interest should not be levied
This provision has been made to avoid application of penal interest on Personal Segment Loan
accounts where EMIs stipulated or installments are being paid regularly by the borrowers
Source Xpress credit circular
SECURITY
The loan is clean in nature and no security is required
PROCESSING FEE
11 of the loan amount including tax
PRE-SANCTION PROCESS
The following documents will be obtained before sanction-
I Application cum appraisal Form With a photograph of the borrower duly attested by the
authorized official
II It is proposed to put in place an arrangement for verification of the address of the borrower by an
outside agency A report duly signed by the verification agency (in places where an arrangement is
in place) or by our officerstaff in other places (where verification agency approved by Corporate
Centre is not available) should be complied based on the following verifications
I Verification of the borrowerrsquos residence address as given in the loan application
by actually visiting the residence of the borrower
II Verification of the borrowerrsquos office address as given in the loan application by
actually visiting the office of the borrower
Source Xpress credit circular
III Verification of the borrowerrsquos residence telephone number as given in the loan
application by actually calling the residence telephone number of the borrower
IV Verification of the borrowerrsquos office telephone number as given in the loan
Application by actually calling the office telephone number of the Borrower
V Verification of the IT return of the Borrower with IT department through a
person approved by the Regional OfficeZonal Office where feasible Where IT
return cannot be verified by the Bank statement of account of the borrower may
be scrutinized to verified income flows
Where the verification is not outsourced the Branch staff
Must do the verification and the report should be added with the loan documents
Flow chart of loan procedure of retail loan
Chart no 01
Disagree
NON PEFORMING ASSETS (NPA) ndash CONCEPT
The three letters ldquoNPArdquostrike terror in banking sector and business circle todayNPA is the short
Form of ldquoNon performing Assetsrdquo
Enquiry about loan
Agreeprovided with check list and
application
submission of documents and application dully
filled up
Documents taken
verification of application and
documebtsCIBIL report
Processing of loan
Sangtion of loan
Document
Control Disbursal of loan
phasewise lumpsum
In banking NPA are loans given to doubtful customers who may or may not repay the
loan on time There are two types of assets viz performing and non performing Performing loans
are standard loans on which both the principle and interest are secured and their return is guaranteed
NPA means the debt which is given by the bank is unable to recover is called
nonperforming assets A NPA account in the books of accounts is an asset as it indicates the amount
received from the defaulters It means if any bank gives loan and is not paid by the customers till 90
days than that account is called as NPA account
DEFINITION
An asset including leased assets becomes nonperforming when it ceases to generate income
for the bank
A NPA was defined as a credit facility in respect of which the interest or installment
of principle as remained ldquopast duerdquo for specific period of time
Source googlecoin
The specific period was reduced in a phased manner as under
wef ndash 31031993 four quarters
wef ndash 31 031994 three quarters
wef - 31031995 two quarters
wef - 31032001 180 days
wef - 31032004 90 days from past due
90 days delinquency is not applicable to agriculture segment
With effect from march 31 2004 NPA shall be a loan or an advance where
1) Term loan interest installment of principle remain over due for 90 days
2) Cash creditover draft an account remain ldquoout of orderrdquo for a period of more than 90 days
3) Bills The bills remain over due for a period more than 90 days
4) Agriculture loan
a The loan has been granted for short duration crop installments of the principle
remain over due for two crop season beyond the due date
b If the loan has been granted for long duration crop installment of the principle
remain over due for one crop season beyond the due date
Source Rbiorgin
CLASSIFICATION OF LOANS
In India loans are classified on following basis
Performing assets
Loans where the interest and or principle not remain overdue for more then 90 days
Non-performing assets
Any loan repayment remains over due for more than 90 days is considered as NPA
According to the securitization and re construction of financial assets and enforcement of
security interest ordinance2002 ldquonon performing assetsrdquo(NPA) means an assets or ac of
borrower which has been classified by the bank as sub-standard doubtful or loss asset in
accordance with the guidelines relating to asset classification issued by RBI
Source googlecoin
ASSET - CLASSIFICATION
Assets can be categorized into four categories (a) standard (b) sub-standard
(c) doubtful (d) loss The last three categories are classified as npa based on the the period for
which the asset has remained non-performing and the realisability of the dues
Standard assets the loan ac which are regular and do not carry more than normal risk are
known as standard assets there could be ac which though have not become npa but are
irregular Such ac are called special mention ac
Sub- standard assets with effect from 3132005 a sub-standard assets is one which is
classified as NPA for a period not exceeding 12 months
Doubtful asset with effect from 3132005 an asset is to be classified as doubtful if it
remained npa or sub-standard for a period exceeding 12 months
Loss assets a loss asset is one where loss has been identified by the bank or internal and
external auditors or the RBI inspection but the amount as not been written off wholly In
other words such an asset is considered uncollectable and such little value that its
continuance as a bankable asset is not warranted although there may be some salvage or
recoverable value
NPA IDENTIFICATION NORMS
With effect from 31st march 2004 a loan or advance become npa when
a Interest or installment of the principle remains overdue for a period more then 90
days in respect of term loan
b The ac remain out of order for a period more 90days in respect of over draft cash
cash credit
c The bill remains overdue for a period more than 90 days in case of bills purchased
and discounted
d With effect from Sept 2004 loan granted for short duration crops will be treated as
NPA if the installment of principle or interest there on remains overdue for two crop
season and loan granted for long duration will be treated as NPA if the installment
remains overdue for one crop season
Out of order
An account will be treated as out as out of order if the outstanding balance remain
continuously in excess of the sanctioned limitdrawing power In cases where the
outstanding balance in the principle operating ac is less than the sanctioned limit but
there are no credit continuously for 90 days as on the date of balance sheet or the
credit are not enough to cover the interest debited during the same period
Overdue
An amount due to the bank under any credit facility is overdue it is not paid on the due
date fixed by the bank
The date of npa will be actual date on which sippage occurred as mentioned below
For term and demand loan ac
The date on which the installment of the principle have
remaine overdue for a period more then 90 days
For over draft and cash credit ac
The date on which the ac completed period of more than 90
days of being continuously out of order
Source wwwRBI Org in
PROVISING NORMS
There is time lag between an ac becoming doubtful for recovery the realization of security and
erosion over a loan period of time in its value So RBI directives now requiresthe banks to make
provisions in their balance sheet for all non- standard loan asset Provisioning is made on all types of
assets ie Standard sub-standard doubtful and loss assets
1 Standard assets RBI vides its circular dated 151108 revised the provisioning requirements
For all type of standard assets it has been reduced to a uniform level of 040of outstanding
at global basis except in the case of direct advance to agriculture and SME sector which
shall continue to attract a provisioning of 025 The provision toward standard assets need
not to be netted from gross advances but shown separately as ldquo contigent provisionsrdquo against
standard assets under other liquidities and provisions others in schedule 5 of the balance
sheet
2 Sub-standard assets- In respect of sub-standard assets the rate of provision is 10 of
outstanding balance without considering ECGC guarantee cover or securities available
However if the loan was unsecured from the begining there would be additional provision of
10 ie total provision would be 20 of the outstanding balance Unsecured exposure is
defined as an exposure where the realizable value of the security as assessed by the
bankreserve banks inspecting officers is not more than 10 ab-intio of the outstanding
exposure
3 Doubtful assets In case of doubtful assets while making provision realizable value of
security is to be considered 100 provision is made for unsecured portion In case of
secured portion the rate of provision depend on age of doubtful assets as under
Age of doubtful assets Provision as of secured portion
Doubtful up to 1 year D1 20 of RVS( realizable value of security)
Doubtful for more than 1 year D2 30 of RVS
Doubtful for more than 3 years D2 100 of RVS
Thus if an ac is doubtful for more than 3 years than 100 of the provision is to be made
both from secured and unsecured portion If an advance has been guaranteed by DICGC
CGFTECGC and is doubtful than provision on secured portion will be as in other cases but
provision on unsecured portion will be made after deducting the claim value
4 LOSS ASSET 100 of the outstanding amount while making provision on NPAs amount
lying in suspense ac and derecognized interest should be deducted from gross advance and
provision be made on balance amount
5 OVERALL PROVISION With a view to improving the improving the provisioning cover
and enhancing the soundness of the individual banks RBI has proposed in oct- 09 policy that
bank should augment their provisions and ensure that their total provisioning coverage ratio
including floating provisions is not less than 70
Source wwwRBIorgin
IMPACTEFFECT OF NPA UPON BANKS
A strong banking sector is important for flourishing economy The failure of banking sector
may have an adverse impact on other sector NPA are one of the major concerns of sector
banks is increasing result in nonperforming assets The NPA impact drastically to the
working of banks The efficiency of bank not always reflected by the size of its balance sheet
but by the level of return on its assetsNPA do not generate interest income for the banks but
the same time banks are required to make provisions for such NPAs from their current
profits
They erode current profits through provisioning requirement
They result in reduced interest income
They require higher provisioning requirements effecting profits and accretion to capital
Adverse impact on capital adequacy ratio
Roe and Roa goes down because NPA do not earn
Banks rating gets effect
Banks cost of raising funds goes up
Bad effect on goodwill
Bad effect on equity value
EARLY SYMPTOMS BY WHICH ONE CAN RECOGNIZE A PERFORMING
ASSETS TURNING TO A NON PERFORMING ASSET
Four categories of early symptoms
1) FINANCIAL
(a) Non- payment of very first installment
(b) Bouncing of cheque due to insufficient balance in the ac
(c) Irregularity in installment
(d) Irregularity of operations in ac
(e) Unpaid overdue bill
(f) Declining current ratio
2) OPERATIONAL AND PHYSICAL
(a) If information is received that the borrower has either initiated the process of winding up or not doing the business
(b) Over-due receivable
(c) Stock statement not submitted on time
(d) External non-controllable factor like natural calamities in the city where the borrower lives
(e) Non- payment of salary
(3) ATTITUDNAL CHANGE
(a) Use for personal comfort stocks and shares by borrowers
(b) Avoidance of contact with bank
(c) Problem between partners
(4) OTHER
(a) Change in govt policies
(b) Death of the borrower
(c) Delay in salary
PREVENTIVE MEASUREMENT FOR NPA
Early recognition of the problem
Invariably by the time banks start their efforts to get involved
in a revival process its too late to retrieve the situation ndash both in terms of rehabilitation of the
project and the recovery of banks dues Identification of the weakness regardless of the fact
that it may not have become NPA is imperative Assessment of the potential of revival may
be done on the basis of a techno-economic viability study Restructuring should be attempted
where after an objective assessment of the promoterrsquos intention banks are convinced of a
turn around with in a scheduled facilitate winding upselling of units earlier so as to recover
whatever is possible through means before the security position becomes worse
Identifying borrowers with genuine intent
Identifying borrower with genuine intent from those who
are non-serious with commitment or stake in revival is a challenge confronting bankers Here
the role of front line officials at branch level is paramount as they are the ones who have
intelligent inputs with regard to promoters lsquo sincerity and capability to achieve turnaround
Based on this objective assessment bank should decide as quickly as possible whether it
would be worthwhile to commit additional finance
In this regard banks may consider having
ldquospecial investigationrdquo of all financial transaction or business transaction books of account
order to ascertain real factor that contributed to sickness of borrower Bank may have panel
of technical experts with proven expertise and task record of preparing techno-economic
study of the project of the borrowers
Borrowers having genuine problems due to temporary mismatch in find flow or sudden
requirement of additional fund may entertained at branch level for this purpose a special
limit to such type of cases should be decided This will obviate the need to route the
additional funding through the controlling officers in deserving cases and avert many
accounts sleeping into NPA category
Timeliness and adequacy of response
Longer the delay in response greater the enjury to the
account and the asset Time is a crucial element in any restructuring or rehabilitation activity
The response decided on the basis of techno- economic study and promoterrsquos commitment
has to be adequate in terms of extend of additional funding and relaxations etc under the
restructuring exercise The package of assistance may be flexible and bank may look at the
exit option
Focus on cash flow
While financing at the time of restructuring the banks may not be guided
by the conventional fund flow analysis only which could yield a potentially misleading
picture Appraisal for fresh credit requirement may be done by analyzing fond flow in
conjunction with the cash flow rather than only on the basis of fund flow
Source wwwAskcom
Management effectiveness
The general perception among the borrower is lack of finance that
leads to sickness and NPAs but this may not be the case all the time Management effectiveness
advance business condition is a very important aspect that affects a borrowing units fortunes A bank
may commit a multiple finance to an align unit only after basic viability of the enterprise also in the
context of quality of management is examined and confirmed It will be useful to have consultant
appointed as early as possible to examine this aspect A proper techno-economic viability study thus
become the basis on which any future action can be considered
Multiple financing
A) During the exercise for assessment of viability and restructuring a pragmatic and unified
approach by all the leading banks as also sharing of all relevant information on the
borrower would go a long way toward overall success of rehabilitation exercise given the
probability of successfailure
B) In some default cases Where the unit is still working The bank should make sure that it
captures the cash flow and insure that such cash are used for working capital purpose
Toward this end there should be a continuous flow of information among consortium
member A bank which is not a part of consortium may not be allowed to offer credit
facility to such defaulting clients Current account facility may also be denied at non-
consortium banks to such clients and violation may attract penal action The credit
information bureau of india (CIBIL) may be very useful for meaningful information
exchange on defaulting borrowers once the setup become fully operational
C) In a forum of lenders the priority of each lender will be different While one set of lender
may be willing to wait for longer time to recover its dues another lender may have a much
shorter timeframe in mind So it is possible that the letter categories of lenders may be
willing to exit even at a cost by a discounted settlement of the exposure There for any plan
for restructuringrehabilitation may takes into account
D) Corporate debt restructuring it has been institutionalized in 2001 to provide a timely and
transparent system for restructuring the corporate debt of RS 20 crores and above with the
banks on a voluntary basis and outside a legal framework Under this system bank are
greatly benefit in terms of restructuring of large standard accounts (potential NPAs) and
viable sub-standard account with multiple banking arrangement
NPA MANAGEMENT- RESOLUTION
Compromise settlement schemes
Restructuringrescheduling
Lok adalat
Corporate debt restructuring cell
Debt recovery Tribunals (DRT)
Proceeding under the code of civil procedure
Board of industrial and financial reconstruction
National company law Tribunal (NCLT)
Sale of NPA to other bank
Sale of NPA to ARCSC under securitization and reconstruction of financial assets for
enforcement of security interest Act 2000 (SRFAESI)
Liquidation
Source wwwRBIorgin
NPA MANAGEMENT IN INDIA
Formation of the credit information bureau (India) limited (CIBIL)
Release of willful defaulterrsquos listRBI also releases a list of borrowers with aggregate
outstanding of RS 1 crore and above against whom bank have filed suit for recovery of their
fund
Reporting of frauds to RBI
Norms of lenders labiality- framing of fair practices code with regard to lenders lability to
be followed by banks
Risk assessment and Risk management
RBI has advised banks to all cases of willful defaulters in case of 1 crore and above and
files suits in such cases
Responding quick mortality cases
Special mention accounts for early identification for bad debt loans and advances over due
for less than one or two quarters would come under this category However these accounts do
not need provisioning
INTERNATIONAL PRACTICES ON NPA MANAGEMENT
Subsequent to the Asian currency crisis which severely crippled the financial system In
addition to the above some of the more recent and aggressive step to NPAs have been taken
by Taiwan Taiwanese financial institution have been encouraged to merge and form bank
based AMCs through the recent introduction of financial holding company act and financial
institution Asian countries the magnitude of NPAs in Asian financial institution was brought
to light Driven by the need to proactively tackle the soaring NPAs level the respective govt
embarked upon a program of substantial reform This involves setting up processes for early
identification and resolution of NPAs The table below provides a cross country comparison
of approaches used for NPA resolution Mergers Act A long side the ministry of finance has
followed a carrot and strict policy of specifying the required NPA ratio for banks while also
providing flexibility in modes of NPA assets resolution and a conduct
ive regulatory and tax environment Deferred loss write-off provisions have been instituted to
provide breathing space for lenders to absorb NPA write-off While it is too early to
comment on success of NPA resolution process in Taiwan the early sign are encouraging
Detailed below are some key NPA management approaches adopted by banks in South East
Asian countries
1 Credit risk mitigation
2 Early warning systems
3 Assets management companies
Increasing willingness to sell NPAs to AMCs
Effective resolution strategy
Appointment of special administrators
4 Out of court restructuring
Source wwwgooglecom
DIFFICULTIES WITH NON PERFORMING ASSETS
I Owners do not receive a market return on their capital In the worst case if the bank
fails owner lose their assets
II Depositors do not receive a market return on savings In the worst case if the bank
fails depositors lose their assets or uninsured balance Banks also redistribute losses
to other borrowers by charging higher rate of interest
III Non-performing loans epitomize bad investors They misallocate credit from good
projects which do not receive funding to failed project
IV 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
shortage the shortage can jam payments across the country
b Illiquidity constraints banks in paying depositors eg cashing their paychecks
c Undercapitalized banks exceed the bank capital base
Lending by bank has been politicized It is common knowledge
that loans are given to various industrial houses on common consideration and
viability of project but on political consideration In normal circumstances banks
before extending any loan would make a thorough study of the actual need of the
party considered the prospect of the business in which it is engaged Since it is
not looked into many of the loans becomes NPA
REASONS F0R AN ACCOUNT BECOMING NPA
Those attribute to borrower
Failure to bring in required capital
Lack of proper planning
Unwanted expenses
Lack of expertise
Poor credit collection
Miss management
Heavy borrowing
Lack of knowledge regarding NPA
Willful defaulters
Death of the borrower
Those attribute to banks
Wrong selection of borrower
Poor credit appraisal
Unhelpful in supervision
Too inflexible attitude
System overload
Lack of motivation
Delay in sanction
Lack of trained staff
Lack of commitment to recovery
Lack of personal visit to the borrower office
Lack of personal visit to the borrowerrsquos residence
Other
Fast changing technology
Unhelpful attitude of govt
Increase in material cost
Government policies
Taxation law
Political hostility
INDIAN ECONOMY AND NPA
Undoubtedly the world economy has slowed down recession is at its peak globally stock markets
have tumbled and business itself getting hard to do The Indian economy has been much affected due
to high fiscal deficit poor infrastructure facilities sticky legal system cutting of exposures to
emerging market by FIIs etc
Further international rating agencies like standard and poor
have lowered Indiarsquos credit rating to sub- investment grade Such negative aspects have often
outweighed positive such as increasing for reserve and a manageable inflation rate
Under such situation I go without saying that banks are no exception
and are bound to face the heat of global down turn One would be surprise to know that banks and
financial institution in India holds non-performing assets worth Rs 1 10000 crores Bankers have
realized that unless the level of NPA is reduced drastically they will find it difficult to survive
The actual level of NPA in India is around $ 40 billion much higher than govt estimation of $16
billion This difference is largely due to the discrepancy in accounting the NPAs followed by India
and rest of the world The accounting norms of India are less stringent than those of the developed
economies The Indian banks also have the tendency to extend the past due Considering the GDP
India nearly $ 470 billion the NPA are 8 of the total GDP which was better than many Asian
countries The NPA of china was 45 of the GDP While Japan had NPAs of 25 of the GDP
The aggregate level of NPAs in Asia has increased from $ 25 billion in 2007 to
$ 34 billion on 2009 looking to such overall pictures of the market we can say that India is doing
well and the steps taken are looking favorable
Source googlecoin
DATA ANALYZING THE QUETIONNAIRE
Two set of questionnaire were prepared to collect the feedback One set of questionnaire was meant for branches and other set of questionnaire was meant for borrowers
The set of questionnaire were given to the branches under hazaribag (RBO) and collected the feedback of the bankers of P segment and the branch manager
The questionnaire prepared for branch contained 15 questions and the questionnaire prepared for borrower contains 10 questions
The data was collected from 50 bankers and the data analysis of the branch questionnaire is as follows
Question number 1
Does not require any data analysis and information was sought to know the business level of the branches for the purpose of whether particular branch is actively engaged in xpress credit portfolio
Question number 2
Do you think that the borrowers are aware about NPA
Answer
32 of the respondent feel that the borrowers are not aware about NPA and 18 respondents feel that borrowers are aware about NPA
Chart no 11
yes
no
0
5
10
15
20
25
30
35
1832 Column1
Conclusion
Majority of the bank officials feels that the borrowers are not aware about NPA
Question number 3
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Answer
Out of 32 respondent 22 respondents is fully satisfied that lack of knowledge among the borrower regarding NPA is one of the reason for NPA 08 respondent were partially satisfied with it and 02 respondent were not satisfied with it
Chart no 12
fully satisfied(22)69
partially satisfied(8)25
not satisfied(2)6
Sales
Conclusion
Majority of the borrowers feels that lack of knowledge among the borrower regarding NPA is one of the reasons for NPA
Question number 4 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Answer
Out of 50 respondent 30 of the respondent strongly satisfied that these external factors contribute to NPA 10 respondent were partially satisfied with it 5 were not satisfied where as 5 were fully dissatisfied with it
Chart no 13
6020
10
10
fully satisfied(30) partially satisfied(10) not satisfiec(5) fully desatisfied(5)
Conclusion
Most of the respondent thinks that external factrs like willful defaulter change in govt policy contribute to NPA
Question number 5
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Answer
Chart no 14
feedback
fully satisfied(20)partially satisfied(12)not satisfied(12)fully dissatisfied(6)
Conclusion
As per the response of the officials most of the officials feel that internal factors are also responsible for NPA
Question number 6
Do you think that inflation is one of the reasons for NPA
Answer
Out f 50 responses 22 were strongly satisfied 18 were partially satisfied 8 were not satisfied and 2 were fully dissatisfied
Chart no 15
fully satisfied(20)44
partially satisfied(18)36
not satisfied(5)10
fullt dissatisfied(5)10
Conclusion
Growing inflation increasing goods rate is also one of the reason for NPA
Question number 7
Do you think that lack of PSS is also contributed to NPA
Answer
Out of 50 responses 30 were fully satisfied with it 12 were partially satisfied and 8 were fully dissatisfied
Chart no 16
6024
16
Open
fully satisfied(30)Partially satisfied(12)not satisfied(0)fully dissatisfied(8)
Conclusion
Majority of the officiais feels that lack of PSS is one of the reason for NPA This means that the PSS carried out by the bank is not sufficient or not carried out properly
Question number 8
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Answer
Most of the respondent feels that increase in unwanted expenses of the borrwer ls contribute to NPA
Chart no 17
56
12
28
4
FULLY SATISFIED(28)PARTIALLY SATISFIED(6)NOT SATISFIED(14)FULLY DISSATISFIED(2)
Conclusion
As per response of the officials increasing inflation have an adverse effect on the financial sector its working performance as well as on NPA
Question number 9
Do you think that high rate of interest under Xpress credit also contributes to NPA
Answer
Out of 50 respondent 25 respondent were not satisfied 10 were partially satisfied 10 were strongly dissatisfied where as only 5 out of 50 were fully satisfied with it
Chart no 18
strongly satisfied(5)partially satisfied(10)not satisfied(25)fully dissatisfied(10)
Conclusion
Most of the respondents are not satisfied with it They feel that the rate of interest charged by SBI under Xpress credit is not high and it will not contribute to NPS
Question number 10
Do you think that lack of proper planning of the borrower is one of the reason for NPA
Answer
Out of 70 respondent 35 were fully satisfied 5 were not satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 19
fully satisfied(35)70
partially satisfied(10)20
not satisfied(5)10
Conclusion
Most of the respondent feels that the borrowers borrow money from the bank without any proper planning which is one of the most important reason for NPA
Question number 11
Is heavy borrowing also contribute to NPA
Answer
Out of 50 respondent 25 respondent were fully satisfied 12 were partially satisfied 8 were not satisfied were as 5 were fully dissatisfied
Chart no 110
50
24
16
10
fully satisfied(25) partially satisfied(12) not satisfied(8) fully dissatisfied(5)
Question number 12
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Answer
As per the response of the officials 20 were fully satisfied 66were partially satisfied 4 were not satisfied with it were as 10 respondent were fully dissatisfied
Chart no 111
fully satisfied(10)20
partially satisfied(33)66
not satisfied(2)4
fullydissatisfied(5)10
Conclusion
As per the response given by the officials most of the officials were partially satisfied that wrong selection of borrower also contribute to NPA which means that selection process carried out by the bank is not appropriate or there is some difficulties in implementing them
Question number 13
Do you think that poor credit appraisal also contribute to NPA
Answer
Out of 50 respondent 5 were fully satisfied 10 were fully satisfied 30 were not satisfied were as only 5 were fully dissatisfied
Chart no 112
fully satisfied(5)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 14
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Answer
Out of 50 responses 3 were fully satisfied 15 were partially satisfied 25 were not satisfied where as 7 were full dissatisfied
Chart no 113
fully satisfied(3)partiallt satisfied(15)not satisfied(25)fully dissatisfied(7)
Conclusion
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not contribute to NPA This means that the attitude of bank toward the borrower is not inflexible
Question number 15
Do you think that system over load is also one of the causes of NPA
Answer
Out of 50 respondent 28 were fully satisfied 12 were partially satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 114
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
SLNO PARTICULARS PAGE NO 01 Executive summery 04-07 02 List of charts 08 03 List of tables 09 04 Student profile 10 05 Mentor profile 11 06 Branch profile 12-13 07 Nature of the project 14 08 Objective of the study 15 09 Main report Introduction 16-52 10 Analysis of questioner- questioner
of officials and borrowers 53-75
11 Comparative study 76-82 12 Case study 83-84 13 Special case study 85 14 Research operation 86 15 Objective of the project 87 16 Scope of the study 88 17 Limitation of the study 89 18 Research methodology 90-92 19 Findingsobservation 93 20 Conclusion 94 21 Suggestions 95 22 Analysis of questioner for
validation of the recommendation 96-98
23 Bibliography 99 24 Annexure 100-104
EXECUTIVE SUMMARY
OBJECTIVE
My project concerns Xpress credit high NPA under Xpress credit ndash a concern in which I need to
assist what is the total NPA under Xpress credit of different branches what are the reason for it who
is responsible for growing NPA and what are the steps to be taken to reduce NPA
Xpress credit
The Xpress Credit Scheme was formulated in April 2004 in the form of pre-approved loan to
employees of leading PSUs and Government organizations At present the scheme is open to
Employees of government semi-government profit making PSUs Educational Institutions of
national repute and companies of good standing (based on their CRA rating)
The scheme is built around the concept of check ndash off (the process by which the salary disbursing
officer undertakes to deduct loan installments from the salary of the borrower and remits the same to
the Bank for credit of the loan account)
ldquoXpress Creditrdquo has Legitimate personal purpose Expenses for Domestic or foreign travel
Medical Treatment Meeting any financial liabilities and many more
Employers Employees Person having minimum monthly income should satisfy the conditions of
Xpress Credit for being eligible for the loan
NON PEFORMING ASSETS (NPA) ndash CONCEPT
ldquoA NPA was defined as a credit facility in respect of which the interest or installment of principle as
remained ldquopast duerdquo for specific period of timerdquo
We can also understand by the other definition ie NPA means the debt which is given to the
doubtful customers by the Bank and is unable to recover is called Non Performing Assets
If any bank gives loan and is unpaid by the customer till 90 days that account is called as NPA
Account
ASSET - CLASSIFICATION
Assets can be categorized into four categories (a) standard (b) sub-standard (c) doubtful (d) loss
Standard assets the loan ac which are regular and do not carry more than normal risk are
known as standard assets
Sub- standard assets with effect from 3132005 a sub-standard assets is one which is
classified as NPA for a period not exceeding 12 months
Doubtful asset with effect from 3132005 an asset is to be classified as doubtful if it
remained NPA or sub-standard for a period exceeding 12 months
Loss assets a loss asset is one where loss has been identified by the bank or internal and
external auditors or the RBI inspection but the amount as not been written off wholly
IMPACTEFFECT OF NPA UPON BANKS
NPA are one of the major concerns of sector banks is increasing result in nonperforming
assets NPA do not generate interest income for the banks but the same time banks are
required to make provisions for such NPAs from their current profits
They result in reduced interest income
Adverse impact on capital adequacy ratio
Bad effect on goodwill amp on equity value
EARLY SYMPTOMS BY WHICH ONE CAN RECOGNIZE A PERFORMING ASSETS
TURNING TO A NON PERFORMING ASSET
1 FINANCIAL
a Non- payment of very first installment
b Bouncing of cheque due to insufficient balance in the ac
2 OPERATIONAL AND PHYSICAL
a If information is received that the borrower has either initiated the process of winding
up or not doing the business
b External non-controllable factor like natural calamities in the city where the borrower
lives
3) ATTITUDNAL CHANGE
a Avoidance of contact with bank
4) OTHER
a Change in govt policies
PREVENTIVE MEASUREMENT FOR NPA
Early recognition of the problem Identifying borrowers with genuine intent Timeliness and
adequacy of response Focus on cash flow Management effectiveness multiple financing
OBSERVATION FINDING
In my research I found that The NPA in Xpress credit is not very high as compared to other
segment
At some extent bank officials are responsible for NPA because bank is worried about mobilizing
more and more business but not concern about maintenance of accounts
Conclusions
To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit
2 NPAs represent high level of risk and low level of credit appraisal
3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA
4 There are some certain guidelines made by RBI for NPAs which are adopted by banks
5 NPA under Xpress credit is less as compare to other segment (education)
Recommendations suggestions
In my study I have found some limitation So I can suggest following suggestions or area of
improvement
Bank should create effectiveness in management of NPAs
Proper monitoring of ac should be adopted to control NPAs
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the
financial capacity of the borrower before than credit facility
This all is done after carefully evaluating the financials position of the borrower
personal interview with the borrower Case study of the borrower as well as personal
interview with the bank officials of different branches
CHART ndashNO PARTICULARS PAGE- NO
01 Loan procedure of retail loan 29
11 Awareness level of borrower regarding NPA 54
12 Bank officials questionnaire analysis 55
13 Bank officials questionnaire analysis 56
14 Bank officials questionnaire analysis 57
15 Bank officials questionnaire analysis 58
16 Bank officials questionnaire analysis 59
17 Bank officials questionnaire analysis 60
18 Bank officials questionnaire analysis 61
19 Bank officials questionnaire analysis 62
110 Bank officials questionnaire analysis 63
111 Bank officials questionnaire analysis 64
112 Bank officials questionnaire analysis 65
113 Bank officials questionnaire analysis 66
114 Bank officials questionnaire analysis 67
115 Bank officials questionnaire analysis 68
116 Borrowers question analysis 70
117 Borrowers question analysis 71
118 Borrowers question analysis 72
119 Borrowers question analysis 73
120 Borrowers question analysis 74
121 Borrower questione analysis 75
122 Last three years NPA comparison of SBI 76
123 Last 10 years overall NPA of hzbag branch 77
124 Last 10 years NPA in p-segment of hzbag branch 78
125 Reason for turning an ac into NPA 82
126 Method of data collection 89
127 Recommendation testing 96
LIST OF CHARTS
LIST OF TABLES
TABLE- NO PARTICULARS PAGE ndash NO
01 Last three years NPAs76
02 Over all NPA over time of hzbag branch (10 years)
77
03 Last 10 years p-segment NPA of hzbag branch
78
04 Product wise NPA comparison of hzbag
branch
79
05 Branch wise comparison of NPA in Xpress
credit
80
06 Profession wise NPA comparison81
07 Reason for turning an ac into NPA as per the borrower
82
08 Validity testing of the recommendation(bank officers views)
96
STUDENT PROFILE
NAME Vivek Kumar gupta
Father name Rajendra Pd gupta
Gender Male
DOB 15081993
Academic qualification Pursuing BCom (insurance honors)
College St Xavierrsquos college Ranchi
At present Pursuing special diploma in Marine insurance
Contact no 7631011853
Email ID vivek7654595gmailcom
PROJECT MENTOR PROFILE
NAME Rajesh Kumar Jha
DESIGNATION Manager (PB) Hazaribag
WORK PLACE SBI Hazaribag
CONTACT NO 9931833473(personal) 9771458627(official)
EMAIL ID rajeshkjhasbicoin
SBI HAZARIBAG BRANCH PROFILE
BRANCH INFORMATION
Date of opening 17-10-55
Branch code 00090
Migration date 14-12-2006
Circle Patna
Network 2
Module name Dhanbad
Branch type Regular branch
MICR code 825002002
License date 17-10-1954
Controllers Email ID agm4zoransbiciin
COMMUNICATION ADDRESS
Address 1 State bank of India
Address 2 Ravindra path
Address 3 NH-33
City Hazaribag
Pin 825301
BRANCH MANAGER
Name Shrwan Kumar Singh
Designation Chief Manager
Contact no 9431140712
Email shrwansinghsbicoin
STAFF STRENGTH
Officers 15
Assistants 30
Messengers 12
Guards 03
ACCOUNTS
Total no of ac - 60720
SB ac ndash 46133
CA ac - 510
Advances ndash 7247 Lakhs
Deposits ndash 91408 Lakhs
Total no of ATMrsquoS ndash 08
NATURE OF THE PROJECT
Xpress credit is a form of personal loan devised to provide instant credit support to person in need It caters mainly salaried person who have their salary ac with the bank The loan is a very good source of increasing retail loan portfolio but also have inherent risk It is a clear loan without any security and hence attracts more provisioning also unexpected events like death of borrower creates problem of recovery Sometimes employers shift their salary to other bank intentionally to avoid repayment and sometime it is difficult to track their transfer and posting
Despite all positive factors of continuous income and benefit of recovery through department the bank is facing the problem of high NPA in Xpress credit
The study is an endeavor to search the cause of acrsquos turning into NPA analyzing the efforts of the bank to recover the dues and to suggest the measures to contain the NPA to minimum or to zero level
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the npa
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
COMPANY PROFILE OF SBI
The evolution of sbi can be traced back to the first decade of the 19th century It began with the
establishment of bank of culcutta in cuicutta on 2nd july 1806 The bank was redesined as the bank of
bangal three year later on 2nd january 1809 It was the first ever joint company of british india
established under the sponsorship of govt of bangal Subsiquently the bank of madras and bank of
bombay follwed the bank of bangal These banks were amalgamated to form imperial bank on 27th
jan 1921
An important turning point in the history of SBI is the launch of 1st five year plan of independence
india in 1951 The plan aimed to serving the indian economy in general and the rural sector of the
countryin particular There for in order to serve the economy as a whole and the rural sector in
particular all india rural credit survey committee recommended the formation of state ndash partnered
and state ndash sponsored bank An act was passed in the parliament of india in may 1955 As a result the
sbi was established on 1st july 1955this results in making SBI more powerful as much as quarter of
resourses of indian banking system was controlled by state later on state bank of india (subsidiary
banks) act was pessedin 1959 This act enabled the sbi to make the 8 state associated bank as its
subsidiaries
BRANCHES
The corporate centre of SBI is located in Mumbai In order to cater to different function There is several other
establishments in and outside Mumbai apart from corporate center The bank boasts of having as many as 14
local head office and 57 zonal offices located as major cities throughout India It is recorded that SBI has
more than 10000 branches will cater to its customer throughout India
ATM
SBI provides easy access to money to its customers through more than 90000 ATMs in India The
bank also facilitates the free transaction of money at ATMs of state bank group You may also
transect money through SBI commercial and international bank ltd by using the state bank ATM
CUM DEBIT CARD It the only banking company to open its ATM in region of kargil
Source SBIcoin
Xpress credit
INTRODUCTION-
The Xpress Credit Scheme was formulated in April 2004 in the form of pre-approved loan to
employees of leading PSUs and Government organizations At present the scheme is open to
Employees of government semi-government profit making PSUs Educational Institutions of
national repute and companies of good standing (based on their CRA rating) The scheme is built
around the concept of check ndash off (the process by which the salary disbursing officer undertakes to
deduct loan installments from the salary of the borrower and remits the same to the Bank for credit
of the loan account) Xpress Credit Loans may also be sanctioned in those cases where the borrower
gives sufficient PDCs (Post Dated Cheques) for entire tenure of the loan
Source Xpress credit circular
PURPOSE
The loan under the scheme is granted for any legitimate personal purpose (eg expenses for
domestic or foreign travel medical treatment of self or a family member meeting any financial
liability such as marriage of sondaughter defraying educational expenses of wards meeting
margins for purchase of assets etc)
Source Xpress credit circular
ELIGIBILITY
1 EMPLOYERS
Central and state Government
Quasi-Government
Profit making PSUs
Educational Institutions of National Repute
Companies with a CRA rating of SB1 to SB5
Companies with a CRA rating of SB6 and SB7 are also eligible if it satisfies take over norms
2 EMPLOYEES
Permanent employees with a minimum 1 yearrsquos length of service
He should have sufficient cash flows to repay the loan from salary as evidenced by 6 monthsrsquo
salary slipsincome tax returns of 2 years
He should provide proof of residence and proof of identity to satisfy KYC norms
He should produce 6 months satisfactory statement of bank account (at any bank)
Proof of Employment in the eligible company
Source Xpress credit circular
MINIMUM NET MONTHLY INCOME
The minimum Net Monthly Income (NMI) of the employee should beRs5000- It can
Be lowered to Rs3000- subject to the condition that the salary accounts of the entire enterprise are
with us The Branch will ensure to obtain an Undertaking from the borrower that there is no other
deduction from hisher salary which is not reflected in the salary slip [As per Annexure ndash (B) ndash (v)]
LOAN AMOUNT
a) Minimum Rs24000=
b) Maximum 24 Months NMI with a ceiling of Rs1500 lacs
TYPE OF LOAN
LoanD Term demand Loan (NO OVERDRAFT)
REPAYMENT PERIOD
Maximum 60 months
EMI NMI le 50
REVIEW
Review of loan will be done yearly
RENEWAL
Renewal of loans will be allowed after 24 months
CHECK OFF
The process by which the salary disbursing officer under takes to deduct the loan
installments from the salary of the borrower and remits the same to the Bank for credit to the loan
account
Or
The employer pays the borrowerrsquos salary into his SavingsCurrent Account with our Bank
The borrower gives an irrevocable Standing Instruction (SI) For recovery of the loan installments
from his aforesaid account with the SI being synchronized with the date of credit of salary in the
borrowerrsquos SavingsCurrent Account
AND
The employer undertakes to inform the Bank if and when there is a severance due to borrowerrsquos
transfer resignation retirement etc[ Branch will ensure to obtain the undertaking from the employer
and employee as per Annexure ndash B (I) B (ii) II or B (iii) ]
Source Xpress credit circular
CATEGORY I
FULL CHECK OFF
As given under the head CHECKOFF
AND
Undertaking from the employer to obtain a NOC from the Bank before settling the dues of the
borrower on transfer resignation retirement etc [As per Annexure ndash B (IV)]
This stipulation can be waived by the sanctioning authority incase of employees of Central State
Government PSUs Universities and Reputed Colleges In case of other employers the CGM of the
Circle has been permitted to waive the stipulation But in no case this can be waived for IT sector
employees
CATEGORY II
PARTIAL CHECK OFF
As given under the head CHECKOFF
CATEGORY III
WITH NO CHECK OFF
The employer pays the borrowerrsquos salary into his SavingsCurrent Account with our Bank
The borrower gives an irrevocable Standing Instruction (SI) for
recovery of the loan installments from his aforesaid account twitch the SI being synchronized with
the date of credit of salary in the borrowerrsquos SavingsCurrent Account
OR
Conditions as given under the head CHECKOFF is not fulfilled but the borrower provides monthly
PDCs (Post Dated Cheques) for entire tenure of the loan provided eligibility criteria are fulfilled
(Guidelines on Post Dated cheques is annexed as per Annexure A)
INTEREST RATE
The Interest rate is based on the category of Check off available
Category I
5 above the base rate ie - 970 +5 =1470 ( currently 1470 pa)
Category II
7 above the base rate (currently 1670 pa)
Note The GM of the Network is vested with powers to extend the Category II rate to a Category III
borrower only in case of employees of SB1 to SB5 rated companies who maintain their salary
accounts with us The Category III employees who do not maintain their salary accounts with us but
provide PDCs for the loan should be charged the card rate applicable to Category III and no
deviation should be permitted by Circle GMs
PENAL INTEREST
Penal interest should not be charged for loans up to Rs25000For Loans above Rs25000- if the
irregularity exceeds EMI or installment amount for a period of one month then penal interest would
be charged 2 pa(over and above the applicable interest
rate) on the overdue amount for the period of default If part installment or part EMI remains
overdue then penal interest should not be levied
This provision has been made to avoid application of penal interest on Personal Segment Loan
accounts where EMIs stipulated or installments are being paid regularly by the borrowers
Source Xpress credit circular
SECURITY
The loan is clean in nature and no security is required
PROCESSING FEE
11 of the loan amount including tax
PRE-SANCTION PROCESS
The following documents will be obtained before sanction-
I Application cum appraisal Form With a photograph of the borrower duly attested by the
authorized official
II It is proposed to put in place an arrangement for verification of the address of the borrower by an
outside agency A report duly signed by the verification agency (in places where an arrangement is
in place) or by our officerstaff in other places (where verification agency approved by Corporate
Centre is not available) should be complied based on the following verifications
I Verification of the borrowerrsquos residence address as given in the loan application
by actually visiting the residence of the borrower
II Verification of the borrowerrsquos office address as given in the loan application by
actually visiting the office of the borrower
Source Xpress credit circular
III Verification of the borrowerrsquos residence telephone number as given in the loan
application by actually calling the residence telephone number of the borrower
IV Verification of the borrowerrsquos office telephone number as given in the loan
Application by actually calling the office telephone number of the Borrower
V Verification of the IT return of the Borrower with IT department through a
person approved by the Regional OfficeZonal Office where feasible Where IT
return cannot be verified by the Bank statement of account of the borrower may
be scrutinized to verified income flows
Where the verification is not outsourced the Branch staff
Must do the verification and the report should be added with the loan documents
Flow chart of loan procedure of retail loan
Chart no 01
Disagree
NON PEFORMING ASSETS (NPA) ndash CONCEPT
The three letters ldquoNPArdquostrike terror in banking sector and business circle todayNPA is the short
Form of ldquoNon performing Assetsrdquo
Enquiry about loan
Agreeprovided with check list and
application
submission of documents and application dully
filled up
Documents taken
verification of application and
documebtsCIBIL report
Processing of loan
Sangtion of loan
Document
Control Disbursal of loan
phasewise lumpsum
In banking NPA are loans given to doubtful customers who may or may not repay the
loan on time There are two types of assets viz performing and non performing Performing loans
are standard loans on which both the principle and interest are secured and their return is guaranteed
NPA means the debt which is given by the bank is unable to recover is called
nonperforming assets A NPA account in the books of accounts is an asset as it indicates the amount
received from the defaulters It means if any bank gives loan and is not paid by the customers till 90
days than that account is called as NPA account
DEFINITION
An asset including leased assets becomes nonperforming when it ceases to generate income
for the bank
A NPA was defined as a credit facility in respect of which the interest or installment
of principle as remained ldquopast duerdquo for specific period of time
Source googlecoin
The specific period was reduced in a phased manner as under
wef ndash 31031993 four quarters
wef ndash 31 031994 three quarters
wef - 31031995 two quarters
wef - 31032001 180 days
wef - 31032004 90 days from past due
90 days delinquency is not applicable to agriculture segment
With effect from march 31 2004 NPA shall be a loan or an advance where
1) Term loan interest installment of principle remain over due for 90 days
2) Cash creditover draft an account remain ldquoout of orderrdquo for a period of more than 90 days
3) Bills The bills remain over due for a period more than 90 days
4) Agriculture loan
a The loan has been granted for short duration crop installments of the principle
remain over due for two crop season beyond the due date
b If the loan has been granted for long duration crop installment of the principle
remain over due for one crop season beyond the due date
Source Rbiorgin
CLASSIFICATION OF LOANS
In India loans are classified on following basis
Performing assets
Loans where the interest and or principle not remain overdue for more then 90 days
Non-performing assets
Any loan repayment remains over due for more than 90 days is considered as NPA
According to the securitization and re construction of financial assets and enforcement of
security interest ordinance2002 ldquonon performing assetsrdquo(NPA) means an assets or ac of
borrower which has been classified by the bank as sub-standard doubtful or loss asset in
accordance with the guidelines relating to asset classification issued by RBI
Source googlecoin
ASSET - CLASSIFICATION
Assets can be categorized into four categories (a) standard (b) sub-standard
(c) doubtful (d) loss The last three categories are classified as npa based on the the period for
which the asset has remained non-performing and the realisability of the dues
Standard assets the loan ac which are regular and do not carry more than normal risk are
known as standard assets there could be ac which though have not become npa but are
irregular Such ac are called special mention ac
Sub- standard assets with effect from 3132005 a sub-standard assets is one which is
classified as NPA for a period not exceeding 12 months
Doubtful asset with effect from 3132005 an asset is to be classified as doubtful if it
remained npa or sub-standard for a period exceeding 12 months
Loss assets a loss asset is one where loss has been identified by the bank or internal and
external auditors or the RBI inspection but the amount as not been written off wholly In
other words such an asset is considered uncollectable and such little value that its
continuance as a bankable asset is not warranted although there may be some salvage or
recoverable value
NPA IDENTIFICATION NORMS
With effect from 31st march 2004 a loan or advance become npa when
a Interest or installment of the principle remains overdue for a period more then 90
days in respect of term loan
b The ac remain out of order for a period more 90days in respect of over draft cash
cash credit
c The bill remains overdue for a period more than 90 days in case of bills purchased
and discounted
d With effect from Sept 2004 loan granted for short duration crops will be treated as
NPA if the installment of principle or interest there on remains overdue for two crop
season and loan granted for long duration will be treated as NPA if the installment
remains overdue for one crop season
Out of order
An account will be treated as out as out of order if the outstanding balance remain
continuously in excess of the sanctioned limitdrawing power In cases where the
outstanding balance in the principle operating ac is less than the sanctioned limit but
there are no credit continuously for 90 days as on the date of balance sheet or the
credit are not enough to cover the interest debited during the same period
Overdue
An amount due to the bank under any credit facility is overdue it is not paid on the due
date fixed by the bank
The date of npa will be actual date on which sippage occurred as mentioned below
For term and demand loan ac
The date on which the installment of the principle have
remaine overdue for a period more then 90 days
For over draft and cash credit ac
The date on which the ac completed period of more than 90
days of being continuously out of order
Source wwwRBI Org in
PROVISING NORMS
There is time lag between an ac becoming doubtful for recovery the realization of security and
erosion over a loan period of time in its value So RBI directives now requiresthe banks to make
provisions in their balance sheet for all non- standard loan asset Provisioning is made on all types of
assets ie Standard sub-standard doubtful and loss assets
1 Standard assets RBI vides its circular dated 151108 revised the provisioning requirements
For all type of standard assets it has been reduced to a uniform level of 040of outstanding
at global basis except in the case of direct advance to agriculture and SME sector which
shall continue to attract a provisioning of 025 The provision toward standard assets need
not to be netted from gross advances but shown separately as ldquo contigent provisionsrdquo against
standard assets under other liquidities and provisions others in schedule 5 of the balance
sheet
2 Sub-standard assets- In respect of sub-standard assets the rate of provision is 10 of
outstanding balance without considering ECGC guarantee cover or securities available
However if the loan was unsecured from the begining there would be additional provision of
10 ie total provision would be 20 of the outstanding balance Unsecured exposure is
defined as an exposure where the realizable value of the security as assessed by the
bankreserve banks inspecting officers is not more than 10 ab-intio of the outstanding
exposure
3 Doubtful assets In case of doubtful assets while making provision realizable value of
security is to be considered 100 provision is made for unsecured portion In case of
secured portion the rate of provision depend on age of doubtful assets as under
Age of doubtful assets Provision as of secured portion
Doubtful up to 1 year D1 20 of RVS( realizable value of security)
Doubtful for more than 1 year D2 30 of RVS
Doubtful for more than 3 years D2 100 of RVS
Thus if an ac is doubtful for more than 3 years than 100 of the provision is to be made
both from secured and unsecured portion If an advance has been guaranteed by DICGC
CGFTECGC and is doubtful than provision on secured portion will be as in other cases but
provision on unsecured portion will be made after deducting the claim value
4 LOSS ASSET 100 of the outstanding amount while making provision on NPAs amount
lying in suspense ac and derecognized interest should be deducted from gross advance and
provision be made on balance amount
5 OVERALL PROVISION With a view to improving the improving the provisioning cover
and enhancing the soundness of the individual banks RBI has proposed in oct- 09 policy that
bank should augment their provisions and ensure that their total provisioning coverage ratio
including floating provisions is not less than 70
Source wwwRBIorgin
IMPACTEFFECT OF NPA UPON BANKS
A strong banking sector is important for flourishing economy The failure of banking sector
may have an adverse impact on other sector NPA are one of the major concerns of sector
banks is increasing result in nonperforming assets The NPA impact drastically to the
working of banks The efficiency of bank not always reflected by the size of its balance sheet
but by the level of return on its assetsNPA do not generate interest income for the banks but
the same time banks are required to make provisions for such NPAs from their current
profits
They erode current profits through provisioning requirement
They result in reduced interest income
They require higher provisioning requirements effecting profits and accretion to capital
Adverse impact on capital adequacy ratio
Roe and Roa goes down because NPA do not earn
Banks rating gets effect
Banks cost of raising funds goes up
Bad effect on goodwill
Bad effect on equity value
EARLY SYMPTOMS BY WHICH ONE CAN RECOGNIZE A PERFORMING
ASSETS TURNING TO A NON PERFORMING ASSET
Four categories of early symptoms
1) FINANCIAL
(a) Non- payment of very first installment
(b) Bouncing of cheque due to insufficient balance in the ac
(c) Irregularity in installment
(d) Irregularity of operations in ac
(e) Unpaid overdue bill
(f) Declining current ratio
2) OPERATIONAL AND PHYSICAL
(a) If information is received that the borrower has either initiated the process of winding up or not doing the business
(b) Over-due receivable
(c) Stock statement not submitted on time
(d) External non-controllable factor like natural calamities in the city where the borrower lives
(e) Non- payment of salary
(3) ATTITUDNAL CHANGE
(a) Use for personal comfort stocks and shares by borrowers
(b) Avoidance of contact with bank
(c) Problem between partners
(4) OTHER
(a) Change in govt policies
(b) Death of the borrower
(c) Delay in salary
PREVENTIVE MEASUREMENT FOR NPA
Early recognition of the problem
Invariably by the time banks start their efforts to get involved
in a revival process its too late to retrieve the situation ndash both in terms of rehabilitation of the
project and the recovery of banks dues Identification of the weakness regardless of the fact
that it may not have become NPA is imperative Assessment of the potential of revival may
be done on the basis of a techno-economic viability study Restructuring should be attempted
where after an objective assessment of the promoterrsquos intention banks are convinced of a
turn around with in a scheduled facilitate winding upselling of units earlier so as to recover
whatever is possible through means before the security position becomes worse
Identifying borrowers with genuine intent
Identifying borrower with genuine intent from those who
are non-serious with commitment or stake in revival is a challenge confronting bankers Here
the role of front line officials at branch level is paramount as they are the ones who have
intelligent inputs with regard to promoters lsquo sincerity and capability to achieve turnaround
Based on this objective assessment bank should decide as quickly as possible whether it
would be worthwhile to commit additional finance
In this regard banks may consider having
ldquospecial investigationrdquo of all financial transaction or business transaction books of account
order to ascertain real factor that contributed to sickness of borrower Bank may have panel
of technical experts with proven expertise and task record of preparing techno-economic
study of the project of the borrowers
Borrowers having genuine problems due to temporary mismatch in find flow or sudden
requirement of additional fund may entertained at branch level for this purpose a special
limit to such type of cases should be decided This will obviate the need to route the
additional funding through the controlling officers in deserving cases and avert many
accounts sleeping into NPA category
Timeliness and adequacy of response
Longer the delay in response greater the enjury to the
account and the asset Time is a crucial element in any restructuring or rehabilitation activity
The response decided on the basis of techno- economic study and promoterrsquos commitment
has to be adequate in terms of extend of additional funding and relaxations etc under the
restructuring exercise The package of assistance may be flexible and bank may look at the
exit option
Focus on cash flow
While financing at the time of restructuring the banks may not be guided
by the conventional fund flow analysis only which could yield a potentially misleading
picture Appraisal for fresh credit requirement may be done by analyzing fond flow in
conjunction with the cash flow rather than only on the basis of fund flow
Source wwwAskcom
Management effectiveness
The general perception among the borrower is lack of finance that
leads to sickness and NPAs but this may not be the case all the time Management effectiveness
advance business condition is a very important aspect that affects a borrowing units fortunes A bank
may commit a multiple finance to an align unit only after basic viability of the enterprise also in the
context of quality of management is examined and confirmed It will be useful to have consultant
appointed as early as possible to examine this aspect A proper techno-economic viability study thus
become the basis on which any future action can be considered
Multiple financing
A) During the exercise for assessment of viability and restructuring a pragmatic and unified
approach by all the leading banks as also sharing of all relevant information on the
borrower would go a long way toward overall success of rehabilitation exercise given the
probability of successfailure
B) In some default cases Where the unit is still working The bank should make sure that it
captures the cash flow and insure that such cash are used for working capital purpose
Toward this end there should be a continuous flow of information among consortium
member A bank which is not a part of consortium may not be allowed to offer credit
facility to such defaulting clients Current account facility may also be denied at non-
consortium banks to such clients and violation may attract penal action The credit
information bureau of india (CIBIL) may be very useful for meaningful information
exchange on defaulting borrowers once the setup become fully operational
C) In a forum of lenders the priority of each lender will be different While one set of lender
may be willing to wait for longer time to recover its dues another lender may have a much
shorter timeframe in mind So it is possible that the letter categories of lenders may be
willing to exit even at a cost by a discounted settlement of the exposure There for any plan
for restructuringrehabilitation may takes into account
D) Corporate debt restructuring it has been institutionalized in 2001 to provide a timely and
transparent system for restructuring the corporate debt of RS 20 crores and above with the
banks on a voluntary basis and outside a legal framework Under this system bank are
greatly benefit in terms of restructuring of large standard accounts (potential NPAs) and
viable sub-standard account with multiple banking arrangement
NPA MANAGEMENT- RESOLUTION
Compromise settlement schemes
Restructuringrescheduling
Lok adalat
Corporate debt restructuring cell
Debt recovery Tribunals (DRT)
Proceeding under the code of civil procedure
Board of industrial and financial reconstruction
National company law Tribunal (NCLT)
Sale of NPA to other bank
Sale of NPA to ARCSC under securitization and reconstruction of financial assets for
enforcement of security interest Act 2000 (SRFAESI)
Liquidation
Source wwwRBIorgin
NPA MANAGEMENT IN INDIA
Formation of the credit information bureau (India) limited (CIBIL)
Release of willful defaulterrsquos listRBI also releases a list of borrowers with aggregate
outstanding of RS 1 crore and above against whom bank have filed suit for recovery of their
fund
Reporting of frauds to RBI
Norms of lenders labiality- framing of fair practices code with regard to lenders lability to
be followed by banks
Risk assessment and Risk management
RBI has advised banks to all cases of willful defaulters in case of 1 crore and above and
files suits in such cases
Responding quick mortality cases
Special mention accounts for early identification for bad debt loans and advances over due
for less than one or two quarters would come under this category However these accounts do
not need provisioning
INTERNATIONAL PRACTICES ON NPA MANAGEMENT
Subsequent to the Asian currency crisis which severely crippled the financial system In
addition to the above some of the more recent and aggressive step to NPAs have been taken
by Taiwan Taiwanese financial institution have been encouraged to merge and form bank
based AMCs through the recent introduction of financial holding company act and financial
institution Asian countries the magnitude of NPAs in Asian financial institution was brought
to light Driven by the need to proactively tackle the soaring NPAs level the respective govt
embarked upon a program of substantial reform This involves setting up processes for early
identification and resolution of NPAs The table below provides a cross country comparison
of approaches used for NPA resolution Mergers Act A long side the ministry of finance has
followed a carrot and strict policy of specifying the required NPA ratio for banks while also
providing flexibility in modes of NPA assets resolution and a conduct
ive regulatory and tax environment Deferred loss write-off provisions have been instituted to
provide breathing space for lenders to absorb NPA write-off While it is too early to
comment on success of NPA resolution process in Taiwan the early sign are encouraging
Detailed below are some key NPA management approaches adopted by banks in South East
Asian countries
1 Credit risk mitigation
2 Early warning systems
3 Assets management companies
Increasing willingness to sell NPAs to AMCs
Effective resolution strategy
Appointment of special administrators
4 Out of court restructuring
Source wwwgooglecom
DIFFICULTIES WITH NON PERFORMING ASSETS
I Owners do not receive a market return on their capital In the worst case if the bank
fails owner lose their assets
II Depositors do not receive a market return on savings In the worst case if the bank
fails depositors lose their assets or uninsured balance Banks also redistribute losses
to other borrowers by charging higher rate of interest
III Non-performing loans epitomize bad investors They misallocate credit from good
projects which do not receive funding to failed project
IV 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
shortage the shortage can jam payments across the country
b Illiquidity constraints banks in paying depositors eg cashing their paychecks
c Undercapitalized banks exceed the bank capital base
Lending by bank has been politicized It is common knowledge
that loans are given to various industrial houses on common consideration and
viability of project but on political consideration In normal circumstances banks
before extending any loan would make a thorough study of the actual need of the
party considered the prospect of the business in which it is engaged Since it is
not looked into many of the loans becomes NPA
REASONS F0R AN ACCOUNT BECOMING NPA
Those attribute to borrower
Failure to bring in required capital
Lack of proper planning
Unwanted expenses
Lack of expertise
Poor credit collection
Miss management
Heavy borrowing
Lack of knowledge regarding NPA
Willful defaulters
Death of the borrower
Those attribute to banks
Wrong selection of borrower
Poor credit appraisal
Unhelpful in supervision
Too inflexible attitude
System overload
Lack of motivation
Delay in sanction
Lack of trained staff
Lack of commitment to recovery
Lack of personal visit to the borrower office
Lack of personal visit to the borrowerrsquos residence
Other
Fast changing technology
Unhelpful attitude of govt
Increase in material cost
Government policies
Taxation law
Political hostility
INDIAN ECONOMY AND NPA
Undoubtedly the world economy has slowed down recession is at its peak globally stock markets
have tumbled and business itself getting hard to do The Indian economy has been much affected due
to high fiscal deficit poor infrastructure facilities sticky legal system cutting of exposures to
emerging market by FIIs etc
Further international rating agencies like standard and poor
have lowered Indiarsquos credit rating to sub- investment grade Such negative aspects have often
outweighed positive such as increasing for reserve and a manageable inflation rate
Under such situation I go without saying that banks are no exception
and are bound to face the heat of global down turn One would be surprise to know that banks and
financial institution in India holds non-performing assets worth Rs 1 10000 crores Bankers have
realized that unless the level of NPA is reduced drastically they will find it difficult to survive
The actual level of NPA in India is around $ 40 billion much higher than govt estimation of $16
billion This difference is largely due to the discrepancy in accounting the NPAs followed by India
and rest of the world The accounting norms of India are less stringent than those of the developed
economies The Indian banks also have the tendency to extend the past due Considering the GDP
India nearly $ 470 billion the NPA are 8 of the total GDP which was better than many Asian
countries The NPA of china was 45 of the GDP While Japan had NPAs of 25 of the GDP
The aggregate level of NPAs in Asia has increased from $ 25 billion in 2007 to
$ 34 billion on 2009 looking to such overall pictures of the market we can say that India is doing
well and the steps taken are looking favorable
Source googlecoin
DATA ANALYZING THE QUETIONNAIRE
Two set of questionnaire were prepared to collect the feedback One set of questionnaire was meant for branches and other set of questionnaire was meant for borrowers
The set of questionnaire were given to the branches under hazaribag (RBO) and collected the feedback of the bankers of P segment and the branch manager
The questionnaire prepared for branch contained 15 questions and the questionnaire prepared for borrower contains 10 questions
The data was collected from 50 bankers and the data analysis of the branch questionnaire is as follows
Question number 1
Does not require any data analysis and information was sought to know the business level of the branches for the purpose of whether particular branch is actively engaged in xpress credit portfolio
Question number 2
Do you think that the borrowers are aware about NPA
Answer
32 of the respondent feel that the borrowers are not aware about NPA and 18 respondents feel that borrowers are aware about NPA
Chart no 11
yes
no
0
5
10
15
20
25
30
35
1832 Column1
Conclusion
Majority of the bank officials feels that the borrowers are not aware about NPA
Question number 3
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Answer
Out of 32 respondent 22 respondents is fully satisfied that lack of knowledge among the borrower regarding NPA is one of the reason for NPA 08 respondent were partially satisfied with it and 02 respondent were not satisfied with it
Chart no 12
fully satisfied(22)69
partially satisfied(8)25
not satisfied(2)6
Sales
Conclusion
Majority of the borrowers feels that lack of knowledge among the borrower regarding NPA is one of the reasons for NPA
Question number 4 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Answer
Out of 50 respondent 30 of the respondent strongly satisfied that these external factors contribute to NPA 10 respondent were partially satisfied with it 5 were not satisfied where as 5 were fully dissatisfied with it
Chart no 13
6020
10
10
fully satisfied(30) partially satisfied(10) not satisfiec(5) fully desatisfied(5)
Conclusion
Most of the respondent thinks that external factrs like willful defaulter change in govt policy contribute to NPA
Question number 5
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Answer
Chart no 14
feedback
fully satisfied(20)partially satisfied(12)not satisfied(12)fully dissatisfied(6)
Conclusion
As per the response of the officials most of the officials feel that internal factors are also responsible for NPA
Question number 6
Do you think that inflation is one of the reasons for NPA
Answer
Out f 50 responses 22 were strongly satisfied 18 were partially satisfied 8 were not satisfied and 2 were fully dissatisfied
Chart no 15
fully satisfied(20)44
partially satisfied(18)36
not satisfied(5)10
fullt dissatisfied(5)10
Conclusion
Growing inflation increasing goods rate is also one of the reason for NPA
Question number 7
Do you think that lack of PSS is also contributed to NPA
Answer
Out of 50 responses 30 were fully satisfied with it 12 were partially satisfied and 8 were fully dissatisfied
Chart no 16
6024
16
Open
fully satisfied(30)Partially satisfied(12)not satisfied(0)fully dissatisfied(8)
Conclusion
Majority of the officiais feels that lack of PSS is one of the reason for NPA This means that the PSS carried out by the bank is not sufficient or not carried out properly
Question number 8
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Answer
Most of the respondent feels that increase in unwanted expenses of the borrwer ls contribute to NPA
Chart no 17
56
12
28
4
FULLY SATISFIED(28)PARTIALLY SATISFIED(6)NOT SATISFIED(14)FULLY DISSATISFIED(2)
Conclusion
As per response of the officials increasing inflation have an adverse effect on the financial sector its working performance as well as on NPA
Question number 9
Do you think that high rate of interest under Xpress credit also contributes to NPA
Answer
Out of 50 respondent 25 respondent were not satisfied 10 were partially satisfied 10 were strongly dissatisfied where as only 5 out of 50 were fully satisfied with it
Chart no 18
strongly satisfied(5)partially satisfied(10)not satisfied(25)fully dissatisfied(10)
Conclusion
Most of the respondents are not satisfied with it They feel that the rate of interest charged by SBI under Xpress credit is not high and it will not contribute to NPS
Question number 10
Do you think that lack of proper planning of the borrower is one of the reason for NPA
Answer
Out of 70 respondent 35 were fully satisfied 5 were not satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 19
fully satisfied(35)70
partially satisfied(10)20
not satisfied(5)10
Conclusion
Most of the respondent feels that the borrowers borrow money from the bank without any proper planning which is one of the most important reason for NPA
Question number 11
Is heavy borrowing also contribute to NPA
Answer
Out of 50 respondent 25 respondent were fully satisfied 12 were partially satisfied 8 were not satisfied were as 5 were fully dissatisfied
Chart no 110
50
24
16
10
fully satisfied(25) partially satisfied(12) not satisfied(8) fully dissatisfied(5)
Question number 12
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Answer
As per the response of the officials 20 were fully satisfied 66were partially satisfied 4 were not satisfied with it were as 10 respondent were fully dissatisfied
Chart no 111
fully satisfied(10)20
partially satisfied(33)66
not satisfied(2)4
fullydissatisfied(5)10
Conclusion
As per the response given by the officials most of the officials were partially satisfied that wrong selection of borrower also contribute to NPA which means that selection process carried out by the bank is not appropriate or there is some difficulties in implementing them
Question number 13
Do you think that poor credit appraisal also contribute to NPA
Answer
Out of 50 respondent 5 were fully satisfied 10 were fully satisfied 30 were not satisfied were as only 5 were fully dissatisfied
Chart no 112
fully satisfied(5)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 14
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Answer
Out of 50 responses 3 were fully satisfied 15 were partially satisfied 25 were not satisfied where as 7 were full dissatisfied
Chart no 113
fully satisfied(3)partiallt satisfied(15)not satisfied(25)fully dissatisfied(7)
Conclusion
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not contribute to NPA This means that the attitude of bank toward the borrower is not inflexible
Question number 15
Do you think that system over load is also one of the causes of NPA
Answer
Out of 50 respondent 28 were fully satisfied 12 were partially satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 114
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
My project concerns Xpress credit high NPA under Xpress credit ndash a concern in which I need to
assist what is the total NPA under Xpress credit of different branches what are the reason for it who
is responsible for growing NPA and what are the steps to be taken to reduce NPA
Xpress credit
The Xpress Credit Scheme was formulated in April 2004 in the form of pre-approved loan to
employees of leading PSUs and Government organizations At present the scheme is open to
Employees of government semi-government profit making PSUs Educational Institutions of
national repute and companies of good standing (based on their CRA rating)
The scheme is built around the concept of check ndash off (the process by which the salary disbursing
officer undertakes to deduct loan installments from the salary of the borrower and remits the same to
the Bank for credit of the loan account)
ldquoXpress Creditrdquo has Legitimate personal purpose Expenses for Domestic or foreign travel
Medical Treatment Meeting any financial liabilities and many more
Employers Employees Person having minimum monthly income should satisfy the conditions of
Xpress Credit for being eligible for the loan
NON PEFORMING ASSETS (NPA) ndash CONCEPT
ldquoA NPA was defined as a credit facility in respect of which the interest or installment of principle as
remained ldquopast duerdquo for specific period of timerdquo
We can also understand by the other definition ie NPA means the debt which is given to the
doubtful customers by the Bank and is unable to recover is called Non Performing Assets
If any bank gives loan and is unpaid by the customer till 90 days that account is called as NPA
Account
ASSET - CLASSIFICATION
Assets can be categorized into four categories (a) standard (b) sub-standard (c) doubtful (d) loss
Standard assets the loan ac which are regular and do not carry more than normal risk are
known as standard assets
Sub- standard assets with effect from 3132005 a sub-standard assets is one which is
classified as NPA for a period not exceeding 12 months
Doubtful asset with effect from 3132005 an asset is to be classified as doubtful if it
remained NPA or sub-standard for a period exceeding 12 months
Loss assets a loss asset is one where loss has been identified by the bank or internal and
external auditors or the RBI inspection but the amount as not been written off wholly
IMPACTEFFECT OF NPA UPON BANKS
NPA are one of the major concerns of sector banks is increasing result in nonperforming
assets NPA do not generate interest income for the banks but the same time banks are
required to make provisions for such NPAs from their current profits
They result in reduced interest income
Adverse impact on capital adequacy ratio
Bad effect on goodwill amp on equity value
EARLY SYMPTOMS BY WHICH ONE CAN RECOGNIZE A PERFORMING ASSETS
TURNING TO A NON PERFORMING ASSET
1 FINANCIAL
a Non- payment of very first installment
b Bouncing of cheque due to insufficient balance in the ac
2 OPERATIONAL AND PHYSICAL
a If information is received that the borrower has either initiated the process of winding
up or not doing the business
b External non-controllable factor like natural calamities in the city where the borrower
lives
3) ATTITUDNAL CHANGE
a Avoidance of contact with bank
4) OTHER
a Change in govt policies
PREVENTIVE MEASUREMENT FOR NPA
Early recognition of the problem Identifying borrowers with genuine intent Timeliness and
adequacy of response Focus on cash flow Management effectiveness multiple financing
OBSERVATION FINDING
In my research I found that The NPA in Xpress credit is not very high as compared to other
segment
At some extent bank officials are responsible for NPA because bank is worried about mobilizing
more and more business but not concern about maintenance of accounts
Conclusions
To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit
2 NPAs represent high level of risk and low level of credit appraisal
3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA
4 There are some certain guidelines made by RBI for NPAs which are adopted by banks
5 NPA under Xpress credit is less as compare to other segment (education)
Recommendations suggestions
In my study I have found some limitation So I can suggest following suggestions or area of
improvement
Bank should create effectiveness in management of NPAs
Proper monitoring of ac should be adopted to control NPAs
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the
financial capacity of the borrower before than credit facility
This all is done after carefully evaluating the financials position of the borrower
personal interview with the borrower Case study of the borrower as well as personal
interview with the bank officials of different branches
CHART ndashNO PARTICULARS PAGE- NO
01 Loan procedure of retail loan 29
11 Awareness level of borrower regarding NPA 54
12 Bank officials questionnaire analysis 55
13 Bank officials questionnaire analysis 56
14 Bank officials questionnaire analysis 57
15 Bank officials questionnaire analysis 58
16 Bank officials questionnaire analysis 59
17 Bank officials questionnaire analysis 60
18 Bank officials questionnaire analysis 61
19 Bank officials questionnaire analysis 62
110 Bank officials questionnaire analysis 63
111 Bank officials questionnaire analysis 64
112 Bank officials questionnaire analysis 65
113 Bank officials questionnaire analysis 66
114 Bank officials questionnaire analysis 67
115 Bank officials questionnaire analysis 68
116 Borrowers question analysis 70
117 Borrowers question analysis 71
118 Borrowers question analysis 72
119 Borrowers question analysis 73
120 Borrowers question analysis 74
121 Borrower questione analysis 75
122 Last three years NPA comparison of SBI 76
123 Last 10 years overall NPA of hzbag branch 77
124 Last 10 years NPA in p-segment of hzbag branch 78
125 Reason for turning an ac into NPA 82
126 Method of data collection 89
127 Recommendation testing 96
LIST OF CHARTS
LIST OF TABLES
TABLE- NO PARTICULARS PAGE ndash NO
01 Last three years NPAs76
02 Over all NPA over time of hzbag branch (10 years)
77
03 Last 10 years p-segment NPA of hzbag branch
78
04 Product wise NPA comparison of hzbag
branch
79
05 Branch wise comparison of NPA in Xpress
credit
80
06 Profession wise NPA comparison81
07 Reason for turning an ac into NPA as per the borrower
82
08 Validity testing of the recommendation(bank officers views)
96
STUDENT PROFILE
NAME Vivek Kumar gupta
Father name Rajendra Pd gupta
Gender Male
DOB 15081993
Academic qualification Pursuing BCom (insurance honors)
College St Xavierrsquos college Ranchi
At present Pursuing special diploma in Marine insurance
Contact no 7631011853
Email ID vivek7654595gmailcom
PROJECT MENTOR PROFILE
NAME Rajesh Kumar Jha
DESIGNATION Manager (PB) Hazaribag
WORK PLACE SBI Hazaribag
CONTACT NO 9931833473(personal) 9771458627(official)
EMAIL ID rajeshkjhasbicoin
SBI HAZARIBAG BRANCH PROFILE
BRANCH INFORMATION
Date of opening 17-10-55
Branch code 00090
Migration date 14-12-2006
Circle Patna
Network 2
Module name Dhanbad
Branch type Regular branch
MICR code 825002002
License date 17-10-1954
Controllers Email ID agm4zoransbiciin
COMMUNICATION ADDRESS
Address 1 State bank of India
Address 2 Ravindra path
Address 3 NH-33
City Hazaribag
Pin 825301
BRANCH MANAGER
Name Shrwan Kumar Singh
Designation Chief Manager
Contact no 9431140712
Email shrwansinghsbicoin
STAFF STRENGTH
Officers 15
Assistants 30
Messengers 12
Guards 03
ACCOUNTS
Total no of ac - 60720
SB ac ndash 46133
CA ac - 510
Advances ndash 7247 Lakhs
Deposits ndash 91408 Lakhs
Total no of ATMrsquoS ndash 08
NATURE OF THE PROJECT
Xpress credit is a form of personal loan devised to provide instant credit support to person in need It caters mainly salaried person who have their salary ac with the bank The loan is a very good source of increasing retail loan portfolio but also have inherent risk It is a clear loan without any security and hence attracts more provisioning also unexpected events like death of borrower creates problem of recovery Sometimes employers shift their salary to other bank intentionally to avoid repayment and sometime it is difficult to track their transfer and posting
Despite all positive factors of continuous income and benefit of recovery through department the bank is facing the problem of high NPA in Xpress credit
The study is an endeavor to search the cause of acrsquos turning into NPA analyzing the efforts of the bank to recover the dues and to suggest the measures to contain the NPA to minimum or to zero level
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the npa
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
COMPANY PROFILE OF SBI
The evolution of sbi can be traced back to the first decade of the 19th century It began with the
establishment of bank of culcutta in cuicutta on 2nd july 1806 The bank was redesined as the bank of
bangal three year later on 2nd january 1809 It was the first ever joint company of british india
established under the sponsorship of govt of bangal Subsiquently the bank of madras and bank of
bombay follwed the bank of bangal These banks were amalgamated to form imperial bank on 27th
jan 1921
An important turning point in the history of SBI is the launch of 1st five year plan of independence
india in 1951 The plan aimed to serving the indian economy in general and the rural sector of the
countryin particular There for in order to serve the economy as a whole and the rural sector in
particular all india rural credit survey committee recommended the formation of state ndash partnered
and state ndash sponsored bank An act was passed in the parliament of india in may 1955 As a result the
sbi was established on 1st july 1955this results in making SBI more powerful as much as quarter of
resourses of indian banking system was controlled by state later on state bank of india (subsidiary
banks) act was pessedin 1959 This act enabled the sbi to make the 8 state associated bank as its
subsidiaries
BRANCHES
The corporate centre of SBI is located in Mumbai In order to cater to different function There is several other
establishments in and outside Mumbai apart from corporate center The bank boasts of having as many as 14
local head office and 57 zonal offices located as major cities throughout India It is recorded that SBI has
more than 10000 branches will cater to its customer throughout India
ATM
SBI provides easy access to money to its customers through more than 90000 ATMs in India The
bank also facilitates the free transaction of money at ATMs of state bank group You may also
transect money through SBI commercial and international bank ltd by using the state bank ATM
CUM DEBIT CARD It the only banking company to open its ATM in region of kargil
Source SBIcoin
Xpress credit
INTRODUCTION-
The Xpress Credit Scheme was formulated in April 2004 in the form of pre-approved loan to
employees of leading PSUs and Government organizations At present the scheme is open to
Employees of government semi-government profit making PSUs Educational Institutions of
national repute and companies of good standing (based on their CRA rating) The scheme is built
around the concept of check ndash off (the process by which the salary disbursing officer undertakes to
deduct loan installments from the salary of the borrower and remits the same to the Bank for credit
of the loan account) Xpress Credit Loans may also be sanctioned in those cases where the borrower
gives sufficient PDCs (Post Dated Cheques) for entire tenure of the loan
Source Xpress credit circular
PURPOSE
The loan under the scheme is granted for any legitimate personal purpose (eg expenses for
domestic or foreign travel medical treatment of self or a family member meeting any financial
liability such as marriage of sondaughter defraying educational expenses of wards meeting
margins for purchase of assets etc)
Source Xpress credit circular
ELIGIBILITY
1 EMPLOYERS
Central and state Government
Quasi-Government
Profit making PSUs
Educational Institutions of National Repute
Companies with a CRA rating of SB1 to SB5
Companies with a CRA rating of SB6 and SB7 are also eligible if it satisfies take over norms
2 EMPLOYEES
Permanent employees with a minimum 1 yearrsquos length of service
He should have sufficient cash flows to repay the loan from salary as evidenced by 6 monthsrsquo
salary slipsincome tax returns of 2 years
He should provide proof of residence and proof of identity to satisfy KYC norms
He should produce 6 months satisfactory statement of bank account (at any bank)
Proof of Employment in the eligible company
Source Xpress credit circular
MINIMUM NET MONTHLY INCOME
The minimum Net Monthly Income (NMI) of the employee should beRs5000- It can
Be lowered to Rs3000- subject to the condition that the salary accounts of the entire enterprise are
with us The Branch will ensure to obtain an Undertaking from the borrower that there is no other
deduction from hisher salary which is not reflected in the salary slip [As per Annexure ndash (B) ndash (v)]
LOAN AMOUNT
a) Minimum Rs24000=
b) Maximum 24 Months NMI with a ceiling of Rs1500 lacs
TYPE OF LOAN
LoanD Term demand Loan (NO OVERDRAFT)
REPAYMENT PERIOD
Maximum 60 months
EMI NMI le 50
REVIEW
Review of loan will be done yearly
RENEWAL
Renewal of loans will be allowed after 24 months
CHECK OFF
The process by which the salary disbursing officer under takes to deduct the loan
installments from the salary of the borrower and remits the same to the Bank for credit to the loan
account
Or
The employer pays the borrowerrsquos salary into his SavingsCurrent Account with our Bank
The borrower gives an irrevocable Standing Instruction (SI) For recovery of the loan installments
from his aforesaid account with the SI being synchronized with the date of credit of salary in the
borrowerrsquos SavingsCurrent Account
AND
The employer undertakes to inform the Bank if and when there is a severance due to borrowerrsquos
transfer resignation retirement etc[ Branch will ensure to obtain the undertaking from the employer
and employee as per Annexure ndash B (I) B (ii) II or B (iii) ]
Source Xpress credit circular
CATEGORY I
FULL CHECK OFF
As given under the head CHECKOFF
AND
Undertaking from the employer to obtain a NOC from the Bank before settling the dues of the
borrower on transfer resignation retirement etc [As per Annexure ndash B (IV)]
This stipulation can be waived by the sanctioning authority incase of employees of Central State
Government PSUs Universities and Reputed Colleges In case of other employers the CGM of the
Circle has been permitted to waive the stipulation But in no case this can be waived for IT sector
employees
CATEGORY II
PARTIAL CHECK OFF
As given under the head CHECKOFF
CATEGORY III
WITH NO CHECK OFF
The employer pays the borrowerrsquos salary into his SavingsCurrent Account with our Bank
The borrower gives an irrevocable Standing Instruction (SI) for
recovery of the loan installments from his aforesaid account twitch the SI being synchronized with
the date of credit of salary in the borrowerrsquos SavingsCurrent Account
OR
Conditions as given under the head CHECKOFF is not fulfilled but the borrower provides monthly
PDCs (Post Dated Cheques) for entire tenure of the loan provided eligibility criteria are fulfilled
(Guidelines on Post Dated cheques is annexed as per Annexure A)
INTEREST RATE
The Interest rate is based on the category of Check off available
Category I
5 above the base rate ie - 970 +5 =1470 ( currently 1470 pa)
Category II
7 above the base rate (currently 1670 pa)
Note The GM of the Network is vested with powers to extend the Category II rate to a Category III
borrower only in case of employees of SB1 to SB5 rated companies who maintain their salary
accounts with us The Category III employees who do not maintain their salary accounts with us but
provide PDCs for the loan should be charged the card rate applicable to Category III and no
deviation should be permitted by Circle GMs
PENAL INTEREST
Penal interest should not be charged for loans up to Rs25000For Loans above Rs25000- if the
irregularity exceeds EMI or installment amount for a period of one month then penal interest would
be charged 2 pa(over and above the applicable interest
rate) on the overdue amount for the period of default If part installment or part EMI remains
overdue then penal interest should not be levied
This provision has been made to avoid application of penal interest on Personal Segment Loan
accounts where EMIs stipulated or installments are being paid regularly by the borrowers
Source Xpress credit circular
SECURITY
The loan is clean in nature and no security is required
PROCESSING FEE
11 of the loan amount including tax
PRE-SANCTION PROCESS
The following documents will be obtained before sanction-
I Application cum appraisal Form With a photograph of the borrower duly attested by the
authorized official
II It is proposed to put in place an arrangement for verification of the address of the borrower by an
outside agency A report duly signed by the verification agency (in places where an arrangement is
in place) or by our officerstaff in other places (where verification agency approved by Corporate
Centre is not available) should be complied based on the following verifications
I Verification of the borrowerrsquos residence address as given in the loan application
by actually visiting the residence of the borrower
II Verification of the borrowerrsquos office address as given in the loan application by
actually visiting the office of the borrower
Source Xpress credit circular
III Verification of the borrowerrsquos residence telephone number as given in the loan
application by actually calling the residence telephone number of the borrower
IV Verification of the borrowerrsquos office telephone number as given in the loan
Application by actually calling the office telephone number of the Borrower
V Verification of the IT return of the Borrower with IT department through a
person approved by the Regional OfficeZonal Office where feasible Where IT
return cannot be verified by the Bank statement of account of the borrower may
be scrutinized to verified income flows
Where the verification is not outsourced the Branch staff
Must do the verification and the report should be added with the loan documents
Flow chart of loan procedure of retail loan
Chart no 01
Disagree
NON PEFORMING ASSETS (NPA) ndash CONCEPT
The three letters ldquoNPArdquostrike terror in banking sector and business circle todayNPA is the short
Form of ldquoNon performing Assetsrdquo
Enquiry about loan
Agreeprovided with check list and
application
submission of documents and application dully
filled up
Documents taken
verification of application and
documebtsCIBIL report
Processing of loan
Sangtion of loan
Document
Control Disbursal of loan
phasewise lumpsum
In banking NPA are loans given to doubtful customers who may or may not repay the
loan on time There are two types of assets viz performing and non performing Performing loans
are standard loans on which both the principle and interest are secured and their return is guaranteed
NPA means the debt which is given by the bank is unable to recover is called
nonperforming assets A NPA account in the books of accounts is an asset as it indicates the amount
received from the defaulters It means if any bank gives loan and is not paid by the customers till 90
days than that account is called as NPA account
DEFINITION
An asset including leased assets becomes nonperforming when it ceases to generate income
for the bank
A NPA was defined as a credit facility in respect of which the interest or installment
of principle as remained ldquopast duerdquo for specific period of time
Source googlecoin
The specific period was reduced in a phased manner as under
wef ndash 31031993 four quarters
wef ndash 31 031994 three quarters
wef - 31031995 two quarters
wef - 31032001 180 days
wef - 31032004 90 days from past due
90 days delinquency is not applicable to agriculture segment
With effect from march 31 2004 NPA shall be a loan or an advance where
1) Term loan interest installment of principle remain over due for 90 days
2) Cash creditover draft an account remain ldquoout of orderrdquo for a period of more than 90 days
3) Bills The bills remain over due for a period more than 90 days
4) Agriculture loan
a The loan has been granted for short duration crop installments of the principle
remain over due for two crop season beyond the due date
b If the loan has been granted for long duration crop installment of the principle
remain over due for one crop season beyond the due date
Source Rbiorgin
CLASSIFICATION OF LOANS
In India loans are classified on following basis
Performing assets
Loans where the interest and or principle not remain overdue for more then 90 days
Non-performing assets
Any loan repayment remains over due for more than 90 days is considered as NPA
According to the securitization and re construction of financial assets and enforcement of
security interest ordinance2002 ldquonon performing assetsrdquo(NPA) means an assets or ac of
borrower which has been classified by the bank as sub-standard doubtful or loss asset in
accordance with the guidelines relating to asset classification issued by RBI
Source googlecoin
ASSET - CLASSIFICATION
Assets can be categorized into four categories (a) standard (b) sub-standard
(c) doubtful (d) loss The last three categories are classified as npa based on the the period for
which the asset has remained non-performing and the realisability of the dues
Standard assets the loan ac which are regular and do not carry more than normal risk are
known as standard assets there could be ac which though have not become npa but are
irregular Such ac are called special mention ac
Sub- standard assets with effect from 3132005 a sub-standard assets is one which is
classified as NPA for a period not exceeding 12 months
Doubtful asset with effect from 3132005 an asset is to be classified as doubtful if it
remained npa or sub-standard for a period exceeding 12 months
Loss assets a loss asset is one where loss has been identified by the bank or internal and
external auditors or the RBI inspection but the amount as not been written off wholly In
other words such an asset is considered uncollectable and such little value that its
continuance as a bankable asset is not warranted although there may be some salvage or
recoverable value
NPA IDENTIFICATION NORMS
With effect from 31st march 2004 a loan or advance become npa when
a Interest or installment of the principle remains overdue for a period more then 90
days in respect of term loan
b The ac remain out of order for a period more 90days in respect of over draft cash
cash credit
c The bill remains overdue for a period more than 90 days in case of bills purchased
and discounted
d With effect from Sept 2004 loan granted for short duration crops will be treated as
NPA if the installment of principle or interest there on remains overdue for two crop
season and loan granted for long duration will be treated as NPA if the installment
remains overdue for one crop season
Out of order
An account will be treated as out as out of order if the outstanding balance remain
continuously in excess of the sanctioned limitdrawing power In cases where the
outstanding balance in the principle operating ac is less than the sanctioned limit but
there are no credit continuously for 90 days as on the date of balance sheet or the
credit are not enough to cover the interest debited during the same period
Overdue
An amount due to the bank under any credit facility is overdue it is not paid on the due
date fixed by the bank
The date of npa will be actual date on which sippage occurred as mentioned below
For term and demand loan ac
The date on which the installment of the principle have
remaine overdue for a period more then 90 days
For over draft and cash credit ac
The date on which the ac completed period of more than 90
days of being continuously out of order
Source wwwRBI Org in
PROVISING NORMS
There is time lag between an ac becoming doubtful for recovery the realization of security and
erosion over a loan period of time in its value So RBI directives now requiresthe banks to make
provisions in their balance sheet for all non- standard loan asset Provisioning is made on all types of
assets ie Standard sub-standard doubtful and loss assets
1 Standard assets RBI vides its circular dated 151108 revised the provisioning requirements
For all type of standard assets it has been reduced to a uniform level of 040of outstanding
at global basis except in the case of direct advance to agriculture and SME sector which
shall continue to attract a provisioning of 025 The provision toward standard assets need
not to be netted from gross advances but shown separately as ldquo contigent provisionsrdquo against
standard assets under other liquidities and provisions others in schedule 5 of the balance
sheet
2 Sub-standard assets- In respect of sub-standard assets the rate of provision is 10 of
outstanding balance without considering ECGC guarantee cover or securities available
However if the loan was unsecured from the begining there would be additional provision of
10 ie total provision would be 20 of the outstanding balance Unsecured exposure is
defined as an exposure where the realizable value of the security as assessed by the
bankreserve banks inspecting officers is not more than 10 ab-intio of the outstanding
exposure
3 Doubtful assets In case of doubtful assets while making provision realizable value of
security is to be considered 100 provision is made for unsecured portion In case of
secured portion the rate of provision depend on age of doubtful assets as under
Age of doubtful assets Provision as of secured portion
Doubtful up to 1 year D1 20 of RVS( realizable value of security)
Doubtful for more than 1 year D2 30 of RVS
Doubtful for more than 3 years D2 100 of RVS
Thus if an ac is doubtful for more than 3 years than 100 of the provision is to be made
both from secured and unsecured portion If an advance has been guaranteed by DICGC
CGFTECGC and is doubtful than provision on secured portion will be as in other cases but
provision on unsecured portion will be made after deducting the claim value
4 LOSS ASSET 100 of the outstanding amount while making provision on NPAs amount
lying in suspense ac and derecognized interest should be deducted from gross advance and
provision be made on balance amount
5 OVERALL PROVISION With a view to improving the improving the provisioning cover
and enhancing the soundness of the individual banks RBI has proposed in oct- 09 policy that
bank should augment their provisions and ensure that their total provisioning coverage ratio
including floating provisions is not less than 70
Source wwwRBIorgin
IMPACTEFFECT OF NPA UPON BANKS
A strong banking sector is important for flourishing economy The failure of banking sector
may have an adverse impact on other sector NPA are one of the major concerns of sector
banks is increasing result in nonperforming assets The NPA impact drastically to the
working of banks The efficiency of bank not always reflected by the size of its balance sheet
but by the level of return on its assetsNPA do not generate interest income for the banks but
the same time banks are required to make provisions for such NPAs from their current
profits
They erode current profits through provisioning requirement
They result in reduced interest income
They require higher provisioning requirements effecting profits and accretion to capital
Adverse impact on capital adequacy ratio
Roe and Roa goes down because NPA do not earn
Banks rating gets effect
Banks cost of raising funds goes up
Bad effect on goodwill
Bad effect on equity value
EARLY SYMPTOMS BY WHICH ONE CAN RECOGNIZE A PERFORMING
ASSETS TURNING TO A NON PERFORMING ASSET
Four categories of early symptoms
1) FINANCIAL
(a) Non- payment of very first installment
(b) Bouncing of cheque due to insufficient balance in the ac
(c) Irregularity in installment
(d) Irregularity of operations in ac
(e) Unpaid overdue bill
(f) Declining current ratio
2) OPERATIONAL AND PHYSICAL
(a) If information is received that the borrower has either initiated the process of winding up or not doing the business
(b) Over-due receivable
(c) Stock statement not submitted on time
(d) External non-controllable factor like natural calamities in the city where the borrower lives
(e) Non- payment of salary
(3) ATTITUDNAL CHANGE
(a) Use for personal comfort stocks and shares by borrowers
(b) Avoidance of contact with bank
(c) Problem between partners
(4) OTHER
(a) Change in govt policies
(b) Death of the borrower
(c) Delay in salary
PREVENTIVE MEASUREMENT FOR NPA
Early recognition of the problem
Invariably by the time banks start their efforts to get involved
in a revival process its too late to retrieve the situation ndash both in terms of rehabilitation of the
project and the recovery of banks dues Identification of the weakness regardless of the fact
that it may not have become NPA is imperative Assessment of the potential of revival may
be done on the basis of a techno-economic viability study Restructuring should be attempted
where after an objective assessment of the promoterrsquos intention banks are convinced of a
turn around with in a scheduled facilitate winding upselling of units earlier so as to recover
whatever is possible through means before the security position becomes worse
Identifying borrowers with genuine intent
Identifying borrower with genuine intent from those who
are non-serious with commitment or stake in revival is a challenge confronting bankers Here
the role of front line officials at branch level is paramount as they are the ones who have
intelligent inputs with regard to promoters lsquo sincerity and capability to achieve turnaround
Based on this objective assessment bank should decide as quickly as possible whether it
would be worthwhile to commit additional finance
In this regard banks may consider having
ldquospecial investigationrdquo of all financial transaction or business transaction books of account
order to ascertain real factor that contributed to sickness of borrower Bank may have panel
of technical experts with proven expertise and task record of preparing techno-economic
study of the project of the borrowers
Borrowers having genuine problems due to temporary mismatch in find flow or sudden
requirement of additional fund may entertained at branch level for this purpose a special
limit to such type of cases should be decided This will obviate the need to route the
additional funding through the controlling officers in deserving cases and avert many
accounts sleeping into NPA category
Timeliness and adequacy of response
Longer the delay in response greater the enjury to the
account and the asset Time is a crucial element in any restructuring or rehabilitation activity
The response decided on the basis of techno- economic study and promoterrsquos commitment
has to be adequate in terms of extend of additional funding and relaxations etc under the
restructuring exercise The package of assistance may be flexible and bank may look at the
exit option
Focus on cash flow
While financing at the time of restructuring the banks may not be guided
by the conventional fund flow analysis only which could yield a potentially misleading
picture Appraisal for fresh credit requirement may be done by analyzing fond flow in
conjunction with the cash flow rather than only on the basis of fund flow
Source wwwAskcom
Management effectiveness
The general perception among the borrower is lack of finance that
leads to sickness and NPAs but this may not be the case all the time Management effectiveness
advance business condition is a very important aspect that affects a borrowing units fortunes A bank
may commit a multiple finance to an align unit only after basic viability of the enterprise also in the
context of quality of management is examined and confirmed It will be useful to have consultant
appointed as early as possible to examine this aspect A proper techno-economic viability study thus
become the basis on which any future action can be considered
Multiple financing
A) During the exercise for assessment of viability and restructuring a pragmatic and unified
approach by all the leading banks as also sharing of all relevant information on the
borrower would go a long way toward overall success of rehabilitation exercise given the
probability of successfailure
B) In some default cases Where the unit is still working The bank should make sure that it
captures the cash flow and insure that such cash are used for working capital purpose
Toward this end there should be a continuous flow of information among consortium
member A bank which is not a part of consortium may not be allowed to offer credit
facility to such defaulting clients Current account facility may also be denied at non-
consortium banks to such clients and violation may attract penal action The credit
information bureau of india (CIBIL) may be very useful for meaningful information
exchange on defaulting borrowers once the setup become fully operational
C) In a forum of lenders the priority of each lender will be different While one set of lender
may be willing to wait for longer time to recover its dues another lender may have a much
shorter timeframe in mind So it is possible that the letter categories of lenders may be
willing to exit even at a cost by a discounted settlement of the exposure There for any plan
for restructuringrehabilitation may takes into account
D) Corporate debt restructuring it has been institutionalized in 2001 to provide a timely and
transparent system for restructuring the corporate debt of RS 20 crores and above with the
banks on a voluntary basis and outside a legal framework Under this system bank are
greatly benefit in terms of restructuring of large standard accounts (potential NPAs) and
viable sub-standard account with multiple banking arrangement
NPA MANAGEMENT- RESOLUTION
Compromise settlement schemes
Restructuringrescheduling
Lok adalat
Corporate debt restructuring cell
Debt recovery Tribunals (DRT)
Proceeding under the code of civil procedure
Board of industrial and financial reconstruction
National company law Tribunal (NCLT)
Sale of NPA to other bank
Sale of NPA to ARCSC under securitization and reconstruction of financial assets for
enforcement of security interest Act 2000 (SRFAESI)
Liquidation
Source wwwRBIorgin
NPA MANAGEMENT IN INDIA
Formation of the credit information bureau (India) limited (CIBIL)
Release of willful defaulterrsquos listRBI also releases a list of borrowers with aggregate
outstanding of RS 1 crore and above against whom bank have filed suit for recovery of their
fund
Reporting of frauds to RBI
Norms of lenders labiality- framing of fair practices code with regard to lenders lability to
be followed by banks
Risk assessment and Risk management
RBI has advised banks to all cases of willful defaulters in case of 1 crore and above and
files suits in such cases
Responding quick mortality cases
Special mention accounts for early identification for bad debt loans and advances over due
for less than one or two quarters would come under this category However these accounts do
not need provisioning
INTERNATIONAL PRACTICES ON NPA MANAGEMENT
Subsequent to the Asian currency crisis which severely crippled the financial system In
addition to the above some of the more recent and aggressive step to NPAs have been taken
by Taiwan Taiwanese financial institution have been encouraged to merge and form bank
based AMCs through the recent introduction of financial holding company act and financial
institution Asian countries the magnitude of NPAs in Asian financial institution was brought
to light Driven by the need to proactively tackle the soaring NPAs level the respective govt
embarked upon a program of substantial reform This involves setting up processes for early
identification and resolution of NPAs The table below provides a cross country comparison
of approaches used for NPA resolution Mergers Act A long side the ministry of finance has
followed a carrot and strict policy of specifying the required NPA ratio for banks while also
providing flexibility in modes of NPA assets resolution and a conduct
ive regulatory and tax environment Deferred loss write-off provisions have been instituted to
provide breathing space for lenders to absorb NPA write-off While it is too early to
comment on success of NPA resolution process in Taiwan the early sign are encouraging
Detailed below are some key NPA management approaches adopted by banks in South East
Asian countries
1 Credit risk mitigation
2 Early warning systems
3 Assets management companies
Increasing willingness to sell NPAs to AMCs
Effective resolution strategy
Appointment of special administrators
4 Out of court restructuring
Source wwwgooglecom
DIFFICULTIES WITH NON PERFORMING ASSETS
I Owners do not receive a market return on their capital In the worst case if the bank
fails owner lose their assets
II Depositors do not receive a market return on savings In the worst case if the bank
fails depositors lose their assets or uninsured balance Banks also redistribute losses
to other borrowers by charging higher rate of interest
III Non-performing loans epitomize bad investors They misallocate credit from good
projects which do not receive funding to failed project
IV 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
shortage the shortage can jam payments across the country
b Illiquidity constraints banks in paying depositors eg cashing their paychecks
c Undercapitalized banks exceed the bank capital base
Lending by bank has been politicized It is common knowledge
that loans are given to various industrial houses on common consideration and
viability of project but on political consideration In normal circumstances banks
before extending any loan would make a thorough study of the actual need of the
party considered the prospect of the business in which it is engaged Since it is
not looked into many of the loans becomes NPA
REASONS F0R AN ACCOUNT BECOMING NPA
Those attribute to borrower
Failure to bring in required capital
Lack of proper planning
Unwanted expenses
Lack of expertise
Poor credit collection
Miss management
Heavy borrowing
Lack of knowledge regarding NPA
Willful defaulters
Death of the borrower
Those attribute to banks
Wrong selection of borrower
Poor credit appraisal
Unhelpful in supervision
Too inflexible attitude
System overload
Lack of motivation
Delay in sanction
Lack of trained staff
Lack of commitment to recovery
Lack of personal visit to the borrower office
Lack of personal visit to the borrowerrsquos residence
Other
Fast changing technology
Unhelpful attitude of govt
Increase in material cost
Government policies
Taxation law
Political hostility
INDIAN ECONOMY AND NPA
Undoubtedly the world economy has slowed down recession is at its peak globally stock markets
have tumbled and business itself getting hard to do The Indian economy has been much affected due
to high fiscal deficit poor infrastructure facilities sticky legal system cutting of exposures to
emerging market by FIIs etc
Further international rating agencies like standard and poor
have lowered Indiarsquos credit rating to sub- investment grade Such negative aspects have often
outweighed positive such as increasing for reserve and a manageable inflation rate
Under such situation I go without saying that banks are no exception
and are bound to face the heat of global down turn One would be surprise to know that banks and
financial institution in India holds non-performing assets worth Rs 1 10000 crores Bankers have
realized that unless the level of NPA is reduced drastically they will find it difficult to survive
The actual level of NPA in India is around $ 40 billion much higher than govt estimation of $16
billion This difference is largely due to the discrepancy in accounting the NPAs followed by India
and rest of the world The accounting norms of India are less stringent than those of the developed
economies The Indian banks also have the tendency to extend the past due Considering the GDP
India nearly $ 470 billion the NPA are 8 of the total GDP which was better than many Asian
countries The NPA of china was 45 of the GDP While Japan had NPAs of 25 of the GDP
The aggregate level of NPAs in Asia has increased from $ 25 billion in 2007 to
$ 34 billion on 2009 looking to such overall pictures of the market we can say that India is doing
well and the steps taken are looking favorable
Source googlecoin
DATA ANALYZING THE QUETIONNAIRE
Two set of questionnaire were prepared to collect the feedback One set of questionnaire was meant for branches and other set of questionnaire was meant for borrowers
The set of questionnaire were given to the branches under hazaribag (RBO) and collected the feedback of the bankers of P segment and the branch manager
The questionnaire prepared for branch contained 15 questions and the questionnaire prepared for borrower contains 10 questions
The data was collected from 50 bankers and the data analysis of the branch questionnaire is as follows
Question number 1
Does not require any data analysis and information was sought to know the business level of the branches for the purpose of whether particular branch is actively engaged in xpress credit portfolio
Question number 2
Do you think that the borrowers are aware about NPA
Answer
32 of the respondent feel that the borrowers are not aware about NPA and 18 respondents feel that borrowers are aware about NPA
Chart no 11
yes
no
0
5
10
15
20
25
30
35
1832 Column1
Conclusion
Majority of the bank officials feels that the borrowers are not aware about NPA
Question number 3
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Answer
Out of 32 respondent 22 respondents is fully satisfied that lack of knowledge among the borrower regarding NPA is one of the reason for NPA 08 respondent were partially satisfied with it and 02 respondent were not satisfied with it
Chart no 12
fully satisfied(22)69
partially satisfied(8)25
not satisfied(2)6
Sales
Conclusion
Majority of the borrowers feels that lack of knowledge among the borrower regarding NPA is one of the reasons for NPA
Question number 4 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Answer
Out of 50 respondent 30 of the respondent strongly satisfied that these external factors contribute to NPA 10 respondent were partially satisfied with it 5 were not satisfied where as 5 were fully dissatisfied with it
Chart no 13
6020
10
10
fully satisfied(30) partially satisfied(10) not satisfiec(5) fully desatisfied(5)
Conclusion
Most of the respondent thinks that external factrs like willful defaulter change in govt policy contribute to NPA
Question number 5
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Answer
Chart no 14
feedback
fully satisfied(20)partially satisfied(12)not satisfied(12)fully dissatisfied(6)
Conclusion
As per the response of the officials most of the officials feel that internal factors are also responsible for NPA
Question number 6
Do you think that inflation is one of the reasons for NPA
Answer
Out f 50 responses 22 were strongly satisfied 18 were partially satisfied 8 were not satisfied and 2 were fully dissatisfied
Chart no 15
fully satisfied(20)44
partially satisfied(18)36
not satisfied(5)10
fullt dissatisfied(5)10
Conclusion
Growing inflation increasing goods rate is also one of the reason for NPA
Question number 7
Do you think that lack of PSS is also contributed to NPA
Answer
Out of 50 responses 30 were fully satisfied with it 12 were partially satisfied and 8 were fully dissatisfied
Chart no 16
6024
16
Open
fully satisfied(30)Partially satisfied(12)not satisfied(0)fully dissatisfied(8)
Conclusion
Majority of the officiais feels that lack of PSS is one of the reason for NPA This means that the PSS carried out by the bank is not sufficient or not carried out properly
Question number 8
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Answer
Most of the respondent feels that increase in unwanted expenses of the borrwer ls contribute to NPA
Chart no 17
56
12
28
4
FULLY SATISFIED(28)PARTIALLY SATISFIED(6)NOT SATISFIED(14)FULLY DISSATISFIED(2)
Conclusion
As per response of the officials increasing inflation have an adverse effect on the financial sector its working performance as well as on NPA
Question number 9
Do you think that high rate of interest under Xpress credit also contributes to NPA
Answer
Out of 50 respondent 25 respondent were not satisfied 10 were partially satisfied 10 were strongly dissatisfied where as only 5 out of 50 were fully satisfied with it
Chart no 18
strongly satisfied(5)partially satisfied(10)not satisfied(25)fully dissatisfied(10)
Conclusion
Most of the respondents are not satisfied with it They feel that the rate of interest charged by SBI under Xpress credit is not high and it will not contribute to NPS
Question number 10
Do you think that lack of proper planning of the borrower is one of the reason for NPA
Answer
Out of 70 respondent 35 were fully satisfied 5 were not satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 19
fully satisfied(35)70
partially satisfied(10)20
not satisfied(5)10
Conclusion
Most of the respondent feels that the borrowers borrow money from the bank without any proper planning which is one of the most important reason for NPA
Question number 11
Is heavy borrowing also contribute to NPA
Answer
Out of 50 respondent 25 respondent were fully satisfied 12 were partially satisfied 8 were not satisfied were as 5 were fully dissatisfied
Chart no 110
50
24
16
10
fully satisfied(25) partially satisfied(12) not satisfied(8) fully dissatisfied(5)
Question number 12
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Answer
As per the response of the officials 20 were fully satisfied 66were partially satisfied 4 were not satisfied with it were as 10 respondent were fully dissatisfied
Chart no 111
fully satisfied(10)20
partially satisfied(33)66
not satisfied(2)4
fullydissatisfied(5)10
Conclusion
As per the response given by the officials most of the officials were partially satisfied that wrong selection of borrower also contribute to NPA which means that selection process carried out by the bank is not appropriate or there is some difficulties in implementing them
Question number 13
Do you think that poor credit appraisal also contribute to NPA
Answer
Out of 50 respondent 5 were fully satisfied 10 were fully satisfied 30 were not satisfied were as only 5 were fully dissatisfied
Chart no 112
fully satisfied(5)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 14
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Answer
Out of 50 responses 3 were fully satisfied 15 were partially satisfied 25 were not satisfied where as 7 were full dissatisfied
Chart no 113
fully satisfied(3)partiallt satisfied(15)not satisfied(25)fully dissatisfied(7)
Conclusion
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not contribute to NPA This means that the attitude of bank toward the borrower is not inflexible
Question number 15
Do you think that system over load is also one of the causes of NPA
Answer
Out of 50 respondent 28 were fully satisfied 12 were partially satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 114
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Standard assets the loan ac which are regular and do not carry more than normal risk are
known as standard assets
Sub- standard assets with effect from 3132005 a sub-standard assets is one which is
classified as NPA for a period not exceeding 12 months
Doubtful asset with effect from 3132005 an asset is to be classified as doubtful if it
remained NPA or sub-standard for a period exceeding 12 months
Loss assets a loss asset is one where loss has been identified by the bank or internal and
external auditors or the RBI inspection but the amount as not been written off wholly
IMPACTEFFECT OF NPA UPON BANKS
NPA are one of the major concerns of sector banks is increasing result in nonperforming
assets NPA do not generate interest income for the banks but the same time banks are
required to make provisions for such NPAs from their current profits
They result in reduced interest income
Adverse impact on capital adequacy ratio
Bad effect on goodwill amp on equity value
EARLY SYMPTOMS BY WHICH ONE CAN RECOGNIZE A PERFORMING ASSETS
TURNING TO A NON PERFORMING ASSET
1 FINANCIAL
a Non- payment of very first installment
b Bouncing of cheque due to insufficient balance in the ac
2 OPERATIONAL AND PHYSICAL
a If information is received that the borrower has either initiated the process of winding
up or not doing the business
b External non-controllable factor like natural calamities in the city where the borrower
lives
3) ATTITUDNAL CHANGE
a Avoidance of contact with bank
4) OTHER
a Change in govt policies
PREVENTIVE MEASUREMENT FOR NPA
Early recognition of the problem Identifying borrowers with genuine intent Timeliness and
adequacy of response Focus on cash flow Management effectiveness multiple financing
OBSERVATION FINDING
In my research I found that The NPA in Xpress credit is not very high as compared to other
segment
At some extent bank officials are responsible for NPA because bank is worried about mobilizing
more and more business but not concern about maintenance of accounts
Conclusions
To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit
2 NPAs represent high level of risk and low level of credit appraisal
3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA
4 There are some certain guidelines made by RBI for NPAs which are adopted by banks
5 NPA under Xpress credit is less as compare to other segment (education)
Recommendations suggestions
In my study I have found some limitation So I can suggest following suggestions or area of
improvement
Bank should create effectiveness in management of NPAs
Proper monitoring of ac should be adopted to control NPAs
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the
financial capacity of the borrower before than credit facility
This all is done after carefully evaluating the financials position of the borrower
personal interview with the borrower Case study of the borrower as well as personal
interview with the bank officials of different branches
CHART ndashNO PARTICULARS PAGE- NO
01 Loan procedure of retail loan 29
11 Awareness level of borrower regarding NPA 54
12 Bank officials questionnaire analysis 55
13 Bank officials questionnaire analysis 56
14 Bank officials questionnaire analysis 57
15 Bank officials questionnaire analysis 58
16 Bank officials questionnaire analysis 59
17 Bank officials questionnaire analysis 60
18 Bank officials questionnaire analysis 61
19 Bank officials questionnaire analysis 62
110 Bank officials questionnaire analysis 63
111 Bank officials questionnaire analysis 64
112 Bank officials questionnaire analysis 65
113 Bank officials questionnaire analysis 66
114 Bank officials questionnaire analysis 67
115 Bank officials questionnaire analysis 68
116 Borrowers question analysis 70
117 Borrowers question analysis 71
118 Borrowers question analysis 72
119 Borrowers question analysis 73
120 Borrowers question analysis 74
121 Borrower questione analysis 75
122 Last three years NPA comparison of SBI 76
123 Last 10 years overall NPA of hzbag branch 77
124 Last 10 years NPA in p-segment of hzbag branch 78
125 Reason for turning an ac into NPA 82
126 Method of data collection 89
127 Recommendation testing 96
LIST OF CHARTS
LIST OF TABLES
TABLE- NO PARTICULARS PAGE ndash NO
01 Last three years NPAs76
02 Over all NPA over time of hzbag branch (10 years)
77
03 Last 10 years p-segment NPA of hzbag branch
78
04 Product wise NPA comparison of hzbag
branch
79
05 Branch wise comparison of NPA in Xpress
credit
80
06 Profession wise NPA comparison81
07 Reason for turning an ac into NPA as per the borrower
82
08 Validity testing of the recommendation(bank officers views)
96
STUDENT PROFILE
NAME Vivek Kumar gupta
Father name Rajendra Pd gupta
Gender Male
DOB 15081993
Academic qualification Pursuing BCom (insurance honors)
College St Xavierrsquos college Ranchi
At present Pursuing special diploma in Marine insurance
Contact no 7631011853
Email ID vivek7654595gmailcom
PROJECT MENTOR PROFILE
NAME Rajesh Kumar Jha
DESIGNATION Manager (PB) Hazaribag
WORK PLACE SBI Hazaribag
CONTACT NO 9931833473(personal) 9771458627(official)
EMAIL ID rajeshkjhasbicoin
SBI HAZARIBAG BRANCH PROFILE
BRANCH INFORMATION
Date of opening 17-10-55
Branch code 00090
Migration date 14-12-2006
Circle Patna
Network 2
Module name Dhanbad
Branch type Regular branch
MICR code 825002002
License date 17-10-1954
Controllers Email ID agm4zoransbiciin
COMMUNICATION ADDRESS
Address 1 State bank of India
Address 2 Ravindra path
Address 3 NH-33
City Hazaribag
Pin 825301
BRANCH MANAGER
Name Shrwan Kumar Singh
Designation Chief Manager
Contact no 9431140712
Email shrwansinghsbicoin
STAFF STRENGTH
Officers 15
Assistants 30
Messengers 12
Guards 03
ACCOUNTS
Total no of ac - 60720
SB ac ndash 46133
CA ac - 510
Advances ndash 7247 Lakhs
Deposits ndash 91408 Lakhs
Total no of ATMrsquoS ndash 08
NATURE OF THE PROJECT
Xpress credit is a form of personal loan devised to provide instant credit support to person in need It caters mainly salaried person who have their salary ac with the bank The loan is a very good source of increasing retail loan portfolio but also have inherent risk It is a clear loan without any security and hence attracts more provisioning also unexpected events like death of borrower creates problem of recovery Sometimes employers shift their salary to other bank intentionally to avoid repayment and sometime it is difficult to track their transfer and posting
Despite all positive factors of continuous income and benefit of recovery through department the bank is facing the problem of high NPA in Xpress credit
The study is an endeavor to search the cause of acrsquos turning into NPA analyzing the efforts of the bank to recover the dues and to suggest the measures to contain the NPA to minimum or to zero level
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the npa
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
COMPANY PROFILE OF SBI
The evolution of sbi can be traced back to the first decade of the 19th century It began with the
establishment of bank of culcutta in cuicutta on 2nd july 1806 The bank was redesined as the bank of
bangal three year later on 2nd january 1809 It was the first ever joint company of british india
established under the sponsorship of govt of bangal Subsiquently the bank of madras and bank of
bombay follwed the bank of bangal These banks were amalgamated to form imperial bank on 27th
jan 1921
An important turning point in the history of SBI is the launch of 1st five year plan of independence
india in 1951 The plan aimed to serving the indian economy in general and the rural sector of the
countryin particular There for in order to serve the economy as a whole and the rural sector in
particular all india rural credit survey committee recommended the formation of state ndash partnered
and state ndash sponsored bank An act was passed in the parliament of india in may 1955 As a result the
sbi was established on 1st july 1955this results in making SBI more powerful as much as quarter of
resourses of indian banking system was controlled by state later on state bank of india (subsidiary
banks) act was pessedin 1959 This act enabled the sbi to make the 8 state associated bank as its
subsidiaries
BRANCHES
The corporate centre of SBI is located in Mumbai In order to cater to different function There is several other
establishments in and outside Mumbai apart from corporate center The bank boasts of having as many as 14
local head office and 57 zonal offices located as major cities throughout India It is recorded that SBI has
more than 10000 branches will cater to its customer throughout India
ATM
SBI provides easy access to money to its customers through more than 90000 ATMs in India The
bank also facilitates the free transaction of money at ATMs of state bank group You may also
transect money through SBI commercial and international bank ltd by using the state bank ATM
CUM DEBIT CARD It the only banking company to open its ATM in region of kargil
Source SBIcoin
Xpress credit
INTRODUCTION-
The Xpress Credit Scheme was formulated in April 2004 in the form of pre-approved loan to
employees of leading PSUs and Government organizations At present the scheme is open to
Employees of government semi-government profit making PSUs Educational Institutions of
national repute and companies of good standing (based on their CRA rating) The scheme is built
around the concept of check ndash off (the process by which the salary disbursing officer undertakes to
deduct loan installments from the salary of the borrower and remits the same to the Bank for credit
of the loan account) Xpress Credit Loans may also be sanctioned in those cases where the borrower
gives sufficient PDCs (Post Dated Cheques) for entire tenure of the loan
Source Xpress credit circular
PURPOSE
The loan under the scheme is granted for any legitimate personal purpose (eg expenses for
domestic or foreign travel medical treatment of self or a family member meeting any financial
liability such as marriage of sondaughter defraying educational expenses of wards meeting
margins for purchase of assets etc)
Source Xpress credit circular
ELIGIBILITY
1 EMPLOYERS
Central and state Government
Quasi-Government
Profit making PSUs
Educational Institutions of National Repute
Companies with a CRA rating of SB1 to SB5
Companies with a CRA rating of SB6 and SB7 are also eligible if it satisfies take over norms
2 EMPLOYEES
Permanent employees with a minimum 1 yearrsquos length of service
He should have sufficient cash flows to repay the loan from salary as evidenced by 6 monthsrsquo
salary slipsincome tax returns of 2 years
He should provide proof of residence and proof of identity to satisfy KYC norms
He should produce 6 months satisfactory statement of bank account (at any bank)
Proof of Employment in the eligible company
Source Xpress credit circular
MINIMUM NET MONTHLY INCOME
The minimum Net Monthly Income (NMI) of the employee should beRs5000- It can
Be lowered to Rs3000- subject to the condition that the salary accounts of the entire enterprise are
with us The Branch will ensure to obtain an Undertaking from the borrower that there is no other
deduction from hisher salary which is not reflected in the salary slip [As per Annexure ndash (B) ndash (v)]
LOAN AMOUNT
a) Minimum Rs24000=
b) Maximum 24 Months NMI with a ceiling of Rs1500 lacs
TYPE OF LOAN
LoanD Term demand Loan (NO OVERDRAFT)
REPAYMENT PERIOD
Maximum 60 months
EMI NMI le 50
REVIEW
Review of loan will be done yearly
RENEWAL
Renewal of loans will be allowed after 24 months
CHECK OFF
The process by which the salary disbursing officer under takes to deduct the loan
installments from the salary of the borrower and remits the same to the Bank for credit to the loan
account
Or
The employer pays the borrowerrsquos salary into his SavingsCurrent Account with our Bank
The borrower gives an irrevocable Standing Instruction (SI) For recovery of the loan installments
from his aforesaid account with the SI being synchronized with the date of credit of salary in the
borrowerrsquos SavingsCurrent Account
AND
The employer undertakes to inform the Bank if and when there is a severance due to borrowerrsquos
transfer resignation retirement etc[ Branch will ensure to obtain the undertaking from the employer
and employee as per Annexure ndash B (I) B (ii) II or B (iii) ]
Source Xpress credit circular
CATEGORY I
FULL CHECK OFF
As given under the head CHECKOFF
AND
Undertaking from the employer to obtain a NOC from the Bank before settling the dues of the
borrower on transfer resignation retirement etc [As per Annexure ndash B (IV)]
This stipulation can be waived by the sanctioning authority incase of employees of Central State
Government PSUs Universities and Reputed Colleges In case of other employers the CGM of the
Circle has been permitted to waive the stipulation But in no case this can be waived for IT sector
employees
CATEGORY II
PARTIAL CHECK OFF
As given under the head CHECKOFF
CATEGORY III
WITH NO CHECK OFF
The employer pays the borrowerrsquos salary into his SavingsCurrent Account with our Bank
The borrower gives an irrevocable Standing Instruction (SI) for
recovery of the loan installments from his aforesaid account twitch the SI being synchronized with
the date of credit of salary in the borrowerrsquos SavingsCurrent Account
OR
Conditions as given under the head CHECKOFF is not fulfilled but the borrower provides monthly
PDCs (Post Dated Cheques) for entire tenure of the loan provided eligibility criteria are fulfilled
(Guidelines on Post Dated cheques is annexed as per Annexure A)
INTEREST RATE
The Interest rate is based on the category of Check off available
Category I
5 above the base rate ie - 970 +5 =1470 ( currently 1470 pa)
Category II
7 above the base rate (currently 1670 pa)
Note The GM of the Network is vested with powers to extend the Category II rate to a Category III
borrower only in case of employees of SB1 to SB5 rated companies who maintain their salary
accounts with us The Category III employees who do not maintain their salary accounts with us but
provide PDCs for the loan should be charged the card rate applicable to Category III and no
deviation should be permitted by Circle GMs
PENAL INTEREST
Penal interest should not be charged for loans up to Rs25000For Loans above Rs25000- if the
irregularity exceeds EMI or installment amount for a period of one month then penal interest would
be charged 2 pa(over and above the applicable interest
rate) on the overdue amount for the period of default If part installment or part EMI remains
overdue then penal interest should not be levied
This provision has been made to avoid application of penal interest on Personal Segment Loan
accounts where EMIs stipulated or installments are being paid regularly by the borrowers
Source Xpress credit circular
SECURITY
The loan is clean in nature and no security is required
PROCESSING FEE
11 of the loan amount including tax
PRE-SANCTION PROCESS
The following documents will be obtained before sanction-
I Application cum appraisal Form With a photograph of the borrower duly attested by the
authorized official
II It is proposed to put in place an arrangement for verification of the address of the borrower by an
outside agency A report duly signed by the verification agency (in places where an arrangement is
in place) or by our officerstaff in other places (where verification agency approved by Corporate
Centre is not available) should be complied based on the following verifications
I Verification of the borrowerrsquos residence address as given in the loan application
by actually visiting the residence of the borrower
II Verification of the borrowerrsquos office address as given in the loan application by
actually visiting the office of the borrower
Source Xpress credit circular
III Verification of the borrowerrsquos residence telephone number as given in the loan
application by actually calling the residence telephone number of the borrower
IV Verification of the borrowerrsquos office telephone number as given in the loan
Application by actually calling the office telephone number of the Borrower
V Verification of the IT return of the Borrower with IT department through a
person approved by the Regional OfficeZonal Office where feasible Where IT
return cannot be verified by the Bank statement of account of the borrower may
be scrutinized to verified income flows
Where the verification is not outsourced the Branch staff
Must do the verification and the report should be added with the loan documents
Flow chart of loan procedure of retail loan
Chart no 01
Disagree
NON PEFORMING ASSETS (NPA) ndash CONCEPT
The three letters ldquoNPArdquostrike terror in banking sector and business circle todayNPA is the short
Form of ldquoNon performing Assetsrdquo
Enquiry about loan
Agreeprovided with check list and
application
submission of documents and application dully
filled up
Documents taken
verification of application and
documebtsCIBIL report
Processing of loan
Sangtion of loan
Document
Control Disbursal of loan
phasewise lumpsum
In banking NPA are loans given to doubtful customers who may or may not repay the
loan on time There are two types of assets viz performing and non performing Performing loans
are standard loans on which both the principle and interest are secured and their return is guaranteed
NPA means the debt which is given by the bank is unable to recover is called
nonperforming assets A NPA account in the books of accounts is an asset as it indicates the amount
received from the defaulters It means if any bank gives loan and is not paid by the customers till 90
days than that account is called as NPA account
DEFINITION
An asset including leased assets becomes nonperforming when it ceases to generate income
for the bank
A NPA was defined as a credit facility in respect of which the interest or installment
of principle as remained ldquopast duerdquo for specific period of time
Source googlecoin
The specific period was reduced in a phased manner as under
wef ndash 31031993 four quarters
wef ndash 31 031994 three quarters
wef - 31031995 two quarters
wef - 31032001 180 days
wef - 31032004 90 days from past due
90 days delinquency is not applicable to agriculture segment
With effect from march 31 2004 NPA shall be a loan or an advance where
1) Term loan interest installment of principle remain over due for 90 days
2) Cash creditover draft an account remain ldquoout of orderrdquo for a period of more than 90 days
3) Bills The bills remain over due for a period more than 90 days
4) Agriculture loan
a The loan has been granted for short duration crop installments of the principle
remain over due for two crop season beyond the due date
b If the loan has been granted for long duration crop installment of the principle
remain over due for one crop season beyond the due date
Source Rbiorgin
CLASSIFICATION OF LOANS
In India loans are classified on following basis
Performing assets
Loans where the interest and or principle not remain overdue for more then 90 days
Non-performing assets
Any loan repayment remains over due for more than 90 days is considered as NPA
According to the securitization and re construction of financial assets and enforcement of
security interest ordinance2002 ldquonon performing assetsrdquo(NPA) means an assets or ac of
borrower which has been classified by the bank as sub-standard doubtful or loss asset in
accordance with the guidelines relating to asset classification issued by RBI
Source googlecoin
ASSET - CLASSIFICATION
Assets can be categorized into four categories (a) standard (b) sub-standard
(c) doubtful (d) loss The last three categories are classified as npa based on the the period for
which the asset has remained non-performing and the realisability of the dues
Standard assets the loan ac which are regular and do not carry more than normal risk are
known as standard assets there could be ac which though have not become npa but are
irregular Such ac are called special mention ac
Sub- standard assets with effect from 3132005 a sub-standard assets is one which is
classified as NPA for a period not exceeding 12 months
Doubtful asset with effect from 3132005 an asset is to be classified as doubtful if it
remained npa or sub-standard for a period exceeding 12 months
Loss assets a loss asset is one where loss has been identified by the bank or internal and
external auditors or the RBI inspection but the amount as not been written off wholly In
other words such an asset is considered uncollectable and such little value that its
continuance as a bankable asset is not warranted although there may be some salvage or
recoverable value
NPA IDENTIFICATION NORMS
With effect from 31st march 2004 a loan or advance become npa when
a Interest or installment of the principle remains overdue for a period more then 90
days in respect of term loan
b The ac remain out of order for a period more 90days in respect of over draft cash
cash credit
c The bill remains overdue for a period more than 90 days in case of bills purchased
and discounted
d With effect from Sept 2004 loan granted for short duration crops will be treated as
NPA if the installment of principle or interest there on remains overdue for two crop
season and loan granted for long duration will be treated as NPA if the installment
remains overdue for one crop season
Out of order
An account will be treated as out as out of order if the outstanding balance remain
continuously in excess of the sanctioned limitdrawing power In cases where the
outstanding balance in the principle operating ac is less than the sanctioned limit but
there are no credit continuously for 90 days as on the date of balance sheet or the
credit are not enough to cover the interest debited during the same period
Overdue
An amount due to the bank under any credit facility is overdue it is not paid on the due
date fixed by the bank
The date of npa will be actual date on which sippage occurred as mentioned below
For term and demand loan ac
The date on which the installment of the principle have
remaine overdue for a period more then 90 days
For over draft and cash credit ac
The date on which the ac completed period of more than 90
days of being continuously out of order
Source wwwRBI Org in
PROVISING NORMS
There is time lag between an ac becoming doubtful for recovery the realization of security and
erosion over a loan period of time in its value So RBI directives now requiresthe banks to make
provisions in their balance sheet for all non- standard loan asset Provisioning is made on all types of
assets ie Standard sub-standard doubtful and loss assets
1 Standard assets RBI vides its circular dated 151108 revised the provisioning requirements
For all type of standard assets it has been reduced to a uniform level of 040of outstanding
at global basis except in the case of direct advance to agriculture and SME sector which
shall continue to attract a provisioning of 025 The provision toward standard assets need
not to be netted from gross advances but shown separately as ldquo contigent provisionsrdquo against
standard assets under other liquidities and provisions others in schedule 5 of the balance
sheet
2 Sub-standard assets- In respect of sub-standard assets the rate of provision is 10 of
outstanding balance without considering ECGC guarantee cover or securities available
However if the loan was unsecured from the begining there would be additional provision of
10 ie total provision would be 20 of the outstanding balance Unsecured exposure is
defined as an exposure where the realizable value of the security as assessed by the
bankreserve banks inspecting officers is not more than 10 ab-intio of the outstanding
exposure
3 Doubtful assets In case of doubtful assets while making provision realizable value of
security is to be considered 100 provision is made for unsecured portion In case of
secured portion the rate of provision depend on age of doubtful assets as under
Age of doubtful assets Provision as of secured portion
Doubtful up to 1 year D1 20 of RVS( realizable value of security)
Doubtful for more than 1 year D2 30 of RVS
Doubtful for more than 3 years D2 100 of RVS
Thus if an ac is doubtful for more than 3 years than 100 of the provision is to be made
both from secured and unsecured portion If an advance has been guaranteed by DICGC
CGFTECGC and is doubtful than provision on secured portion will be as in other cases but
provision on unsecured portion will be made after deducting the claim value
4 LOSS ASSET 100 of the outstanding amount while making provision on NPAs amount
lying in suspense ac and derecognized interest should be deducted from gross advance and
provision be made on balance amount
5 OVERALL PROVISION With a view to improving the improving the provisioning cover
and enhancing the soundness of the individual banks RBI has proposed in oct- 09 policy that
bank should augment their provisions and ensure that their total provisioning coverage ratio
including floating provisions is not less than 70
Source wwwRBIorgin
IMPACTEFFECT OF NPA UPON BANKS
A strong banking sector is important for flourishing economy The failure of banking sector
may have an adverse impact on other sector NPA are one of the major concerns of sector
banks is increasing result in nonperforming assets The NPA impact drastically to the
working of banks The efficiency of bank not always reflected by the size of its balance sheet
but by the level of return on its assetsNPA do not generate interest income for the banks but
the same time banks are required to make provisions for such NPAs from their current
profits
They erode current profits through provisioning requirement
They result in reduced interest income
They require higher provisioning requirements effecting profits and accretion to capital
Adverse impact on capital adequacy ratio
Roe and Roa goes down because NPA do not earn
Banks rating gets effect
Banks cost of raising funds goes up
Bad effect on goodwill
Bad effect on equity value
EARLY SYMPTOMS BY WHICH ONE CAN RECOGNIZE A PERFORMING
ASSETS TURNING TO A NON PERFORMING ASSET
Four categories of early symptoms
1) FINANCIAL
(a) Non- payment of very first installment
(b) Bouncing of cheque due to insufficient balance in the ac
(c) Irregularity in installment
(d) Irregularity of operations in ac
(e) Unpaid overdue bill
(f) Declining current ratio
2) OPERATIONAL AND PHYSICAL
(a) If information is received that the borrower has either initiated the process of winding up or not doing the business
(b) Over-due receivable
(c) Stock statement not submitted on time
(d) External non-controllable factor like natural calamities in the city where the borrower lives
(e) Non- payment of salary
(3) ATTITUDNAL CHANGE
(a) Use for personal comfort stocks and shares by borrowers
(b) Avoidance of contact with bank
(c) Problem between partners
(4) OTHER
(a) Change in govt policies
(b) Death of the borrower
(c) Delay in salary
PREVENTIVE MEASUREMENT FOR NPA
Early recognition of the problem
Invariably by the time banks start their efforts to get involved
in a revival process its too late to retrieve the situation ndash both in terms of rehabilitation of the
project and the recovery of banks dues Identification of the weakness regardless of the fact
that it may not have become NPA is imperative Assessment of the potential of revival may
be done on the basis of a techno-economic viability study Restructuring should be attempted
where after an objective assessment of the promoterrsquos intention banks are convinced of a
turn around with in a scheduled facilitate winding upselling of units earlier so as to recover
whatever is possible through means before the security position becomes worse
Identifying borrowers with genuine intent
Identifying borrower with genuine intent from those who
are non-serious with commitment or stake in revival is a challenge confronting bankers Here
the role of front line officials at branch level is paramount as they are the ones who have
intelligent inputs with regard to promoters lsquo sincerity and capability to achieve turnaround
Based on this objective assessment bank should decide as quickly as possible whether it
would be worthwhile to commit additional finance
In this regard banks may consider having
ldquospecial investigationrdquo of all financial transaction or business transaction books of account
order to ascertain real factor that contributed to sickness of borrower Bank may have panel
of technical experts with proven expertise and task record of preparing techno-economic
study of the project of the borrowers
Borrowers having genuine problems due to temporary mismatch in find flow or sudden
requirement of additional fund may entertained at branch level for this purpose a special
limit to such type of cases should be decided This will obviate the need to route the
additional funding through the controlling officers in deserving cases and avert many
accounts sleeping into NPA category
Timeliness and adequacy of response
Longer the delay in response greater the enjury to the
account and the asset Time is a crucial element in any restructuring or rehabilitation activity
The response decided on the basis of techno- economic study and promoterrsquos commitment
has to be adequate in terms of extend of additional funding and relaxations etc under the
restructuring exercise The package of assistance may be flexible and bank may look at the
exit option
Focus on cash flow
While financing at the time of restructuring the banks may not be guided
by the conventional fund flow analysis only which could yield a potentially misleading
picture Appraisal for fresh credit requirement may be done by analyzing fond flow in
conjunction with the cash flow rather than only on the basis of fund flow
Source wwwAskcom
Management effectiveness
The general perception among the borrower is lack of finance that
leads to sickness and NPAs but this may not be the case all the time Management effectiveness
advance business condition is a very important aspect that affects a borrowing units fortunes A bank
may commit a multiple finance to an align unit only after basic viability of the enterprise also in the
context of quality of management is examined and confirmed It will be useful to have consultant
appointed as early as possible to examine this aspect A proper techno-economic viability study thus
become the basis on which any future action can be considered
Multiple financing
A) During the exercise for assessment of viability and restructuring a pragmatic and unified
approach by all the leading banks as also sharing of all relevant information on the
borrower would go a long way toward overall success of rehabilitation exercise given the
probability of successfailure
B) In some default cases Where the unit is still working The bank should make sure that it
captures the cash flow and insure that such cash are used for working capital purpose
Toward this end there should be a continuous flow of information among consortium
member A bank which is not a part of consortium may not be allowed to offer credit
facility to such defaulting clients Current account facility may also be denied at non-
consortium banks to such clients and violation may attract penal action The credit
information bureau of india (CIBIL) may be very useful for meaningful information
exchange on defaulting borrowers once the setup become fully operational
C) In a forum of lenders the priority of each lender will be different While one set of lender
may be willing to wait for longer time to recover its dues another lender may have a much
shorter timeframe in mind So it is possible that the letter categories of lenders may be
willing to exit even at a cost by a discounted settlement of the exposure There for any plan
for restructuringrehabilitation may takes into account
D) Corporate debt restructuring it has been institutionalized in 2001 to provide a timely and
transparent system for restructuring the corporate debt of RS 20 crores and above with the
banks on a voluntary basis and outside a legal framework Under this system bank are
greatly benefit in terms of restructuring of large standard accounts (potential NPAs) and
viable sub-standard account with multiple banking arrangement
NPA MANAGEMENT- RESOLUTION
Compromise settlement schemes
Restructuringrescheduling
Lok adalat
Corporate debt restructuring cell
Debt recovery Tribunals (DRT)
Proceeding under the code of civil procedure
Board of industrial and financial reconstruction
National company law Tribunal (NCLT)
Sale of NPA to other bank
Sale of NPA to ARCSC under securitization and reconstruction of financial assets for
enforcement of security interest Act 2000 (SRFAESI)
Liquidation
Source wwwRBIorgin
NPA MANAGEMENT IN INDIA
Formation of the credit information bureau (India) limited (CIBIL)
Release of willful defaulterrsquos listRBI also releases a list of borrowers with aggregate
outstanding of RS 1 crore and above against whom bank have filed suit for recovery of their
fund
Reporting of frauds to RBI
Norms of lenders labiality- framing of fair practices code with regard to lenders lability to
be followed by banks
Risk assessment and Risk management
RBI has advised banks to all cases of willful defaulters in case of 1 crore and above and
files suits in such cases
Responding quick mortality cases
Special mention accounts for early identification for bad debt loans and advances over due
for less than one or two quarters would come under this category However these accounts do
not need provisioning
INTERNATIONAL PRACTICES ON NPA MANAGEMENT
Subsequent to the Asian currency crisis which severely crippled the financial system In
addition to the above some of the more recent and aggressive step to NPAs have been taken
by Taiwan Taiwanese financial institution have been encouraged to merge and form bank
based AMCs through the recent introduction of financial holding company act and financial
institution Asian countries the magnitude of NPAs in Asian financial institution was brought
to light Driven by the need to proactively tackle the soaring NPAs level the respective govt
embarked upon a program of substantial reform This involves setting up processes for early
identification and resolution of NPAs The table below provides a cross country comparison
of approaches used for NPA resolution Mergers Act A long side the ministry of finance has
followed a carrot and strict policy of specifying the required NPA ratio for banks while also
providing flexibility in modes of NPA assets resolution and a conduct
ive regulatory and tax environment Deferred loss write-off provisions have been instituted to
provide breathing space for lenders to absorb NPA write-off While it is too early to
comment on success of NPA resolution process in Taiwan the early sign are encouraging
Detailed below are some key NPA management approaches adopted by banks in South East
Asian countries
1 Credit risk mitigation
2 Early warning systems
3 Assets management companies
Increasing willingness to sell NPAs to AMCs
Effective resolution strategy
Appointment of special administrators
4 Out of court restructuring
Source wwwgooglecom
DIFFICULTIES WITH NON PERFORMING ASSETS
I Owners do not receive a market return on their capital In the worst case if the bank
fails owner lose their assets
II Depositors do not receive a market return on savings In the worst case if the bank
fails depositors lose their assets or uninsured balance Banks also redistribute losses
to other borrowers by charging higher rate of interest
III Non-performing loans epitomize bad investors They misallocate credit from good
projects which do not receive funding to failed project
IV 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
shortage the shortage can jam payments across the country
b Illiquidity constraints banks in paying depositors eg cashing their paychecks
c Undercapitalized banks exceed the bank capital base
Lending by bank has been politicized It is common knowledge
that loans are given to various industrial houses on common consideration and
viability of project but on political consideration In normal circumstances banks
before extending any loan would make a thorough study of the actual need of the
party considered the prospect of the business in which it is engaged Since it is
not looked into many of the loans becomes NPA
REASONS F0R AN ACCOUNT BECOMING NPA
Those attribute to borrower
Failure to bring in required capital
Lack of proper planning
Unwanted expenses
Lack of expertise
Poor credit collection
Miss management
Heavy borrowing
Lack of knowledge regarding NPA
Willful defaulters
Death of the borrower
Those attribute to banks
Wrong selection of borrower
Poor credit appraisal
Unhelpful in supervision
Too inflexible attitude
System overload
Lack of motivation
Delay in sanction
Lack of trained staff
Lack of commitment to recovery
Lack of personal visit to the borrower office
Lack of personal visit to the borrowerrsquos residence
Other
Fast changing technology
Unhelpful attitude of govt
Increase in material cost
Government policies
Taxation law
Political hostility
INDIAN ECONOMY AND NPA
Undoubtedly the world economy has slowed down recession is at its peak globally stock markets
have tumbled and business itself getting hard to do The Indian economy has been much affected due
to high fiscal deficit poor infrastructure facilities sticky legal system cutting of exposures to
emerging market by FIIs etc
Further international rating agencies like standard and poor
have lowered Indiarsquos credit rating to sub- investment grade Such negative aspects have often
outweighed positive such as increasing for reserve and a manageable inflation rate
Under such situation I go without saying that banks are no exception
and are bound to face the heat of global down turn One would be surprise to know that banks and
financial institution in India holds non-performing assets worth Rs 1 10000 crores Bankers have
realized that unless the level of NPA is reduced drastically they will find it difficult to survive
The actual level of NPA in India is around $ 40 billion much higher than govt estimation of $16
billion This difference is largely due to the discrepancy in accounting the NPAs followed by India
and rest of the world The accounting norms of India are less stringent than those of the developed
economies The Indian banks also have the tendency to extend the past due Considering the GDP
India nearly $ 470 billion the NPA are 8 of the total GDP which was better than many Asian
countries The NPA of china was 45 of the GDP While Japan had NPAs of 25 of the GDP
The aggregate level of NPAs in Asia has increased from $ 25 billion in 2007 to
$ 34 billion on 2009 looking to such overall pictures of the market we can say that India is doing
well and the steps taken are looking favorable
Source googlecoin
DATA ANALYZING THE QUETIONNAIRE
Two set of questionnaire were prepared to collect the feedback One set of questionnaire was meant for branches and other set of questionnaire was meant for borrowers
The set of questionnaire were given to the branches under hazaribag (RBO) and collected the feedback of the bankers of P segment and the branch manager
The questionnaire prepared for branch contained 15 questions and the questionnaire prepared for borrower contains 10 questions
The data was collected from 50 bankers and the data analysis of the branch questionnaire is as follows
Question number 1
Does not require any data analysis and information was sought to know the business level of the branches for the purpose of whether particular branch is actively engaged in xpress credit portfolio
Question number 2
Do you think that the borrowers are aware about NPA
Answer
32 of the respondent feel that the borrowers are not aware about NPA and 18 respondents feel that borrowers are aware about NPA
Chart no 11
yes
no
0
5
10
15
20
25
30
35
1832 Column1
Conclusion
Majority of the bank officials feels that the borrowers are not aware about NPA
Question number 3
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Answer
Out of 32 respondent 22 respondents is fully satisfied that lack of knowledge among the borrower regarding NPA is one of the reason for NPA 08 respondent were partially satisfied with it and 02 respondent were not satisfied with it
Chart no 12
fully satisfied(22)69
partially satisfied(8)25
not satisfied(2)6
Sales
Conclusion
Majority of the borrowers feels that lack of knowledge among the borrower regarding NPA is one of the reasons for NPA
Question number 4 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Answer
Out of 50 respondent 30 of the respondent strongly satisfied that these external factors contribute to NPA 10 respondent were partially satisfied with it 5 were not satisfied where as 5 were fully dissatisfied with it
Chart no 13
6020
10
10
fully satisfied(30) partially satisfied(10) not satisfiec(5) fully desatisfied(5)
Conclusion
Most of the respondent thinks that external factrs like willful defaulter change in govt policy contribute to NPA
Question number 5
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Answer
Chart no 14
feedback
fully satisfied(20)partially satisfied(12)not satisfied(12)fully dissatisfied(6)
Conclusion
As per the response of the officials most of the officials feel that internal factors are also responsible for NPA
Question number 6
Do you think that inflation is one of the reasons for NPA
Answer
Out f 50 responses 22 were strongly satisfied 18 were partially satisfied 8 were not satisfied and 2 were fully dissatisfied
Chart no 15
fully satisfied(20)44
partially satisfied(18)36
not satisfied(5)10
fullt dissatisfied(5)10
Conclusion
Growing inflation increasing goods rate is also one of the reason for NPA
Question number 7
Do you think that lack of PSS is also contributed to NPA
Answer
Out of 50 responses 30 were fully satisfied with it 12 were partially satisfied and 8 were fully dissatisfied
Chart no 16
6024
16
Open
fully satisfied(30)Partially satisfied(12)not satisfied(0)fully dissatisfied(8)
Conclusion
Majority of the officiais feels that lack of PSS is one of the reason for NPA This means that the PSS carried out by the bank is not sufficient or not carried out properly
Question number 8
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Answer
Most of the respondent feels that increase in unwanted expenses of the borrwer ls contribute to NPA
Chart no 17
56
12
28
4
FULLY SATISFIED(28)PARTIALLY SATISFIED(6)NOT SATISFIED(14)FULLY DISSATISFIED(2)
Conclusion
As per response of the officials increasing inflation have an adverse effect on the financial sector its working performance as well as on NPA
Question number 9
Do you think that high rate of interest under Xpress credit also contributes to NPA
Answer
Out of 50 respondent 25 respondent were not satisfied 10 were partially satisfied 10 were strongly dissatisfied where as only 5 out of 50 were fully satisfied with it
Chart no 18
strongly satisfied(5)partially satisfied(10)not satisfied(25)fully dissatisfied(10)
Conclusion
Most of the respondents are not satisfied with it They feel that the rate of interest charged by SBI under Xpress credit is not high and it will not contribute to NPS
Question number 10
Do you think that lack of proper planning of the borrower is one of the reason for NPA
Answer
Out of 70 respondent 35 were fully satisfied 5 were not satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 19
fully satisfied(35)70
partially satisfied(10)20
not satisfied(5)10
Conclusion
Most of the respondent feels that the borrowers borrow money from the bank without any proper planning which is one of the most important reason for NPA
Question number 11
Is heavy borrowing also contribute to NPA
Answer
Out of 50 respondent 25 respondent were fully satisfied 12 were partially satisfied 8 were not satisfied were as 5 were fully dissatisfied
Chart no 110
50
24
16
10
fully satisfied(25) partially satisfied(12) not satisfied(8) fully dissatisfied(5)
Question number 12
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Answer
As per the response of the officials 20 were fully satisfied 66were partially satisfied 4 were not satisfied with it were as 10 respondent were fully dissatisfied
Chart no 111
fully satisfied(10)20
partially satisfied(33)66
not satisfied(2)4
fullydissatisfied(5)10
Conclusion
As per the response given by the officials most of the officials were partially satisfied that wrong selection of borrower also contribute to NPA which means that selection process carried out by the bank is not appropriate or there is some difficulties in implementing them
Question number 13
Do you think that poor credit appraisal also contribute to NPA
Answer
Out of 50 respondent 5 were fully satisfied 10 were fully satisfied 30 were not satisfied were as only 5 were fully dissatisfied
Chart no 112
fully satisfied(5)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 14
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Answer
Out of 50 responses 3 were fully satisfied 15 were partially satisfied 25 were not satisfied where as 7 were full dissatisfied
Chart no 113
fully satisfied(3)partiallt satisfied(15)not satisfied(25)fully dissatisfied(7)
Conclusion
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not contribute to NPA This means that the attitude of bank toward the borrower is not inflexible
Question number 15
Do you think that system over load is also one of the causes of NPA
Answer
Out of 50 respondent 28 were fully satisfied 12 were partially satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 114
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
3) ATTITUDNAL CHANGE
a Avoidance of contact with bank
4) OTHER
a Change in govt policies
PREVENTIVE MEASUREMENT FOR NPA
Early recognition of the problem Identifying borrowers with genuine intent Timeliness and
adequacy of response Focus on cash flow Management effectiveness multiple financing
OBSERVATION FINDING
In my research I found that The NPA in Xpress credit is not very high as compared to other
segment
At some extent bank officials are responsible for NPA because bank is worried about mobilizing
more and more business but not concern about maintenance of accounts
Conclusions
To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit
2 NPAs represent high level of risk and low level of credit appraisal
3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA
4 There are some certain guidelines made by RBI for NPAs which are adopted by banks
5 NPA under Xpress credit is less as compare to other segment (education)
Recommendations suggestions
In my study I have found some limitation So I can suggest following suggestions or area of
improvement
Bank should create effectiveness in management of NPAs
Proper monitoring of ac should be adopted to control NPAs
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the
financial capacity of the borrower before than credit facility
This all is done after carefully evaluating the financials position of the borrower
personal interview with the borrower Case study of the borrower as well as personal
interview with the bank officials of different branches
CHART ndashNO PARTICULARS PAGE- NO
01 Loan procedure of retail loan 29
11 Awareness level of borrower regarding NPA 54
12 Bank officials questionnaire analysis 55
13 Bank officials questionnaire analysis 56
14 Bank officials questionnaire analysis 57
15 Bank officials questionnaire analysis 58
16 Bank officials questionnaire analysis 59
17 Bank officials questionnaire analysis 60
18 Bank officials questionnaire analysis 61
19 Bank officials questionnaire analysis 62
110 Bank officials questionnaire analysis 63
111 Bank officials questionnaire analysis 64
112 Bank officials questionnaire analysis 65
113 Bank officials questionnaire analysis 66
114 Bank officials questionnaire analysis 67
115 Bank officials questionnaire analysis 68
116 Borrowers question analysis 70
117 Borrowers question analysis 71
118 Borrowers question analysis 72
119 Borrowers question analysis 73
120 Borrowers question analysis 74
121 Borrower questione analysis 75
122 Last three years NPA comparison of SBI 76
123 Last 10 years overall NPA of hzbag branch 77
124 Last 10 years NPA in p-segment of hzbag branch 78
125 Reason for turning an ac into NPA 82
126 Method of data collection 89
127 Recommendation testing 96
LIST OF CHARTS
LIST OF TABLES
TABLE- NO PARTICULARS PAGE ndash NO
01 Last three years NPAs76
02 Over all NPA over time of hzbag branch (10 years)
77
03 Last 10 years p-segment NPA of hzbag branch
78
04 Product wise NPA comparison of hzbag
branch
79
05 Branch wise comparison of NPA in Xpress
credit
80
06 Profession wise NPA comparison81
07 Reason for turning an ac into NPA as per the borrower
82
08 Validity testing of the recommendation(bank officers views)
96
STUDENT PROFILE
NAME Vivek Kumar gupta
Father name Rajendra Pd gupta
Gender Male
DOB 15081993
Academic qualification Pursuing BCom (insurance honors)
College St Xavierrsquos college Ranchi
At present Pursuing special diploma in Marine insurance
Contact no 7631011853
Email ID vivek7654595gmailcom
PROJECT MENTOR PROFILE
NAME Rajesh Kumar Jha
DESIGNATION Manager (PB) Hazaribag
WORK PLACE SBI Hazaribag
CONTACT NO 9931833473(personal) 9771458627(official)
EMAIL ID rajeshkjhasbicoin
SBI HAZARIBAG BRANCH PROFILE
BRANCH INFORMATION
Date of opening 17-10-55
Branch code 00090
Migration date 14-12-2006
Circle Patna
Network 2
Module name Dhanbad
Branch type Regular branch
MICR code 825002002
License date 17-10-1954
Controllers Email ID agm4zoransbiciin
COMMUNICATION ADDRESS
Address 1 State bank of India
Address 2 Ravindra path
Address 3 NH-33
City Hazaribag
Pin 825301
BRANCH MANAGER
Name Shrwan Kumar Singh
Designation Chief Manager
Contact no 9431140712
Email shrwansinghsbicoin
STAFF STRENGTH
Officers 15
Assistants 30
Messengers 12
Guards 03
ACCOUNTS
Total no of ac - 60720
SB ac ndash 46133
CA ac - 510
Advances ndash 7247 Lakhs
Deposits ndash 91408 Lakhs
Total no of ATMrsquoS ndash 08
NATURE OF THE PROJECT
Xpress credit is a form of personal loan devised to provide instant credit support to person in need It caters mainly salaried person who have their salary ac with the bank The loan is a very good source of increasing retail loan portfolio but also have inherent risk It is a clear loan without any security and hence attracts more provisioning also unexpected events like death of borrower creates problem of recovery Sometimes employers shift their salary to other bank intentionally to avoid repayment and sometime it is difficult to track their transfer and posting
Despite all positive factors of continuous income and benefit of recovery through department the bank is facing the problem of high NPA in Xpress credit
The study is an endeavor to search the cause of acrsquos turning into NPA analyzing the efforts of the bank to recover the dues and to suggest the measures to contain the NPA to minimum or to zero level
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the npa
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
COMPANY PROFILE OF SBI
The evolution of sbi can be traced back to the first decade of the 19th century It began with the
establishment of bank of culcutta in cuicutta on 2nd july 1806 The bank was redesined as the bank of
bangal three year later on 2nd january 1809 It was the first ever joint company of british india
established under the sponsorship of govt of bangal Subsiquently the bank of madras and bank of
bombay follwed the bank of bangal These banks were amalgamated to form imperial bank on 27th
jan 1921
An important turning point in the history of SBI is the launch of 1st five year plan of independence
india in 1951 The plan aimed to serving the indian economy in general and the rural sector of the
countryin particular There for in order to serve the economy as a whole and the rural sector in
particular all india rural credit survey committee recommended the formation of state ndash partnered
and state ndash sponsored bank An act was passed in the parliament of india in may 1955 As a result the
sbi was established on 1st july 1955this results in making SBI more powerful as much as quarter of
resourses of indian banking system was controlled by state later on state bank of india (subsidiary
banks) act was pessedin 1959 This act enabled the sbi to make the 8 state associated bank as its
subsidiaries
BRANCHES
The corporate centre of SBI is located in Mumbai In order to cater to different function There is several other
establishments in and outside Mumbai apart from corporate center The bank boasts of having as many as 14
local head office and 57 zonal offices located as major cities throughout India It is recorded that SBI has
more than 10000 branches will cater to its customer throughout India
ATM
SBI provides easy access to money to its customers through more than 90000 ATMs in India The
bank also facilitates the free transaction of money at ATMs of state bank group You may also
transect money through SBI commercial and international bank ltd by using the state bank ATM
CUM DEBIT CARD It the only banking company to open its ATM in region of kargil
Source SBIcoin
Xpress credit
INTRODUCTION-
The Xpress Credit Scheme was formulated in April 2004 in the form of pre-approved loan to
employees of leading PSUs and Government organizations At present the scheme is open to
Employees of government semi-government profit making PSUs Educational Institutions of
national repute and companies of good standing (based on their CRA rating) The scheme is built
around the concept of check ndash off (the process by which the salary disbursing officer undertakes to
deduct loan installments from the salary of the borrower and remits the same to the Bank for credit
of the loan account) Xpress Credit Loans may also be sanctioned in those cases where the borrower
gives sufficient PDCs (Post Dated Cheques) for entire tenure of the loan
Source Xpress credit circular
PURPOSE
The loan under the scheme is granted for any legitimate personal purpose (eg expenses for
domestic or foreign travel medical treatment of self or a family member meeting any financial
liability such as marriage of sondaughter defraying educational expenses of wards meeting
margins for purchase of assets etc)
Source Xpress credit circular
ELIGIBILITY
1 EMPLOYERS
Central and state Government
Quasi-Government
Profit making PSUs
Educational Institutions of National Repute
Companies with a CRA rating of SB1 to SB5
Companies with a CRA rating of SB6 and SB7 are also eligible if it satisfies take over norms
2 EMPLOYEES
Permanent employees with a minimum 1 yearrsquos length of service
He should have sufficient cash flows to repay the loan from salary as evidenced by 6 monthsrsquo
salary slipsincome tax returns of 2 years
He should provide proof of residence and proof of identity to satisfy KYC norms
He should produce 6 months satisfactory statement of bank account (at any bank)
Proof of Employment in the eligible company
Source Xpress credit circular
MINIMUM NET MONTHLY INCOME
The minimum Net Monthly Income (NMI) of the employee should beRs5000- It can
Be lowered to Rs3000- subject to the condition that the salary accounts of the entire enterprise are
with us The Branch will ensure to obtain an Undertaking from the borrower that there is no other
deduction from hisher salary which is not reflected in the salary slip [As per Annexure ndash (B) ndash (v)]
LOAN AMOUNT
a) Minimum Rs24000=
b) Maximum 24 Months NMI with a ceiling of Rs1500 lacs
TYPE OF LOAN
LoanD Term demand Loan (NO OVERDRAFT)
REPAYMENT PERIOD
Maximum 60 months
EMI NMI le 50
REVIEW
Review of loan will be done yearly
RENEWAL
Renewal of loans will be allowed after 24 months
CHECK OFF
The process by which the salary disbursing officer under takes to deduct the loan
installments from the salary of the borrower and remits the same to the Bank for credit to the loan
account
Or
The employer pays the borrowerrsquos salary into his SavingsCurrent Account with our Bank
The borrower gives an irrevocable Standing Instruction (SI) For recovery of the loan installments
from his aforesaid account with the SI being synchronized with the date of credit of salary in the
borrowerrsquos SavingsCurrent Account
AND
The employer undertakes to inform the Bank if and when there is a severance due to borrowerrsquos
transfer resignation retirement etc[ Branch will ensure to obtain the undertaking from the employer
and employee as per Annexure ndash B (I) B (ii) II or B (iii) ]
Source Xpress credit circular
CATEGORY I
FULL CHECK OFF
As given under the head CHECKOFF
AND
Undertaking from the employer to obtain a NOC from the Bank before settling the dues of the
borrower on transfer resignation retirement etc [As per Annexure ndash B (IV)]
This stipulation can be waived by the sanctioning authority incase of employees of Central State
Government PSUs Universities and Reputed Colleges In case of other employers the CGM of the
Circle has been permitted to waive the stipulation But in no case this can be waived for IT sector
employees
CATEGORY II
PARTIAL CHECK OFF
As given under the head CHECKOFF
CATEGORY III
WITH NO CHECK OFF
The employer pays the borrowerrsquos salary into his SavingsCurrent Account with our Bank
The borrower gives an irrevocable Standing Instruction (SI) for
recovery of the loan installments from his aforesaid account twitch the SI being synchronized with
the date of credit of salary in the borrowerrsquos SavingsCurrent Account
OR
Conditions as given under the head CHECKOFF is not fulfilled but the borrower provides monthly
PDCs (Post Dated Cheques) for entire tenure of the loan provided eligibility criteria are fulfilled
(Guidelines on Post Dated cheques is annexed as per Annexure A)
INTEREST RATE
The Interest rate is based on the category of Check off available
Category I
5 above the base rate ie - 970 +5 =1470 ( currently 1470 pa)
Category II
7 above the base rate (currently 1670 pa)
Note The GM of the Network is vested with powers to extend the Category II rate to a Category III
borrower only in case of employees of SB1 to SB5 rated companies who maintain their salary
accounts with us The Category III employees who do not maintain their salary accounts with us but
provide PDCs for the loan should be charged the card rate applicable to Category III and no
deviation should be permitted by Circle GMs
PENAL INTEREST
Penal interest should not be charged for loans up to Rs25000For Loans above Rs25000- if the
irregularity exceeds EMI or installment amount for a period of one month then penal interest would
be charged 2 pa(over and above the applicable interest
rate) on the overdue amount for the period of default If part installment or part EMI remains
overdue then penal interest should not be levied
This provision has been made to avoid application of penal interest on Personal Segment Loan
accounts where EMIs stipulated or installments are being paid regularly by the borrowers
Source Xpress credit circular
SECURITY
The loan is clean in nature and no security is required
PROCESSING FEE
11 of the loan amount including tax
PRE-SANCTION PROCESS
The following documents will be obtained before sanction-
I Application cum appraisal Form With a photograph of the borrower duly attested by the
authorized official
II It is proposed to put in place an arrangement for verification of the address of the borrower by an
outside agency A report duly signed by the verification agency (in places where an arrangement is
in place) or by our officerstaff in other places (where verification agency approved by Corporate
Centre is not available) should be complied based on the following verifications
I Verification of the borrowerrsquos residence address as given in the loan application
by actually visiting the residence of the borrower
II Verification of the borrowerrsquos office address as given in the loan application by
actually visiting the office of the borrower
Source Xpress credit circular
III Verification of the borrowerrsquos residence telephone number as given in the loan
application by actually calling the residence telephone number of the borrower
IV Verification of the borrowerrsquos office telephone number as given in the loan
Application by actually calling the office telephone number of the Borrower
V Verification of the IT return of the Borrower with IT department through a
person approved by the Regional OfficeZonal Office where feasible Where IT
return cannot be verified by the Bank statement of account of the borrower may
be scrutinized to verified income flows
Where the verification is not outsourced the Branch staff
Must do the verification and the report should be added with the loan documents
Flow chart of loan procedure of retail loan
Chart no 01
Disagree
NON PEFORMING ASSETS (NPA) ndash CONCEPT
The three letters ldquoNPArdquostrike terror in banking sector and business circle todayNPA is the short
Form of ldquoNon performing Assetsrdquo
Enquiry about loan
Agreeprovided with check list and
application
submission of documents and application dully
filled up
Documents taken
verification of application and
documebtsCIBIL report
Processing of loan
Sangtion of loan
Document
Control Disbursal of loan
phasewise lumpsum
In banking NPA are loans given to doubtful customers who may or may not repay the
loan on time There are two types of assets viz performing and non performing Performing loans
are standard loans on which both the principle and interest are secured and their return is guaranteed
NPA means the debt which is given by the bank is unable to recover is called
nonperforming assets A NPA account in the books of accounts is an asset as it indicates the amount
received from the defaulters It means if any bank gives loan and is not paid by the customers till 90
days than that account is called as NPA account
DEFINITION
An asset including leased assets becomes nonperforming when it ceases to generate income
for the bank
A NPA was defined as a credit facility in respect of which the interest or installment
of principle as remained ldquopast duerdquo for specific period of time
Source googlecoin
The specific period was reduced in a phased manner as under
wef ndash 31031993 four quarters
wef ndash 31 031994 three quarters
wef - 31031995 two quarters
wef - 31032001 180 days
wef - 31032004 90 days from past due
90 days delinquency is not applicable to agriculture segment
With effect from march 31 2004 NPA shall be a loan or an advance where
1) Term loan interest installment of principle remain over due for 90 days
2) Cash creditover draft an account remain ldquoout of orderrdquo for a period of more than 90 days
3) Bills The bills remain over due for a period more than 90 days
4) Agriculture loan
a The loan has been granted for short duration crop installments of the principle
remain over due for two crop season beyond the due date
b If the loan has been granted for long duration crop installment of the principle
remain over due for one crop season beyond the due date
Source Rbiorgin
CLASSIFICATION OF LOANS
In India loans are classified on following basis
Performing assets
Loans where the interest and or principle not remain overdue for more then 90 days
Non-performing assets
Any loan repayment remains over due for more than 90 days is considered as NPA
According to the securitization and re construction of financial assets and enforcement of
security interest ordinance2002 ldquonon performing assetsrdquo(NPA) means an assets or ac of
borrower which has been classified by the bank as sub-standard doubtful or loss asset in
accordance with the guidelines relating to asset classification issued by RBI
Source googlecoin
ASSET - CLASSIFICATION
Assets can be categorized into four categories (a) standard (b) sub-standard
(c) doubtful (d) loss The last three categories are classified as npa based on the the period for
which the asset has remained non-performing and the realisability of the dues
Standard assets the loan ac which are regular and do not carry more than normal risk are
known as standard assets there could be ac which though have not become npa but are
irregular Such ac are called special mention ac
Sub- standard assets with effect from 3132005 a sub-standard assets is one which is
classified as NPA for a period not exceeding 12 months
Doubtful asset with effect from 3132005 an asset is to be classified as doubtful if it
remained npa or sub-standard for a period exceeding 12 months
Loss assets a loss asset is one where loss has been identified by the bank or internal and
external auditors or the RBI inspection but the amount as not been written off wholly In
other words such an asset is considered uncollectable and such little value that its
continuance as a bankable asset is not warranted although there may be some salvage or
recoverable value
NPA IDENTIFICATION NORMS
With effect from 31st march 2004 a loan or advance become npa when
a Interest or installment of the principle remains overdue for a period more then 90
days in respect of term loan
b The ac remain out of order for a period more 90days in respect of over draft cash
cash credit
c The bill remains overdue for a period more than 90 days in case of bills purchased
and discounted
d With effect from Sept 2004 loan granted for short duration crops will be treated as
NPA if the installment of principle or interest there on remains overdue for two crop
season and loan granted for long duration will be treated as NPA if the installment
remains overdue for one crop season
Out of order
An account will be treated as out as out of order if the outstanding balance remain
continuously in excess of the sanctioned limitdrawing power In cases where the
outstanding balance in the principle operating ac is less than the sanctioned limit but
there are no credit continuously for 90 days as on the date of balance sheet or the
credit are not enough to cover the interest debited during the same period
Overdue
An amount due to the bank under any credit facility is overdue it is not paid on the due
date fixed by the bank
The date of npa will be actual date on which sippage occurred as mentioned below
For term and demand loan ac
The date on which the installment of the principle have
remaine overdue for a period more then 90 days
For over draft and cash credit ac
The date on which the ac completed period of more than 90
days of being continuously out of order
Source wwwRBI Org in
PROVISING NORMS
There is time lag between an ac becoming doubtful for recovery the realization of security and
erosion over a loan period of time in its value So RBI directives now requiresthe banks to make
provisions in their balance sheet for all non- standard loan asset Provisioning is made on all types of
assets ie Standard sub-standard doubtful and loss assets
1 Standard assets RBI vides its circular dated 151108 revised the provisioning requirements
For all type of standard assets it has been reduced to a uniform level of 040of outstanding
at global basis except in the case of direct advance to agriculture and SME sector which
shall continue to attract a provisioning of 025 The provision toward standard assets need
not to be netted from gross advances but shown separately as ldquo contigent provisionsrdquo against
standard assets under other liquidities and provisions others in schedule 5 of the balance
sheet
2 Sub-standard assets- In respect of sub-standard assets the rate of provision is 10 of
outstanding balance without considering ECGC guarantee cover or securities available
However if the loan was unsecured from the begining there would be additional provision of
10 ie total provision would be 20 of the outstanding balance Unsecured exposure is
defined as an exposure where the realizable value of the security as assessed by the
bankreserve banks inspecting officers is not more than 10 ab-intio of the outstanding
exposure
3 Doubtful assets In case of doubtful assets while making provision realizable value of
security is to be considered 100 provision is made for unsecured portion In case of
secured portion the rate of provision depend on age of doubtful assets as under
Age of doubtful assets Provision as of secured portion
Doubtful up to 1 year D1 20 of RVS( realizable value of security)
Doubtful for more than 1 year D2 30 of RVS
Doubtful for more than 3 years D2 100 of RVS
Thus if an ac is doubtful for more than 3 years than 100 of the provision is to be made
both from secured and unsecured portion If an advance has been guaranteed by DICGC
CGFTECGC and is doubtful than provision on secured portion will be as in other cases but
provision on unsecured portion will be made after deducting the claim value
4 LOSS ASSET 100 of the outstanding amount while making provision on NPAs amount
lying in suspense ac and derecognized interest should be deducted from gross advance and
provision be made on balance amount
5 OVERALL PROVISION With a view to improving the improving the provisioning cover
and enhancing the soundness of the individual banks RBI has proposed in oct- 09 policy that
bank should augment their provisions and ensure that their total provisioning coverage ratio
including floating provisions is not less than 70
Source wwwRBIorgin
IMPACTEFFECT OF NPA UPON BANKS
A strong banking sector is important for flourishing economy The failure of banking sector
may have an adverse impact on other sector NPA are one of the major concerns of sector
banks is increasing result in nonperforming assets The NPA impact drastically to the
working of banks The efficiency of bank not always reflected by the size of its balance sheet
but by the level of return on its assetsNPA do not generate interest income for the banks but
the same time banks are required to make provisions for such NPAs from their current
profits
They erode current profits through provisioning requirement
They result in reduced interest income
They require higher provisioning requirements effecting profits and accretion to capital
Adverse impact on capital adequacy ratio
Roe and Roa goes down because NPA do not earn
Banks rating gets effect
Banks cost of raising funds goes up
Bad effect on goodwill
Bad effect on equity value
EARLY SYMPTOMS BY WHICH ONE CAN RECOGNIZE A PERFORMING
ASSETS TURNING TO A NON PERFORMING ASSET
Four categories of early symptoms
1) FINANCIAL
(a) Non- payment of very first installment
(b) Bouncing of cheque due to insufficient balance in the ac
(c) Irregularity in installment
(d) Irregularity of operations in ac
(e) Unpaid overdue bill
(f) Declining current ratio
2) OPERATIONAL AND PHYSICAL
(a) If information is received that the borrower has either initiated the process of winding up or not doing the business
(b) Over-due receivable
(c) Stock statement not submitted on time
(d) External non-controllable factor like natural calamities in the city where the borrower lives
(e) Non- payment of salary
(3) ATTITUDNAL CHANGE
(a) Use for personal comfort stocks and shares by borrowers
(b) Avoidance of contact with bank
(c) Problem between partners
(4) OTHER
(a) Change in govt policies
(b) Death of the borrower
(c) Delay in salary
PREVENTIVE MEASUREMENT FOR NPA
Early recognition of the problem
Invariably by the time banks start their efforts to get involved
in a revival process its too late to retrieve the situation ndash both in terms of rehabilitation of the
project and the recovery of banks dues Identification of the weakness regardless of the fact
that it may not have become NPA is imperative Assessment of the potential of revival may
be done on the basis of a techno-economic viability study Restructuring should be attempted
where after an objective assessment of the promoterrsquos intention banks are convinced of a
turn around with in a scheduled facilitate winding upselling of units earlier so as to recover
whatever is possible through means before the security position becomes worse
Identifying borrowers with genuine intent
Identifying borrower with genuine intent from those who
are non-serious with commitment or stake in revival is a challenge confronting bankers Here
the role of front line officials at branch level is paramount as they are the ones who have
intelligent inputs with regard to promoters lsquo sincerity and capability to achieve turnaround
Based on this objective assessment bank should decide as quickly as possible whether it
would be worthwhile to commit additional finance
In this regard banks may consider having
ldquospecial investigationrdquo of all financial transaction or business transaction books of account
order to ascertain real factor that contributed to sickness of borrower Bank may have panel
of technical experts with proven expertise and task record of preparing techno-economic
study of the project of the borrowers
Borrowers having genuine problems due to temporary mismatch in find flow or sudden
requirement of additional fund may entertained at branch level for this purpose a special
limit to such type of cases should be decided This will obviate the need to route the
additional funding through the controlling officers in deserving cases and avert many
accounts sleeping into NPA category
Timeliness and adequacy of response
Longer the delay in response greater the enjury to the
account and the asset Time is a crucial element in any restructuring or rehabilitation activity
The response decided on the basis of techno- economic study and promoterrsquos commitment
has to be adequate in terms of extend of additional funding and relaxations etc under the
restructuring exercise The package of assistance may be flexible and bank may look at the
exit option
Focus on cash flow
While financing at the time of restructuring the banks may not be guided
by the conventional fund flow analysis only which could yield a potentially misleading
picture Appraisal for fresh credit requirement may be done by analyzing fond flow in
conjunction with the cash flow rather than only on the basis of fund flow
Source wwwAskcom
Management effectiveness
The general perception among the borrower is lack of finance that
leads to sickness and NPAs but this may not be the case all the time Management effectiveness
advance business condition is a very important aspect that affects a borrowing units fortunes A bank
may commit a multiple finance to an align unit only after basic viability of the enterprise also in the
context of quality of management is examined and confirmed It will be useful to have consultant
appointed as early as possible to examine this aspect A proper techno-economic viability study thus
become the basis on which any future action can be considered
Multiple financing
A) During the exercise for assessment of viability and restructuring a pragmatic and unified
approach by all the leading banks as also sharing of all relevant information on the
borrower would go a long way toward overall success of rehabilitation exercise given the
probability of successfailure
B) In some default cases Where the unit is still working The bank should make sure that it
captures the cash flow and insure that such cash are used for working capital purpose
Toward this end there should be a continuous flow of information among consortium
member A bank which is not a part of consortium may not be allowed to offer credit
facility to such defaulting clients Current account facility may also be denied at non-
consortium banks to such clients and violation may attract penal action The credit
information bureau of india (CIBIL) may be very useful for meaningful information
exchange on defaulting borrowers once the setup become fully operational
C) In a forum of lenders the priority of each lender will be different While one set of lender
may be willing to wait for longer time to recover its dues another lender may have a much
shorter timeframe in mind So it is possible that the letter categories of lenders may be
willing to exit even at a cost by a discounted settlement of the exposure There for any plan
for restructuringrehabilitation may takes into account
D) Corporate debt restructuring it has been institutionalized in 2001 to provide a timely and
transparent system for restructuring the corporate debt of RS 20 crores and above with the
banks on a voluntary basis and outside a legal framework Under this system bank are
greatly benefit in terms of restructuring of large standard accounts (potential NPAs) and
viable sub-standard account with multiple banking arrangement
NPA MANAGEMENT- RESOLUTION
Compromise settlement schemes
Restructuringrescheduling
Lok adalat
Corporate debt restructuring cell
Debt recovery Tribunals (DRT)
Proceeding under the code of civil procedure
Board of industrial and financial reconstruction
National company law Tribunal (NCLT)
Sale of NPA to other bank
Sale of NPA to ARCSC under securitization and reconstruction of financial assets for
enforcement of security interest Act 2000 (SRFAESI)
Liquidation
Source wwwRBIorgin
NPA MANAGEMENT IN INDIA
Formation of the credit information bureau (India) limited (CIBIL)
Release of willful defaulterrsquos listRBI also releases a list of borrowers with aggregate
outstanding of RS 1 crore and above against whom bank have filed suit for recovery of their
fund
Reporting of frauds to RBI
Norms of lenders labiality- framing of fair practices code with regard to lenders lability to
be followed by banks
Risk assessment and Risk management
RBI has advised banks to all cases of willful defaulters in case of 1 crore and above and
files suits in such cases
Responding quick mortality cases
Special mention accounts for early identification for bad debt loans and advances over due
for less than one or two quarters would come under this category However these accounts do
not need provisioning
INTERNATIONAL PRACTICES ON NPA MANAGEMENT
Subsequent to the Asian currency crisis which severely crippled the financial system In
addition to the above some of the more recent and aggressive step to NPAs have been taken
by Taiwan Taiwanese financial institution have been encouraged to merge and form bank
based AMCs through the recent introduction of financial holding company act and financial
institution Asian countries the magnitude of NPAs in Asian financial institution was brought
to light Driven by the need to proactively tackle the soaring NPAs level the respective govt
embarked upon a program of substantial reform This involves setting up processes for early
identification and resolution of NPAs The table below provides a cross country comparison
of approaches used for NPA resolution Mergers Act A long side the ministry of finance has
followed a carrot and strict policy of specifying the required NPA ratio for banks while also
providing flexibility in modes of NPA assets resolution and a conduct
ive regulatory and tax environment Deferred loss write-off provisions have been instituted to
provide breathing space for lenders to absorb NPA write-off While it is too early to
comment on success of NPA resolution process in Taiwan the early sign are encouraging
Detailed below are some key NPA management approaches adopted by banks in South East
Asian countries
1 Credit risk mitigation
2 Early warning systems
3 Assets management companies
Increasing willingness to sell NPAs to AMCs
Effective resolution strategy
Appointment of special administrators
4 Out of court restructuring
Source wwwgooglecom
DIFFICULTIES WITH NON PERFORMING ASSETS
I Owners do not receive a market return on their capital In the worst case if the bank
fails owner lose their assets
II Depositors do not receive a market return on savings In the worst case if the bank
fails depositors lose their assets or uninsured balance Banks also redistribute losses
to other borrowers by charging higher rate of interest
III Non-performing loans epitomize bad investors They misallocate credit from good
projects which do not receive funding to failed project
IV 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
shortage the shortage can jam payments across the country
b Illiquidity constraints banks in paying depositors eg cashing their paychecks
c Undercapitalized banks exceed the bank capital base
Lending by bank has been politicized It is common knowledge
that loans are given to various industrial houses on common consideration and
viability of project but on political consideration In normal circumstances banks
before extending any loan would make a thorough study of the actual need of the
party considered the prospect of the business in which it is engaged Since it is
not looked into many of the loans becomes NPA
REASONS F0R AN ACCOUNT BECOMING NPA
Those attribute to borrower
Failure to bring in required capital
Lack of proper planning
Unwanted expenses
Lack of expertise
Poor credit collection
Miss management
Heavy borrowing
Lack of knowledge regarding NPA
Willful defaulters
Death of the borrower
Those attribute to banks
Wrong selection of borrower
Poor credit appraisal
Unhelpful in supervision
Too inflexible attitude
System overload
Lack of motivation
Delay in sanction
Lack of trained staff
Lack of commitment to recovery
Lack of personal visit to the borrower office
Lack of personal visit to the borrowerrsquos residence
Other
Fast changing technology
Unhelpful attitude of govt
Increase in material cost
Government policies
Taxation law
Political hostility
INDIAN ECONOMY AND NPA
Undoubtedly the world economy has slowed down recession is at its peak globally stock markets
have tumbled and business itself getting hard to do The Indian economy has been much affected due
to high fiscal deficit poor infrastructure facilities sticky legal system cutting of exposures to
emerging market by FIIs etc
Further international rating agencies like standard and poor
have lowered Indiarsquos credit rating to sub- investment grade Such negative aspects have often
outweighed positive such as increasing for reserve and a manageable inflation rate
Under such situation I go without saying that banks are no exception
and are bound to face the heat of global down turn One would be surprise to know that banks and
financial institution in India holds non-performing assets worth Rs 1 10000 crores Bankers have
realized that unless the level of NPA is reduced drastically they will find it difficult to survive
The actual level of NPA in India is around $ 40 billion much higher than govt estimation of $16
billion This difference is largely due to the discrepancy in accounting the NPAs followed by India
and rest of the world The accounting norms of India are less stringent than those of the developed
economies The Indian banks also have the tendency to extend the past due Considering the GDP
India nearly $ 470 billion the NPA are 8 of the total GDP which was better than many Asian
countries The NPA of china was 45 of the GDP While Japan had NPAs of 25 of the GDP
The aggregate level of NPAs in Asia has increased from $ 25 billion in 2007 to
$ 34 billion on 2009 looking to such overall pictures of the market we can say that India is doing
well and the steps taken are looking favorable
Source googlecoin
DATA ANALYZING THE QUETIONNAIRE
Two set of questionnaire were prepared to collect the feedback One set of questionnaire was meant for branches and other set of questionnaire was meant for borrowers
The set of questionnaire were given to the branches under hazaribag (RBO) and collected the feedback of the bankers of P segment and the branch manager
The questionnaire prepared for branch contained 15 questions and the questionnaire prepared for borrower contains 10 questions
The data was collected from 50 bankers and the data analysis of the branch questionnaire is as follows
Question number 1
Does not require any data analysis and information was sought to know the business level of the branches for the purpose of whether particular branch is actively engaged in xpress credit portfolio
Question number 2
Do you think that the borrowers are aware about NPA
Answer
32 of the respondent feel that the borrowers are not aware about NPA and 18 respondents feel that borrowers are aware about NPA
Chart no 11
yes
no
0
5
10
15
20
25
30
35
1832 Column1
Conclusion
Majority of the bank officials feels that the borrowers are not aware about NPA
Question number 3
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Answer
Out of 32 respondent 22 respondents is fully satisfied that lack of knowledge among the borrower regarding NPA is one of the reason for NPA 08 respondent were partially satisfied with it and 02 respondent were not satisfied with it
Chart no 12
fully satisfied(22)69
partially satisfied(8)25
not satisfied(2)6
Sales
Conclusion
Majority of the borrowers feels that lack of knowledge among the borrower regarding NPA is one of the reasons for NPA
Question number 4 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Answer
Out of 50 respondent 30 of the respondent strongly satisfied that these external factors contribute to NPA 10 respondent were partially satisfied with it 5 were not satisfied where as 5 were fully dissatisfied with it
Chart no 13
6020
10
10
fully satisfied(30) partially satisfied(10) not satisfiec(5) fully desatisfied(5)
Conclusion
Most of the respondent thinks that external factrs like willful defaulter change in govt policy contribute to NPA
Question number 5
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Answer
Chart no 14
feedback
fully satisfied(20)partially satisfied(12)not satisfied(12)fully dissatisfied(6)
Conclusion
As per the response of the officials most of the officials feel that internal factors are also responsible for NPA
Question number 6
Do you think that inflation is one of the reasons for NPA
Answer
Out f 50 responses 22 were strongly satisfied 18 were partially satisfied 8 were not satisfied and 2 were fully dissatisfied
Chart no 15
fully satisfied(20)44
partially satisfied(18)36
not satisfied(5)10
fullt dissatisfied(5)10
Conclusion
Growing inflation increasing goods rate is also one of the reason for NPA
Question number 7
Do you think that lack of PSS is also contributed to NPA
Answer
Out of 50 responses 30 were fully satisfied with it 12 were partially satisfied and 8 were fully dissatisfied
Chart no 16
6024
16
Open
fully satisfied(30)Partially satisfied(12)not satisfied(0)fully dissatisfied(8)
Conclusion
Majority of the officiais feels that lack of PSS is one of the reason for NPA This means that the PSS carried out by the bank is not sufficient or not carried out properly
Question number 8
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Answer
Most of the respondent feels that increase in unwanted expenses of the borrwer ls contribute to NPA
Chart no 17
56
12
28
4
FULLY SATISFIED(28)PARTIALLY SATISFIED(6)NOT SATISFIED(14)FULLY DISSATISFIED(2)
Conclusion
As per response of the officials increasing inflation have an adverse effect on the financial sector its working performance as well as on NPA
Question number 9
Do you think that high rate of interest under Xpress credit also contributes to NPA
Answer
Out of 50 respondent 25 respondent were not satisfied 10 were partially satisfied 10 were strongly dissatisfied where as only 5 out of 50 were fully satisfied with it
Chart no 18
strongly satisfied(5)partially satisfied(10)not satisfied(25)fully dissatisfied(10)
Conclusion
Most of the respondents are not satisfied with it They feel that the rate of interest charged by SBI under Xpress credit is not high and it will not contribute to NPS
Question number 10
Do you think that lack of proper planning of the borrower is one of the reason for NPA
Answer
Out of 70 respondent 35 were fully satisfied 5 were not satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 19
fully satisfied(35)70
partially satisfied(10)20
not satisfied(5)10
Conclusion
Most of the respondent feels that the borrowers borrow money from the bank without any proper planning which is one of the most important reason for NPA
Question number 11
Is heavy borrowing also contribute to NPA
Answer
Out of 50 respondent 25 respondent were fully satisfied 12 were partially satisfied 8 were not satisfied were as 5 were fully dissatisfied
Chart no 110
50
24
16
10
fully satisfied(25) partially satisfied(12) not satisfied(8) fully dissatisfied(5)
Question number 12
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Answer
As per the response of the officials 20 were fully satisfied 66were partially satisfied 4 were not satisfied with it were as 10 respondent were fully dissatisfied
Chart no 111
fully satisfied(10)20
partially satisfied(33)66
not satisfied(2)4
fullydissatisfied(5)10
Conclusion
As per the response given by the officials most of the officials were partially satisfied that wrong selection of borrower also contribute to NPA which means that selection process carried out by the bank is not appropriate or there is some difficulties in implementing them
Question number 13
Do you think that poor credit appraisal also contribute to NPA
Answer
Out of 50 respondent 5 were fully satisfied 10 were fully satisfied 30 were not satisfied were as only 5 were fully dissatisfied
Chart no 112
fully satisfied(5)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 14
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Answer
Out of 50 responses 3 were fully satisfied 15 were partially satisfied 25 were not satisfied where as 7 were full dissatisfied
Chart no 113
fully satisfied(3)partiallt satisfied(15)not satisfied(25)fully dissatisfied(7)
Conclusion
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not contribute to NPA This means that the attitude of bank toward the borrower is not inflexible
Question number 15
Do you think that system over load is also one of the causes of NPA
Answer
Out of 50 respondent 28 were fully satisfied 12 were partially satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 114
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
In my study I have found some limitation So I can suggest following suggestions or area of
improvement
Bank should create effectiveness in management of NPAs
Proper monitoring of ac should be adopted to control NPAs
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the
financial capacity of the borrower before than credit facility
This all is done after carefully evaluating the financials position of the borrower
personal interview with the borrower Case study of the borrower as well as personal
interview with the bank officials of different branches
CHART ndashNO PARTICULARS PAGE- NO
01 Loan procedure of retail loan 29
11 Awareness level of borrower regarding NPA 54
12 Bank officials questionnaire analysis 55
13 Bank officials questionnaire analysis 56
14 Bank officials questionnaire analysis 57
15 Bank officials questionnaire analysis 58
16 Bank officials questionnaire analysis 59
17 Bank officials questionnaire analysis 60
18 Bank officials questionnaire analysis 61
19 Bank officials questionnaire analysis 62
110 Bank officials questionnaire analysis 63
111 Bank officials questionnaire analysis 64
112 Bank officials questionnaire analysis 65
113 Bank officials questionnaire analysis 66
114 Bank officials questionnaire analysis 67
115 Bank officials questionnaire analysis 68
116 Borrowers question analysis 70
117 Borrowers question analysis 71
118 Borrowers question analysis 72
119 Borrowers question analysis 73
120 Borrowers question analysis 74
121 Borrower questione analysis 75
122 Last three years NPA comparison of SBI 76
123 Last 10 years overall NPA of hzbag branch 77
124 Last 10 years NPA in p-segment of hzbag branch 78
125 Reason for turning an ac into NPA 82
126 Method of data collection 89
127 Recommendation testing 96
LIST OF CHARTS
LIST OF TABLES
TABLE- NO PARTICULARS PAGE ndash NO
01 Last three years NPAs76
02 Over all NPA over time of hzbag branch (10 years)
77
03 Last 10 years p-segment NPA of hzbag branch
78
04 Product wise NPA comparison of hzbag
branch
79
05 Branch wise comparison of NPA in Xpress
credit
80
06 Profession wise NPA comparison81
07 Reason for turning an ac into NPA as per the borrower
82
08 Validity testing of the recommendation(bank officers views)
96
STUDENT PROFILE
NAME Vivek Kumar gupta
Father name Rajendra Pd gupta
Gender Male
DOB 15081993
Academic qualification Pursuing BCom (insurance honors)
College St Xavierrsquos college Ranchi
At present Pursuing special diploma in Marine insurance
Contact no 7631011853
Email ID vivek7654595gmailcom
PROJECT MENTOR PROFILE
NAME Rajesh Kumar Jha
DESIGNATION Manager (PB) Hazaribag
WORK PLACE SBI Hazaribag
CONTACT NO 9931833473(personal) 9771458627(official)
EMAIL ID rajeshkjhasbicoin
SBI HAZARIBAG BRANCH PROFILE
BRANCH INFORMATION
Date of opening 17-10-55
Branch code 00090
Migration date 14-12-2006
Circle Patna
Network 2
Module name Dhanbad
Branch type Regular branch
MICR code 825002002
License date 17-10-1954
Controllers Email ID agm4zoransbiciin
COMMUNICATION ADDRESS
Address 1 State bank of India
Address 2 Ravindra path
Address 3 NH-33
City Hazaribag
Pin 825301
BRANCH MANAGER
Name Shrwan Kumar Singh
Designation Chief Manager
Contact no 9431140712
Email shrwansinghsbicoin
STAFF STRENGTH
Officers 15
Assistants 30
Messengers 12
Guards 03
ACCOUNTS
Total no of ac - 60720
SB ac ndash 46133
CA ac - 510
Advances ndash 7247 Lakhs
Deposits ndash 91408 Lakhs
Total no of ATMrsquoS ndash 08
NATURE OF THE PROJECT
Xpress credit is a form of personal loan devised to provide instant credit support to person in need It caters mainly salaried person who have their salary ac with the bank The loan is a very good source of increasing retail loan portfolio but also have inherent risk It is a clear loan without any security and hence attracts more provisioning also unexpected events like death of borrower creates problem of recovery Sometimes employers shift their salary to other bank intentionally to avoid repayment and sometime it is difficult to track their transfer and posting
Despite all positive factors of continuous income and benefit of recovery through department the bank is facing the problem of high NPA in Xpress credit
The study is an endeavor to search the cause of acrsquos turning into NPA analyzing the efforts of the bank to recover the dues and to suggest the measures to contain the NPA to minimum or to zero level
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the npa
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
COMPANY PROFILE OF SBI
The evolution of sbi can be traced back to the first decade of the 19th century It began with the
establishment of bank of culcutta in cuicutta on 2nd july 1806 The bank was redesined as the bank of
bangal three year later on 2nd january 1809 It was the first ever joint company of british india
established under the sponsorship of govt of bangal Subsiquently the bank of madras and bank of
bombay follwed the bank of bangal These banks were amalgamated to form imperial bank on 27th
jan 1921
An important turning point in the history of SBI is the launch of 1st five year plan of independence
india in 1951 The plan aimed to serving the indian economy in general and the rural sector of the
countryin particular There for in order to serve the economy as a whole and the rural sector in
particular all india rural credit survey committee recommended the formation of state ndash partnered
and state ndash sponsored bank An act was passed in the parliament of india in may 1955 As a result the
sbi was established on 1st july 1955this results in making SBI more powerful as much as quarter of
resourses of indian banking system was controlled by state later on state bank of india (subsidiary
banks) act was pessedin 1959 This act enabled the sbi to make the 8 state associated bank as its
subsidiaries
BRANCHES
The corporate centre of SBI is located in Mumbai In order to cater to different function There is several other
establishments in and outside Mumbai apart from corporate center The bank boasts of having as many as 14
local head office and 57 zonal offices located as major cities throughout India It is recorded that SBI has
more than 10000 branches will cater to its customer throughout India
ATM
SBI provides easy access to money to its customers through more than 90000 ATMs in India The
bank also facilitates the free transaction of money at ATMs of state bank group You may also
transect money through SBI commercial and international bank ltd by using the state bank ATM
CUM DEBIT CARD It the only banking company to open its ATM in region of kargil
Source SBIcoin
Xpress credit
INTRODUCTION-
The Xpress Credit Scheme was formulated in April 2004 in the form of pre-approved loan to
employees of leading PSUs and Government organizations At present the scheme is open to
Employees of government semi-government profit making PSUs Educational Institutions of
national repute and companies of good standing (based on their CRA rating) The scheme is built
around the concept of check ndash off (the process by which the salary disbursing officer undertakes to
deduct loan installments from the salary of the borrower and remits the same to the Bank for credit
of the loan account) Xpress Credit Loans may also be sanctioned in those cases where the borrower
gives sufficient PDCs (Post Dated Cheques) for entire tenure of the loan
Source Xpress credit circular
PURPOSE
The loan under the scheme is granted for any legitimate personal purpose (eg expenses for
domestic or foreign travel medical treatment of self or a family member meeting any financial
liability such as marriage of sondaughter defraying educational expenses of wards meeting
margins for purchase of assets etc)
Source Xpress credit circular
ELIGIBILITY
1 EMPLOYERS
Central and state Government
Quasi-Government
Profit making PSUs
Educational Institutions of National Repute
Companies with a CRA rating of SB1 to SB5
Companies with a CRA rating of SB6 and SB7 are also eligible if it satisfies take over norms
2 EMPLOYEES
Permanent employees with a minimum 1 yearrsquos length of service
He should have sufficient cash flows to repay the loan from salary as evidenced by 6 monthsrsquo
salary slipsincome tax returns of 2 years
He should provide proof of residence and proof of identity to satisfy KYC norms
He should produce 6 months satisfactory statement of bank account (at any bank)
Proof of Employment in the eligible company
Source Xpress credit circular
MINIMUM NET MONTHLY INCOME
The minimum Net Monthly Income (NMI) of the employee should beRs5000- It can
Be lowered to Rs3000- subject to the condition that the salary accounts of the entire enterprise are
with us The Branch will ensure to obtain an Undertaking from the borrower that there is no other
deduction from hisher salary which is not reflected in the salary slip [As per Annexure ndash (B) ndash (v)]
LOAN AMOUNT
a) Minimum Rs24000=
b) Maximum 24 Months NMI with a ceiling of Rs1500 lacs
TYPE OF LOAN
LoanD Term demand Loan (NO OVERDRAFT)
REPAYMENT PERIOD
Maximum 60 months
EMI NMI le 50
REVIEW
Review of loan will be done yearly
RENEWAL
Renewal of loans will be allowed after 24 months
CHECK OFF
The process by which the salary disbursing officer under takes to deduct the loan
installments from the salary of the borrower and remits the same to the Bank for credit to the loan
account
Or
The employer pays the borrowerrsquos salary into his SavingsCurrent Account with our Bank
The borrower gives an irrevocable Standing Instruction (SI) For recovery of the loan installments
from his aforesaid account with the SI being synchronized with the date of credit of salary in the
borrowerrsquos SavingsCurrent Account
AND
The employer undertakes to inform the Bank if and when there is a severance due to borrowerrsquos
transfer resignation retirement etc[ Branch will ensure to obtain the undertaking from the employer
and employee as per Annexure ndash B (I) B (ii) II or B (iii) ]
Source Xpress credit circular
CATEGORY I
FULL CHECK OFF
As given under the head CHECKOFF
AND
Undertaking from the employer to obtain a NOC from the Bank before settling the dues of the
borrower on transfer resignation retirement etc [As per Annexure ndash B (IV)]
This stipulation can be waived by the sanctioning authority incase of employees of Central State
Government PSUs Universities and Reputed Colleges In case of other employers the CGM of the
Circle has been permitted to waive the stipulation But in no case this can be waived for IT sector
employees
CATEGORY II
PARTIAL CHECK OFF
As given under the head CHECKOFF
CATEGORY III
WITH NO CHECK OFF
The employer pays the borrowerrsquos salary into his SavingsCurrent Account with our Bank
The borrower gives an irrevocable Standing Instruction (SI) for
recovery of the loan installments from his aforesaid account twitch the SI being synchronized with
the date of credit of salary in the borrowerrsquos SavingsCurrent Account
OR
Conditions as given under the head CHECKOFF is not fulfilled but the borrower provides monthly
PDCs (Post Dated Cheques) for entire tenure of the loan provided eligibility criteria are fulfilled
(Guidelines on Post Dated cheques is annexed as per Annexure A)
INTEREST RATE
The Interest rate is based on the category of Check off available
Category I
5 above the base rate ie - 970 +5 =1470 ( currently 1470 pa)
Category II
7 above the base rate (currently 1670 pa)
Note The GM of the Network is vested with powers to extend the Category II rate to a Category III
borrower only in case of employees of SB1 to SB5 rated companies who maintain their salary
accounts with us The Category III employees who do not maintain their salary accounts with us but
provide PDCs for the loan should be charged the card rate applicable to Category III and no
deviation should be permitted by Circle GMs
PENAL INTEREST
Penal interest should not be charged for loans up to Rs25000For Loans above Rs25000- if the
irregularity exceeds EMI or installment amount for a period of one month then penal interest would
be charged 2 pa(over and above the applicable interest
rate) on the overdue amount for the period of default If part installment or part EMI remains
overdue then penal interest should not be levied
This provision has been made to avoid application of penal interest on Personal Segment Loan
accounts where EMIs stipulated or installments are being paid regularly by the borrowers
Source Xpress credit circular
SECURITY
The loan is clean in nature and no security is required
PROCESSING FEE
11 of the loan amount including tax
PRE-SANCTION PROCESS
The following documents will be obtained before sanction-
I Application cum appraisal Form With a photograph of the borrower duly attested by the
authorized official
II It is proposed to put in place an arrangement for verification of the address of the borrower by an
outside agency A report duly signed by the verification agency (in places where an arrangement is
in place) or by our officerstaff in other places (where verification agency approved by Corporate
Centre is not available) should be complied based on the following verifications
I Verification of the borrowerrsquos residence address as given in the loan application
by actually visiting the residence of the borrower
II Verification of the borrowerrsquos office address as given in the loan application by
actually visiting the office of the borrower
Source Xpress credit circular
III Verification of the borrowerrsquos residence telephone number as given in the loan
application by actually calling the residence telephone number of the borrower
IV Verification of the borrowerrsquos office telephone number as given in the loan
Application by actually calling the office telephone number of the Borrower
V Verification of the IT return of the Borrower with IT department through a
person approved by the Regional OfficeZonal Office where feasible Where IT
return cannot be verified by the Bank statement of account of the borrower may
be scrutinized to verified income flows
Where the verification is not outsourced the Branch staff
Must do the verification and the report should be added with the loan documents
Flow chart of loan procedure of retail loan
Chart no 01
Disagree
NON PEFORMING ASSETS (NPA) ndash CONCEPT
The three letters ldquoNPArdquostrike terror in banking sector and business circle todayNPA is the short
Form of ldquoNon performing Assetsrdquo
Enquiry about loan
Agreeprovided with check list and
application
submission of documents and application dully
filled up
Documents taken
verification of application and
documebtsCIBIL report
Processing of loan
Sangtion of loan
Document
Control Disbursal of loan
phasewise lumpsum
In banking NPA are loans given to doubtful customers who may or may not repay the
loan on time There are two types of assets viz performing and non performing Performing loans
are standard loans on which both the principle and interest are secured and their return is guaranteed
NPA means the debt which is given by the bank is unable to recover is called
nonperforming assets A NPA account in the books of accounts is an asset as it indicates the amount
received from the defaulters It means if any bank gives loan and is not paid by the customers till 90
days than that account is called as NPA account
DEFINITION
An asset including leased assets becomes nonperforming when it ceases to generate income
for the bank
A NPA was defined as a credit facility in respect of which the interest or installment
of principle as remained ldquopast duerdquo for specific period of time
Source googlecoin
The specific period was reduced in a phased manner as under
wef ndash 31031993 four quarters
wef ndash 31 031994 three quarters
wef - 31031995 two quarters
wef - 31032001 180 days
wef - 31032004 90 days from past due
90 days delinquency is not applicable to agriculture segment
With effect from march 31 2004 NPA shall be a loan or an advance where
1) Term loan interest installment of principle remain over due for 90 days
2) Cash creditover draft an account remain ldquoout of orderrdquo for a period of more than 90 days
3) Bills The bills remain over due for a period more than 90 days
4) Agriculture loan
a The loan has been granted for short duration crop installments of the principle
remain over due for two crop season beyond the due date
b If the loan has been granted for long duration crop installment of the principle
remain over due for one crop season beyond the due date
Source Rbiorgin
CLASSIFICATION OF LOANS
In India loans are classified on following basis
Performing assets
Loans where the interest and or principle not remain overdue for more then 90 days
Non-performing assets
Any loan repayment remains over due for more than 90 days is considered as NPA
According to the securitization and re construction of financial assets and enforcement of
security interest ordinance2002 ldquonon performing assetsrdquo(NPA) means an assets or ac of
borrower which has been classified by the bank as sub-standard doubtful or loss asset in
accordance with the guidelines relating to asset classification issued by RBI
Source googlecoin
ASSET - CLASSIFICATION
Assets can be categorized into four categories (a) standard (b) sub-standard
(c) doubtful (d) loss The last three categories are classified as npa based on the the period for
which the asset has remained non-performing and the realisability of the dues
Standard assets the loan ac which are regular and do not carry more than normal risk are
known as standard assets there could be ac which though have not become npa but are
irregular Such ac are called special mention ac
Sub- standard assets with effect from 3132005 a sub-standard assets is one which is
classified as NPA for a period not exceeding 12 months
Doubtful asset with effect from 3132005 an asset is to be classified as doubtful if it
remained npa or sub-standard for a period exceeding 12 months
Loss assets a loss asset is one where loss has been identified by the bank or internal and
external auditors or the RBI inspection but the amount as not been written off wholly In
other words such an asset is considered uncollectable and such little value that its
continuance as a bankable asset is not warranted although there may be some salvage or
recoverable value
NPA IDENTIFICATION NORMS
With effect from 31st march 2004 a loan or advance become npa when
a Interest or installment of the principle remains overdue for a period more then 90
days in respect of term loan
b The ac remain out of order for a period more 90days in respect of over draft cash
cash credit
c The bill remains overdue for a period more than 90 days in case of bills purchased
and discounted
d With effect from Sept 2004 loan granted for short duration crops will be treated as
NPA if the installment of principle or interest there on remains overdue for two crop
season and loan granted for long duration will be treated as NPA if the installment
remains overdue for one crop season
Out of order
An account will be treated as out as out of order if the outstanding balance remain
continuously in excess of the sanctioned limitdrawing power In cases where the
outstanding balance in the principle operating ac is less than the sanctioned limit but
there are no credit continuously for 90 days as on the date of balance sheet or the
credit are not enough to cover the interest debited during the same period
Overdue
An amount due to the bank under any credit facility is overdue it is not paid on the due
date fixed by the bank
The date of npa will be actual date on which sippage occurred as mentioned below
For term and demand loan ac
The date on which the installment of the principle have
remaine overdue for a period more then 90 days
For over draft and cash credit ac
The date on which the ac completed period of more than 90
days of being continuously out of order
Source wwwRBI Org in
PROVISING NORMS
There is time lag between an ac becoming doubtful for recovery the realization of security and
erosion over a loan period of time in its value So RBI directives now requiresthe banks to make
provisions in their balance sheet for all non- standard loan asset Provisioning is made on all types of
assets ie Standard sub-standard doubtful and loss assets
1 Standard assets RBI vides its circular dated 151108 revised the provisioning requirements
For all type of standard assets it has been reduced to a uniform level of 040of outstanding
at global basis except in the case of direct advance to agriculture and SME sector which
shall continue to attract a provisioning of 025 The provision toward standard assets need
not to be netted from gross advances but shown separately as ldquo contigent provisionsrdquo against
standard assets under other liquidities and provisions others in schedule 5 of the balance
sheet
2 Sub-standard assets- In respect of sub-standard assets the rate of provision is 10 of
outstanding balance without considering ECGC guarantee cover or securities available
However if the loan was unsecured from the begining there would be additional provision of
10 ie total provision would be 20 of the outstanding balance Unsecured exposure is
defined as an exposure where the realizable value of the security as assessed by the
bankreserve banks inspecting officers is not more than 10 ab-intio of the outstanding
exposure
3 Doubtful assets In case of doubtful assets while making provision realizable value of
security is to be considered 100 provision is made for unsecured portion In case of
secured portion the rate of provision depend on age of doubtful assets as under
Age of doubtful assets Provision as of secured portion
Doubtful up to 1 year D1 20 of RVS( realizable value of security)
Doubtful for more than 1 year D2 30 of RVS
Doubtful for more than 3 years D2 100 of RVS
Thus if an ac is doubtful for more than 3 years than 100 of the provision is to be made
both from secured and unsecured portion If an advance has been guaranteed by DICGC
CGFTECGC and is doubtful than provision on secured portion will be as in other cases but
provision on unsecured portion will be made after deducting the claim value
4 LOSS ASSET 100 of the outstanding amount while making provision on NPAs amount
lying in suspense ac and derecognized interest should be deducted from gross advance and
provision be made on balance amount
5 OVERALL PROVISION With a view to improving the improving the provisioning cover
and enhancing the soundness of the individual banks RBI has proposed in oct- 09 policy that
bank should augment their provisions and ensure that their total provisioning coverage ratio
including floating provisions is not less than 70
Source wwwRBIorgin
IMPACTEFFECT OF NPA UPON BANKS
A strong banking sector is important for flourishing economy The failure of banking sector
may have an adverse impact on other sector NPA are one of the major concerns of sector
banks is increasing result in nonperforming assets The NPA impact drastically to the
working of banks The efficiency of bank not always reflected by the size of its balance sheet
but by the level of return on its assetsNPA do not generate interest income for the banks but
the same time banks are required to make provisions for such NPAs from their current
profits
They erode current profits through provisioning requirement
They result in reduced interest income
They require higher provisioning requirements effecting profits and accretion to capital
Adverse impact on capital adequacy ratio
Roe and Roa goes down because NPA do not earn
Banks rating gets effect
Banks cost of raising funds goes up
Bad effect on goodwill
Bad effect on equity value
EARLY SYMPTOMS BY WHICH ONE CAN RECOGNIZE A PERFORMING
ASSETS TURNING TO A NON PERFORMING ASSET
Four categories of early symptoms
1) FINANCIAL
(a) Non- payment of very first installment
(b) Bouncing of cheque due to insufficient balance in the ac
(c) Irregularity in installment
(d) Irregularity of operations in ac
(e) Unpaid overdue bill
(f) Declining current ratio
2) OPERATIONAL AND PHYSICAL
(a) If information is received that the borrower has either initiated the process of winding up or not doing the business
(b) Over-due receivable
(c) Stock statement not submitted on time
(d) External non-controllable factor like natural calamities in the city where the borrower lives
(e) Non- payment of salary
(3) ATTITUDNAL CHANGE
(a) Use for personal comfort stocks and shares by borrowers
(b) Avoidance of contact with bank
(c) Problem between partners
(4) OTHER
(a) Change in govt policies
(b) Death of the borrower
(c) Delay in salary
PREVENTIVE MEASUREMENT FOR NPA
Early recognition of the problem
Invariably by the time banks start their efforts to get involved
in a revival process its too late to retrieve the situation ndash both in terms of rehabilitation of the
project and the recovery of banks dues Identification of the weakness regardless of the fact
that it may not have become NPA is imperative Assessment of the potential of revival may
be done on the basis of a techno-economic viability study Restructuring should be attempted
where after an objective assessment of the promoterrsquos intention banks are convinced of a
turn around with in a scheduled facilitate winding upselling of units earlier so as to recover
whatever is possible through means before the security position becomes worse
Identifying borrowers with genuine intent
Identifying borrower with genuine intent from those who
are non-serious with commitment or stake in revival is a challenge confronting bankers Here
the role of front line officials at branch level is paramount as they are the ones who have
intelligent inputs with regard to promoters lsquo sincerity and capability to achieve turnaround
Based on this objective assessment bank should decide as quickly as possible whether it
would be worthwhile to commit additional finance
In this regard banks may consider having
ldquospecial investigationrdquo of all financial transaction or business transaction books of account
order to ascertain real factor that contributed to sickness of borrower Bank may have panel
of technical experts with proven expertise and task record of preparing techno-economic
study of the project of the borrowers
Borrowers having genuine problems due to temporary mismatch in find flow or sudden
requirement of additional fund may entertained at branch level for this purpose a special
limit to such type of cases should be decided This will obviate the need to route the
additional funding through the controlling officers in deserving cases and avert many
accounts sleeping into NPA category
Timeliness and adequacy of response
Longer the delay in response greater the enjury to the
account and the asset Time is a crucial element in any restructuring or rehabilitation activity
The response decided on the basis of techno- economic study and promoterrsquos commitment
has to be adequate in terms of extend of additional funding and relaxations etc under the
restructuring exercise The package of assistance may be flexible and bank may look at the
exit option
Focus on cash flow
While financing at the time of restructuring the banks may not be guided
by the conventional fund flow analysis only which could yield a potentially misleading
picture Appraisal for fresh credit requirement may be done by analyzing fond flow in
conjunction with the cash flow rather than only on the basis of fund flow
Source wwwAskcom
Management effectiveness
The general perception among the borrower is lack of finance that
leads to sickness and NPAs but this may not be the case all the time Management effectiveness
advance business condition is a very important aspect that affects a borrowing units fortunes A bank
may commit a multiple finance to an align unit only after basic viability of the enterprise also in the
context of quality of management is examined and confirmed It will be useful to have consultant
appointed as early as possible to examine this aspect A proper techno-economic viability study thus
become the basis on which any future action can be considered
Multiple financing
A) During the exercise for assessment of viability and restructuring a pragmatic and unified
approach by all the leading banks as also sharing of all relevant information on the
borrower would go a long way toward overall success of rehabilitation exercise given the
probability of successfailure
B) In some default cases Where the unit is still working The bank should make sure that it
captures the cash flow and insure that such cash are used for working capital purpose
Toward this end there should be a continuous flow of information among consortium
member A bank which is not a part of consortium may not be allowed to offer credit
facility to such defaulting clients Current account facility may also be denied at non-
consortium banks to such clients and violation may attract penal action The credit
information bureau of india (CIBIL) may be very useful for meaningful information
exchange on defaulting borrowers once the setup become fully operational
C) In a forum of lenders the priority of each lender will be different While one set of lender
may be willing to wait for longer time to recover its dues another lender may have a much
shorter timeframe in mind So it is possible that the letter categories of lenders may be
willing to exit even at a cost by a discounted settlement of the exposure There for any plan
for restructuringrehabilitation may takes into account
D) Corporate debt restructuring it has been institutionalized in 2001 to provide a timely and
transparent system for restructuring the corporate debt of RS 20 crores and above with the
banks on a voluntary basis and outside a legal framework Under this system bank are
greatly benefit in terms of restructuring of large standard accounts (potential NPAs) and
viable sub-standard account with multiple banking arrangement
NPA MANAGEMENT- RESOLUTION
Compromise settlement schemes
Restructuringrescheduling
Lok adalat
Corporate debt restructuring cell
Debt recovery Tribunals (DRT)
Proceeding under the code of civil procedure
Board of industrial and financial reconstruction
National company law Tribunal (NCLT)
Sale of NPA to other bank
Sale of NPA to ARCSC under securitization and reconstruction of financial assets for
enforcement of security interest Act 2000 (SRFAESI)
Liquidation
Source wwwRBIorgin
NPA MANAGEMENT IN INDIA
Formation of the credit information bureau (India) limited (CIBIL)
Release of willful defaulterrsquos listRBI also releases a list of borrowers with aggregate
outstanding of RS 1 crore and above against whom bank have filed suit for recovery of their
fund
Reporting of frauds to RBI
Norms of lenders labiality- framing of fair practices code with regard to lenders lability to
be followed by banks
Risk assessment and Risk management
RBI has advised banks to all cases of willful defaulters in case of 1 crore and above and
files suits in such cases
Responding quick mortality cases
Special mention accounts for early identification for bad debt loans and advances over due
for less than one or two quarters would come under this category However these accounts do
not need provisioning
INTERNATIONAL PRACTICES ON NPA MANAGEMENT
Subsequent to the Asian currency crisis which severely crippled the financial system In
addition to the above some of the more recent and aggressive step to NPAs have been taken
by Taiwan Taiwanese financial institution have been encouraged to merge and form bank
based AMCs through the recent introduction of financial holding company act and financial
institution Asian countries the magnitude of NPAs in Asian financial institution was brought
to light Driven by the need to proactively tackle the soaring NPAs level the respective govt
embarked upon a program of substantial reform This involves setting up processes for early
identification and resolution of NPAs The table below provides a cross country comparison
of approaches used for NPA resolution Mergers Act A long side the ministry of finance has
followed a carrot and strict policy of specifying the required NPA ratio for banks while also
providing flexibility in modes of NPA assets resolution and a conduct
ive regulatory and tax environment Deferred loss write-off provisions have been instituted to
provide breathing space for lenders to absorb NPA write-off While it is too early to
comment on success of NPA resolution process in Taiwan the early sign are encouraging
Detailed below are some key NPA management approaches adopted by banks in South East
Asian countries
1 Credit risk mitigation
2 Early warning systems
3 Assets management companies
Increasing willingness to sell NPAs to AMCs
Effective resolution strategy
Appointment of special administrators
4 Out of court restructuring
Source wwwgooglecom
DIFFICULTIES WITH NON PERFORMING ASSETS
I Owners do not receive a market return on their capital In the worst case if the bank
fails owner lose their assets
II Depositors do not receive a market return on savings In the worst case if the bank
fails depositors lose their assets or uninsured balance Banks also redistribute losses
to other borrowers by charging higher rate of interest
III Non-performing loans epitomize bad investors They misallocate credit from good
projects which do not receive funding to failed project
IV 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
shortage the shortage can jam payments across the country
b Illiquidity constraints banks in paying depositors eg cashing their paychecks
c Undercapitalized banks exceed the bank capital base
Lending by bank has been politicized It is common knowledge
that loans are given to various industrial houses on common consideration and
viability of project but on political consideration In normal circumstances banks
before extending any loan would make a thorough study of the actual need of the
party considered the prospect of the business in which it is engaged Since it is
not looked into many of the loans becomes NPA
REASONS F0R AN ACCOUNT BECOMING NPA
Those attribute to borrower
Failure to bring in required capital
Lack of proper planning
Unwanted expenses
Lack of expertise
Poor credit collection
Miss management
Heavy borrowing
Lack of knowledge regarding NPA
Willful defaulters
Death of the borrower
Those attribute to banks
Wrong selection of borrower
Poor credit appraisal
Unhelpful in supervision
Too inflexible attitude
System overload
Lack of motivation
Delay in sanction
Lack of trained staff
Lack of commitment to recovery
Lack of personal visit to the borrower office
Lack of personal visit to the borrowerrsquos residence
Other
Fast changing technology
Unhelpful attitude of govt
Increase in material cost
Government policies
Taxation law
Political hostility
INDIAN ECONOMY AND NPA
Undoubtedly the world economy has slowed down recession is at its peak globally stock markets
have tumbled and business itself getting hard to do The Indian economy has been much affected due
to high fiscal deficit poor infrastructure facilities sticky legal system cutting of exposures to
emerging market by FIIs etc
Further international rating agencies like standard and poor
have lowered Indiarsquos credit rating to sub- investment grade Such negative aspects have often
outweighed positive such as increasing for reserve and a manageable inflation rate
Under such situation I go without saying that banks are no exception
and are bound to face the heat of global down turn One would be surprise to know that banks and
financial institution in India holds non-performing assets worth Rs 1 10000 crores Bankers have
realized that unless the level of NPA is reduced drastically they will find it difficult to survive
The actual level of NPA in India is around $ 40 billion much higher than govt estimation of $16
billion This difference is largely due to the discrepancy in accounting the NPAs followed by India
and rest of the world The accounting norms of India are less stringent than those of the developed
economies The Indian banks also have the tendency to extend the past due Considering the GDP
India nearly $ 470 billion the NPA are 8 of the total GDP which was better than many Asian
countries The NPA of china was 45 of the GDP While Japan had NPAs of 25 of the GDP
The aggregate level of NPAs in Asia has increased from $ 25 billion in 2007 to
$ 34 billion on 2009 looking to such overall pictures of the market we can say that India is doing
well and the steps taken are looking favorable
Source googlecoin
DATA ANALYZING THE QUETIONNAIRE
Two set of questionnaire were prepared to collect the feedback One set of questionnaire was meant for branches and other set of questionnaire was meant for borrowers
The set of questionnaire were given to the branches under hazaribag (RBO) and collected the feedback of the bankers of P segment and the branch manager
The questionnaire prepared for branch contained 15 questions and the questionnaire prepared for borrower contains 10 questions
The data was collected from 50 bankers and the data analysis of the branch questionnaire is as follows
Question number 1
Does not require any data analysis and information was sought to know the business level of the branches for the purpose of whether particular branch is actively engaged in xpress credit portfolio
Question number 2
Do you think that the borrowers are aware about NPA
Answer
32 of the respondent feel that the borrowers are not aware about NPA and 18 respondents feel that borrowers are aware about NPA
Chart no 11
yes
no
0
5
10
15
20
25
30
35
1832 Column1
Conclusion
Majority of the bank officials feels that the borrowers are not aware about NPA
Question number 3
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Answer
Out of 32 respondent 22 respondents is fully satisfied that lack of knowledge among the borrower regarding NPA is one of the reason for NPA 08 respondent were partially satisfied with it and 02 respondent were not satisfied with it
Chart no 12
fully satisfied(22)69
partially satisfied(8)25
not satisfied(2)6
Sales
Conclusion
Majority of the borrowers feels that lack of knowledge among the borrower regarding NPA is one of the reasons for NPA
Question number 4 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Answer
Out of 50 respondent 30 of the respondent strongly satisfied that these external factors contribute to NPA 10 respondent were partially satisfied with it 5 were not satisfied where as 5 were fully dissatisfied with it
Chart no 13
6020
10
10
fully satisfied(30) partially satisfied(10) not satisfiec(5) fully desatisfied(5)
Conclusion
Most of the respondent thinks that external factrs like willful defaulter change in govt policy contribute to NPA
Question number 5
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Answer
Chart no 14
feedback
fully satisfied(20)partially satisfied(12)not satisfied(12)fully dissatisfied(6)
Conclusion
As per the response of the officials most of the officials feel that internal factors are also responsible for NPA
Question number 6
Do you think that inflation is one of the reasons for NPA
Answer
Out f 50 responses 22 were strongly satisfied 18 were partially satisfied 8 were not satisfied and 2 were fully dissatisfied
Chart no 15
fully satisfied(20)44
partially satisfied(18)36
not satisfied(5)10
fullt dissatisfied(5)10
Conclusion
Growing inflation increasing goods rate is also one of the reason for NPA
Question number 7
Do you think that lack of PSS is also contributed to NPA
Answer
Out of 50 responses 30 were fully satisfied with it 12 were partially satisfied and 8 were fully dissatisfied
Chart no 16
6024
16
Open
fully satisfied(30)Partially satisfied(12)not satisfied(0)fully dissatisfied(8)
Conclusion
Majority of the officiais feels that lack of PSS is one of the reason for NPA This means that the PSS carried out by the bank is not sufficient or not carried out properly
Question number 8
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Answer
Most of the respondent feels that increase in unwanted expenses of the borrwer ls contribute to NPA
Chart no 17
56
12
28
4
FULLY SATISFIED(28)PARTIALLY SATISFIED(6)NOT SATISFIED(14)FULLY DISSATISFIED(2)
Conclusion
As per response of the officials increasing inflation have an adverse effect on the financial sector its working performance as well as on NPA
Question number 9
Do you think that high rate of interest under Xpress credit also contributes to NPA
Answer
Out of 50 respondent 25 respondent were not satisfied 10 were partially satisfied 10 were strongly dissatisfied where as only 5 out of 50 were fully satisfied with it
Chart no 18
strongly satisfied(5)partially satisfied(10)not satisfied(25)fully dissatisfied(10)
Conclusion
Most of the respondents are not satisfied with it They feel that the rate of interest charged by SBI under Xpress credit is not high and it will not contribute to NPS
Question number 10
Do you think that lack of proper planning of the borrower is one of the reason for NPA
Answer
Out of 70 respondent 35 were fully satisfied 5 were not satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 19
fully satisfied(35)70
partially satisfied(10)20
not satisfied(5)10
Conclusion
Most of the respondent feels that the borrowers borrow money from the bank without any proper planning which is one of the most important reason for NPA
Question number 11
Is heavy borrowing also contribute to NPA
Answer
Out of 50 respondent 25 respondent were fully satisfied 12 were partially satisfied 8 were not satisfied were as 5 were fully dissatisfied
Chart no 110
50
24
16
10
fully satisfied(25) partially satisfied(12) not satisfied(8) fully dissatisfied(5)
Question number 12
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Answer
As per the response of the officials 20 were fully satisfied 66were partially satisfied 4 were not satisfied with it were as 10 respondent were fully dissatisfied
Chart no 111
fully satisfied(10)20
partially satisfied(33)66
not satisfied(2)4
fullydissatisfied(5)10
Conclusion
As per the response given by the officials most of the officials were partially satisfied that wrong selection of borrower also contribute to NPA which means that selection process carried out by the bank is not appropriate or there is some difficulties in implementing them
Question number 13
Do you think that poor credit appraisal also contribute to NPA
Answer
Out of 50 respondent 5 were fully satisfied 10 were fully satisfied 30 were not satisfied were as only 5 were fully dissatisfied
Chart no 112
fully satisfied(5)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 14
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Answer
Out of 50 responses 3 were fully satisfied 15 were partially satisfied 25 were not satisfied where as 7 were full dissatisfied
Chart no 113
fully satisfied(3)partiallt satisfied(15)not satisfied(25)fully dissatisfied(7)
Conclusion
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not contribute to NPA This means that the attitude of bank toward the borrower is not inflexible
Question number 15
Do you think that system over load is also one of the causes of NPA
Answer
Out of 50 respondent 28 were fully satisfied 12 were partially satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 114
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
17 Bank officials questionnaire analysis 60
18 Bank officials questionnaire analysis 61
19 Bank officials questionnaire analysis 62
110 Bank officials questionnaire analysis 63
111 Bank officials questionnaire analysis 64
112 Bank officials questionnaire analysis 65
113 Bank officials questionnaire analysis 66
114 Bank officials questionnaire analysis 67
115 Bank officials questionnaire analysis 68
116 Borrowers question analysis 70
117 Borrowers question analysis 71
118 Borrowers question analysis 72
119 Borrowers question analysis 73
120 Borrowers question analysis 74
121 Borrower questione analysis 75
122 Last three years NPA comparison of SBI 76
123 Last 10 years overall NPA of hzbag branch 77
124 Last 10 years NPA in p-segment of hzbag branch 78
125 Reason for turning an ac into NPA 82
126 Method of data collection 89
127 Recommendation testing 96
LIST OF CHARTS
LIST OF TABLES
TABLE- NO PARTICULARS PAGE ndash NO
01 Last three years NPAs76
02 Over all NPA over time of hzbag branch (10 years)
77
03 Last 10 years p-segment NPA of hzbag branch
78
04 Product wise NPA comparison of hzbag
branch
79
05 Branch wise comparison of NPA in Xpress
credit
80
06 Profession wise NPA comparison81
07 Reason for turning an ac into NPA as per the borrower
82
08 Validity testing of the recommendation(bank officers views)
96
STUDENT PROFILE
NAME Vivek Kumar gupta
Father name Rajendra Pd gupta
Gender Male
DOB 15081993
Academic qualification Pursuing BCom (insurance honors)
College St Xavierrsquos college Ranchi
At present Pursuing special diploma in Marine insurance
Contact no 7631011853
Email ID vivek7654595gmailcom
PROJECT MENTOR PROFILE
NAME Rajesh Kumar Jha
DESIGNATION Manager (PB) Hazaribag
WORK PLACE SBI Hazaribag
CONTACT NO 9931833473(personal) 9771458627(official)
EMAIL ID rajeshkjhasbicoin
SBI HAZARIBAG BRANCH PROFILE
BRANCH INFORMATION
Date of opening 17-10-55
Branch code 00090
Migration date 14-12-2006
Circle Patna
Network 2
Module name Dhanbad
Branch type Regular branch
MICR code 825002002
License date 17-10-1954
Controllers Email ID agm4zoransbiciin
COMMUNICATION ADDRESS
Address 1 State bank of India
Address 2 Ravindra path
Address 3 NH-33
City Hazaribag
Pin 825301
BRANCH MANAGER
Name Shrwan Kumar Singh
Designation Chief Manager
Contact no 9431140712
Email shrwansinghsbicoin
STAFF STRENGTH
Officers 15
Assistants 30
Messengers 12
Guards 03
ACCOUNTS
Total no of ac - 60720
SB ac ndash 46133
CA ac - 510
Advances ndash 7247 Lakhs
Deposits ndash 91408 Lakhs
Total no of ATMrsquoS ndash 08
NATURE OF THE PROJECT
Xpress credit is a form of personal loan devised to provide instant credit support to person in need It caters mainly salaried person who have their salary ac with the bank The loan is a very good source of increasing retail loan portfolio but also have inherent risk It is a clear loan without any security and hence attracts more provisioning also unexpected events like death of borrower creates problem of recovery Sometimes employers shift their salary to other bank intentionally to avoid repayment and sometime it is difficult to track their transfer and posting
Despite all positive factors of continuous income and benefit of recovery through department the bank is facing the problem of high NPA in Xpress credit
The study is an endeavor to search the cause of acrsquos turning into NPA analyzing the efforts of the bank to recover the dues and to suggest the measures to contain the NPA to minimum or to zero level
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the npa
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
COMPANY PROFILE OF SBI
The evolution of sbi can be traced back to the first decade of the 19th century It began with the
establishment of bank of culcutta in cuicutta on 2nd july 1806 The bank was redesined as the bank of
bangal three year later on 2nd january 1809 It was the first ever joint company of british india
established under the sponsorship of govt of bangal Subsiquently the bank of madras and bank of
bombay follwed the bank of bangal These banks were amalgamated to form imperial bank on 27th
jan 1921
An important turning point in the history of SBI is the launch of 1st five year plan of independence
india in 1951 The plan aimed to serving the indian economy in general and the rural sector of the
countryin particular There for in order to serve the economy as a whole and the rural sector in
particular all india rural credit survey committee recommended the formation of state ndash partnered
and state ndash sponsored bank An act was passed in the parliament of india in may 1955 As a result the
sbi was established on 1st july 1955this results in making SBI more powerful as much as quarter of
resourses of indian banking system was controlled by state later on state bank of india (subsidiary
banks) act was pessedin 1959 This act enabled the sbi to make the 8 state associated bank as its
subsidiaries
BRANCHES
The corporate centre of SBI is located in Mumbai In order to cater to different function There is several other
establishments in and outside Mumbai apart from corporate center The bank boasts of having as many as 14
local head office and 57 zonal offices located as major cities throughout India It is recorded that SBI has
more than 10000 branches will cater to its customer throughout India
ATM
SBI provides easy access to money to its customers through more than 90000 ATMs in India The
bank also facilitates the free transaction of money at ATMs of state bank group You may also
transect money through SBI commercial and international bank ltd by using the state bank ATM
CUM DEBIT CARD It the only banking company to open its ATM in region of kargil
Source SBIcoin
Xpress credit
INTRODUCTION-
The Xpress Credit Scheme was formulated in April 2004 in the form of pre-approved loan to
employees of leading PSUs and Government organizations At present the scheme is open to
Employees of government semi-government profit making PSUs Educational Institutions of
national repute and companies of good standing (based on their CRA rating) The scheme is built
around the concept of check ndash off (the process by which the salary disbursing officer undertakes to
deduct loan installments from the salary of the borrower and remits the same to the Bank for credit
of the loan account) Xpress Credit Loans may also be sanctioned in those cases where the borrower
gives sufficient PDCs (Post Dated Cheques) for entire tenure of the loan
Source Xpress credit circular
PURPOSE
The loan under the scheme is granted for any legitimate personal purpose (eg expenses for
domestic or foreign travel medical treatment of self or a family member meeting any financial
liability such as marriage of sondaughter defraying educational expenses of wards meeting
margins for purchase of assets etc)
Source Xpress credit circular
ELIGIBILITY
1 EMPLOYERS
Central and state Government
Quasi-Government
Profit making PSUs
Educational Institutions of National Repute
Companies with a CRA rating of SB1 to SB5
Companies with a CRA rating of SB6 and SB7 are also eligible if it satisfies take over norms
2 EMPLOYEES
Permanent employees with a minimum 1 yearrsquos length of service
He should have sufficient cash flows to repay the loan from salary as evidenced by 6 monthsrsquo
salary slipsincome tax returns of 2 years
He should provide proof of residence and proof of identity to satisfy KYC norms
He should produce 6 months satisfactory statement of bank account (at any bank)
Proof of Employment in the eligible company
Source Xpress credit circular
MINIMUM NET MONTHLY INCOME
The minimum Net Monthly Income (NMI) of the employee should beRs5000- It can
Be lowered to Rs3000- subject to the condition that the salary accounts of the entire enterprise are
with us The Branch will ensure to obtain an Undertaking from the borrower that there is no other
deduction from hisher salary which is not reflected in the salary slip [As per Annexure ndash (B) ndash (v)]
LOAN AMOUNT
a) Minimum Rs24000=
b) Maximum 24 Months NMI with a ceiling of Rs1500 lacs
TYPE OF LOAN
LoanD Term demand Loan (NO OVERDRAFT)
REPAYMENT PERIOD
Maximum 60 months
EMI NMI le 50
REVIEW
Review of loan will be done yearly
RENEWAL
Renewal of loans will be allowed after 24 months
CHECK OFF
The process by which the salary disbursing officer under takes to deduct the loan
installments from the salary of the borrower and remits the same to the Bank for credit to the loan
account
Or
The employer pays the borrowerrsquos salary into his SavingsCurrent Account with our Bank
The borrower gives an irrevocable Standing Instruction (SI) For recovery of the loan installments
from his aforesaid account with the SI being synchronized with the date of credit of salary in the
borrowerrsquos SavingsCurrent Account
AND
The employer undertakes to inform the Bank if and when there is a severance due to borrowerrsquos
transfer resignation retirement etc[ Branch will ensure to obtain the undertaking from the employer
and employee as per Annexure ndash B (I) B (ii) II or B (iii) ]
Source Xpress credit circular
CATEGORY I
FULL CHECK OFF
As given under the head CHECKOFF
AND
Undertaking from the employer to obtain a NOC from the Bank before settling the dues of the
borrower on transfer resignation retirement etc [As per Annexure ndash B (IV)]
This stipulation can be waived by the sanctioning authority incase of employees of Central State
Government PSUs Universities and Reputed Colleges In case of other employers the CGM of the
Circle has been permitted to waive the stipulation But in no case this can be waived for IT sector
employees
CATEGORY II
PARTIAL CHECK OFF
As given under the head CHECKOFF
CATEGORY III
WITH NO CHECK OFF
The employer pays the borrowerrsquos salary into his SavingsCurrent Account with our Bank
The borrower gives an irrevocable Standing Instruction (SI) for
recovery of the loan installments from his aforesaid account twitch the SI being synchronized with
the date of credit of salary in the borrowerrsquos SavingsCurrent Account
OR
Conditions as given under the head CHECKOFF is not fulfilled but the borrower provides monthly
PDCs (Post Dated Cheques) for entire tenure of the loan provided eligibility criteria are fulfilled
(Guidelines on Post Dated cheques is annexed as per Annexure A)
INTEREST RATE
The Interest rate is based on the category of Check off available
Category I
5 above the base rate ie - 970 +5 =1470 ( currently 1470 pa)
Category II
7 above the base rate (currently 1670 pa)
Note The GM of the Network is vested with powers to extend the Category II rate to a Category III
borrower only in case of employees of SB1 to SB5 rated companies who maintain their salary
accounts with us The Category III employees who do not maintain their salary accounts with us but
provide PDCs for the loan should be charged the card rate applicable to Category III and no
deviation should be permitted by Circle GMs
PENAL INTEREST
Penal interest should not be charged for loans up to Rs25000For Loans above Rs25000- if the
irregularity exceeds EMI or installment amount for a period of one month then penal interest would
be charged 2 pa(over and above the applicable interest
rate) on the overdue amount for the period of default If part installment or part EMI remains
overdue then penal interest should not be levied
This provision has been made to avoid application of penal interest on Personal Segment Loan
accounts where EMIs stipulated or installments are being paid regularly by the borrowers
Source Xpress credit circular
SECURITY
The loan is clean in nature and no security is required
PROCESSING FEE
11 of the loan amount including tax
PRE-SANCTION PROCESS
The following documents will be obtained before sanction-
I Application cum appraisal Form With a photograph of the borrower duly attested by the
authorized official
II It is proposed to put in place an arrangement for verification of the address of the borrower by an
outside agency A report duly signed by the verification agency (in places where an arrangement is
in place) or by our officerstaff in other places (where verification agency approved by Corporate
Centre is not available) should be complied based on the following verifications
I Verification of the borrowerrsquos residence address as given in the loan application
by actually visiting the residence of the borrower
II Verification of the borrowerrsquos office address as given in the loan application by
actually visiting the office of the borrower
Source Xpress credit circular
III Verification of the borrowerrsquos residence telephone number as given in the loan
application by actually calling the residence telephone number of the borrower
IV Verification of the borrowerrsquos office telephone number as given in the loan
Application by actually calling the office telephone number of the Borrower
V Verification of the IT return of the Borrower with IT department through a
person approved by the Regional OfficeZonal Office where feasible Where IT
return cannot be verified by the Bank statement of account of the borrower may
be scrutinized to verified income flows
Where the verification is not outsourced the Branch staff
Must do the verification and the report should be added with the loan documents
Flow chart of loan procedure of retail loan
Chart no 01
Disagree
NON PEFORMING ASSETS (NPA) ndash CONCEPT
The three letters ldquoNPArdquostrike terror in banking sector and business circle todayNPA is the short
Form of ldquoNon performing Assetsrdquo
Enquiry about loan
Agreeprovided with check list and
application
submission of documents and application dully
filled up
Documents taken
verification of application and
documebtsCIBIL report
Processing of loan
Sangtion of loan
Document
Control Disbursal of loan
phasewise lumpsum
In banking NPA are loans given to doubtful customers who may or may not repay the
loan on time There are two types of assets viz performing and non performing Performing loans
are standard loans on which both the principle and interest are secured and their return is guaranteed
NPA means the debt which is given by the bank is unable to recover is called
nonperforming assets A NPA account in the books of accounts is an asset as it indicates the amount
received from the defaulters It means if any bank gives loan and is not paid by the customers till 90
days than that account is called as NPA account
DEFINITION
An asset including leased assets becomes nonperforming when it ceases to generate income
for the bank
A NPA was defined as a credit facility in respect of which the interest or installment
of principle as remained ldquopast duerdquo for specific period of time
Source googlecoin
The specific period was reduced in a phased manner as under
wef ndash 31031993 four quarters
wef ndash 31 031994 three quarters
wef - 31031995 two quarters
wef - 31032001 180 days
wef - 31032004 90 days from past due
90 days delinquency is not applicable to agriculture segment
With effect from march 31 2004 NPA shall be a loan or an advance where
1) Term loan interest installment of principle remain over due for 90 days
2) Cash creditover draft an account remain ldquoout of orderrdquo for a period of more than 90 days
3) Bills The bills remain over due for a period more than 90 days
4) Agriculture loan
a The loan has been granted for short duration crop installments of the principle
remain over due for two crop season beyond the due date
b If the loan has been granted for long duration crop installment of the principle
remain over due for one crop season beyond the due date
Source Rbiorgin
CLASSIFICATION OF LOANS
In India loans are classified on following basis
Performing assets
Loans where the interest and or principle not remain overdue for more then 90 days
Non-performing assets
Any loan repayment remains over due for more than 90 days is considered as NPA
According to the securitization and re construction of financial assets and enforcement of
security interest ordinance2002 ldquonon performing assetsrdquo(NPA) means an assets or ac of
borrower which has been classified by the bank as sub-standard doubtful or loss asset in
accordance with the guidelines relating to asset classification issued by RBI
Source googlecoin
ASSET - CLASSIFICATION
Assets can be categorized into four categories (a) standard (b) sub-standard
(c) doubtful (d) loss The last three categories are classified as npa based on the the period for
which the asset has remained non-performing and the realisability of the dues
Standard assets the loan ac which are regular and do not carry more than normal risk are
known as standard assets there could be ac which though have not become npa but are
irregular Such ac are called special mention ac
Sub- standard assets with effect from 3132005 a sub-standard assets is one which is
classified as NPA for a period not exceeding 12 months
Doubtful asset with effect from 3132005 an asset is to be classified as doubtful if it
remained npa or sub-standard for a period exceeding 12 months
Loss assets a loss asset is one where loss has been identified by the bank or internal and
external auditors or the RBI inspection but the amount as not been written off wholly In
other words such an asset is considered uncollectable and such little value that its
continuance as a bankable asset is not warranted although there may be some salvage or
recoverable value
NPA IDENTIFICATION NORMS
With effect from 31st march 2004 a loan or advance become npa when
a Interest or installment of the principle remains overdue for a period more then 90
days in respect of term loan
b The ac remain out of order for a period more 90days in respect of over draft cash
cash credit
c The bill remains overdue for a period more than 90 days in case of bills purchased
and discounted
d With effect from Sept 2004 loan granted for short duration crops will be treated as
NPA if the installment of principle or interest there on remains overdue for two crop
season and loan granted for long duration will be treated as NPA if the installment
remains overdue for one crop season
Out of order
An account will be treated as out as out of order if the outstanding balance remain
continuously in excess of the sanctioned limitdrawing power In cases where the
outstanding balance in the principle operating ac is less than the sanctioned limit but
there are no credit continuously for 90 days as on the date of balance sheet or the
credit are not enough to cover the interest debited during the same period
Overdue
An amount due to the bank under any credit facility is overdue it is not paid on the due
date fixed by the bank
The date of npa will be actual date on which sippage occurred as mentioned below
For term and demand loan ac
The date on which the installment of the principle have
remaine overdue for a period more then 90 days
For over draft and cash credit ac
The date on which the ac completed period of more than 90
days of being continuously out of order
Source wwwRBI Org in
PROVISING NORMS
There is time lag between an ac becoming doubtful for recovery the realization of security and
erosion over a loan period of time in its value So RBI directives now requiresthe banks to make
provisions in their balance sheet for all non- standard loan asset Provisioning is made on all types of
assets ie Standard sub-standard doubtful and loss assets
1 Standard assets RBI vides its circular dated 151108 revised the provisioning requirements
For all type of standard assets it has been reduced to a uniform level of 040of outstanding
at global basis except in the case of direct advance to agriculture and SME sector which
shall continue to attract a provisioning of 025 The provision toward standard assets need
not to be netted from gross advances but shown separately as ldquo contigent provisionsrdquo against
standard assets under other liquidities and provisions others in schedule 5 of the balance
sheet
2 Sub-standard assets- In respect of sub-standard assets the rate of provision is 10 of
outstanding balance without considering ECGC guarantee cover or securities available
However if the loan was unsecured from the begining there would be additional provision of
10 ie total provision would be 20 of the outstanding balance Unsecured exposure is
defined as an exposure where the realizable value of the security as assessed by the
bankreserve banks inspecting officers is not more than 10 ab-intio of the outstanding
exposure
3 Doubtful assets In case of doubtful assets while making provision realizable value of
security is to be considered 100 provision is made for unsecured portion In case of
secured portion the rate of provision depend on age of doubtful assets as under
Age of doubtful assets Provision as of secured portion
Doubtful up to 1 year D1 20 of RVS( realizable value of security)
Doubtful for more than 1 year D2 30 of RVS
Doubtful for more than 3 years D2 100 of RVS
Thus if an ac is doubtful for more than 3 years than 100 of the provision is to be made
both from secured and unsecured portion If an advance has been guaranteed by DICGC
CGFTECGC and is doubtful than provision on secured portion will be as in other cases but
provision on unsecured portion will be made after deducting the claim value
4 LOSS ASSET 100 of the outstanding amount while making provision on NPAs amount
lying in suspense ac and derecognized interest should be deducted from gross advance and
provision be made on balance amount
5 OVERALL PROVISION With a view to improving the improving the provisioning cover
and enhancing the soundness of the individual banks RBI has proposed in oct- 09 policy that
bank should augment their provisions and ensure that their total provisioning coverage ratio
including floating provisions is not less than 70
Source wwwRBIorgin
IMPACTEFFECT OF NPA UPON BANKS
A strong banking sector is important for flourishing economy The failure of banking sector
may have an adverse impact on other sector NPA are one of the major concerns of sector
banks is increasing result in nonperforming assets The NPA impact drastically to the
working of banks The efficiency of bank not always reflected by the size of its balance sheet
but by the level of return on its assetsNPA do not generate interest income for the banks but
the same time banks are required to make provisions for such NPAs from their current
profits
They erode current profits through provisioning requirement
They result in reduced interest income
They require higher provisioning requirements effecting profits and accretion to capital
Adverse impact on capital adequacy ratio
Roe and Roa goes down because NPA do not earn
Banks rating gets effect
Banks cost of raising funds goes up
Bad effect on goodwill
Bad effect on equity value
EARLY SYMPTOMS BY WHICH ONE CAN RECOGNIZE A PERFORMING
ASSETS TURNING TO A NON PERFORMING ASSET
Four categories of early symptoms
1) FINANCIAL
(a) Non- payment of very first installment
(b) Bouncing of cheque due to insufficient balance in the ac
(c) Irregularity in installment
(d) Irregularity of operations in ac
(e) Unpaid overdue bill
(f) Declining current ratio
2) OPERATIONAL AND PHYSICAL
(a) If information is received that the borrower has either initiated the process of winding up or not doing the business
(b) Over-due receivable
(c) Stock statement not submitted on time
(d) External non-controllable factor like natural calamities in the city where the borrower lives
(e) Non- payment of salary
(3) ATTITUDNAL CHANGE
(a) Use for personal comfort stocks and shares by borrowers
(b) Avoidance of contact with bank
(c) Problem between partners
(4) OTHER
(a) Change in govt policies
(b) Death of the borrower
(c) Delay in salary
PREVENTIVE MEASUREMENT FOR NPA
Early recognition of the problem
Invariably by the time banks start their efforts to get involved
in a revival process its too late to retrieve the situation ndash both in terms of rehabilitation of the
project and the recovery of banks dues Identification of the weakness regardless of the fact
that it may not have become NPA is imperative Assessment of the potential of revival may
be done on the basis of a techno-economic viability study Restructuring should be attempted
where after an objective assessment of the promoterrsquos intention banks are convinced of a
turn around with in a scheduled facilitate winding upselling of units earlier so as to recover
whatever is possible through means before the security position becomes worse
Identifying borrowers with genuine intent
Identifying borrower with genuine intent from those who
are non-serious with commitment or stake in revival is a challenge confronting bankers Here
the role of front line officials at branch level is paramount as they are the ones who have
intelligent inputs with regard to promoters lsquo sincerity and capability to achieve turnaround
Based on this objective assessment bank should decide as quickly as possible whether it
would be worthwhile to commit additional finance
In this regard banks may consider having
ldquospecial investigationrdquo of all financial transaction or business transaction books of account
order to ascertain real factor that contributed to sickness of borrower Bank may have panel
of technical experts with proven expertise and task record of preparing techno-economic
study of the project of the borrowers
Borrowers having genuine problems due to temporary mismatch in find flow or sudden
requirement of additional fund may entertained at branch level for this purpose a special
limit to such type of cases should be decided This will obviate the need to route the
additional funding through the controlling officers in deserving cases and avert many
accounts sleeping into NPA category
Timeliness and adequacy of response
Longer the delay in response greater the enjury to the
account and the asset Time is a crucial element in any restructuring or rehabilitation activity
The response decided on the basis of techno- economic study and promoterrsquos commitment
has to be adequate in terms of extend of additional funding and relaxations etc under the
restructuring exercise The package of assistance may be flexible and bank may look at the
exit option
Focus on cash flow
While financing at the time of restructuring the banks may not be guided
by the conventional fund flow analysis only which could yield a potentially misleading
picture Appraisal for fresh credit requirement may be done by analyzing fond flow in
conjunction with the cash flow rather than only on the basis of fund flow
Source wwwAskcom
Management effectiveness
The general perception among the borrower is lack of finance that
leads to sickness and NPAs but this may not be the case all the time Management effectiveness
advance business condition is a very important aspect that affects a borrowing units fortunes A bank
may commit a multiple finance to an align unit only after basic viability of the enterprise also in the
context of quality of management is examined and confirmed It will be useful to have consultant
appointed as early as possible to examine this aspect A proper techno-economic viability study thus
become the basis on which any future action can be considered
Multiple financing
A) During the exercise for assessment of viability and restructuring a pragmatic and unified
approach by all the leading banks as also sharing of all relevant information on the
borrower would go a long way toward overall success of rehabilitation exercise given the
probability of successfailure
B) In some default cases Where the unit is still working The bank should make sure that it
captures the cash flow and insure that such cash are used for working capital purpose
Toward this end there should be a continuous flow of information among consortium
member A bank which is not a part of consortium may not be allowed to offer credit
facility to such defaulting clients Current account facility may also be denied at non-
consortium banks to such clients and violation may attract penal action The credit
information bureau of india (CIBIL) may be very useful for meaningful information
exchange on defaulting borrowers once the setup become fully operational
C) In a forum of lenders the priority of each lender will be different While one set of lender
may be willing to wait for longer time to recover its dues another lender may have a much
shorter timeframe in mind So it is possible that the letter categories of lenders may be
willing to exit even at a cost by a discounted settlement of the exposure There for any plan
for restructuringrehabilitation may takes into account
D) Corporate debt restructuring it has been institutionalized in 2001 to provide a timely and
transparent system for restructuring the corporate debt of RS 20 crores and above with the
banks on a voluntary basis and outside a legal framework Under this system bank are
greatly benefit in terms of restructuring of large standard accounts (potential NPAs) and
viable sub-standard account with multiple banking arrangement
NPA MANAGEMENT- RESOLUTION
Compromise settlement schemes
Restructuringrescheduling
Lok adalat
Corporate debt restructuring cell
Debt recovery Tribunals (DRT)
Proceeding under the code of civil procedure
Board of industrial and financial reconstruction
National company law Tribunal (NCLT)
Sale of NPA to other bank
Sale of NPA to ARCSC under securitization and reconstruction of financial assets for
enforcement of security interest Act 2000 (SRFAESI)
Liquidation
Source wwwRBIorgin
NPA MANAGEMENT IN INDIA
Formation of the credit information bureau (India) limited (CIBIL)
Release of willful defaulterrsquos listRBI also releases a list of borrowers with aggregate
outstanding of RS 1 crore and above against whom bank have filed suit for recovery of their
fund
Reporting of frauds to RBI
Norms of lenders labiality- framing of fair practices code with regard to lenders lability to
be followed by banks
Risk assessment and Risk management
RBI has advised banks to all cases of willful defaulters in case of 1 crore and above and
files suits in such cases
Responding quick mortality cases
Special mention accounts for early identification for bad debt loans and advances over due
for less than one or two quarters would come under this category However these accounts do
not need provisioning
INTERNATIONAL PRACTICES ON NPA MANAGEMENT
Subsequent to the Asian currency crisis which severely crippled the financial system In
addition to the above some of the more recent and aggressive step to NPAs have been taken
by Taiwan Taiwanese financial institution have been encouraged to merge and form bank
based AMCs through the recent introduction of financial holding company act and financial
institution Asian countries the magnitude of NPAs in Asian financial institution was brought
to light Driven by the need to proactively tackle the soaring NPAs level the respective govt
embarked upon a program of substantial reform This involves setting up processes for early
identification and resolution of NPAs The table below provides a cross country comparison
of approaches used for NPA resolution Mergers Act A long side the ministry of finance has
followed a carrot and strict policy of specifying the required NPA ratio for banks while also
providing flexibility in modes of NPA assets resolution and a conduct
ive regulatory and tax environment Deferred loss write-off provisions have been instituted to
provide breathing space for lenders to absorb NPA write-off While it is too early to
comment on success of NPA resolution process in Taiwan the early sign are encouraging
Detailed below are some key NPA management approaches adopted by banks in South East
Asian countries
1 Credit risk mitigation
2 Early warning systems
3 Assets management companies
Increasing willingness to sell NPAs to AMCs
Effective resolution strategy
Appointment of special administrators
4 Out of court restructuring
Source wwwgooglecom
DIFFICULTIES WITH NON PERFORMING ASSETS
I Owners do not receive a market return on their capital In the worst case if the bank
fails owner lose their assets
II Depositors do not receive a market return on savings In the worst case if the bank
fails depositors lose their assets or uninsured balance Banks also redistribute losses
to other borrowers by charging higher rate of interest
III Non-performing loans epitomize bad investors They misallocate credit from good
projects which do not receive funding to failed project
IV 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
shortage the shortage can jam payments across the country
b Illiquidity constraints banks in paying depositors eg cashing their paychecks
c Undercapitalized banks exceed the bank capital base
Lending by bank has been politicized It is common knowledge
that loans are given to various industrial houses on common consideration and
viability of project but on political consideration In normal circumstances banks
before extending any loan would make a thorough study of the actual need of the
party considered the prospect of the business in which it is engaged Since it is
not looked into many of the loans becomes NPA
REASONS F0R AN ACCOUNT BECOMING NPA
Those attribute to borrower
Failure to bring in required capital
Lack of proper planning
Unwanted expenses
Lack of expertise
Poor credit collection
Miss management
Heavy borrowing
Lack of knowledge regarding NPA
Willful defaulters
Death of the borrower
Those attribute to banks
Wrong selection of borrower
Poor credit appraisal
Unhelpful in supervision
Too inflexible attitude
System overload
Lack of motivation
Delay in sanction
Lack of trained staff
Lack of commitment to recovery
Lack of personal visit to the borrower office
Lack of personal visit to the borrowerrsquos residence
Other
Fast changing technology
Unhelpful attitude of govt
Increase in material cost
Government policies
Taxation law
Political hostility
INDIAN ECONOMY AND NPA
Undoubtedly the world economy has slowed down recession is at its peak globally stock markets
have tumbled and business itself getting hard to do The Indian economy has been much affected due
to high fiscal deficit poor infrastructure facilities sticky legal system cutting of exposures to
emerging market by FIIs etc
Further international rating agencies like standard and poor
have lowered Indiarsquos credit rating to sub- investment grade Such negative aspects have often
outweighed positive such as increasing for reserve and a manageable inflation rate
Under such situation I go without saying that banks are no exception
and are bound to face the heat of global down turn One would be surprise to know that banks and
financial institution in India holds non-performing assets worth Rs 1 10000 crores Bankers have
realized that unless the level of NPA is reduced drastically they will find it difficult to survive
The actual level of NPA in India is around $ 40 billion much higher than govt estimation of $16
billion This difference is largely due to the discrepancy in accounting the NPAs followed by India
and rest of the world The accounting norms of India are less stringent than those of the developed
economies The Indian banks also have the tendency to extend the past due Considering the GDP
India nearly $ 470 billion the NPA are 8 of the total GDP which was better than many Asian
countries The NPA of china was 45 of the GDP While Japan had NPAs of 25 of the GDP
The aggregate level of NPAs in Asia has increased from $ 25 billion in 2007 to
$ 34 billion on 2009 looking to such overall pictures of the market we can say that India is doing
well and the steps taken are looking favorable
Source googlecoin
DATA ANALYZING THE QUETIONNAIRE
Two set of questionnaire were prepared to collect the feedback One set of questionnaire was meant for branches and other set of questionnaire was meant for borrowers
The set of questionnaire were given to the branches under hazaribag (RBO) and collected the feedback of the bankers of P segment and the branch manager
The questionnaire prepared for branch contained 15 questions and the questionnaire prepared for borrower contains 10 questions
The data was collected from 50 bankers and the data analysis of the branch questionnaire is as follows
Question number 1
Does not require any data analysis and information was sought to know the business level of the branches for the purpose of whether particular branch is actively engaged in xpress credit portfolio
Question number 2
Do you think that the borrowers are aware about NPA
Answer
32 of the respondent feel that the borrowers are not aware about NPA and 18 respondents feel that borrowers are aware about NPA
Chart no 11
yes
no
0
5
10
15
20
25
30
35
1832 Column1
Conclusion
Majority of the bank officials feels that the borrowers are not aware about NPA
Question number 3
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Answer
Out of 32 respondent 22 respondents is fully satisfied that lack of knowledge among the borrower regarding NPA is one of the reason for NPA 08 respondent were partially satisfied with it and 02 respondent were not satisfied with it
Chart no 12
fully satisfied(22)69
partially satisfied(8)25
not satisfied(2)6
Sales
Conclusion
Majority of the borrowers feels that lack of knowledge among the borrower regarding NPA is one of the reasons for NPA
Question number 4 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Answer
Out of 50 respondent 30 of the respondent strongly satisfied that these external factors contribute to NPA 10 respondent were partially satisfied with it 5 were not satisfied where as 5 were fully dissatisfied with it
Chart no 13
6020
10
10
fully satisfied(30) partially satisfied(10) not satisfiec(5) fully desatisfied(5)
Conclusion
Most of the respondent thinks that external factrs like willful defaulter change in govt policy contribute to NPA
Question number 5
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Answer
Chart no 14
feedback
fully satisfied(20)partially satisfied(12)not satisfied(12)fully dissatisfied(6)
Conclusion
As per the response of the officials most of the officials feel that internal factors are also responsible for NPA
Question number 6
Do you think that inflation is one of the reasons for NPA
Answer
Out f 50 responses 22 were strongly satisfied 18 were partially satisfied 8 were not satisfied and 2 were fully dissatisfied
Chart no 15
fully satisfied(20)44
partially satisfied(18)36
not satisfied(5)10
fullt dissatisfied(5)10
Conclusion
Growing inflation increasing goods rate is also one of the reason for NPA
Question number 7
Do you think that lack of PSS is also contributed to NPA
Answer
Out of 50 responses 30 were fully satisfied with it 12 were partially satisfied and 8 were fully dissatisfied
Chart no 16
6024
16
Open
fully satisfied(30)Partially satisfied(12)not satisfied(0)fully dissatisfied(8)
Conclusion
Majority of the officiais feels that lack of PSS is one of the reason for NPA This means that the PSS carried out by the bank is not sufficient or not carried out properly
Question number 8
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Answer
Most of the respondent feels that increase in unwanted expenses of the borrwer ls contribute to NPA
Chart no 17
56
12
28
4
FULLY SATISFIED(28)PARTIALLY SATISFIED(6)NOT SATISFIED(14)FULLY DISSATISFIED(2)
Conclusion
As per response of the officials increasing inflation have an adverse effect on the financial sector its working performance as well as on NPA
Question number 9
Do you think that high rate of interest under Xpress credit also contributes to NPA
Answer
Out of 50 respondent 25 respondent were not satisfied 10 were partially satisfied 10 were strongly dissatisfied where as only 5 out of 50 were fully satisfied with it
Chart no 18
strongly satisfied(5)partially satisfied(10)not satisfied(25)fully dissatisfied(10)
Conclusion
Most of the respondents are not satisfied with it They feel that the rate of interest charged by SBI under Xpress credit is not high and it will not contribute to NPS
Question number 10
Do you think that lack of proper planning of the borrower is one of the reason for NPA
Answer
Out of 70 respondent 35 were fully satisfied 5 were not satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 19
fully satisfied(35)70
partially satisfied(10)20
not satisfied(5)10
Conclusion
Most of the respondent feels that the borrowers borrow money from the bank without any proper planning which is one of the most important reason for NPA
Question number 11
Is heavy borrowing also contribute to NPA
Answer
Out of 50 respondent 25 respondent were fully satisfied 12 were partially satisfied 8 were not satisfied were as 5 were fully dissatisfied
Chart no 110
50
24
16
10
fully satisfied(25) partially satisfied(12) not satisfied(8) fully dissatisfied(5)
Question number 12
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Answer
As per the response of the officials 20 were fully satisfied 66were partially satisfied 4 were not satisfied with it were as 10 respondent were fully dissatisfied
Chart no 111
fully satisfied(10)20
partially satisfied(33)66
not satisfied(2)4
fullydissatisfied(5)10
Conclusion
As per the response given by the officials most of the officials were partially satisfied that wrong selection of borrower also contribute to NPA which means that selection process carried out by the bank is not appropriate or there is some difficulties in implementing them
Question number 13
Do you think that poor credit appraisal also contribute to NPA
Answer
Out of 50 respondent 5 were fully satisfied 10 were fully satisfied 30 were not satisfied were as only 5 were fully dissatisfied
Chart no 112
fully satisfied(5)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 14
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Answer
Out of 50 responses 3 were fully satisfied 15 were partially satisfied 25 were not satisfied where as 7 were full dissatisfied
Chart no 113
fully satisfied(3)partiallt satisfied(15)not satisfied(25)fully dissatisfied(7)
Conclusion
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not contribute to NPA This means that the attitude of bank toward the borrower is not inflexible
Question number 15
Do you think that system over load is also one of the causes of NPA
Answer
Out of 50 respondent 28 were fully satisfied 12 were partially satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 114
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
02 Over all NPA over time of hzbag branch (10 years)
77
03 Last 10 years p-segment NPA of hzbag branch
78
04 Product wise NPA comparison of hzbag
branch
79
05 Branch wise comparison of NPA in Xpress
credit
80
06 Profession wise NPA comparison81
07 Reason for turning an ac into NPA as per the borrower
82
08 Validity testing of the recommendation(bank officers views)
96
STUDENT PROFILE
NAME Vivek Kumar gupta
Father name Rajendra Pd gupta
Gender Male
DOB 15081993
Academic qualification Pursuing BCom (insurance honors)
College St Xavierrsquos college Ranchi
At present Pursuing special diploma in Marine insurance
Contact no 7631011853
Email ID vivek7654595gmailcom
PROJECT MENTOR PROFILE
NAME Rajesh Kumar Jha
DESIGNATION Manager (PB) Hazaribag
WORK PLACE SBI Hazaribag
CONTACT NO 9931833473(personal) 9771458627(official)
EMAIL ID rajeshkjhasbicoin
SBI HAZARIBAG BRANCH PROFILE
BRANCH INFORMATION
Date of opening 17-10-55
Branch code 00090
Migration date 14-12-2006
Circle Patna
Network 2
Module name Dhanbad
Branch type Regular branch
MICR code 825002002
License date 17-10-1954
Controllers Email ID agm4zoransbiciin
COMMUNICATION ADDRESS
Address 1 State bank of India
Address 2 Ravindra path
Address 3 NH-33
City Hazaribag
Pin 825301
BRANCH MANAGER
Name Shrwan Kumar Singh
Designation Chief Manager
Contact no 9431140712
Email shrwansinghsbicoin
STAFF STRENGTH
Officers 15
Assistants 30
Messengers 12
Guards 03
ACCOUNTS
Total no of ac - 60720
SB ac ndash 46133
CA ac - 510
Advances ndash 7247 Lakhs
Deposits ndash 91408 Lakhs
Total no of ATMrsquoS ndash 08
NATURE OF THE PROJECT
Xpress credit is a form of personal loan devised to provide instant credit support to person in need It caters mainly salaried person who have their salary ac with the bank The loan is a very good source of increasing retail loan portfolio but also have inherent risk It is a clear loan without any security and hence attracts more provisioning also unexpected events like death of borrower creates problem of recovery Sometimes employers shift their salary to other bank intentionally to avoid repayment and sometime it is difficult to track their transfer and posting
Despite all positive factors of continuous income and benefit of recovery through department the bank is facing the problem of high NPA in Xpress credit
The study is an endeavor to search the cause of acrsquos turning into NPA analyzing the efforts of the bank to recover the dues and to suggest the measures to contain the NPA to minimum or to zero level
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the npa
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
COMPANY PROFILE OF SBI
The evolution of sbi can be traced back to the first decade of the 19th century It began with the
establishment of bank of culcutta in cuicutta on 2nd july 1806 The bank was redesined as the bank of
bangal three year later on 2nd january 1809 It was the first ever joint company of british india
established under the sponsorship of govt of bangal Subsiquently the bank of madras and bank of
bombay follwed the bank of bangal These banks were amalgamated to form imperial bank on 27th
jan 1921
An important turning point in the history of SBI is the launch of 1st five year plan of independence
india in 1951 The plan aimed to serving the indian economy in general and the rural sector of the
countryin particular There for in order to serve the economy as a whole and the rural sector in
particular all india rural credit survey committee recommended the formation of state ndash partnered
and state ndash sponsored bank An act was passed in the parliament of india in may 1955 As a result the
sbi was established on 1st july 1955this results in making SBI more powerful as much as quarter of
resourses of indian banking system was controlled by state later on state bank of india (subsidiary
banks) act was pessedin 1959 This act enabled the sbi to make the 8 state associated bank as its
subsidiaries
BRANCHES
The corporate centre of SBI is located in Mumbai In order to cater to different function There is several other
establishments in and outside Mumbai apart from corporate center The bank boasts of having as many as 14
local head office and 57 zonal offices located as major cities throughout India It is recorded that SBI has
more than 10000 branches will cater to its customer throughout India
ATM
SBI provides easy access to money to its customers through more than 90000 ATMs in India The
bank also facilitates the free transaction of money at ATMs of state bank group You may also
transect money through SBI commercial and international bank ltd by using the state bank ATM
CUM DEBIT CARD It the only banking company to open its ATM in region of kargil
Source SBIcoin
Xpress credit
INTRODUCTION-
The Xpress Credit Scheme was formulated in April 2004 in the form of pre-approved loan to
employees of leading PSUs and Government organizations At present the scheme is open to
Employees of government semi-government profit making PSUs Educational Institutions of
national repute and companies of good standing (based on their CRA rating) The scheme is built
around the concept of check ndash off (the process by which the salary disbursing officer undertakes to
deduct loan installments from the salary of the borrower and remits the same to the Bank for credit
of the loan account) Xpress Credit Loans may also be sanctioned in those cases where the borrower
gives sufficient PDCs (Post Dated Cheques) for entire tenure of the loan
Source Xpress credit circular
PURPOSE
The loan under the scheme is granted for any legitimate personal purpose (eg expenses for
domestic or foreign travel medical treatment of self or a family member meeting any financial
liability such as marriage of sondaughter defraying educational expenses of wards meeting
margins for purchase of assets etc)
Source Xpress credit circular
ELIGIBILITY
1 EMPLOYERS
Central and state Government
Quasi-Government
Profit making PSUs
Educational Institutions of National Repute
Companies with a CRA rating of SB1 to SB5
Companies with a CRA rating of SB6 and SB7 are also eligible if it satisfies take over norms
2 EMPLOYEES
Permanent employees with a minimum 1 yearrsquos length of service
He should have sufficient cash flows to repay the loan from salary as evidenced by 6 monthsrsquo
salary slipsincome tax returns of 2 years
He should provide proof of residence and proof of identity to satisfy KYC norms
He should produce 6 months satisfactory statement of bank account (at any bank)
Proof of Employment in the eligible company
Source Xpress credit circular
MINIMUM NET MONTHLY INCOME
The minimum Net Monthly Income (NMI) of the employee should beRs5000- It can
Be lowered to Rs3000- subject to the condition that the salary accounts of the entire enterprise are
with us The Branch will ensure to obtain an Undertaking from the borrower that there is no other
deduction from hisher salary which is not reflected in the salary slip [As per Annexure ndash (B) ndash (v)]
LOAN AMOUNT
a) Minimum Rs24000=
b) Maximum 24 Months NMI with a ceiling of Rs1500 lacs
TYPE OF LOAN
LoanD Term demand Loan (NO OVERDRAFT)
REPAYMENT PERIOD
Maximum 60 months
EMI NMI le 50
REVIEW
Review of loan will be done yearly
RENEWAL
Renewal of loans will be allowed after 24 months
CHECK OFF
The process by which the salary disbursing officer under takes to deduct the loan
installments from the salary of the borrower and remits the same to the Bank for credit to the loan
account
Or
The employer pays the borrowerrsquos salary into his SavingsCurrent Account with our Bank
The borrower gives an irrevocable Standing Instruction (SI) For recovery of the loan installments
from his aforesaid account with the SI being synchronized with the date of credit of salary in the
borrowerrsquos SavingsCurrent Account
AND
The employer undertakes to inform the Bank if and when there is a severance due to borrowerrsquos
transfer resignation retirement etc[ Branch will ensure to obtain the undertaking from the employer
and employee as per Annexure ndash B (I) B (ii) II or B (iii) ]
Source Xpress credit circular
CATEGORY I
FULL CHECK OFF
As given under the head CHECKOFF
AND
Undertaking from the employer to obtain a NOC from the Bank before settling the dues of the
borrower on transfer resignation retirement etc [As per Annexure ndash B (IV)]
This stipulation can be waived by the sanctioning authority incase of employees of Central State
Government PSUs Universities and Reputed Colleges In case of other employers the CGM of the
Circle has been permitted to waive the stipulation But in no case this can be waived for IT sector
employees
CATEGORY II
PARTIAL CHECK OFF
As given under the head CHECKOFF
CATEGORY III
WITH NO CHECK OFF
The employer pays the borrowerrsquos salary into his SavingsCurrent Account with our Bank
The borrower gives an irrevocable Standing Instruction (SI) for
recovery of the loan installments from his aforesaid account twitch the SI being synchronized with
the date of credit of salary in the borrowerrsquos SavingsCurrent Account
OR
Conditions as given under the head CHECKOFF is not fulfilled but the borrower provides monthly
PDCs (Post Dated Cheques) for entire tenure of the loan provided eligibility criteria are fulfilled
(Guidelines on Post Dated cheques is annexed as per Annexure A)
INTEREST RATE
The Interest rate is based on the category of Check off available
Category I
5 above the base rate ie - 970 +5 =1470 ( currently 1470 pa)
Category II
7 above the base rate (currently 1670 pa)
Note The GM of the Network is vested with powers to extend the Category II rate to a Category III
borrower only in case of employees of SB1 to SB5 rated companies who maintain their salary
accounts with us The Category III employees who do not maintain their salary accounts with us but
provide PDCs for the loan should be charged the card rate applicable to Category III and no
deviation should be permitted by Circle GMs
PENAL INTEREST
Penal interest should not be charged for loans up to Rs25000For Loans above Rs25000- if the
irregularity exceeds EMI or installment amount for a period of one month then penal interest would
be charged 2 pa(over and above the applicable interest
rate) on the overdue amount for the period of default If part installment or part EMI remains
overdue then penal interest should not be levied
This provision has been made to avoid application of penal interest on Personal Segment Loan
accounts where EMIs stipulated or installments are being paid regularly by the borrowers
Source Xpress credit circular
SECURITY
The loan is clean in nature and no security is required
PROCESSING FEE
11 of the loan amount including tax
PRE-SANCTION PROCESS
The following documents will be obtained before sanction-
I Application cum appraisal Form With a photograph of the borrower duly attested by the
authorized official
II It is proposed to put in place an arrangement for verification of the address of the borrower by an
outside agency A report duly signed by the verification agency (in places where an arrangement is
in place) or by our officerstaff in other places (where verification agency approved by Corporate
Centre is not available) should be complied based on the following verifications
I Verification of the borrowerrsquos residence address as given in the loan application
by actually visiting the residence of the borrower
II Verification of the borrowerrsquos office address as given in the loan application by
actually visiting the office of the borrower
Source Xpress credit circular
III Verification of the borrowerrsquos residence telephone number as given in the loan
application by actually calling the residence telephone number of the borrower
IV Verification of the borrowerrsquos office telephone number as given in the loan
Application by actually calling the office telephone number of the Borrower
V Verification of the IT return of the Borrower with IT department through a
person approved by the Regional OfficeZonal Office where feasible Where IT
return cannot be verified by the Bank statement of account of the borrower may
be scrutinized to verified income flows
Where the verification is not outsourced the Branch staff
Must do the verification and the report should be added with the loan documents
Flow chart of loan procedure of retail loan
Chart no 01
Disagree
NON PEFORMING ASSETS (NPA) ndash CONCEPT
The three letters ldquoNPArdquostrike terror in banking sector and business circle todayNPA is the short
Form of ldquoNon performing Assetsrdquo
Enquiry about loan
Agreeprovided with check list and
application
submission of documents and application dully
filled up
Documents taken
verification of application and
documebtsCIBIL report
Processing of loan
Sangtion of loan
Document
Control Disbursal of loan
phasewise lumpsum
In banking NPA are loans given to doubtful customers who may or may not repay the
loan on time There are two types of assets viz performing and non performing Performing loans
are standard loans on which both the principle and interest are secured and their return is guaranteed
NPA means the debt which is given by the bank is unable to recover is called
nonperforming assets A NPA account in the books of accounts is an asset as it indicates the amount
received from the defaulters It means if any bank gives loan and is not paid by the customers till 90
days than that account is called as NPA account
DEFINITION
An asset including leased assets becomes nonperforming when it ceases to generate income
for the bank
A NPA was defined as a credit facility in respect of which the interest or installment
of principle as remained ldquopast duerdquo for specific period of time
Source googlecoin
The specific period was reduced in a phased manner as under
wef ndash 31031993 four quarters
wef ndash 31 031994 three quarters
wef - 31031995 two quarters
wef - 31032001 180 days
wef - 31032004 90 days from past due
90 days delinquency is not applicable to agriculture segment
With effect from march 31 2004 NPA shall be a loan or an advance where
1) Term loan interest installment of principle remain over due for 90 days
2) Cash creditover draft an account remain ldquoout of orderrdquo for a period of more than 90 days
3) Bills The bills remain over due for a period more than 90 days
4) Agriculture loan
a The loan has been granted for short duration crop installments of the principle
remain over due for two crop season beyond the due date
b If the loan has been granted for long duration crop installment of the principle
remain over due for one crop season beyond the due date
Source Rbiorgin
CLASSIFICATION OF LOANS
In India loans are classified on following basis
Performing assets
Loans where the interest and or principle not remain overdue for more then 90 days
Non-performing assets
Any loan repayment remains over due for more than 90 days is considered as NPA
According to the securitization and re construction of financial assets and enforcement of
security interest ordinance2002 ldquonon performing assetsrdquo(NPA) means an assets or ac of
borrower which has been classified by the bank as sub-standard doubtful or loss asset in
accordance with the guidelines relating to asset classification issued by RBI
Source googlecoin
ASSET - CLASSIFICATION
Assets can be categorized into four categories (a) standard (b) sub-standard
(c) doubtful (d) loss The last three categories are classified as npa based on the the period for
which the asset has remained non-performing and the realisability of the dues
Standard assets the loan ac which are regular and do not carry more than normal risk are
known as standard assets there could be ac which though have not become npa but are
irregular Such ac are called special mention ac
Sub- standard assets with effect from 3132005 a sub-standard assets is one which is
classified as NPA for a period not exceeding 12 months
Doubtful asset with effect from 3132005 an asset is to be classified as doubtful if it
remained npa or sub-standard for a period exceeding 12 months
Loss assets a loss asset is one where loss has been identified by the bank or internal and
external auditors or the RBI inspection but the amount as not been written off wholly In
other words such an asset is considered uncollectable and such little value that its
continuance as a bankable asset is not warranted although there may be some salvage or
recoverable value
NPA IDENTIFICATION NORMS
With effect from 31st march 2004 a loan or advance become npa when
a Interest or installment of the principle remains overdue for a period more then 90
days in respect of term loan
b The ac remain out of order for a period more 90days in respect of over draft cash
cash credit
c The bill remains overdue for a period more than 90 days in case of bills purchased
and discounted
d With effect from Sept 2004 loan granted for short duration crops will be treated as
NPA if the installment of principle or interest there on remains overdue for two crop
season and loan granted for long duration will be treated as NPA if the installment
remains overdue for one crop season
Out of order
An account will be treated as out as out of order if the outstanding balance remain
continuously in excess of the sanctioned limitdrawing power In cases where the
outstanding balance in the principle operating ac is less than the sanctioned limit but
there are no credit continuously for 90 days as on the date of balance sheet or the
credit are not enough to cover the interest debited during the same period
Overdue
An amount due to the bank under any credit facility is overdue it is not paid on the due
date fixed by the bank
The date of npa will be actual date on which sippage occurred as mentioned below
For term and demand loan ac
The date on which the installment of the principle have
remaine overdue for a period more then 90 days
For over draft and cash credit ac
The date on which the ac completed period of more than 90
days of being continuously out of order
Source wwwRBI Org in
PROVISING NORMS
There is time lag between an ac becoming doubtful for recovery the realization of security and
erosion over a loan period of time in its value So RBI directives now requiresthe banks to make
provisions in their balance sheet for all non- standard loan asset Provisioning is made on all types of
assets ie Standard sub-standard doubtful and loss assets
1 Standard assets RBI vides its circular dated 151108 revised the provisioning requirements
For all type of standard assets it has been reduced to a uniform level of 040of outstanding
at global basis except in the case of direct advance to agriculture and SME sector which
shall continue to attract a provisioning of 025 The provision toward standard assets need
not to be netted from gross advances but shown separately as ldquo contigent provisionsrdquo against
standard assets under other liquidities and provisions others in schedule 5 of the balance
sheet
2 Sub-standard assets- In respect of sub-standard assets the rate of provision is 10 of
outstanding balance without considering ECGC guarantee cover or securities available
However if the loan was unsecured from the begining there would be additional provision of
10 ie total provision would be 20 of the outstanding balance Unsecured exposure is
defined as an exposure where the realizable value of the security as assessed by the
bankreserve banks inspecting officers is not more than 10 ab-intio of the outstanding
exposure
3 Doubtful assets In case of doubtful assets while making provision realizable value of
security is to be considered 100 provision is made for unsecured portion In case of
secured portion the rate of provision depend on age of doubtful assets as under
Age of doubtful assets Provision as of secured portion
Doubtful up to 1 year D1 20 of RVS( realizable value of security)
Doubtful for more than 1 year D2 30 of RVS
Doubtful for more than 3 years D2 100 of RVS
Thus if an ac is doubtful for more than 3 years than 100 of the provision is to be made
both from secured and unsecured portion If an advance has been guaranteed by DICGC
CGFTECGC and is doubtful than provision on secured portion will be as in other cases but
provision on unsecured portion will be made after deducting the claim value
4 LOSS ASSET 100 of the outstanding amount while making provision on NPAs amount
lying in suspense ac and derecognized interest should be deducted from gross advance and
provision be made on balance amount
5 OVERALL PROVISION With a view to improving the improving the provisioning cover
and enhancing the soundness of the individual banks RBI has proposed in oct- 09 policy that
bank should augment their provisions and ensure that their total provisioning coverage ratio
including floating provisions is not less than 70
Source wwwRBIorgin
IMPACTEFFECT OF NPA UPON BANKS
A strong banking sector is important for flourishing economy The failure of banking sector
may have an adverse impact on other sector NPA are one of the major concerns of sector
banks is increasing result in nonperforming assets The NPA impact drastically to the
working of banks The efficiency of bank not always reflected by the size of its balance sheet
but by the level of return on its assetsNPA do not generate interest income for the banks but
the same time banks are required to make provisions for such NPAs from their current
profits
They erode current profits through provisioning requirement
They result in reduced interest income
They require higher provisioning requirements effecting profits and accretion to capital
Adverse impact on capital adequacy ratio
Roe and Roa goes down because NPA do not earn
Banks rating gets effect
Banks cost of raising funds goes up
Bad effect on goodwill
Bad effect on equity value
EARLY SYMPTOMS BY WHICH ONE CAN RECOGNIZE A PERFORMING
ASSETS TURNING TO A NON PERFORMING ASSET
Four categories of early symptoms
1) FINANCIAL
(a) Non- payment of very first installment
(b) Bouncing of cheque due to insufficient balance in the ac
(c) Irregularity in installment
(d) Irregularity of operations in ac
(e) Unpaid overdue bill
(f) Declining current ratio
2) OPERATIONAL AND PHYSICAL
(a) If information is received that the borrower has either initiated the process of winding up or not doing the business
(b) Over-due receivable
(c) Stock statement not submitted on time
(d) External non-controllable factor like natural calamities in the city where the borrower lives
(e) Non- payment of salary
(3) ATTITUDNAL CHANGE
(a) Use for personal comfort stocks and shares by borrowers
(b) Avoidance of contact with bank
(c) Problem between partners
(4) OTHER
(a) Change in govt policies
(b) Death of the borrower
(c) Delay in salary
PREVENTIVE MEASUREMENT FOR NPA
Early recognition of the problem
Invariably by the time banks start their efforts to get involved
in a revival process its too late to retrieve the situation ndash both in terms of rehabilitation of the
project and the recovery of banks dues Identification of the weakness regardless of the fact
that it may not have become NPA is imperative Assessment of the potential of revival may
be done on the basis of a techno-economic viability study Restructuring should be attempted
where after an objective assessment of the promoterrsquos intention banks are convinced of a
turn around with in a scheduled facilitate winding upselling of units earlier so as to recover
whatever is possible through means before the security position becomes worse
Identifying borrowers with genuine intent
Identifying borrower with genuine intent from those who
are non-serious with commitment or stake in revival is a challenge confronting bankers Here
the role of front line officials at branch level is paramount as they are the ones who have
intelligent inputs with regard to promoters lsquo sincerity and capability to achieve turnaround
Based on this objective assessment bank should decide as quickly as possible whether it
would be worthwhile to commit additional finance
In this regard banks may consider having
ldquospecial investigationrdquo of all financial transaction or business transaction books of account
order to ascertain real factor that contributed to sickness of borrower Bank may have panel
of technical experts with proven expertise and task record of preparing techno-economic
study of the project of the borrowers
Borrowers having genuine problems due to temporary mismatch in find flow or sudden
requirement of additional fund may entertained at branch level for this purpose a special
limit to such type of cases should be decided This will obviate the need to route the
additional funding through the controlling officers in deserving cases and avert many
accounts sleeping into NPA category
Timeliness and adequacy of response
Longer the delay in response greater the enjury to the
account and the asset Time is a crucial element in any restructuring or rehabilitation activity
The response decided on the basis of techno- economic study and promoterrsquos commitment
has to be adequate in terms of extend of additional funding and relaxations etc under the
restructuring exercise The package of assistance may be flexible and bank may look at the
exit option
Focus on cash flow
While financing at the time of restructuring the banks may not be guided
by the conventional fund flow analysis only which could yield a potentially misleading
picture Appraisal for fresh credit requirement may be done by analyzing fond flow in
conjunction with the cash flow rather than only on the basis of fund flow
Source wwwAskcom
Management effectiveness
The general perception among the borrower is lack of finance that
leads to sickness and NPAs but this may not be the case all the time Management effectiveness
advance business condition is a very important aspect that affects a borrowing units fortunes A bank
may commit a multiple finance to an align unit only after basic viability of the enterprise also in the
context of quality of management is examined and confirmed It will be useful to have consultant
appointed as early as possible to examine this aspect A proper techno-economic viability study thus
become the basis on which any future action can be considered
Multiple financing
A) During the exercise for assessment of viability and restructuring a pragmatic and unified
approach by all the leading banks as also sharing of all relevant information on the
borrower would go a long way toward overall success of rehabilitation exercise given the
probability of successfailure
B) In some default cases Where the unit is still working The bank should make sure that it
captures the cash flow and insure that such cash are used for working capital purpose
Toward this end there should be a continuous flow of information among consortium
member A bank which is not a part of consortium may not be allowed to offer credit
facility to such defaulting clients Current account facility may also be denied at non-
consortium banks to such clients and violation may attract penal action The credit
information bureau of india (CIBIL) may be very useful for meaningful information
exchange on defaulting borrowers once the setup become fully operational
C) In a forum of lenders the priority of each lender will be different While one set of lender
may be willing to wait for longer time to recover its dues another lender may have a much
shorter timeframe in mind So it is possible that the letter categories of lenders may be
willing to exit even at a cost by a discounted settlement of the exposure There for any plan
for restructuringrehabilitation may takes into account
D) Corporate debt restructuring it has been institutionalized in 2001 to provide a timely and
transparent system for restructuring the corporate debt of RS 20 crores and above with the
banks on a voluntary basis and outside a legal framework Under this system bank are
greatly benefit in terms of restructuring of large standard accounts (potential NPAs) and
viable sub-standard account with multiple banking arrangement
NPA MANAGEMENT- RESOLUTION
Compromise settlement schemes
Restructuringrescheduling
Lok adalat
Corporate debt restructuring cell
Debt recovery Tribunals (DRT)
Proceeding under the code of civil procedure
Board of industrial and financial reconstruction
National company law Tribunal (NCLT)
Sale of NPA to other bank
Sale of NPA to ARCSC under securitization and reconstruction of financial assets for
enforcement of security interest Act 2000 (SRFAESI)
Liquidation
Source wwwRBIorgin
NPA MANAGEMENT IN INDIA
Formation of the credit information bureau (India) limited (CIBIL)
Release of willful defaulterrsquos listRBI also releases a list of borrowers with aggregate
outstanding of RS 1 crore and above against whom bank have filed suit for recovery of their
fund
Reporting of frauds to RBI
Norms of lenders labiality- framing of fair practices code with regard to lenders lability to
be followed by banks
Risk assessment and Risk management
RBI has advised banks to all cases of willful defaulters in case of 1 crore and above and
files suits in such cases
Responding quick mortality cases
Special mention accounts for early identification for bad debt loans and advances over due
for less than one or two quarters would come under this category However these accounts do
not need provisioning
INTERNATIONAL PRACTICES ON NPA MANAGEMENT
Subsequent to the Asian currency crisis which severely crippled the financial system In
addition to the above some of the more recent and aggressive step to NPAs have been taken
by Taiwan Taiwanese financial institution have been encouraged to merge and form bank
based AMCs through the recent introduction of financial holding company act and financial
institution Asian countries the magnitude of NPAs in Asian financial institution was brought
to light Driven by the need to proactively tackle the soaring NPAs level the respective govt
embarked upon a program of substantial reform This involves setting up processes for early
identification and resolution of NPAs The table below provides a cross country comparison
of approaches used for NPA resolution Mergers Act A long side the ministry of finance has
followed a carrot and strict policy of specifying the required NPA ratio for banks while also
providing flexibility in modes of NPA assets resolution and a conduct
ive regulatory and tax environment Deferred loss write-off provisions have been instituted to
provide breathing space for lenders to absorb NPA write-off While it is too early to
comment on success of NPA resolution process in Taiwan the early sign are encouraging
Detailed below are some key NPA management approaches adopted by banks in South East
Asian countries
1 Credit risk mitigation
2 Early warning systems
3 Assets management companies
Increasing willingness to sell NPAs to AMCs
Effective resolution strategy
Appointment of special administrators
4 Out of court restructuring
Source wwwgooglecom
DIFFICULTIES WITH NON PERFORMING ASSETS
I Owners do not receive a market return on their capital In the worst case if the bank
fails owner lose their assets
II Depositors do not receive a market return on savings In the worst case if the bank
fails depositors lose their assets or uninsured balance Banks also redistribute losses
to other borrowers by charging higher rate of interest
III Non-performing loans epitomize bad investors They misallocate credit from good
projects which do not receive funding to failed project
IV 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
shortage the shortage can jam payments across the country
b Illiquidity constraints banks in paying depositors eg cashing their paychecks
c Undercapitalized banks exceed the bank capital base
Lending by bank has been politicized It is common knowledge
that loans are given to various industrial houses on common consideration and
viability of project but on political consideration In normal circumstances banks
before extending any loan would make a thorough study of the actual need of the
party considered the prospect of the business in which it is engaged Since it is
not looked into many of the loans becomes NPA
REASONS F0R AN ACCOUNT BECOMING NPA
Those attribute to borrower
Failure to bring in required capital
Lack of proper planning
Unwanted expenses
Lack of expertise
Poor credit collection
Miss management
Heavy borrowing
Lack of knowledge regarding NPA
Willful defaulters
Death of the borrower
Those attribute to banks
Wrong selection of borrower
Poor credit appraisal
Unhelpful in supervision
Too inflexible attitude
System overload
Lack of motivation
Delay in sanction
Lack of trained staff
Lack of commitment to recovery
Lack of personal visit to the borrower office
Lack of personal visit to the borrowerrsquos residence
Other
Fast changing technology
Unhelpful attitude of govt
Increase in material cost
Government policies
Taxation law
Political hostility
INDIAN ECONOMY AND NPA
Undoubtedly the world economy has slowed down recession is at its peak globally stock markets
have tumbled and business itself getting hard to do The Indian economy has been much affected due
to high fiscal deficit poor infrastructure facilities sticky legal system cutting of exposures to
emerging market by FIIs etc
Further international rating agencies like standard and poor
have lowered Indiarsquos credit rating to sub- investment grade Such negative aspects have often
outweighed positive such as increasing for reserve and a manageable inflation rate
Under such situation I go without saying that banks are no exception
and are bound to face the heat of global down turn One would be surprise to know that banks and
financial institution in India holds non-performing assets worth Rs 1 10000 crores Bankers have
realized that unless the level of NPA is reduced drastically they will find it difficult to survive
The actual level of NPA in India is around $ 40 billion much higher than govt estimation of $16
billion This difference is largely due to the discrepancy in accounting the NPAs followed by India
and rest of the world The accounting norms of India are less stringent than those of the developed
economies The Indian banks also have the tendency to extend the past due Considering the GDP
India nearly $ 470 billion the NPA are 8 of the total GDP which was better than many Asian
countries The NPA of china was 45 of the GDP While Japan had NPAs of 25 of the GDP
The aggregate level of NPAs in Asia has increased from $ 25 billion in 2007 to
$ 34 billion on 2009 looking to such overall pictures of the market we can say that India is doing
well and the steps taken are looking favorable
Source googlecoin
DATA ANALYZING THE QUETIONNAIRE
Two set of questionnaire were prepared to collect the feedback One set of questionnaire was meant for branches and other set of questionnaire was meant for borrowers
The set of questionnaire were given to the branches under hazaribag (RBO) and collected the feedback of the bankers of P segment and the branch manager
The questionnaire prepared for branch contained 15 questions and the questionnaire prepared for borrower contains 10 questions
The data was collected from 50 bankers and the data analysis of the branch questionnaire is as follows
Question number 1
Does not require any data analysis and information was sought to know the business level of the branches for the purpose of whether particular branch is actively engaged in xpress credit portfolio
Question number 2
Do you think that the borrowers are aware about NPA
Answer
32 of the respondent feel that the borrowers are not aware about NPA and 18 respondents feel that borrowers are aware about NPA
Chart no 11
yes
no
0
5
10
15
20
25
30
35
1832 Column1
Conclusion
Majority of the bank officials feels that the borrowers are not aware about NPA
Question number 3
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Answer
Out of 32 respondent 22 respondents is fully satisfied that lack of knowledge among the borrower regarding NPA is one of the reason for NPA 08 respondent were partially satisfied with it and 02 respondent were not satisfied with it
Chart no 12
fully satisfied(22)69
partially satisfied(8)25
not satisfied(2)6
Sales
Conclusion
Majority of the borrowers feels that lack of knowledge among the borrower regarding NPA is one of the reasons for NPA
Question number 4 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Answer
Out of 50 respondent 30 of the respondent strongly satisfied that these external factors contribute to NPA 10 respondent were partially satisfied with it 5 were not satisfied where as 5 were fully dissatisfied with it
Chart no 13
6020
10
10
fully satisfied(30) partially satisfied(10) not satisfiec(5) fully desatisfied(5)
Conclusion
Most of the respondent thinks that external factrs like willful defaulter change in govt policy contribute to NPA
Question number 5
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Answer
Chart no 14
feedback
fully satisfied(20)partially satisfied(12)not satisfied(12)fully dissatisfied(6)
Conclusion
As per the response of the officials most of the officials feel that internal factors are also responsible for NPA
Question number 6
Do you think that inflation is one of the reasons for NPA
Answer
Out f 50 responses 22 were strongly satisfied 18 were partially satisfied 8 were not satisfied and 2 were fully dissatisfied
Chart no 15
fully satisfied(20)44
partially satisfied(18)36
not satisfied(5)10
fullt dissatisfied(5)10
Conclusion
Growing inflation increasing goods rate is also one of the reason for NPA
Question number 7
Do you think that lack of PSS is also contributed to NPA
Answer
Out of 50 responses 30 were fully satisfied with it 12 were partially satisfied and 8 were fully dissatisfied
Chart no 16
6024
16
Open
fully satisfied(30)Partially satisfied(12)not satisfied(0)fully dissatisfied(8)
Conclusion
Majority of the officiais feels that lack of PSS is one of the reason for NPA This means that the PSS carried out by the bank is not sufficient or not carried out properly
Question number 8
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Answer
Most of the respondent feels that increase in unwanted expenses of the borrwer ls contribute to NPA
Chart no 17
56
12
28
4
FULLY SATISFIED(28)PARTIALLY SATISFIED(6)NOT SATISFIED(14)FULLY DISSATISFIED(2)
Conclusion
As per response of the officials increasing inflation have an adverse effect on the financial sector its working performance as well as on NPA
Question number 9
Do you think that high rate of interest under Xpress credit also contributes to NPA
Answer
Out of 50 respondent 25 respondent were not satisfied 10 were partially satisfied 10 were strongly dissatisfied where as only 5 out of 50 were fully satisfied with it
Chart no 18
strongly satisfied(5)partially satisfied(10)not satisfied(25)fully dissatisfied(10)
Conclusion
Most of the respondents are not satisfied with it They feel that the rate of interest charged by SBI under Xpress credit is not high and it will not contribute to NPS
Question number 10
Do you think that lack of proper planning of the borrower is one of the reason for NPA
Answer
Out of 70 respondent 35 were fully satisfied 5 were not satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 19
fully satisfied(35)70
partially satisfied(10)20
not satisfied(5)10
Conclusion
Most of the respondent feels that the borrowers borrow money from the bank without any proper planning which is one of the most important reason for NPA
Question number 11
Is heavy borrowing also contribute to NPA
Answer
Out of 50 respondent 25 respondent were fully satisfied 12 were partially satisfied 8 were not satisfied were as 5 were fully dissatisfied
Chart no 110
50
24
16
10
fully satisfied(25) partially satisfied(12) not satisfied(8) fully dissatisfied(5)
Question number 12
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Answer
As per the response of the officials 20 were fully satisfied 66were partially satisfied 4 were not satisfied with it were as 10 respondent were fully dissatisfied
Chart no 111
fully satisfied(10)20
partially satisfied(33)66
not satisfied(2)4
fullydissatisfied(5)10
Conclusion
As per the response given by the officials most of the officials were partially satisfied that wrong selection of borrower also contribute to NPA which means that selection process carried out by the bank is not appropriate or there is some difficulties in implementing them
Question number 13
Do you think that poor credit appraisal also contribute to NPA
Answer
Out of 50 respondent 5 were fully satisfied 10 were fully satisfied 30 were not satisfied were as only 5 were fully dissatisfied
Chart no 112
fully satisfied(5)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 14
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Answer
Out of 50 responses 3 were fully satisfied 15 were partially satisfied 25 were not satisfied where as 7 were full dissatisfied
Chart no 113
fully satisfied(3)partiallt satisfied(15)not satisfied(25)fully dissatisfied(7)
Conclusion
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not contribute to NPA This means that the attitude of bank toward the borrower is not inflexible
Question number 15
Do you think that system over load is also one of the causes of NPA
Answer
Out of 50 respondent 28 were fully satisfied 12 were partially satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 114
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
DOB 15081993
Academic qualification Pursuing BCom (insurance honors)
College St Xavierrsquos college Ranchi
At present Pursuing special diploma in Marine insurance
Contact no 7631011853
Email ID vivek7654595gmailcom
PROJECT MENTOR PROFILE
NAME Rajesh Kumar Jha
DESIGNATION Manager (PB) Hazaribag
WORK PLACE SBI Hazaribag
CONTACT NO 9931833473(personal) 9771458627(official)
EMAIL ID rajeshkjhasbicoin
SBI HAZARIBAG BRANCH PROFILE
BRANCH INFORMATION
Date of opening 17-10-55
Branch code 00090
Migration date 14-12-2006
Circle Patna
Network 2
Module name Dhanbad
Branch type Regular branch
MICR code 825002002
License date 17-10-1954
Controllers Email ID agm4zoransbiciin
COMMUNICATION ADDRESS
Address 1 State bank of India
Address 2 Ravindra path
Address 3 NH-33
City Hazaribag
Pin 825301
BRANCH MANAGER
Name Shrwan Kumar Singh
Designation Chief Manager
Contact no 9431140712
Email shrwansinghsbicoin
STAFF STRENGTH
Officers 15
Assistants 30
Messengers 12
Guards 03
ACCOUNTS
Total no of ac - 60720
SB ac ndash 46133
CA ac - 510
Advances ndash 7247 Lakhs
Deposits ndash 91408 Lakhs
Total no of ATMrsquoS ndash 08
NATURE OF THE PROJECT
Xpress credit is a form of personal loan devised to provide instant credit support to person in need It caters mainly salaried person who have their salary ac with the bank The loan is a very good source of increasing retail loan portfolio but also have inherent risk It is a clear loan without any security and hence attracts more provisioning also unexpected events like death of borrower creates problem of recovery Sometimes employers shift their salary to other bank intentionally to avoid repayment and sometime it is difficult to track their transfer and posting
Despite all positive factors of continuous income and benefit of recovery through department the bank is facing the problem of high NPA in Xpress credit
The study is an endeavor to search the cause of acrsquos turning into NPA analyzing the efforts of the bank to recover the dues and to suggest the measures to contain the NPA to minimum or to zero level
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the npa
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
COMPANY PROFILE OF SBI
The evolution of sbi can be traced back to the first decade of the 19th century It began with the
establishment of bank of culcutta in cuicutta on 2nd july 1806 The bank was redesined as the bank of
bangal three year later on 2nd january 1809 It was the first ever joint company of british india
established under the sponsorship of govt of bangal Subsiquently the bank of madras and bank of
bombay follwed the bank of bangal These banks were amalgamated to form imperial bank on 27th
jan 1921
An important turning point in the history of SBI is the launch of 1st five year plan of independence
india in 1951 The plan aimed to serving the indian economy in general and the rural sector of the
countryin particular There for in order to serve the economy as a whole and the rural sector in
particular all india rural credit survey committee recommended the formation of state ndash partnered
and state ndash sponsored bank An act was passed in the parliament of india in may 1955 As a result the
sbi was established on 1st july 1955this results in making SBI more powerful as much as quarter of
resourses of indian banking system was controlled by state later on state bank of india (subsidiary
banks) act was pessedin 1959 This act enabled the sbi to make the 8 state associated bank as its
subsidiaries
BRANCHES
The corporate centre of SBI is located in Mumbai In order to cater to different function There is several other
establishments in and outside Mumbai apart from corporate center The bank boasts of having as many as 14
local head office and 57 zonal offices located as major cities throughout India It is recorded that SBI has
more than 10000 branches will cater to its customer throughout India
ATM
SBI provides easy access to money to its customers through more than 90000 ATMs in India The
bank also facilitates the free transaction of money at ATMs of state bank group You may also
transect money through SBI commercial and international bank ltd by using the state bank ATM
CUM DEBIT CARD It the only banking company to open its ATM in region of kargil
Source SBIcoin
Xpress credit
INTRODUCTION-
The Xpress Credit Scheme was formulated in April 2004 in the form of pre-approved loan to
employees of leading PSUs and Government organizations At present the scheme is open to
Employees of government semi-government profit making PSUs Educational Institutions of
national repute and companies of good standing (based on their CRA rating) The scheme is built
around the concept of check ndash off (the process by which the salary disbursing officer undertakes to
deduct loan installments from the salary of the borrower and remits the same to the Bank for credit
of the loan account) Xpress Credit Loans may also be sanctioned in those cases where the borrower
gives sufficient PDCs (Post Dated Cheques) for entire tenure of the loan
Source Xpress credit circular
PURPOSE
The loan under the scheme is granted for any legitimate personal purpose (eg expenses for
domestic or foreign travel medical treatment of self or a family member meeting any financial
liability such as marriage of sondaughter defraying educational expenses of wards meeting
margins for purchase of assets etc)
Source Xpress credit circular
ELIGIBILITY
1 EMPLOYERS
Central and state Government
Quasi-Government
Profit making PSUs
Educational Institutions of National Repute
Companies with a CRA rating of SB1 to SB5
Companies with a CRA rating of SB6 and SB7 are also eligible if it satisfies take over norms
2 EMPLOYEES
Permanent employees with a minimum 1 yearrsquos length of service
He should have sufficient cash flows to repay the loan from salary as evidenced by 6 monthsrsquo
salary slipsincome tax returns of 2 years
He should provide proof of residence and proof of identity to satisfy KYC norms
He should produce 6 months satisfactory statement of bank account (at any bank)
Proof of Employment in the eligible company
Source Xpress credit circular
MINIMUM NET MONTHLY INCOME
The minimum Net Monthly Income (NMI) of the employee should beRs5000- It can
Be lowered to Rs3000- subject to the condition that the salary accounts of the entire enterprise are
with us The Branch will ensure to obtain an Undertaking from the borrower that there is no other
deduction from hisher salary which is not reflected in the salary slip [As per Annexure ndash (B) ndash (v)]
LOAN AMOUNT
a) Minimum Rs24000=
b) Maximum 24 Months NMI with a ceiling of Rs1500 lacs
TYPE OF LOAN
LoanD Term demand Loan (NO OVERDRAFT)
REPAYMENT PERIOD
Maximum 60 months
EMI NMI le 50
REVIEW
Review of loan will be done yearly
RENEWAL
Renewal of loans will be allowed after 24 months
CHECK OFF
The process by which the salary disbursing officer under takes to deduct the loan
installments from the salary of the borrower and remits the same to the Bank for credit to the loan
account
Or
The employer pays the borrowerrsquos salary into his SavingsCurrent Account with our Bank
The borrower gives an irrevocable Standing Instruction (SI) For recovery of the loan installments
from his aforesaid account with the SI being synchronized with the date of credit of salary in the
borrowerrsquos SavingsCurrent Account
AND
The employer undertakes to inform the Bank if and when there is a severance due to borrowerrsquos
transfer resignation retirement etc[ Branch will ensure to obtain the undertaking from the employer
and employee as per Annexure ndash B (I) B (ii) II or B (iii) ]
Source Xpress credit circular
CATEGORY I
FULL CHECK OFF
As given under the head CHECKOFF
AND
Undertaking from the employer to obtain a NOC from the Bank before settling the dues of the
borrower on transfer resignation retirement etc [As per Annexure ndash B (IV)]
This stipulation can be waived by the sanctioning authority incase of employees of Central State
Government PSUs Universities and Reputed Colleges In case of other employers the CGM of the
Circle has been permitted to waive the stipulation But in no case this can be waived for IT sector
employees
CATEGORY II
PARTIAL CHECK OFF
As given under the head CHECKOFF
CATEGORY III
WITH NO CHECK OFF
The employer pays the borrowerrsquos salary into his SavingsCurrent Account with our Bank
The borrower gives an irrevocable Standing Instruction (SI) for
recovery of the loan installments from his aforesaid account twitch the SI being synchronized with
the date of credit of salary in the borrowerrsquos SavingsCurrent Account
OR
Conditions as given under the head CHECKOFF is not fulfilled but the borrower provides monthly
PDCs (Post Dated Cheques) for entire tenure of the loan provided eligibility criteria are fulfilled
(Guidelines on Post Dated cheques is annexed as per Annexure A)
INTEREST RATE
The Interest rate is based on the category of Check off available
Category I
5 above the base rate ie - 970 +5 =1470 ( currently 1470 pa)
Category II
7 above the base rate (currently 1670 pa)
Note The GM of the Network is vested with powers to extend the Category II rate to a Category III
borrower only in case of employees of SB1 to SB5 rated companies who maintain their salary
accounts with us The Category III employees who do not maintain their salary accounts with us but
provide PDCs for the loan should be charged the card rate applicable to Category III and no
deviation should be permitted by Circle GMs
PENAL INTEREST
Penal interest should not be charged for loans up to Rs25000For Loans above Rs25000- if the
irregularity exceeds EMI or installment amount for a period of one month then penal interest would
be charged 2 pa(over and above the applicable interest
rate) on the overdue amount for the period of default If part installment or part EMI remains
overdue then penal interest should not be levied
This provision has been made to avoid application of penal interest on Personal Segment Loan
accounts where EMIs stipulated or installments are being paid regularly by the borrowers
Source Xpress credit circular
SECURITY
The loan is clean in nature and no security is required
PROCESSING FEE
11 of the loan amount including tax
PRE-SANCTION PROCESS
The following documents will be obtained before sanction-
I Application cum appraisal Form With a photograph of the borrower duly attested by the
authorized official
II It is proposed to put in place an arrangement for verification of the address of the borrower by an
outside agency A report duly signed by the verification agency (in places where an arrangement is
in place) or by our officerstaff in other places (where verification agency approved by Corporate
Centre is not available) should be complied based on the following verifications
I Verification of the borrowerrsquos residence address as given in the loan application
by actually visiting the residence of the borrower
II Verification of the borrowerrsquos office address as given in the loan application by
actually visiting the office of the borrower
Source Xpress credit circular
III Verification of the borrowerrsquos residence telephone number as given in the loan
application by actually calling the residence telephone number of the borrower
IV Verification of the borrowerrsquos office telephone number as given in the loan
Application by actually calling the office telephone number of the Borrower
V Verification of the IT return of the Borrower with IT department through a
person approved by the Regional OfficeZonal Office where feasible Where IT
return cannot be verified by the Bank statement of account of the borrower may
be scrutinized to verified income flows
Where the verification is not outsourced the Branch staff
Must do the verification and the report should be added with the loan documents
Flow chart of loan procedure of retail loan
Chart no 01
Disagree
NON PEFORMING ASSETS (NPA) ndash CONCEPT
The three letters ldquoNPArdquostrike terror in banking sector and business circle todayNPA is the short
Form of ldquoNon performing Assetsrdquo
Enquiry about loan
Agreeprovided with check list and
application
submission of documents and application dully
filled up
Documents taken
verification of application and
documebtsCIBIL report
Processing of loan
Sangtion of loan
Document
Control Disbursal of loan
phasewise lumpsum
In banking NPA are loans given to doubtful customers who may or may not repay the
loan on time There are two types of assets viz performing and non performing Performing loans
are standard loans on which both the principle and interest are secured and their return is guaranteed
NPA means the debt which is given by the bank is unable to recover is called
nonperforming assets A NPA account in the books of accounts is an asset as it indicates the amount
received from the defaulters It means if any bank gives loan and is not paid by the customers till 90
days than that account is called as NPA account
DEFINITION
An asset including leased assets becomes nonperforming when it ceases to generate income
for the bank
A NPA was defined as a credit facility in respect of which the interest or installment
of principle as remained ldquopast duerdquo for specific period of time
Source googlecoin
The specific period was reduced in a phased manner as under
wef ndash 31031993 four quarters
wef ndash 31 031994 three quarters
wef - 31031995 two quarters
wef - 31032001 180 days
wef - 31032004 90 days from past due
90 days delinquency is not applicable to agriculture segment
With effect from march 31 2004 NPA shall be a loan or an advance where
1) Term loan interest installment of principle remain over due for 90 days
2) Cash creditover draft an account remain ldquoout of orderrdquo for a period of more than 90 days
3) Bills The bills remain over due for a period more than 90 days
4) Agriculture loan
a The loan has been granted for short duration crop installments of the principle
remain over due for two crop season beyond the due date
b If the loan has been granted for long duration crop installment of the principle
remain over due for one crop season beyond the due date
Source Rbiorgin
CLASSIFICATION OF LOANS
In India loans are classified on following basis
Performing assets
Loans where the interest and or principle not remain overdue for more then 90 days
Non-performing assets
Any loan repayment remains over due for more than 90 days is considered as NPA
According to the securitization and re construction of financial assets and enforcement of
security interest ordinance2002 ldquonon performing assetsrdquo(NPA) means an assets or ac of
borrower which has been classified by the bank as sub-standard doubtful or loss asset in
accordance with the guidelines relating to asset classification issued by RBI
Source googlecoin
ASSET - CLASSIFICATION
Assets can be categorized into four categories (a) standard (b) sub-standard
(c) doubtful (d) loss The last three categories are classified as npa based on the the period for
which the asset has remained non-performing and the realisability of the dues
Standard assets the loan ac which are regular and do not carry more than normal risk are
known as standard assets there could be ac which though have not become npa but are
irregular Such ac are called special mention ac
Sub- standard assets with effect from 3132005 a sub-standard assets is one which is
classified as NPA for a period not exceeding 12 months
Doubtful asset with effect from 3132005 an asset is to be classified as doubtful if it
remained npa or sub-standard for a period exceeding 12 months
Loss assets a loss asset is one where loss has been identified by the bank or internal and
external auditors or the RBI inspection but the amount as not been written off wholly In
other words such an asset is considered uncollectable and such little value that its
continuance as a bankable asset is not warranted although there may be some salvage or
recoverable value
NPA IDENTIFICATION NORMS
With effect from 31st march 2004 a loan or advance become npa when
a Interest or installment of the principle remains overdue for a period more then 90
days in respect of term loan
b The ac remain out of order for a period more 90days in respect of over draft cash
cash credit
c The bill remains overdue for a period more than 90 days in case of bills purchased
and discounted
d With effect from Sept 2004 loan granted for short duration crops will be treated as
NPA if the installment of principle or interest there on remains overdue for two crop
season and loan granted for long duration will be treated as NPA if the installment
remains overdue for one crop season
Out of order
An account will be treated as out as out of order if the outstanding balance remain
continuously in excess of the sanctioned limitdrawing power In cases where the
outstanding balance in the principle operating ac is less than the sanctioned limit but
there are no credit continuously for 90 days as on the date of balance sheet or the
credit are not enough to cover the interest debited during the same period
Overdue
An amount due to the bank under any credit facility is overdue it is not paid on the due
date fixed by the bank
The date of npa will be actual date on which sippage occurred as mentioned below
For term and demand loan ac
The date on which the installment of the principle have
remaine overdue for a period more then 90 days
For over draft and cash credit ac
The date on which the ac completed period of more than 90
days of being continuously out of order
Source wwwRBI Org in
PROVISING NORMS
There is time lag between an ac becoming doubtful for recovery the realization of security and
erosion over a loan period of time in its value So RBI directives now requiresthe banks to make
provisions in their balance sheet for all non- standard loan asset Provisioning is made on all types of
assets ie Standard sub-standard doubtful and loss assets
1 Standard assets RBI vides its circular dated 151108 revised the provisioning requirements
For all type of standard assets it has been reduced to a uniform level of 040of outstanding
at global basis except in the case of direct advance to agriculture and SME sector which
shall continue to attract a provisioning of 025 The provision toward standard assets need
not to be netted from gross advances but shown separately as ldquo contigent provisionsrdquo against
standard assets under other liquidities and provisions others in schedule 5 of the balance
sheet
2 Sub-standard assets- In respect of sub-standard assets the rate of provision is 10 of
outstanding balance without considering ECGC guarantee cover or securities available
However if the loan was unsecured from the begining there would be additional provision of
10 ie total provision would be 20 of the outstanding balance Unsecured exposure is
defined as an exposure where the realizable value of the security as assessed by the
bankreserve banks inspecting officers is not more than 10 ab-intio of the outstanding
exposure
3 Doubtful assets In case of doubtful assets while making provision realizable value of
security is to be considered 100 provision is made for unsecured portion In case of
secured portion the rate of provision depend on age of doubtful assets as under
Age of doubtful assets Provision as of secured portion
Doubtful up to 1 year D1 20 of RVS( realizable value of security)
Doubtful for more than 1 year D2 30 of RVS
Doubtful for more than 3 years D2 100 of RVS
Thus if an ac is doubtful for more than 3 years than 100 of the provision is to be made
both from secured and unsecured portion If an advance has been guaranteed by DICGC
CGFTECGC and is doubtful than provision on secured portion will be as in other cases but
provision on unsecured portion will be made after deducting the claim value
4 LOSS ASSET 100 of the outstanding amount while making provision on NPAs amount
lying in suspense ac and derecognized interest should be deducted from gross advance and
provision be made on balance amount
5 OVERALL PROVISION With a view to improving the improving the provisioning cover
and enhancing the soundness of the individual banks RBI has proposed in oct- 09 policy that
bank should augment their provisions and ensure that their total provisioning coverage ratio
including floating provisions is not less than 70
Source wwwRBIorgin
IMPACTEFFECT OF NPA UPON BANKS
A strong banking sector is important for flourishing economy The failure of banking sector
may have an adverse impact on other sector NPA are one of the major concerns of sector
banks is increasing result in nonperforming assets The NPA impact drastically to the
working of banks The efficiency of bank not always reflected by the size of its balance sheet
but by the level of return on its assetsNPA do not generate interest income for the banks but
the same time banks are required to make provisions for such NPAs from their current
profits
They erode current profits through provisioning requirement
They result in reduced interest income
They require higher provisioning requirements effecting profits and accretion to capital
Adverse impact on capital adequacy ratio
Roe and Roa goes down because NPA do not earn
Banks rating gets effect
Banks cost of raising funds goes up
Bad effect on goodwill
Bad effect on equity value
EARLY SYMPTOMS BY WHICH ONE CAN RECOGNIZE A PERFORMING
ASSETS TURNING TO A NON PERFORMING ASSET
Four categories of early symptoms
1) FINANCIAL
(a) Non- payment of very first installment
(b) Bouncing of cheque due to insufficient balance in the ac
(c) Irregularity in installment
(d) Irregularity of operations in ac
(e) Unpaid overdue bill
(f) Declining current ratio
2) OPERATIONAL AND PHYSICAL
(a) If information is received that the borrower has either initiated the process of winding up or not doing the business
(b) Over-due receivable
(c) Stock statement not submitted on time
(d) External non-controllable factor like natural calamities in the city where the borrower lives
(e) Non- payment of salary
(3) ATTITUDNAL CHANGE
(a) Use for personal comfort stocks and shares by borrowers
(b) Avoidance of contact with bank
(c) Problem between partners
(4) OTHER
(a) Change in govt policies
(b) Death of the borrower
(c) Delay in salary
PREVENTIVE MEASUREMENT FOR NPA
Early recognition of the problem
Invariably by the time banks start their efforts to get involved
in a revival process its too late to retrieve the situation ndash both in terms of rehabilitation of the
project and the recovery of banks dues Identification of the weakness regardless of the fact
that it may not have become NPA is imperative Assessment of the potential of revival may
be done on the basis of a techno-economic viability study Restructuring should be attempted
where after an objective assessment of the promoterrsquos intention banks are convinced of a
turn around with in a scheduled facilitate winding upselling of units earlier so as to recover
whatever is possible through means before the security position becomes worse
Identifying borrowers with genuine intent
Identifying borrower with genuine intent from those who
are non-serious with commitment or stake in revival is a challenge confronting bankers Here
the role of front line officials at branch level is paramount as they are the ones who have
intelligent inputs with regard to promoters lsquo sincerity and capability to achieve turnaround
Based on this objective assessment bank should decide as quickly as possible whether it
would be worthwhile to commit additional finance
In this regard banks may consider having
ldquospecial investigationrdquo of all financial transaction or business transaction books of account
order to ascertain real factor that contributed to sickness of borrower Bank may have panel
of technical experts with proven expertise and task record of preparing techno-economic
study of the project of the borrowers
Borrowers having genuine problems due to temporary mismatch in find flow or sudden
requirement of additional fund may entertained at branch level for this purpose a special
limit to such type of cases should be decided This will obviate the need to route the
additional funding through the controlling officers in deserving cases and avert many
accounts sleeping into NPA category
Timeliness and adequacy of response
Longer the delay in response greater the enjury to the
account and the asset Time is a crucial element in any restructuring or rehabilitation activity
The response decided on the basis of techno- economic study and promoterrsquos commitment
has to be adequate in terms of extend of additional funding and relaxations etc under the
restructuring exercise The package of assistance may be flexible and bank may look at the
exit option
Focus on cash flow
While financing at the time of restructuring the banks may not be guided
by the conventional fund flow analysis only which could yield a potentially misleading
picture Appraisal for fresh credit requirement may be done by analyzing fond flow in
conjunction with the cash flow rather than only on the basis of fund flow
Source wwwAskcom
Management effectiveness
The general perception among the borrower is lack of finance that
leads to sickness and NPAs but this may not be the case all the time Management effectiveness
advance business condition is a very important aspect that affects a borrowing units fortunes A bank
may commit a multiple finance to an align unit only after basic viability of the enterprise also in the
context of quality of management is examined and confirmed It will be useful to have consultant
appointed as early as possible to examine this aspect A proper techno-economic viability study thus
become the basis on which any future action can be considered
Multiple financing
A) During the exercise for assessment of viability and restructuring a pragmatic and unified
approach by all the leading banks as also sharing of all relevant information on the
borrower would go a long way toward overall success of rehabilitation exercise given the
probability of successfailure
B) In some default cases Where the unit is still working The bank should make sure that it
captures the cash flow and insure that such cash are used for working capital purpose
Toward this end there should be a continuous flow of information among consortium
member A bank which is not a part of consortium may not be allowed to offer credit
facility to such defaulting clients Current account facility may also be denied at non-
consortium banks to such clients and violation may attract penal action The credit
information bureau of india (CIBIL) may be very useful for meaningful information
exchange on defaulting borrowers once the setup become fully operational
C) In a forum of lenders the priority of each lender will be different While one set of lender
may be willing to wait for longer time to recover its dues another lender may have a much
shorter timeframe in mind So it is possible that the letter categories of lenders may be
willing to exit even at a cost by a discounted settlement of the exposure There for any plan
for restructuringrehabilitation may takes into account
D) Corporate debt restructuring it has been institutionalized in 2001 to provide a timely and
transparent system for restructuring the corporate debt of RS 20 crores and above with the
banks on a voluntary basis and outside a legal framework Under this system bank are
greatly benefit in terms of restructuring of large standard accounts (potential NPAs) and
viable sub-standard account with multiple banking arrangement
NPA MANAGEMENT- RESOLUTION
Compromise settlement schemes
Restructuringrescheduling
Lok adalat
Corporate debt restructuring cell
Debt recovery Tribunals (DRT)
Proceeding under the code of civil procedure
Board of industrial and financial reconstruction
National company law Tribunal (NCLT)
Sale of NPA to other bank
Sale of NPA to ARCSC under securitization and reconstruction of financial assets for
enforcement of security interest Act 2000 (SRFAESI)
Liquidation
Source wwwRBIorgin
NPA MANAGEMENT IN INDIA
Formation of the credit information bureau (India) limited (CIBIL)
Release of willful defaulterrsquos listRBI also releases a list of borrowers with aggregate
outstanding of RS 1 crore and above against whom bank have filed suit for recovery of their
fund
Reporting of frauds to RBI
Norms of lenders labiality- framing of fair practices code with regard to lenders lability to
be followed by banks
Risk assessment and Risk management
RBI has advised banks to all cases of willful defaulters in case of 1 crore and above and
files suits in such cases
Responding quick mortality cases
Special mention accounts for early identification for bad debt loans and advances over due
for less than one or two quarters would come under this category However these accounts do
not need provisioning
INTERNATIONAL PRACTICES ON NPA MANAGEMENT
Subsequent to the Asian currency crisis which severely crippled the financial system In
addition to the above some of the more recent and aggressive step to NPAs have been taken
by Taiwan Taiwanese financial institution have been encouraged to merge and form bank
based AMCs through the recent introduction of financial holding company act and financial
institution Asian countries the magnitude of NPAs in Asian financial institution was brought
to light Driven by the need to proactively tackle the soaring NPAs level the respective govt
embarked upon a program of substantial reform This involves setting up processes for early
identification and resolution of NPAs The table below provides a cross country comparison
of approaches used for NPA resolution Mergers Act A long side the ministry of finance has
followed a carrot and strict policy of specifying the required NPA ratio for banks while also
providing flexibility in modes of NPA assets resolution and a conduct
ive regulatory and tax environment Deferred loss write-off provisions have been instituted to
provide breathing space for lenders to absorb NPA write-off While it is too early to
comment on success of NPA resolution process in Taiwan the early sign are encouraging
Detailed below are some key NPA management approaches adopted by banks in South East
Asian countries
1 Credit risk mitigation
2 Early warning systems
3 Assets management companies
Increasing willingness to sell NPAs to AMCs
Effective resolution strategy
Appointment of special administrators
4 Out of court restructuring
Source wwwgooglecom
DIFFICULTIES WITH NON PERFORMING ASSETS
I Owners do not receive a market return on their capital In the worst case if the bank
fails owner lose their assets
II Depositors do not receive a market return on savings In the worst case if the bank
fails depositors lose their assets or uninsured balance Banks also redistribute losses
to other borrowers by charging higher rate of interest
III Non-performing loans epitomize bad investors They misallocate credit from good
projects which do not receive funding to failed project
IV 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
shortage the shortage can jam payments across the country
b Illiquidity constraints banks in paying depositors eg cashing their paychecks
c Undercapitalized banks exceed the bank capital base
Lending by bank has been politicized It is common knowledge
that loans are given to various industrial houses on common consideration and
viability of project but on political consideration In normal circumstances banks
before extending any loan would make a thorough study of the actual need of the
party considered the prospect of the business in which it is engaged Since it is
not looked into many of the loans becomes NPA
REASONS F0R AN ACCOUNT BECOMING NPA
Those attribute to borrower
Failure to bring in required capital
Lack of proper planning
Unwanted expenses
Lack of expertise
Poor credit collection
Miss management
Heavy borrowing
Lack of knowledge regarding NPA
Willful defaulters
Death of the borrower
Those attribute to banks
Wrong selection of borrower
Poor credit appraisal
Unhelpful in supervision
Too inflexible attitude
System overload
Lack of motivation
Delay in sanction
Lack of trained staff
Lack of commitment to recovery
Lack of personal visit to the borrower office
Lack of personal visit to the borrowerrsquos residence
Other
Fast changing technology
Unhelpful attitude of govt
Increase in material cost
Government policies
Taxation law
Political hostility
INDIAN ECONOMY AND NPA
Undoubtedly the world economy has slowed down recession is at its peak globally stock markets
have tumbled and business itself getting hard to do The Indian economy has been much affected due
to high fiscal deficit poor infrastructure facilities sticky legal system cutting of exposures to
emerging market by FIIs etc
Further international rating agencies like standard and poor
have lowered Indiarsquos credit rating to sub- investment grade Such negative aspects have often
outweighed positive such as increasing for reserve and a manageable inflation rate
Under such situation I go without saying that banks are no exception
and are bound to face the heat of global down turn One would be surprise to know that banks and
financial institution in India holds non-performing assets worth Rs 1 10000 crores Bankers have
realized that unless the level of NPA is reduced drastically they will find it difficult to survive
The actual level of NPA in India is around $ 40 billion much higher than govt estimation of $16
billion This difference is largely due to the discrepancy in accounting the NPAs followed by India
and rest of the world The accounting norms of India are less stringent than those of the developed
economies The Indian banks also have the tendency to extend the past due Considering the GDP
India nearly $ 470 billion the NPA are 8 of the total GDP which was better than many Asian
countries The NPA of china was 45 of the GDP While Japan had NPAs of 25 of the GDP
The aggregate level of NPAs in Asia has increased from $ 25 billion in 2007 to
$ 34 billion on 2009 looking to such overall pictures of the market we can say that India is doing
well and the steps taken are looking favorable
Source googlecoin
DATA ANALYZING THE QUETIONNAIRE
Two set of questionnaire were prepared to collect the feedback One set of questionnaire was meant for branches and other set of questionnaire was meant for borrowers
The set of questionnaire were given to the branches under hazaribag (RBO) and collected the feedback of the bankers of P segment and the branch manager
The questionnaire prepared for branch contained 15 questions and the questionnaire prepared for borrower contains 10 questions
The data was collected from 50 bankers and the data analysis of the branch questionnaire is as follows
Question number 1
Does not require any data analysis and information was sought to know the business level of the branches for the purpose of whether particular branch is actively engaged in xpress credit portfolio
Question number 2
Do you think that the borrowers are aware about NPA
Answer
32 of the respondent feel that the borrowers are not aware about NPA and 18 respondents feel that borrowers are aware about NPA
Chart no 11
yes
no
0
5
10
15
20
25
30
35
1832 Column1
Conclusion
Majority of the bank officials feels that the borrowers are not aware about NPA
Question number 3
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Answer
Out of 32 respondent 22 respondents is fully satisfied that lack of knowledge among the borrower regarding NPA is one of the reason for NPA 08 respondent were partially satisfied with it and 02 respondent were not satisfied with it
Chart no 12
fully satisfied(22)69
partially satisfied(8)25
not satisfied(2)6
Sales
Conclusion
Majority of the borrowers feels that lack of knowledge among the borrower regarding NPA is one of the reasons for NPA
Question number 4 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Answer
Out of 50 respondent 30 of the respondent strongly satisfied that these external factors contribute to NPA 10 respondent were partially satisfied with it 5 were not satisfied where as 5 were fully dissatisfied with it
Chart no 13
6020
10
10
fully satisfied(30) partially satisfied(10) not satisfiec(5) fully desatisfied(5)
Conclusion
Most of the respondent thinks that external factrs like willful defaulter change in govt policy contribute to NPA
Question number 5
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Answer
Chart no 14
feedback
fully satisfied(20)partially satisfied(12)not satisfied(12)fully dissatisfied(6)
Conclusion
As per the response of the officials most of the officials feel that internal factors are also responsible for NPA
Question number 6
Do you think that inflation is one of the reasons for NPA
Answer
Out f 50 responses 22 were strongly satisfied 18 were partially satisfied 8 were not satisfied and 2 were fully dissatisfied
Chart no 15
fully satisfied(20)44
partially satisfied(18)36
not satisfied(5)10
fullt dissatisfied(5)10
Conclusion
Growing inflation increasing goods rate is also one of the reason for NPA
Question number 7
Do you think that lack of PSS is also contributed to NPA
Answer
Out of 50 responses 30 were fully satisfied with it 12 were partially satisfied and 8 were fully dissatisfied
Chart no 16
6024
16
Open
fully satisfied(30)Partially satisfied(12)not satisfied(0)fully dissatisfied(8)
Conclusion
Majority of the officiais feels that lack of PSS is one of the reason for NPA This means that the PSS carried out by the bank is not sufficient or not carried out properly
Question number 8
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Answer
Most of the respondent feels that increase in unwanted expenses of the borrwer ls contribute to NPA
Chart no 17
56
12
28
4
FULLY SATISFIED(28)PARTIALLY SATISFIED(6)NOT SATISFIED(14)FULLY DISSATISFIED(2)
Conclusion
As per response of the officials increasing inflation have an adverse effect on the financial sector its working performance as well as on NPA
Question number 9
Do you think that high rate of interest under Xpress credit also contributes to NPA
Answer
Out of 50 respondent 25 respondent were not satisfied 10 were partially satisfied 10 were strongly dissatisfied where as only 5 out of 50 were fully satisfied with it
Chart no 18
strongly satisfied(5)partially satisfied(10)not satisfied(25)fully dissatisfied(10)
Conclusion
Most of the respondents are not satisfied with it They feel that the rate of interest charged by SBI under Xpress credit is not high and it will not contribute to NPS
Question number 10
Do you think that lack of proper planning of the borrower is one of the reason for NPA
Answer
Out of 70 respondent 35 were fully satisfied 5 were not satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 19
fully satisfied(35)70
partially satisfied(10)20
not satisfied(5)10
Conclusion
Most of the respondent feels that the borrowers borrow money from the bank without any proper planning which is one of the most important reason for NPA
Question number 11
Is heavy borrowing also contribute to NPA
Answer
Out of 50 respondent 25 respondent were fully satisfied 12 were partially satisfied 8 were not satisfied were as 5 were fully dissatisfied
Chart no 110
50
24
16
10
fully satisfied(25) partially satisfied(12) not satisfied(8) fully dissatisfied(5)
Question number 12
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Answer
As per the response of the officials 20 were fully satisfied 66were partially satisfied 4 were not satisfied with it were as 10 respondent were fully dissatisfied
Chart no 111
fully satisfied(10)20
partially satisfied(33)66
not satisfied(2)4
fullydissatisfied(5)10
Conclusion
As per the response given by the officials most of the officials were partially satisfied that wrong selection of borrower also contribute to NPA which means that selection process carried out by the bank is not appropriate or there is some difficulties in implementing them
Question number 13
Do you think that poor credit appraisal also contribute to NPA
Answer
Out of 50 respondent 5 were fully satisfied 10 were fully satisfied 30 were not satisfied were as only 5 were fully dissatisfied
Chart no 112
fully satisfied(5)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 14
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Answer
Out of 50 responses 3 were fully satisfied 15 were partially satisfied 25 were not satisfied where as 7 were full dissatisfied
Chart no 113
fully satisfied(3)partiallt satisfied(15)not satisfied(25)fully dissatisfied(7)
Conclusion
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not contribute to NPA This means that the attitude of bank toward the borrower is not inflexible
Question number 15
Do you think that system over load is also one of the causes of NPA
Answer
Out of 50 respondent 28 were fully satisfied 12 were partially satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 114
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
WORK PLACE SBI Hazaribag
CONTACT NO 9931833473(personal) 9771458627(official)
EMAIL ID rajeshkjhasbicoin
SBI HAZARIBAG BRANCH PROFILE
BRANCH INFORMATION
Date of opening 17-10-55
Branch code 00090
Migration date 14-12-2006
Circle Patna
Network 2
Module name Dhanbad
Branch type Regular branch
MICR code 825002002
License date 17-10-1954
Controllers Email ID agm4zoransbiciin
COMMUNICATION ADDRESS
Address 1 State bank of India
Address 2 Ravindra path
Address 3 NH-33
City Hazaribag
Pin 825301
BRANCH MANAGER
Name Shrwan Kumar Singh
Designation Chief Manager
Contact no 9431140712
Email shrwansinghsbicoin
STAFF STRENGTH
Officers 15
Assistants 30
Messengers 12
Guards 03
ACCOUNTS
Total no of ac - 60720
SB ac ndash 46133
CA ac - 510
Advances ndash 7247 Lakhs
Deposits ndash 91408 Lakhs
Total no of ATMrsquoS ndash 08
NATURE OF THE PROJECT
Xpress credit is a form of personal loan devised to provide instant credit support to person in need It caters mainly salaried person who have their salary ac with the bank The loan is a very good source of increasing retail loan portfolio but also have inherent risk It is a clear loan without any security and hence attracts more provisioning also unexpected events like death of borrower creates problem of recovery Sometimes employers shift their salary to other bank intentionally to avoid repayment and sometime it is difficult to track their transfer and posting
Despite all positive factors of continuous income and benefit of recovery through department the bank is facing the problem of high NPA in Xpress credit
The study is an endeavor to search the cause of acrsquos turning into NPA analyzing the efforts of the bank to recover the dues and to suggest the measures to contain the NPA to minimum or to zero level
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the npa
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
COMPANY PROFILE OF SBI
The evolution of sbi can be traced back to the first decade of the 19th century It began with the
establishment of bank of culcutta in cuicutta on 2nd july 1806 The bank was redesined as the bank of
bangal three year later on 2nd january 1809 It was the first ever joint company of british india
established under the sponsorship of govt of bangal Subsiquently the bank of madras and bank of
bombay follwed the bank of bangal These banks were amalgamated to form imperial bank on 27th
jan 1921
An important turning point in the history of SBI is the launch of 1st five year plan of independence
india in 1951 The plan aimed to serving the indian economy in general and the rural sector of the
countryin particular There for in order to serve the economy as a whole and the rural sector in
particular all india rural credit survey committee recommended the formation of state ndash partnered
and state ndash sponsored bank An act was passed in the parliament of india in may 1955 As a result the
sbi was established on 1st july 1955this results in making SBI more powerful as much as quarter of
resourses of indian banking system was controlled by state later on state bank of india (subsidiary
banks) act was pessedin 1959 This act enabled the sbi to make the 8 state associated bank as its
subsidiaries
BRANCHES
The corporate centre of SBI is located in Mumbai In order to cater to different function There is several other
establishments in and outside Mumbai apart from corporate center The bank boasts of having as many as 14
local head office and 57 zonal offices located as major cities throughout India It is recorded that SBI has
more than 10000 branches will cater to its customer throughout India
ATM
SBI provides easy access to money to its customers through more than 90000 ATMs in India The
bank also facilitates the free transaction of money at ATMs of state bank group You may also
transect money through SBI commercial and international bank ltd by using the state bank ATM
CUM DEBIT CARD It the only banking company to open its ATM in region of kargil
Source SBIcoin
Xpress credit
INTRODUCTION-
The Xpress Credit Scheme was formulated in April 2004 in the form of pre-approved loan to
employees of leading PSUs and Government organizations At present the scheme is open to
Employees of government semi-government profit making PSUs Educational Institutions of
national repute and companies of good standing (based on their CRA rating) The scheme is built
around the concept of check ndash off (the process by which the salary disbursing officer undertakes to
deduct loan installments from the salary of the borrower and remits the same to the Bank for credit
of the loan account) Xpress Credit Loans may also be sanctioned in those cases where the borrower
gives sufficient PDCs (Post Dated Cheques) for entire tenure of the loan
Source Xpress credit circular
PURPOSE
The loan under the scheme is granted for any legitimate personal purpose (eg expenses for
domestic or foreign travel medical treatment of self or a family member meeting any financial
liability such as marriage of sondaughter defraying educational expenses of wards meeting
margins for purchase of assets etc)
Source Xpress credit circular
ELIGIBILITY
1 EMPLOYERS
Central and state Government
Quasi-Government
Profit making PSUs
Educational Institutions of National Repute
Companies with a CRA rating of SB1 to SB5
Companies with a CRA rating of SB6 and SB7 are also eligible if it satisfies take over norms
2 EMPLOYEES
Permanent employees with a minimum 1 yearrsquos length of service
He should have sufficient cash flows to repay the loan from salary as evidenced by 6 monthsrsquo
salary slipsincome tax returns of 2 years
He should provide proof of residence and proof of identity to satisfy KYC norms
He should produce 6 months satisfactory statement of bank account (at any bank)
Proof of Employment in the eligible company
Source Xpress credit circular
MINIMUM NET MONTHLY INCOME
The minimum Net Monthly Income (NMI) of the employee should beRs5000- It can
Be lowered to Rs3000- subject to the condition that the salary accounts of the entire enterprise are
with us The Branch will ensure to obtain an Undertaking from the borrower that there is no other
deduction from hisher salary which is not reflected in the salary slip [As per Annexure ndash (B) ndash (v)]
LOAN AMOUNT
a) Minimum Rs24000=
b) Maximum 24 Months NMI with a ceiling of Rs1500 lacs
TYPE OF LOAN
LoanD Term demand Loan (NO OVERDRAFT)
REPAYMENT PERIOD
Maximum 60 months
EMI NMI le 50
REVIEW
Review of loan will be done yearly
RENEWAL
Renewal of loans will be allowed after 24 months
CHECK OFF
The process by which the salary disbursing officer under takes to deduct the loan
installments from the salary of the borrower and remits the same to the Bank for credit to the loan
account
Or
The employer pays the borrowerrsquos salary into his SavingsCurrent Account with our Bank
The borrower gives an irrevocable Standing Instruction (SI) For recovery of the loan installments
from his aforesaid account with the SI being synchronized with the date of credit of salary in the
borrowerrsquos SavingsCurrent Account
AND
The employer undertakes to inform the Bank if and when there is a severance due to borrowerrsquos
transfer resignation retirement etc[ Branch will ensure to obtain the undertaking from the employer
and employee as per Annexure ndash B (I) B (ii) II or B (iii) ]
Source Xpress credit circular
CATEGORY I
FULL CHECK OFF
As given under the head CHECKOFF
AND
Undertaking from the employer to obtain a NOC from the Bank before settling the dues of the
borrower on transfer resignation retirement etc [As per Annexure ndash B (IV)]
This stipulation can be waived by the sanctioning authority incase of employees of Central State
Government PSUs Universities and Reputed Colleges In case of other employers the CGM of the
Circle has been permitted to waive the stipulation But in no case this can be waived for IT sector
employees
CATEGORY II
PARTIAL CHECK OFF
As given under the head CHECKOFF
CATEGORY III
WITH NO CHECK OFF
The employer pays the borrowerrsquos salary into his SavingsCurrent Account with our Bank
The borrower gives an irrevocable Standing Instruction (SI) for
recovery of the loan installments from his aforesaid account twitch the SI being synchronized with
the date of credit of salary in the borrowerrsquos SavingsCurrent Account
OR
Conditions as given under the head CHECKOFF is not fulfilled but the borrower provides monthly
PDCs (Post Dated Cheques) for entire tenure of the loan provided eligibility criteria are fulfilled
(Guidelines on Post Dated cheques is annexed as per Annexure A)
INTEREST RATE
The Interest rate is based on the category of Check off available
Category I
5 above the base rate ie - 970 +5 =1470 ( currently 1470 pa)
Category II
7 above the base rate (currently 1670 pa)
Note The GM of the Network is vested with powers to extend the Category II rate to a Category III
borrower only in case of employees of SB1 to SB5 rated companies who maintain their salary
accounts with us The Category III employees who do not maintain their salary accounts with us but
provide PDCs for the loan should be charged the card rate applicable to Category III and no
deviation should be permitted by Circle GMs
PENAL INTEREST
Penal interest should not be charged for loans up to Rs25000For Loans above Rs25000- if the
irregularity exceeds EMI or installment amount for a period of one month then penal interest would
be charged 2 pa(over and above the applicable interest
rate) on the overdue amount for the period of default If part installment or part EMI remains
overdue then penal interest should not be levied
This provision has been made to avoid application of penal interest on Personal Segment Loan
accounts where EMIs stipulated or installments are being paid regularly by the borrowers
Source Xpress credit circular
SECURITY
The loan is clean in nature and no security is required
PROCESSING FEE
11 of the loan amount including tax
PRE-SANCTION PROCESS
The following documents will be obtained before sanction-
I Application cum appraisal Form With a photograph of the borrower duly attested by the
authorized official
II It is proposed to put in place an arrangement for verification of the address of the borrower by an
outside agency A report duly signed by the verification agency (in places where an arrangement is
in place) or by our officerstaff in other places (where verification agency approved by Corporate
Centre is not available) should be complied based on the following verifications
I Verification of the borrowerrsquos residence address as given in the loan application
by actually visiting the residence of the borrower
II Verification of the borrowerrsquos office address as given in the loan application by
actually visiting the office of the borrower
Source Xpress credit circular
III Verification of the borrowerrsquos residence telephone number as given in the loan
application by actually calling the residence telephone number of the borrower
IV Verification of the borrowerrsquos office telephone number as given in the loan
Application by actually calling the office telephone number of the Borrower
V Verification of the IT return of the Borrower with IT department through a
person approved by the Regional OfficeZonal Office where feasible Where IT
return cannot be verified by the Bank statement of account of the borrower may
be scrutinized to verified income flows
Where the verification is not outsourced the Branch staff
Must do the verification and the report should be added with the loan documents
Flow chart of loan procedure of retail loan
Chart no 01
Disagree
NON PEFORMING ASSETS (NPA) ndash CONCEPT
The three letters ldquoNPArdquostrike terror in banking sector and business circle todayNPA is the short
Form of ldquoNon performing Assetsrdquo
Enquiry about loan
Agreeprovided with check list and
application
submission of documents and application dully
filled up
Documents taken
verification of application and
documebtsCIBIL report
Processing of loan
Sangtion of loan
Document
Control Disbursal of loan
phasewise lumpsum
In banking NPA are loans given to doubtful customers who may or may not repay the
loan on time There are two types of assets viz performing and non performing Performing loans
are standard loans on which both the principle and interest are secured and their return is guaranteed
NPA means the debt which is given by the bank is unable to recover is called
nonperforming assets A NPA account in the books of accounts is an asset as it indicates the amount
received from the defaulters It means if any bank gives loan and is not paid by the customers till 90
days than that account is called as NPA account
DEFINITION
An asset including leased assets becomes nonperforming when it ceases to generate income
for the bank
A NPA was defined as a credit facility in respect of which the interest or installment
of principle as remained ldquopast duerdquo for specific period of time
Source googlecoin
The specific period was reduced in a phased manner as under
wef ndash 31031993 four quarters
wef ndash 31 031994 three quarters
wef - 31031995 two quarters
wef - 31032001 180 days
wef - 31032004 90 days from past due
90 days delinquency is not applicable to agriculture segment
With effect from march 31 2004 NPA shall be a loan or an advance where
1) Term loan interest installment of principle remain over due for 90 days
2) Cash creditover draft an account remain ldquoout of orderrdquo for a period of more than 90 days
3) Bills The bills remain over due for a period more than 90 days
4) Agriculture loan
a The loan has been granted for short duration crop installments of the principle
remain over due for two crop season beyond the due date
b If the loan has been granted for long duration crop installment of the principle
remain over due for one crop season beyond the due date
Source Rbiorgin
CLASSIFICATION OF LOANS
In India loans are classified on following basis
Performing assets
Loans where the interest and or principle not remain overdue for more then 90 days
Non-performing assets
Any loan repayment remains over due for more than 90 days is considered as NPA
According to the securitization and re construction of financial assets and enforcement of
security interest ordinance2002 ldquonon performing assetsrdquo(NPA) means an assets or ac of
borrower which has been classified by the bank as sub-standard doubtful or loss asset in
accordance with the guidelines relating to asset classification issued by RBI
Source googlecoin
ASSET - CLASSIFICATION
Assets can be categorized into four categories (a) standard (b) sub-standard
(c) doubtful (d) loss The last three categories are classified as npa based on the the period for
which the asset has remained non-performing and the realisability of the dues
Standard assets the loan ac which are regular and do not carry more than normal risk are
known as standard assets there could be ac which though have not become npa but are
irregular Such ac are called special mention ac
Sub- standard assets with effect from 3132005 a sub-standard assets is one which is
classified as NPA for a period not exceeding 12 months
Doubtful asset with effect from 3132005 an asset is to be classified as doubtful if it
remained npa or sub-standard for a period exceeding 12 months
Loss assets a loss asset is one where loss has been identified by the bank or internal and
external auditors or the RBI inspection but the amount as not been written off wholly In
other words such an asset is considered uncollectable and such little value that its
continuance as a bankable asset is not warranted although there may be some salvage or
recoverable value
NPA IDENTIFICATION NORMS
With effect from 31st march 2004 a loan or advance become npa when
a Interest or installment of the principle remains overdue for a period more then 90
days in respect of term loan
b The ac remain out of order for a period more 90days in respect of over draft cash
cash credit
c The bill remains overdue for a period more than 90 days in case of bills purchased
and discounted
d With effect from Sept 2004 loan granted for short duration crops will be treated as
NPA if the installment of principle or interest there on remains overdue for two crop
season and loan granted for long duration will be treated as NPA if the installment
remains overdue for one crop season
Out of order
An account will be treated as out as out of order if the outstanding balance remain
continuously in excess of the sanctioned limitdrawing power In cases where the
outstanding balance in the principle operating ac is less than the sanctioned limit but
there are no credit continuously for 90 days as on the date of balance sheet or the
credit are not enough to cover the interest debited during the same period
Overdue
An amount due to the bank under any credit facility is overdue it is not paid on the due
date fixed by the bank
The date of npa will be actual date on which sippage occurred as mentioned below
For term and demand loan ac
The date on which the installment of the principle have
remaine overdue for a period more then 90 days
For over draft and cash credit ac
The date on which the ac completed period of more than 90
days of being continuously out of order
Source wwwRBI Org in
PROVISING NORMS
There is time lag between an ac becoming doubtful for recovery the realization of security and
erosion over a loan period of time in its value So RBI directives now requiresthe banks to make
provisions in their balance sheet for all non- standard loan asset Provisioning is made on all types of
assets ie Standard sub-standard doubtful and loss assets
1 Standard assets RBI vides its circular dated 151108 revised the provisioning requirements
For all type of standard assets it has been reduced to a uniform level of 040of outstanding
at global basis except in the case of direct advance to agriculture and SME sector which
shall continue to attract a provisioning of 025 The provision toward standard assets need
not to be netted from gross advances but shown separately as ldquo contigent provisionsrdquo against
standard assets under other liquidities and provisions others in schedule 5 of the balance
sheet
2 Sub-standard assets- In respect of sub-standard assets the rate of provision is 10 of
outstanding balance without considering ECGC guarantee cover or securities available
However if the loan was unsecured from the begining there would be additional provision of
10 ie total provision would be 20 of the outstanding balance Unsecured exposure is
defined as an exposure where the realizable value of the security as assessed by the
bankreserve banks inspecting officers is not more than 10 ab-intio of the outstanding
exposure
3 Doubtful assets In case of doubtful assets while making provision realizable value of
security is to be considered 100 provision is made for unsecured portion In case of
secured portion the rate of provision depend on age of doubtful assets as under
Age of doubtful assets Provision as of secured portion
Doubtful up to 1 year D1 20 of RVS( realizable value of security)
Doubtful for more than 1 year D2 30 of RVS
Doubtful for more than 3 years D2 100 of RVS
Thus if an ac is doubtful for more than 3 years than 100 of the provision is to be made
both from secured and unsecured portion If an advance has been guaranteed by DICGC
CGFTECGC and is doubtful than provision on secured portion will be as in other cases but
provision on unsecured portion will be made after deducting the claim value
4 LOSS ASSET 100 of the outstanding amount while making provision on NPAs amount
lying in suspense ac and derecognized interest should be deducted from gross advance and
provision be made on balance amount
5 OVERALL PROVISION With a view to improving the improving the provisioning cover
and enhancing the soundness of the individual banks RBI has proposed in oct- 09 policy that
bank should augment their provisions and ensure that their total provisioning coverage ratio
including floating provisions is not less than 70
Source wwwRBIorgin
IMPACTEFFECT OF NPA UPON BANKS
A strong banking sector is important for flourishing economy The failure of banking sector
may have an adverse impact on other sector NPA are one of the major concerns of sector
banks is increasing result in nonperforming assets The NPA impact drastically to the
working of banks The efficiency of bank not always reflected by the size of its balance sheet
but by the level of return on its assetsNPA do not generate interest income for the banks but
the same time banks are required to make provisions for such NPAs from their current
profits
They erode current profits through provisioning requirement
They result in reduced interest income
They require higher provisioning requirements effecting profits and accretion to capital
Adverse impact on capital adequacy ratio
Roe and Roa goes down because NPA do not earn
Banks rating gets effect
Banks cost of raising funds goes up
Bad effect on goodwill
Bad effect on equity value
EARLY SYMPTOMS BY WHICH ONE CAN RECOGNIZE A PERFORMING
ASSETS TURNING TO A NON PERFORMING ASSET
Four categories of early symptoms
1) FINANCIAL
(a) Non- payment of very first installment
(b) Bouncing of cheque due to insufficient balance in the ac
(c) Irregularity in installment
(d) Irregularity of operations in ac
(e) Unpaid overdue bill
(f) Declining current ratio
2) OPERATIONAL AND PHYSICAL
(a) If information is received that the borrower has either initiated the process of winding up or not doing the business
(b) Over-due receivable
(c) Stock statement not submitted on time
(d) External non-controllable factor like natural calamities in the city where the borrower lives
(e) Non- payment of salary
(3) ATTITUDNAL CHANGE
(a) Use for personal comfort stocks and shares by borrowers
(b) Avoidance of contact with bank
(c) Problem between partners
(4) OTHER
(a) Change in govt policies
(b) Death of the borrower
(c) Delay in salary
PREVENTIVE MEASUREMENT FOR NPA
Early recognition of the problem
Invariably by the time banks start their efforts to get involved
in a revival process its too late to retrieve the situation ndash both in terms of rehabilitation of the
project and the recovery of banks dues Identification of the weakness regardless of the fact
that it may not have become NPA is imperative Assessment of the potential of revival may
be done on the basis of a techno-economic viability study Restructuring should be attempted
where after an objective assessment of the promoterrsquos intention banks are convinced of a
turn around with in a scheduled facilitate winding upselling of units earlier so as to recover
whatever is possible through means before the security position becomes worse
Identifying borrowers with genuine intent
Identifying borrower with genuine intent from those who
are non-serious with commitment or stake in revival is a challenge confronting bankers Here
the role of front line officials at branch level is paramount as they are the ones who have
intelligent inputs with regard to promoters lsquo sincerity and capability to achieve turnaround
Based on this objective assessment bank should decide as quickly as possible whether it
would be worthwhile to commit additional finance
In this regard banks may consider having
ldquospecial investigationrdquo of all financial transaction or business transaction books of account
order to ascertain real factor that contributed to sickness of borrower Bank may have panel
of technical experts with proven expertise and task record of preparing techno-economic
study of the project of the borrowers
Borrowers having genuine problems due to temporary mismatch in find flow or sudden
requirement of additional fund may entertained at branch level for this purpose a special
limit to such type of cases should be decided This will obviate the need to route the
additional funding through the controlling officers in deserving cases and avert many
accounts sleeping into NPA category
Timeliness and adequacy of response
Longer the delay in response greater the enjury to the
account and the asset Time is a crucial element in any restructuring or rehabilitation activity
The response decided on the basis of techno- economic study and promoterrsquos commitment
has to be adequate in terms of extend of additional funding and relaxations etc under the
restructuring exercise The package of assistance may be flexible and bank may look at the
exit option
Focus on cash flow
While financing at the time of restructuring the banks may not be guided
by the conventional fund flow analysis only which could yield a potentially misleading
picture Appraisal for fresh credit requirement may be done by analyzing fond flow in
conjunction with the cash flow rather than only on the basis of fund flow
Source wwwAskcom
Management effectiveness
The general perception among the borrower is lack of finance that
leads to sickness and NPAs but this may not be the case all the time Management effectiveness
advance business condition is a very important aspect that affects a borrowing units fortunes A bank
may commit a multiple finance to an align unit only after basic viability of the enterprise also in the
context of quality of management is examined and confirmed It will be useful to have consultant
appointed as early as possible to examine this aspect A proper techno-economic viability study thus
become the basis on which any future action can be considered
Multiple financing
A) During the exercise for assessment of viability and restructuring a pragmatic and unified
approach by all the leading banks as also sharing of all relevant information on the
borrower would go a long way toward overall success of rehabilitation exercise given the
probability of successfailure
B) In some default cases Where the unit is still working The bank should make sure that it
captures the cash flow and insure that such cash are used for working capital purpose
Toward this end there should be a continuous flow of information among consortium
member A bank which is not a part of consortium may not be allowed to offer credit
facility to such defaulting clients Current account facility may also be denied at non-
consortium banks to such clients and violation may attract penal action The credit
information bureau of india (CIBIL) may be very useful for meaningful information
exchange on defaulting borrowers once the setup become fully operational
C) In a forum of lenders the priority of each lender will be different While one set of lender
may be willing to wait for longer time to recover its dues another lender may have a much
shorter timeframe in mind So it is possible that the letter categories of lenders may be
willing to exit even at a cost by a discounted settlement of the exposure There for any plan
for restructuringrehabilitation may takes into account
D) Corporate debt restructuring it has been institutionalized in 2001 to provide a timely and
transparent system for restructuring the corporate debt of RS 20 crores and above with the
banks on a voluntary basis and outside a legal framework Under this system bank are
greatly benefit in terms of restructuring of large standard accounts (potential NPAs) and
viable sub-standard account with multiple banking arrangement
NPA MANAGEMENT- RESOLUTION
Compromise settlement schemes
Restructuringrescheduling
Lok adalat
Corporate debt restructuring cell
Debt recovery Tribunals (DRT)
Proceeding under the code of civil procedure
Board of industrial and financial reconstruction
National company law Tribunal (NCLT)
Sale of NPA to other bank
Sale of NPA to ARCSC under securitization and reconstruction of financial assets for
enforcement of security interest Act 2000 (SRFAESI)
Liquidation
Source wwwRBIorgin
NPA MANAGEMENT IN INDIA
Formation of the credit information bureau (India) limited (CIBIL)
Release of willful defaulterrsquos listRBI also releases a list of borrowers with aggregate
outstanding of RS 1 crore and above against whom bank have filed suit for recovery of their
fund
Reporting of frauds to RBI
Norms of lenders labiality- framing of fair practices code with regard to lenders lability to
be followed by banks
Risk assessment and Risk management
RBI has advised banks to all cases of willful defaulters in case of 1 crore and above and
files suits in such cases
Responding quick mortality cases
Special mention accounts for early identification for bad debt loans and advances over due
for less than one or two quarters would come under this category However these accounts do
not need provisioning
INTERNATIONAL PRACTICES ON NPA MANAGEMENT
Subsequent to the Asian currency crisis which severely crippled the financial system In
addition to the above some of the more recent and aggressive step to NPAs have been taken
by Taiwan Taiwanese financial institution have been encouraged to merge and form bank
based AMCs through the recent introduction of financial holding company act and financial
institution Asian countries the magnitude of NPAs in Asian financial institution was brought
to light Driven by the need to proactively tackle the soaring NPAs level the respective govt
embarked upon a program of substantial reform This involves setting up processes for early
identification and resolution of NPAs The table below provides a cross country comparison
of approaches used for NPA resolution Mergers Act A long side the ministry of finance has
followed a carrot and strict policy of specifying the required NPA ratio for banks while also
providing flexibility in modes of NPA assets resolution and a conduct
ive regulatory and tax environment Deferred loss write-off provisions have been instituted to
provide breathing space for lenders to absorb NPA write-off While it is too early to
comment on success of NPA resolution process in Taiwan the early sign are encouraging
Detailed below are some key NPA management approaches adopted by banks in South East
Asian countries
1 Credit risk mitigation
2 Early warning systems
3 Assets management companies
Increasing willingness to sell NPAs to AMCs
Effective resolution strategy
Appointment of special administrators
4 Out of court restructuring
Source wwwgooglecom
DIFFICULTIES WITH NON PERFORMING ASSETS
I Owners do not receive a market return on their capital In the worst case if the bank
fails owner lose their assets
II Depositors do not receive a market return on savings In the worst case if the bank
fails depositors lose their assets or uninsured balance Banks also redistribute losses
to other borrowers by charging higher rate of interest
III Non-performing loans epitomize bad investors They misallocate credit from good
projects which do not receive funding to failed project
IV 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
shortage the shortage can jam payments across the country
b Illiquidity constraints banks in paying depositors eg cashing their paychecks
c Undercapitalized banks exceed the bank capital base
Lending by bank has been politicized It is common knowledge
that loans are given to various industrial houses on common consideration and
viability of project but on political consideration In normal circumstances banks
before extending any loan would make a thorough study of the actual need of the
party considered the prospect of the business in which it is engaged Since it is
not looked into many of the loans becomes NPA
REASONS F0R AN ACCOUNT BECOMING NPA
Those attribute to borrower
Failure to bring in required capital
Lack of proper planning
Unwanted expenses
Lack of expertise
Poor credit collection
Miss management
Heavy borrowing
Lack of knowledge regarding NPA
Willful defaulters
Death of the borrower
Those attribute to banks
Wrong selection of borrower
Poor credit appraisal
Unhelpful in supervision
Too inflexible attitude
System overload
Lack of motivation
Delay in sanction
Lack of trained staff
Lack of commitment to recovery
Lack of personal visit to the borrower office
Lack of personal visit to the borrowerrsquos residence
Other
Fast changing technology
Unhelpful attitude of govt
Increase in material cost
Government policies
Taxation law
Political hostility
INDIAN ECONOMY AND NPA
Undoubtedly the world economy has slowed down recession is at its peak globally stock markets
have tumbled and business itself getting hard to do The Indian economy has been much affected due
to high fiscal deficit poor infrastructure facilities sticky legal system cutting of exposures to
emerging market by FIIs etc
Further international rating agencies like standard and poor
have lowered Indiarsquos credit rating to sub- investment grade Such negative aspects have often
outweighed positive such as increasing for reserve and a manageable inflation rate
Under such situation I go without saying that banks are no exception
and are bound to face the heat of global down turn One would be surprise to know that banks and
financial institution in India holds non-performing assets worth Rs 1 10000 crores Bankers have
realized that unless the level of NPA is reduced drastically they will find it difficult to survive
The actual level of NPA in India is around $ 40 billion much higher than govt estimation of $16
billion This difference is largely due to the discrepancy in accounting the NPAs followed by India
and rest of the world The accounting norms of India are less stringent than those of the developed
economies The Indian banks also have the tendency to extend the past due Considering the GDP
India nearly $ 470 billion the NPA are 8 of the total GDP which was better than many Asian
countries The NPA of china was 45 of the GDP While Japan had NPAs of 25 of the GDP
The aggregate level of NPAs in Asia has increased from $ 25 billion in 2007 to
$ 34 billion on 2009 looking to such overall pictures of the market we can say that India is doing
well and the steps taken are looking favorable
Source googlecoin
DATA ANALYZING THE QUETIONNAIRE
Two set of questionnaire were prepared to collect the feedback One set of questionnaire was meant for branches and other set of questionnaire was meant for borrowers
The set of questionnaire were given to the branches under hazaribag (RBO) and collected the feedback of the bankers of P segment and the branch manager
The questionnaire prepared for branch contained 15 questions and the questionnaire prepared for borrower contains 10 questions
The data was collected from 50 bankers and the data analysis of the branch questionnaire is as follows
Question number 1
Does not require any data analysis and information was sought to know the business level of the branches for the purpose of whether particular branch is actively engaged in xpress credit portfolio
Question number 2
Do you think that the borrowers are aware about NPA
Answer
32 of the respondent feel that the borrowers are not aware about NPA and 18 respondents feel that borrowers are aware about NPA
Chart no 11
yes
no
0
5
10
15
20
25
30
35
1832 Column1
Conclusion
Majority of the bank officials feels that the borrowers are not aware about NPA
Question number 3
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Answer
Out of 32 respondent 22 respondents is fully satisfied that lack of knowledge among the borrower regarding NPA is one of the reason for NPA 08 respondent were partially satisfied with it and 02 respondent were not satisfied with it
Chart no 12
fully satisfied(22)69
partially satisfied(8)25
not satisfied(2)6
Sales
Conclusion
Majority of the borrowers feels that lack of knowledge among the borrower regarding NPA is one of the reasons for NPA
Question number 4 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Answer
Out of 50 respondent 30 of the respondent strongly satisfied that these external factors contribute to NPA 10 respondent were partially satisfied with it 5 were not satisfied where as 5 were fully dissatisfied with it
Chart no 13
6020
10
10
fully satisfied(30) partially satisfied(10) not satisfiec(5) fully desatisfied(5)
Conclusion
Most of the respondent thinks that external factrs like willful defaulter change in govt policy contribute to NPA
Question number 5
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Answer
Chart no 14
feedback
fully satisfied(20)partially satisfied(12)not satisfied(12)fully dissatisfied(6)
Conclusion
As per the response of the officials most of the officials feel that internal factors are also responsible for NPA
Question number 6
Do you think that inflation is one of the reasons for NPA
Answer
Out f 50 responses 22 were strongly satisfied 18 were partially satisfied 8 were not satisfied and 2 were fully dissatisfied
Chart no 15
fully satisfied(20)44
partially satisfied(18)36
not satisfied(5)10
fullt dissatisfied(5)10
Conclusion
Growing inflation increasing goods rate is also one of the reason for NPA
Question number 7
Do you think that lack of PSS is also contributed to NPA
Answer
Out of 50 responses 30 were fully satisfied with it 12 were partially satisfied and 8 were fully dissatisfied
Chart no 16
6024
16
Open
fully satisfied(30)Partially satisfied(12)not satisfied(0)fully dissatisfied(8)
Conclusion
Majority of the officiais feels that lack of PSS is one of the reason for NPA This means that the PSS carried out by the bank is not sufficient or not carried out properly
Question number 8
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Answer
Most of the respondent feels that increase in unwanted expenses of the borrwer ls contribute to NPA
Chart no 17
56
12
28
4
FULLY SATISFIED(28)PARTIALLY SATISFIED(6)NOT SATISFIED(14)FULLY DISSATISFIED(2)
Conclusion
As per response of the officials increasing inflation have an adverse effect on the financial sector its working performance as well as on NPA
Question number 9
Do you think that high rate of interest under Xpress credit also contributes to NPA
Answer
Out of 50 respondent 25 respondent were not satisfied 10 were partially satisfied 10 were strongly dissatisfied where as only 5 out of 50 were fully satisfied with it
Chart no 18
strongly satisfied(5)partially satisfied(10)not satisfied(25)fully dissatisfied(10)
Conclusion
Most of the respondents are not satisfied with it They feel that the rate of interest charged by SBI under Xpress credit is not high and it will not contribute to NPS
Question number 10
Do you think that lack of proper planning of the borrower is one of the reason for NPA
Answer
Out of 70 respondent 35 were fully satisfied 5 were not satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 19
fully satisfied(35)70
partially satisfied(10)20
not satisfied(5)10
Conclusion
Most of the respondent feels that the borrowers borrow money from the bank without any proper planning which is one of the most important reason for NPA
Question number 11
Is heavy borrowing also contribute to NPA
Answer
Out of 50 respondent 25 respondent were fully satisfied 12 were partially satisfied 8 were not satisfied were as 5 were fully dissatisfied
Chart no 110
50
24
16
10
fully satisfied(25) partially satisfied(12) not satisfied(8) fully dissatisfied(5)
Question number 12
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Answer
As per the response of the officials 20 were fully satisfied 66were partially satisfied 4 were not satisfied with it were as 10 respondent were fully dissatisfied
Chart no 111
fully satisfied(10)20
partially satisfied(33)66
not satisfied(2)4
fullydissatisfied(5)10
Conclusion
As per the response given by the officials most of the officials were partially satisfied that wrong selection of borrower also contribute to NPA which means that selection process carried out by the bank is not appropriate or there is some difficulties in implementing them
Question number 13
Do you think that poor credit appraisal also contribute to NPA
Answer
Out of 50 respondent 5 were fully satisfied 10 were fully satisfied 30 were not satisfied were as only 5 were fully dissatisfied
Chart no 112
fully satisfied(5)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 14
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Answer
Out of 50 responses 3 were fully satisfied 15 were partially satisfied 25 were not satisfied where as 7 were full dissatisfied
Chart no 113
fully satisfied(3)partiallt satisfied(15)not satisfied(25)fully dissatisfied(7)
Conclusion
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not contribute to NPA This means that the attitude of bank toward the borrower is not inflexible
Question number 15
Do you think that system over load is also one of the causes of NPA
Answer
Out of 50 respondent 28 were fully satisfied 12 were partially satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 114
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Module name Dhanbad
Branch type Regular branch
MICR code 825002002
License date 17-10-1954
Controllers Email ID agm4zoransbiciin
COMMUNICATION ADDRESS
Address 1 State bank of India
Address 2 Ravindra path
Address 3 NH-33
City Hazaribag
Pin 825301
BRANCH MANAGER
Name Shrwan Kumar Singh
Designation Chief Manager
Contact no 9431140712
Email shrwansinghsbicoin
STAFF STRENGTH
Officers 15
Assistants 30
Messengers 12
Guards 03
ACCOUNTS
Total no of ac - 60720
SB ac ndash 46133
CA ac - 510
Advances ndash 7247 Lakhs
Deposits ndash 91408 Lakhs
Total no of ATMrsquoS ndash 08
NATURE OF THE PROJECT
Xpress credit is a form of personal loan devised to provide instant credit support to person in need It caters mainly salaried person who have their salary ac with the bank The loan is a very good source of increasing retail loan portfolio but also have inherent risk It is a clear loan without any security and hence attracts more provisioning also unexpected events like death of borrower creates problem of recovery Sometimes employers shift their salary to other bank intentionally to avoid repayment and sometime it is difficult to track their transfer and posting
Despite all positive factors of continuous income and benefit of recovery through department the bank is facing the problem of high NPA in Xpress credit
The study is an endeavor to search the cause of acrsquos turning into NPA analyzing the efforts of the bank to recover the dues and to suggest the measures to contain the NPA to minimum or to zero level
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the npa
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
COMPANY PROFILE OF SBI
The evolution of sbi can be traced back to the first decade of the 19th century It began with the
establishment of bank of culcutta in cuicutta on 2nd july 1806 The bank was redesined as the bank of
bangal three year later on 2nd january 1809 It was the first ever joint company of british india
established under the sponsorship of govt of bangal Subsiquently the bank of madras and bank of
bombay follwed the bank of bangal These banks were amalgamated to form imperial bank on 27th
jan 1921
An important turning point in the history of SBI is the launch of 1st five year plan of independence
india in 1951 The plan aimed to serving the indian economy in general and the rural sector of the
countryin particular There for in order to serve the economy as a whole and the rural sector in
particular all india rural credit survey committee recommended the formation of state ndash partnered
and state ndash sponsored bank An act was passed in the parliament of india in may 1955 As a result the
sbi was established on 1st july 1955this results in making SBI more powerful as much as quarter of
resourses of indian banking system was controlled by state later on state bank of india (subsidiary
banks) act was pessedin 1959 This act enabled the sbi to make the 8 state associated bank as its
subsidiaries
BRANCHES
The corporate centre of SBI is located in Mumbai In order to cater to different function There is several other
establishments in and outside Mumbai apart from corporate center The bank boasts of having as many as 14
local head office and 57 zonal offices located as major cities throughout India It is recorded that SBI has
more than 10000 branches will cater to its customer throughout India
ATM
SBI provides easy access to money to its customers through more than 90000 ATMs in India The
bank also facilitates the free transaction of money at ATMs of state bank group You may also
transect money through SBI commercial and international bank ltd by using the state bank ATM
CUM DEBIT CARD It the only banking company to open its ATM in region of kargil
Source SBIcoin
Xpress credit
INTRODUCTION-
The Xpress Credit Scheme was formulated in April 2004 in the form of pre-approved loan to
employees of leading PSUs and Government organizations At present the scheme is open to
Employees of government semi-government profit making PSUs Educational Institutions of
national repute and companies of good standing (based on their CRA rating) The scheme is built
around the concept of check ndash off (the process by which the salary disbursing officer undertakes to
deduct loan installments from the salary of the borrower and remits the same to the Bank for credit
of the loan account) Xpress Credit Loans may also be sanctioned in those cases where the borrower
gives sufficient PDCs (Post Dated Cheques) for entire tenure of the loan
Source Xpress credit circular
PURPOSE
The loan under the scheme is granted for any legitimate personal purpose (eg expenses for
domestic or foreign travel medical treatment of self or a family member meeting any financial
liability such as marriage of sondaughter defraying educational expenses of wards meeting
margins for purchase of assets etc)
Source Xpress credit circular
ELIGIBILITY
1 EMPLOYERS
Central and state Government
Quasi-Government
Profit making PSUs
Educational Institutions of National Repute
Companies with a CRA rating of SB1 to SB5
Companies with a CRA rating of SB6 and SB7 are also eligible if it satisfies take over norms
2 EMPLOYEES
Permanent employees with a minimum 1 yearrsquos length of service
He should have sufficient cash flows to repay the loan from salary as evidenced by 6 monthsrsquo
salary slipsincome tax returns of 2 years
He should provide proof of residence and proof of identity to satisfy KYC norms
He should produce 6 months satisfactory statement of bank account (at any bank)
Proof of Employment in the eligible company
Source Xpress credit circular
MINIMUM NET MONTHLY INCOME
The minimum Net Monthly Income (NMI) of the employee should beRs5000- It can
Be lowered to Rs3000- subject to the condition that the salary accounts of the entire enterprise are
with us The Branch will ensure to obtain an Undertaking from the borrower that there is no other
deduction from hisher salary which is not reflected in the salary slip [As per Annexure ndash (B) ndash (v)]
LOAN AMOUNT
a) Minimum Rs24000=
b) Maximum 24 Months NMI with a ceiling of Rs1500 lacs
TYPE OF LOAN
LoanD Term demand Loan (NO OVERDRAFT)
REPAYMENT PERIOD
Maximum 60 months
EMI NMI le 50
REVIEW
Review of loan will be done yearly
RENEWAL
Renewal of loans will be allowed after 24 months
CHECK OFF
The process by which the salary disbursing officer under takes to deduct the loan
installments from the salary of the borrower and remits the same to the Bank for credit to the loan
account
Or
The employer pays the borrowerrsquos salary into his SavingsCurrent Account with our Bank
The borrower gives an irrevocable Standing Instruction (SI) For recovery of the loan installments
from his aforesaid account with the SI being synchronized with the date of credit of salary in the
borrowerrsquos SavingsCurrent Account
AND
The employer undertakes to inform the Bank if and when there is a severance due to borrowerrsquos
transfer resignation retirement etc[ Branch will ensure to obtain the undertaking from the employer
and employee as per Annexure ndash B (I) B (ii) II or B (iii) ]
Source Xpress credit circular
CATEGORY I
FULL CHECK OFF
As given under the head CHECKOFF
AND
Undertaking from the employer to obtain a NOC from the Bank before settling the dues of the
borrower on transfer resignation retirement etc [As per Annexure ndash B (IV)]
This stipulation can be waived by the sanctioning authority incase of employees of Central State
Government PSUs Universities and Reputed Colleges In case of other employers the CGM of the
Circle has been permitted to waive the stipulation But in no case this can be waived for IT sector
employees
CATEGORY II
PARTIAL CHECK OFF
As given under the head CHECKOFF
CATEGORY III
WITH NO CHECK OFF
The employer pays the borrowerrsquos salary into his SavingsCurrent Account with our Bank
The borrower gives an irrevocable Standing Instruction (SI) for
recovery of the loan installments from his aforesaid account twitch the SI being synchronized with
the date of credit of salary in the borrowerrsquos SavingsCurrent Account
OR
Conditions as given under the head CHECKOFF is not fulfilled but the borrower provides monthly
PDCs (Post Dated Cheques) for entire tenure of the loan provided eligibility criteria are fulfilled
(Guidelines on Post Dated cheques is annexed as per Annexure A)
INTEREST RATE
The Interest rate is based on the category of Check off available
Category I
5 above the base rate ie - 970 +5 =1470 ( currently 1470 pa)
Category II
7 above the base rate (currently 1670 pa)
Note The GM of the Network is vested with powers to extend the Category II rate to a Category III
borrower only in case of employees of SB1 to SB5 rated companies who maintain their salary
accounts with us The Category III employees who do not maintain their salary accounts with us but
provide PDCs for the loan should be charged the card rate applicable to Category III and no
deviation should be permitted by Circle GMs
PENAL INTEREST
Penal interest should not be charged for loans up to Rs25000For Loans above Rs25000- if the
irregularity exceeds EMI or installment amount for a period of one month then penal interest would
be charged 2 pa(over and above the applicable interest
rate) on the overdue amount for the period of default If part installment or part EMI remains
overdue then penal interest should not be levied
This provision has been made to avoid application of penal interest on Personal Segment Loan
accounts where EMIs stipulated or installments are being paid regularly by the borrowers
Source Xpress credit circular
SECURITY
The loan is clean in nature and no security is required
PROCESSING FEE
11 of the loan amount including tax
PRE-SANCTION PROCESS
The following documents will be obtained before sanction-
I Application cum appraisal Form With a photograph of the borrower duly attested by the
authorized official
II It is proposed to put in place an arrangement for verification of the address of the borrower by an
outside agency A report duly signed by the verification agency (in places where an arrangement is
in place) or by our officerstaff in other places (where verification agency approved by Corporate
Centre is not available) should be complied based on the following verifications
I Verification of the borrowerrsquos residence address as given in the loan application
by actually visiting the residence of the borrower
II Verification of the borrowerrsquos office address as given in the loan application by
actually visiting the office of the borrower
Source Xpress credit circular
III Verification of the borrowerrsquos residence telephone number as given in the loan
application by actually calling the residence telephone number of the borrower
IV Verification of the borrowerrsquos office telephone number as given in the loan
Application by actually calling the office telephone number of the Borrower
V Verification of the IT return of the Borrower with IT department through a
person approved by the Regional OfficeZonal Office where feasible Where IT
return cannot be verified by the Bank statement of account of the borrower may
be scrutinized to verified income flows
Where the verification is not outsourced the Branch staff
Must do the verification and the report should be added with the loan documents
Flow chart of loan procedure of retail loan
Chart no 01
Disagree
NON PEFORMING ASSETS (NPA) ndash CONCEPT
The three letters ldquoNPArdquostrike terror in banking sector and business circle todayNPA is the short
Form of ldquoNon performing Assetsrdquo
Enquiry about loan
Agreeprovided with check list and
application
submission of documents and application dully
filled up
Documents taken
verification of application and
documebtsCIBIL report
Processing of loan
Sangtion of loan
Document
Control Disbursal of loan
phasewise lumpsum
In banking NPA are loans given to doubtful customers who may or may not repay the
loan on time There are two types of assets viz performing and non performing Performing loans
are standard loans on which both the principle and interest are secured and their return is guaranteed
NPA means the debt which is given by the bank is unable to recover is called
nonperforming assets A NPA account in the books of accounts is an asset as it indicates the amount
received from the defaulters It means if any bank gives loan and is not paid by the customers till 90
days than that account is called as NPA account
DEFINITION
An asset including leased assets becomes nonperforming when it ceases to generate income
for the bank
A NPA was defined as a credit facility in respect of which the interest or installment
of principle as remained ldquopast duerdquo for specific period of time
Source googlecoin
The specific period was reduced in a phased manner as under
wef ndash 31031993 four quarters
wef ndash 31 031994 three quarters
wef - 31031995 two quarters
wef - 31032001 180 days
wef - 31032004 90 days from past due
90 days delinquency is not applicable to agriculture segment
With effect from march 31 2004 NPA shall be a loan or an advance where
1) Term loan interest installment of principle remain over due for 90 days
2) Cash creditover draft an account remain ldquoout of orderrdquo for a period of more than 90 days
3) Bills The bills remain over due for a period more than 90 days
4) Agriculture loan
a The loan has been granted for short duration crop installments of the principle
remain over due for two crop season beyond the due date
b If the loan has been granted for long duration crop installment of the principle
remain over due for one crop season beyond the due date
Source Rbiorgin
CLASSIFICATION OF LOANS
In India loans are classified on following basis
Performing assets
Loans where the interest and or principle not remain overdue for more then 90 days
Non-performing assets
Any loan repayment remains over due for more than 90 days is considered as NPA
According to the securitization and re construction of financial assets and enforcement of
security interest ordinance2002 ldquonon performing assetsrdquo(NPA) means an assets or ac of
borrower which has been classified by the bank as sub-standard doubtful or loss asset in
accordance with the guidelines relating to asset classification issued by RBI
Source googlecoin
ASSET - CLASSIFICATION
Assets can be categorized into four categories (a) standard (b) sub-standard
(c) doubtful (d) loss The last three categories are classified as npa based on the the period for
which the asset has remained non-performing and the realisability of the dues
Standard assets the loan ac which are regular and do not carry more than normal risk are
known as standard assets there could be ac which though have not become npa but are
irregular Such ac are called special mention ac
Sub- standard assets with effect from 3132005 a sub-standard assets is one which is
classified as NPA for a period not exceeding 12 months
Doubtful asset with effect from 3132005 an asset is to be classified as doubtful if it
remained npa or sub-standard for a period exceeding 12 months
Loss assets a loss asset is one where loss has been identified by the bank or internal and
external auditors or the RBI inspection but the amount as not been written off wholly In
other words such an asset is considered uncollectable and such little value that its
continuance as a bankable asset is not warranted although there may be some salvage or
recoverable value
NPA IDENTIFICATION NORMS
With effect from 31st march 2004 a loan or advance become npa when
a Interest or installment of the principle remains overdue for a period more then 90
days in respect of term loan
b The ac remain out of order for a period more 90days in respect of over draft cash
cash credit
c The bill remains overdue for a period more than 90 days in case of bills purchased
and discounted
d With effect from Sept 2004 loan granted for short duration crops will be treated as
NPA if the installment of principle or interest there on remains overdue for two crop
season and loan granted for long duration will be treated as NPA if the installment
remains overdue for one crop season
Out of order
An account will be treated as out as out of order if the outstanding balance remain
continuously in excess of the sanctioned limitdrawing power In cases where the
outstanding balance in the principle operating ac is less than the sanctioned limit but
there are no credit continuously for 90 days as on the date of balance sheet or the
credit are not enough to cover the interest debited during the same period
Overdue
An amount due to the bank under any credit facility is overdue it is not paid on the due
date fixed by the bank
The date of npa will be actual date on which sippage occurred as mentioned below
For term and demand loan ac
The date on which the installment of the principle have
remaine overdue for a period more then 90 days
For over draft and cash credit ac
The date on which the ac completed period of more than 90
days of being continuously out of order
Source wwwRBI Org in
PROVISING NORMS
There is time lag between an ac becoming doubtful for recovery the realization of security and
erosion over a loan period of time in its value So RBI directives now requiresthe banks to make
provisions in their balance sheet for all non- standard loan asset Provisioning is made on all types of
assets ie Standard sub-standard doubtful and loss assets
1 Standard assets RBI vides its circular dated 151108 revised the provisioning requirements
For all type of standard assets it has been reduced to a uniform level of 040of outstanding
at global basis except in the case of direct advance to agriculture and SME sector which
shall continue to attract a provisioning of 025 The provision toward standard assets need
not to be netted from gross advances but shown separately as ldquo contigent provisionsrdquo against
standard assets under other liquidities and provisions others in schedule 5 of the balance
sheet
2 Sub-standard assets- In respect of sub-standard assets the rate of provision is 10 of
outstanding balance without considering ECGC guarantee cover or securities available
However if the loan was unsecured from the begining there would be additional provision of
10 ie total provision would be 20 of the outstanding balance Unsecured exposure is
defined as an exposure where the realizable value of the security as assessed by the
bankreserve banks inspecting officers is not more than 10 ab-intio of the outstanding
exposure
3 Doubtful assets In case of doubtful assets while making provision realizable value of
security is to be considered 100 provision is made for unsecured portion In case of
secured portion the rate of provision depend on age of doubtful assets as under
Age of doubtful assets Provision as of secured portion
Doubtful up to 1 year D1 20 of RVS( realizable value of security)
Doubtful for more than 1 year D2 30 of RVS
Doubtful for more than 3 years D2 100 of RVS
Thus if an ac is doubtful for more than 3 years than 100 of the provision is to be made
both from secured and unsecured portion If an advance has been guaranteed by DICGC
CGFTECGC and is doubtful than provision on secured portion will be as in other cases but
provision on unsecured portion will be made after deducting the claim value
4 LOSS ASSET 100 of the outstanding amount while making provision on NPAs amount
lying in suspense ac and derecognized interest should be deducted from gross advance and
provision be made on balance amount
5 OVERALL PROVISION With a view to improving the improving the provisioning cover
and enhancing the soundness of the individual banks RBI has proposed in oct- 09 policy that
bank should augment their provisions and ensure that their total provisioning coverage ratio
including floating provisions is not less than 70
Source wwwRBIorgin
IMPACTEFFECT OF NPA UPON BANKS
A strong banking sector is important for flourishing economy The failure of banking sector
may have an adverse impact on other sector NPA are one of the major concerns of sector
banks is increasing result in nonperforming assets The NPA impact drastically to the
working of banks The efficiency of bank not always reflected by the size of its balance sheet
but by the level of return on its assetsNPA do not generate interest income for the banks but
the same time banks are required to make provisions for such NPAs from their current
profits
They erode current profits through provisioning requirement
They result in reduced interest income
They require higher provisioning requirements effecting profits and accretion to capital
Adverse impact on capital adequacy ratio
Roe and Roa goes down because NPA do not earn
Banks rating gets effect
Banks cost of raising funds goes up
Bad effect on goodwill
Bad effect on equity value
EARLY SYMPTOMS BY WHICH ONE CAN RECOGNIZE A PERFORMING
ASSETS TURNING TO A NON PERFORMING ASSET
Four categories of early symptoms
1) FINANCIAL
(a) Non- payment of very first installment
(b) Bouncing of cheque due to insufficient balance in the ac
(c) Irregularity in installment
(d) Irregularity of operations in ac
(e) Unpaid overdue bill
(f) Declining current ratio
2) OPERATIONAL AND PHYSICAL
(a) If information is received that the borrower has either initiated the process of winding up or not doing the business
(b) Over-due receivable
(c) Stock statement not submitted on time
(d) External non-controllable factor like natural calamities in the city where the borrower lives
(e) Non- payment of salary
(3) ATTITUDNAL CHANGE
(a) Use for personal comfort stocks and shares by borrowers
(b) Avoidance of contact with bank
(c) Problem between partners
(4) OTHER
(a) Change in govt policies
(b) Death of the borrower
(c) Delay in salary
PREVENTIVE MEASUREMENT FOR NPA
Early recognition of the problem
Invariably by the time banks start their efforts to get involved
in a revival process its too late to retrieve the situation ndash both in terms of rehabilitation of the
project and the recovery of banks dues Identification of the weakness regardless of the fact
that it may not have become NPA is imperative Assessment of the potential of revival may
be done on the basis of a techno-economic viability study Restructuring should be attempted
where after an objective assessment of the promoterrsquos intention banks are convinced of a
turn around with in a scheduled facilitate winding upselling of units earlier so as to recover
whatever is possible through means before the security position becomes worse
Identifying borrowers with genuine intent
Identifying borrower with genuine intent from those who
are non-serious with commitment or stake in revival is a challenge confronting bankers Here
the role of front line officials at branch level is paramount as they are the ones who have
intelligent inputs with regard to promoters lsquo sincerity and capability to achieve turnaround
Based on this objective assessment bank should decide as quickly as possible whether it
would be worthwhile to commit additional finance
In this regard banks may consider having
ldquospecial investigationrdquo of all financial transaction or business transaction books of account
order to ascertain real factor that contributed to sickness of borrower Bank may have panel
of technical experts with proven expertise and task record of preparing techno-economic
study of the project of the borrowers
Borrowers having genuine problems due to temporary mismatch in find flow or sudden
requirement of additional fund may entertained at branch level for this purpose a special
limit to such type of cases should be decided This will obviate the need to route the
additional funding through the controlling officers in deserving cases and avert many
accounts sleeping into NPA category
Timeliness and adequacy of response
Longer the delay in response greater the enjury to the
account and the asset Time is a crucial element in any restructuring or rehabilitation activity
The response decided on the basis of techno- economic study and promoterrsquos commitment
has to be adequate in terms of extend of additional funding and relaxations etc under the
restructuring exercise The package of assistance may be flexible and bank may look at the
exit option
Focus on cash flow
While financing at the time of restructuring the banks may not be guided
by the conventional fund flow analysis only which could yield a potentially misleading
picture Appraisal for fresh credit requirement may be done by analyzing fond flow in
conjunction with the cash flow rather than only on the basis of fund flow
Source wwwAskcom
Management effectiveness
The general perception among the borrower is lack of finance that
leads to sickness and NPAs but this may not be the case all the time Management effectiveness
advance business condition is a very important aspect that affects a borrowing units fortunes A bank
may commit a multiple finance to an align unit only after basic viability of the enterprise also in the
context of quality of management is examined and confirmed It will be useful to have consultant
appointed as early as possible to examine this aspect A proper techno-economic viability study thus
become the basis on which any future action can be considered
Multiple financing
A) During the exercise for assessment of viability and restructuring a pragmatic and unified
approach by all the leading banks as also sharing of all relevant information on the
borrower would go a long way toward overall success of rehabilitation exercise given the
probability of successfailure
B) In some default cases Where the unit is still working The bank should make sure that it
captures the cash flow and insure that such cash are used for working capital purpose
Toward this end there should be a continuous flow of information among consortium
member A bank which is not a part of consortium may not be allowed to offer credit
facility to such defaulting clients Current account facility may also be denied at non-
consortium banks to such clients and violation may attract penal action The credit
information bureau of india (CIBIL) may be very useful for meaningful information
exchange on defaulting borrowers once the setup become fully operational
C) In a forum of lenders the priority of each lender will be different While one set of lender
may be willing to wait for longer time to recover its dues another lender may have a much
shorter timeframe in mind So it is possible that the letter categories of lenders may be
willing to exit even at a cost by a discounted settlement of the exposure There for any plan
for restructuringrehabilitation may takes into account
D) Corporate debt restructuring it has been institutionalized in 2001 to provide a timely and
transparent system for restructuring the corporate debt of RS 20 crores and above with the
banks on a voluntary basis and outside a legal framework Under this system bank are
greatly benefit in terms of restructuring of large standard accounts (potential NPAs) and
viable sub-standard account with multiple banking arrangement
NPA MANAGEMENT- RESOLUTION
Compromise settlement schemes
Restructuringrescheduling
Lok adalat
Corporate debt restructuring cell
Debt recovery Tribunals (DRT)
Proceeding under the code of civil procedure
Board of industrial and financial reconstruction
National company law Tribunal (NCLT)
Sale of NPA to other bank
Sale of NPA to ARCSC under securitization and reconstruction of financial assets for
enforcement of security interest Act 2000 (SRFAESI)
Liquidation
Source wwwRBIorgin
NPA MANAGEMENT IN INDIA
Formation of the credit information bureau (India) limited (CIBIL)
Release of willful defaulterrsquos listRBI also releases a list of borrowers with aggregate
outstanding of RS 1 crore and above against whom bank have filed suit for recovery of their
fund
Reporting of frauds to RBI
Norms of lenders labiality- framing of fair practices code with regard to lenders lability to
be followed by banks
Risk assessment and Risk management
RBI has advised banks to all cases of willful defaulters in case of 1 crore and above and
files suits in such cases
Responding quick mortality cases
Special mention accounts for early identification for bad debt loans and advances over due
for less than one or two quarters would come under this category However these accounts do
not need provisioning
INTERNATIONAL PRACTICES ON NPA MANAGEMENT
Subsequent to the Asian currency crisis which severely crippled the financial system In
addition to the above some of the more recent and aggressive step to NPAs have been taken
by Taiwan Taiwanese financial institution have been encouraged to merge and form bank
based AMCs through the recent introduction of financial holding company act and financial
institution Asian countries the magnitude of NPAs in Asian financial institution was brought
to light Driven by the need to proactively tackle the soaring NPAs level the respective govt
embarked upon a program of substantial reform This involves setting up processes for early
identification and resolution of NPAs The table below provides a cross country comparison
of approaches used for NPA resolution Mergers Act A long side the ministry of finance has
followed a carrot and strict policy of specifying the required NPA ratio for banks while also
providing flexibility in modes of NPA assets resolution and a conduct
ive regulatory and tax environment Deferred loss write-off provisions have been instituted to
provide breathing space for lenders to absorb NPA write-off While it is too early to
comment on success of NPA resolution process in Taiwan the early sign are encouraging
Detailed below are some key NPA management approaches adopted by banks in South East
Asian countries
1 Credit risk mitigation
2 Early warning systems
3 Assets management companies
Increasing willingness to sell NPAs to AMCs
Effective resolution strategy
Appointment of special administrators
4 Out of court restructuring
Source wwwgooglecom
DIFFICULTIES WITH NON PERFORMING ASSETS
I Owners do not receive a market return on their capital In the worst case if the bank
fails owner lose their assets
II Depositors do not receive a market return on savings In the worst case if the bank
fails depositors lose their assets or uninsured balance Banks also redistribute losses
to other borrowers by charging higher rate of interest
III Non-performing loans epitomize bad investors They misallocate credit from good
projects which do not receive funding to failed project
IV 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
shortage the shortage can jam payments across the country
b Illiquidity constraints banks in paying depositors eg cashing their paychecks
c Undercapitalized banks exceed the bank capital base
Lending by bank has been politicized It is common knowledge
that loans are given to various industrial houses on common consideration and
viability of project but on political consideration In normal circumstances banks
before extending any loan would make a thorough study of the actual need of the
party considered the prospect of the business in which it is engaged Since it is
not looked into many of the loans becomes NPA
REASONS F0R AN ACCOUNT BECOMING NPA
Those attribute to borrower
Failure to bring in required capital
Lack of proper planning
Unwanted expenses
Lack of expertise
Poor credit collection
Miss management
Heavy borrowing
Lack of knowledge regarding NPA
Willful defaulters
Death of the borrower
Those attribute to banks
Wrong selection of borrower
Poor credit appraisal
Unhelpful in supervision
Too inflexible attitude
System overload
Lack of motivation
Delay in sanction
Lack of trained staff
Lack of commitment to recovery
Lack of personal visit to the borrower office
Lack of personal visit to the borrowerrsquos residence
Other
Fast changing technology
Unhelpful attitude of govt
Increase in material cost
Government policies
Taxation law
Political hostility
INDIAN ECONOMY AND NPA
Undoubtedly the world economy has slowed down recession is at its peak globally stock markets
have tumbled and business itself getting hard to do The Indian economy has been much affected due
to high fiscal deficit poor infrastructure facilities sticky legal system cutting of exposures to
emerging market by FIIs etc
Further international rating agencies like standard and poor
have lowered Indiarsquos credit rating to sub- investment grade Such negative aspects have often
outweighed positive such as increasing for reserve and a manageable inflation rate
Under such situation I go without saying that banks are no exception
and are bound to face the heat of global down turn One would be surprise to know that banks and
financial institution in India holds non-performing assets worth Rs 1 10000 crores Bankers have
realized that unless the level of NPA is reduced drastically they will find it difficult to survive
The actual level of NPA in India is around $ 40 billion much higher than govt estimation of $16
billion This difference is largely due to the discrepancy in accounting the NPAs followed by India
and rest of the world The accounting norms of India are less stringent than those of the developed
economies The Indian banks also have the tendency to extend the past due Considering the GDP
India nearly $ 470 billion the NPA are 8 of the total GDP which was better than many Asian
countries The NPA of china was 45 of the GDP While Japan had NPAs of 25 of the GDP
The aggregate level of NPAs in Asia has increased from $ 25 billion in 2007 to
$ 34 billion on 2009 looking to such overall pictures of the market we can say that India is doing
well and the steps taken are looking favorable
Source googlecoin
DATA ANALYZING THE QUETIONNAIRE
Two set of questionnaire were prepared to collect the feedback One set of questionnaire was meant for branches and other set of questionnaire was meant for borrowers
The set of questionnaire were given to the branches under hazaribag (RBO) and collected the feedback of the bankers of P segment and the branch manager
The questionnaire prepared for branch contained 15 questions and the questionnaire prepared for borrower contains 10 questions
The data was collected from 50 bankers and the data analysis of the branch questionnaire is as follows
Question number 1
Does not require any data analysis and information was sought to know the business level of the branches for the purpose of whether particular branch is actively engaged in xpress credit portfolio
Question number 2
Do you think that the borrowers are aware about NPA
Answer
32 of the respondent feel that the borrowers are not aware about NPA and 18 respondents feel that borrowers are aware about NPA
Chart no 11
yes
no
0
5
10
15
20
25
30
35
1832 Column1
Conclusion
Majority of the bank officials feels that the borrowers are not aware about NPA
Question number 3
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Answer
Out of 32 respondent 22 respondents is fully satisfied that lack of knowledge among the borrower regarding NPA is one of the reason for NPA 08 respondent were partially satisfied with it and 02 respondent were not satisfied with it
Chart no 12
fully satisfied(22)69
partially satisfied(8)25
not satisfied(2)6
Sales
Conclusion
Majority of the borrowers feels that lack of knowledge among the borrower regarding NPA is one of the reasons for NPA
Question number 4 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Answer
Out of 50 respondent 30 of the respondent strongly satisfied that these external factors contribute to NPA 10 respondent were partially satisfied with it 5 were not satisfied where as 5 were fully dissatisfied with it
Chart no 13
6020
10
10
fully satisfied(30) partially satisfied(10) not satisfiec(5) fully desatisfied(5)
Conclusion
Most of the respondent thinks that external factrs like willful defaulter change in govt policy contribute to NPA
Question number 5
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Answer
Chart no 14
feedback
fully satisfied(20)partially satisfied(12)not satisfied(12)fully dissatisfied(6)
Conclusion
As per the response of the officials most of the officials feel that internal factors are also responsible for NPA
Question number 6
Do you think that inflation is one of the reasons for NPA
Answer
Out f 50 responses 22 were strongly satisfied 18 were partially satisfied 8 were not satisfied and 2 were fully dissatisfied
Chart no 15
fully satisfied(20)44
partially satisfied(18)36
not satisfied(5)10
fullt dissatisfied(5)10
Conclusion
Growing inflation increasing goods rate is also one of the reason for NPA
Question number 7
Do you think that lack of PSS is also contributed to NPA
Answer
Out of 50 responses 30 were fully satisfied with it 12 were partially satisfied and 8 were fully dissatisfied
Chart no 16
6024
16
Open
fully satisfied(30)Partially satisfied(12)not satisfied(0)fully dissatisfied(8)
Conclusion
Majority of the officiais feels that lack of PSS is one of the reason for NPA This means that the PSS carried out by the bank is not sufficient or not carried out properly
Question number 8
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Answer
Most of the respondent feels that increase in unwanted expenses of the borrwer ls contribute to NPA
Chart no 17
56
12
28
4
FULLY SATISFIED(28)PARTIALLY SATISFIED(6)NOT SATISFIED(14)FULLY DISSATISFIED(2)
Conclusion
As per response of the officials increasing inflation have an adverse effect on the financial sector its working performance as well as on NPA
Question number 9
Do you think that high rate of interest under Xpress credit also contributes to NPA
Answer
Out of 50 respondent 25 respondent were not satisfied 10 were partially satisfied 10 were strongly dissatisfied where as only 5 out of 50 were fully satisfied with it
Chart no 18
strongly satisfied(5)partially satisfied(10)not satisfied(25)fully dissatisfied(10)
Conclusion
Most of the respondents are not satisfied with it They feel that the rate of interest charged by SBI under Xpress credit is not high and it will not contribute to NPS
Question number 10
Do you think that lack of proper planning of the borrower is one of the reason for NPA
Answer
Out of 70 respondent 35 were fully satisfied 5 were not satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 19
fully satisfied(35)70
partially satisfied(10)20
not satisfied(5)10
Conclusion
Most of the respondent feels that the borrowers borrow money from the bank without any proper planning which is one of the most important reason for NPA
Question number 11
Is heavy borrowing also contribute to NPA
Answer
Out of 50 respondent 25 respondent were fully satisfied 12 were partially satisfied 8 were not satisfied were as 5 were fully dissatisfied
Chart no 110
50
24
16
10
fully satisfied(25) partially satisfied(12) not satisfied(8) fully dissatisfied(5)
Question number 12
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Answer
As per the response of the officials 20 were fully satisfied 66were partially satisfied 4 were not satisfied with it were as 10 respondent were fully dissatisfied
Chart no 111
fully satisfied(10)20
partially satisfied(33)66
not satisfied(2)4
fullydissatisfied(5)10
Conclusion
As per the response given by the officials most of the officials were partially satisfied that wrong selection of borrower also contribute to NPA which means that selection process carried out by the bank is not appropriate or there is some difficulties in implementing them
Question number 13
Do you think that poor credit appraisal also contribute to NPA
Answer
Out of 50 respondent 5 were fully satisfied 10 were fully satisfied 30 were not satisfied were as only 5 were fully dissatisfied
Chart no 112
fully satisfied(5)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 14
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Answer
Out of 50 responses 3 were fully satisfied 15 were partially satisfied 25 were not satisfied where as 7 were full dissatisfied
Chart no 113
fully satisfied(3)partiallt satisfied(15)not satisfied(25)fully dissatisfied(7)
Conclusion
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not contribute to NPA This means that the attitude of bank toward the borrower is not inflexible
Question number 15
Do you think that system over load is also one of the causes of NPA
Answer
Out of 50 respondent 28 were fully satisfied 12 were partially satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 114
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Messengers 12
Guards 03
ACCOUNTS
Total no of ac - 60720
SB ac ndash 46133
CA ac - 510
Advances ndash 7247 Lakhs
Deposits ndash 91408 Lakhs
Total no of ATMrsquoS ndash 08
NATURE OF THE PROJECT
Xpress credit is a form of personal loan devised to provide instant credit support to person in need It caters mainly salaried person who have their salary ac with the bank The loan is a very good source of increasing retail loan portfolio but also have inherent risk It is a clear loan without any security and hence attracts more provisioning also unexpected events like death of borrower creates problem of recovery Sometimes employers shift their salary to other bank intentionally to avoid repayment and sometime it is difficult to track their transfer and posting
Despite all positive factors of continuous income and benefit of recovery through department the bank is facing the problem of high NPA in Xpress credit
The study is an endeavor to search the cause of acrsquos turning into NPA analyzing the efforts of the bank to recover the dues and to suggest the measures to contain the NPA to minimum or to zero level
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the npa
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
COMPANY PROFILE OF SBI
The evolution of sbi can be traced back to the first decade of the 19th century It began with the
establishment of bank of culcutta in cuicutta on 2nd july 1806 The bank was redesined as the bank of
bangal three year later on 2nd january 1809 It was the first ever joint company of british india
established under the sponsorship of govt of bangal Subsiquently the bank of madras and bank of
bombay follwed the bank of bangal These banks were amalgamated to form imperial bank on 27th
jan 1921
An important turning point in the history of SBI is the launch of 1st five year plan of independence
india in 1951 The plan aimed to serving the indian economy in general and the rural sector of the
countryin particular There for in order to serve the economy as a whole and the rural sector in
particular all india rural credit survey committee recommended the formation of state ndash partnered
and state ndash sponsored bank An act was passed in the parliament of india in may 1955 As a result the
sbi was established on 1st july 1955this results in making SBI more powerful as much as quarter of
resourses of indian banking system was controlled by state later on state bank of india (subsidiary
banks) act was pessedin 1959 This act enabled the sbi to make the 8 state associated bank as its
subsidiaries
BRANCHES
The corporate centre of SBI is located in Mumbai In order to cater to different function There is several other
establishments in and outside Mumbai apart from corporate center The bank boasts of having as many as 14
local head office and 57 zonal offices located as major cities throughout India It is recorded that SBI has
more than 10000 branches will cater to its customer throughout India
ATM
SBI provides easy access to money to its customers through more than 90000 ATMs in India The
bank also facilitates the free transaction of money at ATMs of state bank group You may also
transect money through SBI commercial and international bank ltd by using the state bank ATM
CUM DEBIT CARD It the only banking company to open its ATM in region of kargil
Source SBIcoin
Xpress credit
INTRODUCTION-
The Xpress Credit Scheme was formulated in April 2004 in the form of pre-approved loan to
employees of leading PSUs and Government organizations At present the scheme is open to
Employees of government semi-government profit making PSUs Educational Institutions of
national repute and companies of good standing (based on their CRA rating) The scheme is built
around the concept of check ndash off (the process by which the salary disbursing officer undertakes to
deduct loan installments from the salary of the borrower and remits the same to the Bank for credit
of the loan account) Xpress Credit Loans may also be sanctioned in those cases where the borrower
gives sufficient PDCs (Post Dated Cheques) for entire tenure of the loan
Source Xpress credit circular
PURPOSE
The loan under the scheme is granted for any legitimate personal purpose (eg expenses for
domestic or foreign travel medical treatment of self or a family member meeting any financial
liability such as marriage of sondaughter defraying educational expenses of wards meeting
margins for purchase of assets etc)
Source Xpress credit circular
ELIGIBILITY
1 EMPLOYERS
Central and state Government
Quasi-Government
Profit making PSUs
Educational Institutions of National Repute
Companies with a CRA rating of SB1 to SB5
Companies with a CRA rating of SB6 and SB7 are also eligible if it satisfies take over norms
2 EMPLOYEES
Permanent employees with a minimum 1 yearrsquos length of service
He should have sufficient cash flows to repay the loan from salary as evidenced by 6 monthsrsquo
salary slipsincome tax returns of 2 years
He should provide proof of residence and proof of identity to satisfy KYC norms
He should produce 6 months satisfactory statement of bank account (at any bank)
Proof of Employment in the eligible company
Source Xpress credit circular
MINIMUM NET MONTHLY INCOME
The minimum Net Monthly Income (NMI) of the employee should beRs5000- It can
Be lowered to Rs3000- subject to the condition that the salary accounts of the entire enterprise are
with us The Branch will ensure to obtain an Undertaking from the borrower that there is no other
deduction from hisher salary which is not reflected in the salary slip [As per Annexure ndash (B) ndash (v)]
LOAN AMOUNT
a) Minimum Rs24000=
b) Maximum 24 Months NMI with a ceiling of Rs1500 lacs
TYPE OF LOAN
LoanD Term demand Loan (NO OVERDRAFT)
REPAYMENT PERIOD
Maximum 60 months
EMI NMI le 50
REVIEW
Review of loan will be done yearly
RENEWAL
Renewal of loans will be allowed after 24 months
CHECK OFF
The process by which the salary disbursing officer under takes to deduct the loan
installments from the salary of the borrower and remits the same to the Bank for credit to the loan
account
Or
The employer pays the borrowerrsquos salary into his SavingsCurrent Account with our Bank
The borrower gives an irrevocable Standing Instruction (SI) For recovery of the loan installments
from his aforesaid account with the SI being synchronized with the date of credit of salary in the
borrowerrsquos SavingsCurrent Account
AND
The employer undertakes to inform the Bank if and when there is a severance due to borrowerrsquos
transfer resignation retirement etc[ Branch will ensure to obtain the undertaking from the employer
and employee as per Annexure ndash B (I) B (ii) II or B (iii) ]
Source Xpress credit circular
CATEGORY I
FULL CHECK OFF
As given under the head CHECKOFF
AND
Undertaking from the employer to obtain a NOC from the Bank before settling the dues of the
borrower on transfer resignation retirement etc [As per Annexure ndash B (IV)]
This stipulation can be waived by the sanctioning authority incase of employees of Central State
Government PSUs Universities and Reputed Colleges In case of other employers the CGM of the
Circle has been permitted to waive the stipulation But in no case this can be waived for IT sector
employees
CATEGORY II
PARTIAL CHECK OFF
As given under the head CHECKOFF
CATEGORY III
WITH NO CHECK OFF
The employer pays the borrowerrsquos salary into his SavingsCurrent Account with our Bank
The borrower gives an irrevocable Standing Instruction (SI) for
recovery of the loan installments from his aforesaid account twitch the SI being synchronized with
the date of credit of salary in the borrowerrsquos SavingsCurrent Account
OR
Conditions as given under the head CHECKOFF is not fulfilled but the borrower provides monthly
PDCs (Post Dated Cheques) for entire tenure of the loan provided eligibility criteria are fulfilled
(Guidelines on Post Dated cheques is annexed as per Annexure A)
INTEREST RATE
The Interest rate is based on the category of Check off available
Category I
5 above the base rate ie - 970 +5 =1470 ( currently 1470 pa)
Category II
7 above the base rate (currently 1670 pa)
Note The GM of the Network is vested with powers to extend the Category II rate to a Category III
borrower only in case of employees of SB1 to SB5 rated companies who maintain their salary
accounts with us The Category III employees who do not maintain their salary accounts with us but
provide PDCs for the loan should be charged the card rate applicable to Category III and no
deviation should be permitted by Circle GMs
PENAL INTEREST
Penal interest should not be charged for loans up to Rs25000For Loans above Rs25000- if the
irregularity exceeds EMI or installment amount for a period of one month then penal interest would
be charged 2 pa(over and above the applicable interest
rate) on the overdue amount for the period of default If part installment or part EMI remains
overdue then penal interest should not be levied
This provision has been made to avoid application of penal interest on Personal Segment Loan
accounts where EMIs stipulated or installments are being paid regularly by the borrowers
Source Xpress credit circular
SECURITY
The loan is clean in nature and no security is required
PROCESSING FEE
11 of the loan amount including tax
PRE-SANCTION PROCESS
The following documents will be obtained before sanction-
I Application cum appraisal Form With a photograph of the borrower duly attested by the
authorized official
II It is proposed to put in place an arrangement for verification of the address of the borrower by an
outside agency A report duly signed by the verification agency (in places where an arrangement is
in place) or by our officerstaff in other places (where verification agency approved by Corporate
Centre is not available) should be complied based on the following verifications
I Verification of the borrowerrsquos residence address as given in the loan application
by actually visiting the residence of the borrower
II Verification of the borrowerrsquos office address as given in the loan application by
actually visiting the office of the borrower
Source Xpress credit circular
III Verification of the borrowerrsquos residence telephone number as given in the loan
application by actually calling the residence telephone number of the borrower
IV Verification of the borrowerrsquos office telephone number as given in the loan
Application by actually calling the office telephone number of the Borrower
V Verification of the IT return of the Borrower with IT department through a
person approved by the Regional OfficeZonal Office where feasible Where IT
return cannot be verified by the Bank statement of account of the borrower may
be scrutinized to verified income flows
Where the verification is not outsourced the Branch staff
Must do the verification and the report should be added with the loan documents
Flow chart of loan procedure of retail loan
Chart no 01
Disagree
NON PEFORMING ASSETS (NPA) ndash CONCEPT
The three letters ldquoNPArdquostrike terror in banking sector and business circle todayNPA is the short
Form of ldquoNon performing Assetsrdquo
Enquiry about loan
Agreeprovided with check list and
application
submission of documents and application dully
filled up
Documents taken
verification of application and
documebtsCIBIL report
Processing of loan
Sangtion of loan
Document
Control Disbursal of loan
phasewise lumpsum
In banking NPA are loans given to doubtful customers who may or may not repay the
loan on time There are two types of assets viz performing and non performing Performing loans
are standard loans on which both the principle and interest are secured and their return is guaranteed
NPA means the debt which is given by the bank is unable to recover is called
nonperforming assets A NPA account in the books of accounts is an asset as it indicates the amount
received from the defaulters It means if any bank gives loan and is not paid by the customers till 90
days than that account is called as NPA account
DEFINITION
An asset including leased assets becomes nonperforming when it ceases to generate income
for the bank
A NPA was defined as a credit facility in respect of which the interest or installment
of principle as remained ldquopast duerdquo for specific period of time
Source googlecoin
The specific period was reduced in a phased manner as under
wef ndash 31031993 four quarters
wef ndash 31 031994 three quarters
wef - 31031995 two quarters
wef - 31032001 180 days
wef - 31032004 90 days from past due
90 days delinquency is not applicable to agriculture segment
With effect from march 31 2004 NPA shall be a loan or an advance where
1) Term loan interest installment of principle remain over due for 90 days
2) Cash creditover draft an account remain ldquoout of orderrdquo for a period of more than 90 days
3) Bills The bills remain over due for a period more than 90 days
4) Agriculture loan
a The loan has been granted for short duration crop installments of the principle
remain over due for two crop season beyond the due date
b If the loan has been granted for long duration crop installment of the principle
remain over due for one crop season beyond the due date
Source Rbiorgin
CLASSIFICATION OF LOANS
In India loans are classified on following basis
Performing assets
Loans where the interest and or principle not remain overdue for more then 90 days
Non-performing assets
Any loan repayment remains over due for more than 90 days is considered as NPA
According to the securitization and re construction of financial assets and enforcement of
security interest ordinance2002 ldquonon performing assetsrdquo(NPA) means an assets or ac of
borrower which has been classified by the bank as sub-standard doubtful or loss asset in
accordance with the guidelines relating to asset classification issued by RBI
Source googlecoin
ASSET - CLASSIFICATION
Assets can be categorized into four categories (a) standard (b) sub-standard
(c) doubtful (d) loss The last three categories are classified as npa based on the the period for
which the asset has remained non-performing and the realisability of the dues
Standard assets the loan ac which are regular and do not carry more than normal risk are
known as standard assets there could be ac which though have not become npa but are
irregular Such ac are called special mention ac
Sub- standard assets with effect from 3132005 a sub-standard assets is one which is
classified as NPA for a period not exceeding 12 months
Doubtful asset with effect from 3132005 an asset is to be classified as doubtful if it
remained npa or sub-standard for a period exceeding 12 months
Loss assets a loss asset is one where loss has been identified by the bank or internal and
external auditors or the RBI inspection but the amount as not been written off wholly In
other words such an asset is considered uncollectable and such little value that its
continuance as a bankable asset is not warranted although there may be some salvage or
recoverable value
NPA IDENTIFICATION NORMS
With effect from 31st march 2004 a loan or advance become npa when
a Interest or installment of the principle remains overdue for a period more then 90
days in respect of term loan
b The ac remain out of order for a period more 90days in respect of over draft cash
cash credit
c The bill remains overdue for a period more than 90 days in case of bills purchased
and discounted
d With effect from Sept 2004 loan granted for short duration crops will be treated as
NPA if the installment of principle or interest there on remains overdue for two crop
season and loan granted for long duration will be treated as NPA if the installment
remains overdue for one crop season
Out of order
An account will be treated as out as out of order if the outstanding balance remain
continuously in excess of the sanctioned limitdrawing power In cases where the
outstanding balance in the principle operating ac is less than the sanctioned limit but
there are no credit continuously for 90 days as on the date of balance sheet or the
credit are not enough to cover the interest debited during the same period
Overdue
An amount due to the bank under any credit facility is overdue it is not paid on the due
date fixed by the bank
The date of npa will be actual date on which sippage occurred as mentioned below
For term and demand loan ac
The date on which the installment of the principle have
remaine overdue for a period more then 90 days
For over draft and cash credit ac
The date on which the ac completed period of more than 90
days of being continuously out of order
Source wwwRBI Org in
PROVISING NORMS
There is time lag between an ac becoming doubtful for recovery the realization of security and
erosion over a loan period of time in its value So RBI directives now requiresthe banks to make
provisions in their balance sheet for all non- standard loan asset Provisioning is made on all types of
assets ie Standard sub-standard doubtful and loss assets
1 Standard assets RBI vides its circular dated 151108 revised the provisioning requirements
For all type of standard assets it has been reduced to a uniform level of 040of outstanding
at global basis except in the case of direct advance to agriculture and SME sector which
shall continue to attract a provisioning of 025 The provision toward standard assets need
not to be netted from gross advances but shown separately as ldquo contigent provisionsrdquo against
standard assets under other liquidities and provisions others in schedule 5 of the balance
sheet
2 Sub-standard assets- In respect of sub-standard assets the rate of provision is 10 of
outstanding balance without considering ECGC guarantee cover or securities available
However if the loan was unsecured from the begining there would be additional provision of
10 ie total provision would be 20 of the outstanding balance Unsecured exposure is
defined as an exposure where the realizable value of the security as assessed by the
bankreserve banks inspecting officers is not more than 10 ab-intio of the outstanding
exposure
3 Doubtful assets In case of doubtful assets while making provision realizable value of
security is to be considered 100 provision is made for unsecured portion In case of
secured portion the rate of provision depend on age of doubtful assets as under
Age of doubtful assets Provision as of secured portion
Doubtful up to 1 year D1 20 of RVS( realizable value of security)
Doubtful for more than 1 year D2 30 of RVS
Doubtful for more than 3 years D2 100 of RVS
Thus if an ac is doubtful for more than 3 years than 100 of the provision is to be made
both from secured and unsecured portion If an advance has been guaranteed by DICGC
CGFTECGC and is doubtful than provision on secured portion will be as in other cases but
provision on unsecured portion will be made after deducting the claim value
4 LOSS ASSET 100 of the outstanding amount while making provision on NPAs amount
lying in suspense ac and derecognized interest should be deducted from gross advance and
provision be made on balance amount
5 OVERALL PROVISION With a view to improving the improving the provisioning cover
and enhancing the soundness of the individual banks RBI has proposed in oct- 09 policy that
bank should augment their provisions and ensure that their total provisioning coverage ratio
including floating provisions is not less than 70
Source wwwRBIorgin
IMPACTEFFECT OF NPA UPON BANKS
A strong banking sector is important for flourishing economy The failure of banking sector
may have an adverse impact on other sector NPA are one of the major concerns of sector
banks is increasing result in nonperforming assets The NPA impact drastically to the
working of banks The efficiency of bank not always reflected by the size of its balance sheet
but by the level of return on its assetsNPA do not generate interest income for the banks but
the same time banks are required to make provisions for such NPAs from their current
profits
They erode current profits through provisioning requirement
They result in reduced interest income
They require higher provisioning requirements effecting profits and accretion to capital
Adverse impact on capital adequacy ratio
Roe and Roa goes down because NPA do not earn
Banks rating gets effect
Banks cost of raising funds goes up
Bad effect on goodwill
Bad effect on equity value
EARLY SYMPTOMS BY WHICH ONE CAN RECOGNIZE A PERFORMING
ASSETS TURNING TO A NON PERFORMING ASSET
Four categories of early symptoms
1) FINANCIAL
(a) Non- payment of very first installment
(b) Bouncing of cheque due to insufficient balance in the ac
(c) Irregularity in installment
(d) Irregularity of operations in ac
(e) Unpaid overdue bill
(f) Declining current ratio
2) OPERATIONAL AND PHYSICAL
(a) If information is received that the borrower has either initiated the process of winding up or not doing the business
(b) Over-due receivable
(c) Stock statement not submitted on time
(d) External non-controllable factor like natural calamities in the city where the borrower lives
(e) Non- payment of salary
(3) ATTITUDNAL CHANGE
(a) Use for personal comfort stocks and shares by borrowers
(b) Avoidance of contact with bank
(c) Problem between partners
(4) OTHER
(a) Change in govt policies
(b) Death of the borrower
(c) Delay in salary
PREVENTIVE MEASUREMENT FOR NPA
Early recognition of the problem
Invariably by the time banks start their efforts to get involved
in a revival process its too late to retrieve the situation ndash both in terms of rehabilitation of the
project and the recovery of banks dues Identification of the weakness regardless of the fact
that it may not have become NPA is imperative Assessment of the potential of revival may
be done on the basis of a techno-economic viability study Restructuring should be attempted
where after an objective assessment of the promoterrsquos intention banks are convinced of a
turn around with in a scheduled facilitate winding upselling of units earlier so as to recover
whatever is possible through means before the security position becomes worse
Identifying borrowers with genuine intent
Identifying borrower with genuine intent from those who
are non-serious with commitment or stake in revival is a challenge confronting bankers Here
the role of front line officials at branch level is paramount as they are the ones who have
intelligent inputs with regard to promoters lsquo sincerity and capability to achieve turnaround
Based on this objective assessment bank should decide as quickly as possible whether it
would be worthwhile to commit additional finance
In this regard banks may consider having
ldquospecial investigationrdquo of all financial transaction or business transaction books of account
order to ascertain real factor that contributed to sickness of borrower Bank may have panel
of technical experts with proven expertise and task record of preparing techno-economic
study of the project of the borrowers
Borrowers having genuine problems due to temporary mismatch in find flow or sudden
requirement of additional fund may entertained at branch level for this purpose a special
limit to such type of cases should be decided This will obviate the need to route the
additional funding through the controlling officers in deserving cases and avert many
accounts sleeping into NPA category
Timeliness and adequacy of response
Longer the delay in response greater the enjury to the
account and the asset Time is a crucial element in any restructuring or rehabilitation activity
The response decided on the basis of techno- economic study and promoterrsquos commitment
has to be adequate in terms of extend of additional funding and relaxations etc under the
restructuring exercise The package of assistance may be flexible and bank may look at the
exit option
Focus on cash flow
While financing at the time of restructuring the banks may not be guided
by the conventional fund flow analysis only which could yield a potentially misleading
picture Appraisal for fresh credit requirement may be done by analyzing fond flow in
conjunction with the cash flow rather than only on the basis of fund flow
Source wwwAskcom
Management effectiveness
The general perception among the borrower is lack of finance that
leads to sickness and NPAs but this may not be the case all the time Management effectiveness
advance business condition is a very important aspect that affects a borrowing units fortunes A bank
may commit a multiple finance to an align unit only after basic viability of the enterprise also in the
context of quality of management is examined and confirmed It will be useful to have consultant
appointed as early as possible to examine this aspect A proper techno-economic viability study thus
become the basis on which any future action can be considered
Multiple financing
A) During the exercise for assessment of viability and restructuring a pragmatic and unified
approach by all the leading banks as also sharing of all relevant information on the
borrower would go a long way toward overall success of rehabilitation exercise given the
probability of successfailure
B) In some default cases Where the unit is still working The bank should make sure that it
captures the cash flow and insure that such cash are used for working capital purpose
Toward this end there should be a continuous flow of information among consortium
member A bank which is not a part of consortium may not be allowed to offer credit
facility to such defaulting clients Current account facility may also be denied at non-
consortium banks to such clients and violation may attract penal action The credit
information bureau of india (CIBIL) may be very useful for meaningful information
exchange on defaulting borrowers once the setup become fully operational
C) In a forum of lenders the priority of each lender will be different While one set of lender
may be willing to wait for longer time to recover its dues another lender may have a much
shorter timeframe in mind So it is possible that the letter categories of lenders may be
willing to exit even at a cost by a discounted settlement of the exposure There for any plan
for restructuringrehabilitation may takes into account
D) Corporate debt restructuring it has been institutionalized in 2001 to provide a timely and
transparent system for restructuring the corporate debt of RS 20 crores and above with the
banks on a voluntary basis and outside a legal framework Under this system bank are
greatly benefit in terms of restructuring of large standard accounts (potential NPAs) and
viable sub-standard account with multiple banking arrangement
NPA MANAGEMENT- RESOLUTION
Compromise settlement schemes
Restructuringrescheduling
Lok adalat
Corporate debt restructuring cell
Debt recovery Tribunals (DRT)
Proceeding under the code of civil procedure
Board of industrial and financial reconstruction
National company law Tribunal (NCLT)
Sale of NPA to other bank
Sale of NPA to ARCSC under securitization and reconstruction of financial assets for
enforcement of security interest Act 2000 (SRFAESI)
Liquidation
Source wwwRBIorgin
NPA MANAGEMENT IN INDIA
Formation of the credit information bureau (India) limited (CIBIL)
Release of willful defaulterrsquos listRBI also releases a list of borrowers with aggregate
outstanding of RS 1 crore and above against whom bank have filed suit for recovery of their
fund
Reporting of frauds to RBI
Norms of lenders labiality- framing of fair practices code with regard to lenders lability to
be followed by banks
Risk assessment and Risk management
RBI has advised banks to all cases of willful defaulters in case of 1 crore and above and
files suits in such cases
Responding quick mortality cases
Special mention accounts for early identification for bad debt loans and advances over due
for less than one or two quarters would come under this category However these accounts do
not need provisioning
INTERNATIONAL PRACTICES ON NPA MANAGEMENT
Subsequent to the Asian currency crisis which severely crippled the financial system In
addition to the above some of the more recent and aggressive step to NPAs have been taken
by Taiwan Taiwanese financial institution have been encouraged to merge and form bank
based AMCs through the recent introduction of financial holding company act and financial
institution Asian countries the magnitude of NPAs in Asian financial institution was brought
to light Driven by the need to proactively tackle the soaring NPAs level the respective govt
embarked upon a program of substantial reform This involves setting up processes for early
identification and resolution of NPAs The table below provides a cross country comparison
of approaches used for NPA resolution Mergers Act A long side the ministry of finance has
followed a carrot and strict policy of specifying the required NPA ratio for banks while also
providing flexibility in modes of NPA assets resolution and a conduct
ive regulatory and tax environment Deferred loss write-off provisions have been instituted to
provide breathing space for lenders to absorb NPA write-off While it is too early to
comment on success of NPA resolution process in Taiwan the early sign are encouraging
Detailed below are some key NPA management approaches adopted by banks in South East
Asian countries
1 Credit risk mitigation
2 Early warning systems
3 Assets management companies
Increasing willingness to sell NPAs to AMCs
Effective resolution strategy
Appointment of special administrators
4 Out of court restructuring
Source wwwgooglecom
DIFFICULTIES WITH NON PERFORMING ASSETS
I Owners do not receive a market return on their capital In the worst case if the bank
fails owner lose their assets
II Depositors do not receive a market return on savings In the worst case if the bank
fails depositors lose their assets or uninsured balance Banks also redistribute losses
to other borrowers by charging higher rate of interest
III Non-performing loans epitomize bad investors They misallocate credit from good
projects which do not receive funding to failed project
IV 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
shortage the shortage can jam payments across the country
b Illiquidity constraints banks in paying depositors eg cashing their paychecks
c Undercapitalized banks exceed the bank capital base
Lending by bank has been politicized It is common knowledge
that loans are given to various industrial houses on common consideration and
viability of project but on political consideration In normal circumstances banks
before extending any loan would make a thorough study of the actual need of the
party considered the prospect of the business in which it is engaged Since it is
not looked into many of the loans becomes NPA
REASONS F0R AN ACCOUNT BECOMING NPA
Those attribute to borrower
Failure to bring in required capital
Lack of proper planning
Unwanted expenses
Lack of expertise
Poor credit collection
Miss management
Heavy borrowing
Lack of knowledge regarding NPA
Willful defaulters
Death of the borrower
Those attribute to banks
Wrong selection of borrower
Poor credit appraisal
Unhelpful in supervision
Too inflexible attitude
System overload
Lack of motivation
Delay in sanction
Lack of trained staff
Lack of commitment to recovery
Lack of personal visit to the borrower office
Lack of personal visit to the borrowerrsquos residence
Other
Fast changing technology
Unhelpful attitude of govt
Increase in material cost
Government policies
Taxation law
Political hostility
INDIAN ECONOMY AND NPA
Undoubtedly the world economy has slowed down recession is at its peak globally stock markets
have tumbled and business itself getting hard to do The Indian economy has been much affected due
to high fiscal deficit poor infrastructure facilities sticky legal system cutting of exposures to
emerging market by FIIs etc
Further international rating agencies like standard and poor
have lowered Indiarsquos credit rating to sub- investment grade Such negative aspects have often
outweighed positive such as increasing for reserve and a manageable inflation rate
Under such situation I go without saying that banks are no exception
and are bound to face the heat of global down turn One would be surprise to know that banks and
financial institution in India holds non-performing assets worth Rs 1 10000 crores Bankers have
realized that unless the level of NPA is reduced drastically they will find it difficult to survive
The actual level of NPA in India is around $ 40 billion much higher than govt estimation of $16
billion This difference is largely due to the discrepancy in accounting the NPAs followed by India
and rest of the world The accounting norms of India are less stringent than those of the developed
economies The Indian banks also have the tendency to extend the past due Considering the GDP
India nearly $ 470 billion the NPA are 8 of the total GDP which was better than many Asian
countries The NPA of china was 45 of the GDP While Japan had NPAs of 25 of the GDP
The aggregate level of NPAs in Asia has increased from $ 25 billion in 2007 to
$ 34 billion on 2009 looking to such overall pictures of the market we can say that India is doing
well and the steps taken are looking favorable
Source googlecoin
DATA ANALYZING THE QUETIONNAIRE
Two set of questionnaire were prepared to collect the feedback One set of questionnaire was meant for branches and other set of questionnaire was meant for borrowers
The set of questionnaire were given to the branches under hazaribag (RBO) and collected the feedback of the bankers of P segment and the branch manager
The questionnaire prepared for branch contained 15 questions and the questionnaire prepared for borrower contains 10 questions
The data was collected from 50 bankers and the data analysis of the branch questionnaire is as follows
Question number 1
Does not require any data analysis and information was sought to know the business level of the branches for the purpose of whether particular branch is actively engaged in xpress credit portfolio
Question number 2
Do you think that the borrowers are aware about NPA
Answer
32 of the respondent feel that the borrowers are not aware about NPA and 18 respondents feel that borrowers are aware about NPA
Chart no 11
yes
no
0
5
10
15
20
25
30
35
1832 Column1
Conclusion
Majority of the bank officials feels that the borrowers are not aware about NPA
Question number 3
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Answer
Out of 32 respondent 22 respondents is fully satisfied that lack of knowledge among the borrower regarding NPA is one of the reason for NPA 08 respondent were partially satisfied with it and 02 respondent were not satisfied with it
Chart no 12
fully satisfied(22)69
partially satisfied(8)25
not satisfied(2)6
Sales
Conclusion
Majority of the borrowers feels that lack of knowledge among the borrower regarding NPA is one of the reasons for NPA
Question number 4 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Answer
Out of 50 respondent 30 of the respondent strongly satisfied that these external factors contribute to NPA 10 respondent were partially satisfied with it 5 were not satisfied where as 5 were fully dissatisfied with it
Chart no 13
6020
10
10
fully satisfied(30) partially satisfied(10) not satisfiec(5) fully desatisfied(5)
Conclusion
Most of the respondent thinks that external factrs like willful defaulter change in govt policy contribute to NPA
Question number 5
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Answer
Chart no 14
feedback
fully satisfied(20)partially satisfied(12)not satisfied(12)fully dissatisfied(6)
Conclusion
As per the response of the officials most of the officials feel that internal factors are also responsible for NPA
Question number 6
Do you think that inflation is one of the reasons for NPA
Answer
Out f 50 responses 22 were strongly satisfied 18 were partially satisfied 8 were not satisfied and 2 were fully dissatisfied
Chart no 15
fully satisfied(20)44
partially satisfied(18)36
not satisfied(5)10
fullt dissatisfied(5)10
Conclusion
Growing inflation increasing goods rate is also one of the reason for NPA
Question number 7
Do you think that lack of PSS is also contributed to NPA
Answer
Out of 50 responses 30 were fully satisfied with it 12 were partially satisfied and 8 were fully dissatisfied
Chart no 16
6024
16
Open
fully satisfied(30)Partially satisfied(12)not satisfied(0)fully dissatisfied(8)
Conclusion
Majority of the officiais feels that lack of PSS is one of the reason for NPA This means that the PSS carried out by the bank is not sufficient or not carried out properly
Question number 8
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Answer
Most of the respondent feels that increase in unwanted expenses of the borrwer ls contribute to NPA
Chart no 17
56
12
28
4
FULLY SATISFIED(28)PARTIALLY SATISFIED(6)NOT SATISFIED(14)FULLY DISSATISFIED(2)
Conclusion
As per response of the officials increasing inflation have an adverse effect on the financial sector its working performance as well as on NPA
Question number 9
Do you think that high rate of interest under Xpress credit also contributes to NPA
Answer
Out of 50 respondent 25 respondent were not satisfied 10 were partially satisfied 10 were strongly dissatisfied where as only 5 out of 50 were fully satisfied with it
Chart no 18
strongly satisfied(5)partially satisfied(10)not satisfied(25)fully dissatisfied(10)
Conclusion
Most of the respondents are not satisfied with it They feel that the rate of interest charged by SBI under Xpress credit is not high and it will not contribute to NPS
Question number 10
Do you think that lack of proper planning of the borrower is one of the reason for NPA
Answer
Out of 70 respondent 35 were fully satisfied 5 were not satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 19
fully satisfied(35)70
partially satisfied(10)20
not satisfied(5)10
Conclusion
Most of the respondent feels that the borrowers borrow money from the bank without any proper planning which is one of the most important reason for NPA
Question number 11
Is heavy borrowing also contribute to NPA
Answer
Out of 50 respondent 25 respondent were fully satisfied 12 were partially satisfied 8 were not satisfied were as 5 were fully dissatisfied
Chart no 110
50
24
16
10
fully satisfied(25) partially satisfied(12) not satisfied(8) fully dissatisfied(5)
Question number 12
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Answer
As per the response of the officials 20 were fully satisfied 66were partially satisfied 4 were not satisfied with it were as 10 respondent were fully dissatisfied
Chart no 111
fully satisfied(10)20
partially satisfied(33)66
not satisfied(2)4
fullydissatisfied(5)10
Conclusion
As per the response given by the officials most of the officials were partially satisfied that wrong selection of borrower also contribute to NPA which means that selection process carried out by the bank is not appropriate or there is some difficulties in implementing them
Question number 13
Do you think that poor credit appraisal also contribute to NPA
Answer
Out of 50 respondent 5 were fully satisfied 10 were fully satisfied 30 were not satisfied were as only 5 were fully dissatisfied
Chart no 112
fully satisfied(5)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 14
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Answer
Out of 50 responses 3 were fully satisfied 15 were partially satisfied 25 were not satisfied where as 7 were full dissatisfied
Chart no 113
fully satisfied(3)partiallt satisfied(15)not satisfied(25)fully dissatisfied(7)
Conclusion
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not contribute to NPA This means that the attitude of bank toward the borrower is not inflexible
Question number 15
Do you think that system over load is also one of the causes of NPA
Answer
Out of 50 respondent 28 were fully satisfied 12 were partially satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 114
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
The study is an endeavor to search the cause of acrsquos turning into NPA analyzing the efforts of the bank to recover the dues and to suggest the measures to contain the NPA to minimum or to zero level
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the npa
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
COMPANY PROFILE OF SBI
The evolution of sbi can be traced back to the first decade of the 19th century It began with the
establishment of bank of culcutta in cuicutta on 2nd july 1806 The bank was redesined as the bank of
bangal three year later on 2nd january 1809 It was the first ever joint company of british india
established under the sponsorship of govt of bangal Subsiquently the bank of madras and bank of
bombay follwed the bank of bangal These banks were amalgamated to form imperial bank on 27th
jan 1921
An important turning point in the history of SBI is the launch of 1st five year plan of independence
india in 1951 The plan aimed to serving the indian economy in general and the rural sector of the
countryin particular There for in order to serve the economy as a whole and the rural sector in
particular all india rural credit survey committee recommended the formation of state ndash partnered
and state ndash sponsored bank An act was passed in the parliament of india in may 1955 As a result the
sbi was established on 1st july 1955this results in making SBI more powerful as much as quarter of
resourses of indian banking system was controlled by state later on state bank of india (subsidiary
banks) act was pessedin 1959 This act enabled the sbi to make the 8 state associated bank as its
subsidiaries
BRANCHES
The corporate centre of SBI is located in Mumbai In order to cater to different function There is several other
establishments in and outside Mumbai apart from corporate center The bank boasts of having as many as 14
local head office and 57 zonal offices located as major cities throughout India It is recorded that SBI has
more than 10000 branches will cater to its customer throughout India
ATM
SBI provides easy access to money to its customers through more than 90000 ATMs in India The
bank also facilitates the free transaction of money at ATMs of state bank group You may also
transect money through SBI commercial and international bank ltd by using the state bank ATM
CUM DEBIT CARD It the only banking company to open its ATM in region of kargil
Source SBIcoin
Xpress credit
INTRODUCTION-
The Xpress Credit Scheme was formulated in April 2004 in the form of pre-approved loan to
employees of leading PSUs and Government organizations At present the scheme is open to
Employees of government semi-government profit making PSUs Educational Institutions of
national repute and companies of good standing (based on their CRA rating) The scheme is built
around the concept of check ndash off (the process by which the salary disbursing officer undertakes to
deduct loan installments from the salary of the borrower and remits the same to the Bank for credit
of the loan account) Xpress Credit Loans may also be sanctioned in those cases where the borrower
gives sufficient PDCs (Post Dated Cheques) for entire tenure of the loan
Source Xpress credit circular
PURPOSE
The loan under the scheme is granted for any legitimate personal purpose (eg expenses for
domestic or foreign travel medical treatment of self or a family member meeting any financial
liability such as marriage of sondaughter defraying educational expenses of wards meeting
margins for purchase of assets etc)
Source Xpress credit circular
ELIGIBILITY
1 EMPLOYERS
Central and state Government
Quasi-Government
Profit making PSUs
Educational Institutions of National Repute
Companies with a CRA rating of SB1 to SB5
Companies with a CRA rating of SB6 and SB7 are also eligible if it satisfies take over norms
2 EMPLOYEES
Permanent employees with a minimum 1 yearrsquos length of service
He should have sufficient cash flows to repay the loan from salary as evidenced by 6 monthsrsquo
salary slipsincome tax returns of 2 years
He should provide proof of residence and proof of identity to satisfy KYC norms
He should produce 6 months satisfactory statement of bank account (at any bank)
Proof of Employment in the eligible company
Source Xpress credit circular
MINIMUM NET MONTHLY INCOME
The minimum Net Monthly Income (NMI) of the employee should beRs5000- It can
Be lowered to Rs3000- subject to the condition that the salary accounts of the entire enterprise are
with us The Branch will ensure to obtain an Undertaking from the borrower that there is no other
deduction from hisher salary which is not reflected in the salary slip [As per Annexure ndash (B) ndash (v)]
LOAN AMOUNT
a) Minimum Rs24000=
b) Maximum 24 Months NMI with a ceiling of Rs1500 lacs
TYPE OF LOAN
LoanD Term demand Loan (NO OVERDRAFT)
REPAYMENT PERIOD
Maximum 60 months
EMI NMI le 50
REVIEW
Review of loan will be done yearly
RENEWAL
Renewal of loans will be allowed after 24 months
CHECK OFF
The process by which the salary disbursing officer under takes to deduct the loan
installments from the salary of the borrower and remits the same to the Bank for credit to the loan
account
Or
The employer pays the borrowerrsquos salary into his SavingsCurrent Account with our Bank
The borrower gives an irrevocable Standing Instruction (SI) For recovery of the loan installments
from his aforesaid account with the SI being synchronized with the date of credit of salary in the
borrowerrsquos SavingsCurrent Account
AND
The employer undertakes to inform the Bank if and when there is a severance due to borrowerrsquos
transfer resignation retirement etc[ Branch will ensure to obtain the undertaking from the employer
and employee as per Annexure ndash B (I) B (ii) II or B (iii) ]
Source Xpress credit circular
CATEGORY I
FULL CHECK OFF
As given under the head CHECKOFF
AND
Undertaking from the employer to obtain a NOC from the Bank before settling the dues of the
borrower on transfer resignation retirement etc [As per Annexure ndash B (IV)]
This stipulation can be waived by the sanctioning authority incase of employees of Central State
Government PSUs Universities and Reputed Colleges In case of other employers the CGM of the
Circle has been permitted to waive the stipulation But in no case this can be waived for IT sector
employees
CATEGORY II
PARTIAL CHECK OFF
As given under the head CHECKOFF
CATEGORY III
WITH NO CHECK OFF
The employer pays the borrowerrsquos salary into his SavingsCurrent Account with our Bank
The borrower gives an irrevocable Standing Instruction (SI) for
recovery of the loan installments from his aforesaid account twitch the SI being synchronized with
the date of credit of salary in the borrowerrsquos SavingsCurrent Account
OR
Conditions as given under the head CHECKOFF is not fulfilled but the borrower provides monthly
PDCs (Post Dated Cheques) for entire tenure of the loan provided eligibility criteria are fulfilled
(Guidelines on Post Dated cheques is annexed as per Annexure A)
INTEREST RATE
The Interest rate is based on the category of Check off available
Category I
5 above the base rate ie - 970 +5 =1470 ( currently 1470 pa)
Category II
7 above the base rate (currently 1670 pa)
Note The GM of the Network is vested with powers to extend the Category II rate to a Category III
borrower only in case of employees of SB1 to SB5 rated companies who maintain their salary
accounts with us The Category III employees who do not maintain their salary accounts with us but
provide PDCs for the loan should be charged the card rate applicable to Category III and no
deviation should be permitted by Circle GMs
PENAL INTEREST
Penal interest should not be charged for loans up to Rs25000For Loans above Rs25000- if the
irregularity exceeds EMI or installment amount for a period of one month then penal interest would
be charged 2 pa(over and above the applicable interest
rate) on the overdue amount for the period of default If part installment or part EMI remains
overdue then penal interest should not be levied
This provision has been made to avoid application of penal interest on Personal Segment Loan
accounts where EMIs stipulated or installments are being paid regularly by the borrowers
Source Xpress credit circular
SECURITY
The loan is clean in nature and no security is required
PROCESSING FEE
11 of the loan amount including tax
PRE-SANCTION PROCESS
The following documents will be obtained before sanction-
I Application cum appraisal Form With a photograph of the borrower duly attested by the
authorized official
II It is proposed to put in place an arrangement for verification of the address of the borrower by an
outside agency A report duly signed by the verification agency (in places where an arrangement is
in place) or by our officerstaff in other places (where verification agency approved by Corporate
Centre is not available) should be complied based on the following verifications
I Verification of the borrowerrsquos residence address as given in the loan application
by actually visiting the residence of the borrower
II Verification of the borrowerrsquos office address as given in the loan application by
actually visiting the office of the borrower
Source Xpress credit circular
III Verification of the borrowerrsquos residence telephone number as given in the loan
application by actually calling the residence telephone number of the borrower
IV Verification of the borrowerrsquos office telephone number as given in the loan
Application by actually calling the office telephone number of the Borrower
V Verification of the IT return of the Borrower with IT department through a
person approved by the Regional OfficeZonal Office where feasible Where IT
return cannot be verified by the Bank statement of account of the borrower may
be scrutinized to verified income flows
Where the verification is not outsourced the Branch staff
Must do the verification and the report should be added with the loan documents
Flow chart of loan procedure of retail loan
Chart no 01
Disagree
NON PEFORMING ASSETS (NPA) ndash CONCEPT
The three letters ldquoNPArdquostrike terror in banking sector and business circle todayNPA is the short
Form of ldquoNon performing Assetsrdquo
Enquiry about loan
Agreeprovided with check list and
application
submission of documents and application dully
filled up
Documents taken
verification of application and
documebtsCIBIL report
Processing of loan
Sangtion of loan
Document
Control Disbursal of loan
phasewise lumpsum
In banking NPA are loans given to doubtful customers who may or may not repay the
loan on time There are two types of assets viz performing and non performing Performing loans
are standard loans on which both the principle and interest are secured and their return is guaranteed
NPA means the debt which is given by the bank is unable to recover is called
nonperforming assets A NPA account in the books of accounts is an asset as it indicates the amount
received from the defaulters It means if any bank gives loan and is not paid by the customers till 90
days than that account is called as NPA account
DEFINITION
An asset including leased assets becomes nonperforming when it ceases to generate income
for the bank
A NPA was defined as a credit facility in respect of which the interest or installment
of principle as remained ldquopast duerdquo for specific period of time
Source googlecoin
The specific period was reduced in a phased manner as under
wef ndash 31031993 four quarters
wef ndash 31 031994 three quarters
wef - 31031995 two quarters
wef - 31032001 180 days
wef - 31032004 90 days from past due
90 days delinquency is not applicable to agriculture segment
With effect from march 31 2004 NPA shall be a loan or an advance where
1) Term loan interest installment of principle remain over due for 90 days
2) Cash creditover draft an account remain ldquoout of orderrdquo for a period of more than 90 days
3) Bills The bills remain over due for a period more than 90 days
4) Agriculture loan
a The loan has been granted for short duration crop installments of the principle
remain over due for two crop season beyond the due date
b If the loan has been granted for long duration crop installment of the principle
remain over due for one crop season beyond the due date
Source Rbiorgin
CLASSIFICATION OF LOANS
In India loans are classified on following basis
Performing assets
Loans where the interest and or principle not remain overdue for more then 90 days
Non-performing assets
Any loan repayment remains over due for more than 90 days is considered as NPA
According to the securitization and re construction of financial assets and enforcement of
security interest ordinance2002 ldquonon performing assetsrdquo(NPA) means an assets or ac of
borrower which has been classified by the bank as sub-standard doubtful or loss asset in
accordance with the guidelines relating to asset classification issued by RBI
Source googlecoin
ASSET - CLASSIFICATION
Assets can be categorized into four categories (a) standard (b) sub-standard
(c) doubtful (d) loss The last three categories are classified as npa based on the the period for
which the asset has remained non-performing and the realisability of the dues
Standard assets the loan ac which are regular and do not carry more than normal risk are
known as standard assets there could be ac which though have not become npa but are
irregular Such ac are called special mention ac
Sub- standard assets with effect from 3132005 a sub-standard assets is one which is
classified as NPA for a period not exceeding 12 months
Doubtful asset with effect from 3132005 an asset is to be classified as doubtful if it
remained npa or sub-standard for a period exceeding 12 months
Loss assets a loss asset is one where loss has been identified by the bank or internal and
external auditors or the RBI inspection but the amount as not been written off wholly In
other words such an asset is considered uncollectable and such little value that its
continuance as a bankable asset is not warranted although there may be some salvage or
recoverable value
NPA IDENTIFICATION NORMS
With effect from 31st march 2004 a loan or advance become npa when
a Interest or installment of the principle remains overdue for a period more then 90
days in respect of term loan
b The ac remain out of order for a period more 90days in respect of over draft cash
cash credit
c The bill remains overdue for a period more than 90 days in case of bills purchased
and discounted
d With effect from Sept 2004 loan granted for short duration crops will be treated as
NPA if the installment of principle or interest there on remains overdue for two crop
season and loan granted for long duration will be treated as NPA if the installment
remains overdue for one crop season
Out of order
An account will be treated as out as out of order if the outstanding balance remain
continuously in excess of the sanctioned limitdrawing power In cases where the
outstanding balance in the principle operating ac is less than the sanctioned limit but
there are no credit continuously for 90 days as on the date of balance sheet or the
credit are not enough to cover the interest debited during the same period
Overdue
An amount due to the bank under any credit facility is overdue it is not paid on the due
date fixed by the bank
The date of npa will be actual date on which sippage occurred as mentioned below
For term and demand loan ac
The date on which the installment of the principle have
remaine overdue for a period more then 90 days
For over draft and cash credit ac
The date on which the ac completed period of more than 90
days of being continuously out of order
Source wwwRBI Org in
PROVISING NORMS
There is time lag between an ac becoming doubtful for recovery the realization of security and
erosion over a loan period of time in its value So RBI directives now requiresthe banks to make
provisions in their balance sheet for all non- standard loan asset Provisioning is made on all types of
assets ie Standard sub-standard doubtful and loss assets
1 Standard assets RBI vides its circular dated 151108 revised the provisioning requirements
For all type of standard assets it has been reduced to a uniform level of 040of outstanding
at global basis except in the case of direct advance to agriculture and SME sector which
shall continue to attract a provisioning of 025 The provision toward standard assets need
not to be netted from gross advances but shown separately as ldquo contigent provisionsrdquo against
standard assets under other liquidities and provisions others in schedule 5 of the balance
sheet
2 Sub-standard assets- In respect of sub-standard assets the rate of provision is 10 of
outstanding balance without considering ECGC guarantee cover or securities available
However if the loan was unsecured from the begining there would be additional provision of
10 ie total provision would be 20 of the outstanding balance Unsecured exposure is
defined as an exposure where the realizable value of the security as assessed by the
bankreserve banks inspecting officers is not more than 10 ab-intio of the outstanding
exposure
3 Doubtful assets In case of doubtful assets while making provision realizable value of
security is to be considered 100 provision is made for unsecured portion In case of
secured portion the rate of provision depend on age of doubtful assets as under
Age of doubtful assets Provision as of secured portion
Doubtful up to 1 year D1 20 of RVS( realizable value of security)
Doubtful for more than 1 year D2 30 of RVS
Doubtful for more than 3 years D2 100 of RVS
Thus if an ac is doubtful for more than 3 years than 100 of the provision is to be made
both from secured and unsecured portion If an advance has been guaranteed by DICGC
CGFTECGC and is doubtful than provision on secured portion will be as in other cases but
provision on unsecured portion will be made after deducting the claim value
4 LOSS ASSET 100 of the outstanding amount while making provision on NPAs amount
lying in suspense ac and derecognized interest should be deducted from gross advance and
provision be made on balance amount
5 OVERALL PROVISION With a view to improving the improving the provisioning cover
and enhancing the soundness of the individual banks RBI has proposed in oct- 09 policy that
bank should augment their provisions and ensure that their total provisioning coverage ratio
including floating provisions is not less than 70
Source wwwRBIorgin
IMPACTEFFECT OF NPA UPON BANKS
A strong banking sector is important for flourishing economy The failure of banking sector
may have an adverse impact on other sector NPA are one of the major concerns of sector
banks is increasing result in nonperforming assets The NPA impact drastically to the
working of banks The efficiency of bank not always reflected by the size of its balance sheet
but by the level of return on its assetsNPA do not generate interest income for the banks but
the same time banks are required to make provisions for such NPAs from their current
profits
They erode current profits through provisioning requirement
They result in reduced interest income
They require higher provisioning requirements effecting profits and accretion to capital
Adverse impact on capital adequacy ratio
Roe and Roa goes down because NPA do not earn
Banks rating gets effect
Banks cost of raising funds goes up
Bad effect on goodwill
Bad effect on equity value
EARLY SYMPTOMS BY WHICH ONE CAN RECOGNIZE A PERFORMING
ASSETS TURNING TO A NON PERFORMING ASSET
Four categories of early symptoms
1) FINANCIAL
(a) Non- payment of very first installment
(b) Bouncing of cheque due to insufficient balance in the ac
(c) Irregularity in installment
(d) Irregularity of operations in ac
(e) Unpaid overdue bill
(f) Declining current ratio
2) OPERATIONAL AND PHYSICAL
(a) If information is received that the borrower has either initiated the process of winding up or not doing the business
(b) Over-due receivable
(c) Stock statement not submitted on time
(d) External non-controllable factor like natural calamities in the city where the borrower lives
(e) Non- payment of salary
(3) ATTITUDNAL CHANGE
(a) Use for personal comfort stocks and shares by borrowers
(b) Avoidance of contact with bank
(c) Problem between partners
(4) OTHER
(a) Change in govt policies
(b) Death of the borrower
(c) Delay in salary
PREVENTIVE MEASUREMENT FOR NPA
Early recognition of the problem
Invariably by the time banks start their efforts to get involved
in a revival process its too late to retrieve the situation ndash both in terms of rehabilitation of the
project and the recovery of banks dues Identification of the weakness regardless of the fact
that it may not have become NPA is imperative Assessment of the potential of revival may
be done on the basis of a techno-economic viability study Restructuring should be attempted
where after an objective assessment of the promoterrsquos intention banks are convinced of a
turn around with in a scheduled facilitate winding upselling of units earlier so as to recover
whatever is possible through means before the security position becomes worse
Identifying borrowers with genuine intent
Identifying borrower with genuine intent from those who
are non-serious with commitment or stake in revival is a challenge confronting bankers Here
the role of front line officials at branch level is paramount as they are the ones who have
intelligent inputs with regard to promoters lsquo sincerity and capability to achieve turnaround
Based on this objective assessment bank should decide as quickly as possible whether it
would be worthwhile to commit additional finance
In this regard banks may consider having
ldquospecial investigationrdquo of all financial transaction or business transaction books of account
order to ascertain real factor that contributed to sickness of borrower Bank may have panel
of technical experts with proven expertise and task record of preparing techno-economic
study of the project of the borrowers
Borrowers having genuine problems due to temporary mismatch in find flow or sudden
requirement of additional fund may entertained at branch level for this purpose a special
limit to such type of cases should be decided This will obviate the need to route the
additional funding through the controlling officers in deserving cases and avert many
accounts sleeping into NPA category
Timeliness and adequacy of response
Longer the delay in response greater the enjury to the
account and the asset Time is a crucial element in any restructuring or rehabilitation activity
The response decided on the basis of techno- economic study and promoterrsquos commitment
has to be adequate in terms of extend of additional funding and relaxations etc under the
restructuring exercise The package of assistance may be flexible and bank may look at the
exit option
Focus on cash flow
While financing at the time of restructuring the banks may not be guided
by the conventional fund flow analysis only which could yield a potentially misleading
picture Appraisal for fresh credit requirement may be done by analyzing fond flow in
conjunction with the cash flow rather than only on the basis of fund flow
Source wwwAskcom
Management effectiveness
The general perception among the borrower is lack of finance that
leads to sickness and NPAs but this may not be the case all the time Management effectiveness
advance business condition is a very important aspect that affects a borrowing units fortunes A bank
may commit a multiple finance to an align unit only after basic viability of the enterprise also in the
context of quality of management is examined and confirmed It will be useful to have consultant
appointed as early as possible to examine this aspect A proper techno-economic viability study thus
become the basis on which any future action can be considered
Multiple financing
A) During the exercise for assessment of viability and restructuring a pragmatic and unified
approach by all the leading banks as also sharing of all relevant information on the
borrower would go a long way toward overall success of rehabilitation exercise given the
probability of successfailure
B) In some default cases Where the unit is still working The bank should make sure that it
captures the cash flow and insure that such cash are used for working capital purpose
Toward this end there should be a continuous flow of information among consortium
member A bank which is not a part of consortium may not be allowed to offer credit
facility to such defaulting clients Current account facility may also be denied at non-
consortium banks to such clients and violation may attract penal action The credit
information bureau of india (CIBIL) may be very useful for meaningful information
exchange on defaulting borrowers once the setup become fully operational
C) In a forum of lenders the priority of each lender will be different While one set of lender
may be willing to wait for longer time to recover its dues another lender may have a much
shorter timeframe in mind So it is possible that the letter categories of lenders may be
willing to exit even at a cost by a discounted settlement of the exposure There for any plan
for restructuringrehabilitation may takes into account
D) Corporate debt restructuring it has been institutionalized in 2001 to provide a timely and
transparent system for restructuring the corporate debt of RS 20 crores and above with the
banks on a voluntary basis and outside a legal framework Under this system bank are
greatly benefit in terms of restructuring of large standard accounts (potential NPAs) and
viable sub-standard account with multiple banking arrangement
NPA MANAGEMENT- RESOLUTION
Compromise settlement schemes
Restructuringrescheduling
Lok adalat
Corporate debt restructuring cell
Debt recovery Tribunals (DRT)
Proceeding under the code of civil procedure
Board of industrial and financial reconstruction
National company law Tribunal (NCLT)
Sale of NPA to other bank
Sale of NPA to ARCSC under securitization and reconstruction of financial assets for
enforcement of security interest Act 2000 (SRFAESI)
Liquidation
Source wwwRBIorgin
NPA MANAGEMENT IN INDIA
Formation of the credit information bureau (India) limited (CIBIL)
Release of willful defaulterrsquos listRBI also releases a list of borrowers with aggregate
outstanding of RS 1 crore and above against whom bank have filed suit for recovery of their
fund
Reporting of frauds to RBI
Norms of lenders labiality- framing of fair practices code with regard to lenders lability to
be followed by banks
Risk assessment and Risk management
RBI has advised banks to all cases of willful defaulters in case of 1 crore and above and
files suits in such cases
Responding quick mortality cases
Special mention accounts for early identification for bad debt loans and advances over due
for less than one or two quarters would come under this category However these accounts do
not need provisioning
INTERNATIONAL PRACTICES ON NPA MANAGEMENT
Subsequent to the Asian currency crisis which severely crippled the financial system In
addition to the above some of the more recent and aggressive step to NPAs have been taken
by Taiwan Taiwanese financial institution have been encouraged to merge and form bank
based AMCs through the recent introduction of financial holding company act and financial
institution Asian countries the magnitude of NPAs in Asian financial institution was brought
to light Driven by the need to proactively tackle the soaring NPAs level the respective govt
embarked upon a program of substantial reform This involves setting up processes for early
identification and resolution of NPAs The table below provides a cross country comparison
of approaches used for NPA resolution Mergers Act A long side the ministry of finance has
followed a carrot and strict policy of specifying the required NPA ratio for banks while also
providing flexibility in modes of NPA assets resolution and a conduct
ive regulatory and tax environment Deferred loss write-off provisions have been instituted to
provide breathing space for lenders to absorb NPA write-off While it is too early to
comment on success of NPA resolution process in Taiwan the early sign are encouraging
Detailed below are some key NPA management approaches adopted by banks in South East
Asian countries
1 Credit risk mitigation
2 Early warning systems
3 Assets management companies
Increasing willingness to sell NPAs to AMCs
Effective resolution strategy
Appointment of special administrators
4 Out of court restructuring
Source wwwgooglecom
DIFFICULTIES WITH NON PERFORMING ASSETS
I Owners do not receive a market return on their capital In the worst case if the bank
fails owner lose their assets
II Depositors do not receive a market return on savings In the worst case if the bank
fails depositors lose their assets or uninsured balance Banks also redistribute losses
to other borrowers by charging higher rate of interest
III Non-performing loans epitomize bad investors They misallocate credit from good
projects which do not receive funding to failed project
IV 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
shortage the shortage can jam payments across the country
b Illiquidity constraints banks in paying depositors eg cashing their paychecks
c Undercapitalized banks exceed the bank capital base
Lending by bank has been politicized It is common knowledge
that loans are given to various industrial houses on common consideration and
viability of project but on political consideration In normal circumstances banks
before extending any loan would make a thorough study of the actual need of the
party considered the prospect of the business in which it is engaged Since it is
not looked into many of the loans becomes NPA
REASONS F0R AN ACCOUNT BECOMING NPA
Those attribute to borrower
Failure to bring in required capital
Lack of proper planning
Unwanted expenses
Lack of expertise
Poor credit collection
Miss management
Heavy borrowing
Lack of knowledge regarding NPA
Willful defaulters
Death of the borrower
Those attribute to banks
Wrong selection of borrower
Poor credit appraisal
Unhelpful in supervision
Too inflexible attitude
System overload
Lack of motivation
Delay in sanction
Lack of trained staff
Lack of commitment to recovery
Lack of personal visit to the borrower office
Lack of personal visit to the borrowerrsquos residence
Other
Fast changing technology
Unhelpful attitude of govt
Increase in material cost
Government policies
Taxation law
Political hostility
INDIAN ECONOMY AND NPA
Undoubtedly the world economy has slowed down recession is at its peak globally stock markets
have tumbled and business itself getting hard to do The Indian economy has been much affected due
to high fiscal deficit poor infrastructure facilities sticky legal system cutting of exposures to
emerging market by FIIs etc
Further international rating agencies like standard and poor
have lowered Indiarsquos credit rating to sub- investment grade Such negative aspects have often
outweighed positive such as increasing for reserve and a manageable inflation rate
Under such situation I go without saying that banks are no exception
and are bound to face the heat of global down turn One would be surprise to know that banks and
financial institution in India holds non-performing assets worth Rs 1 10000 crores Bankers have
realized that unless the level of NPA is reduced drastically they will find it difficult to survive
The actual level of NPA in India is around $ 40 billion much higher than govt estimation of $16
billion This difference is largely due to the discrepancy in accounting the NPAs followed by India
and rest of the world The accounting norms of India are less stringent than those of the developed
economies The Indian banks also have the tendency to extend the past due Considering the GDP
India nearly $ 470 billion the NPA are 8 of the total GDP which was better than many Asian
countries The NPA of china was 45 of the GDP While Japan had NPAs of 25 of the GDP
The aggregate level of NPAs in Asia has increased from $ 25 billion in 2007 to
$ 34 billion on 2009 looking to such overall pictures of the market we can say that India is doing
well and the steps taken are looking favorable
Source googlecoin
DATA ANALYZING THE QUETIONNAIRE
Two set of questionnaire were prepared to collect the feedback One set of questionnaire was meant for branches and other set of questionnaire was meant for borrowers
The set of questionnaire were given to the branches under hazaribag (RBO) and collected the feedback of the bankers of P segment and the branch manager
The questionnaire prepared for branch contained 15 questions and the questionnaire prepared for borrower contains 10 questions
The data was collected from 50 bankers and the data analysis of the branch questionnaire is as follows
Question number 1
Does not require any data analysis and information was sought to know the business level of the branches for the purpose of whether particular branch is actively engaged in xpress credit portfolio
Question number 2
Do you think that the borrowers are aware about NPA
Answer
32 of the respondent feel that the borrowers are not aware about NPA and 18 respondents feel that borrowers are aware about NPA
Chart no 11
yes
no
0
5
10
15
20
25
30
35
1832 Column1
Conclusion
Majority of the bank officials feels that the borrowers are not aware about NPA
Question number 3
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Answer
Out of 32 respondent 22 respondents is fully satisfied that lack of knowledge among the borrower regarding NPA is one of the reason for NPA 08 respondent were partially satisfied with it and 02 respondent were not satisfied with it
Chart no 12
fully satisfied(22)69
partially satisfied(8)25
not satisfied(2)6
Sales
Conclusion
Majority of the borrowers feels that lack of knowledge among the borrower regarding NPA is one of the reasons for NPA
Question number 4 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Answer
Out of 50 respondent 30 of the respondent strongly satisfied that these external factors contribute to NPA 10 respondent were partially satisfied with it 5 were not satisfied where as 5 were fully dissatisfied with it
Chart no 13
6020
10
10
fully satisfied(30) partially satisfied(10) not satisfiec(5) fully desatisfied(5)
Conclusion
Most of the respondent thinks that external factrs like willful defaulter change in govt policy contribute to NPA
Question number 5
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Answer
Chart no 14
feedback
fully satisfied(20)partially satisfied(12)not satisfied(12)fully dissatisfied(6)
Conclusion
As per the response of the officials most of the officials feel that internal factors are also responsible for NPA
Question number 6
Do you think that inflation is one of the reasons for NPA
Answer
Out f 50 responses 22 were strongly satisfied 18 were partially satisfied 8 were not satisfied and 2 were fully dissatisfied
Chart no 15
fully satisfied(20)44
partially satisfied(18)36
not satisfied(5)10
fullt dissatisfied(5)10
Conclusion
Growing inflation increasing goods rate is also one of the reason for NPA
Question number 7
Do you think that lack of PSS is also contributed to NPA
Answer
Out of 50 responses 30 were fully satisfied with it 12 were partially satisfied and 8 were fully dissatisfied
Chart no 16
6024
16
Open
fully satisfied(30)Partially satisfied(12)not satisfied(0)fully dissatisfied(8)
Conclusion
Majority of the officiais feels that lack of PSS is one of the reason for NPA This means that the PSS carried out by the bank is not sufficient or not carried out properly
Question number 8
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Answer
Most of the respondent feels that increase in unwanted expenses of the borrwer ls contribute to NPA
Chart no 17
56
12
28
4
FULLY SATISFIED(28)PARTIALLY SATISFIED(6)NOT SATISFIED(14)FULLY DISSATISFIED(2)
Conclusion
As per response of the officials increasing inflation have an adverse effect on the financial sector its working performance as well as on NPA
Question number 9
Do you think that high rate of interest under Xpress credit also contributes to NPA
Answer
Out of 50 respondent 25 respondent were not satisfied 10 were partially satisfied 10 were strongly dissatisfied where as only 5 out of 50 were fully satisfied with it
Chart no 18
strongly satisfied(5)partially satisfied(10)not satisfied(25)fully dissatisfied(10)
Conclusion
Most of the respondents are not satisfied with it They feel that the rate of interest charged by SBI under Xpress credit is not high and it will not contribute to NPS
Question number 10
Do you think that lack of proper planning of the borrower is one of the reason for NPA
Answer
Out of 70 respondent 35 were fully satisfied 5 were not satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 19
fully satisfied(35)70
partially satisfied(10)20
not satisfied(5)10
Conclusion
Most of the respondent feels that the borrowers borrow money from the bank without any proper planning which is one of the most important reason for NPA
Question number 11
Is heavy borrowing also contribute to NPA
Answer
Out of 50 respondent 25 respondent were fully satisfied 12 were partially satisfied 8 were not satisfied were as 5 were fully dissatisfied
Chart no 110
50
24
16
10
fully satisfied(25) partially satisfied(12) not satisfied(8) fully dissatisfied(5)
Question number 12
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Answer
As per the response of the officials 20 were fully satisfied 66were partially satisfied 4 were not satisfied with it were as 10 respondent were fully dissatisfied
Chart no 111
fully satisfied(10)20
partially satisfied(33)66
not satisfied(2)4
fullydissatisfied(5)10
Conclusion
As per the response given by the officials most of the officials were partially satisfied that wrong selection of borrower also contribute to NPA which means that selection process carried out by the bank is not appropriate or there is some difficulties in implementing them
Question number 13
Do you think that poor credit appraisal also contribute to NPA
Answer
Out of 50 respondent 5 were fully satisfied 10 were fully satisfied 30 were not satisfied were as only 5 were fully dissatisfied
Chart no 112
fully satisfied(5)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 14
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Answer
Out of 50 responses 3 were fully satisfied 15 were partially satisfied 25 were not satisfied where as 7 were full dissatisfied
Chart no 113
fully satisfied(3)partiallt satisfied(15)not satisfied(25)fully dissatisfied(7)
Conclusion
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not contribute to NPA This means that the attitude of bank toward the borrower is not inflexible
Question number 15
Do you think that system over load is also one of the causes of NPA
Answer
Out of 50 respondent 28 were fully satisfied 12 were partially satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 114
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
COMPANY PROFILE OF SBI
The evolution of sbi can be traced back to the first decade of the 19th century It began with the
establishment of bank of culcutta in cuicutta on 2nd july 1806 The bank was redesined as the bank of
bangal three year later on 2nd january 1809 It was the first ever joint company of british india
established under the sponsorship of govt of bangal Subsiquently the bank of madras and bank of
bombay follwed the bank of bangal These banks were amalgamated to form imperial bank on 27th
jan 1921
An important turning point in the history of SBI is the launch of 1st five year plan of independence
india in 1951 The plan aimed to serving the indian economy in general and the rural sector of the
countryin particular There for in order to serve the economy as a whole and the rural sector in
particular all india rural credit survey committee recommended the formation of state ndash partnered
and state ndash sponsored bank An act was passed in the parliament of india in may 1955 As a result the
sbi was established on 1st july 1955this results in making SBI more powerful as much as quarter of
resourses of indian banking system was controlled by state later on state bank of india (subsidiary
banks) act was pessedin 1959 This act enabled the sbi to make the 8 state associated bank as its
subsidiaries
BRANCHES
The corporate centre of SBI is located in Mumbai In order to cater to different function There is several other
establishments in and outside Mumbai apart from corporate center The bank boasts of having as many as 14
local head office and 57 zonal offices located as major cities throughout India It is recorded that SBI has
more than 10000 branches will cater to its customer throughout India
ATM
SBI provides easy access to money to its customers through more than 90000 ATMs in India The
bank also facilitates the free transaction of money at ATMs of state bank group You may also
transect money through SBI commercial and international bank ltd by using the state bank ATM
CUM DEBIT CARD It the only banking company to open its ATM in region of kargil
Source SBIcoin
Xpress credit
INTRODUCTION-
The Xpress Credit Scheme was formulated in April 2004 in the form of pre-approved loan to
employees of leading PSUs and Government organizations At present the scheme is open to
Employees of government semi-government profit making PSUs Educational Institutions of
national repute and companies of good standing (based on their CRA rating) The scheme is built
around the concept of check ndash off (the process by which the salary disbursing officer undertakes to
deduct loan installments from the salary of the borrower and remits the same to the Bank for credit
of the loan account) Xpress Credit Loans may also be sanctioned in those cases where the borrower
gives sufficient PDCs (Post Dated Cheques) for entire tenure of the loan
Source Xpress credit circular
PURPOSE
The loan under the scheme is granted for any legitimate personal purpose (eg expenses for
domestic or foreign travel medical treatment of self or a family member meeting any financial
liability such as marriage of sondaughter defraying educational expenses of wards meeting
margins for purchase of assets etc)
Source Xpress credit circular
ELIGIBILITY
1 EMPLOYERS
Central and state Government
Quasi-Government
Profit making PSUs
Educational Institutions of National Repute
Companies with a CRA rating of SB1 to SB5
Companies with a CRA rating of SB6 and SB7 are also eligible if it satisfies take over norms
2 EMPLOYEES
Permanent employees with a minimum 1 yearrsquos length of service
He should have sufficient cash flows to repay the loan from salary as evidenced by 6 monthsrsquo
salary slipsincome tax returns of 2 years
He should provide proof of residence and proof of identity to satisfy KYC norms
He should produce 6 months satisfactory statement of bank account (at any bank)
Proof of Employment in the eligible company
Source Xpress credit circular
MINIMUM NET MONTHLY INCOME
The minimum Net Monthly Income (NMI) of the employee should beRs5000- It can
Be lowered to Rs3000- subject to the condition that the salary accounts of the entire enterprise are
with us The Branch will ensure to obtain an Undertaking from the borrower that there is no other
deduction from hisher salary which is not reflected in the salary slip [As per Annexure ndash (B) ndash (v)]
LOAN AMOUNT
a) Minimum Rs24000=
b) Maximum 24 Months NMI with a ceiling of Rs1500 lacs
TYPE OF LOAN
LoanD Term demand Loan (NO OVERDRAFT)
REPAYMENT PERIOD
Maximum 60 months
EMI NMI le 50
REVIEW
Review of loan will be done yearly
RENEWAL
Renewal of loans will be allowed after 24 months
CHECK OFF
The process by which the salary disbursing officer under takes to deduct the loan
installments from the salary of the borrower and remits the same to the Bank for credit to the loan
account
Or
The employer pays the borrowerrsquos salary into his SavingsCurrent Account with our Bank
The borrower gives an irrevocable Standing Instruction (SI) For recovery of the loan installments
from his aforesaid account with the SI being synchronized with the date of credit of salary in the
borrowerrsquos SavingsCurrent Account
AND
The employer undertakes to inform the Bank if and when there is a severance due to borrowerrsquos
transfer resignation retirement etc[ Branch will ensure to obtain the undertaking from the employer
and employee as per Annexure ndash B (I) B (ii) II or B (iii) ]
Source Xpress credit circular
CATEGORY I
FULL CHECK OFF
As given under the head CHECKOFF
AND
Undertaking from the employer to obtain a NOC from the Bank before settling the dues of the
borrower on transfer resignation retirement etc [As per Annexure ndash B (IV)]
This stipulation can be waived by the sanctioning authority incase of employees of Central State
Government PSUs Universities and Reputed Colleges In case of other employers the CGM of the
Circle has been permitted to waive the stipulation But in no case this can be waived for IT sector
employees
CATEGORY II
PARTIAL CHECK OFF
As given under the head CHECKOFF
CATEGORY III
WITH NO CHECK OFF
The employer pays the borrowerrsquos salary into his SavingsCurrent Account with our Bank
The borrower gives an irrevocable Standing Instruction (SI) for
recovery of the loan installments from his aforesaid account twitch the SI being synchronized with
the date of credit of salary in the borrowerrsquos SavingsCurrent Account
OR
Conditions as given under the head CHECKOFF is not fulfilled but the borrower provides monthly
PDCs (Post Dated Cheques) for entire tenure of the loan provided eligibility criteria are fulfilled
(Guidelines on Post Dated cheques is annexed as per Annexure A)
INTEREST RATE
The Interest rate is based on the category of Check off available
Category I
5 above the base rate ie - 970 +5 =1470 ( currently 1470 pa)
Category II
7 above the base rate (currently 1670 pa)
Note The GM of the Network is vested with powers to extend the Category II rate to a Category III
borrower only in case of employees of SB1 to SB5 rated companies who maintain their salary
accounts with us The Category III employees who do not maintain their salary accounts with us but
provide PDCs for the loan should be charged the card rate applicable to Category III and no
deviation should be permitted by Circle GMs
PENAL INTEREST
Penal interest should not be charged for loans up to Rs25000For Loans above Rs25000- if the
irregularity exceeds EMI or installment amount for a period of one month then penal interest would
be charged 2 pa(over and above the applicable interest
rate) on the overdue amount for the period of default If part installment or part EMI remains
overdue then penal interest should not be levied
This provision has been made to avoid application of penal interest on Personal Segment Loan
accounts where EMIs stipulated or installments are being paid regularly by the borrowers
Source Xpress credit circular
SECURITY
The loan is clean in nature and no security is required
PROCESSING FEE
11 of the loan amount including tax
PRE-SANCTION PROCESS
The following documents will be obtained before sanction-
I Application cum appraisal Form With a photograph of the borrower duly attested by the
authorized official
II It is proposed to put in place an arrangement for verification of the address of the borrower by an
outside agency A report duly signed by the verification agency (in places where an arrangement is
in place) or by our officerstaff in other places (where verification agency approved by Corporate
Centre is not available) should be complied based on the following verifications
I Verification of the borrowerrsquos residence address as given in the loan application
by actually visiting the residence of the borrower
II Verification of the borrowerrsquos office address as given in the loan application by
actually visiting the office of the borrower
Source Xpress credit circular
III Verification of the borrowerrsquos residence telephone number as given in the loan
application by actually calling the residence telephone number of the borrower
IV Verification of the borrowerrsquos office telephone number as given in the loan
Application by actually calling the office telephone number of the Borrower
V Verification of the IT return of the Borrower with IT department through a
person approved by the Regional OfficeZonal Office where feasible Where IT
return cannot be verified by the Bank statement of account of the borrower may
be scrutinized to verified income flows
Where the verification is not outsourced the Branch staff
Must do the verification and the report should be added with the loan documents
Flow chart of loan procedure of retail loan
Chart no 01
Disagree
NON PEFORMING ASSETS (NPA) ndash CONCEPT
The three letters ldquoNPArdquostrike terror in banking sector and business circle todayNPA is the short
Form of ldquoNon performing Assetsrdquo
Enquiry about loan
Agreeprovided with check list and
application
submission of documents and application dully
filled up
Documents taken
verification of application and
documebtsCIBIL report
Processing of loan
Sangtion of loan
Document
Control Disbursal of loan
phasewise lumpsum
In banking NPA are loans given to doubtful customers who may or may not repay the
loan on time There are two types of assets viz performing and non performing Performing loans
are standard loans on which both the principle and interest are secured and their return is guaranteed
NPA means the debt which is given by the bank is unable to recover is called
nonperforming assets A NPA account in the books of accounts is an asset as it indicates the amount
received from the defaulters It means if any bank gives loan and is not paid by the customers till 90
days than that account is called as NPA account
DEFINITION
An asset including leased assets becomes nonperforming when it ceases to generate income
for the bank
A NPA was defined as a credit facility in respect of which the interest or installment
of principle as remained ldquopast duerdquo for specific period of time
Source googlecoin
The specific period was reduced in a phased manner as under
wef ndash 31031993 four quarters
wef ndash 31 031994 three quarters
wef - 31031995 two quarters
wef - 31032001 180 days
wef - 31032004 90 days from past due
90 days delinquency is not applicable to agriculture segment
With effect from march 31 2004 NPA shall be a loan or an advance where
1) Term loan interest installment of principle remain over due for 90 days
2) Cash creditover draft an account remain ldquoout of orderrdquo for a period of more than 90 days
3) Bills The bills remain over due for a period more than 90 days
4) Agriculture loan
a The loan has been granted for short duration crop installments of the principle
remain over due for two crop season beyond the due date
b If the loan has been granted for long duration crop installment of the principle
remain over due for one crop season beyond the due date
Source Rbiorgin
CLASSIFICATION OF LOANS
In India loans are classified on following basis
Performing assets
Loans where the interest and or principle not remain overdue for more then 90 days
Non-performing assets
Any loan repayment remains over due for more than 90 days is considered as NPA
According to the securitization and re construction of financial assets and enforcement of
security interest ordinance2002 ldquonon performing assetsrdquo(NPA) means an assets or ac of
borrower which has been classified by the bank as sub-standard doubtful or loss asset in
accordance with the guidelines relating to asset classification issued by RBI
Source googlecoin
ASSET - CLASSIFICATION
Assets can be categorized into four categories (a) standard (b) sub-standard
(c) doubtful (d) loss The last three categories are classified as npa based on the the period for
which the asset has remained non-performing and the realisability of the dues
Standard assets the loan ac which are regular and do not carry more than normal risk are
known as standard assets there could be ac which though have not become npa but are
irregular Such ac are called special mention ac
Sub- standard assets with effect from 3132005 a sub-standard assets is one which is
classified as NPA for a period not exceeding 12 months
Doubtful asset with effect from 3132005 an asset is to be classified as doubtful if it
remained npa or sub-standard for a period exceeding 12 months
Loss assets a loss asset is one where loss has been identified by the bank or internal and
external auditors or the RBI inspection but the amount as not been written off wholly In
other words such an asset is considered uncollectable and such little value that its
continuance as a bankable asset is not warranted although there may be some salvage or
recoverable value
NPA IDENTIFICATION NORMS
With effect from 31st march 2004 a loan or advance become npa when
a Interest or installment of the principle remains overdue for a period more then 90
days in respect of term loan
b The ac remain out of order for a period more 90days in respect of over draft cash
cash credit
c The bill remains overdue for a period more than 90 days in case of bills purchased
and discounted
d With effect from Sept 2004 loan granted for short duration crops will be treated as
NPA if the installment of principle or interest there on remains overdue for two crop
season and loan granted for long duration will be treated as NPA if the installment
remains overdue for one crop season
Out of order
An account will be treated as out as out of order if the outstanding balance remain
continuously in excess of the sanctioned limitdrawing power In cases where the
outstanding balance in the principle operating ac is less than the sanctioned limit but
there are no credit continuously for 90 days as on the date of balance sheet or the
credit are not enough to cover the interest debited during the same period
Overdue
An amount due to the bank under any credit facility is overdue it is not paid on the due
date fixed by the bank
The date of npa will be actual date on which sippage occurred as mentioned below
For term and demand loan ac
The date on which the installment of the principle have
remaine overdue for a period more then 90 days
For over draft and cash credit ac
The date on which the ac completed period of more than 90
days of being continuously out of order
Source wwwRBI Org in
PROVISING NORMS
There is time lag between an ac becoming doubtful for recovery the realization of security and
erosion over a loan period of time in its value So RBI directives now requiresthe banks to make
provisions in their balance sheet for all non- standard loan asset Provisioning is made on all types of
assets ie Standard sub-standard doubtful and loss assets
1 Standard assets RBI vides its circular dated 151108 revised the provisioning requirements
For all type of standard assets it has been reduced to a uniform level of 040of outstanding
at global basis except in the case of direct advance to agriculture and SME sector which
shall continue to attract a provisioning of 025 The provision toward standard assets need
not to be netted from gross advances but shown separately as ldquo contigent provisionsrdquo against
standard assets under other liquidities and provisions others in schedule 5 of the balance
sheet
2 Sub-standard assets- In respect of sub-standard assets the rate of provision is 10 of
outstanding balance without considering ECGC guarantee cover or securities available
However if the loan was unsecured from the begining there would be additional provision of
10 ie total provision would be 20 of the outstanding balance Unsecured exposure is
defined as an exposure where the realizable value of the security as assessed by the
bankreserve banks inspecting officers is not more than 10 ab-intio of the outstanding
exposure
3 Doubtful assets In case of doubtful assets while making provision realizable value of
security is to be considered 100 provision is made for unsecured portion In case of
secured portion the rate of provision depend on age of doubtful assets as under
Age of doubtful assets Provision as of secured portion
Doubtful up to 1 year D1 20 of RVS( realizable value of security)
Doubtful for more than 1 year D2 30 of RVS
Doubtful for more than 3 years D2 100 of RVS
Thus if an ac is doubtful for more than 3 years than 100 of the provision is to be made
both from secured and unsecured portion If an advance has been guaranteed by DICGC
CGFTECGC and is doubtful than provision on secured portion will be as in other cases but
provision on unsecured portion will be made after deducting the claim value
4 LOSS ASSET 100 of the outstanding amount while making provision on NPAs amount
lying in suspense ac and derecognized interest should be deducted from gross advance and
provision be made on balance amount
5 OVERALL PROVISION With a view to improving the improving the provisioning cover
and enhancing the soundness of the individual banks RBI has proposed in oct- 09 policy that
bank should augment their provisions and ensure that their total provisioning coverage ratio
including floating provisions is not less than 70
Source wwwRBIorgin
IMPACTEFFECT OF NPA UPON BANKS
A strong banking sector is important for flourishing economy The failure of banking sector
may have an adverse impact on other sector NPA are one of the major concerns of sector
banks is increasing result in nonperforming assets The NPA impact drastically to the
working of banks The efficiency of bank not always reflected by the size of its balance sheet
but by the level of return on its assetsNPA do not generate interest income for the banks but
the same time banks are required to make provisions for such NPAs from their current
profits
They erode current profits through provisioning requirement
They result in reduced interest income
They require higher provisioning requirements effecting profits and accretion to capital
Adverse impact on capital adequacy ratio
Roe and Roa goes down because NPA do not earn
Banks rating gets effect
Banks cost of raising funds goes up
Bad effect on goodwill
Bad effect on equity value
EARLY SYMPTOMS BY WHICH ONE CAN RECOGNIZE A PERFORMING
ASSETS TURNING TO A NON PERFORMING ASSET
Four categories of early symptoms
1) FINANCIAL
(a) Non- payment of very first installment
(b) Bouncing of cheque due to insufficient balance in the ac
(c) Irregularity in installment
(d) Irregularity of operations in ac
(e) Unpaid overdue bill
(f) Declining current ratio
2) OPERATIONAL AND PHYSICAL
(a) If information is received that the borrower has either initiated the process of winding up or not doing the business
(b) Over-due receivable
(c) Stock statement not submitted on time
(d) External non-controllable factor like natural calamities in the city where the borrower lives
(e) Non- payment of salary
(3) ATTITUDNAL CHANGE
(a) Use for personal comfort stocks and shares by borrowers
(b) Avoidance of contact with bank
(c) Problem between partners
(4) OTHER
(a) Change in govt policies
(b) Death of the borrower
(c) Delay in salary
PREVENTIVE MEASUREMENT FOR NPA
Early recognition of the problem
Invariably by the time banks start their efforts to get involved
in a revival process its too late to retrieve the situation ndash both in terms of rehabilitation of the
project and the recovery of banks dues Identification of the weakness regardless of the fact
that it may not have become NPA is imperative Assessment of the potential of revival may
be done on the basis of a techno-economic viability study Restructuring should be attempted
where after an objective assessment of the promoterrsquos intention banks are convinced of a
turn around with in a scheduled facilitate winding upselling of units earlier so as to recover
whatever is possible through means before the security position becomes worse
Identifying borrowers with genuine intent
Identifying borrower with genuine intent from those who
are non-serious with commitment or stake in revival is a challenge confronting bankers Here
the role of front line officials at branch level is paramount as they are the ones who have
intelligent inputs with regard to promoters lsquo sincerity and capability to achieve turnaround
Based on this objective assessment bank should decide as quickly as possible whether it
would be worthwhile to commit additional finance
In this regard banks may consider having
ldquospecial investigationrdquo of all financial transaction or business transaction books of account
order to ascertain real factor that contributed to sickness of borrower Bank may have panel
of technical experts with proven expertise and task record of preparing techno-economic
study of the project of the borrowers
Borrowers having genuine problems due to temporary mismatch in find flow or sudden
requirement of additional fund may entertained at branch level for this purpose a special
limit to such type of cases should be decided This will obviate the need to route the
additional funding through the controlling officers in deserving cases and avert many
accounts sleeping into NPA category
Timeliness and adequacy of response
Longer the delay in response greater the enjury to the
account and the asset Time is a crucial element in any restructuring or rehabilitation activity
The response decided on the basis of techno- economic study and promoterrsquos commitment
has to be adequate in terms of extend of additional funding and relaxations etc under the
restructuring exercise The package of assistance may be flexible and bank may look at the
exit option
Focus on cash flow
While financing at the time of restructuring the banks may not be guided
by the conventional fund flow analysis only which could yield a potentially misleading
picture Appraisal for fresh credit requirement may be done by analyzing fond flow in
conjunction with the cash flow rather than only on the basis of fund flow
Source wwwAskcom
Management effectiveness
The general perception among the borrower is lack of finance that
leads to sickness and NPAs but this may not be the case all the time Management effectiveness
advance business condition is a very important aspect that affects a borrowing units fortunes A bank
may commit a multiple finance to an align unit only after basic viability of the enterprise also in the
context of quality of management is examined and confirmed It will be useful to have consultant
appointed as early as possible to examine this aspect A proper techno-economic viability study thus
become the basis on which any future action can be considered
Multiple financing
A) During the exercise for assessment of viability and restructuring a pragmatic and unified
approach by all the leading banks as also sharing of all relevant information on the
borrower would go a long way toward overall success of rehabilitation exercise given the
probability of successfailure
B) In some default cases Where the unit is still working The bank should make sure that it
captures the cash flow and insure that such cash are used for working capital purpose
Toward this end there should be a continuous flow of information among consortium
member A bank which is not a part of consortium may not be allowed to offer credit
facility to such defaulting clients Current account facility may also be denied at non-
consortium banks to such clients and violation may attract penal action The credit
information bureau of india (CIBIL) may be very useful for meaningful information
exchange on defaulting borrowers once the setup become fully operational
C) In a forum of lenders the priority of each lender will be different While one set of lender
may be willing to wait for longer time to recover its dues another lender may have a much
shorter timeframe in mind So it is possible that the letter categories of lenders may be
willing to exit even at a cost by a discounted settlement of the exposure There for any plan
for restructuringrehabilitation may takes into account
D) Corporate debt restructuring it has been institutionalized in 2001 to provide a timely and
transparent system for restructuring the corporate debt of RS 20 crores and above with the
banks on a voluntary basis and outside a legal framework Under this system bank are
greatly benefit in terms of restructuring of large standard accounts (potential NPAs) and
viable sub-standard account with multiple banking arrangement
NPA MANAGEMENT- RESOLUTION
Compromise settlement schemes
Restructuringrescheduling
Lok adalat
Corporate debt restructuring cell
Debt recovery Tribunals (DRT)
Proceeding under the code of civil procedure
Board of industrial and financial reconstruction
National company law Tribunal (NCLT)
Sale of NPA to other bank
Sale of NPA to ARCSC under securitization and reconstruction of financial assets for
enforcement of security interest Act 2000 (SRFAESI)
Liquidation
Source wwwRBIorgin
NPA MANAGEMENT IN INDIA
Formation of the credit information bureau (India) limited (CIBIL)
Release of willful defaulterrsquos listRBI also releases a list of borrowers with aggregate
outstanding of RS 1 crore and above against whom bank have filed suit for recovery of their
fund
Reporting of frauds to RBI
Norms of lenders labiality- framing of fair practices code with regard to lenders lability to
be followed by banks
Risk assessment and Risk management
RBI has advised banks to all cases of willful defaulters in case of 1 crore and above and
files suits in such cases
Responding quick mortality cases
Special mention accounts for early identification for bad debt loans and advances over due
for less than one or two quarters would come under this category However these accounts do
not need provisioning
INTERNATIONAL PRACTICES ON NPA MANAGEMENT
Subsequent to the Asian currency crisis which severely crippled the financial system In
addition to the above some of the more recent and aggressive step to NPAs have been taken
by Taiwan Taiwanese financial institution have been encouraged to merge and form bank
based AMCs through the recent introduction of financial holding company act and financial
institution Asian countries the magnitude of NPAs in Asian financial institution was brought
to light Driven by the need to proactively tackle the soaring NPAs level the respective govt
embarked upon a program of substantial reform This involves setting up processes for early
identification and resolution of NPAs The table below provides a cross country comparison
of approaches used for NPA resolution Mergers Act A long side the ministry of finance has
followed a carrot and strict policy of specifying the required NPA ratio for banks while also
providing flexibility in modes of NPA assets resolution and a conduct
ive regulatory and tax environment Deferred loss write-off provisions have been instituted to
provide breathing space for lenders to absorb NPA write-off While it is too early to
comment on success of NPA resolution process in Taiwan the early sign are encouraging
Detailed below are some key NPA management approaches adopted by banks in South East
Asian countries
1 Credit risk mitigation
2 Early warning systems
3 Assets management companies
Increasing willingness to sell NPAs to AMCs
Effective resolution strategy
Appointment of special administrators
4 Out of court restructuring
Source wwwgooglecom
DIFFICULTIES WITH NON PERFORMING ASSETS
I Owners do not receive a market return on their capital In the worst case if the bank
fails owner lose their assets
II Depositors do not receive a market return on savings In the worst case if the bank
fails depositors lose their assets or uninsured balance Banks also redistribute losses
to other borrowers by charging higher rate of interest
III Non-performing loans epitomize bad investors They misallocate credit from good
projects which do not receive funding to failed project
IV 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
shortage the shortage can jam payments across the country
b Illiquidity constraints banks in paying depositors eg cashing their paychecks
c Undercapitalized banks exceed the bank capital base
Lending by bank has been politicized It is common knowledge
that loans are given to various industrial houses on common consideration and
viability of project but on political consideration In normal circumstances banks
before extending any loan would make a thorough study of the actual need of the
party considered the prospect of the business in which it is engaged Since it is
not looked into many of the loans becomes NPA
REASONS F0R AN ACCOUNT BECOMING NPA
Those attribute to borrower
Failure to bring in required capital
Lack of proper planning
Unwanted expenses
Lack of expertise
Poor credit collection
Miss management
Heavy borrowing
Lack of knowledge regarding NPA
Willful defaulters
Death of the borrower
Those attribute to banks
Wrong selection of borrower
Poor credit appraisal
Unhelpful in supervision
Too inflexible attitude
System overload
Lack of motivation
Delay in sanction
Lack of trained staff
Lack of commitment to recovery
Lack of personal visit to the borrower office
Lack of personal visit to the borrowerrsquos residence
Other
Fast changing technology
Unhelpful attitude of govt
Increase in material cost
Government policies
Taxation law
Political hostility
INDIAN ECONOMY AND NPA
Undoubtedly the world economy has slowed down recession is at its peak globally stock markets
have tumbled and business itself getting hard to do The Indian economy has been much affected due
to high fiscal deficit poor infrastructure facilities sticky legal system cutting of exposures to
emerging market by FIIs etc
Further international rating agencies like standard and poor
have lowered Indiarsquos credit rating to sub- investment grade Such negative aspects have often
outweighed positive such as increasing for reserve and a manageable inflation rate
Under such situation I go without saying that banks are no exception
and are bound to face the heat of global down turn One would be surprise to know that banks and
financial institution in India holds non-performing assets worth Rs 1 10000 crores Bankers have
realized that unless the level of NPA is reduced drastically they will find it difficult to survive
The actual level of NPA in India is around $ 40 billion much higher than govt estimation of $16
billion This difference is largely due to the discrepancy in accounting the NPAs followed by India
and rest of the world The accounting norms of India are less stringent than those of the developed
economies The Indian banks also have the tendency to extend the past due Considering the GDP
India nearly $ 470 billion the NPA are 8 of the total GDP which was better than many Asian
countries The NPA of china was 45 of the GDP While Japan had NPAs of 25 of the GDP
The aggregate level of NPAs in Asia has increased from $ 25 billion in 2007 to
$ 34 billion on 2009 looking to such overall pictures of the market we can say that India is doing
well and the steps taken are looking favorable
Source googlecoin
DATA ANALYZING THE QUETIONNAIRE
Two set of questionnaire were prepared to collect the feedback One set of questionnaire was meant for branches and other set of questionnaire was meant for borrowers
The set of questionnaire were given to the branches under hazaribag (RBO) and collected the feedback of the bankers of P segment and the branch manager
The questionnaire prepared for branch contained 15 questions and the questionnaire prepared for borrower contains 10 questions
The data was collected from 50 bankers and the data analysis of the branch questionnaire is as follows
Question number 1
Does not require any data analysis and information was sought to know the business level of the branches for the purpose of whether particular branch is actively engaged in xpress credit portfolio
Question number 2
Do you think that the borrowers are aware about NPA
Answer
32 of the respondent feel that the borrowers are not aware about NPA and 18 respondents feel that borrowers are aware about NPA
Chart no 11
yes
no
0
5
10
15
20
25
30
35
1832 Column1
Conclusion
Majority of the bank officials feels that the borrowers are not aware about NPA
Question number 3
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Answer
Out of 32 respondent 22 respondents is fully satisfied that lack of knowledge among the borrower regarding NPA is one of the reason for NPA 08 respondent were partially satisfied with it and 02 respondent were not satisfied with it
Chart no 12
fully satisfied(22)69
partially satisfied(8)25
not satisfied(2)6
Sales
Conclusion
Majority of the borrowers feels that lack of knowledge among the borrower regarding NPA is one of the reasons for NPA
Question number 4 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Answer
Out of 50 respondent 30 of the respondent strongly satisfied that these external factors contribute to NPA 10 respondent were partially satisfied with it 5 were not satisfied where as 5 were fully dissatisfied with it
Chart no 13
6020
10
10
fully satisfied(30) partially satisfied(10) not satisfiec(5) fully desatisfied(5)
Conclusion
Most of the respondent thinks that external factrs like willful defaulter change in govt policy contribute to NPA
Question number 5
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Answer
Chart no 14
feedback
fully satisfied(20)partially satisfied(12)not satisfied(12)fully dissatisfied(6)
Conclusion
As per the response of the officials most of the officials feel that internal factors are also responsible for NPA
Question number 6
Do you think that inflation is one of the reasons for NPA
Answer
Out f 50 responses 22 were strongly satisfied 18 were partially satisfied 8 were not satisfied and 2 were fully dissatisfied
Chart no 15
fully satisfied(20)44
partially satisfied(18)36
not satisfied(5)10
fullt dissatisfied(5)10
Conclusion
Growing inflation increasing goods rate is also one of the reason for NPA
Question number 7
Do you think that lack of PSS is also contributed to NPA
Answer
Out of 50 responses 30 were fully satisfied with it 12 were partially satisfied and 8 were fully dissatisfied
Chart no 16
6024
16
Open
fully satisfied(30)Partially satisfied(12)not satisfied(0)fully dissatisfied(8)
Conclusion
Majority of the officiais feels that lack of PSS is one of the reason for NPA This means that the PSS carried out by the bank is not sufficient or not carried out properly
Question number 8
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Answer
Most of the respondent feels that increase in unwanted expenses of the borrwer ls contribute to NPA
Chart no 17
56
12
28
4
FULLY SATISFIED(28)PARTIALLY SATISFIED(6)NOT SATISFIED(14)FULLY DISSATISFIED(2)
Conclusion
As per response of the officials increasing inflation have an adverse effect on the financial sector its working performance as well as on NPA
Question number 9
Do you think that high rate of interest under Xpress credit also contributes to NPA
Answer
Out of 50 respondent 25 respondent were not satisfied 10 were partially satisfied 10 were strongly dissatisfied where as only 5 out of 50 were fully satisfied with it
Chart no 18
strongly satisfied(5)partially satisfied(10)not satisfied(25)fully dissatisfied(10)
Conclusion
Most of the respondents are not satisfied with it They feel that the rate of interest charged by SBI under Xpress credit is not high and it will not contribute to NPS
Question number 10
Do you think that lack of proper planning of the borrower is one of the reason for NPA
Answer
Out of 70 respondent 35 were fully satisfied 5 were not satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 19
fully satisfied(35)70
partially satisfied(10)20
not satisfied(5)10
Conclusion
Most of the respondent feels that the borrowers borrow money from the bank without any proper planning which is one of the most important reason for NPA
Question number 11
Is heavy borrowing also contribute to NPA
Answer
Out of 50 respondent 25 respondent were fully satisfied 12 were partially satisfied 8 were not satisfied were as 5 were fully dissatisfied
Chart no 110
50
24
16
10
fully satisfied(25) partially satisfied(12) not satisfied(8) fully dissatisfied(5)
Question number 12
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Answer
As per the response of the officials 20 were fully satisfied 66were partially satisfied 4 were not satisfied with it were as 10 respondent were fully dissatisfied
Chart no 111
fully satisfied(10)20
partially satisfied(33)66
not satisfied(2)4
fullydissatisfied(5)10
Conclusion
As per the response given by the officials most of the officials were partially satisfied that wrong selection of borrower also contribute to NPA which means that selection process carried out by the bank is not appropriate or there is some difficulties in implementing them
Question number 13
Do you think that poor credit appraisal also contribute to NPA
Answer
Out of 50 respondent 5 were fully satisfied 10 were fully satisfied 30 were not satisfied were as only 5 were fully dissatisfied
Chart no 112
fully satisfied(5)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 14
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Answer
Out of 50 responses 3 were fully satisfied 15 were partially satisfied 25 were not satisfied where as 7 were full dissatisfied
Chart no 113
fully satisfied(3)partiallt satisfied(15)not satisfied(25)fully dissatisfied(7)
Conclusion
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not contribute to NPA This means that the attitude of bank toward the borrower is not inflexible
Question number 15
Do you think that system over load is also one of the causes of NPA
Answer
Out of 50 respondent 28 were fully satisfied 12 were partially satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 114
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
banks) act was pessedin 1959 This act enabled the sbi to make the 8 state associated bank as its
subsidiaries
BRANCHES
The corporate centre of SBI is located in Mumbai In order to cater to different function There is several other
establishments in and outside Mumbai apart from corporate center The bank boasts of having as many as 14
local head office and 57 zonal offices located as major cities throughout India It is recorded that SBI has
more than 10000 branches will cater to its customer throughout India
ATM
SBI provides easy access to money to its customers through more than 90000 ATMs in India The
bank also facilitates the free transaction of money at ATMs of state bank group You may also
transect money through SBI commercial and international bank ltd by using the state bank ATM
CUM DEBIT CARD It the only banking company to open its ATM in region of kargil
Source SBIcoin
Xpress credit
INTRODUCTION-
The Xpress Credit Scheme was formulated in April 2004 in the form of pre-approved loan to
employees of leading PSUs and Government organizations At present the scheme is open to
Employees of government semi-government profit making PSUs Educational Institutions of
national repute and companies of good standing (based on their CRA rating) The scheme is built
around the concept of check ndash off (the process by which the salary disbursing officer undertakes to
deduct loan installments from the salary of the borrower and remits the same to the Bank for credit
of the loan account) Xpress Credit Loans may also be sanctioned in those cases where the borrower
gives sufficient PDCs (Post Dated Cheques) for entire tenure of the loan
Source Xpress credit circular
PURPOSE
The loan under the scheme is granted for any legitimate personal purpose (eg expenses for
domestic or foreign travel medical treatment of self or a family member meeting any financial
liability such as marriage of sondaughter defraying educational expenses of wards meeting
margins for purchase of assets etc)
Source Xpress credit circular
ELIGIBILITY
1 EMPLOYERS
Central and state Government
Quasi-Government
Profit making PSUs
Educational Institutions of National Repute
Companies with a CRA rating of SB1 to SB5
Companies with a CRA rating of SB6 and SB7 are also eligible if it satisfies take over norms
2 EMPLOYEES
Permanent employees with a minimum 1 yearrsquos length of service
He should have sufficient cash flows to repay the loan from salary as evidenced by 6 monthsrsquo
salary slipsincome tax returns of 2 years
He should provide proof of residence and proof of identity to satisfy KYC norms
He should produce 6 months satisfactory statement of bank account (at any bank)
Proof of Employment in the eligible company
Source Xpress credit circular
MINIMUM NET MONTHLY INCOME
The minimum Net Monthly Income (NMI) of the employee should beRs5000- It can
Be lowered to Rs3000- subject to the condition that the salary accounts of the entire enterprise are
with us The Branch will ensure to obtain an Undertaking from the borrower that there is no other
deduction from hisher salary which is not reflected in the salary slip [As per Annexure ndash (B) ndash (v)]
LOAN AMOUNT
a) Minimum Rs24000=
b) Maximum 24 Months NMI with a ceiling of Rs1500 lacs
TYPE OF LOAN
LoanD Term demand Loan (NO OVERDRAFT)
REPAYMENT PERIOD
Maximum 60 months
EMI NMI le 50
REVIEW
Review of loan will be done yearly
RENEWAL
Renewal of loans will be allowed after 24 months
CHECK OFF
The process by which the salary disbursing officer under takes to deduct the loan
installments from the salary of the borrower and remits the same to the Bank for credit to the loan
account
Or
The employer pays the borrowerrsquos salary into his SavingsCurrent Account with our Bank
The borrower gives an irrevocable Standing Instruction (SI) For recovery of the loan installments
from his aforesaid account with the SI being synchronized with the date of credit of salary in the
borrowerrsquos SavingsCurrent Account
AND
The employer undertakes to inform the Bank if and when there is a severance due to borrowerrsquos
transfer resignation retirement etc[ Branch will ensure to obtain the undertaking from the employer
and employee as per Annexure ndash B (I) B (ii) II or B (iii) ]
Source Xpress credit circular
CATEGORY I
FULL CHECK OFF
As given under the head CHECKOFF
AND
Undertaking from the employer to obtain a NOC from the Bank before settling the dues of the
borrower on transfer resignation retirement etc [As per Annexure ndash B (IV)]
This stipulation can be waived by the sanctioning authority incase of employees of Central State
Government PSUs Universities and Reputed Colleges In case of other employers the CGM of the
Circle has been permitted to waive the stipulation But in no case this can be waived for IT sector
employees
CATEGORY II
PARTIAL CHECK OFF
As given under the head CHECKOFF
CATEGORY III
WITH NO CHECK OFF
The employer pays the borrowerrsquos salary into his SavingsCurrent Account with our Bank
The borrower gives an irrevocable Standing Instruction (SI) for
recovery of the loan installments from his aforesaid account twitch the SI being synchronized with
the date of credit of salary in the borrowerrsquos SavingsCurrent Account
OR
Conditions as given under the head CHECKOFF is not fulfilled but the borrower provides monthly
PDCs (Post Dated Cheques) for entire tenure of the loan provided eligibility criteria are fulfilled
(Guidelines on Post Dated cheques is annexed as per Annexure A)
INTEREST RATE
The Interest rate is based on the category of Check off available
Category I
5 above the base rate ie - 970 +5 =1470 ( currently 1470 pa)
Category II
7 above the base rate (currently 1670 pa)
Note The GM of the Network is vested with powers to extend the Category II rate to a Category III
borrower only in case of employees of SB1 to SB5 rated companies who maintain their salary
accounts with us The Category III employees who do not maintain their salary accounts with us but
provide PDCs for the loan should be charged the card rate applicable to Category III and no
deviation should be permitted by Circle GMs
PENAL INTEREST
Penal interest should not be charged for loans up to Rs25000For Loans above Rs25000- if the
irregularity exceeds EMI or installment amount for a period of one month then penal interest would
be charged 2 pa(over and above the applicable interest
rate) on the overdue amount for the period of default If part installment or part EMI remains
overdue then penal interest should not be levied
This provision has been made to avoid application of penal interest on Personal Segment Loan
accounts where EMIs stipulated or installments are being paid regularly by the borrowers
Source Xpress credit circular
SECURITY
The loan is clean in nature and no security is required
PROCESSING FEE
11 of the loan amount including tax
PRE-SANCTION PROCESS
The following documents will be obtained before sanction-
I Application cum appraisal Form With a photograph of the borrower duly attested by the
authorized official
II It is proposed to put in place an arrangement for verification of the address of the borrower by an
outside agency A report duly signed by the verification agency (in places where an arrangement is
in place) or by our officerstaff in other places (where verification agency approved by Corporate
Centre is not available) should be complied based on the following verifications
I Verification of the borrowerrsquos residence address as given in the loan application
by actually visiting the residence of the borrower
II Verification of the borrowerrsquos office address as given in the loan application by
actually visiting the office of the borrower
Source Xpress credit circular
III Verification of the borrowerrsquos residence telephone number as given in the loan
application by actually calling the residence telephone number of the borrower
IV Verification of the borrowerrsquos office telephone number as given in the loan
Application by actually calling the office telephone number of the Borrower
V Verification of the IT return of the Borrower with IT department through a
person approved by the Regional OfficeZonal Office where feasible Where IT
return cannot be verified by the Bank statement of account of the borrower may
be scrutinized to verified income flows
Where the verification is not outsourced the Branch staff
Must do the verification and the report should be added with the loan documents
Flow chart of loan procedure of retail loan
Chart no 01
Disagree
NON PEFORMING ASSETS (NPA) ndash CONCEPT
The three letters ldquoNPArdquostrike terror in banking sector and business circle todayNPA is the short
Form of ldquoNon performing Assetsrdquo
Enquiry about loan
Agreeprovided with check list and
application
submission of documents and application dully
filled up
Documents taken
verification of application and
documebtsCIBIL report
Processing of loan
Sangtion of loan
Document
Control Disbursal of loan
phasewise lumpsum
In banking NPA are loans given to doubtful customers who may or may not repay the
loan on time There are two types of assets viz performing and non performing Performing loans
are standard loans on which both the principle and interest are secured and their return is guaranteed
NPA means the debt which is given by the bank is unable to recover is called
nonperforming assets A NPA account in the books of accounts is an asset as it indicates the amount
received from the defaulters It means if any bank gives loan and is not paid by the customers till 90
days than that account is called as NPA account
DEFINITION
An asset including leased assets becomes nonperforming when it ceases to generate income
for the bank
A NPA was defined as a credit facility in respect of which the interest or installment
of principle as remained ldquopast duerdquo for specific period of time
Source googlecoin
The specific period was reduced in a phased manner as under
wef ndash 31031993 four quarters
wef ndash 31 031994 three quarters
wef - 31031995 two quarters
wef - 31032001 180 days
wef - 31032004 90 days from past due
90 days delinquency is not applicable to agriculture segment
With effect from march 31 2004 NPA shall be a loan or an advance where
1) Term loan interest installment of principle remain over due for 90 days
2) Cash creditover draft an account remain ldquoout of orderrdquo for a period of more than 90 days
3) Bills The bills remain over due for a period more than 90 days
4) Agriculture loan
a The loan has been granted for short duration crop installments of the principle
remain over due for two crop season beyond the due date
b If the loan has been granted for long duration crop installment of the principle
remain over due for one crop season beyond the due date
Source Rbiorgin
CLASSIFICATION OF LOANS
In India loans are classified on following basis
Performing assets
Loans where the interest and or principle not remain overdue for more then 90 days
Non-performing assets
Any loan repayment remains over due for more than 90 days is considered as NPA
According to the securitization and re construction of financial assets and enforcement of
security interest ordinance2002 ldquonon performing assetsrdquo(NPA) means an assets or ac of
borrower which has been classified by the bank as sub-standard doubtful or loss asset in
accordance with the guidelines relating to asset classification issued by RBI
Source googlecoin
ASSET - CLASSIFICATION
Assets can be categorized into four categories (a) standard (b) sub-standard
(c) doubtful (d) loss The last three categories are classified as npa based on the the period for
which the asset has remained non-performing and the realisability of the dues
Standard assets the loan ac which are regular and do not carry more than normal risk are
known as standard assets there could be ac which though have not become npa but are
irregular Such ac are called special mention ac
Sub- standard assets with effect from 3132005 a sub-standard assets is one which is
classified as NPA for a period not exceeding 12 months
Doubtful asset with effect from 3132005 an asset is to be classified as doubtful if it
remained npa or sub-standard for a period exceeding 12 months
Loss assets a loss asset is one where loss has been identified by the bank or internal and
external auditors or the RBI inspection but the amount as not been written off wholly In
other words such an asset is considered uncollectable and such little value that its
continuance as a bankable asset is not warranted although there may be some salvage or
recoverable value
NPA IDENTIFICATION NORMS
With effect from 31st march 2004 a loan or advance become npa when
a Interest or installment of the principle remains overdue for a period more then 90
days in respect of term loan
b The ac remain out of order for a period more 90days in respect of over draft cash
cash credit
c The bill remains overdue for a period more than 90 days in case of bills purchased
and discounted
d With effect from Sept 2004 loan granted for short duration crops will be treated as
NPA if the installment of principle or interest there on remains overdue for two crop
season and loan granted for long duration will be treated as NPA if the installment
remains overdue for one crop season
Out of order
An account will be treated as out as out of order if the outstanding balance remain
continuously in excess of the sanctioned limitdrawing power In cases where the
outstanding balance in the principle operating ac is less than the sanctioned limit but
there are no credit continuously for 90 days as on the date of balance sheet or the
credit are not enough to cover the interest debited during the same period
Overdue
An amount due to the bank under any credit facility is overdue it is not paid on the due
date fixed by the bank
The date of npa will be actual date on which sippage occurred as mentioned below
For term and demand loan ac
The date on which the installment of the principle have
remaine overdue for a period more then 90 days
For over draft and cash credit ac
The date on which the ac completed period of more than 90
days of being continuously out of order
Source wwwRBI Org in
PROVISING NORMS
There is time lag between an ac becoming doubtful for recovery the realization of security and
erosion over a loan period of time in its value So RBI directives now requiresthe banks to make
provisions in their balance sheet for all non- standard loan asset Provisioning is made on all types of
assets ie Standard sub-standard doubtful and loss assets
1 Standard assets RBI vides its circular dated 151108 revised the provisioning requirements
For all type of standard assets it has been reduced to a uniform level of 040of outstanding
at global basis except in the case of direct advance to agriculture and SME sector which
shall continue to attract a provisioning of 025 The provision toward standard assets need
not to be netted from gross advances but shown separately as ldquo contigent provisionsrdquo against
standard assets under other liquidities and provisions others in schedule 5 of the balance
sheet
2 Sub-standard assets- In respect of sub-standard assets the rate of provision is 10 of
outstanding balance without considering ECGC guarantee cover or securities available
However if the loan was unsecured from the begining there would be additional provision of
10 ie total provision would be 20 of the outstanding balance Unsecured exposure is
defined as an exposure where the realizable value of the security as assessed by the
bankreserve banks inspecting officers is not more than 10 ab-intio of the outstanding
exposure
3 Doubtful assets In case of doubtful assets while making provision realizable value of
security is to be considered 100 provision is made for unsecured portion In case of
secured portion the rate of provision depend on age of doubtful assets as under
Age of doubtful assets Provision as of secured portion
Doubtful up to 1 year D1 20 of RVS( realizable value of security)
Doubtful for more than 1 year D2 30 of RVS
Doubtful for more than 3 years D2 100 of RVS
Thus if an ac is doubtful for more than 3 years than 100 of the provision is to be made
both from secured and unsecured portion If an advance has been guaranteed by DICGC
CGFTECGC and is doubtful than provision on secured portion will be as in other cases but
provision on unsecured portion will be made after deducting the claim value
4 LOSS ASSET 100 of the outstanding amount while making provision on NPAs amount
lying in suspense ac and derecognized interest should be deducted from gross advance and
provision be made on balance amount
5 OVERALL PROVISION With a view to improving the improving the provisioning cover
and enhancing the soundness of the individual banks RBI has proposed in oct- 09 policy that
bank should augment their provisions and ensure that their total provisioning coverage ratio
including floating provisions is not less than 70
Source wwwRBIorgin
IMPACTEFFECT OF NPA UPON BANKS
A strong banking sector is important for flourishing economy The failure of banking sector
may have an adverse impact on other sector NPA are one of the major concerns of sector
banks is increasing result in nonperforming assets The NPA impact drastically to the
working of banks The efficiency of bank not always reflected by the size of its balance sheet
but by the level of return on its assetsNPA do not generate interest income for the banks but
the same time banks are required to make provisions for such NPAs from their current
profits
They erode current profits through provisioning requirement
They result in reduced interest income
They require higher provisioning requirements effecting profits and accretion to capital
Adverse impact on capital adequacy ratio
Roe and Roa goes down because NPA do not earn
Banks rating gets effect
Banks cost of raising funds goes up
Bad effect on goodwill
Bad effect on equity value
EARLY SYMPTOMS BY WHICH ONE CAN RECOGNIZE A PERFORMING
ASSETS TURNING TO A NON PERFORMING ASSET
Four categories of early symptoms
1) FINANCIAL
(a) Non- payment of very first installment
(b) Bouncing of cheque due to insufficient balance in the ac
(c) Irregularity in installment
(d) Irregularity of operations in ac
(e) Unpaid overdue bill
(f) Declining current ratio
2) OPERATIONAL AND PHYSICAL
(a) If information is received that the borrower has either initiated the process of winding up or not doing the business
(b) Over-due receivable
(c) Stock statement not submitted on time
(d) External non-controllable factor like natural calamities in the city where the borrower lives
(e) Non- payment of salary
(3) ATTITUDNAL CHANGE
(a) Use for personal comfort stocks and shares by borrowers
(b) Avoidance of contact with bank
(c) Problem between partners
(4) OTHER
(a) Change in govt policies
(b) Death of the borrower
(c) Delay in salary
PREVENTIVE MEASUREMENT FOR NPA
Early recognition of the problem
Invariably by the time banks start their efforts to get involved
in a revival process its too late to retrieve the situation ndash both in terms of rehabilitation of the
project and the recovery of banks dues Identification of the weakness regardless of the fact
that it may not have become NPA is imperative Assessment of the potential of revival may
be done on the basis of a techno-economic viability study Restructuring should be attempted
where after an objective assessment of the promoterrsquos intention banks are convinced of a
turn around with in a scheduled facilitate winding upselling of units earlier so as to recover
whatever is possible through means before the security position becomes worse
Identifying borrowers with genuine intent
Identifying borrower with genuine intent from those who
are non-serious with commitment or stake in revival is a challenge confronting bankers Here
the role of front line officials at branch level is paramount as they are the ones who have
intelligent inputs with regard to promoters lsquo sincerity and capability to achieve turnaround
Based on this objective assessment bank should decide as quickly as possible whether it
would be worthwhile to commit additional finance
In this regard banks may consider having
ldquospecial investigationrdquo of all financial transaction or business transaction books of account
order to ascertain real factor that contributed to sickness of borrower Bank may have panel
of technical experts with proven expertise and task record of preparing techno-economic
study of the project of the borrowers
Borrowers having genuine problems due to temporary mismatch in find flow or sudden
requirement of additional fund may entertained at branch level for this purpose a special
limit to such type of cases should be decided This will obviate the need to route the
additional funding through the controlling officers in deserving cases and avert many
accounts sleeping into NPA category
Timeliness and adequacy of response
Longer the delay in response greater the enjury to the
account and the asset Time is a crucial element in any restructuring or rehabilitation activity
The response decided on the basis of techno- economic study and promoterrsquos commitment
has to be adequate in terms of extend of additional funding and relaxations etc under the
restructuring exercise The package of assistance may be flexible and bank may look at the
exit option
Focus on cash flow
While financing at the time of restructuring the banks may not be guided
by the conventional fund flow analysis only which could yield a potentially misleading
picture Appraisal for fresh credit requirement may be done by analyzing fond flow in
conjunction with the cash flow rather than only on the basis of fund flow
Source wwwAskcom
Management effectiveness
The general perception among the borrower is lack of finance that
leads to sickness and NPAs but this may not be the case all the time Management effectiveness
advance business condition is a very important aspect that affects a borrowing units fortunes A bank
may commit a multiple finance to an align unit only after basic viability of the enterprise also in the
context of quality of management is examined and confirmed It will be useful to have consultant
appointed as early as possible to examine this aspect A proper techno-economic viability study thus
become the basis on which any future action can be considered
Multiple financing
A) During the exercise for assessment of viability and restructuring a pragmatic and unified
approach by all the leading banks as also sharing of all relevant information on the
borrower would go a long way toward overall success of rehabilitation exercise given the
probability of successfailure
B) In some default cases Where the unit is still working The bank should make sure that it
captures the cash flow and insure that such cash are used for working capital purpose
Toward this end there should be a continuous flow of information among consortium
member A bank which is not a part of consortium may not be allowed to offer credit
facility to such defaulting clients Current account facility may also be denied at non-
consortium banks to such clients and violation may attract penal action The credit
information bureau of india (CIBIL) may be very useful for meaningful information
exchange on defaulting borrowers once the setup become fully operational
C) In a forum of lenders the priority of each lender will be different While one set of lender
may be willing to wait for longer time to recover its dues another lender may have a much
shorter timeframe in mind So it is possible that the letter categories of lenders may be
willing to exit even at a cost by a discounted settlement of the exposure There for any plan
for restructuringrehabilitation may takes into account
D) Corporate debt restructuring it has been institutionalized in 2001 to provide a timely and
transparent system for restructuring the corporate debt of RS 20 crores and above with the
banks on a voluntary basis and outside a legal framework Under this system bank are
greatly benefit in terms of restructuring of large standard accounts (potential NPAs) and
viable sub-standard account with multiple banking arrangement
NPA MANAGEMENT- RESOLUTION
Compromise settlement schemes
Restructuringrescheduling
Lok adalat
Corporate debt restructuring cell
Debt recovery Tribunals (DRT)
Proceeding under the code of civil procedure
Board of industrial and financial reconstruction
National company law Tribunal (NCLT)
Sale of NPA to other bank
Sale of NPA to ARCSC under securitization and reconstruction of financial assets for
enforcement of security interest Act 2000 (SRFAESI)
Liquidation
Source wwwRBIorgin
NPA MANAGEMENT IN INDIA
Formation of the credit information bureau (India) limited (CIBIL)
Release of willful defaulterrsquos listRBI also releases a list of borrowers with aggregate
outstanding of RS 1 crore and above against whom bank have filed suit for recovery of their
fund
Reporting of frauds to RBI
Norms of lenders labiality- framing of fair practices code with regard to lenders lability to
be followed by banks
Risk assessment and Risk management
RBI has advised banks to all cases of willful defaulters in case of 1 crore and above and
files suits in such cases
Responding quick mortality cases
Special mention accounts for early identification for bad debt loans and advances over due
for less than one or two quarters would come under this category However these accounts do
not need provisioning
INTERNATIONAL PRACTICES ON NPA MANAGEMENT
Subsequent to the Asian currency crisis which severely crippled the financial system In
addition to the above some of the more recent and aggressive step to NPAs have been taken
by Taiwan Taiwanese financial institution have been encouraged to merge and form bank
based AMCs through the recent introduction of financial holding company act and financial
institution Asian countries the magnitude of NPAs in Asian financial institution was brought
to light Driven by the need to proactively tackle the soaring NPAs level the respective govt
embarked upon a program of substantial reform This involves setting up processes for early
identification and resolution of NPAs The table below provides a cross country comparison
of approaches used for NPA resolution Mergers Act A long side the ministry of finance has
followed a carrot and strict policy of specifying the required NPA ratio for banks while also
providing flexibility in modes of NPA assets resolution and a conduct
ive regulatory and tax environment Deferred loss write-off provisions have been instituted to
provide breathing space for lenders to absorb NPA write-off While it is too early to
comment on success of NPA resolution process in Taiwan the early sign are encouraging
Detailed below are some key NPA management approaches adopted by banks in South East
Asian countries
1 Credit risk mitigation
2 Early warning systems
3 Assets management companies
Increasing willingness to sell NPAs to AMCs
Effective resolution strategy
Appointment of special administrators
4 Out of court restructuring
Source wwwgooglecom
DIFFICULTIES WITH NON PERFORMING ASSETS
I Owners do not receive a market return on their capital In the worst case if the bank
fails owner lose their assets
II Depositors do not receive a market return on savings In the worst case if the bank
fails depositors lose their assets or uninsured balance Banks also redistribute losses
to other borrowers by charging higher rate of interest
III Non-performing loans epitomize bad investors They misallocate credit from good
projects which do not receive funding to failed project
IV 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
shortage the shortage can jam payments across the country
b Illiquidity constraints banks in paying depositors eg cashing their paychecks
c Undercapitalized banks exceed the bank capital base
Lending by bank has been politicized It is common knowledge
that loans are given to various industrial houses on common consideration and
viability of project but on political consideration In normal circumstances banks
before extending any loan would make a thorough study of the actual need of the
party considered the prospect of the business in which it is engaged Since it is
not looked into many of the loans becomes NPA
REASONS F0R AN ACCOUNT BECOMING NPA
Those attribute to borrower
Failure to bring in required capital
Lack of proper planning
Unwanted expenses
Lack of expertise
Poor credit collection
Miss management
Heavy borrowing
Lack of knowledge regarding NPA
Willful defaulters
Death of the borrower
Those attribute to banks
Wrong selection of borrower
Poor credit appraisal
Unhelpful in supervision
Too inflexible attitude
System overload
Lack of motivation
Delay in sanction
Lack of trained staff
Lack of commitment to recovery
Lack of personal visit to the borrower office
Lack of personal visit to the borrowerrsquos residence
Other
Fast changing technology
Unhelpful attitude of govt
Increase in material cost
Government policies
Taxation law
Political hostility
INDIAN ECONOMY AND NPA
Undoubtedly the world economy has slowed down recession is at its peak globally stock markets
have tumbled and business itself getting hard to do The Indian economy has been much affected due
to high fiscal deficit poor infrastructure facilities sticky legal system cutting of exposures to
emerging market by FIIs etc
Further international rating agencies like standard and poor
have lowered Indiarsquos credit rating to sub- investment grade Such negative aspects have often
outweighed positive such as increasing for reserve and a manageable inflation rate
Under such situation I go without saying that banks are no exception
and are bound to face the heat of global down turn One would be surprise to know that banks and
financial institution in India holds non-performing assets worth Rs 1 10000 crores Bankers have
realized that unless the level of NPA is reduced drastically they will find it difficult to survive
The actual level of NPA in India is around $ 40 billion much higher than govt estimation of $16
billion This difference is largely due to the discrepancy in accounting the NPAs followed by India
and rest of the world The accounting norms of India are less stringent than those of the developed
economies The Indian banks also have the tendency to extend the past due Considering the GDP
India nearly $ 470 billion the NPA are 8 of the total GDP which was better than many Asian
countries The NPA of china was 45 of the GDP While Japan had NPAs of 25 of the GDP
The aggregate level of NPAs in Asia has increased from $ 25 billion in 2007 to
$ 34 billion on 2009 looking to such overall pictures of the market we can say that India is doing
well and the steps taken are looking favorable
Source googlecoin
DATA ANALYZING THE QUETIONNAIRE
Two set of questionnaire were prepared to collect the feedback One set of questionnaire was meant for branches and other set of questionnaire was meant for borrowers
The set of questionnaire were given to the branches under hazaribag (RBO) and collected the feedback of the bankers of P segment and the branch manager
The questionnaire prepared for branch contained 15 questions and the questionnaire prepared for borrower contains 10 questions
The data was collected from 50 bankers and the data analysis of the branch questionnaire is as follows
Question number 1
Does not require any data analysis and information was sought to know the business level of the branches for the purpose of whether particular branch is actively engaged in xpress credit portfolio
Question number 2
Do you think that the borrowers are aware about NPA
Answer
32 of the respondent feel that the borrowers are not aware about NPA and 18 respondents feel that borrowers are aware about NPA
Chart no 11
yes
no
0
5
10
15
20
25
30
35
1832 Column1
Conclusion
Majority of the bank officials feels that the borrowers are not aware about NPA
Question number 3
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Answer
Out of 32 respondent 22 respondents is fully satisfied that lack of knowledge among the borrower regarding NPA is one of the reason for NPA 08 respondent were partially satisfied with it and 02 respondent were not satisfied with it
Chart no 12
fully satisfied(22)69
partially satisfied(8)25
not satisfied(2)6
Sales
Conclusion
Majority of the borrowers feels that lack of knowledge among the borrower regarding NPA is one of the reasons for NPA
Question number 4 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Answer
Out of 50 respondent 30 of the respondent strongly satisfied that these external factors contribute to NPA 10 respondent were partially satisfied with it 5 were not satisfied where as 5 were fully dissatisfied with it
Chart no 13
6020
10
10
fully satisfied(30) partially satisfied(10) not satisfiec(5) fully desatisfied(5)
Conclusion
Most of the respondent thinks that external factrs like willful defaulter change in govt policy contribute to NPA
Question number 5
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Answer
Chart no 14
feedback
fully satisfied(20)partially satisfied(12)not satisfied(12)fully dissatisfied(6)
Conclusion
As per the response of the officials most of the officials feel that internal factors are also responsible for NPA
Question number 6
Do you think that inflation is one of the reasons for NPA
Answer
Out f 50 responses 22 were strongly satisfied 18 were partially satisfied 8 were not satisfied and 2 were fully dissatisfied
Chart no 15
fully satisfied(20)44
partially satisfied(18)36
not satisfied(5)10
fullt dissatisfied(5)10
Conclusion
Growing inflation increasing goods rate is also one of the reason for NPA
Question number 7
Do you think that lack of PSS is also contributed to NPA
Answer
Out of 50 responses 30 were fully satisfied with it 12 were partially satisfied and 8 were fully dissatisfied
Chart no 16
6024
16
Open
fully satisfied(30)Partially satisfied(12)not satisfied(0)fully dissatisfied(8)
Conclusion
Majority of the officiais feels that lack of PSS is one of the reason for NPA This means that the PSS carried out by the bank is not sufficient or not carried out properly
Question number 8
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Answer
Most of the respondent feels that increase in unwanted expenses of the borrwer ls contribute to NPA
Chart no 17
56
12
28
4
FULLY SATISFIED(28)PARTIALLY SATISFIED(6)NOT SATISFIED(14)FULLY DISSATISFIED(2)
Conclusion
As per response of the officials increasing inflation have an adverse effect on the financial sector its working performance as well as on NPA
Question number 9
Do you think that high rate of interest under Xpress credit also contributes to NPA
Answer
Out of 50 respondent 25 respondent were not satisfied 10 were partially satisfied 10 were strongly dissatisfied where as only 5 out of 50 were fully satisfied with it
Chart no 18
strongly satisfied(5)partially satisfied(10)not satisfied(25)fully dissatisfied(10)
Conclusion
Most of the respondents are not satisfied with it They feel that the rate of interest charged by SBI under Xpress credit is not high and it will not contribute to NPS
Question number 10
Do you think that lack of proper planning of the borrower is one of the reason for NPA
Answer
Out of 70 respondent 35 were fully satisfied 5 were not satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 19
fully satisfied(35)70
partially satisfied(10)20
not satisfied(5)10
Conclusion
Most of the respondent feels that the borrowers borrow money from the bank without any proper planning which is one of the most important reason for NPA
Question number 11
Is heavy borrowing also contribute to NPA
Answer
Out of 50 respondent 25 respondent were fully satisfied 12 were partially satisfied 8 were not satisfied were as 5 were fully dissatisfied
Chart no 110
50
24
16
10
fully satisfied(25) partially satisfied(12) not satisfied(8) fully dissatisfied(5)
Question number 12
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Answer
As per the response of the officials 20 were fully satisfied 66were partially satisfied 4 were not satisfied with it were as 10 respondent were fully dissatisfied
Chart no 111
fully satisfied(10)20
partially satisfied(33)66
not satisfied(2)4
fullydissatisfied(5)10
Conclusion
As per the response given by the officials most of the officials were partially satisfied that wrong selection of borrower also contribute to NPA which means that selection process carried out by the bank is not appropriate or there is some difficulties in implementing them
Question number 13
Do you think that poor credit appraisal also contribute to NPA
Answer
Out of 50 respondent 5 were fully satisfied 10 were fully satisfied 30 were not satisfied were as only 5 were fully dissatisfied
Chart no 112
fully satisfied(5)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 14
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Answer
Out of 50 responses 3 were fully satisfied 15 were partially satisfied 25 were not satisfied where as 7 were full dissatisfied
Chart no 113
fully satisfied(3)partiallt satisfied(15)not satisfied(25)fully dissatisfied(7)
Conclusion
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not contribute to NPA This means that the attitude of bank toward the borrower is not inflexible
Question number 15
Do you think that system over load is also one of the causes of NPA
Answer
Out of 50 respondent 28 were fully satisfied 12 were partially satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 114
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Xpress credit
INTRODUCTION-
The Xpress Credit Scheme was formulated in April 2004 in the form of pre-approved loan to
employees of leading PSUs and Government organizations At present the scheme is open to
Employees of government semi-government profit making PSUs Educational Institutions of
national repute and companies of good standing (based on their CRA rating) The scheme is built
around the concept of check ndash off (the process by which the salary disbursing officer undertakes to
deduct loan installments from the salary of the borrower and remits the same to the Bank for credit
of the loan account) Xpress Credit Loans may also be sanctioned in those cases where the borrower
gives sufficient PDCs (Post Dated Cheques) for entire tenure of the loan
Source Xpress credit circular
PURPOSE
The loan under the scheme is granted for any legitimate personal purpose (eg expenses for
domestic or foreign travel medical treatment of self or a family member meeting any financial
liability such as marriage of sondaughter defraying educational expenses of wards meeting
margins for purchase of assets etc)
Source Xpress credit circular
ELIGIBILITY
1 EMPLOYERS
Central and state Government
Quasi-Government
Profit making PSUs
Educational Institutions of National Repute
Companies with a CRA rating of SB1 to SB5
Companies with a CRA rating of SB6 and SB7 are also eligible if it satisfies take over norms
2 EMPLOYEES
Permanent employees with a minimum 1 yearrsquos length of service
He should have sufficient cash flows to repay the loan from salary as evidenced by 6 monthsrsquo
salary slipsincome tax returns of 2 years
He should provide proof of residence and proof of identity to satisfy KYC norms
He should produce 6 months satisfactory statement of bank account (at any bank)
Proof of Employment in the eligible company
Source Xpress credit circular
MINIMUM NET MONTHLY INCOME
The minimum Net Monthly Income (NMI) of the employee should beRs5000- It can
Be lowered to Rs3000- subject to the condition that the salary accounts of the entire enterprise are
with us The Branch will ensure to obtain an Undertaking from the borrower that there is no other
deduction from hisher salary which is not reflected in the salary slip [As per Annexure ndash (B) ndash (v)]
LOAN AMOUNT
a) Minimum Rs24000=
b) Maximum 24 Months NMI with a ceiling of Rs1500 lacs
TYPE OF LOAN
LoanD Term demand Loan (NO OVERDRAFT)
REPAYMENT PERIOD
Maximum 60 months
EMI NMI le 50
REVIEW
Review of loan will be done yearly
RENEWAL
Renewal of loans will be allowed after 24 months
CHECK OFF
The process by which the salary disbursing officer under takes to deduct the loan
installments from the salary of the borrower and remits the same to the Bank for credit to the loan
account
Or
The employer pays the borrowerrsquos salary into his SavingsCurrent Account with our Bank
The borrower gives an irrevocable Standing Instruction (SI) For recovery of the loan installments
from his aforesaid account with the SI being synchronized with the date of credit of salary in the
borrowerrsquos SavingsCurrent Account
AND
The employer undertakes to inform the Bank if and when there is a severance due to borrowerrsquos
transfer resignation retirement etc[ Branch will ensure to obtain the undertaking from the employer
and employee as per Annexure ndash B (I) B (ii) II or B (iii) ]
Source Xpress credit circular
CATEGORY I
FULL CHECK OFF
As given under the head CHECKOFF
AND
Undertaking from the employer to obtain a NOC from the Bank before settling the dues of the
borrower on transfer resignation retirement etc [As per Annexure ndash B (IV)]
This stipulation can be waived by the sanctioning authority incase of employees of Central State
Government PSUs Universities and Reputed Colleges In case of other employers the CGM of the
Circle has been permitted to waive the stipulation But in no case this can be waived for IT sector
employees
CATEGORY II
PARTIAL CHECK OFF
As given under the head CHECKOFF
CATEGORY III
WITH NO CHECK OFF
The employer pays the borrowerrsquos salary into his SavingsCurrent Account with our Bank
The borrower gives an irrevocable Standing Instruction (SI) for
recovery of the loan installments from his aforesaid account twitch the SI being synchronized with
the date of credit of salary in the borrowerrsquos SavingsCurrent Account
OR
Conditions as given under the head CHECKOFF is not fulfilled but the borrower provides monthly
PDCs (Post Dated Cheques) for entire tenure of the loan provided eligibility criteria are fulfilled
(Guidelines on Post Dated cheques is annexed as per Annexure A)
INTEREST RATE
The Interest rate is based on the category of Check off available
Category I
5 above the base rate ie - 970 +5 =1470 ( currently 1470 pa)
Category II
7 above the base rate (currently 1670 pa)
Note The GM of the Network is vested with powers to extend the Category II rate to a Category III
borrower only in case of employees of SB1 to SB5 rated companies who maintain their salary
accounts with us The Category III employees who do not maintain their salary accounts with us but
provide PDCs for the loan should be charged the card rate applicable to Category III and no
deviation should be permitted by Circle GMs
PENAL INTEREST
Penal interest should not be charged for loans up to Rs25000For Loans above Rs25000- if the
irregularity exceeds EMI or installment amount for a period of one month then penal interest would
be charged 2 pa(over and above the applicable interest
rate) on the overdue amount for the period of default If part installment or part EMI remains
overdue then penal interest should not be levied
This provision has been made to avoid application of penal interest on Personal Segment Loan
accounts where EMIs stipulated or installments are being paid regularly by the borrowers
Source Xpress credit circular
SECURITY
The loan is clean in nature and no security is required
PROCESSING FEE
11 of the loan amount including tax
PRE-SANCTION PROCESS
The following documents will be obtained before sanction-
I Application cum appraisal Form With a photograph of the borrower duly attested by the
authorized official
II It is proposed to put in place an arrangement for verification of the address of the borrower by an
outside agency A report duly signed by the verification agency (in places where an arrangement is
in place) or by our officerstaff in other places (where verification agency approved by Corporate
Centre is not available) should be complied based on the following verifications
I Verification of the borrowerrsquos residence address as given in the loan application
by actually visiting the residence of the borrower
II Verification of the borrowerrsquos office address as given in the loan application by
actually visiting the office of the borrower
Source Xpress credit circular
III Verification of the borrowerrsquos residence telephone number as given in the loan
application by actually calling the residence telephone number of the borrower
IV Verification of the borrowerrsquos office telephone number as given in the loan
Application by actually calling the office telephone number of the Borrower
V Verification of the IT return of the Borrower with IT department through a
person approved by the Regional OfficeZonal Office where feasible Where IT
return cannot be verified by the Bank statement of account of the borrower may
be scrutinized to verified income flows
Where the verification is not outsourced the Branch staff
Must do the verification and the report should be added with the loan documents
Flow chart of loan procedure of retail loan
Chart no 01
Disagree
NON PEFORMING ASSETS (NPA) ndash CONCEPT
The three letters ldquoNPArdquostrike terror in banking sector and business circle todayNPA is the short
Form of ldquoNon performing Assetsrdquo
Enquiry about loan
Agreeprovided with check list and
application
submission of documents and application dully
filled up
Documents taken
verification of application and
documebtsCIBIL report
Processing of loan
Sangtion of loan
Document
Control Disbursal of loan
phasewise lumpsum
In banking NPA are loans given to doubtful customers who may or may not repay the
loan on time There are two types of assets viz performing and non performing Performing loans
are standard loans on which both the principle and interest are secured and their return is guaranteed
NPA means the debt which is given by the bank is unable to recover is called
nonperforming assets A NPA account in the books of accounts is an asset as it indicates the amount
received from the defaulters It means if any bank gives loan and is not paid by the customers till 90
days than that account is called as NPA account
DEFINITION
An asset including leased assets becomes nonperforming when it ceases to generate income
for the bank
A NPA was defined as a credit facility in respect of which the interest or installment
of principle as remained ldquopast duerdquo for specific period of time
Source googlecoin
The specific period was reduced in a phased manner as under
wef ndash 31031993 four quarters
wef ndash 31 031994 three quarters
wef - 31031995 two quarters
wef - 31032001 180 days
wef - 31032004 90 days from past due
90 days delinquency is not applicable to agriculture segment
With effect from march 31 2004 NPA shall be a loan or an advance where
1) Term loan interest installment of principle remain over due for 90 days
2) Cash creditover draft an account remain ldquoout of orderrdquo for a period of more than 90 days
3) Bills The bills remain over due for a period more than 90 days
4) Agriculture loan
a The loan has been granted for short duration crop installments of the principle
remain over due for two crop season beyond the due date
b If the loan has been granted for long duration crop installment of the principle
remain over due for one crop season beyond the due date
Source Rbiorgin
CLASSIFICATION OF LOANS
In India loans are classified on following basis
Performing assets
Loans where the interest and or principle not remain overdue for more then 90 days
Non-performing assets
Any loan repayment remains over due for more than 90 days is considered as NPA
According to the securitization and re construction of financial assets and enforcement of
security interest ordinance2002 ldquonon performing assetsrdquo(NPA) means an assets or ac of
borrower which has been classified by the bank as sub-standard doubtful or loss asset in
accordance with the guidelines relating to asset classification issued by RBI
Source googlecoin
ASSET - CLASSIFICATION
Assets can be categorized into four categories (a) standard (b) sub-standard
(c) doubtful (d) loss The last three categories are classified as npa based on the the period for
which the asset has remained non-performing and the realisability of the dues
Standard assets the loan ac which are regular and do not carry more than normal risk are
known as standard assets there could be ac which though have not become npa but are
irregular Such ac are called special mention ac
Sub- standard assets with effect from 3132005 a sub-standard assets is one which is
classified as NPA for a period not exceeding 12 months
Doubtful asset with effect from 3132005 an asset is to be classified as doubtful if it
remained npa or sub-standard for a period exceeding 12 months
Loss assets a loss asset is one where loss has been identified by the bank or internal and
external auditors or the RBI inspection but the amount as not been written off wholly In
other words such an asset is considered uncollectable and such little value that its
continuance as a bankable asset is not warranted although there may be some salvage or
recoverable value
NPA IDENTIFICATION NORMS
With effect from 31st march 2004 a loan or advance become npa when
a Interest or installment of the principle remains overdue for a period more then 90
days in respect of term loan
b The ac remain out of order for a period more 90days in respect of over draft cash
cash credit
c The bill remains overdue for a period more than 90 days in case of bills purchased
and discounted
d With effect from Sept 2004 loan granted for short duration crops will be treated as
NPA if the installment of principle or interest there on remains overdue for two crop
season and loan granted for long duration will be treated as NPA if the installment
remains overdue for one crop season
Out of order
An account will be treated as out as out of order if the outstanding balance remain
continuously in excess of the sanctioned limitdrawing power In cases where the
outstanding balance in the principle operating ac is less than the sanctioned limit but
there are no credit continuously for 90 days as on the date of balance sheet or the
credit are not enough to cover the interest debited during the same period
Overdue
An amount due to the bank under any credit facility is overdue it is not paid on the due
date fixed by the bank
The date of npa will be actual date on which sippage occurred as mentioned below
For term and demand loan ac
The date on which the installment of the principle have
remaine overdue for a period more then 90 days
For over draft and cash credit ac
The date on which the ac completed period of more than 90
days of being continuously out of order
Source wwwRBI Org in
PROVISING NORMS
There is time lag between an ac becoming doubtful for recovery the realization of security and
erosion over a loan period of time in its value So RBI directives now requiresthe banks to make
provisions in their balance sheet for all non- standard loan asset Provisioning is made on all types of
assets ie Standard sub-standard doubtful and loss assets
1 Standard assets RBI vides its circular dated 151108 revised the provisioning requirements
For all type of standard assets it has been reduced to a uniform level of 040of outstanding
at global basis except in the case of direct advance to agriculture and SME sector which
shall continue to attract a provisioning of 025 The provision toward standard assets need
not to be netted from gross advances but shown separately as ldquo contigent provisionsrdquo against
standard assets under other liquidities and provisions others in schedule 5 of the balance
sheet
2 Sub-standard assets- In respect of sub-standard assets the rate of provision is 10 of
outstanding balance without considering ECGC guarantee cover or securities available
However if the loan was unsecured from the begining there would be additional provision of
10 ie total provision would be 20 of the outstanding balance Unsecured exposure is
defined as an exposure where the realizable value of the security as assessed by the
bankreserve banks inspecting officers is not more than 10 ab-intio of the outstanding
exposure
3 Doubtful assets In case of doubtful assets while making provision realizable value of
security is to be considered 100 provision is made for unsecured portion In case of
secured portion the rate of provision depend on age of doubtful assets as under
Age of doubtful assets Provision as of secured portion
Doubtful up to 1 year D1 20 of RVS( realizable value of security)
Doubtful for more than 1 year D2 30 of RVS
Doubtful for more than 3 years D2 100 of RVS
Thus if an ac is doubtful for more than 3 years than 100 of the provision is to be made
both from secured and unsecured portion If an advance has been guaranteed by DICGC
CGFTECGC and is doubtful than provision on secured portion will be as in other cases but
provision on unsecured portion will be made after deducting the claim value
4 LOSS ASSET 100 of the outstanding amount while making provision on NPAs amount
lying in suspense ac and derecognized interest should be deducted from gross advance and
provision be made on balance amount
5 OVERALL PROVISION With a view to improving the improving the provisioning cover
and enhancing the soundness of the individual banks RBI has proposed in oct- 09 policy that
bank should augment their provisions and ensure that their total provisioning coverage ratio
including floating provisions is not less than 70
Source wwwRBIorgin
IMPACTEFFECT OF NPA UPON BANKS
A strong banking sector is important for flourishing economy The failure of banking sector
may have an adverse impact on other sector NPA are one of the major concerns of sector
banks is increasing result in nonperforming assets The NPA impact drastically to the
working of banks The efficiency of bank not always reflected by the size of its balance sheet
but by the level of return on its assetsNPA do not generate interest income for the banks but
the same time banks are required to make provisions for such NPAs from their current
profits
They erode current profits through provisioning requirement
They result in reduced interest income
They require higher provisioning requirements effecting profits and accretion to capital
Adverse impact on capital adequacy ratio
Roe and Roa goes down because NPA do not earn
Banks rating gets effect
Banks cost of raising funds goes up
Bad effect on goodwill
Bad effect on equity value
EARLY SYMPTOMS BY WHICH ONE CAN RECOGNIZE A PERFORMING
ASSETS TURNING TO A NON PERFORMING ASSET
Four categories of early symptoms
1) FINANCIAL
(a) Non- payment of very first installment
(b) Bouncing of cheque due to insufficient balance in the ac
(c) Irregularity in installment
(d) Irregularity of operations in ac
(e) Unpaid overdue bill
(f) Declining current ratio
2) OPERATIONAL AND PHYSICAL
(a) If information is received that the borrower has either initiated the process of winding up or not doing the business
(b) Over-due receivable
(c) Stock statement not submitted on time
(d) External non-controllable factor like natural calamities in the city where the borrower lives
(e) Non- payment of salary
(3) ATTITUDNAL CHANGE
(a) Use for personal comfort stocks and shares by borrowers
(b) Avoidance of contact with bank
(c) Problem between partners
(4) OTHER
(a) Change in govt policies
(b) Death of the borrower
(c) Delay in salary
PREVENTIVE MEASUREMENT FOR NPA
Early recognition of the problem
Invariably by the time banks start their efforts to get involved
in a revival process its too late to retrieve the situation ndash both in terms of rehabilitation of the
project and the recovery of banks dues Identification of the weakness regardless of the fact
that it may not have become NPA is imperative Assessment of the potential of revival may
be done on the basis of a techno-economic viability study Restructuring should be attempted
where after an objective assessment of the promoterrsquos intention banks are convinced of a
turn around with in a scheduled facilitate winding upselling of units earlier so as to recover
whatever is possible through means before the security position becomes worse
Identifying borrowers with genuine intent
Identifying borrower with genuine intent from those who
are non-serious with commitment or stake in revival is a challenge confronting bankers Here
the role of front line officials at branch level is paramount as they are the ones who have
intelligent inputs with regard to promoters lsquo sincerity and capability to achieve turnaround
Based on this objective assessment bank should decide as quickly as possible whether it
would be worthwhile to commit additional finance
In this regard banks may consider having
ldquospecial investigationrdquo of all financial transaction or business transaction books of account
order to ascertain real factor that contributed to sickness of borrower Bank may have panel
of technical experts with proven expertise and task record of preparing techno-economic
study of the project of the borrowers
Borrowers having genuine problems due to temporary mismatch in find flow or sudden
requirement of additional fund may entertained at branch level for this purpose a special
limit to such type of cases should be decided This will obviate the need to route the
additional funding through the controlling officers in deserving cases and avert many
accounts sleeping into NPA category
Timeliness and adequacy of response
Longer the delay in response greater the enjury to the
account and the asset Time is a crucial element in any restructuring or rehabilitation activity
The response decided on the basis of techno- economic study and promoterrsquos commitment
has to be adequate in terms of extend of additional funding and relaxations etc under the
restructuring exercise The package of assistance may be flexible and bank may look at the
exit option
Focus on cash flow
While financing at the time of restructuring the banks may not be guided
by the conventional fund flow analysis only which could yield a potentially misleading
picture Appraisal for fresh credit requirement may be done by analyzing fond flow in
conjunction with the cash flow rather than only on the basis of fund flow
Source wwwAskcom
Management effectiveness
The general perception among the borrower is lack of finance that
leads to sickness and NPAs but this may not be the case all the time Management effectiveness
advance business condition is a very important aspect that affects a borrowing units fortunes A bank
may commit a multiple finance to an align unit only after basic viability of the enterprise also in the
context of quality of management is examined and confirmed It will be useful to have consultant
appointed as early as possible to examine this aspect A proper techno-economic viability study thus
become the basis on which any future action can be considered
Multiple financing
A) During the exercise for assessment of viability and restructuring a pragmatic and unified
approach by all the leading banks as also sharing of all relevant information on the
borrower would go a long way toward overall success of rehabilitation exercise given the
probability of successfailure
B) In some default cases Where the unit is still working The bank should make sure that it
captures the cash flow and insure that such cash are used for working capital purpose
Toward this end there should be a continuous flow of information among consortium
member A bank which is not a part of consortium may not be allowed to offer credit
facility to such defaulting clients Current account facility may also be denied at non-
consortium banks to such clients and violation may attract penal action The credit
information bureau of india (CIBIL) may be very useful for meaningful information
exchange on defaulting borrowers once the setup become fully operational
C) In a forum of lenders the priority of each lender will be different While one set of lender
may be willing to wait for longer time to recover its dues another lender may have a much
shorter timeframe in mind So it is possible that the letter categories of lenders may be
willing to exit even at a cost by a discounted settlement of the exposure There for any plan
for restructuringrehabilitation may takes into account
D) Corporate debt restructuring it has been institutionalized in 2001 to provide a timely and
transparent system for restructuring the corporate debt of RS 20 crores and above with the
banks on a voluntary basis and outside a legal framework Under this system bank are
greatly benefit in terms of restructuring of large standard accounts (potential NPAs) and
viable sub-standard account with multiple banking arrangement
NPA MANAGEMENT- RESOLUTION
Compromise settlement schemes
Restructuringrescheduling
Lok adalat
Corporate debt restructuring cell
Debt recovery Tribunals (DRT)
Proceeding under the code of civil procedure
Board of industrial and financial reconstruction
National company law Tribunal (NCLT)
Sale of NPA to other bank
Sale of NPA to ARCSC under securitization and reconstruction of financial assets for
enforcement of security interest Act 2000 (SRFAESI)
Liquidation
Source wwwRBIorgin
NPA MANAGEMENT IN INDIA
Formation of the credit information bureau (India) limited (CIBIL)
Release of willful defaulterrsquos listRBI also releases a list of borrowers with aggregate
outstanding of RS 1 crore and above against whom bank have filed suit for recovery of their
fund
Reporting of frauds to RBI
Norms of lenders labiality- framing of fair practices code with regard to lenders lability to
be followed by banks
Risk assessment and Risk management
RBI has advised banks to all cases of willful defaulters in case of 1 crore and above and
files suits in such cases
Responding quick mortality cases
Special mention accounts for early identification for bad debt loans and advances over due
for less than one or two quarters would come under this category However these accounts do
not need provisioning
INTERNATIONAL PRACTICES ON NPA MANAGEMENT
Subsequent to the Asian currency crisis which severely crippled the financial system In
addition to the above some of the more recent and aggressive step to NPAs have been taken
by Taiwan Taiwanese financial institution have been encouraged to merge and form bank
based AMCs through the recent introduction of financial holding company act and financial
institution Asian countries the magnitude of NPAs in Asian financial institution was brought
to light Driven by the need to proactively tackle the soaring NPAs level the respective govt
embarked upon a program of substantial reform This involves setting up processes for early
identification and resolution of NPAs The table below provides a cross country comparison
of approaches used for NPA resolution Mergers Act A long side the ministry of finance has
followed a carrot and strict policy of specifying the required NPA ratio for banks while also
providing flexibility in modes of NPA assets resolution and a conduct
ive regulatory and tax environment Deferred loss write-off provisions have been instituted to
provide breathing space for lenders to absorb NPA write-off While it is too early to
comment on success of NPA resolution process in Taiwan the early sign are encouraging
Detailed below are some key NPA management approaches adopted by banks in South East
Asian countries
1 Credit risk mitigation
2 Early warning systems
3 Assets management companies
Increasing willingness to sell NPAs to AMCs
Effective resolution strategy
Appointment of special administrators
4 Out of court restructuring
Source wwwgooglecom
DIFFICULTIES WITH NON PERFORMING ASSETS
I Owners do not receive a market return on their capital In the worst case if the bank
fails owner lose their assets
II Depositors do not receive a market return on savings In the worst case if the bank
fails depositors lose their assets or uninsured balance Banks also redistribute losses
to other borrowers by charging higher rate of interest
III Non-performing loans epitomize bad investors They misallocate credit from good
projects which do not receive funding to failed project
IV 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
shortage the shortage can jam payments across the country
b Illiquidity constraints banks in paying depositors eg cashing their paychecks
c Undercapitalized banks exceed the bank capital base
Lending by bank has been politicized It is common knowledge
that loans are given to various industrial houses on common consideration and
viability of project but on political consideration In normal circumstances banks
before extending any loan would make a thorough study of the actual need of the
party considered the prospect of the business in which it is engaged Since it is
not looked into many of the loans becomes NPA
REASONS F0R AN ACCOUNT BECOMING NPA
Those attribute to borrower
Failure to bring in required capital
Lack of proper planning
Unwanted expenses
Lack of expertise
Poor credit collection
Miss management
Heavy borrowing
Lack of knowledge regarding NPA
Willful defaulters
Death of the borrower
Those attribute to banks
Wrong selection of borrower
Poor credit appraisal
Unhelpful in supervision
Too inflexible attitude
System overload
Lack of motivation
Delay in sanction
Lack of trained staff
Lack of commitment to recovery
Lack of personal visit to the borrower office
Lack of personal visit to the borrowerrsquos residence
Other
Fast changing technology
Unhelpful attitude of govt
Increase in material cost
Government policies
Taxation law
Political hostility
INDIAN ECONOMY AND NPA
Undoubtedly the world economy has slowed down recession is at its peak globally stock markets
have tumbled and business itself getting hard to do The Indian economy has been much affected due
to high fiscal deficit poor infrastructure facilities sticky legal system cutting of exposures to
emerging market by FIIs etc
Further international rating agencies like standard and poor
have lowered Indiarsquos credit rating to sub- investment grade Such negative aspects have often
outweighed positive such as increasing for reserve and a manageable inflation rate
Under such situation I go without saying that banks are no exception
and are bound to face the heat of global down turn One would be surprise to know that banks and
financial institution in India holds non-performing assets worth Rs 1 10000 crores Bankers have
realized that unless the level of NPA is reduced drastically they will find it difficult to survive
The actual level of NPA in India is around $ 40 billion much higher than govt estimation of $16
billion This difference is largely due to the discrepancy in accounting the NPAs followed by India
and rest of the world The accounting norms of India are less stringent than those of the developed
economies The Indian banks also have the tendency to extend the past due Considering the GDP
India nearly $ 470 billion the NPA are 8 of the total GDP which was better than many Asian
countries The NPA of china was 45 of the GDP While Japan had NPAs of 25 of the GDP
The aggregate level of NPAs in Asia has increased from $ 25 billion in 2007 to
$ 34 billion on 2009 looking to such overall pictures of the market we can say that India is doing
well and the steps taken are looking favorable
Source googlecoin
DATA ANALYZING THE QUETIONNAIRE
Two set of questionnaire were prepared to collect the feedback One set of questionnaire was meant for branches and other set of questionnaire was meant for borrowers
The set of questionnaire were given to the branches under hazaribag (RBO) and collected the feedback of the bankers of P segment and the branch manager
The questionnaire prepared for branch contained 15 questions and the questionnaire prepared for borrower contains 10 questions
The data was collected from 50 bankers and the data analysis of the branch questionnaire is as follows
Question number 1
Does not require any data analysis and information was sought to know the business level of the branches for the purpose of whether particular branch is actively engaged in xpress credit portfolio
Question number 2
Do you think that the borrowers are aware about NPA
Answer
32 of the respondent feel that the borrowers are not aware about NPA and 18 respondents feel that borrowers are aware about NPA
Chart no 11
yes
no
0
5
10
15
20
25
30
35
1832 Column1
Conclusion
Majority of the bank officials feels that the borrowers are not aware about NPA
Question number 3
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Answer
Out of 32 respondent 22 respondents is fully satisfied that lack of knowledge among the borrower regarding NPA is one of the reason for NPA 08 respondent were partially satisfied with it and 02 respondent were not satisfied with it
Chart no 12
fully satisfied(22)69
partially satisfied(8)25
not satisfied(2)6
Sales
Conclusion
Majority of the borrowers feels that lack of knowledge among the borrower regarding NPA is one of the reasons for NPA
Question number 4 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Answer
Out of 50 respondent 30 of the respondent strongly satisfied that these external factors contribute to NPA 10 respondent were partially satisfied with it 5 were not satisfied where as 5 were fully dissatisfied with it
Chart no 13
6020
10
10
fully satisfied(30) partially satisfied(10) not satisfiec(5) fully desatisfied(5)
Conclusion
Most of the respondent thinks that external factrs like willful defaulter change in govt policy contribute to NPA
Question number 5
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Answer
Chart no 14
feedback
fully satisfied(20)partially satisfied(12)not satisfied(12)fully dissatisfied(6)
Conclusion
As per the response of the officials most of the officials feel that internal factors are also responsible for NPA
Question number 6
Do you think that inflation is one of the reasons for NPA
Answer
Out f 50 responses 22 were strongly satisfied 18 were partially satisfied 8 were not satisfied and 2 were fully dissatisfied
Chart no 15
fully satisfied(20)44
partially satisfied(18)36
not satisfied(5)10
fullt dissatisfied(5)10
Conclusion
Growing inflation increasing goods rate is also one of the reason for NPA
Question number 7
Do you think that lack of PSS is also contributed to NPA
Answer
Out of 50 responses 30 were fully satisfied with it 12 were partially satisfied and 8 were fully dissatisfied
Chart no 16
6024
16
Open
fully satisfied(30)Partially satisfied(12)not satisfied(0)fully dissatisfied(8)
Conclusion
Majority of the officiais feels that lack of PSS is one of the reason for NPA This means that the PSS carried out by the bank is not sufficient or not carried out properly
Question number 8
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Answer
Most of the respondent feels that increase in unwanted expenses of the borrwer ls contribute to NPA
Chart no 17
56
12
28
4
FULLY SATISFIED(28)PARTIALLY SATISFIED(6)NOT SATISFIED(14)FULLY DISSATISFIED(2)
Conclusion
As per response of the officials increasing inflation have an adverse effect on the financial sector its working performance as well as on NPA
Question number 9
Do you think that high rate of interest under Xpress credit also contributes to NPA
Answer
Out of 50 respondent 25 respondent were not satisfied 10 were partially satisfied 10 were strongly dissatisfied where as only 5 out of 50 were fully satisfied with it
Chart no 18
strongly satisfied(5)partially satisfied(10)not satisfied(25)fully dissatisfied(10)
Conclusion
Most of the respondents are not satisfied with it They feel that the rate of interest charged by SBI under Xpress credit is not high and it will not contribute to NPS
Question number 10
Do you think that lack of proper planning of the borrower is one of the reason for NPA
Answer
Out of 70 respondent 35 were fully satisfied 5 were not satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 19
fully satisfied(35)70
partially satisfied(10)20
not satisfied(5)10
Conclusion
Most of the respondent feels that the borrowers borrow money from the bank without any proper planning which is one of the most important reason for NPA
Question number 11
Is heavy borrowing also contribute to NPA
Answer
Out of 50 respondent 25 respondent were fully satisfied 12 were partially satisfied 8 were not satisfied were as 5 were fully dissatisfied
Chart no 110
50
24
16
10
fully satisfied(25) partially satisfied(12) not satisfied(8) fully dissatisfied(5)
Question number 12
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Answer
As per the response of the officials 20 were fully satisfied 66were partially satisfied 4 were not satisfied with it were as 10 respondent were fully dissatisfied
Chart no 111
fully satisfied(10)20
partially satisfied(33)66
not satisfied(2)4
fullydissatisfied(5)10
Conclusion
As per the response given by the officials most of the officials were partially satisfied that wrong selection of borrower also contribute to NPA which means that selection process carried out by the bank is not appropriate or there is some difficulties in implementing them
Question number 13
Do you think that poor credit appraisal also contribute to NPA
Answer
Out of 50 respondent 5 were fully satisfied 10 were fully satisfied 30 were not satisfied were as only 5 were fully dissatisfied
Chart no 112
fully satisfied(5)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 14
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Answer
Out of 50 responses 3 were fully satisfied 15 were partially satisfied 25 were not satisfied where as 7 were full dissatisfied
Chart no 113
fully satisfied(3)partiallt satisfied(15)not satisfied(25)fully dissatisfied(7)
Conclusion
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not contribute to NPA This means that the attitude of bank toward the borrower is not inflexible
Question number 15
Do you think that system over load is also one of the causes of NPA
Answer
Out of 50 respondent 28 were fully satisfied 12 were partially satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 114
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
PURPOSE
The loan under the scheme is granted for any legitimate personal purpose (eg expenses for
domestic or foreign travel medical treatment of self or a family member meeting any financial
liability such as marriage of sondaughter defraying educational expenses of wards meeting
margins for purchase of assets etc)
Source Xpress credit circular
ELIGIBILITY
1 EMPLOYERS
Central and state Government
Quasi-Government
Profit making PSUs
Educational Institutions of National Repute
Companies with a CRA rating of SB1 to SB5
Companies with a CRA rating of SB6 and SB7 are also eligible if it satisfies take over norms
2 EMPLOYEES
Permanent employees with a minimum 1 yearrsquos length of service
He should have sufficient cash flows to repay the loan from salary as evidenced by 6 monthsrsquo
salary slipsincome tax returns of 2 years
He should provide proof of residence and proof of identity to satisfy KYC norms
He should produce 6 months satisfactory statement of bank account (at any bank)
Proof of Employment in the eligible company
Source Xpress credit circular
MINIMUM NET MONTHLY INCOME
The minimum Net Monthly Income (NMI) of the employee should beRs5000- It can
Be lowered to Rs3000- subject to the condition that the salary accounts of the entire enterprise are
with us The Branch will ensure to obtain an Undertaking from the borrower that there is no other
deduction from hisher salary which is not reflected in the salary slip [As per Annexure ndash (B) ndash (v)]
LOAN AMOUNT
a) Minimum Rs24000=
b) Maximum 24 Months NMI with a ceiling of Rs1500 lacs
TYPE OF LOAN
LoanD Term demand Loan (NO OVERDRAFT)
REPAYMENT PERIOD
Maximum 60 months
EMI NMI le 50
REVIEW
Review of loan will be done yearly
RENEWAL
Renewal of loans will be allowed after 24 months
CHECK OFF
The process by which the salary disbursing officer under takes to deduct the loan
installments from the salary of the borrower and remits the same to the Bank for credit to the loan
account
Or
The employer pays the borrowerrsquos salary into his SavingsCurrent Account with our Bank
The borrower gives an irrevocable Standing Instruction (SI) For recovery of the loan installments
from his aforesaid account with the SI being synchronized with the date of credit of salary in the
borrowerrsquos SavingsCurrent Account
AND
The employer undertakes to inform the Bank if and when there is a severance due to borrowerrsquos
transfer resignation retirement etc[ Branch will ensure to obtain the undertaking from the employer
and employee as per Annexure ndash B (I) B (ii) II or B (iii) ]
Source Xpress credit circular
CATEGORY I
FULL CHECK OFF
As given under the head CHECKOFF
AND
Undertaking from the employer to obtain a NOC from the Bank before settling the dues of the
borrower on transfer resignation retirement etc [As per Annexure ndash B (IV)]
This stipulation can be waived by the sanctioning authority incase of employees of Central State
Government PSUs Universities and Reputed Colleges In case of other employers the CGM of the
Circle has been permitted to waive the stipulation But in no case this can be waived for IT sector
employees
CATEGORY II
PARTIAL CHECK OFF
As given under the head CHECKOFF
CATEGORY III
WITH NO CHECK OFF
The employer pays the borrowerrsquos salary into his SavingsCurrent Account with our Bank
The borrower gives an irrevocable Standing Instruction (SI) for
recovery of the loan installments from his aforesaid account twitch the SI being synchronized with
the date of credit of salary in the borrowerrsquos SavingsCurrent Account
OR
Conditions as given under the head CHECKOFF is not fulfilled but the borrower provides monthly
PDCs (Post Dated Cheques) for entire tenure of the loan provided eligibility criteria are fulfilled
(Guidelines on Post Dated cheques is annexed as per Annexure A)
INTEREST RATE
The Interest rate is based on the category of Check off available
Category I
5 above the base rate ie - 970 +5 =1470 ( currently 1470 pa)
Category II
7 above the base rate (currently 1670 pa)
Note The GM of the Network is vested with powers to extend the Category II rate to a Category III
borrower only in case of employees of SB1 to SB5 rated companies who maintain their salary
accounts with us The Category III employees who do not maintain their salary accounts with us but
provide PDCs for the loan should be charged the card rate applicable to Category III and no
deviation should be permitted by Circle GMs
PENAL INTEREST
Penal interest should not be charged for loans up to Rs25000For Loans above Rs25000- if the
irregularity exceeds EMI or installment amount for a period of one month then penal interest would
be charged 2 pa(over and above the applicable interest
rate) on the overdue amount for the period of default If part installment or part EMI remains
overdue then penal interest should not be levied
This provision has been made to avoid application of penal interest on Personal Segment Loan
accounts where EMIs stipulated or installments are being paid regularly by the borrowers
Source Xpress credit circular
SECURITY
The loan is clean in nature and no security is required
PROCESSING FEE
11 of the loan amount including tax
PRE-SANCTION PROCESS
The following documents will be obtained before sanction-
I Application cum appraisal Form With a photograph of the borrower duly attested by the
authorized official
II It is proposed to put in place an arrangement for verification of the address of the borrower by an
outside agency A report duly signed by the verification agency (in places where an arrangement is
in place) or by our officerstaff in other places (where verification agency approved by Corporate
Centre is not available) should be complied based on the following verifications
I Verification of the borrowerrsquos residence address as given in the loan application
by actually visiting the residence of the borrower
II Verification of the borrowerrsquos office address as given in the loan application by
actually visiting the office of the borrower
Source Xpress credit circular
III Verification of the borrowerrsquos residence telephone number as given in the loan
application by actually calling the residence telephone number of the borrower
IV Verification of the borrowerrsquos office telephone number as given in the loan
Application by actually calling the office telephone number of the Borrower
V Verification of the IT return of the Borrower with IT department through a
person approved by the Regional OfficeZonal Office where feasible Where IT
return cannot be verified by the Bank statement of account of the borrower may
be scrutinized to verified income flows
Where the verification is not outsourced the Branch staff
Must do the verification and the report should be added with the loan documents
Flow chart of loan procedure of retail loan
Chart no 01
Disagree
NON PEFORMING ASSETS (NPA) ndash CONCEPT
The three letters ldquoNPArdquostrike terror in banking sector and business circle todayNPA is the short
Form of ldquoNon performing Assetsrdquo
Enquiry about loan
Agreeprovided with check list and
application
submission of documents and application dully
filled up
Documents taken
verification of application and
documebtsCIBIL report
Processing of loan
Sangtion of loan
Document
Control Disbursal of loan
phasewise lumpsum
In banking NPA are loans given to doubtful customers who may or may not repay the
loan on time There are two types of assets viz performing and non performing Performing loans
are standard loans on which both the principle and interest are secured and their return is guaranteed
NPA means the debt which is given by the bank is unable to recover is called
nonperforming assets A NPA account in the books of accounts is an asset as it indicates the amount
received from the defaulters It means if any bank gives loan and is not paid by the customers till 90
days than that account is called as NPA account
DEFINITION
An asset including leased assets becomes nonperforming when it ceases to generate income
for the bank
A NPA was defined as a credit facility in respect of which the interest or installment
of principle as remained ldquopast duerdquo for specific period of time
Source googlecoin
The specific period was reduced in a phased manner as under
wef ndash 31031993 four quarters
wef ndash 31 031994 three quarters
wef - 31031995 two quarters
wef - 31032001 180 days
wef - 31032004 90 days from past due
90 days delinquency is not applicable to agriculture segment
With effect from march 31 2004 NPA shall be a loan or an advance where
1) Term loan interest installment of principle remain over due for 90 days
2) Cash creditover draft an account remain ldquoout of orderrdquo for a period of more than 90 days
3) Bills The bills remain over due for a period more than 90 days
4) Agriculture loan
a The loan has been granted for short duration crop installments of the principle
remain over due for two crop season beyond the due date
b If the loan has been granted for long duration crop installment of the principle
remain over due for one crop season beyond the due date
Source Rbiorgin
CLASSIFICATION OF LOANS
In India loans are classified on following basis
Performing assets
Loans where the interest and or principle not remain overdue for more then 90 days
Non-performing assets
Any loan repayment remains over due for more than 90 days is considered as NPA
According to the securitization and re construction of financial assets and enforcement of
security interest ordinance2002 ldquonon performing assetsrdquo(NPA) means an assets or ac of
borrower which has been classified by the bank as sub-standard doubtful or loss asset in
accordance with the guidelines relating to asset classification issued by RBI
Source googlecoin
ASSET - CLASSIFICATION
Assets can be categorized into four categories (a) standard (b) sub-standard
(c) doubtful (d) loss The last three categories are classified as npa based on the the period for
which the asset has remained non-performing and the realisability of the dues
Standard assets the loan ac which are regular and do not carry more than normal risk are
known as standard assets there could be ac which though have not become npa but are
irregular Such ac are called special mention ac
Sub- standard assets with effect from 3132005 a sub-standard assets is one which is
classified as NPA for a period not exceeding 12 months
Doubtful asset with effect from 3132005 an asset is to be classified as doubtful if it
remained npa or sub-standard for a period exceeding 12 months
Loss assets a loss asset is one where loss has been identified by the bank or internal and
external auditors or the RBI inspection but the amount as not been written off wholly In
other words such an asset is considered uncollectable and such little value that its
continuance as a bankable asset is not warranted although there may be some salvage or
recoverable value
NPA IDENTIFICATION NORMS
With effect from 31st march 2004 a loan or advance become npa when
a Interest or installment of the principle remains overdue for a period more then 90
days in respect of term loan
b The ac remain out of order for a period more 90days in respect of over draft cash
cash credit
c The bill remains overdue for a period more than 90 days in case of bills purchased
and discounted
d With effect from Sept 2004 loan granted for short duration crops will be treated as
NPA if the installment of principle or interest there on remains overdue for two crop
season and loan granted for long duration will be treated as NPA if the installment
remains overdue for one crop season
Out of order
An account will be treated as out as out of order if the outstanding balance remain
continuously in excess of the sanctioned limitdrawing power In cases where the
outstanding balance in the principle operating ac is less than the sanctioned limit but
there are no credit continuously for 90 days as on the date of balance sheet or the
credit are not enough to cover the interest debited during the same period
Overdue
An amount due to the bank under any credit facility is overdue it is not paid on the due
date fixed by the bank
The date of npa will be actual date on which sippage occurred as mentioned below
For term and demand loan ac
The date on which the installment of the principle have
remaine overdue for a period more then 90 days
For over draft and cash credit ac
The date on which the ac completed period of more than 90
days of being continuously out of order
Source wwwRBI Org in
PROVISING NORMS
There is time lag between an ac becoming doubtful for recovery the realization of security and
erosion over a loan period of time in its value So RBI directives now requiresthe banks to make
provisions in their balance sheet for all non- standard loan asset Provisioning is made on all types of
assets ie Standard sub-standard doubtful and loss assets
1 Standard assets RBI vides its circular dated 151108 revised the provisioning requirements
For all type of standard assets it has been reduced to a uniform level of 040of outstanding
at global basis except in the case of direct advance to agriculture and SME sector which
shall continue to attract a provisioning of 025 The provision toward standard assets need
not to be netted from gross advances but shown separately as ldquo contigent provisionsrdquo against
standard assets under other liquidities and provisions others in schedule 5 of the balance
sheet
2 Sub-standard assets- In respect of sub-standard assets the rate of provision is 10 of
outstanding balance without considering ECGC guarantee cover or securities available
However if the loan was unsecured from the begining there would be additional provision of
10 ie total provision would be 20 of the outstanding balance Unsecured exposure is
defined as an exposure where the realizable value of the security as assessed by the
bankreserve banks inspecting officers is not more than 10 ab-intio of the outstanding
exposure
3 Doubtful assets In case of doubtful assets while making provision realizable value of
security is to be considered 100 provision is made for unsecured portion In case of
secured portion the rate of provision depend on age of doubtful assets as under
Age of doubtful assets Provision as of secured portion
Doubtful up to 1 year D1 20 of RVS( realizable value of security)
Doubtful for more than 1 year D2 30 of RVS
Doubtful for more than 3 years D2 100 of RVS
Thus if an ac is doubtful for more than 3 years than 100 of the provision is to be made
both from secured and unsecured portion If an advance has been guaranteed by DICGC
CGFTECGC and is doubtful than provision on secured portion will be as in other cases but
provision on unsecured portion will be made after deducting the claim value
4 LOSS ASSET 100 of the outstanding amount while making provision on NPAs amount
lying in suspense ac and derecognized interest should be deducted from gross advance and
provision be made on balance amount
5 OVERALL PROVISION With a view to improving the improving the provisioning cover
and enhancing the soundness of the individual banks RBI has proposed in oct- 09 policy that
bank should augment their provisions and ensure that their total provisioning coverage ratio
including floating provisions is not less than 70
Source wwwRBIorgin
IMPACTEFFECT OF NPA UPON BANKS
A strong banking sector is important for flourishing economy The failure of banking sector
may have an adverse impact on other sector NPA are one of the major concerns of sector
banks is increasing result in nonperforming assets The NPA impact drastically to the
working of banks The efficiency of bank not always reflected by the size of its balance sheet
but by the level of return on its assetsNPA do not generate interest income for the banks but
the same time banks are required to make provisions for such NPAs from their current
profits
They erode current profits through provisioning requirement
They result in reduced interest income
They require higher provisioning requirements effecting profits and accretion to capital
Adverse impact on capital adequacy ratio
Roe and Roa goes down because NPA do not earn
Banks rating gets effect
Banks cost of raising funds goes up
Bad effect on goodwill
Bad effect on equity value
EARLY SYMPTOMS BY WHICH ONE CAN RECOGNIZE A PERFORMING
ASSETS TURNING TO A NON PERFORMING ASSET
Four categories of early symptoms
1) FINANCIAL
(a) Non- payment of very first installment
(b) Bouncing of cheque due to insufficient balance in the ac
(c) Irregularity in installment
(d) Irregularity of operations in ac
(e) Unpaid overdue bill
(f) Declining current ratio
2) OPERATIONAL AND PHYSICAL
(a) If information is received that the borrower has either initiated the process of winding up or not doing the business
(b) Over-due receivable
(c) Stock statement not submitted on time
(d) External non-controllable factor like natural calamities in the city where the borrower lives
(e) Non- payment of salary
(3) ATTITUDNAL CHANGE
(a) Use for personal comfort stocks and shares by borrowers
(b) Avoidance of contact with bank
(c) Problem between partners
(4) OTHER
(a) Change in govt policies
(b) Death of the borrower
(c) Delay in salary
PREVENTIVE MEASUREMENT FOR NPA
Early recognition of the problem
Invariably by the time banks start their efforts to get involved
in a revival process its too late to retrieve the situation ndash both in terms of rehabilitation of the
project and the recovery of banks dues Identification of the weakness regardless of the fact
that it may not have become NPA is imperative Assessment of the potential of revival may
be done on the basis of a techno-economic viability study Restructuring should be attempted
where after an objective assessment of the promoterrsquos intention banks are convinced of a
turn around with in a scheduled facilitate winding upselling of units earlier so as to recover
whatever is possible through means before the security position becomes worse
Identifying borrowers with genuine intent
Identifying borrower with genuine intent from those who
are non-serious with commitment or stake in revival is a challenge confronting bankers Here
the role of front line officials at branch level is paramount as they are the ones who have
intelligent inputs with regard to promoters lsquo sincerity and capability to achieve turnaround
Based on this objective assessment bank should decide as quickly as possible whether it
would be worthwhile to commit additional finance
In this regard banks may consider having
ldquospecial investigationrdquo of all financial transaction or business transaction books of account
order to ascertain real factor that contributed to sickness of borrower Bank may have panel
of technical experts with proven expertise and task record of preparing techno-economic
study of the project of the borrowers
Borrowers having genuine problems due to temporary mismatch in find flow or sudden
requirement of additional fund may entertained at branch level for this purpose a special
limit to such type of cases should be decided This will obviate the need to route the
additional funding through the controlling officers in deserving cases and avert many
accounts sleeping into NPA category
Timeliness and adequacy of response
Longer the delay in response greater the enjury to the
account and the asset Time is a crucial element in any restructuring or rehabilitation activity
The response decided on the basis of techno- economic study and promoterrsquos commitment
has to be adequate in terms of extend of additional funding and relaxations etc under the
restructuring exercise The package of assistance may be flexible and bank may look at the
exit option
Focus on cash flow
While financing at the time of restructuring the banks may not be guided
by the conventional fund flow analysis only which could yield a potentially misleading
picture Appraisal for fresh credit requirement may be done by analyzing fond flow in
conjunction with the cash flow rather than only on the basis of fund flow
Source wwwAskcom
Management effectiveness
The general perception among the borrower is lack of finance that
leads to sickness and NPAs but this may not be the case all the time Management effectiveness
advance business condition is a very important aspect that affects a borrowing units fortunes A bank
may commit a multiple finance to an align unit only after basic viability of the enterprise also in the
context of quality of management is examined and confirmed It will be useful to have consultant
appointed as early as possible to examine this aspect A proper techno-economic viability study thus
become the basis on which any future action can be considered
Multiple financing
A) During the exercise for assessment of viability and restructuring a pragmatic and unified
approach by all the leading banks as also sharing of all relevant information on the
borrower would go a long way toward overall success of rehabilitation exercise given the
probability of successfailure
B) In some default cases Where the unit is still working The bank should make sure that it
captures the cash flow and insure that such cash are used for working capital purpose
Toward this end there should be a continuous flow of information among consortium
member A bank which is not a part of consortium may not be allowed to offer credit
facility to such defaulting clients Current account facility may also be denied at non-
consortium banks to such clients and violation may attract penal action The credit
information bureau of india (CIBIL) may be very useful for meaningful information
exchange on defaulting borrowers once the setup become fully operational
C) In a forum of lenders the priority of each lender will be different While one set of lender
may be willing to wait for longer time to recover its dues another lender may have a much
shorter timeframe in mind So it is possible that the letter categories of lenders may be
willing to exit even at a cost by a discounted settlement of the exposure There for any plan
for restructuringrehabilitation may takes into account
D) Corporate debt restructuring it has been institutionalized in 2001 to provide a timely and
transparent system for restructuring the corporate debt of RS 20 crores and above with the
banks on a voluntary basis and outside a legal framework Under this system bank are
greatly benefit in terms of restructuring of large standard accounts (potential NPAs) and
viable sub-standard account with multiple banking arrangement
NPA MANAGEMENT- RESOLUTION
Compromise settlement schemes
Restructuringrescheduling
Lok adalat
Corporate debt restructuring cell
Debt recovery Tribunals (DRT)
Proceeding under the code of civil procedure
Board of industrial and financial reconstruction
National company law Tribunal (NCLT)
Sale of NPA to other bank
Sale of NPA to ARCSC under securitization and reconstruction of financial assets for
enforcement of security interest Act 2000 (SRFAESI)
Liquidation
Source wwwRBIorgin
NPA MANAGEMENT IN INDIA
Formation of the credit information bureau (India) limited (CIBIL)
Release of willful defaulterrsquos listRBI also releases a list of borrowers with aggregate
outstanding of RS 1 crore and above against whom bank have filed suit for recovery of their
fund
Reporting of frauds to RBI
Norms of lenders labiality- framing of fair practices code with regard to lenders lability to
be followed by banks
Risk assessment and Risk management
RBI has advised banks to all cases of willful defaulters in case of 1 crore and above and
files suits in such cases
Responding quick mortality cases
Special mention accounts for early identification for bad debt loans and advances over due
for less than one or two quarters would come under this category However these accounts do
not need provisioning
INTERNATIONAL PRACTICES ON NPA MANAGEMENT
Subsequent to the Asian currency crisis which severely crippled the financial system In
addition to the above some of the more recent and aggressive step to NPAs have been taken
by Taiwan Taiwanese financial institution have been encouraged to merge and form bank
based AMCs through the recent introduction of financial holding company act and financial
institution Asian countries the magnitude of NPAs in Asian financial institution was brought
to light Driven by the need to proactively tackle the soaring NPAs level the respective govt
embarked upon a program of substantial reform This involves setting up processes for early
identification and resolution of NPAs The table below provides a cross country comparison
of approaches used for NPA resolution Mergers Act A long side the ministry of finance has
followed a carrot and strict policy of specifying the required NPA ratio for banks while also
providing flexibility in modes of NPA assets resolution and a conduct
ive regulatory and tax environment Deferred loss write-off provisions have been instituted to
provide breathing space for lenders to absorb NPA write-off While it is too early to
comment on success of NPA resolution process in Taiwan the early sign are encouraging
Detailed below are some key NPA management approaches adopted by banks in South East
Asian countries
1 Credit risk mitigation
2 Early warning systems
3 Assets management companies
Increasing willingness to sell NPAs to AMCs
Effective resolution strategy
Appointment of special administrators
4 Out of court restructuring
Source wwwgooglecom
DIFFICULTIES WITH NON PERFORMING ASSETS
I Owners do not receive a market return on their capital In the worst case if the bank
fails owner lose their assets
II Depositors do not receive a market return on savings In the worst case if the bank
fails depositors lose their assets or uninsured balance Banks also redistribute losses
to other borrowers by charging higher rate of interest
III Non-performing loans epitomize bad investors They misallocate credit from good
projects which do not receive funding to failed project
IV 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
shortage the shortage can jam payments across the country
b Illiquidity constraints banks in paying depositors eg cashing their paychecks
c Undercapitalized banks exceed the bank capital base
Lending by bank has been politicized It is common knowledge
that loans are given to various industrial houses on common consideration and
viability of project but on political consideration In normal circumstances banks
before extending any loan would make a thorough study of the actual need of the
party considered the prospect of the business in which it is engaged Since it is
not looked into many of the loans becomes NPA
REASONS F0R AN ACCOUNT BECOMING NPA
Those attribute to borrower
Failure to bring in required capital
Lack of proper planning
Unwanted expenses
Lack of expertise
Poor credit collection
Miss management
Heavy borrowing
Lack of knowledge regarding NPA
Willful defaulters
Death of the borrower
Those attribute to banks
Wrong selection of borrower
Poor credit appraisal
Unhelpful in supervision
Too inflexible attitude
System overload
Lack of motivation
Delay in sanction
Lack of trained staff
Lack of commitment to recovery
Lack of personal visit to the borrower office
Lack of personal visit to the borrowerrsquos residence
Other
Fast changing technology
Unhelpful attitude of govt
Increase in material cost
Government policies
Taxation law
Political hostility
INDIAN ECONOMY AND NPA
Undoubtedly the world economy has slowed down recession is at its peak globally stock markets
have tumbled and business itself getting hard to do The Indian economy has been much affected due
to high fiscal deficit poor infrastructure facilities sticky legal system cutting of exposures to
emerging market by FIIs etc
Further international rating agencies like standard and poor
have lowered Indiarsquos credit rating to sub- investment grade Such negative aspects have often
outweighed positive such as increasing for reserve and a manageable inflation rate
Under such situation I go without saying that banks are no exception
and are bound to face the heat of global down turn One would be surprise to know that banks and
financial institution in India holds non-performing assets worth Rs 1 10000 crores Bankers have
realized that unless the level of NPA is reduced drastically they will find it difficult to survive
The actual level of NPA in India is around $ 40 billion much higher than govt estimation of $16
billion This difference is largely due to the discrepancy in accounting the NPAs followed by India
and rest of the world The accounting norms of India are less stringent than those of the developed
economies The Indian banks also have the tendency to extend the past due Considering the GDP
India nearly $ 470 billion the NPA are 8 of the total GDP which was better than many Asian
countries The NPA of china was 45 of the GDP While Japan had NPAs of 25 of the GDP
The aggregate level of NPAs in Asia has increased from $ 25 billion in 2007 to
$ 34 billion on 2009 looking to such overall pictures of the market we can say that India is doing
well and the steps taken are looking favorable
Source googlecoin
DATA ANALYZING THE QUETIONNAIRE
Two set of questionnaire were prepared to collect the feedback One set of questionnaire was meant for branches and other set of questionnaire was meant for borrowers
The set of questionnaire were given to the branches under hazaribag (RBO) and collected the feedback of the bankers of P segment and the branch manager
The questionnaire prepared for branch contained 15 questions and the questionnaire prepared for borrower contains 10 questions
The data was collected from 50 bankers and the data analysis of the branch questionnaire is as follows
Question number 1
Does not require any data analysis and information was sought to know the business level of the branches for the purpose of whether particular branch is actively engaged in xpress credit portfolio
Question number 2
Do you think that the borrowers are aware about NPA
Answer
32 of the respondent feel that the borrowers are not aware about NPA and 18 respondents feel that borrowers are aware about NPA
Chart no 11
yes
no
0
5
10
15
20
25
30
35
1832 Column1
Conclusion
Majority of the bank officials feels that the borrowers are not aware about NPA
Question number 3
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Answer
Out of 32 respondent 22 respondents is fully satisfied that lack of knowledge among the borrower regarding NPA is one of the reason for NPA 08 respondent were partially satisfied with it and 02 respondent were not satisfied with it
Chart no 12
fully satisfied(22)69
partially satisfied(8)25
not satisfied(2)6
Sales
Conclusion
Majority of the borrowers feels that lack of knowledge among the borrower regarding NPA is one of the reasons for NPA
Question number 4 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Answer
Out of 50 respondent 30 of the respondent strongly satisfied that these external factors contribute to NPA 10 respondent were partially satisfied with it 5 were not satisfied where as 5 were fully dissatisfied with it
Chart no 13
6020
10
10
fully satisfied(30) partially satisfied(10) not satisfiec(5) fully desatisfied(5)
Conclusion
Most of the respondent thinks that external factrs like willful defaulter change in govt policy contribute to NPA
Question number 5
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Answer
Chart no 14
feedback
fully satisfied(20)partially satisfied(12)not satisfied(12)fully dissatisfied(6)
Conclusion
As per the response of the officials most of the officials feel that internal factors are also responsible for NPA
Question number 6
Do you think that inflation is one of the reasons for NPA
Answer
Out f 50 responses 22 were strongly satisfied 18 were partially satisfied 8 were not satisfied and 2 were fully dissatisfied
Chart no 15
fully satisfied(20)44
partially satisfied(18)36
not satisfied(5)10
fullt dissatisfied(5)10
Conclusion
Growing inflation increasing goods rate is also one of the reason for NPA
Question number 7
Do you think that lack of PSS is also contributed to NPA
Answer
Out of 50 responses 30 were fully satisfied with it 12 were partially satisfied and 8 were fully dissatisfied
Chart no 16
6024
16
Open
fully satisfied(30)Partially satisfied(12)not satisfied(0)fully dissatisfied(8)
Conclusion
Majority of the officiais feels that lack of PSS is one of the reason for NPA This means that the PSS carried out by the bank is not sufficient or not carried out properly
Question number 8
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Answer
Most of the respondent feels that increase in unwanted expenses of the borrwer ls contribute to NPA
Chart no 17
56
12
28
4
FULLY SATISFIED(28)PARTIALLY SATISFIED(6)NOT SATISFIED(14)FULLY DISSATISFIED(2)
Conclusion
As per response of the officials increasing inflation have an adverse effect on the financial sector its working performance as well as on NPA
Question number 9
Do you think that high rate of interest under Xpress credit also contributes to NPA
Answer
Out of 50 respondent 25 respondent were not satisfied 10 were partially satisfied 10 were strongly dissatisfied where as only 5 out of 50 were fully satisfied with it
Chart no 18
strongly satisfied(5)partially satisfied(10)not satisfied(25)fully dissatisfied(10)
Conclusion
Most of the respondents are not satisfied with it They feel that the rate of interest charged by SBI under Xpress credit is not high and it will not contribute to NPS
Question number 10
Do you think that lack of proper planning of the borrower is one of the reason for NPA
Answer
Out of 70 respondent 35 were fully satisfied 5 were not satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 19
fully satisfied(35)70
partially satisfied(10)20
not satisfied(5)10
Conclusion
Most of the respondent feels that the borrowers borrow money from the bank without any proper planning which is one of the most important reason for NPA
Question number 11
Is heavy borrowing also contribute to NPA
Answer
Out of 50 respondent 25 respondent were fully satisfied 12 were partially satisfied 8 were not satisfied were as 5 were fully dissatisfied
Chart no 110
50
24
16
10
fully satisfied(25) partially satisfied(12) not satisfied(8) fully dissatisfied(5)
Question number 12
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Answer
As per the response of the officials 20 were fully satisfied 66were partially satisfied 4 were not satisfied with it were as 10 respondent were fully dissatisfied
Chart no 111
fully satisfied(10)20
partially satisfied(33)66
not satisfied(2)4
fullydissatisfied(5)10
Conclusion
As per the response given by the officials most of the officials were partially satisfied that wrong selection of borrower also contribute to NPA which means that selection process carried out by the bank is not appropriate or there is some difficulties in implementing them
Question number 13
Do you think that poor credit appraisal also contribute to NPA
Answer
Out of 50 respondent 5 were fully satisfied 10 were fully satisfied 30 were not satisfied were as only 5 were fully dissatisfied
Chart no 112
fully satisfied(5)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 14
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Answer
Out of 50 responses 3 were fully satisfied 15 were partially satisfied 25 were not satisfied where as 7 were full dissatisfied
Chart no 113
fully satisfied(3)partiallt satisfied(15)not satisfied(25)fully dissatisfied(7)
Conclusion
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not contribute to NPA This means that the attitude of bank toward the borrower is not inflexible
Question number 15
Do you think that system over load is also one of the causes of NPA
Answer
Out of 50 respondent 28 were fully satisfied 12 were partially satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 114
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
ELIGIBILITY
1 EMPLOYERS
Central and state Government
Quasi-Government
Profit making PSUs
Educational Institutions of National Repute
Companies with a CRA rating of SB1 to SB5
Companies with a CRA rating of SB6 and SB7 are also eligible if it satisfies take over norms
2 EMPLOYEES
Permanent employees with a minimum 1 yearrsquos length of service
He should have sufficient cash flows to repay the loan from salary as evidenced by 6 monthsrsquo
salary slipsincome tax returns of 2 years
He should provide proof of residence and proof of identity to satisfy KYC norms
He should produce 6 months satisfactory statement of bank account (at any bank)
Proof of Employment in the eligible company
Source Xpress credit circular
MINIMUM NET MONTHLY INCOME
The minimum Net Monthly Income (NMI) of the employee should beRs5000- It can
Be lowered to Rs3000- subject to the condition that the salary accounts of the entire enterprise are
with us The Branch will ensure to obtain an Undertaking from the borrower that there is no other
deduction from hisher salary which is not reflected in the salary slip [As per Annexure ndash (B) ndash (v)]
LOAN AMOUNT
a) Minimum Rs24000=
b) Maximum 24 Months NMI with a ceiling of Rs1500 lacs
TYPE OF LOAN
LoanD Term demand Loan (NO OVERDRAFT)
REPAYMENT PERIOD
Maximum 60 months
EMI NMI le 50
REVIEW
Review of loan will be done yearly
RENEWAL
Renewal of loans will be allowed after 24 months
CHECK OFF
The process by which the salary disbursing officer under takes to deduct the loan
installments from the salary of the borrower and remits the same to the Bank for credit to the loan
account
Or
The employer pays the borrowerrsquos salary into his SavingsCurrent Account with our Bank
The borrower gives an irrevocable Standing Instruction (SI) For recovery of the loan installments
from his aforesaid account with the SI being synchronized with the date of credit of salary in the
borrowerrsquos SavingsCurrent Account
AND
The employer undertakes to inform the Bank if and when there is a severance due to borrowerrsquos
transfer resignation retirement etc[ Branch will ensure to obtain the undertaking from the employer
and employee as per Annexure ndash B (I) B (ii) II or B (iii) ]
Source Xpress credit circular
CATEGORY I
FULL CHECK OFF
As given under the head CHECKOFF
AND
Undertaking from the employer to obtain a NOC from the Bank before settling the dues of the
borrower on transfer resignation retirement etc [As per Annexure ndash B (IV)]
This stipulation can be waived by the sanctioning authority incase of employees of Central State
Government PSUs Universities and Reputed Colleges In case of other employers the CGM of the
Circle has been permitted to waive the stipulation But in no case this can be waived for IT sector
employees
CATEGORY II
PARTIAL CHECK OFF
As given under the head CHECKOFF
CATEGORY III
WITH NO CHECK OFF
The employer pays the borrowerrsquos salary into his SavingsCurrent Account with our Bank
The borrower gives an irrevocable Standing Instruction (SI) for
recovery of the loan installments from his aforesaid account twitch the SI being synchronized with
the date of credit of salary in the borrowerrsquos SavingsCurrent Account
OR
Conditions as given under the head CHECKOFF is not fulfilled but the borrower provides monthly
PDCs (Post Dated Cheques) for entire tenure of the loan provided eligibility criteria are fulfilled
(Guidelines on Post Dated cheques is annexed as per Annexure A)
INTEREST RATE
The Interest rate is based on the category of Check off available
Category I
5 above the base rate ie - 970 +5 =1470 ( currently 1470 pa)
Category II
7 above the base rate (currently 1670 pa)
Note The GM of the Network is vested with powers to extend the Category II rate to a Category III
borrower only in case of employees of SB1 to SB5 rated companies who maintain their salary
accounts with us The Category III employees who do not maintain their salary accounts with us but
provide PDCs for the loan should be charged the card rate applicable to Category III and no
deviation should be permitted by Circle GMs
PENAL INTEREST
Penal interest should not be charged for loans up to Rs25000For Loans above Rs25000- if the
irregularity exceeds EMI or installment amount for a period of one month then penal interest would
be charged 2 pa(over and above the applicable interest
rate) on the overdue amount for the period of default If part installment or part EMI remains
overdue then penal interest should not be levied
This provision has been made to avoid application of penal interest on Personal Segment Loan
accounts where EMIs stipulated or installments are being paid regularly by the borrowers
Source Xpress credit circular
SECURITY
The loan is clean in nature and no security is required
PROCESSING FEE
11 of the loan amount including tax
PRE-SANCTION PROCESS
The following documents will be obtained before sanction-
I Application cum appraisal Form With a photograph of the borrower duly attested by the
authorized official
II It is proposed to put in place an arrangement for verification of the address of the borrower by an
outside agency A report duly signed by the verification agency (in places where an arrangement is
in place) or by our officerstaff in other places (where verification agency approved by Corporate
Centre is not available) should be complied based on the following verifications
I Verification of the borrowerrsquos residence address as given in the loan application
by actually visiting the residence of the borrower
II Verification of the borrowerrsquos office address as given in the loan application by
actually visiting the office of the borrower
Source Xpress credit circular
III Verification of the borrowerrsquos residence telephone number as given in the loan
application by actually calling the residence telephone number of the borrower
IV Verification of the borrowerrsquos office telephone number as given in the loan
Application by actually calling the office telephone number of the Borrower
V Verification of the IT return of the Borrower with IT department through a
person approved by the Regional OfficeZonal Office where feasible Where IT
return cannot be verified by the Bank statement of account of the borrower may
be scrutinized to verified income flows
Where the verification is not outsourced the Branch staff
Must do the verification and the report should be added with the loan documents
Flow chart of loan procedure of retail loan
Chart no 01
Disagree
NON PEFORMING ASSETS (NPA) ndash CONCEPT
The three letters ldquoNPArdquostrike terror in banking sector and business circle todayNPA is the short
Form of ldquoNon performing Assetsrdquo
Enquiry about loan
Agreeprovided with check list and
application
submission of documents and application dully
filled up
Documents taken
verification of application and
documebtsCIBIL report
Processing of loan
Sangtion of loan
Document
Control Disbursal of loan
phasewise lumpsum
In banking NPA are loans given to doubtful customers who may or may not repay the
loan on time There are two types of assets viz performing and non performing Performing loans
are standard loans on which both the principle and interest are secured and their return is guaranteed
NPA means the debt which is given by the bank is unable to recover is called
nonperforming assets A NPA account in the books of accounts is an asset as it indicates the amount
received from the defaulters It means if any bank gives loan and is not paid by the customers till 90
days than that account is called as NPA account
DEFINITION
An asset including leased assets becomes nonperforming when it ceases to generate income
for the bank
A NPA was defined as a credit facility in respect of which the interest or installment
of principle as remained ldquopast duerdquo for specific period of time
Source googlecoin
The specific period was reduced in a phased manner as under
wef ndash 31031993 four quarters
wef ndash 31 031994 three quarters
wef - 31031995 two quarters
wef - 31032001 180 days
wef - 31032004 90 days from past due
90 days delinquency is not applicable to agriculture segment
With effect from march 31 2004 NPA shall be a loan or an advance where
1) Term loan interest installment of principle remain over due for 90 days
2) Cash creditover draft an account remain ldquoout of orderrdquo for a period of more than 90 days
3) Bills The bills remain over due for a period more than 90 days
4) Agriculture loan
a The loan has been granted for short duration crop installments of the principle
remain over due for two crop season beyond the due date
b If the loan has been granted for long duration crop installment of the principle
remain over due for one crop season beyond the due date
Source Rbiorgin
CLASSIFICATION OF LOANS
In India loans are classified on following basis
Performing assets
Loans where the interest and or principle not remain overdue for more then 90 days
Non-performing assets
Any loan repayment remains over due for more than 90 days is considered as NPA
According to the securitization and re construction of financial assets and enforcement of
security interest ordinance2002 ldquonon performing assetsrdquo(NPA) means an assets or ac of
borrower which has been classified by the bank as sub-standard doubtful or loss asset in
accordance with the guidelines relating to asset classification issued by RBI
Source googlecoin
ASSET - CLASSIFICATION
Assets can be categorized into four categories (a) standard (b) sub-standard
(c) doubtful (d) loss The last three categories are classified as npa based on the the period for
which the asset has remained non-performing and the realisability of the dues
Standard assets the loan ac which are regular and do not carry more than normal risk are
known as standard assets there could be ac which though have not become npa but are
irregular Such ac are called special mention ac
Sub- standard assets with effect from 3132005 a sub-standard assets is one which is
classified as NPA for a period not exceeding 12 months
Doubtful asset with effect from 3132005 an asset is to be classified as doubtful if it
remained npa or sub-standard for a period exceeding 12 months
Loss assets a loss asset is one where loss has been identified by the bank or internal and
external auditors or the RBI inspection but the amount as not been written off wholly In
other words such an asset is considered uncollectable and such little value that its
continuance as a bankable asset is not warranted although there may be some salvage or
recoverable value
NPA IDENTIFICATION NORMS
With effect from 31st march 2004 a loan or advance become npa when
a Interest or installment of the principle remains overdue for a period more then 90
days in respect of term loan
b The ac remain out of order for a period more 90days in respect of over draft cash
cash credit
c The bill remains overdue for a period more than 90 days in case of bills purchased
and discounted
d With effect from Sept 2004 loan granted for short duration crops will be treated as
NPA if the installment of principle or interest there on remains overdue for two crop
season and loan granted for long duration will be treated as NPA if the installment
remains overdue for one crop season
Out of order
An account will be treated as out as out of order if the outstanding balance remain
continuously in excess of the sanctioned limitdrawing power In cases where the
outstanding balance in the principle operating ac is less than the sanctioned limit but
there are no credit continuously for 90 days as on the date of balance sheet or the
credit are not enough to cover the interest debited during the same period
Overdue
An amount due to the bank under any credit facility is overdue it is not paid on the due
date fixed by the bank
The date of npa will be actual date on which sippage occurred as mentioned below
For term and demand loan ac
The date on which the installment of the principle have
remaine overdue for a period more then 90 days
For over draft and cash credit ac
The date on which the ac completed period of more than 90
days of being continuously out of order
Source wwwRBI Org in
PROVISING NORMS
There is time lag between an ac becoming doubtful for recovery the realization of security and
erosion over a loan period of time in its value So RBI directives now requiresthe banks to make
provisions in their balance sheet for all non- standard loan asset Provisioning is made on all types of
assets ie Standard sub-standard doubtful and loss assets
1 Standard assets RBI vides its circular dated 151108 revised the provisioning requirements
For all type of standard assets it has been reduced to a uniform level of 040of outstanding
at global basis except in the case of direct advance to agriculture and SME sector which
shall continue to attract a provisioning of 025 The provision toward standard assets need
not to be netted from gross advances but shown separately as ldquo contigent provisionsrdquo against
standard assets under other liquidities and provisions others in schedule 5 of the balance
sheet
2 Sub-standard assets- In respect of sub-standard assets the rate of provision is 10 of
outstanding balance without considering ECGC guarantee cover or securities available
However if the loan was unsecured from the begining there would be additional provision of
10 ie total provision would be 20 of the outstanding balance Unsecured exposure is
defined as an exposure where the realizable value of the security as assessed by the
bankreserve banks inspecting officers is not more than 10 ab-intio of the outstanding
exposure
3 Doubtful assets In case of doubtful assets while making provision realizable value of
security is to be considered 100 provision is made for unsecured portion In case of
secured portion the rate of provision depend on age of doubtful assets as under
Age of doubtful assets Provision as of secured portion
Doubtful up to 1 year D1 20 of RVS( realizable value of security)
Doubtful for more than 1 year D2 30 of RVS
Doubtful for more than 3 years D2 100 of RVS
Thus if an ac is doubtful for more than 3 years than 100 of the provision is to be made
both from secured and unsecured portion If an advance has been guaranteed by DICGC
CGFTECGC and is doubtful than provision on secured portion will be as in other cases but
provision on unsecured portion will be made after deducting the claim value
4 LOSS ASSET 100 of the outstanding amount while making provision on NPAs amount
lying in suspense ac and derecognized interest should be deducted from gross advance and
provision be made on balance amount
5 OVERALL PROVISION With a view to improving the improving the provisioning cover
and enhancing the soundness of the individual banks RBI has proposed in oct- 09 policy that
bank should augment their provisions and ensure that their total provisioning coverage ratio
including floating provisions is not less than 70
Source wwwRBIorgin
IMPACTEFFECT OF NPA UPON BANKS
A strong banking sector is important for flourishing economy The failure of banking sector
may have an adverse impact on other sector NPA are one of the major concerns of sector
banks is increasing result in nonperforming assets The NPA impact drastically to the
working of banks The efficiency of bank not always reflected by the size of its balance sheet
but by the level of return on its assetsNPA do not generate interest income for the banks but
the same time banks are required to make provisions for such NPAs from their current
profits
They erode current profits through provisioning requirement
They result in reduced interest income
They require higher provisioning requirements effecting profits and accretion to capital
Adverse impact on capital adequacy ratio
Roe and Roa goes down because NPA do not earn
Banks rating gets effect
Banks cost of raising funds goes up
Bad effect on goodwill
Bad effect on equity value
EARLY SYMPTOMS BY WHICH ONE CAN RECOGNIZE A PERFORMING
ASSETS TURNING TO A NON PERFORMING ASSET
Four categories of early symptoms
1) FINANCIAL
(a) Non- payment of very first installment
(b) Bouncing of cheque due to insufficient balance in the ac
(c) Irregularity in installment
(d) Irregularity of operations in ac
(e) Unpaid overdue bill
(f) Declining current ratio
2) OPERATIONAL AND PHYSICAL
(a) If information is received that the borrower has either initiated the process of winding up or not doing the business
(b) Over-due receivable
(c) Stock statement not submitted on time
(d) External non-controllable factor like natural calamities in the city where the borrower lives
(e) Non- payment of salary
(3) ATTITUDNAL CHANGE
(a) Use for personal comfort stocks and shares by borrowers
(b) Avoidance of contact with bank
(c) Problem between partners
(4) OTHER
(a) Change in govt policies
(b) Death of the borrower
(c) Delay in salary
PREVENTIVE MEASUREMENT FOR NPA
Early recognition of the problem
Invariably by the time banks start their efforts to get involved
in a revival process its too late to retrieve the situation ndash both in terms of rehabilitation of the
project and the recovery of banks dues Identification of the weakness regardless of the fact
that it may not have become NPA is imperative Assessment of the potential of revival may
be done on the basis of a techno-economic viability study Restructuring should be attempted
where after an objective assessment of the promoterrsquos intention banks are convinced of a
turn around with in a scheduled facilitate winding upselling of units earlier so as to recover
whatever is possible through means before the security position becomes worse
Identifying borrowers with genuine intent
Identifying borrower with genuine intent from those who
are non-serious with commitment or stake in revival is a challenge confronting bankers Here
the role of front line officials at branch level is paramount as they are the ones who have
intelligent inputs with regard to promoters lsquo sincerity and capability to achieve turnaround
Based on this objective assessment bank should decide as quickly as possible whether it
would be worthwhile to commit additional finance
In this regard banks may consider having
ldquospecial investigationrdquo of all financial transaction or business transaction books of account
order to ascertain real factor that contributed to sickness of borrower Bank may have panel
of technical experts with proven expertise and task record of preparing techno-economic
study of the project of the borrowers
Borrowers having genuine problems due to temporary mismatch in find flow or sudden
requirement of additional fund may entertained at branch level for this purpose a special
limit to such type of cases should be decided This will obviate the need to route the
additional funding through the controlling officers in deserving cases and avert many
accounts sleeping into NPA category
Timeliness and adequacy of response
Longer the delay in response greater the enjury to the
account and the asset Time is a crucial element in any restructuring or rehabilitation activity
The response decided on the basis of techno- economic study and promoterrsquos commitment
has to be adequate in terms of extend of additional funding and relaxations etc under the
restructuring exercise The package of assistance may be flexible and bank may look at the
exit option
Focus on cash flow
While financing at the time of restructuring the banks may not be guided
by the conventional fund flow analysis only which could yield a potentially misleading
picture Appraisal for fresh credit requirement may be done by analyzing fond flow in
conjunction with the cash flow rather than only on the basis of fund flow
Source wwwAskcom
Management effectiveness
The general perception among the borrower is lack of finance that
leads to sickness and NPAs but this may not be the case all the time Management effectiveness
advance business condition is a very important aspect that affects a borrowing units fortunes A bank
may commit a multiple finance to an align unit only after basic viability of the enterprise also in the
context of quality of management is examined and confirmed It will be useful to have consultant
appointed as early as possible to examine this aspect A proper techno-economic viability study thus
become the basis on which any future action can be considered
Multiple financing
A) During the exercise for assessment of viability and restructuring a pragmatic and unified
approach by all the leading banks as also sharing of all relevant information on the
borrower would go a long way toward overall success of rehabilitation exercise given the
probability of successfailure
B) In some default cases Where the unit is still working The bank should make sure that it
captures the cash flow and insure that such cash are used for working capital purpose
Toward this end there should be a continuous flow of information among consortium
member A bank which is not a part of consortium may not be allowed to offer credit
facility to such defaulting clients Current account facility may also be denied at non-
consortium banks to such clients and violation may attract penal action The credit
information bureau of india (CIBIL) may be very useful for meaningful information
exchange on defaulting borrowers once the setup become fully operational
C) In a forum of lenders the priority of each lender will be different While one set of lender
may be willing to wait for longer time to recover its dues another lender may have a much
shorter timeframe in mind So it is possible that the letter categories of lenders may be
willing to exit even at a cost by a discounted settlement of the exposure There for any plan
for restructuringrehabilitation may takes into account
D) Corporate debt restructuring it has been institutionalized in 2001 to provide a timely and
transparent system for restructuring the corporate debt of RS 20 crores and above with the
banks on a voluntary basis and outside a legal framework Under this system bank are
greatly benefit in terms of restructuring of large standard accounts (potential NPAs) and
viable sub-standard account with multiple banking arrangement
NPA MANAGEMENT- RESOLUTION
Compromise settlement schemes
Restructuringrescheduling
Lok adalat
Corporate debt restructuring cell
Debt recovery Tribunals (DRT)
Proceeding under the code of civil procedure
Board of industrial and financial reconstruction
National company law Tribunal (NCLT)
Sale of NPA to other bank
Sale of NPA to ARCSC under securitization and reconstruction of financial assets for
enforcement of security interest Act 2000 (SRFAESI)
Liquidation
Source wwwRBIorgin
NPA MANAGEMENT IN INDIA
Formation of the credit information bureau (India) limited (CIBIL)
Release of willful defaulterrsquos listRBI also releases a list of borrowers with aggregate
outstanding of RS 1 crore and above against whom bank have filed suit for recovery of their
fund
Reporting of frauds to RBI
Norms of lenders labiality- framing of fair practices code with regard to lenders lability to
be followed by banks
Risk assessment and Risk management
RBI has advised banks to all cases of willful defaulters in case of 1 crore and above and
files suits in such cases
Responding quick mortality cases
Special mention accounts for early identification for bad debt loans and advances over due
for less than one or two quarters would come under this category However these accounts do
not need provisioning
INTERNATIONAL PRACTICES ON NPA MANAGEMENT
Subsequent to the Asian currency crisis which severely crippled the financial system In
addition to the above some of the more recent and aggressive step to NPAs have been taken
by Taiwan Taiwanese financial institution have been encouraged to merge and form bank
based AMCs through the recent introduction of financial holding company act and financial
institution Asian countries the magnitude of NPAs in Asian financial institution was brought
to light Driven by the need to proactively tackle the soaring NPAs level the respective govt
embarked upon a program of substantial reform This involves setting up processes for early
identification and resolution of NPAs The table below provides a cross country comparison
of approaches used for NPA resolution Mergers Act A long side the ministry of finance has
followed a carrot and strict policy of specifying the required NPA ratio for banks while also
providing flexibility in modes of NPA assets resolution and a conduct
ive regulatory and tax environment Deferred loss write-off provisions have been instituted to
provide breathing space for lenders to absorb NPA write-off While it is too early to
comment on success of NPA resolution process in Taiwan the early sign are encouraging
Detailed below are some key NPA management approaches adopted by banks in South East
Asian countries
1 Credit risk mitigation
2 Early warning systems
3 Assets management companies
Increasing willingness to sell NPAs to AMCs
Effective resolution strategy
Appointment of special administrators
4 Out of court restructuring
Source wwwgooglecom
DIFFICULTIES WITH NON PERFORMING ASSETS
I Owners do not receive a market return on their capital In the worst case if the bank
fails owner lose their assets
II Depositors do not receive a market return on savings In the worst case if the bank
fails depositors lose their assets or uninsured balance Banks also redistribute losses
to other borrowers by charging higher rate of interest
III Non-performing loans epitomize bad investors They misallocate credit from good
projects which do not receive funding to failed project
IV 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
shortage the shortage can jam payments across the country
b Illiquidity constraints banks in paying depositors eg cashing their paychecks
c Undercapitalized banks exceed the bank capital base
Lending by bank has been politicized It is common knowledge
that loans are given to various industrial houses on common consideration and
viability of project but on political consideration In normal circumstances banks
before extending any loan would make a thorough study of the actual need of the
party considered the prospect of the business in which it is engaged Since it is
not looked into many of the loans becomes NPA
REASONS F0R AN ACCOUNT BECOMING NPA
Those attribute to borrower
Failure to bring in required capital
Lack of proper planning
Unwanted expenses
Lack of expertise
Poor credit collection
Miss management
Heavy borrowing
Lack of knowledge regarding NPA
Willful defaulters
Death of the borrower
Those attribute to banks
Wrong selection of borrower
Poor credit appraisal
Unhelpful in supervision
Too inflexible attitude
System overload
Lack of motivation
Delay in sanction
Lack of trained staff
Lack of commitment to recovery
Lack of personal visit to the borrower office
Lack of personal visit to the borrowerrsquos residence
Other
Fast changing technology
Unhelpful attitude of govt
Increase in material cost
Government policies
Taxation law
Political hostility
INDIAN ECONOMY AND NPA
Undoubtedly the world economy has slowed down recession is at its peak globally stock markets
have tumbled and business itself getting hard to do The Indian economy has been much affected due
to high fiscal deficit poor infrastructure facilities sticky legal system cutting of exposures to
emerging market by FIIs etc
Further international rating agencies like standard and poor
have lowered Indiarsquos credit rating to sub- investment grade Such negative aspects have often
outweighed positive such as increasing for reserve and a manageable inflation rate
Under such situation I go without saying that banks are no exception
and are bound to face the heat of global down turn One would be surprise to know that banks and
financial institution in India holds non-performing assets worth Rs 1 10000 crores Bankers have
realized that unless the level of NPA is reduced drastically they will find it difficult to survive
The actual level of NPA in India is around $ 40 billion much higher than govt estimation of $16
billion This difference is largely due to the discrepancy in accounting the NPAs followed by India
and rest of the world The accounting norms of India are less stringent than those of the developed
economies The Indian banks also have the tendency to extend the past due Considering the GDP
India nearly $ 470 billion the NPA are 8 of the total GDP which was better than many Asian
countries The NPA of china was 45 of the GDP While Japan had NPAs of 25 of the GDP
The aggregate level of NPAs in Asia has increased from $ 25 billion in 2007 to
$ 34 billion on 2009 looking to such overall pictures of the market we can say that India is doing
well and the steps taken are looking favorable
Source googlecoin
DATA ANALYZING THE QUETIONNAIRE
Two set of questionnaire were prepared to collect the feedback One set of questionnaire was meant for branches and other set of questionnaire was meant for borrowers
The set of questionnaire were given to the branches under hazaribag (RBO) and collected the feedback of the bankers of P segment and the branch manager
The questionnaire prepared for branch contained 15 questions and the questionnaire prepared for borrower contains 10 questions
The data was collected from 50 bankers and the data analysis of the branch questionnaire is as follows
Question number 1
Does not require any data analysis and information was sought to know the business level of the branches for the purpose of whether particular branch is actively engaged in xpress credit portfolio
Question number 2
Do you think that the borrowers are aware about NPA
Answer
32 of the respondent feel that the borrowers are not aware about NPA and 18 respondents feel that borrowers are aware about NPA
Chart no 11
yes
no
0
5
10
15
20
25
30
35
1832 Column1
Conclusion
Majority of the bank officials feels that the borrowers are not aware about NPA
Question number 3
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Answer
Out of 32 respondent 22 respondents is fully satisfied that lack of knowledge among the borrower regarding NPA is one of the reason for NPA 08 respondent were partially satisfied with it and 02 respondent were not satisfied with it
Chart no 12
fully satisfied(22)69
partially satisfied(8)25
not satisfied(2)6
Sales
Conclusion
Majority of the borrowers feels that lack of knowledge among the borrower regarding NPA is one of the reasons for NPA
Question number 4 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Answer
Out of 50 respondent 30 of the respondent strongly satisfied that these external factors contribute to NPA 10 respondent were partially satisfied with it 5 were not satisfied where as 5 were fully dissatisfied with it
Chart no 13
6020
10
10
fully satisfied(30) partially satisfied(10) not satisfiec(5) fully desatisfied(5)
Conclusion
Most of the respondent thinks that external factrs like willful defaulter change in govt policy contribute to NPA
Question number 5
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Answer
Chart no 14
feedback
fully satisfied(20)partially satisfied(12)not satisfied(12)fully dissatisfied(6)
Conclusion
As per the response of the officials most of the officials feel that internal factors are also responsible for NPA
Question number 6
Do you think that inflation is one of the reasons for NPA
Answer
Out f 50 responses 22 were strongly satisfied 18 were partially satisfied 8 were not satisfied and 2 were fully dissatisfied
Chart no 15
fully satisfied(20)44
partially satisfied(18)36
not satisfied(5)10
fullt dissatisfied(5)10
Conclusion
Growing inflation increasing goods rate is also one of the reason for NPA
Question number 7
Do you think that lack of PSS is also contributed to NPA
Answer
Out of 50 responses 30 were fully satisfied with it 12 were partially satisfied and 8 were fully dissatisfied
Chart no 16
6024
16
Open
fully satisfied(30)Partially satisfied(12)not satisfied(0)fully dissatisfied(8)
Conclusion
Majority of the officiais feels that lack of PSS is one of the reason for NPA This means that the PSS carried out by the bank is not sufficient or not carried out properly
Question number 8
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Answer
Most of the respondent feels that increase in unwanted expenses of the borrwer ls contribute to NPA
Chart no 17
56
12
28
4
FULLY SATISFIED(28)PARTIALLY SATISFIED(6)NOT SATISFIED(14)FULLY DISSATISFIED(2)
Conclusion
As per response of the officials increasing inflation have an adverse effect on the financial sector its working performance as well as on NPA
Question number 9
Do you think that high rate of interest under Xpress credit also contributes to NPA
Answer
Out of 50 respondent 25 respondent were not satisfied 10 were partially satisfied 10 were strongly dissatisfied where as only 5 out of 50 were fully satisfied with it
Chart no 18
strongly satisfied(5)partially satisfied(10)not satisfied(25)fully dissatisfied(10)
Conclusion
Most of the respondents are not satisfied with it They feel that the rate of interest charged by SBI under Xpress credit is not high and it will not contribute to NPS
Question number 10
Do you think that lack of proper planning of the borrower is one of the reason for NPA
Answer
Out of 70 respondent 35 were fully satisfied 5 were not satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 19
fully satisfied(35)70
partially satisfied(10)20
not satisfied(5)10
Conclusion
Most of the respondent feels that the borrowers borrow money from the bank without any proper planning which is one of the most important reason for NPA
Question number 11
Is heavy borrowing also contribute to NPA
Answer
Out of 50 respondent 25 respondent were fully satisfied 12 were partially satisfied 8 were not satisfied were as 5 were fully dissatisfied
Chart no 110
50
24
16
10
fully satisfied(25) partially satisfied(12) not satisfied(8) fully dissatisfied(5)
Question number 12
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Answer
As per the response of the officials 20 were fully satisfied 66were partially satisfied 4 were not satisfied with it were as 10 respondent were fully dissatisfied
Chart no 111
fully satisfied(10)20
partially satisfied(33)66
not satisfied(2)4
fullydissatisfied(5)10
Conclusion
As per the response given by the officials most of the officials were partially satisfied that wrong selection of borrower also contribute to NPA which means that selection process carried out by the bank is not appropriate or there is some difficulties in implementing them
Question number 13
Do you think that poor credit appraisal also contribute to NPA
Answer
Out of 50 respondent 5 were fully satisfied 10 were fully satisfied 30 were not satisfied were as only 5 were fully dissatisfied
Chart no 112
fully satisfied(5)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 14
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Answer
Out of 50 responses 3 were fully satisfied 15 were partially satisfied 25 were not satisfied where as 7 were full dissatisfied
Chart no 113
fully satisfied(3)partiallt satisfied(15)not satisfied(25)fully dissatisfied(7)
Conclusion
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not contribute to NPA This means that the attitude of bank toward the borrower is not inflexible
Question number 15
Do you think that system over load is also one of the causes of NPA
Answer
Out of 50 respondent 28 were fully satisfied 12 were partially satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 114
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
The minimum Net Monthly Income (NMI) of the employee should beRs5000- It can
Be lowered to Rs3000- subject to the condition that the salary accounts of the entire enterprise are
with us The Branch will ensure to obtain an Undertaking from the borrower that there is no other
deduction from hisher salary which is not reflected in the salary slip [As per Annexure ndash (B) ndash (v)]
LOAN AMOUNT
a) Minimum Rs24000=
b) Maximum 24 Months NMI with a ceiling of Rs1500 lacs
TYPE OF LOAN
LoanD Term demand Loan (NO OVERDRAFT)
REPAYMENT PERIOD
Maximum 60 months
EMI NMI le 50
REVIEW
Review of loan will be done yearly
RENEWAL
Renewal of loans will be allowed after 24 months
CHECK OFF
The process by which the salary disbursing officer under takes to deduct the loan
installments from the salary of the borrower and remits the same to the Bank for credit to the loan
account
Or
The employer pays the borrowerrsquos salary into his SavingsCurrent Account with our Bank
The borrower gives an irrevocable Standing Instruction (SI) For recovery of the loan installments
from his aforesaid account with the SI being synchronized with the date of credit of salary in the
borrowerrsquos SavingsCurrent Account
AND
The employer undertakes to inform the Bank if and when there is a severance due to borrowerrsquos
transfer resignation retirement etc[ Branch will ensure to obtain the undertaking from the employer
and employee as per Annexure ndash B (I) B (ii) II or B (iii) ]
Source Xpress credit circular
CATEGORY I
FULL CHECK OFF
As given under the head CHECKOFF
AND
Undertaking from the employer to obtain a NOC from the Bank before settling the dues of the
borrower on transfer resignation retirement etc [As per Annexure ndash B (IV)]
This stipulation can be waived by the sanctioning authority incase of employees of Central State
Government PSUs Universities and Reputed Colleges In case of other employers the CGM of the
Circle has been permitted to waive the stipulation But in no case this can be waived for IT sector
employees
CATEGORY II
PARTIAL CHECK OFF
As given under the head CHECKOFF
CATEGORY III
WITH NO CHECK OFF
The employer pays the borrowerrsquos salary into his SavingsCurrent Account with our Bank
The borrower gives an irrevocable Standing Instruction (SI) for
recovery of the loan installments from his aforesaid account twitch the SI being synchronized with
the date of credit of salary in the borrowerrsquos SavingsCurrent Account
OR
Conditions as given under the head CHECKOFF is not fulfilled but the borrower provides monthly
PDCs (Post Dated Cheques) for entire tenure of the loan provided eligibility criteria are fulfilled
(Guidelines on Post Dated cheques is annexed as per Annexure A)
INTEREST RATE
The Interest rate is based on the category of Check off available
Category I
5 above the base rate ie - 970 +5 =1470 ( currently 1470 pa)
Category II
7 above the base rate (currently 1670 pa)
Note The GM of the Network is vested with powers to extend the Category II rate to a Category III
borrower only in case of employees of SB1 to SB5 rated companies who maintain their salary
accounts with us The Category III employees who do not maintain their salary accounts with us but
provide PDCs for the loan should be charged the card rate applicable to Category III and no
deviation should be permitted by Circle GMs
PENAL INTEREST
Penal interest should not be charged for loans up to Rs25000For Loans above Rs25000- if the
irregularity exceeds EMI or installment amount for a period of one month then penal interest would
be charged 2 pa(over and above the applicable interest
rate) on the overdue amount for the period of default If part installment or part EMI remains
overdue then penal interest should not be levied
This provision has been made to avoid application of penal interest on Personal Segment Loan
accounts where EMIs stipulated or installments are being paid regularly by the borrowers
Source Xpress credit circular
SECURITY
The loan is clean in nature and no security is required
PROCESSING FEE
11 of the loan amount including tax
PRE-SANCTION PROCESS
The following documents will be obtained before sanction-
I Application cum appraisal Form With a photograph of the borrower duly attested by the
authorized official
II It is proposed to put in place an arrangement for verification of the address of the borrower by an
outside agency A report duly signed by the verification agency (in places where an arrangement is
in place) or by our officerstaff in other places (where verification agency approved by Corporate
Centre is not available) should be complied based on the following verifications
I Verification of the borrowerrsquos residence address as given in the loan application
by actually visiting the residence of the borrower
II Verification of the borrowerrsquos office address as given in the loan application by
actually visiting the office of the borrower
Source Xpress credit circular
III Verification of the borrowerrsquos residence telephone number as given in the loan
application by actually calling the residence telephone number of the borrower
IV Verification of the borrowerrsquos office telephone number as given in the loan
Application by actually calling the office telephone number of the Borrower
V Verification of the IT return of the Borrower with IT department through a
person approved by the Regional OfficeZonal Office where feasible Where IT
return cannot be verified by the Bank statement of account of the borrower may
be scrutinized to verified income flows
Where the verification is not outsourced the Branch staff
Must do the verification and the report should be added with the loan documents
Flow chart of loan procedure of retail loan
Chart no 01
Disagree
NON PEFORMING ASSETS (NPA) ndash CONCEPT
The three letters ldquoNPArdquostrike terror in banking sector and business circle todayNPA is the short
Form of ldquoNon performing Assetsrdquo
Enquiry about loan
Agreeprovided with check list and
application
submission of documents and application dully
filled up
Documents taken
verification of application and
documebtsCIBIL report
Processing of loan
Sangtion of loan
Document
Control Disbursal of loan
phasewise lumpsum
In banking NPA are loans given to doubtful customers who may or may not repay the
loan on time There are two types of assets viz performing and non performing Performing loans
are standard loans on which both the principle and interest are secured and their return is guaranteed
NPA means the debt which is given by the bank is unable to recover is called
nonperforming assets A NPA account in the books of accounts is an asset as it indicates the amount
received from the defaulters It means if any bank gives loan and is not paid by the customers till 90
days than that account is called as NPA account
DEFINITION
An asset including leased assets becomes nonperforming when it ceases to generate income
for the bank
A NPA was defined as a credit facility in respect of which the interest or installment
of principle as remained ldquopast duerdquo for specific period of time
Source googlecoin
The specific period was reduced in a phased manner as under
wef ndash 31031993 four quarters
wef ndash 31 031994 three quarters
wef - 31031995 two quarters
wef - 31032001 180 days
wef - 31032004 90 days from past due
90 days delinquency is not applicable to agriculture segment
With effect from march 31 2004 NPA shall be a loan or an advance where
1) Term loan interest installment of principle remain over due for 90 days
2) Cash creditover draft an account remain ldquoout of orderrdquo for a period of more than 90 days
3) Bills The bills remain over due for a period more than 90 days
4) Agriculture loan
a The loan has been granted for short duration crop installments of the principle
remain over due for two crop season beyond the due date
b If the loan has been granted for long duration crop installment of the principle
remain over due for one crop season beyond the due date
Source Rbiorgin
CLASSIFICATION OF LOANS
In India loans are classified on following basis
Performing assets
Loans where the interest and or principle not remain overdue for more then 90 days
Non-performing assets
Any loan repayment remains over due for more than 90 days is considered as NPA
According to the securitization and re construction of financial assets and enforcement of
security interest ordinance2002 ldquonon performing assetsrdquo(NPA) means an assets or ac of
borrower which has been classified by the bank as sub-standard doubtful or loss asset in
accordance with the guidelines relating to asset classification issued by RBI
Source googlecoin
ASSET - CLASSIFICATION
Assets can be categorized into four categories (a) standard (b) sub-standard
(c) doubtful (d) loss The last three categories are classified as npa based on the the period for
which the asset has remained non-performing and the realisability of the dues
Standard assets the loan ac which are regular and do not carry more than normal risk are
known as standard assets there could be ac which though have not become npa but are
irregular Such ac are called special mention ac
Sub- standard assets with effect from 3132005 a sub-standard assets is one which is
classified as NPA for a period not exceeding 12 months
Doubtful asset with effect from 3132005 an asset is to be classified as doubtful if it
remained npa or sub-standard for a period exceeding 12 months
Loss assets a loss asset is one where loss has been identified by the bank or internal and
external auditors or the RBI inspection but the amount as not been written off wholly In
other words such an asset is considered uncollectable and such little value that its
continuance as a bankable asset is not warranted although there may be some salvage or
recoverable value
NPA IDENTIFICATION NORMS
With effect from 31st march 2004 a loan or advance become npa when
a Interest or installment of the principle remains overdue for a period more then 90
days in respect of term loan
b The ac remain out of order for a period more 90days in respect of over draft cash
cash credit
c The bill remains overdue for a period more than 90 days in case of bills purchased
and discounted
d With effect from Sept 2004 loan granted for short duration crops will be treated as
NPA if the installment of principle or interest there on remains overdue for two crop
season and loan granted for long duration will be treated as NPA if the installment
remains overdue for one crop season
Out of order
An account will be treated as out as out of order if the outstanding balance remain
continuously in excess of the sanctioned limitdrawing power In cases where the
outstanding balance in the principle operating ac is less than the sanctioned limit but
there are no credit continuously for 90 days as on the date of balance sheet or the
credit are not enough to cover the interest debited during the same period
Overdue
An amount due to the bank under any credit facility is overdue it is not paid on the due
date fixed by the bank
The date of npa will be actual date on which sippage occurred as mentioned below
For term and demand loan ac
The date on which the installment of the principle have
remaine overdue for a period more then 90 days
For over draft and cash credit ac
The date on which the ac completed period of more than 90
days of being continuously out of order
Source wwwRBI Org in
PROVISING NORMS
There is time lag between an ac becoming doubtful for recovery the realization of security and
erosion over a loan period of time in its value So RBI directives now requiresthe banks to make
provisions in their balance sheet for all non- standard loan asset Provisioning is made on all types of
assets ie Standard sub-standard doubtful and loss assets
1 Standard assets RBI vides its circular dated 151108 revised the provisioning requirements
For all type of standard assets it has been reduced to a uniform level of 040of outstanding
at global basis except in the case of direct advance to agriculture and SME sector which
shall continue to attract a provisioning of 025 The provision toward standard assets need
not to be netted from gross advances but shown separately as ldquo contigent provisionsrdquo against
standard assets under other liquidities and provisions others in schedule 5 of the balance
sheet
2 Sub-standard assets- In respect of sub-standard assets the rate of provision is 10 of
outstanding balance without considering ECGC guarantee cover or securities available
However if the loan was unsecured from the begining there would be additional provision of
10 ie total provision would be 20 of the outstanding balance Unsecured exposure is
defined as an exposure where the realizable value of the security as assessed by the
bankreserve banks inspecting officers is not more than 10 ab-intio of the outstanding
exposure
3 Doubtful assets In case of doubtful assets while making provision realizable value of
security is to be considered 100 provision is made for unsecured portion In case of
secured portion the rate of provision depend on age of doubtful assets as under
Age of doubtful assets Provision as of secured portion
Doubtful up to 1 year D1 20 of RVS( realizable value of security)
Doubtful for more than 1 year D2 30 of RVS
Doubtful for more than 3 years D2 100 of RVS
Thus if an ac is doubtful for more than 3 years than 100 of the provision is to be made
both from secured and unsecured portion If an advance has been guaranteed by DICGC
CGFTECGC and is doubtful than provision on secured portion will be as in other cases but
provision on unsecured portion will be made after deducting the claim value
4 LOSS ASSET 100 of the outstanding amount while making provision on NPAs amount
lying in suspense ac and derecognized interest should be deducted from gross advance and
provision be made on balance amount
5 OVERALL PROVISION With a view to improving the improving the provisioning cover
and enhancing the soundness of the individual banks RBI has proposed in oct- 09 policy that
bank should augment their provisions and ensure that their total provisioning coverage ratio
including floating provisions is not less than 70
Source wwwRBIorgin
IMPACTEFFECT OF NPA UPON BANKS
A strong banking sector is important for flourishing economy The failure of banking sector
may have an adverse impact on other sector NPA are one of the major concerns of sector
banks is increasing result in nonperforming assets The NPA impact drastically to the
working of banks The efficiency of bank not always reflected by the size of its balance sheet
but by the level of return on its assetsNPA do not generate interest income for the banks but
the same time banks are required to make provisions for such NPAs from their current
profits
They erode current profits through provisioning requirement
They result in reduced interest income
They require higher provisioning requirements effecting profits and accretion to capital
Adverse impact on capital adequacy ratio
Roe and Roa goes down because NPA do not earn
Banks rating gets effect
Banks cost of raising funds goes up
Bad effect on goodwill
Bad effect on equity value
EARLY SYMPTOMS BY WHICH ONE CAN RECOGNIZE A PERFORMING
ASSETS TURNING TO A NON PERFORMING ASSET
Four categories of early symptoms
1) FINANCIAL
(a) Non- payment of very first installment
(b) Bouncing of cheque due to insufficient balance in the ac
(c) Irregularity in installment
(d) Irregularity of operations in ac
(e) Unpaid overdue bill
(f) Declining current ratio
2) OPERATIONAL AND PHYSICAL
(a) If information is received that the borrower has either initiated the process of winding up or not doing the business
(b) Over-due receivable
(c) Stock statement not submitted on time
(d) External non-controllable factor like natural calamities in the city where the borrower lives
(e) Non- payment of salary
(3) ATTITUDNAL CHANGE
(a) Use for personal comfort stocks and shares by borrowers
(b) Avoidance of contact with bank
(c) Problem between partners
(4) OTHER
(a) Change in govt policies
(b) Death of the borrower
(c) Delay in salary
PREVENTIVE MEASUREMENT FOR NPA
Early recognition of the problem
Invariably by the time banks start their efforts to get involved
in a revival process its too late to retrieve the situation ndash both in terms of rehabilitation of the
project and the recovery of banks dues Identification of the weakness regardless of the fact
that it may not have become NPA is imperative Assessment of the potential of revival may
be done on the basis of a techno-economic viability study Restructuring should be attempted
where after an objective assessment of the promoterrsquos intention banks are convinced of a
turn around with in a scheduled facilitate winding upselling of units earlier so as to recover
whatever is possible through means before the security position becomes worse
Identifying borrowers with genuine intent
Identifying borrower with genuine intent from those who
are non-serious with commitment or stake in revival is a challenge confronting bankers Here
the role of front line officials at branch level is paramount as they are the ones who have
intelligent inputs with regard to promoters lsquo sincerity and capability to achieve turnaround
Based on this objective assessment bank should decide as quickly as possible whether it
would be worthwhile to commit additional finance
In this regard banks may consider having
ldquospecial investigationrdquo of all financial transaction or business transaction books of account
order to ascertain real factor that contributed to sickness of borrower Bank may have panel
of technical experts with proven expertise and task record of preparing techno-economic
study of the project of the borrowers
Borrowers having genuine problems due to temporary mismatch in find flow or sudden
requirement of additional fund may entertained at branch level for this purpose a special
limit to such type of cases should be decided This will obviate the need to route the
additional funding through the controlling officers in deserving cases and avert many
accounts sleeping into NPA category
Timeliness and adequacy of response
Longer the delay in response greater the enjury to the
account and the asset Time is a crucial element in any restructuring or rehabilitation activity
The response decided on the basis of techno- economic study and promoterrsquos commitment
has to be adequate in terms of extend of additional funding and relaxations etc under the
restructuring exercise The package of assistance may be flexible and bank may look at the
exit option
Focus on cash flow
While financing at the time of restructuring the banks may not be guided
by the conventional fund flow analysis only which could yield a potentially misleading
picture Appraisal for fresh credit requirement may be done by analyzing fond flow in
conjunction with the cash flow rather than only on the basis of fund flow
Source wwwAskcom
Management effectiveness
The general perception among the borrower is lack of finance that
leads to sickness and NPAs but this may not be the case all the time Management effectiveness
advance business condition is a very important aspect that affects a borrowing units fortunes A bank
may commit a multiple finance to an align unit only after basic viability of the enterprise also in the
context of quality of management is examined and confirmed It will be useful to have consultant
appointed as early as possible to examine this aspect A proper techno-economic viability study thus
become the basis on which any future action can be considered
Multiple financing
A) During the exercise for assessment of viability and restructuring a pragmatic and unified
approach by all the leading banks as also sharing of all relevant information on the
borrower would go a long way toward overall success of rehabilitation exercise given the
probability of successfailure
B) In some default cases Where the unit is still working The bank should make sure that it
captures the cash flow and insure that such cash are used for working capital purpose
Toward this end there should be a continuous flow of information among consortium
member A bank which is not a part of consortium may not be allowed to offer credit
facility to such defaulting clients Current account facility may also be denied at non-
consortium banks to such clients and violation may attract penal action The credit
information bureau of india (CIBIL) may be very useful for meaningful information
exchange on defaulting borrowers once the setup become fully operational
C) In a forum of lenders the priority of each lender will be different While one set of lender
may be willing to wait for longer time to recover its dues another lender may have a much
shorter timeframe in mind So it is possible that the letter categories of lenders may be
willing to exit even at a cost by a discounted settlement of the exposure There for any plan
for restructuringrehabilitation may takes into account
D) Corporate debt restructuring it has been institutionalized in 2001 to provide a timely and
transparent system for restructuring the corporate debt of RS 20 crores and above with the
banks on a voluntary basis and outside a legal framework Under this system bank are
greatly benefit in terms of restructuring of large standard accounts (potential NPAs) and
viable sub-standard account with multiple banking arrangement
NPA MANAGEMENT- RESOLUTION
Compromise settlement schemes
Restructuringrescheduling
Lok adalat
Corporate debt restructuring cell
Debt recovery Tribunals (DRT)
Proceeding under the code of civil procedure
Board of industrial and financial reconstruction
National company law Tribunal (NCLT)
Sale of NPA to other bank
Sale of NPA to ARCSC under securitization and reconstruction of financial assets for
enforcement of security interest Act 2000 (SRFAESI)
Liquidation
Source wwwRBIorgin
NPA MANAGEMENT IN INDIA
Formation of the credit information bureau (India) limited (CIBIL)
Release of willful defaulterrsquos listRBI also releases a list of borrowers with aggregate
outstanding of RS 1 crore and above against whom bank have filed suit for recovery of their
fund
Reporting of frauds to RBI
Norms of lenders labiality- framing of fair practices code with regard to lenders lability to
be followed by banks
Risk assessment and Risk management
RBI has advised banks to all cases of willful defaulters in case of 1 crore and above and
files suits in such cases
Responding quick mortality cases
Special mention accounts for early identification for bad debt loans and advances over due
for less than one or two quarters would come under this category However these accounts do
not need provisioning
INTERNATIONAL PRACTICES ON NPA MANAGEMENT
Subsequent to the Asian currency crisis which severely crippled the financial system In
addition to the above some of the more recent and aggressive step to NPAs have been taken
by Taiwan Taiwanese financial institution have been encouraged to merge and form bank
based AMCs through the recent introduction of financial holding company act and financial
institution Asian countries the magnitude of NPAs in Asian financial institution was brought
to light Driven by the need to proactively tackle the soaring NPAs level the respective govt
embarked upon a program of substantial reform This involves setting up processes for early
identification and resolution of NPAs The table below provides a cross country comparison
of approaches used for NPA resolution Mergers Act A long side the ministry of finance has
followed a carrot and strict policy of specifying the required NPA ratio for banks while also
providing flexibility in modes of NPA assets resolution and a conduct
ive regulatory and tax environment Deferred loss write-off provisions have been instituted to
provide breathing space for lenders to absorb NPA write-off While it is too early to
comment on success of NPA resolution process in Taiwan the early sign are encouraging
Detailed below are some key NPA management approaches adopted by banks in South East
Asian countries
1 Credit risk mitigation
2 Early warning systems
3 Assets management companies
Increasing willingness to sell NPAs to AMCs
Effective resolution strategy
Appointment of special administrators
4 Out of court restructuring
Source wwwgooglecom
DIFFICULTIES WITH NON PERFORMING ASSETS
I Owners do not receive a market return on their capital In the worst case if the bank
fails owner lose their assets
II Depositors do not receive a market return on savings In the worst case if the bank
fails depositors lose their assets or uninsured balance Banks also redistribute losses
to other borrowers by charging higher rate of interest
III Non-performing loans epitomize bad investors They misallocate credit from good
projects which do not receive funding to failed project
IV 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
shortage the shortage can jam payments across the country
b Illiquidity constraints banks in paying depositors eg cashing their paychecks
c Undercapitalized banks exceed the bank capital base
Lending by bank has been politicized It is common knowledge
that loans are given to various industrial houses on common consideration and
viability of project but on political consideration In normal circumstances banks
before extending any loan would make a thorough study of the actual need of the
party considered the prospect of the business in which it is engaged Since it is
not looked into many of the loans becomes NPA
REASONS F0R AN ACCOUNT BECOMING NPA
Those attribute to borrower
Failure to bring in required capital
Lack of proper planning
Unwanted expenses
Lack of expertise
Poor credit collection
Miss management
Heavy borrowing
Lack of knowledge regarding NPA
Willful defaulters
Death of the borrower
Those attribute to banks
Wrong selection of borrower
Poor credit appraisal
Unhelpful in supervision
Too inflexible attitude
System overload
Lack of motivation
Delay in sanction
Lack of trained staff
Lack of commitment to recovery
Lack of personal visit to the borrower office
Lack of personal visit to the borrowerrsquos residence
Other
Fast changing technology
Unhelpful attitude of govt
Increase in material cost
Government policies
Taxation law
Political hostility
INDIAN ECONOMY AND NPA
Undoubtedly the world economy has slowed down recession is at its peak globally stock markets
have tumbled and business itself getting hard to do The Indian economy has been much affected due
to high fiscal deficit poor infrastructure facilities sticky legal system cutting of exposures to
emerging market by FIIs etc
Further international rating agencies like standard and poor
have lowered Indiarsquos credit rating to sub- investment grade Such negative aspects have often
outweighed positive such as increasing for reserve and a manageable inflation rate
Under such situation I go without saying that banks are no exception
and are bound to face the heat of global down turn One would be surprise to know that banks and
financial institution in India holds non-performing assets worth Rs 1 10000 crores Bankers have
realized that unless the level of NPA is reduced drastically they will find it difficult to survive
The actual level of NPA in India is around $ 40 billion much higher than govt estimation of $16
billion This difference is largely due to the discrepancy in accounting the NPAs followed by India
and rest of the world The accounting norms of India are less stringent than those of the developed
economies The Indian banks also have the tendency to extend the past due Considering the GDP
India nearly $ 470 billion the NPA are 8 of the total GDP which was better than many Asian
countries The NPA of china was 45 of the GDP While Japan had NPAs of 25 of the GDP
The aggregate level of NPAs in Asia has increased from $ 25 billion in 2007 to
$ 34 billion on 2009 looking to such overall pictures of the market we can say that India is doing
well and the steps taken are looking favorable
Source googlecoin
DATA ANALYZING THE QUETIONNAIRE
Two set of questionnaire were prepared to collect the feedback One set of questionnaire was meant for branches and other set of questionnaire was meant for borrowers
The set of questionnaire were given to the branches under hazaribag (RBO) and collected the feedback of the bankers of P segment and the branch manager
The questionnaire prepared for branch contained 15 questions and the questionnaire prepared for borrower contains 10 questions
The data was collected from 50 bankers and the data analysis of the branch questionnaire is as follows
Question number 1
Does not require any data analysis and information was sought to know the business level of the branches for the purpose of whether particular branch is actively engaged in xpress credit portfolio
Question number 2
Do you think that the borrowers are aware about NPA
Answer
32 of the respondent feel that the borrowers are not aware about NPA and 18 respondents feel that borrowers are aware about NPA
Chart no 11
yes
no
0
5
10
15
20
25
30
35
1832 Column1
Conclusion
Majority of the bank officials feels that the borrowers are not aware about NPA
Question number 3
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Answer
Out of 32 respondent 22 respondents is fully satisfied that lack of knowledge among the borrower regarding NPA is one of the reason for NPA 08 respondent were partially satisfied with it and 02 respondent were not satisfied with it
Chart no 12
fully satisfied(22)69
partially satisfied(8)25
not satisfied(2)6
Sales
Conclusion
Majority of the borrowers feels that lack of knowledge among the borrower regarding NPA is one of the reasons for NPA
Question number 4 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Answer
Out of 50 respondent 30 of the respondent strongly satisfied that these external factors contribute to NPA 10 respondent were partially satisfied with it 5 were not satisfied where as 5 were fully dissatisfied with it
Chart no 13
6020
10
10
fully satisfied(30) partially satisfied(10) not satisfiec(5) fully desatisfied(5)
Conclusion
Most of the respondent thinks that external factrs like willful defaulter change in govt policy contribute to NPA
Question number 5
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Answer
Chart no 14
feedback
fully satisfied(20)partially satisfied(12)not satisfied(12)fully dissatisfied(6)
Conclusion
As per the response of the officials most of the officials feel that internal factors are also responsible for NPA
Question number 6
Do you think that inflation is one of the reasons for NPA
Answer
Out f 50 responses 22 were strongly satisfied 18 were partially satisfied 8 were not satisfied and 2 were fully dissatisfied
Chart no 15
fully satisfied(20)44
partially satisfied(18)36
not satisfied(5)10
fullt dissatisfied(5)10
Conclusion
Growing inflation increasing goods rate is also one of the reason for NPA
Question number 7
Do you think that lack of PSS is also contributed to NPA
Answer
Out of 50 responses 30 were fully satisfied with it 12 were partially satisfied and 8 were fully dissatisfied
Chart no 16
6024
16
Open
fully satisfied(30)Partially satisfied(12)not satisfied(0)fully dissatisfied(8)
Conclusion
Majority of the officiais feels that lack of PSS is one of the reason for NPA This means that the PSS carried out by the bank is not sufficient or not carried out properly
Question number 8
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Answer
Most of the respondent feels that increase in unwanted expenses of the borrwer ls contribute to NPA
Chart no 17
56
12
28
4
FULLY SATISFIED(28)PARTIALLY SATISFIED(6)NOT SATISFIED(14)FULLY DISSATISFIED(2)
Conclusion
As per response of the officials increasing inflation have an adverse effect on the financial sector its working performance as well as on NPA
Question number 9
Do you think that high rate of interest under Xpress credit also contributes to NPA
Answer
Out of 50 respondent 25 respondent were not satisfied 10 were partially satisfied 10 were strongly dissatisfied where as only 5 out of 50 were fully satisfied with it
Chart no 18
strongly satisfied(5)partially satisfied(10)not satisfied(25)fully dissatisfied(10)
Conclusion
Most of the respondents are not satisfied with it They feel that the rate of interest charged by SBI under Xpress credit is not high and it will not contribute to NPS
Question number 10
Do you think that lack of proper planning of the borrower is one of the reason for NPA
Answer
Out of 70 respondent 35 were fully satisfied 5 were not satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 19
fully satisfied(35)70
partially satisfied(10)20
not satisfied(5)10
Conclusion
Most of the respondent feels that the borrowers borrow money from the bank without any proper planning which is one of the most important reason for NPA
Question number 11
Is heavy borrowing also contribute to NPA
Answer
Out of 50 respondent 25 respondent were fully satisfied 12 were partially satisfied 8 were not satisfied were as 5 were fully dissatisfied
Chart no 110
50
24
16
10
fully satisfied(25) partially satisfied(12) not satisfied(8) fully dissatisfied(5)
Question number 12
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Answer
As per the response of the officials 20 were fully satisfied 66were partially satisfied 4 were not satisfied with it were as 10 respondent were fully dissatisfied
Chart no 111
fully satisfied(10)20
partially satisfied(33)66
not satisfied(2)4
fullydissatisfied(5)10
Conclusion
As per the response given by the officials most of the officials were partially satisfied that wrong selection of borrower also contribute to NPA which means that selection process carried out by the bank is not appropriate or there is some difficulties in implementing them
Question number 13
Do you think that poor credit appraisal also contribute to NPA
Answer
Out of 50 respondent 5 were fully satisfied 10 were fully satisfied 30 were not satisfied were as only 5 were fully dissatisfied
Chart no 112
fully satisfied(5)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 14
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Answer
Out of 50 responses 3 were fully satisfied 15 were partially satisfied 25 were not satisfied where as 7 were full dissatisfied
Chart no 113
fully satisfied(3)partiallt satisfied(15)not satisfied(25)fully dissatisfied(7)
Conclusion
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not contribute to NPA This means that the attitude of bank toward the borrower is not inflexible
Question number 15
Do you think that system over load is also one of the causes of NPA
Answer
Out of 50 respondent 28 were fully satisfied 12 were partially satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 114
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Review of loan will be done yearly
RENEWAL
Renewal of loans will be allowed after 24 months
CHECK OFF
The process by which the salary disbursing officer under takes to deduct the loan
installments from the salary of the borrower and remits the same to the Bank for credit to the loan
account
Or
The employer pays the borrowerrsquos salary into his SavingsCurrent Account with our Bank
The borrower gives an irrevocable Standing Instruction (SI) For recovery of the loan installments
from his aforesaid account with the SI being synchronized with the date of credit of salary in the
borrowerrsquos SavingsCurrent Account
AND
The employer undertakes to inform the Bank if and when there is a severance due to borrowerrsquos
transfer resignation retirement etc[ Branch will ensure to obtain the undertaking from the employer
and employee as per Annexure ndash B (I) B (ii) II or B (iii) ]
Source Xpress credit circular
CATEGORY I
FULL CHECK OFF
As given under the head CHECKOFF
AND
Undertaking from the employer to obtain a NOC from the Bank before settling the dues of the
borrower on transfer resignation retirement etc [As per Annexure ndash B (IV)]
This stipulation can be waived by the sanctioning authority incase of employees of Central State
Government PSUs Universities and Reputed Colleges In case of other employers the CGM of the
Circle has been permitted to waive the stipulation But in no case this can be waived for IT sector
employees
CATEGORY II
PARTIAL CHECK OFF
As given under the head CHECKOFF
CATEGORY III
WITH NO CHECK OFF
The employer pays the borrowerrsquos salary into his SavingsCurrent Account with our Bank
The borrower gives an irrevocable Standing Instruction (SI) for
recovery of the loan installments from his aforesaid account twitch the SI being synchronized with
the date of credit of salary in the borrowerrsquos SavingsCurrent Account
OR
Conditions as given under the head CHECKOFF is not fulfilled but the borrower provides monthly
PDCs (Post Dated Cheques) for entire tenure of the loan provided eligibility criteria are fulfilled
(Guidelines on Post Dated cheques is annexed as per Annexure A)
INTEREST RATE
The Interest rate is based on the category of Check off available
Category I
5 above the base rate ie - 970 +5 =1470 ( currently 1470 pa)
Category II
7 above the base rate (currently 1670 pa)
Note The GM of the Network is vested with powers to extend the Category II rate to a Category III
borrower only in case of employees of SB1 to SB5 rated companies who maintain their salary
accounts with us The Category III employees who do not maintain their salary accounts with us but
provide PDCs for the loan should be charged the card rate applicable to Category III and no
deviation should be permitted by Circle GMs
PENAL INTEREST
Penal interest should not be charged for loans up to Rs25000For Loans above Rs25000- if the
irregularity exceeds EMI or installment amount for a period of one month then penal interest would
be charged 2 pa(over and above the applicable interest
rate) on the overdue amount for the period of default If part installment or part EMI remains
overdue then penal interest should not be levied
This provision has been made to avoid application of penal interest on Personal Segment Loan
accounts where EMIs stipulated or installments are being paid regularly by the borrowers
Source Xpress credit circular
SECURITY
The loan is clean in nature and no security is required
PROCESSING FEE
11 of the loan amount including tax
PRE-SANCTION PROCESS
The following documents will be obtained before sanction-
I Application cum appraisal Form With a photograph of the borrower duly attested by the
authorized official
II It is proposed to put in place an arrangement for verification of the address of the borrower by an
outside agency A report duly signed by the verification agency (in places where an arrangement is
in place) or by our officerstaff in other places (where verification agency approved by Corporate
Centre is not available) should be complied based on the following verifications
I Verification of the borrowerrsquos residence address as given in the loan application
by actually visiting the residence of the borrower
II Verification of the borrowerrsquos office address as given in the loan application by
actually visiting the office of the borrower
Source Xpress credit circular
III Verification of the borrowerrsquos residence telephone number as given in the loan
application by actually calling the residence telephone number of the borrower
IV Verification of the borrowerrsquos office telephone number as given in the loan
Application by actually calling the office telephone number of the Borrower
V Verification of the IT return of the Borrower with IT department through a
person approved by the Regional OfficeZonal Office where feasible Where IT
return cannot be verified by the Bank statement of account of the borrower may
be scrutinized to verified income flows
Where the verification is not outsourced the Branch staff
Must do the verification and the report should be added with the loan documents
Flow chart of loan procedure of retail loan
Chart no 01
Disagree
NON PEFORMING ASSETS (NPA) ndash CONCEPT
The three letters ldquoNPArdquostrike terror in banking sector and business circle todayNPA is the short
Form of ldquoNon performing Assetsrdquo
Enquiry about loan
Agreeprovided with check list and
application
submission of documents and application dully
filled up
Documents taken
verification of application and
documebtsCIBIL report
Processing of loan
Sangtion of loan
Document
Control Disbursal of loan
phasewise lumpsum
In banking NPA are loans given to doubtful customers who may or may not repay the
loan on time There are two types of assets viz performing and non performing Performing loans
are standard loans on which both the principle and interest are secured and their return is guaranteed
NPA means the debt which is given by the bank is unable to recover is called
nonperforming assets A NPA account in the books of accounts is an asset as it indicates the amount
received from the defaulters It means if any bank gives loan and is not paid by the customers till 90
days than that account is called as NPA account
DEFINITION
An asset including leased assets becomes nonperforming when it ceases to generate income
for the bank
A NPA was defined as a credit facility in respect of which the interest or installment
of principle as remained ldquopast duerdquo for specific period of time
Source googlecoin
The specific period was reduced in a phased manner as under
wef ndash 31031993 four quarters
wef ndash 31 031994 three quarters
wef - 31031995 two quarters
wef - 31032001 180 days
wef - 31032004 90 days from past due
90 days delinquency is not applicable to agriculture segment
With effect from march 31 2004 NPA shall be a loan or an advance where
1) Term loan interest installment of principle remain over due for 90 days
2) Cash creditover draft an account remain ldquoout of orderrdquo for a period of more than 90 days
3) Bills The bills remain over due for a period more than 90 days
4) Agriculture loan
a The loan has been granted for short duration crop installments of the principle
remain over due for two crop season beyond the due date
b If the loan has been granted for long duration crop installment of the principle
remain over due for one crop season beyond the due date
Source Rbiorgin
CLASSIFICATION OF LOANS
In India loans are classified on following basis
Performing assets
Loans where the interest and or principle not remain overdue for more then 90 days
Non-performing assets
Any loan repayment remains over due for more than 90 days is considered as NPA
According to the securitization and re construction of financial assets and enforcement of
security interest ordinance2002 ldquonon performing assetsrdquo(NPA) means an assets or ac of
borrower which has been classified by the bank as sub-standard doubtful or loss asset in
accordance with the guidelines relating to asset classification issued by RBI
Source googlecoin
ASSET - CLASSIFICATION
Assets can be categorized into four categories (a) standard (b) sub-standard
(c) doubtful (d) loss The last three categories are classified as npa based on the the period for
which the asset has remained non-performing and the realisability of the dues
Standard assets the loan ac which are regular and do not carry more than normal risk are
known as standard assets there could be ac which though have not become npa but are
irregular Such ac are called special mention ac
Sub- standard assets with effect from 3132005 a sub-standard assets is one which is
classified as NPA for a period not exceeding 12 months
Doubtful asset with effect from 3132005 an asset is to be classified as doubtful if it
remained npa or sub-standard for a period exceeding 12 months
Loss assets a loss asset is one where loss has been identified by the bank or internal and
external auditors or the RBI inspection but the amount as not been written off wholly In
other words such an asset is considered uncollectable and such little value that its
continuance as a bankable asset is not warranted although there may be some salvage or
recoverable value
NPA IDENTIFICATION NORMS
With effect from 31st march 2004 a loan or advance become npa when
a Interest or installment of the principle remains overdue for a period more then 90
days in respect of term loan
b The ac remain out of order for a period more 90days in respect of over draft cash
cash credit
c The bill remains overdue for a period more than 90 days in case of bills purchased
and discounted
d With effect from Sept 2004 loan granted for short duration crops will be treated as
NPA if the installment of principle or interest there on remains overdue for two crop
season and loan granted for long duration will be treated as NPA if the installment
remains overdue for one crop season
Out of order
An account will be treated as out as out of order if the outstanding balance remain
continuously in excess of the sanctioned limitdrawing power In cases where the
outstanding balance in the principle operating ac is less than the sanctioned limit but
there are no credit continuously for 90 days as on the date of balance sheet or the
credit are not enough to cover the interest debited during the same period
Overdue
An amount due to the bank under any credit facility is overdue it is not paid on the due
date fixed by the bank
The date of npa will be actual date on which sippage occurred as mentioned below
For term and demand loan ac
The date on which the installment of the principle have
remaine overdue for a period more then 90 days
For over draft and cash credit ac
The date on which the ac completed period of more than 90
days of being continuously out of order
Source wwwRBI Org in
PROVISING NORMS
There is time lag between an ac becoming doubtful for recovery the realization of security and
erosion over a loan period of time in its value So RBI directives now requiresthe banks to make
provisions in their balance sheet for all non- standard loan asset Provisioning is made on all types of
assets ie Standard sub-standard doubtful and loss assets
1 Standard assets RBI vides its circular dated 151108 revised the provisioning requirements
For all type of standard assets it has been reduced to a uniform level of 040of outstanding
at global basis except in the case of direct advance to agriculture and SME sector which
shall continue to attract a provisioning of 025 The provision toward standard assets need
not to be netted from gross advances but shown separately as ldquo contigent provisionsrdquo against
standard assets under other liquidities and provisions others in schedule 5 of the balance
sheet
2 Sub-standard assets- In respect of sub-standard assets the rate of provision is 10 of
outstanding balance without considering ECGC guarantee cover or securities available
However if the loan was unsecured from the begining there would be additional provision of
10 ie total provision would be 20 of the outstanding balance Unsecured exposure is
defined as an exposure where the realizable value of the security as assessed by the
bankreserve banks inspecting officers is not more than 10 ab-intio of the outstanding
exposure
3 Doubtful assets In case of doubtful assets while making provision realizable value of
security is to be considered 100 provision is made for unsecured portion In case of
secured portion the rate of provision depend on age of doubtful assets as under
Age of doubtful assets Provision as of secured portion
Doubtful up to 1 year D1 20 of RVS( realizable value of security)
Doubtful for more than 1 year D2 30 of RVS
Doubtful for more than 3 years D2 100 of RVS
Thus if an ac is doubtful for more than 3 years than 100 of the provision is to be made
both from secured and unsecured portion If an advance has been guaranteed by DICGC
CGFTECGC and is doubtful than provision on secured portion will be as in other cases but
provision on unsecured portion will be made after deducting the claim value
4 LOSS ASSET 100 of the outstanding amount while making provision on NPAs amount
lying in suspense ac and derecognized interest should be deducted from gross advance and
provision be made on balance amount
5 OVERALL PROVISION With a view to improving the improving the provisioning cover
and enhancing the soundness of the individual banks RBI has proposed in oct- 09 policy that
bank should augment their provisions and ensure that their total provisioning coverage ratio
including floating provisions is not less than 70
Source wwwRBIorgin
IMPACTEFFECT OF NPA UPON BANKS
A strong banking sector is important for flourishing economy The failure of banking sector
may have an adverse impact on other sector NPA are one of the major concerns of sector
banks is increasing result in nonperforming assets The NPA impact drastically to the
working of banks The efficiency of bank not always reflected by the size of its balance sheet
but by the level of return on its assetsNPA do not generate interest income for the banks but
the same time banks are required to make provisions for such NPAs from their current
profits
They erode current profits through provisioning requirement
They result in reduced interest income
They require higher provisioning requirements effecting profits and accretion to capital
Adverse impact on capital adequacy ratio
Roe and Roa goes down because NPA do not earn
Banks rating gets effect
Banks cost of raising funds goes up
Bad effect on goodwill
Bad effect on equity value
EARLY SYMPTOMS BY WHICH ONE CAN RECOGNIZE A PERFORMING
ASSETS TURNING TO A NON PERFORMING ASSET
Four categories of early symptoms
1) FINANCIAL
(a) Non- payment of very first installment
(b) Bouncing of cheque due to insufficient balance in the ac
(c) Irregularity in installment
(d) Irregularity of operations in ac
(e) Unpaid overdue bill
(f) Declining current ratio
2) OPERATIONAL AND PHYSICAL
(a) If information is received that the borrower has either initiated the process of winding up or not doing the business
(b) Over-due receivable
(c) Stock statement not submitted on time
(d) External non-controllable factor like natural calamities in the city where the borrower lives
(e) Non- payment of salary
(3) ATTITUDNAL CHANGE
(a) Use for personal comfort stocks and shares by borrowers
(b) Avoidance of contact with bank
(c) Problem between partners
(4) OTHER
(a) Change in govt policies
(b) Death of the borrower
(c) Delay in salary
PREVENTIVE MEASUREMENT FOR NPA
Early recognition of the problem
Invariably by the time banks start their efforts to get involved
in a revival process its too late to retrieve the situation ndash both in terms of rehabilitation of the
project and the recovery of banks dues Identification of the weakness regardless of the fact
that it may not have become NPA is imperative Assessment of the potential of revival may
be done on the basis of a techno-economic viability study Restructuring should be attempted
where after an objective assessment of the promoterrsquos intention banks are convinced of a
turn around with in a scheduled facilitate winding upselling of units earlier so as to recover
whatever is possible through means before the security position becomes worse
Identifying borrowers with genuine intent
Identifying borrower with genuine intent from those who
are non-serious with commitment or stake in revival is a challenge confronting bankers Here
the role of front line officials at branch level is paramount as they are the ones who have
intelligent inputs with regard to promoters lsquo sincerity and capability to achieve turnaround
Based on this objective assessment bank should decide as quickly as possible whether it
would be worthwhile to commit additional finance
In this regard banks may consider having
ldquospecial investigationrdquo of all financial transaction or business transaction books of account
order to ascertain real factor that contributed to sickness of borrower Bank may have panel
of technical experts with proven expertise and task record of preparing techno-economic
study of the project of the borrowers
Borrowers having genuine problems due to temporary mismatch in find flow or sudden
requirement of additional fund may entertained at branch level for this purpose a special
limit to such type of cases should be decided This will obviate the need to route the
additional funding through the controlling officers in deserving cases and avert many
accounts sleeping into NPA category
Timeliness and adequacy of response
Longer the delay in response greater the enjury to the
account and the asset Time is a crucial element in any restructuring or rehabilitation activity
The response decided on the basis of techno- economic study and promoterrsquos commitment
has to be adequate in terms of extend of additional funding and relaxations etc under the
restructuring exercise The package of assistance may be flexible and bank may look at the
exit option
Focus on cash flow
While financing at the time of restructuring the banks may not be guided
by the conventional fund flow analysis only which could yield a potentially misleading
picture Appraisal for fresh credit requirement may be done by analyzing fond flow in
conjunction with the cash flow rather than only on the basis of fund flow
Source wwwAskcom
Management effectiveness
The general perception among the borrower is lack of finance that
leads to sickness and NPAs but this may not be the case all the time Management effectiveness
advance business condition is a very important aspect that affects a borrowing units fortunes A bank
may commit a multiple finance to an align unit only after basic viability of the enterprise also in the
context of quality of management is examined and confirmed It will be useful to have consultant
appointed as early as possible to examine this aspect A proper techno-economic viability study thus
become the basis on which any future action can be considered
Multiple financing
A) During the exercise for assessment of viability and restructuring a pragmatic and unified
approach by all the leading banks as also sharing of all relevant information on the
borrower would go a long way toward overall success of rehabilitation exercise given the
probability of successfailure
B) In some default cases Where the unit is still working The bank should make sure that it
captures the cash flow and insure that such cash are used for working capital purpose
Toward this end there should be a continuous flow of information among consortium
member A bank which is not a part of consortium may not be allowed to offer credit
facility to such defaulting clients Current account facility may also be denied at non-
consortium banks to such clients and violation may attract penal action The credit
information bureau of india (CIBIL) may be very useful for meaningful information
exchange on defaulting borrowers once the setup become fully operational
C) In a forum of lenders the priority of each lender will be different While one set of lender
may be willing to wait for longer time to recover its dues another lender may have a much
shorter timeframe in mind So it is possible that the letter categories of lenders may be
willing to exit even at a cost by a discounted settlement of the exposure There for any plan
for restructuringrehabilitation may takes into account
D) Corporate debt restructuring it has been institutionalized in 2001 to provide a timely and
transparent system for restructuring the corporate debt of RS 20 crores and above with the
banks on a voluntary basis and outside a legal framework Under this system bank are
greatly benefit in terms of restructuring of large standard accounts (potential NPAs) and
viable sub-standard account with multiple banking arrangement
NPA MANAGEMENT- RESOLUTION
Compromise settlement schemes
Restructuringrescheduling
Lok adalat
Corporate debt restructuring cell
Debt recovery Tribunals (DRT)
Proceeding under the code of civil procedure
Board of industrial and financial reconstruction
National company law Tribunal (NCLT)
Sale of NPA to other bank
Sale of NPA to ARCSC under securitization and reconstruction of financial assets for
enforcement of security interest Act 2000 (SRFAESI)
Liquidation
Source wwwRBIorgin
NPA MANAGEMENT IN INDIA
Formation of the credit information bureau (India) limited (CIBIL)
Release of willful defaulterrsquos listRBI also releases a list of borrowers with aggregate
outstanding of RS 1 crore and above against whom bank have filed suit for recovery of their
fund
Reporting of frauds to RBI
Norms of lenders labiality- framing of fair practices code with regard to lenders lability to
be followed by banks
Risk assessment and Risk management
RBI has advised banks to all cases of willful defaulters in case of 1 crore and above and
files suits in such cases
Responding quick mortality cases
Special mention accounts for early identification for bad debt loans and advances over due
for less than one or two quarters would come under this category However these accounts do
not need provisioning
INTERNATIONAL PRACTICES ON NPA MANAGEMENT
Subsequent to the Asian currency crisis which severely crippled the financial system In
addition to the above some of the more recent and aggressive step to NPAs have been taken
by Taiwan Taiwanese financial institution have been encouraged to merge and form bank
based AMCs through the recent introduction of financial holding company act and financial
institution Asian countries the magnitude of NPAs in Asian financial institution was brought
to light Driven by the need to proactively tackle the soaring NPAs level the respective govt
embarked upon a program of substantial reform This involves setting up processes for early
identification and resolution of NPAs The table below provides a cross country comparison
of approaches used for NPA resolution Mergers Act A long side the ministry of finance has
followed a carrot and strict policy of specifying the required NPA ratio for banks while also
providing flexibility in modes of NPA assets resolution and a conduct
ive regulatory and tax environment Deferred loss write-off provisions have been instituted to
provide breathing space for lenders to absorb NPA write-off While it is too early to
comment on success of NPA resolution process in Taiwan the early sign are encouraging
Detailed below are some key NPA management approaches adopted by banks in South East
Asian countries
1 Credit risk mitigation
2 Early warning systems
3 Assets management companies
Increasing willingness to sell NPAs to AMCs
Effective resolution strategy
Appointment of special administrators
4 Out of court restructuring
Source wwwgooglecom
DIFFICULTIES WITH NON PERFORMING ASSETS
I Owners do not receive a market return on their capital In the worst case if the bank
fails owner lose their assets
II Depositors do not receive a market return on savings In the worst case if the bank
fails depositors lose their assets or uninsured balance Banks also redistribute losses
to other borrowers by charging higher rate of interest
III Non-performing loans epitomize bad investors They misallocate credit from good
projects which do not receive funding to failed project
IV 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
shortage the shortage can jam payments across the country
b Illiquidity constraints banks in paying depositors eg cashing their paychecks
c Undercapitalized banks exceed the bank capital base
Lending by bank has been politicized It is common knowledge
that loans are given to various industrial houses on common consideration and
viability of project but on political consideration In normal circumstances banks
before extending any loan would make a thorough study of the actual need of the
party considered the prospect of the business in which it is engaged Since it is
not looked into many of the loans becomes NPA
REASONS F0R AN ACCOUNT BECOMING NPA
Those attribute to borrower
Failure to bring in required capital
Lack of proper planning
Unwanted expenses
Lack of expertise
Poor credit collection
Miss management
Heavy borrowing
Lack of knowledge regarding NPA
Willful defaulters
Death of the borrower
Those attribute to banks
Wrong selection of borrower
Poor credit appraisal
Unhelpful in supervision
Too inflexible attitude
System overload
Lack of motivation
Delay in sanction
Lack of trained staff
Lack of commitment to recovery
Lack of personal visit to the borrower office
Lack of personal visit to the borrowerrsquos residence
Other
Fast changing technology
Unhelpful attitude of govt
Increase in material cost
Government policies
Taxation law
Political hostility
INDIAN ECONOMY AND NPA
Undoubtedly the world economy has slowed down recession is at its peak globally stock markets
have tumbled and business itself getting hard to do The Indian economy has been much affected due
to high fiscal deficit poor infrastructure facilities sticky legal system cutting of exposures to
emerging market by FIIs etc
Further international rating agencies like standard and poor
have lowered Indiarsquos credit rating to sub- investment grade Such negative aspects have often
outweighed positive such as increasing for reserve and a manageable inflation rate
Under such situation I go without saying that banks are no exception
and are bound to face the heat of global down turn One would be surprise to know that banks and
financial institution in India holds non-performing assets worth Rs 1 10000 crores Bankers have
realized that unless the level of NPA is reduced drastically they will find it difficult to survive
The actual level of NPA in India is around $ 40 billion much higher than govt estimation of $16
billion This difference is largely due to the discrepancy in accounting the NPAs followed by India
and rest of the world The accounting norms of India are less stringent than those of the developed
economies The Indian banks also have the tendency to extend the past due Considering the GDP
India nearly $ 470 billion the NPA are 8 of the total GDP which was better than many Asian
countries The NPA of china was 45 of the GDP While Japan had NPAs of 25 of the GDP
The aggregate level of NPAs in Asia has increased from $ 25 billion in 2007 to
$ 34 billion on 2009 looking to such overall pictures of the market we can say that India is doing
well and the steps taken are looking favorable
Source googlecoin
DATA ANALYZING THE QUETIONNAIRE
Two set of questionnaire were prepared to collect the feedback One set of questionnaire was meant for branches and other set of questionnaire was meant for borrowers
The set of questionnaire were given to the branches under hazaribag (RBO) and collected the feedback of the bankers of P segment and the branch manager
The questionnaire prepared for branch contained 15 questions and the questionnaire prepared for borrower contains 10 questions
The data was collected from 50 bankers and the data analysis of the branch questionnaire is as follows
Question number 1
Does not require any data analysis and information was sought to know the business level of the branches for the purpose of whether particular branch is actively engaged in xpress credit portfolio
Question number 2
Do you think that the borrowers are aware about NPA
Answer
32 of the respondent feel that the borrowers are not aware about NPA and 18 respondents feel that borrowers are aware about NPA
Chart no 11
yes
no
0
5
10
15
20
25
30
35
1832 Column1
Conclusion
Majority of the bank officials feels that the borrowers are not aware about NPA
Question number 3
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Answer
Out of 32 respondent 22 respondents is fully satisfied that lack of knowledge among the borrower regarding NPA is one of the reason for NPA 08 respondent were partially satisfied with it and 02 respondent were not satisfied with it
Chart no 12
fully satisfied(22)69
partially satisfied(8)25
not satisfied(2)6
Sales
Conclusion
Majority of the borrowers feels that lack of knowledge among the borrower regarding NPA is one of the reasons for NPA
Question number 4 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Answer
Out of 50 respondent 30 of the respondent strongly satisfied that these external factors contribute to NPA 10 respondent were partially satisfied with it 5 were not satisfied where as 5 were fully dissatisfied with it
Chart no 13
6020
10
10
fully satisfied(30) partially satisfied(10) not satisfiec(5) fully desatisfied(5)
Conclusion
Most of the respondent thinks that external factrs like willful defaulter change in govt policy contribute to NPA
Question number 5
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Answer
Chart no 14
feedback
fully satisfied(20)partially satisfied(12)not satisfied(12)fully dissatisfied(6)
Conclusion
As per the response of the officials most of the officials feel that internal factors are also responsible for NPA
Question number 6
Do you think that inflation is one of the reasons for NPA
Answer
Out f 50 responses 22 were strongly satisfied 18 were partially satisfied 8 were not satisfied and 2 were fully dissatisfied
Chart no 15
fully satisfied(20)44
partially satisfied(18)36
not satisfied(5)10
fullt dissatisfied(5)10
Conclusion
Growing inflation increasing goods rate is also one of the reason for NPA
Question number 7
Do you think that lack of PSS is also contributed to NPA
Answer
Out of 50 responses 30 were fully satisfied with it 12 were partially satisfied and 8 were fully dissatisfied
Chart no 16
6024
16
Open
fully satisfied(30)Partially satisfied(12)not satisfied(0)fully dissatisfied(8)
Conclusion
Majority of the officiais feels that lack of PSS is one of the reason for NPA This means that the PSS carried out by the bank is not sufficient or not carried out properly
Question number 8
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Answer
Most of the respondent feels that increase in unwanted expenses of the borrwer ls contribute to NPA
Chart no 17
56
12
28
4
FULLY SATISFIED(28)PARTIALLY SATISFIED(6)NOT SATISFIED(14)FULLY DISSATISFIED(2)
Conclusion
As per response of the officials increasing inflation have an adverse effect on the financial sector its working performance as well as on NPA
Question number 9
Do you think that high rate of interest under Xpress credit also contributes to NPA
Answer
Out of 50 respondent 25 respondent were not satisfied 10 were partially satisfied 10 were strongly dissatisfied where as only 5 out of 50 were fully satisfied with it
Chart no 18
strongly satisfied(5)partially satisfied(10)not satisfied(25)fully dissatisfied(10)
Conclusion
Most of the respondents are not satisfied with it They feel that the rate of interest charged by SBI under Xpress credit is not high and it will not contribute to NPS
Question number 10
Do you think that lack of proper planning of the borrower is one of the reason for NPA
Answer
Out of 70 respondent 35 were fully satisfied 5 were not satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 19
fully satisfied(35)70
partially satisfied(10)20
not satisfied(5)10
Conclusion
Most of the respondent feels that the borrowers borrow money from the bank without any proper planning which is one of the most important reason for NPA
Question number 11
Is heavy borrowing also contribute to NPA
Answer
Out of 50 respondent 25 respondent were fully satisfied 12 were partially satisfied 8 were not satisfied were as 5 were fully dissatisfied
Chart no 110
50
24
16
10
fully satisfied(25) partially satisfied(12) not satisfied(8) fully dissatisfied(5)
Question number 12
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Answer
As per the response of the officials 20 were fully satisfied 66were partially satisfied 4 were not satisfied with it were as 10 respondent were fully dissatisfied
Chart no 111
fully satisfied(10)20
partially satisfied(33)66
not satisfied(2)4
fullydissatisfied(5)10
Conclusion
As per the response given by the officials most of the officials were partially satisfied that wrong selection of borrower also contribute to NPA which means that selection process carried out by the bank is not appropriate or there is some difficulties in implementing them
Question number 13
Do you think that poor credit appraisal also contribute to NPA
Answer
Out of 50 respondent 5 were fully satisfied 10 were fully satisfied 30 were not satisfied were as only 5 were fully dissatisfied
Chart no 112
fully satisfied(5)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 14
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Answer
Out of 50 responses 3 were fully satisfied 15 were partially satisfied 25 were not satisfied where as 7 were full dissatisfied
Chart no 113
fully satisfied(3)partiallt satisfied(15)not satisfied(25)fully dissatisfied(7)
Conclusion
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not contribute to NPA This means that the attitude of bank toward the borrower is not inflexible
Question number 15
Do you think that system over load is also one of the causes of NPA
Answer
Out of 50 respondent 28 were fully satisfied 12 were partially satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 114
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
FULL CHECK OFF
As given under the head CHECKOFF
AND
Undertaking from the employer to obtain a NOC from the Bank before settling the dues of the
borrower on transfer resignation retirement etc [As per Annexure ndash B (IV)]
This stipulation can be waived by the sanctioning authority incase of employees of Central State
Government PSUs Universities and Reputed Colleges In case of other employers the CGM of the
Circle has been permitted to waive the stipulation But in no case this can be waived for IT sector
employees
CATEGORY II
PARTIAL CHECK OFF
As given under the head CHECKOFF
CATEGORY III
WITH NO CHECK OFF
The employer pays the borrowerrsquos salary into his SavingsCurrent Account with our Bank
The borrower gives an irrevocable Standing Instruction (SI) for
recovery of the loan installments from his aforesaid account twitch the SI being synchronized with
the date of credit of salary in the borrowerrsquos SavingsCurrent Account
OR
Conditions as given under the head CHECKOFF is not fulfilled but the borrower provides monthly
PDCs (Post Dated Cheques) for entire tenure of the loan provided eligibility criteria are fulfilled
(Guidelines on Post Dated cheques is annexed as per Annexure A)
INTEREST RATE
The Interest rate is based on the category of Check off available
Category I
5 above the base rate ie - 970 +5 =1470 ( currently 1470 pa)
Category II
7 above the base rate (currently 1670 pa)
Note The GM of the Network is vested with powers to extend the Category II rate to a Category III
borrower only in case of employees of SB1 to SB5 rated companies who maintain their salary
accounts with us The Category III employees who do not maintain their salary accounts with us but
provide PDCs for the loan should be charged the card rate applicable to Category III and no
deviation should be permitted by Circle GMs
PENAL INTEREST
Penal interest should not be charged for loans up to Rs25000For Loans above Rs25000- if the
irregularity exceeds EMI or installment amount for a period of one month then penal interest would
be charged 2 pa(over and above the applicable interest
rate) on the overdue amount for the period of default If part installment or part EMI remains
overdue then penal interest should not be levied
This provision has been made to avoid application of penal interest on Personal Segment Loan
accounts where EMIs stipulated or installments are being paid regularly by the borrowers
Source Xpress credit circular
SECURITY
The loan is clean in nature and no security is required
PROCESSING FEE
11 of the loan amount including tax
PRE-SANCTION PROCESS
The following documents will be obtained before sanction-
I Application cum appraisal Form With a photograph of the borrower duly attested by the
authorized official
II It is proposed to put in place an arrangement for verification of the address of the borrower by an
outside agency A report duly signed by the verification agency (in places where an arrangement is
in place) or by our officerstaff in other places (where verification agency approved by Corporate
Centre is not available) should be complied based on the following verifications
I Verification of the borrowerrsquos residence address as given in the loan application
by actually visiting the residence of the borrower
II Verification of the borrowerrsquos office address as given in the loan application by
actually visiting the office of the borrower
Source Xpress credit circular
III Verification of the borrowerrsquos residence telephone number as given in the loan
application by actually calling the residence telephone number of the borrower
IV Verification of the borrowerrsquos office telephone number as given in the loan
Application by actually calling the office telephone number of the Borrower
V Verification of the IT return of the Borrower with IT department through a
person approved by the Regional OfficeZonal Office where feasible Where IT
return cannot be verified by the Bank statement of account of the borrower may
be scrutinized to verified income flows
Where the verification is not outsourced the Branch staff
Must do the verification and the report should be added with the loan documents
Flow chart of loan procedure of retail loan
Chart no 01
Disagree
NON PEFORMING ASSETS (NPA) ndash CONCEPT
The three letters ldquoNPArdquostrike terror in banking sector and business circle todayNPA is the short
Form of ldquoNon performing Assetsrdquo
Enquiry about loan
Agreeprovided with check list and
application
submission of documents and application dully
filled up
Documents taken
verification of application and
documebtsCIBIL report
Processing of loan
Sangtion of loan
Document
Control Disbursal of loan
phasewise lumpsum
In banking NPA are loans given to doubtful customers who may or may not repay the
loan on time There are two types of assets viz performing and non performing Performing loans
are standard loans on which both the principle and interest are secured and their return is guaranteed
NPA means the debt which is given by the bank is unable to recover is called
nonperforming assets A NPA account in the books of accounts is an asset as it indicates the amount
received from the defaulters It means if any bank gives loan and is not paid by the customers till 90
days than that account is called as NPA account
DEFINITION
An asset including leased assets becomes nonperforming when it ceases to generate income
for the bank
A NPA was defined as a credit facility in respect of which the interest or installment
of principle as remained ldquopast duerdquo for specific period of time
Source googlecoin
The specific period was reduced in a phased manner as under
wef ndash 31031993 four quarters
wef ndash 31 031994 three quarters
wef - 31031995 two quarters
wef - 31032001 180 days
wef - 31032004 90 days from past due
90 days delinquency is not applicable to agriculture segment
With effect from march 31 2004 NPA shall be a loan or an advance where
1) Term loan interest installment of principle remain over due for 90 days
2) Cash creditover draft an account remain ldquoout of orderrdquo for a period of more than 90 days
3) Bills The bills remain over due for a period more than 90 days
4) Agriculture loan
a The loan has been granted for short duration crop installments of the principle
remain over due for two crop season beyond the due date
b If the loan has been granted for long duration crop installment of the principle
remain over due for one crop season beyond the due date
Source Rbiorgin
CLASSIFICATION OF LOANS
In India loans are classified on following basis
Performing assets
Loans where the interest and or principle not remain overdue for more then 90 days
Non-performing assets
Any loan repayment remains over due for more than 90 days is considered as NPA
According to the securitization and re construction of financial assets and enforcement of
security interest ordinance2002 ldquonon performing assetsrdquo(NPA) means an assets or ac of
borrower which has been classified by the bank as sub-standard doubtful or loss asset in
accordance with the guidelines relating to asset classification issued by RBI
Source googlecoin
ASSET - CLASSIFICATION
Assets can be categorized into four categories (a) standard (b) sub-standard
(c) doubtful (d) loss The last three categories are classified as npa based on the the period for
which the asset has remained non-performing and the realisability of the dues
Standard assets the loan ac which are regular and do not carry more than normal risk are
known as standard assets there could be ac which though have not become npa but are
irregular Such ac are called special mention ac
Sub- standard assets with effect from 3132005 a sub-standard assets is one which is
classified as NPA for a period not exceeding 12 months
Doubtful asset with effect from 3132005 an asset is to be classified as doubtful if it
remained npa or sub-standard for a period exceeding 12 months
Loss assets a loss asset is one where loss has been identified by the bank or internal and
external auditors or the RBI inspection but the amount as not been written off wholly In
other words such an asset is considered uncollectable and such little value that its
continuance as a bankable asset is not warranted although there may be some salvage or
recoverable value
NPA IDENTIFICATION NORMS
With effect from 31st march 2004 a loan or advance become npa when
a Interest or installment of the principle remains overdue for a period more then 90
days in respect of term loan
b The ac remain out of order for a period more 90days in respect of over draft cash
cash credit
c The bill remains overdue for a period more than 90 days in case of bills purchased
and discounted
d With effect from Sept 2004 loan granted for short duration crops will be treated as
NPA if the installment of principle or interest there on remains overdue for two crop
season and loan granted for long duration will be treated as NPA if the installment
remains overdue for one crop season
Out of order
An account will be treated as out as out of order if the outstanding balance remain
continuously in excess of the sanctioned limitdrawing power In cases where the
outstanding balance in the principle operating ac is less than the sanctioned limit but
there are no credit continuously for 90 days as on the date of balance sheet or the
credit are not enough to cover the interest debited during the same period
Overdue
An amount due to the bank under any credit facility is overdue it is not paid on the due
date fixed by the bank
The date of npa will be actual date on which sippage occurred as mentioned below
For term and demand loan ac
The date on which the installment of the principle have
remaine overdue for a period more then 90 days
For over draft and cash credit ac
The date on which the ac completed period of more than 90
days of being continuously out of order
Source wwwRBI Org in
PROVISING NORMS
There is time lag between an ac becoming doubtful for recovery the realization of security and
erosion over a loan period of time in its value So RBI directives now requiresthe banks to make
provisions in their balance sheet for all non- standard loan asset Provisioning is made on all types of
assets ie Standard sub-standard doubtful and loss assets
1 Standard assets RBI vides its circular dated 151108 revised the provisioning requirements
For all type of standard assets it has been reduced to a uniform level of 040of outstanding
at global basis except in the case of direct advance to agriculture and SME sector which
shall continue to attract a provisioning of 025 The provision toward standard assets need
not to be netted from gross advances but shown separately as ldquo contigent provisionsrdquo against
standard assets under other liquidities and provisions others in schedule 5 of the balance
sheet
2 Sub-standard assets- In respect of sub-standard assets the rate of provision is 10 of
outstanding balance without considering ECGC guarantee cover or securities available
However if the loan was unsecured from the begining there would be additional provision of
10 ie total provision would be 20 of the outstanding balance Unsecured exposure is
defined as an exposure where the realizable value of the security as assessed by the
bankreserve banks inspecting officers is not more than 10 ab-intio of the outstanding
exposure
3 Doubtful assets In case of doubtful assets while making provision realizable value of
security is to be considered 100 provision is made for unsecured portion In case of
secured portion the rate of provision depend on age of doubtful assets as under
Age of doubtful assets Provision as of secured portion
Doubtful up to 1 year D1 20 of RVS( realizable value of security)
Doubtful for more than 1 year D2 30 of RVS
Doubtful for more than 3 years D2 100 of RVS
Thus if an ac is doubtful for more than 3 years than 100 of the provision is to be made
both from secured and unsecured portion If an advance has been guaranteed by DICGC
CGFTECGC and is doubtful than provision on secured portion will be as in other cases but
provision on unsecured portion will be made after deducting the claim value
4 LOSS ASSET 100 of the outstanding amount while making provision on NPAs amount
lying in suspense ac and derecognized interest should be deducted from gross advance and
provision be made on balance amount
5 OVERALL PROVISION With a view to improving the improving the provisioning cover
and enhancing the soundness of the individual banks RBI has proposed in oct- 09 policy that
bank should augment their provisions and ensure that their total provisioning coverage ratio
including floating provisions is not less than 70
Source wwwRBIorgin
IMPACTEFFECT OF NPA UPON BANKS
A strong banking sector is important for flourishing economy The failure of banking sector
may have an adverse impact on other sector NPA are one of the major concerns of sector
banks is increasing result in nonperforming assets The NPA impact drastically to the
working of banks The efficiency of bank not always reflected by the size of its balance sheet
but by the level of return on its assetsNPA do not generate interest income for the banks but
the same time banks are required to make provisions for such NPAs from their current
profits
They erode current profits through provisioning requirement
They result in reduced interest income
They require higher provisioning requirements effecting profits and accretion to capital
Adverse impact on capital adequacy ratio
Roe and Roa goes down because NPA do not earn
Banks rating gets effect
Banks cost of raising funds goes up
Bad effect on goodwill
Bad effect on equity value
EARLY SYMPTOMS BY WHICH ONE CAN RECOGNIZE A PERFORMING
ASSETS TURNING TO A NON PERFORMING ASSET
Four categories of early symptoms
1) FINANCIAL
(a) Non- payment of very first installment
(b) Bouncing of cheque due to insufficient balance in the ac
(c) Irregularity in installment
(d) Irregularity of operations in ac
(e) Unpaid overdue bill
(f) Declining current ratio
2) OPERATIONAL AND PHYSICAL
(a) If information is received that the borrower has either initiated the process of winding up or not doing the business
(b) Over-due receivable
(c) Stock statement not submitted on time
(d) External non-controllable factor like natural calamities in the city where the borrower lives
(e) Non- payment of salary
(3) ATTITUDNAL CHANGE
(a) Use for personal comfort stocks and shares by borrowers
(b) Avoidance of contact with bank
(c) Problem between partners
(4) OTHER
(a) Change in govt policies
(b) Death of the borrower
(c) Delay in salary
PREVENTIVE MEASUREMENT FOR NPA
Early recognition of the problem
Invariably by the time banks start their efforts to get involved
in a revival process its too late to retrieve the situation ndash both in terms of rehabilitation of the
project and the recovery of banks dues Identification of the weakness regardless of the fact
that it may not have become NPA is imperative Assessment of the potential of revival may
be done on the basis of a techno-economic viability study Restructuring should be attempted
where after an objective assessment of the promoterrsquos intention banks are convinced of a
turn around with in a scheduled facilitate winding upselling of units earlier so as to recover
whatever is possible through means before the security position becomes worse
Identifying borrowers with genuine intent
Identifying borrower with genuine intent from those who
are non-serious with commitment or stake in revival is a challenge confronting bankers Here
the role of front line officials at branch level is paramount as they are the ones who have
intelligent inputs with regard to promoters lsquo sincerity and capability to achieve turnaround
Based on this objective assessment bank should decide as quickly as possible whether it
would be worthwhile to commit additional finance
In this regard banks may consider having
ldquospecial investigationrdquo of all financial transaction or business transaction books of account
order to ascertain real factor that contributed to sickness of borrower Bank may have panel
of technical experts with proven expertise and task record of preparing techno-economic
study of the project of the borrowers
Borrowers having genuine problems due to temporary mismatch in find flow or sudden
requirement of additional fund may entertained at branch level for this purpose a special
limit to such type of cases should be decided This will obviate the need to route the
additional funding through the controlling officers in deserving cases and avert many
accounts sleeping into NPA category
Timeliness and adequacy of response
Longer the delay in response greater the enjury to the
account and the asset Time is a crucial element in any restructuring or rehabilitation activity
The response decided on the basis of techno- economic study and promoterrsquos commitment
has to be adequate in terms of extend of additional funding and relaxations etc under the
restructuring exercise The package of assistance may be flexible and bank may look at the
exit option
Focus on cash flow
While financing at the time of restructuring the banks may not be guided
by the conventional fund flow analysis only which could yield a potentially misleading
picture Appraisal for fresh credit requirement may be done by analyzing fond flow in
conjunction with the cash flow rather than only on the basis of fund flow
Source wwwAskcom
Management effectiveness
The general perception among the borrower is lack of finance that
leads to sickness and NPAs but this may not be the case all the time Management effectiveness
advance business condition is a very important aspect that affects a borrowing units fortunes A bank
may commit a multiple finance to an align unit only after basic viability of the enterprise also in the
context of quality of management is examined and confirmed It will be useful to have consultant
appointed as early as possible to examine this aspect A proper techno-economic viability study thus
become the basis on which any future action can be considered
Multiple financing
A) During the exercise for assessment of viability and restructuring a pragmatic and unified
approach by all the leading banks as also sharing of all relevant information on the
borrower would go a long way toward overall success of rehabilitation exercise given the
probability of successfailure
B) In some default cases Where the unit is still working The bank should make sure that it
captures the cash flow and insure that such cash are used for working capital purpose
Toward this end there should be a continuous flow of information among consortium
member A bank which is not a part of consortium may not be allowed to offer credit
facility to such defaulting clients Current account facility may also be denied at non-
consortium banks to such clients and violation may attract penal action The credit
information bureau of india (CIBIL) may be very useful for meaningful information
exchange on defaulting borrowers once the setup become fully operational
C) In a forum of lenders the priority of each lender will be different While one set of lender
may be willing to wait for longer time to recover its dues another lender may have a much
shorter timeframe in mind So it is possible that the letter categories of lenders may be
willing to exit even at a cost by a discounted settlement of the exposure There for any plan
for restructuringrehabilitation may takes into account
D) Corporate debt restructuring it has been institutionalized in 2001 to provide a timely and
transparent system for restructuring the corporate debt of RS 20 crores and above with the
banks on a voluntary basis and outside a legal framework Under this system bank are
greatly benefit in terms of restructuring of large standard accounts (potential NPAs) and
viable sub-standard account with multiple banking arrangement
NPA MANAGEMENT- RESOLUTION
Compromise settlement schemes
Restructuringrescheduling
Lok adalat
Corporate debt restructuring cell
Debt recovery Tribunals (DRT)
Proceeding under the code of civil procedure
Board of industrial and financial reconstruction
National company law Tribunal (NCLT)
Sale of NPA to other bank
Sale of NPA to ARCSC under securitization and reconstruction of financial assets for
enforcement of security interest Act 2000 (SRFAESI)
Liquidation
Source wwwRBIorgin
NPA MANAGEMENT IN INDIA
Formation of the credit information bureau (India) limited (CIBIL)
Release of willful defaulterrsquos listRBI also releases a list of borrowers with aggregate
outstanding of RS 1 crore and above against whom bank have filed suit for recovery of their
fund
Reporting of frauds to RBI
Norms of lenders labiality- framing of fair practices code with regard to lenders lability to
be followed by banks
Risk assessment and Risk management
RBI has advised banks to all cases of willful defaulters in case of 1 crore and above and
files suits in such cases
Responding quick mortality cases
Special mention accounts for early identification for bad debt loans and advances over due
for less than one or two quarters would come under this category However these accounts do
not need provisioning
INTERNATIONAL PRACTICES ON NPA MANAGEMENT
Subsequent to the Asian currency crisis which severely crippled the financial system In
addition to the above some of the more recent and aggressive step to NPAs have been taken
by Taiwan Taiwanese financial institution have been encouraged to merge and form bank
based AMCs through the recent introduction of financial holding company act and financial
institution Asian countries the magnitude of NPAs in Asian financial institution was brought
to light Driven by the need to proactively tackle the soaring NPAs level the respective govt
embarked upon a program of substantial reform This involves setting up processes for early
identification and resolution of NPAs The table below provides a cross country comparison
of approaches used for NPA resolution Mergers Act A long side the ministry of finance has
followed a carrot and strict policy of specifying the required NPA ratio for banks while also
providing flexibility in modes of NPA assets resolution and a conduct
ive regulatory and tax environment Deferred loss write-off provisions have been instituted to
provide breathing space for lenders to absorb NPA write-off While it is too early to
comment on success of NPA resolution process in Taiwan the early sign are encouraging
Detailed below are some key NPA management approaches adopted by banks in South East
Asian countries
1 Credit risk mitigation
2 Early warning systems
3 Assets management companies
Increasing willingness to sell NPAs to AMCs
Effective resolution strategy
Appointment of special administrators
4 Out of court restructuring
Source wwwgooglecom
DIFFICULTIES WITH NON PERFORMING ASSETS
I Owners do not receive a market return on their capital In the worst case if the bank
fails owner lose their assets
II Depositors do not receive a market return on savings In the worst case if the bank
fails depositors lose their assets or uninsured balance Banks also redistribute losses
to other borrowers by charging higher rate of interest
III Non-performing loans epitomize bad investors They misallocate credit from good
projects which do not receive funding to failed project
IV 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
shortage the shortage can jam payments across the country
b Illiquidity constraints banks in paying depositors eg cashing their paychecks
c Undercapitalized banks exceed the bank capital base
Lending by bank has been politicized It is common knowledge
that loans are given to various industrial houses on common consideration and
viability of project but on political consideration In normal circumstances banks
before extending any loan would make a thorough study of the actual need of the
party considered the prospect of the business in which it is engaged Since it is
not looked into many of the loans becomes NPA
REASONS F0R AN ACCOUNT BECOMING NPA
Those attribute to borrower
Failure to bring in required capital
Lack of proper planning
Unwanted expenses
Lack of expertise
Poor credit collection
Miss management
Heavy borrowing
Lack of knowledge regarding NPA
Willful defaulters
Death of the borrower
Those attribute to banks
Wrong selection of borrower
Poor credit appraisal
Unhelpful in supervision
Too inflexible attitude
System overload
Lack of motivation
Delay in sanction
Lack of trained staff
Lack of commitment to recovery
Lack of personal visit to the borrower office
Lack of personal visit to the borrowerrsquos residence
Other
Fast changing technology
Unhelpful attitude of govt
Increase in material cost
Government policies
Taxation law
Political hostility
INDIAN ECONOMY AND NPA
Undoubtedly the world economy has slowed down recession is at its peak globally stock markets
have tumbled and business itself getting hard to do The Indian economy has been much affected due
to high fiscal deficit poor infrastructure facilities sticky legal system cutting of exposures to
emerging market by FIIs etc
Further international rating agencies like standard and poor
have lowered Indiarsquos credit rating to sub- investment grade Such negative aspects have often
outweighed positive such as increasing for reserve and a manageable inflation rate
Under such situation I go without saying that banks are no exception
and are bound to face the heat of global down turn One would be surprise to know that banks and
financial institution in India holds non-performing assets worth Rs 1 10000 crores Bankers have
realized that unless the level of NPA is reduced drastically they will find it difficult to survive
The actual level of NPA in India is around $ 40 billion much higher than govt estimation of $16
billion This difference is largely due to the discrepancy in accounting the NPAs followed by India
and rest of the world The accounting norms of India are less stringent than those of the developed
economies The Indian banks also have the tendency to extend the past due Considering the GDP
India nearly $ 470 billion the NPA are 8 of the total GDP which was better than many Asian
countries The NPA of china was 45 of the GDP While Japan had NPAs of 25 of the GDP
The aggregate level of NPAs in Asia has increased from $ 25 billion in 2007 to
$ 34 billion on 2009 looking to such overall pictures of the market we can say that India is doing
well and the steps taken are looking favorable
Source googlecoin
DATA ANALYZING THE QUETIONNAIRE
Two set of questionnaire were prepared to collect the feedback One set of questionnaire was meant for branches and other set of questionnaire was meant for borrowers
The set of questionnaire were given to the branches under hazaribag (RBO) and collected the feedback of the bankers of P segment and the branch manager
The questionnaire prepared for branch contained 15 questions and the questionnaire prepared for borrower contains 10 questions
The data was collected from 50 bankers and the data analysis of the branch questionnaire is as follows
Question number 1
Does not require any data analysis and information was sought to know the business level of the branches for the purpose of whether particular branch is actively engaged in xpress credit portfolio
Question number 2
Do you think that the borrowers are aware about NPA
Answer
32 of the respondent feel that the borrowers are not aware about NPA and 18 respondents feel that borrowers are aware about NPA
Chart no 11
yes
no
0
5
10
15
20
25
30
35
1832 Column1
Conclusion
Majority of the bank officials feels that the borrowers are not aware about NPA
Question number 3
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Answer
Out of 32 respondent 22 respondents is fully satisfied that lack of knowledge among the borrower regarding NPA is one of the reason for NPA 08 respondent were partially satisfied with it and 02 respondent were not satisfied with it
Chart no 12
fully satisfied(22)69
partially satisfied(8)25
not satisfied(2)6
Sales
Conclusion
Majority of the borrowers feels that lack of knowledge among the borrower regarding NPA is one of the reasons for NPA
Question number 4 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Answer
Out of 50 respondent 30 of the respondent strongly satisfied that these external factors contribute to NPA 10 respondent were partially satisfied with it 5 were not satisfied where as 5 were fully dissatisfied with it
Chart no 13
6020
10
10
fully satisfied(30) partially satisfied(10) not satisfiec(5) fully desatisfied(5)
Conclusion
Most of the respondent thinks that external factrs like willful defaulter change in govt policy contribute to NPA
Question number 5
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Answer
Chart no 14
feedback
fully satisfied(20)partially satisfied(12)not satisfied(12)fully dissatisfied(6)
Conclusion
As per the response of the officials most of the officials feel that internal factors are also responsible for NPA
Question number 6
Do you think that inflation is one of the reasons for NPA
Answer
Out f 50 responses 22 were strongly satisfied 18 were partially satisfied 8 were not satisfied and 2 were fully dissatisfied
Chart no 15
fully satisfied(20)44
partially satisfied(18)36
not satisfied(5)10
fullt dissatisfied(5)10
Conclusion
Growing inflation increasing goods rate is also one of the reason for NPA
Question number 7
Do you think that lack of PSS is also contributed to NPA
Answer
Out of 50 responses 30 were fully satisfied with it 12 were partially satisfied and 8 were fully dissatisfied
Chart no 16
6024
16
Open
fully satisfied(30)Partially satisfied(12)not satisfied(0)fully dissatisfied(8)
Conclusion
Majority of the officiais feels that lack of PSS is one of the reason for NPA This means that the PSS carried out by the bank is not sufficient or not carried out properly
Question number 8
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Answer
Most of the respondent feels that increase in unwanted expenses of the borrwer ls contribute to NPA
Chart no 17
56
12
28
4
FULLY SATISFIED(28)PARTIALLY SATISFIED(6)NOT SATISFIED(14)FULLY DISSATISFIED(2)
Conclusion
As per response of the officials increasing inflation have an adverse effect on the financial sector its working performance as well as on NPA
Question number 9
Do you think that high rate of interest under Xpress credit also contributes to NPA
Answer
Out of 50 respondent 25 respondent were not satisfied 10 were partially satisfied 10 were strongly dissatisfied where as only 5 out of 50 were fully satisfied with it
Chart no 18
strongly satisfied(5)partially satisfied(10)not satisfied(25)fully dissatisfied(10)
Conclusion
Most of the respondents are not satisfied with it They feel that the rate of interest charged by SBI under Xpress credit is not high and it will not contribute to NPS
Question number 10
Do you think that lack of proper planning of the borrower is one of the reason for NPA
Answer
Out of 70 respondent 35 were fully satisfied 5 were not satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 19
fully satisfied(35)70
partially satisfied(10)20
not satisfied(5)10
Conclusion
Most of the respondent feels that the borrowers borrow money from the bank without any proper planning which is one of the most important reason for NPA
Question number 11
Is heavy borrowing also contribute to NPA
Answer
Out of 50 respondent 25 respondent were fully satisfied 12 were partially satisfied 8 were not satisfied were as 5 were fully dissatisfied
Chart no 110
50
24
16
10
fully satisfied(25) partially satisfied(12) not satisfied(8) fully dissatisfied(5)
Question number 12
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Answer
As per the response of the officials 20 were fully satisfied 66were partially satisfied 4 were not satisfied with it were as 10 respondent were fully dissatisfied
Chart no 111
fully satisfied(10)20
partially satisfied(33)66
not satisfied(2)4
fullydissatisfied(5)10
Conclusion
As per the response given by the officials most of the officials were partially satisfied that wrong selection of borrower also contribute to NPA which means that selection process carried out by the bank is not appropriate or there is some difficulties in implementing them
Question number 13
Do you think that poor credit appraisal also contribute to NPA
Answer
Out of 50 respondent 5 were fully satisfied 10 were fully satisfied 30 were not satisfied were as only 5 were fully dissatisfied
Chart no 112
fully satisfied(5)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 14
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Answer
Out of 50 responses 3 were fully satisfied 15 were partially satisfied 25 were not satisfied where as 7 were full dissatisfied
Chart no 113
fully satisfied(3)partiallt satisfied(15)not satisfied(25)fully dissatisfied(7)
Conclusion
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not contribute to NPA This means that the attitude of bank toward the borrower is not inflexible
Question number 15
Do you think that system over load is also one of the causes of NPA
Answer
Out of 50 respondent 28 were fully satisfied 12 were partially satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 114
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
The employer pays the borrowerrsquos salary into his SavingsCurrent Account with our Bank
The borrower gives an irrevocable Standing Instruction (SI) for
recovery of the loan installments from his aforesaid account twitch the SI being synchronized with
the date of credit of salary in the borrowerrsquos SavingsCurrent Account
OR
Conditions as given under the head CHECKOFF is not fulfilled but the borrower provides monthly
PDCs (Post Dated Cheques) for entire tenure of the loan provided eligibility criteria are fulfilled
(Guidelines on Post Dated cheques is annexed as per Annexure A)
INTEREST RATE
The Interest rate is based on the category of Check off available
Category I
5 above the base rate ie - 970 +5 =1470 ( currently 1470 pa)
Category II
7 above the base rate (currently 1670 pa)
Note The GM of the Network is vested with powers to extend the Category II rate to a Category III
borrower only in case of employees of SB1 to SB5 rated companies who maintain their salary
accounts with us The Category III employees who do not maintain their salary accounts with us but
provide PDCs for the loan should be charged the card rate applicable to Category III and no
deviation should be permitted by Circle GMs
PENAL INTEREST
Penal interest should not be charged for loans up to Rs25000For Loans above Rs25000- if the
irregularity exceeds EMI or installment amount for a period of one month then penal interest would
be charged 2 pa(over and above the applicable interest
rate) on the overdue amount for the period of default If part installment or part EMI remains
overdue then penal interest should not be levied
This provision has been made to avoid application of penal interest on Personal Segment Loan
accounts where EMIs stipulated or installments are being paid regularly by the borrowers
Source Xpress credit circular
SECURITY
The loan is clean in nature and no security is required
PROCESSING FEE
11 of the loan amount including tax
PRE-SANCTION PROCESS
The following documents will be obtained before sanction-
I Application cum appraisal Form With a photograph of the borrower duly attested by the
authorized official
II It is proposed to put in place an arrangement for verification of the address of the borrower by an
outside agency A report duly signed by the verification agency (in places where an arrangement is
in place) or by our officerstaff in other places (where verification agency approved by Corporate
Centre is not available) should be complied based on the following verifications
I Verification of the borrowerrsquos residence address as given in the loan application
by actually visiting the residence of the borrower
II Verification of the borrowerrsquos office address as given in the loan application by
actually visiting the office of the borrower
Source Xpress credit circular
III Verification of the borrowerrsquos residence telephone number as given in the loan
application by actually calling the residence telephone number of the borrower
IV Verification of the borrowerrsquos office telephone number as given in the loan
Application by actually calling the office telephone number of the Borrower
V Verification of the IT return of the Borrower with IT department through a
person approved by the Regional OfficeZonal Office where feasible Where IT
return cannot be verified by the Bank statement of account of the borrower may
be scrutinized to verified income flows
Where the verification is not outsourced the Branch staff
Must do the verification and the report should be added with the loan documents
Flow chart of loan procedure of retail loan
Chart no 01
Disagree
NON PEFORMING ASSETS (NPA) ndash CONCEPT
The three letters ldquoNPArdquostrike terror in banking sector and business circle todayNPA is the short
Form of ldquoNon performing Assetsrdquo
Enquiry about loan
Agreeprovided with check list and
application
submission of documents and application dully
filled up
Documents taken
verification of application and
documebtsCIBIL report
Processing of loan
Sangtion of loan
Document
Control Disbursal of loan
phasewise lumpsum
In banking NPA are loans given to doubtful customers who may or may not repay the
loan on time There are two types of assets viz performing and non performing Performing loans
are standard loans on which both the principle and interest are secured and their return is guaranteed
NPA means the debt which is given by the bank is unable to recover is called
nonperforming assets A NPA account in the books of accounts is an asset as it indicates the amount
received from the defaulters It means if any bank gives loan and is not paid by the customers till 90
days than that account is called as NPA account
DEFINITION
An asset including leased assets becomes nonperforming when it ceases to generate income
for the bank
A NPA was defined as a credit facility in respect of which the interest or installment
of principle as remained ldquopast duerdquo for specific period of time
Source googlecoin
The specific period was reduced in a phased manner as under
wef ndash 31031993 four quarters
wef ndash 31 031994 three quarters
wef - 31031995 two quarters
wef - 31032001 180 days
wef - 31032004 90 days from past due
90 days delinquency is not applicable to agriculture segment
With effect from march 31 2004 NPA shall be a loan or an advance where
1) Term loan interest installment of principle remain over due for 90 days
2) Cash creditover draft an account remain ldquoout of orderrdquo for a period of more than 90 days
3) Bills The bills remain over due for a period more than 90 days
4) Agriculture loan
a The loan has been granted for short duration crop installments of the principle
remain over due for two crop season beyond the due date
b If the loan has been granted for long duration crop installment of the principle
remain over due for one crop season beyond the due date
Source Rbiorgin
CLASSIFICATION OF LOANS
In India loans are classified on following basis
Performing assets
Loans where the interest and or principle not remain overdue for more then 90 days
Non-performing assets
Any loan repayment remains over due for more than 90 days is considered as NPA
According to the securitization and re construction of financial assets and enforcement of
security interest ordinance2002 ldquonon performing assetsrdquo(NPA) means an assets or ac of
borrower which has been classified by the bank as sub-standard doubtful or loss asset in
accordance with the guidelines relating to asset classification issued by RBI
Source googlecoin
ASSET - CLASSIFICATION
Assets can be categorized into four categories (a) standard (b) sub-standard
(c) doubtful (d) loss The last three categories are classified as npa based on the the period for
which the asset has remained non-performing and the realisability of the dues
Standard assets the loan ac which are regular and do not carry more than normal risk are
known as standard assets there could be ac which though have not become npa but are
irregular Such ac are called special mention ac
Sub- standard assets with effect from 3132005 a sub-standard assets is one which is
classified as NPA for a period not exceeding 12 months
Doubtful asset with effect from 3132005 an asset is to be classified as doubtful if it
remained npa or sub-standard for a period exceeding 12 months
Loss assets a loss asset is one where loss has been identified by the bank or internal and
external auditors or the RBI inspection but the amount as not been written off wholly In
other words such an asset is considered uncollectable and such little value that its
continuance as a bankable asset is not warranted although there may be some salvage or
recoverable value
NPA IDENTIFICATION NORMS
With effect from 31st march 2004 a loan or advance become npa when
a Interest or installment of the principle remains overdue for a period more then 90
days in respect of term loan
b The ac remain out of order for a period more 90days in respect of over draft cash
cash credit
c The bill remains overdue for a period more than 90 days in case of bills purchased
and discounted
d With effect from Sept 2004 loan granted for short duration crops will be treated as
NPA if the installment of principle or interest there on remains overdue for two crop
season and loan granted for long duration will be treated as NPA if the installment
remains overdue for one crop season
Out of order
An account will be treated as out as out of order if the outstanding balance remain
continuously in excess of the sanctioned limitdrawing power In cases where the
outstanding balance in the principle operating ac is less than the sanctioned limit but
there are no credit continuously for 90 days as on the date of balance sheet or the
credit are not enough to cover the interest debited during the same period
Overdue
An amount due to the bank under any credit facility is overdue it is not paid on the due
date fixed by the bank
The date of npa will be actual date on which sippage occurred as mentioned below
For term and demand loan ac
The date on which the installment of the principle have
remaine overdue for a period more then 90 days
For over draft and cash credit ac
The date on which the ac completed period of more than 90
days of being continuously out of order
Source wwwRBI Org in
PROVISING NORMS
There is time lag between an ac becoming doubtful for recovery the realization of security and
erosion over a loan period of time in its value So RBI directives now requiresthe banks to make
provisions in their balance sheet for all non- standard loan asset Provisioning is made on all types of
assets ie Standard sub-standard doubtful and loss assets
1 Standard assets RBI vides its circular dated 151108 revised the provisioning requirements
For all type of standard assets it has been reduced to a uniform level of 040of outstanding
at global basis except in the case of direct advance to agriculture and SME sector which
shall continue to attract a provisioning of 025 The provision toward standard assets need
not to be netted from gross advances but shown separately as ldquo contigent provisionsrdquo against
standard assets under other liquidities and provisions others in schedule 5 of the balance
sheet
2 Sub-standard assets- In respect of sub-standard assets the rate of provision is 10 of
outstanding balance without considering ECGC guarantee cover or securities available
However if the loan was unsecured from the begining there would be additional provision of
10 ie total provision would be 20 of the outstanding balance Unsecured exposure is
defined as an exposure where the realizable value of the security as assessed by the
bankreserve banks inspecting officers is not more than 10 ab-intio of the outstanding
exposure
3 Doubtful assets In case of doubtful assets while making provision realizable value of
security is to be considered 100 provision is made for unsecured portion In case of
secured portion the rate of provision depend on age of doubtful assets as under
Age of doubtful assets Provision as of secured portion
Doubtful up to 1 year D1 20 of RVS( realizable value of security)
Doubtful for more than 1 year D2 30 of RVS
Doubtful for more than 3 years D2 100 of RVS
Thus if an ac is doubtful for more than 3 years than 100 of the provision is to be made
both from secured and unsecured portion If an advance has been guaranteed by DICGC
CGFTECGC and is doubtful than provision on secured portion will be as in other cases but
provision on unsecured portion will be made after deducting the claim value
4 LOSS ASSET 100 of the outstanding amount while making provision on NPAs amount
lying in suspense ac and derecognized interest should be deducted from gross advance and
provision be made on balance amount
5 OVERALL PROVISION With a view to improving the improving the provisioning cover
and enhancing the soundness of the individual banks RBI has proposed in oct- 09 policy that
bank should augment their provisions and ensure that their total provisioning coverage ratio
including floating provisions is not less than 70
Source wwwRBIorgin
IMPACTEFFECT OF NPA UPON BANKS
A strong banking sector is important for flourishing economy The failure of banking sector
may have an adverse impact on other sector NPA are one of the major concerns of sector
banks is increasing result in nonperforming assets The NPA impact drastically to the
working of banks The efficiency of bank not always reflected by the size of its balance sheet
but by the level of return on its assetsNPA do not generate interest income for the banks but
the same time banks are required to make provisions for such NPAs from their current
profits
They erode current profits through provisioning requirement
They result in reduced interest income
They require higher provisioning requirements effecting profits and accretion to capital
Adverse impact on capital adequacy ratio
Roe and Roa goes down because NPA do not earn
Banks rating gets effect
Banks cost of raising funds goes up
Bad effect on goodwill
Bad effect on equity value
EARLY SYMPTOMS BY WHICH ONE CAN RECOGNIZE A PERFORMING
ASSETS TURNING TO A NON PERFORMING ASSET
Four categories of early symptoms
1) FINANCIAL
(a) Non- payment of very first installment
(b) Bouncing of cheque due to insufficient balance in the ac
(c) Irregularity in installment
(d) Irregularity of operations in ac
(e) Unpaid overdue bill
(f) Declining current ratio
2) OPERATIONAL AND PHYSICAL
(a) If information is received that the borrower has either initiated the process of winding up or not doing the business
(b) Over-due receivable
(c) Stock statement not submitted on time
(d) External non-controllable factor like natural calamities in the city where the borrower lives
(e) Non- payment of salary
(3) ATTITUDNAL CHANGE
(a) Use for personal comfort stocks and shares by borrowers
(b) Avoidance of contact with bank
(c) Problem between partners
(4) OTHER
(a) Change in govt policies
(b) Death of the borrower
(c) Delay in salary
PREVENTIVE MEASUREMENT FOR NPA
Early recognition of the problem
Invariably by the time banks start their efforts to get involved
in a revival process its too late to retrieve the situation ndash both in terms of rehabilitation of the
project and the recovery of banks dues Identification of the weakness regardless of the fact
that it may not have become NPA is imperative Assessment of the potential of revival may
be done on the basis of a techno-economic viability study Restructuring should be attempted
where after an objective assessment of the promoterrsquos intention banks are convinced of a
turn around with in a scheduled facilitate winding upselling of units earlier so as to recover
whatever is possible through means before the security position becomes worse
Identifying borrowers with genuine intent
Identifying borrower with genuine intent from those who
are non-serious with commitment or stake in revival is a challenge confronting bankers Here
the role of front line officials at branch level is paramount as they are the ones who have
intelligent inputs with regard to promoters lsquo sincerity and capability to achieve turnaround
Based on this objective assessment bank should decide as quickly as possible whether it
would be worthwhile to commit additional finance
In this regard banks may consider having
ldquospecial investigationrdquo of all financial transaction or business transaction books of account
order to ascertain real factor that contributed to sickness of borrower Bank may have panel
of technical experts with proven expertise and task record of preparing techno-economic
study of the project of the borrowers
Borrowers having genuine problems due to temporary mismatch in find flow or sudden
requirement of additional fund may entertained at branch level for this purpose a special
limit to such type of cases should be decided This will obviate the need to route the
additional funding through the controlling officers in deserving cases and avert many
accounts sleeping into NPA category
Timeliness and adequacy of response
Longer the delay in response greater the enjury to the
account and the asset Time is a crucial element in any restructuring or rehabilitation activity
The response decided on the basis of techno- economic study and promoterrsquos commitment
has to be adequate in terms of extend of additional funding and relaxations etc under the
restructuring exercise The package of assistance may be flexible and bank may look at the
exit option
Focus on cash flow
While financing at the time of restructuring the banks may not be guided
by the conventional fund flow analysis only which could yield a potentially misleading
picture Appraisal for fresh credit requirement may be done by analyzing fond flow in
conjunction with the cash flow rather than only on the basis of fund flow
Source wwwAskcom
Management effectiveness
The general perception among the borrower is lack of finance that
leads to sickness and NPAs but this may not be the case all the time Management effectiveness
advance business condition is a very important aspect that affects a borrowing units fortunes A bank
may commit a multiple finance to an align unit only after basic viability of the enterprise also in the
context of quality of management is examined and confirmed It will be useful to have consultant
appointed as early as possible to examine this aspect A proper techno-economic viability study thus
become the basis on which any future action can be considered
Multiple financing
A) During the exercise for assessment of viability and restructuring a pragmatic and unified
approach by all the leading banks as also sharing of all relevant information on the
borrower would go a long way toward overall success of rehabilitation exercise given the
probability of successfailure
B) In some default cases Where the unit is still working The bank should make sure that it
captures the cash flow and insure that such cash are used for working capital purpose
Toward this end there should be a continuous flow of information among consortium
member A bank which is not a part of consortium may not be allowed to offer credit
facility to such defaulting clients Current account facility may also be denied at non-
consortium banks to such clients and violation may attract penal action The credit
information bureau of india (CIBIL) may be very useful for meaningful information
exchange on defaulting borrowers once the setup become fully operational
C) In a forum of lenders the priority of each lender will be different While one set of lender
may be willing to wait for longer time to recover its dues another lender may have a much
shorter timeframe in mind So it is possible that the letter categories of lenders may be
willing to exit even at a cost by a discounted settlement of the exposure There for any plan
for restructuringrehabilitation may takes into account
D) Corporate debt restructuring it has been institutionalized in 2001 to provide a timely and
transparent system for restructuring the corporate debt of RS 20 crores and above with the
banks on a voluntary basis and outside a legal framework Under this system bank are
greatly benefit in terms of restructuring of large standard accounts (potential NPAs) and
viable sub-standard account with multiple banking arrangement
NPA MANAGEMENT- RESOLUTION
Compromise settlement schemes
Restructuringrescheduling
Lok adalat
Corporate debt restructuring cell
Debt recovery Tribunals (DRT)
Proceeding under the code of civil procedure
Board of industrial and financial reconstruction
National company law Tribunal (NCLT)
Sale of NPA to other bank
Sale of NPA to ARCSC under securitization and reconstruction of financial assets for
enforcement of security interest Act 2000 (SRFAESI)
Liquidation
Source wwwRBIorgin
NPA MANAGEMENT IN INDIA
Formation of the credit information bureau (India) limited (CIBIL)
Release of willful defaulterrsquos listRBI also releases a list of borrowers with aggregate
outstanding of RS 1 crore and above against whom bank have filed suit for recovery of their
fund
Reporting of frauds to RBI
Norms of lenders labiality- framing of fair practices code with regard to lenders lability to
be followed by banks
Risk assessment and Risk management
RBI has advised banks to all cases of willful defaulters in case of 1 crore and above and
files suits in such cases
Responding quick mortality cases
Special mention accounts for early identification for bad debt loans and advances over due
for less than one or two quarters would come under this category However these accounts do
not need provisioning
INTERNATIONAL PRACTICES ON NPA MANAGEMENT
Subsequent to the Asian currency crisis which severely crippled the financial system In
addition to the above some of the more recent and aggressive step to NPAs have been taken
by Taiwan Taiwanese financial institution have been encouraged to merge and form bank
based AMCs through the recent introduction of financial holding company act and financial
institution Asian countries the magnitude of NPAs in Asian financial institution was brought
to light Driven by the need to proactively tackle the soaring NPAs level the respective govt
embarked upon a program of substantial reform This involves setting up processes for early
identification and resolution of NPAs The table below provides a cross country comparison
of approaches used for NPA resolution Mergers Act A long side the ministry of finance has
followed a carrot and strict policy of specifying the required NPA ratio for banks while also
providing flexibility in modes of NPA assets resolution and a conduct
ive regulatory and tax environment Deferred loss write-off provisions have been instituted to
provide breathing space for lenders to absorb NPA write-off While it is too early to
comment on success of NPA resolution process in Taiwan the early sign are encouraging
Detailed below are some key NPA management approaches adopted by banks in South East
Asian countries
1 Credit risk mitigation
2 Early warning systems
3 Assets management companies
Increasing willingness to sell NPAs to AMCs
Effective resolution strategy
Appointment of special administrators
4 Out of court restructuring
Source wwwgooglecom
DIFFICULTIES WITH NON PERFORMING ASSETS
I Owners do not receive a market return on their capital In the worst case if the bank
fails owner lose their assets
II Depositors do not receive a market return on savings In the worst case if the bank
fails depositors lose their assets or uninsured balance Banks also redistribute losses
to other borrowers by charging higher rate of interest
III Non-performing loans epitomize bad investors They misallocate credit from good
projects which do not receive funding to failed project
IV 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
shortage the shortage can jam payments across the country
b Illiquidity constraints banks in paying depositors eg cashing their paychecks
c Undercapitalized banks exceed the bank capital base
Lending by bank has been politicized It is common knowledge
that loans are given to various industrial houses on common consideration and
viability of project but on political consideration In normal circumstances banks
before extending any loan would make a thorough study of the actual need of the
party considered the prospect of the business in which it is engaged Since it is
not looked into many of the loans becomes NPA
REASONS F0R AN ACCOUNT BECOMING NPA
Those attribute to borrower
Failure to bring in required capital
Lack of proper planning
Unwanted expenses
Lack of expertise
Poor credit collection
Miss management
Heavy borrowing
Lack of knowledge regarding NPA
Willful defaulters
Death of the borrower
Those attribute to banks
Wrong selection of borrower
Poor credit appraisal
Unhelpful in supervision
Too inflexible attitude
System overload
Lack of motivation
Delay in sanction
Lack of trained staff
Lack of commitment to recovery
Lack of personal visit to the borrower office
Lack of personal visit to the borrowerrsquos residence
Other
Fast changing technology
Unhelpful attitude of govt
Increase in material cost
Government policies
Taxation law
Political hostility
INDIAN ECONOMY AND NPA
Undoubtedly the world economy has slowed down recession is at its peak globally stock markets
have tumbled and business itself getting hard to do The Indian economy has been much affected due
to high fiscal deficit poor infrastructure facilities sticky legal system cutting of exposures to
emerging market by FIIs etc
Further international rating agencies like standard and poor
have lowered Indiarsquos credit rating to sub- investment grade Such negative aspects have often
outweighed positive such as increasing for reserve and a manageable inflation rate
Under such situation I go without saying that banks are no exception
and are bound to face the heat of global down turn One would be surprise to know that banks and
financial institution in India holds non-performing assets worth Rs 1 10000 crores Bankers have
realized that unless the level of NPA is reduced drastically they will find it difficult to survive
The actual level of NPA in India is around $ 40 billion much higher than govt estimation of $16
billion This difference is largely due to the discrepancy in accounting the NPAs followed by India
and rest of the world The accounting norms of India are less stringent than those of the developed
economies The Indian banks also have the tendency to extend the past due Considering the GDP
India nearly $ 470 billion the NPA are 8 of the total GDP which was better than many Asian
countries The NPA of china was 45 of the GDP While Japan had NPAs of 25 of the GDP
The aggregate level of NPAs in Asia has increased from $ 25 billion in 2007 to
$ 34 billion on 2009 looking to such overall pictures of the market we can say that India is doing
well and the steps taken are looking favorable
Source googlecoin
DATA ANALYZING THE QUETIONNAIRE
Two set of questionnaire were prepared to collect the feedback One set of questionnaire was meant for branches and other set of questionnaire was meant for borrowers
The set of questionnaire were given to the branches under hazaribag (RBO) and collected the feedback of the bankers of P segment and the branch manager
The questionnaire prepared for branch contained 15 questions and the questionnaire prepared for borrower contains 10 questions
The data was collected from 50 bankers and the data analysis of the branch questionnaire is as follows
Question number 1
Does not require any data analysis and information was sought to know the business level of the branches for the purpose of whether particular branch is actively engaged in xpress credit portfolio
Question number 2
Do you think that the borrowers are aware about NPA
Answer
32 of the respondent feel that the borrowers are not aware about NPA and 18 respondents feel that borrowers are aware about NPA
Chart no 11
yes
no
0
5
10
15
20
25
30
35
1832 Column1
Conclusion
Majority of the bank officials feels that the borrowers are not aware about NPA
Question number 3
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Answer
Out of 32 respondent 22 respondents is fully satisfied that lack of knowledge among the borrower regarding NPA is one of the reason for NPA 08 respondent were partially satisfied with it and 02 respondent were not satisfied with it
Chart no 12
fully satisfied(22)69
partially satisfied(8)25
not satisfied(2)6
Sales
Conclusion
Majority of the borrowers feels that lack of knowledge among the borrower regarding NPA is one of the reasons for NPA
Question number 4 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Answer
Out of 50 respondent 30 of the respondent strongly satisfied that these external factors contribute to NPA 10 respondent were partially satisfied with it 5 were not satisfied where as 5 were fully dissatisfied with it
Chart no 13
6020
10
10
fully satisfied(30) partially satisfied(10) not satisfiec(5) fully desatisfied(5)
Conclusion
Most of the respondent thinks that external factrs like willful defaulter change in govt policy contribute to NPA
Question number 5
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Answer
Chart no 14
feedback
fully satisfied(20)partially satisfied(12)not satisfied(12)fully dissatisfied(6)
Conclusion
As per the response of the officials most of the officials feel that internal factors are also responsible for NPA
Question number 6
Do you think that inflation is one of the reasons for NPA
Answer
Out f 50 responses 22 were strongly satisfied 18 were partially satisfied 8 were not satisfied and 2 were fully dissatisfied
Chart no 15
fully satisfied(20)44
partially satisfied(18)36
not satisfied(5)10
fullt dissatisfied(5)10
Conclusion
Growing inflation increasing goods rate is also one of the reason for NPA
Question number 7
Do you think that lack of PSS is also contributed to NPA
Answer
Out of 50 responses 30 were fully satisfied with it 12 were partially satisfied and 8 were fully dissatisfied
Chart no 16
6024
16
Open
fully satisfied(30)Partially satisfied(12)not satisfied(0)fully dissatisfied(8)
Conclusion
Majority of the officiais feels that lack of PSS is one of the reason for NPA This means that the PSS carried out by the bank is not sufficient or not carried out properly
Question number 8
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Answer
Most of the respondent feels that increase in unwanted expenses of the borrwer ls contribute to NPA
Chart no 17
56
12
28
4
FULLY SATISFIED(28)PARTIALLY SATISFIED(6)NOT SATISFIED(14)FULLY DISSATISFIED(2)
Conclusion
As per response of the officials increasing inflation have an adverse effect on the financial sector its working performance as well as on NPA
Question number 9
Do you think that high rate of interest under Xpress credit also contributes to NPA
Answer
Out of 50 respondent 25 respondent were not satisfied 10 were partially satisfied 10 were strongly dissatisfied where as only 5 out of 50 were fully satisfied with it
Chart no 18
strongly satisfied(5)partially satisfied(10)not satisfied(25)fully dissatisfied(10)
Conclusion
Most of the respondents are not satisfied with it They feel that the rate of interest charged by SBI under Xpress credit is not high and it will not contribute to NPS
Question number 10
Do you think that lack of proper planning of the borrower is one of the reason for NPA
Answer
Out of 70 respondent 35 were fully satisfied 5 were not satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 19
fully satisfied(35)70
partially satisfied(10)20
not satisfied(5)10
Conclusion
Most of the respondent feels that the borrowers borrow money from the bank without any proper planning which is one of the most important reason for NPA
Question number 11
Is heavy borrowing also contribute to NPA
Answer
Out of 50 respondent 25 respondent were fully satisfied 12 were partially satisfied 8 were not satisfied were as 5 were fully dissatisfied
Chart no 110
50
24
16
10
fully satisfied(25) partially satisfied(12) not satisfied(8) fully dissatisfied(5)
Question number 12
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Answer
As per the response of the officials 20 were fully satisfied 66were partially satisfied 4 were not satisfied with it were as 10 respondent were fully dissatisfied
Chart no 111
fully satisfied(10)20
partially satisfied(33)66
not satisfied(2)4
fullydissatisfied(5)10
Conclusion
As per the response given by the officials most of the officials were partially satisfied that wrong selection of borrower also contribute to NPA which means that selection process carried out by the bank is not appropriate or there is some difficulties in implementing them
Question number 13
Do you think that poor credit appraisal also contribute to NPA
Answer
Out of 50 respondent 5 were fully satisfied 10 were fully satisfied 30 were not satisfied were as only 5 were fully dissatisfied
Chart no 112
fully satisfied(5)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 14
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Answer
Out of 50 responses 3 were fully satisfied 15 were partially satisfied 25 were not satisfied where as 7 were full dissatisfied
Chart no 113
fully satisfied(3)partiallt satisfied(15)not satisfied(25)fully dissatisfied(7)
Conclusion
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not contribute to NPA This means that the attitude of bank toward the borrower is not inflexible
Question number 15
Do you think that system over load is also one of the causes of NPA
Answer
Out of 50 respondent 28 were fully satisfied 12 were partially satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 114
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Category II
7 above the base rate (currently 1670 pa)
Note The GM of the Network is vested with powers to extend the Category II rate to a Category III
borrower only in case of employees of SB1 to SB5 rated companies who maintain their salary
accounts with us The Category III employees who do not maintain their salary accounts with us but
provide PDCs for the loan should be charged the card rate applicable to Category III and no
deviation should be permitted by Circle GMs
PENAL INTEREST
Penal interest should not be charged for loans up to Rs25000For Loans above Rs25000- if the
irregularity exceeds EMI or installment amount for a period of one month then penal interest would
be charged 2 pa(over and above the applicable interest
rate) on the overdue amount for the period of default If part installment or part EMI remains
overdue then penal interest should not be levied
This provision has been made to avoid application of penal interest on Personal Segment Loan
accounts where EMIs stipulated or installments are being paid regularly by the borrowers
Source Xpress credit circular
SECURITY
The loan is clean in nature and no security is required
PROCESSING FEE
11 of the loan amount including tax
PRE-SANCTION PROCESS
The following documents will be obtained before sanction-
I Application cum appraisal Form With a photograph of the borrower duly attested by the
authorized official
II It is proposed to put in place an arrangement for verification of the address of the borrower by an
outside agency A report duly signed by the verification agency (in places where an arrangement is
in place) or by our officerstaff in other places (where verification agency approved by Corporate
Centre is not available) should be complied based on the following verifications
I Verification of the borrowerrsquos residence address as given in the loan application
by actually visiting the residence of the borrower
II Verification of the borrowerrsquos office address as given in the loan application by
actually visiting the office of the borrower
Source Xpress credit circular
III Verification of the borrowerrsquos residence telephone number as given in the loan
application by actually calling the residence telephone number of the borrower
IV Verification of the borrowerrsquos office telephone number as given in the loan
Application by actually calling the office telephone number of the Borrower
V Verification of the IT return of the Borrower with IT department through a
person approved by the Regional OfficeZonal Office where feasible Where IT
return cannot be verified by the Bank statement of account of the borrower may
be scrutinized to verified income flows
Where the verification is not outsourced the Branch staff
Must do the verification and the report should be added with the loan documents
Flow chart of loan procedure of retail loan
Chart no 01
Disagree
NON PEFORMING ASSETS (NPA) ndash CONCEPT
The three letters ldquoNPArdquostrike terror in banking sector and business circle todayNPA is the short
Form of ldquoNon performing Assetsrdquo
Enquiry about loan
Agreeprovided with check list and
application
submission of documents and application dully
filled up
Documents taken
verification of application and
documebtsCIBIL report
Processing of loan
Sangtion of loan
Document
Control Disbursal of loan
phasewise lumpsum
In banking NPA are loans given to doubtful customers who may or may not repay the
loan on time There are two types of assets viz performing and non performing Performing loans
are standard loans on which both the principle and interest are secured and their return is guaranteed
NPA means the debt which is given by the bank is unable to recover is called
nonperforming assets A NPA account in the books of accounts is an asset as it indicates the amount
received from the defaulters It means if any bank gives loan and is not paid by the customers till 90
days than that account is called as NPA account
DEFINITION
An asset including leased assets becomes nonperforming when it ceases to generate income
for the bank
A NPA was defined as a credit facility in respect of which the interest or installment
of principle as remained ldquopast duerdquo for specific period of time
Source googlecoin
The specific period was reduced in a phased manner as under
wef ndash 31031993 four quarters
wef ndash 31 031994 three quarters
wef - 31031995 two quarters
wef - 31032001 180 days
wef - 31032004 90 days from past due
90 days delinquency is not applicable to agriculture segment
With effect from march 31 2004 NPA shall be a loan or an advance where
1) Term loan interest installment of principle remain over due for 90 days
2) Cash creditover draft an account remain ldquoout of orderrdquo for a period of more than 90 days
3) Bills The bills remain over due for a period more than 90 days
4) Agriculture loan
a The loan has been granted for short duration crop installments of the principle
remain over due for two crop season beyond the due date
b If the loan has been granted for long duration crop installment of the principle
remain over due for one crop season beyond the due date
Source Rbiorgin
CLASSIFICATION OF LOANS
In India loans are classified on following basis
Performing assets
Loans where the interest and or principle not remain overdue for more then 90 days
Non-performing assets
Any loan repayment remains over due for more than 90 days is considered as NPA
According to the securitization and re construction of financial assets and enforcement of
security interest ordinance2002 ldquonon performing assetsrdquo(NPA) means an assets or ac of
borrower which has been classified by the bank as sub-standard doubtful or loss asset in
accordance with the guidelines relating to asset classification issued by RBI
Source googlecoin
ASSET - CLASSIFICATION
Assets can be categorized into four categories (a) standard (b) sub-standard
(c) doubtful (d) loss The last three categories are classified as npa based on the the period for
which the asset has remained non-performing and the realisability of the dues
Standard assets the loan ac which are regular and do not carry more than normal risk are
known as standard assets there could be ac which though have not become npa but are
irregular Such ac are called special mention ac
Sub- standard assets with effect from 3132005 a sub-standard assets is one which is
classified as NPA for a period not exceeding 12 months
Doubtful asset with effect from 3132005 an asset is to be classified as doubtful if it
remained npa or sub-standard for a period exceeding 12 months
Loss assets a loss asset is one where loss has been identified by the bank or internal and
external auditors or the RBI inspection but the amount as not been written off wholly In
other words such an asset is considered uncollectable and such little value that its
continuance as a bankable asset is not warranted although there may be some salvage or
recoverable value
NPA IDENTIFICATION NORMS
With effect from 31st march 2004 a loan or advance become npa when
a Interest or installment of the principle remains overdue for a period more then 90
days in respect of term loan
b The ac remain out of order for a period more 90days in respect of over draft cash
cash credit
c The bill remains overdue for a period more than 90 days in case of bills purchased
and discounted
d With effect from Sept 2004 loan granted for short duration crops will be treated as
NPA if the installment of principle or interest there on remains overdue for two crop
season and loan granted for long duration will be treated as NPA if the installment
remains overdue for one crop season
Out of order
An account will be treated as out as out of order if the outstanding balance remain
continuously in excess of the sanctioned limitdrawing power In cases where the
outstanding balance in the principle operating ac is less than the sanctioned limit but
there are no credit continuously for 90 days as on the date of balance sheet or the
credit are not enough to cover the interest debited during the same period
Overdue
An amount due to the bank under any credit facility is overdue it is not paid on the due
date fixed by the bank
The date of npa will be actual date on which sippage occurred as mentioned below
For term and demand loan ac
The date on which the installment of the principle have
remaine overdue for a period more then 90 days
For over draft and cash credit ac
The date on which the ac completed period of more than 90
days of being continuously out of order
Source wwwRBI Org in
PROVISING NORMS
There is time lag between an ac becoming doubtful for recovery the realization of security and
erosion over a loan period of time in its value So RBI directives now requiresthe banks to make
provisions in their balance sheet for all non- standard loan asset Provisioning is made on all types of
assets ie Standard sub-standard doubtful and loss assets
1 Standard assets RBI vides its circular dated 151108 revised the provisioning requirements
For all type of standard assets it has been reduced to a uniform level of 040of outstanding
at global basis except in the case of direct advance to agriculture and SME sector which
shall continue to attract a provisioning of 025 The provision toward standard assets need
not to be netted from gross advances but shown separately as ldquo contigent provisionsrdquo against
standard assets under other liquidities and provisions others in schedule 5 of the balance
sheet
2 Sub-standard assets- In respect of sub-standard assets the rate of provision is 10 of
outstanding balance without considering ECGC guarantee cover or securities available
However if the loan was unsecured from the begining there would be additional provision of
10 ie total provision would be 20 of the outstanding balance Unsecured exposure is
defined as an exposure where the realizable value of the security as assessed by the
bankreserve banks inspecting officers is not more than 10 ab-intio of the outstanding
exposure
3 Doubtful assets In case of doubtful assets while making provision realizable value of
security is to be considered 100 provision is made for unsecured portion In case of
secured portion the rate of provision depend on age of doubtful assets as under
Age of doubtful assets Provision as of secured portion
Doubtful up to 1 year D1 20 of RVS( realizable value of security)
Doubtful for more than 1 year D2 30 of RVS
Doubtful for more than 3 years D2 100 of RVS
Thus if an ac is doubtful for more than 3 years than 100 of the provision is to be made
both from secured and unsecured portion If an advance has been guaranteed by DICGC
CGFTECGC and is doubtful than provision on secured portion will be as in other cases but
provision on unsecured portion will be made after deducting the claim value
4 LOSS ASSET 100 of the outstanding amount while making provision on NPAs amount
lying in suspense ac and derecognized interest should be deducted from gross advance and
provision be made on balance amount
5 OVERALL PROVISION With a view to improving the improving the provisioning cover
and enhancing the soundness of the individual banks RBI has proposed in oct- 09 policy that
bank should augment their provisions and ensure that their total provisioning coverage ratio
including floating provisions is not less than 70
Source wwwRBIorgin
IMPACTEFFECT OF NPA UPON BANKS
A strong banking sector is important for flourishing economy The failure of banking sector
may have an adverse impact on other sector NPA are one of the major concerns of sector
banks is increasing result in nonperforming assets The NPA impact drastically to the
working of banks The efficiency of bank not always reflected by the size of its balance sheet
but by the level of return on its assetsNPA do not generate interest income for the banks but
the same time banks are required to make provisions for such NPAs from their current
profits
They erode current profits through provisioning requirement
They result in reduced interest income
They require higher provisioning requirements effecting profits and accretion to capital
Adverse impact on capital adequacy ratio
Roe and Roa goes down because NPA do not earn
Banks rating gets effect
Banks cost of raising funds goes up
Bad effect on goodwill
Bad effect on equity value
EARLY SYMPTOMS BY WHICH ONE CAN RECOGNIZE A PERFORMING
ASSETS TURNING TO A NON PERFORMING ASSET
Four categories of early symptoms
1) FINANCIAL
(a) Non- payment of very first installment
(b) Bouncing of cheque due to insufficient balance in the ac
(c) Irregularity in installment
(d) Irregularity of operations in ac
(e) Unpaid overdue bill
(f) Declining current ratio
2) OPERATIONAL AND PHYSICAL
(a) If information is received that the borrower has either initiated the process of winding up or not doing the business
(b) Over-due receivable
(c) Stock statement not submitted on time
(d) External non-controllable factor like natural calamities in the city where the borrower lives
(e) Non- payment of salary
(3) ATTITUDNAL CHANGE
(a) Use for personal comfort stocks and shares by borrowers
(b) Avoidance of contact with bank
(c) Problem between partners
(4) OTHER
(a) Change in govt policies
(b) Death of the borrower
(c) Delay in salary
PREVENTIVE MEASUREMENT FOR NPA
Early recognition of the problem
Invariably by the time banks start their efforts to get involved
in a revival process its too late to retrieve the situation ndash both in terms of rehabilitation of the
project and the recovery of banks dues Identification of the weakness regardless of the fact
that it may not have become NPA is imperative Assessment of the potential of revival may
be done on the basis of a techno-economic viability study Restructuring should be attempted
where after an objective assessment of the promoterrsquos intention banks are convinced of a
turn around with in a scheduled facilitate winding upselling of units earlier so as to recover
whatever is possible through means before the security position becomes worse
Identifying borrowers with genuine intent
Identifying borrower with genuine intent from those who
are non-serious with commitment or stake in revival is a challenge confronting bankers Here
the role of front line officials at branch level is paramount as they are the ones who have
intelligent inputs with regard to promoters lsquo sincerity and capability to achieve turnaround
Based on this objective assessment bank should decide as quickly as possible whether it
would be worthwhile to commit additional finance
In this regard banks may consider having
ldquospecial investigationrdquo of all financial transaction or business transaction books of account
order to ascertain real factor that contributed to sickness of borrower Bank may have panel
of technical experts with proven expertise and task record of preparing techno-economic
study of the project of the borrowers
Borrowers having genuine problems due to temporary mismatch in find flow or sudden
requirement of additional fund may entertained at branch level for this purpose a special
limit to such type of cases should be decided This will obviate the need to route the
additional funding through the controlling officers in deserving cases and avert many
accounts sleeping into NPA category
Timeliness and adequacy of response
Longer the delay in response greater the enjury to the
account and the asset Time is a crucial element in any restructuring or rehabilitation activity
The response decided on the basis of techno- economic study and promoterrsquos commitment
has to be adequate in terms of extend of additional funding and relaxations etc under the
restructuring exercise The package of assistance may be flexible and bank may look at the
exit option
Focus on cash flow
While financing at the time of restructuring the banks may not be guided
by the conventional fund flow analysis only which could yield a potentially misleading
picture Appraisal for fresh credit requirement may be done by analyzing fond flow in
conjunction with the cash flow rather than only on the basis of fund flow
Source wwwAskcom
Management effectiveness
The general perception among the borrower is lack of finance that
leads to sickness and NPAs but this may not be the case all the time Management effectiveness
advance business condition is a very important aspect that affects a borrowing units fortunes A bank
may commit a multiple finance to an align unit only after basic viability of the enterprise also in the
context of quality of management is examined and confirmed It will be useful to have consultant
appointed as early as possible to examine this aspect A proper techno-economic viability study thus
become the basis on which any future action can be considered
Multiple financing
A) During the exercise for assessment of viability and restructuring a pragmatic and unified
approach by all the leading banks as also sharing of all relevant information on the
borrower would go a long way toward overall success of rehabilitation exercise given the
probability of successfailure
B) In some default cases Where the unit is still working The bank should make sure that it
captures the cash flow and insure that such cash are used for working capital purpose
Toward this end there should be a continuous flow of information among consortium
member A bank which is not a part of consortium may not be allowed to offer credit
facility to such defaulting clients Current account facility may also be denied at non-
consortium banks to such clients and violation may attract penal action The credit
information bureau of india (CIBIL) may be very useful for meaningful information
exchange on defaulting borrowers once the setup become fully operational
C) In a forum of lenders the priority of each lender will be different While one set of lender
may be willing to wait for longer time to recover its dues another lender may have a much
shorter timeframe in mind So it is possible that the letter categories of lenders may be
willing to exit even at a cost by a discounted settlement of the exposure There for any plan
for restructuringrehabilitation may takes into account
D) Corporate debt restructuring it has been institutionalized in 2001 to provide a timely and
transparent system for restructuring the corporate debt of RS 20 crores and above with the
banks on a voluntary basis and outside a legal framework Under this system bank are
greatly benefit in terms of restructuring of large standard accounts (potential NPAs) and
viable sub-standard account with multiple banking arrangement
NPA MANAGEMENT- RESOLUTION
Compromise settlement schemes
Restructuringrescheduling
Lok adalat
Corporate debt restructuring cell
Debt recovery Tribunals (DRT)
Proceeding under the code of civil procedure
Board of industrial and financial reconstruction
National company law Tribunal (NCLT)
Sale of NPA to other bank
Sale of NPA to ARCSC under securitization and reconstruction of financial assets for
enforcement of security interest Act 2000 (SRFAESI)
Liquidation
Source wwwRBIorgin
NPA MANAGEMENT IN INDIA
Formation of the credit information bureau (India) limited (CIBIL)
Release of willful defaulterrsquos listRBI also releases a list of borrowers with aggregate
outstanding of RS 1 crore and above against whom bank have filed suit for recovery of their
fund
Reporting of frauds to RBI
Norms of lenders labiality- framing of fair practices code with regard to lenders lability to
be followed by banks
Risk assessment and Risk management
RBI has advised banks to all cases of willful defaulters in case of 1 crore and above and
files suits in such cases
Responding quick mortality cases
Special mention accounts for early identification for bad debt loans and advances over due
for less than one or two quarters would come under this category However these accounts do
not need provisioning
INTERNATIONAL PRACTICES ON NPA MANAGEMENT
Subsequent to the Asian currency crisis which severely crippled the financial system In
addition to the above some of the more recent and aggressive step to NPAs have been taken
by Taiwan Taiwanese financial institution have been encouraged to merge and form bank
based AMCs through the recent introduction of financial holding company act and financial
institution Asian countries the magnitude of NPAs in Asian financial institution was brought
to light Driven by the need to proactively tackle the soaring NPAs level the respective govt
embarked upon a program of substantial reform This involves setting up processes for early
identification and resolution of NPAs The table below provides a cross country comparison
of approaches used for NPA resolution Mergers Act A long side the ministry of finance has
followed a carrot and strict policy of specifying the required NPA ratio for banks while also
providing flexibility in modes of NPA assets resolution and a conduct
ive regulatory and tax environment Deferred loss write-off provisions have been instituted to
provide breathing space for lenders to absorb NPA write-off While it is too early to
comment on success of NPA resolution process in Taiwan the early sign are encouraging
Detailed below are some key NPA management approaches adopted by banks in South East
Asian countries
1 Credit risk mitigation
2 Early warning systems
3 Assets management companies
Increasing willingness to sell NPAs to AMCs
Effective resolution strategy
Appointment of special administrators
4 Out of court restructuring
Source wwwgooglecom
DIFFICULTIES WITH NON PERFORMING ASSETS
I Owners do not receive a market return on their capital In the worst case if the bank
fails owner lose their assets
II Depositors do not receive a market return on savings In the worst case if the bank
fails depositors lose their assets or uninsured balance Banks also redistribute losses
to other borrowers by charging higher rate of interest
III Non-performing loans epitomize bad investors They misallocate credit from good
projects which do not receive funding to failed project
IV 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
shortage the shortage can jam payments across the country
b Illiquidity constraints banks in paying depositors eg cashing their paychecks
c Undercapitalized banks exceed the bank capital base
Lending by bank has been politicized It is common knowledge
that loans are given to various industrial houses on common consideration and
viability of project but on political consideration In normal circumstances banks
before extending any loan would make a thorough study of the actual need of the
party considered the prospect of the business in which it is engaged Since it is
not looked into many of the loans becomes NPA
REASONS F0R AN ACCOUNT BECOMING NPA
Those attribute to borrower
Failure to bring in required capital
Lack of proper planning
Unwanted expenses
Lack of expertise
Poor credit collection
Miss management
Heavy borrowing
Lack of knowledge regarding NPA
Willful defaulters
Death of the borrower
Those attribute to banks
Wrong selection of borrower
Poor credit appraisal
Unhelpful in supervision
Too inflexible attitude
System overload
Lack of motivation
Delay in sanction
Lack of trained staff
Lack of commitment to recovery
Lack of personal visit to the borrower office
Lack of personal visit to the borrowerrsquos residence
Other
Fast changing technology
Unhelpful attitude of govt
Increase in material cost
Government policies
Taxation law
Political hostility
INDIAN ECONOMY AND NPA
Undoubtedly the world economy has slowed down recession is at its peak globally stock markets
have tumbled and business itself getting hard to do The Indian economy has been much affected due
to high fiscal deficit poor infrastructure facilities sticky legal system cutting of exposures to
emerging market by FIIs etc
Further international rating agencies like standard and poor
have lowered Indiarsquos credit rating to sub- investment grade Such negative aspects have often
outweighed positive such as increasing for reserve and a manageable inflation rate
Under such situation I go without saying that banks are no exception
and are bound to face the heat of global down turn One would be surprise to know that banks and
financial institution in India holds non-performing assets worth Rs 1 10000 crores Bankers have
realized that unless the level of NPA is reduced drastically they will find it difficult to survive
The actual level of NPA in India is around $ 40 billion much higher than govt estimation of $16
billion This difference is largely due to the discrepancy in accounting the NPAs followed by India
and rest of the world The accounting norms of India are less stringent than those of the developed
economies The Indian banks also have the tendency to extend the past due Considering the GDP
India nearly $ 470 billion the NPA are 8 of the total GDP which was better than many Asian
countries The NPA of china was 45 of the GDP While Japan had NPAs of 25 of the GDP
The aggregate level of NPAs in Asia has increased from $ 25 billion in 2007 to
$ 34 billion on 2009 looking to such overall pictures of the market we can say that India is doing
well and the steps taken are looking favorable
Source googlecoin
DATA ANALYZING THE QUETIONNAIRE
Two set of questionnaire were prepared to collect the feedback One set of questionnaire was meant for branches and other set of questionnaire was meant for borrowers
The set of questionnaire were given to the branches under hazaribag (RBO) and collected the feedback of the bankers of P segment and the branch manager
The questionnaire prepared for branch contained 15 questions and the questionnaire prepared for borrower contains 10 questions
The data was collected from 50 bankers and the data analysis of the branch questionnaire is as follows
Question number 1
Does not require any data analysis and information was sought to know the business level of the branches for the purpose of whether particular branch is actively engaged in xpress credit portfolio
Question number 2
Do you think that the borrowers are aware about NPA
Answer
32 of the respondent feel that the borrowers are not aware about NPA and 18 respondents feel that borrowers are aware about NPA
Chart no 11
yes
no
0
5
10
15
20
25
30
35
1832 Column1
Conclusion
Majority of the bank officials feels that the borrowers are not aware about NPA
Question number 3
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Answer
Out of 32 respondent 22 respondents is fully satisfied that lack of knowledge among the borrower regarding NPA is one of the reason for NPA 08 respondent were partially satisfied with it and 02 respondent were not satisfied with it
Chart no 12
fully satisfied(22)69
partially satisfied(8)25
not satisfied(2)6
Sales
Conclusion
Majority of the borrowers feels that lack of knowledge among the borrower regarding NPA is one of the reasons for NPA
Question number 4 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Answer
Out of 50 respondent 30 of the respondent strongly satisfied that these external factors contribute to NPA 10 respondent were partially satisfied with it 5 were not satisfied where as 5 were fully dissatisfied with it
Chart no 13
6020
10
10
fully satisfied(30) partially satisfied(10) not satisfiec(5) fully desatisfied(5)
Conclusion
Most of the respondent thinks that external factrs like willful defaulter change in govt policy contribute to NPA
Question number 5
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Answer
Chart no 14
feedback
fully satisfied(20)partially satisfied(12)not satisfied(12)fully dissatisfied(6)
Conclusion
As per the response of the officials most of the officials feel that internal factors are also responsible for NPA
Question number 6
Do you think that inflation is one of the reasons for NPA
Answer
Out f 50 responses 22 were strongly satisfied 18 were partially satisfied 8 were not satisfied and 2 were fully dissatisfied
Chart no 15
fully satisfied(20)44
partially satisfied(18)36
not satisfied(5)10
fullt dissatisfied(5)10
Conclusion
Growing inflation increasing goods rate is also one of the reason for NPA
Question number 7
Do you think that lack of PSS is also contributed to NPA
Answer
Out of 50 responses 30 were fully satisfied with it 12 were partially satisfied and 8 were fully dissatisfied
Chart no 16
6024
16
Open
fully satisfied(30)Partially satisfied(12)not satisfied(0)fully dissatisfied(8)
Conclusion
Majority of the officiais feels that lack of PSS is one of the reason for NPA This means that the PSS carried out by the bank is not sufficient or not carried out properly
Question number 8
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Answer
Most of the respondent feels that increase in unwanted expenses of the borrwer ls contribute to NPA
Chart no 17
56
12
28
4
FULLY SATISFIED(28)PARTIALLY SATISFIED(6)NOT SATISFIED(14)FULLY DISSATISFIED(2)
Conclusion
As per response of the officials increasing inflation have an adverse effect on the financial sector its working performance as well as on NPA
Question number 9
Do you think that high rate of interest under Xpress credit also contributes to NPA
Answer
Out of 50 respondent 25 respondent were not satisfied 10 were partially satisfied 10 were strongly dissatisfied where as only 5 out of 50 were fully satisfied with it
Chart no 18
strongly satisfied(5)partially satisfied(10)not satisfied(25)fully dissatisfied(10)
Conclusion
Most of the respondents are not satisfied with it They feel that the rate of interest charged by SBI under Xpress credit is not high and it will not contribute to NPS
Question number 10
Do you think that lack of proper planning of the borrower is one of the reason for NPA
Answer
Out of 70 respondent 35 were fully satisfied 5 were not satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 19
fully satisfied(35)70
partially satisfied(10)20
not satisfied(5)10
Conclusion
Most of the respondent feels that the borrowers borrow money from the bank without any proper planning which is one of the most important reason for NPA
Question number 11
Is heavy borrowing also contribute to NPA
Answer
Out of 50 respondent 25 respondent were fully satisfied 12 were partially satisfied 8 were not satisfied were as 5 were fully dissatisfied
Chart no 110
50
24
16
10
fully satisfied(25) partially satisfied(12) not satisfied(8) fully dissatisfied(5)
Question number 12
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Answer
As per the response of the officials 20 were fully satisfied 66were partially satisfied 4 were not satisfied with it were as 10 respondent were fully dissatisfied
Chart no 111
fully satisfied(10)20
partially satisfied(33)66
not satisfied(2)4
fullydissatisfied(5)10
Conclusion
As per the response given by the officials most of the officials were partially satisfied that wrong selection of borrower also contribute to NPA which means that selection process carried out by the bank is not appropriate or there is some difficulties in implementing them
Question number 13
Do you think that poor credit appraisal also contribute to NPA
Answer
Out of 50 respondent 5 were fully satisfied 10 were fully satisfied 30 were not satisfied were as only 5 were fully dissatisfied
Chart no 112
fully satisfied(5)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 14
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Answer
Out of 50 responses 3 were fully satisfied 15 were partially satisfied 25 were not satisfied where as 7 were full dissatisfied
Chart no 113
fully satisfied(3)partiallt satisfied(15)not satisfied(25)fully dissatisfied(7)
Conclusion
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not contribute to NPA This means that the attitude of bank toward the borrower is not inflexible
Question number 15
Do you think that system over load is also one of the causes of NPA
Answer
Out of 50 respondent 28 were fully satisfied 12 were partially satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 114
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
PRE-SANCTION PROCESS
The following documents will be obtained before sanction-
I Application cum appraisal Form With a photograph of the borrower duly attested by the
authorized official
II It is proposed to put in place an arrangement for verification of the address of the borrower by an
outside agency A report duly signed by the verification agency (in places where an arrangement is
in place) or by our officerstaff in other places (where verification agency approved by Corporate
Centre is not available) should be complied based on the following verifications
I Verification of the borrowerrsquos residence address as given in the loan application
by actually visiting the residence of the borrower
II Verification of the borrowerrsquos office address as given in the loan application by
actually visiting the office of the borrower
Source Xpress credit circular
III Verification of the borrowerrsquos residence telephone number as given in the loan
application by actually calling the residence telephone number of the borrower
IV Verification of the borrowerrsquos office telephone number as given in the loan
Application by actually calling the office telephone number of the Borrower
V Verification of the IT return of the Borrower with IT department through a
person approved by the Regional OfficeZonal Office where feasible Where IT
return cannot be verified by the Bank statement of account of the borrower may
be scrutinized to verified income flows
Where the verification is not outsourced the Branch staff
Must do the verification and the report should be added with the loan documents
Flow chart of loan procedure of retail loan
Chart no 01
Disagree
NON PEFORMING ASSETS (NPA) ndash CONCEPT
The three letters ldquoNPArdquostrike terror in banking sector and business circle todayNPA is the short
Form of ldquoNon performing Assetsrdquo
Enquiry about loan
Agreeprovided with check list and
application
submission of documents and application dully
filled up
Documents taken
verification of application and
documebtsCIBIL report
Processing of loan
Sangtion of loan
Document
Control Disbursal of loan
phasewise lumpsum
In banking NPA are loans given to doubtful customers who may or may not repay the
loan on time There are two types of assets viz performing and non performing Performing loans
are standard loans on which both the principle and interest are secured and their return is guaranteed
NPA means the debt which is given by the bank is unable to recover is called
nonperforming assets A NPA account in the books of accounts is an asset as it indicates the amount
received from the defaulters It means if any bank gives loan and is not paid by the customers till 90
days than that account is called as NPA account
DEFINITION
An asset including leased assets becomes nonperforming when it ceases to generate income
for the bank
A NPA was defined as a credit facility in respect of which the interest or installment
of principle as remained ldquopast duerdquo for specific period of time
Source googlecoin
The specific period was reduced in a phased manner as under
wef ndash 31031993 four quarters
wef ndash 31 031994 three quarters
wef - 31031995 two quarters
wef - 31032001 180 days
wef - 31032004 90 days from past due
90 days delinquency is not applicable to agriculture segment
With effect from march 31 2004 NPA shall be a loan or an advance where
1) Term loan interest installment of principle remain over due for 90 days
2) Cash creditover draft an account remain ldquoout of orderrdquo for a period of more than 90 days
3) Bills The bills remain over due for a period more than 90 days
4) Agriculture loan
a The loan has been granted for short duration crop installments of the principle
remain over due for two crop season beyond the due date
b If the loan has been granted for long duration crop installment of the principle
remain over due for one crop season beyond the due date
Source Rbiorgin
CLASSIFICATION OF LOANS
In India loans are classified on following basis
Performing assets
Loans where the interest and or principle not remain overdue for more then 90 days
Non-performing assets
Any loan repayment remains over due for more than 90 days is considered as NPA
According to the securitization and re construction of financial assets and enforcement of
security interest ordinance2002 ldquonon performing assetsrdquo(NPA) means an assets or ac of
borrower which has been classified by the bank as sub-standard doubtful or loss asset in
accordance with the guidelines relating to asset classification issued by RBI
Source googlecoin
ASSET - CLASSIFICATION
Assets can be categorized into four categories (a) standard (b) sub-standard
(c) doubtful (d) loss The last three categories are classified as npa based on the the period for
which the asset has remained non-performing and the realisability of the dues
Standard assets the loan ac which are regular and do not carry more than normal risk are
known as standard assets there could be ac which though have not become npa but are
irregular Such ac are called special mention ac
Sub- standard assets with effect from 3132005 a sub-standard assets is one which is
classified as NPA for a period not exceeding 12 months
Doubtful asset with effect from 3132005 an asset is to be classified as doubtful if it
remained npa or sub-standard for a period exceeding 12 months
Loss assets a loss asset is one where loss has been identified by the bank or internal and
external auditors or the RBI inspection but the amount as not been written off wholly In
other words such an asset is considered uncollectable and such little value that its
continuance as a bankable asset is not warranted although there may be some salvage or
recoverable value
NPA IDENTIFICATION NORMS
With effect from 31st march 2004 a loan or advance become npa when
a Interest or installment of the principle remains overdue for a period more then 90
days in respect of term loan
b The ac remain out of order for a period more 90days in respect of over draft cash
cash credit
c The bill remains overdue for a period more than 90 days in case of bills purchased
and discounted
d With effect from Sept 2004 loan granted for short duration crops will be treated as
NPA if the installment of principle or interest there on remains overdue for two crop
season and loan granted for long duration will be treated as NPA if the installment
remains overdue for one crop season
Out of order
An account will be treated as out as out of order if the outstanding balance remain
continuously in excess of the sanctioned limitdrawing power In cases where the
outstanding balance in the principle operating ac is less than the sanctioned limit but
there are no credit continuously for 90 days as on the date of balance sheet or the
credit are not enough to cover the interest debited during the same period
Overdue
An amount due to the bank under any credit facility is overdue it is not paid on the due
date fixed by the bank
The date of npa will be actual date on which sippage occurred as mentioned below
For term and demand loan ac
The date on which the installment of the principle have
remaine overdue for a period more then 90 days
For over draft and cash credit ac
The date on which the ac completed period of more than 90
days of being continuously out of order
Source wwwRBI Org in
PROVISING NORMS
There is time lag between an ac becoming doubtful for recovery the realization of security and
erosion over a loan period of time in its value So RBI directives now requiresthe banks to make
provisions in their balance sheet for all non- standard loan asset Provisioning is made on all types of
assets ie Standard sub-standard doubtful and loss assets
1 Standard assets RBI vides its circular dated 151108 revised the provisioning requirements
For all type of standard assets it has been reduced to a uniform level of 040of outstanding
at global basis except in the case of direct advance to agriculture and SME sector which
shall continue to attract a provisioning of 025 The provision toward standard assets need
not to be netted from gross advances but shown separately as ldquo contigent provisionsrdquo against
standard assets under other liquidities and provisions others in schedule 5 of the balance
sheet
2 Sub-standard assets- In respect of sub-standard assets the rate of provision is 10 of
outstanding balance without considering ECGC guarantee cover or securities available
However if the loan was unsecured from the begining there would be additional provision of
10 ie total provision would be 20 of the outstanding balance Unsecured exposure is
defined as an exposure where the realizable value of the security as assessed by the
bankreserve banks inspecting officers is not more than 10 ab-intio of the outstanding
exposure
3 Doubtful assets In case of doubtful assets while making provision realizable value of
security is to be considered 100 provision is made for unsecured portion In case of
secured portion the rate of provision depend on age of doubtful assets as under
Age of doubtful assets Provision as of secured portion
Doubtful up to 1 year D1 20 of RVS( realizable value of security)
Doubtful for more than 1 year D2 30 of RVS
Doubtful for more than 3 years D2 100 of RVS
Thus if an ac is doubtful for more than 3 years than 100 of the provision is to be made
both from secured and unsecured portion If an advance has been guaranteed by DICGC
CGFTECGC and is doubtful than provision on secured portion will be as in other cases but
provision on unsecured portion will be made after deducting the claim value
4 LOSS ASSET 100 of the outstanding amount while making provision on NPAs amount
lying in suspense ac and derecognized interest should be deducted from gross advance and
provision be made on balance amount
5 OVERALL PROVISION With a view to improving the improving the provisioning cover
and enhancing the soundness of the individual banks RBI has proposed in oct- 09 policy that
bank should augment their provisions and ensure that their total provisioning coverage ratio
including floating provisions is not less than 70
Source wwwRBIorgin
IMPACTEFFECT OF NPA UPON BANKS
A strong banking sector is important for flourishing economy The failure of banking sector
may have an adverse impact on other sector NPA are one of the major concerns of sector
banks is increasing result in nonperforming assets The NPA impact drastically to the
working of banks The efficiency of bank not always reflected by the size of its balance sheet
but by the level of return on its assetsNPA do not generate interest income for the banks but
the same time banks are required to make provisions for such NPAs from their current
profits
They erode current profits through provisioning requirement
They result in reduced interest income
They require higher provisioning requirements effecting profits and accretion to capital
Adverse impact on capital adequacy ratio
Roe and Roa goes down because NPA do not earn
Banks rating gets effect
Banks cost of raising funds goes up
Bad effect on goodwill
Bad effect on equity value
EARLY SYMPTOMS BY WHICH ONE CAN RECOGNIZE A PERFORMING
ASSETS TURNING TO A NON PERFORMING ASSET
Four categories of early symptoms
1) FINANCIAL
(a) Non- payment of very first installment
(b) Bouncing of cheque due to insufficient balance in the ac
(c) Irregularity in installment
(d) Irregularity of operations in ac
(e) Unpaid overdue bill
(f) Declining current ratio
2) OPERATIONAL AND PHYSICAL
(a) If information is received that the borrower has either initiated the process of winding up or not doing the business
(b) Over-due receivable
(c) Stock statement not submitted on time
(d) External non-controllable factor like natural calamities in the city where the borrower lives
(e) Non- payment of salary
(3) ATTITUDNAL CHANGE
(a) Use for personal comfort stocks and shares by borrowers
(b) Avoidance of contact with bank
(c) Problem between partners
(4) OTHER
(a) Change in govt policies
(b) Death of the borrower
(c) Delay in salary
PREVENTIVE MEASUREMENT FOR NPA
Early recognition of the problem
Invariably by the time banks start their efforts to get involved
in a revival process its too late to retrieve the situation ndash both in terms of rehabilitation of the
project and the recovery of banks dues Identification of the weakness regardless of the fact
that it may not have become NPA is imperative Assessment of the potential of revival may
be done on the basis of a techno-economic viability study Restructuring should be attempted
where after an objective assessment of the promoterrsquos intention banks are convinced of a
turn around with in a scheduled facilitate winding upselling of units earlier so as to recover
whatever is possible through means before the security position becomes worse
Identifying borrowers with genuine intent
Identifying borrower with genuine intent from those who
are non-serious with commitment or stake in revival is a challenge confronting bankers Here
the role of front line officials at branch level is paramount as they are the ones who have
intelligent inputs with regard to promoters lsquo sincerity and capability to achieve turnaround
Based on this objective assessment bank should decide as quickly as possible whether it
would be worthwhile to commit additional finance
In this regard banks may consider having
ldquospecial investigationrdquo of all financial transaction or business transaction books of account
order to ascertain real factor that contributed to sickness of borrower Bank may have panel
of technical experts with proven expertise and task record of preparing techno-economic
study of the project of the borrowers
Borrowers having genuine problems due to temporary mismatch in find flow or sudden
requirement of additional fund may entertained at branch level for this purpose a special
limit to such type of cases should be decided This will obviate the need to route the
additional funding through the controlling officers in deserving cases and avert many
accounts sleeping into NPA category
Timeliness and adequacy of response
Longer the delay in response greater the enjury to the
account and the asset Time is a crucial element in any restructuring or rehabilitation activity
The response decided on the basis of techno- economic study and promoterrsquos commitment
has to be adequate in terms of extend of additional funding and relaxations etc under the
restructuring exercise The package of assistance may be flexible and bank may look at the
exit option
Focus on cash flow
While financing at the time of restructuring the banks may not be guided
by the conventional fund flow analysis only which could yield a potentially misleading
picture Appraisal for fresh credit requirement may be done by analyzing fond flow in
conjunction with the cash flow rather than only on the basis of fund flow
Source wwwAskcom
Management effectiveness
The general perception among the borrower is lack of finance that
leads to sickness and NPAs but this may not be the case all the time Management effectiveness
advance business condition is a very important aspect that affects a borrowing units fortunes A bank
may commit a multiple finance to an align unit only after basic viability of the enterprise also in the
context of quality of management is examined and confirmed It will be useful to have consultant
appointed as early as possible to examine this aspect A proper techno-economic viability study thus
become the basis on which any future action can be considered
Multiple financing
A) During the exercise for assessment of viability and restructuring a pragmatic and unified
approach by all the leading banks as also sharing of all relevant information on the
borrower would go a long way toward overall success of rehabilitation exercise given the
probability of successfailure
B) In some default cases Where the unit is still working The bank should make sure that it
captures the cash flow and insure that such cash are used for working capital purpose
Toward this end there should be a continuous flow of information among consortium
member A bank which is not a part of consortium may not be allowed to offer credit
facility to such defaulting clients Current account facility may also be denied at non-
consortium banks to such clients and violation may attract penal action The credit
information bureau of india (CIBIL) may be very useful for meaningful information
exchange on defaulting borrowers once the setup become fully operational
C) In a forum of lenders the priority of each lender will be different While one set of lender
may be willing to wait for longer time to recover its dues another lender may have a much
shorter timeframe in mind So it is possible that the letter categories of lenders may be
willing to exit even at a cost by a discounted settlement of the exposure There for any plan
for restructuringrehabilitation may takes into account
D) Corporate debt restructuring it has been institutionalized in 2001 to provide a timely and
transparent system for restructuring the corporate debt of RS 20 crores and above with the
banks on a voluntary basis and outside a legal framework Under this system bank are
greatly benefit in terms of restructuring of large standard accounts (potential NPAs) and
viable sub-standard account with multiple banking arrangement
NPA MANAGEMENT- RESOLUTION
Compromise settlement schemes
Restructuringrescheduling
Lok adalat
Corporate debt restructuring cell
Debt recovery Tribunals (DRT)
Proceeding under the code of civil procedure
Board of industrial and financial reconstruction
National company law Tribunal (NCLT)
Sale of NPA to other bank
Sale of NPA to ARCSC under securitization and reconstruction of financial assets for
enforcement of security interest Act 2000 (SRFAESI)
Liquidation
Source wwwRBIorgin
NPA MANAGEMENT IN INDIA
Formation of the credit information bureau (India) limited (CIBIL)
Release of willful defaulterrsquos listRBI also releases a list of borrowers with aggregate
outstanding of RS 1 crore and above against whom bank have filed suit for recovery of their
fund
Reporting of frauds to RBI
Norms of lenders labiality- framing of fair practices code with regard to lenders lability to
be followed by banks
Risk assessment and Risk management
RBI has advised banks to all cases of willful defaulters in case of 1 crore and above and
files suits in such cases
Responding quick mortality cases
Special mention accounts for early identification for bad debt loans and advances over due
for less than one or two quarters would come under this category However these accounts do
not need provisioning
INTERNATIONAL PRACTICES ON NPA MANAGEMENT
Subsequent to the Asian currency crisis which severely crippled the financial system In
addition to the above some of the more recent and aggressive step to NPAs have been taken
by Taiwan Taiwanese financial institution have been encouraged to merge and form bank
based AMCs through the recent introduction of financial holding company act and financial
institution Asian countries the magnitude of NPAs in Asian financial institution was brought
to light Driven by the need to proactively tackle the soaring NPAs level the respective govt
embarked upon a program of substantial reform This involves setting up processes for early
identification and resolution of NPAs The table below provides a cross country comparison
of approaches used for NPA resolution Mergers Act A long side the ministry of finance has
followed a carrot and strict policy of specifying the required NPA ratio for banks while also
providing flexibility in modes of NPA assets resolution and a conduct
ive regulatory and tax environment Deferred loss write-off provisions have been instituted to
provide breathing space for lenders to absorb NPA write-off While it is too early to
comment on success of NPA resolution process in Taiwan the early sign are encouraging
Detailed below are some key NPA management approaches adopted by banks in South East
Asian countries
1 Credit risk mitigation
2 Early warning systems
3 Assets management companies
Increasing willingness to sell NPAs to AMCs
Effective resolution strategy
Appointment of special administrators
4 Out of court restructuring
Source wwwgooglecom
DIFFICULTIES WITH NON PERFORMING ASSETS
I Owners do not receive a market return on their capital In the worst case if the bank
fails owner lose their assets
II Depositors do not receive a market return on savings In the worst case if the bank
fails depositors lose their assets or uninsured balance Banks also redistribute losses
to other borrowers by charging higher rate of interest
III Non-performing loans epitomize bad investors They misallocate credit from good
projects which do not receive funding to failed project
IV 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
shortage the shortage can jam payments across the country
b Illiquidity constraints banks in paying depositors eg cashing their paychecks
c Undercapitalized banks exceed the bank capital base
Lending by bank has been politicized It is common knowledge
that loans are given to various industrial houses on common consideration and
viability of project but on political consideration In normal circumstances banks
before extending any loan would make a thorough study of the actual need of the
party considered the prospect of the business in which it is engaged Since it is
not looked into many of the loans becomes NPA
REASONS F0R AN ACCOUNT BECOMING NPA
Those attribute to borrower
Failure to bring in required capital
Lack of proper planning
Unwanted expenses
Lack of expertise
Poor credit collection
Miss management
Heavy borrowing
Lack of knowledge regarding NPA
Willful defaulters
Death of the borrower
Those attribute to banks
Wrong selection of borrower
Poor credit appraisal
Unhelpful in supervision
Too inflexible attitude
System overload
Lack of motivation
Delay in sanction
Lack of trained staff
Lack of commitment to recovery
Lack of personal visit to the borrower office
Lack of personal visit to the borrowerrsquos residence
Other
Fast changing technology
Unhelpful attitude of govt
Increase in material cost
Government policies
Taxation law
Political hostility
INDIAN ECONOMY AND NPA
Undoubtedly the world economy has slowed down recession is at its peak globally stock markets
have tumbled and business itself getting hard to do The Indian economy has been much affected due
to high fiscal deficit poor infrastructure facilities sticky legal system cutting of exposures to
emerging market by FIIs etc
Further international rating agencies like standard and poor
have lowered Indiarsquos credit rating to sub- investment grade Such negative aspects have often
outweighed positive such as increasing for reserve and a manageable inflation rate
Under such situation I go without saying that banks are no exception
and are bound to face the heat of global down turn One would be surprise to know that banks and
financial institution in India holds non-performing assets worth Rs 1 10000 crores Bankers have
realized that unless the level of NPA is reduced drastically they will find it difficult to survive
The actual level of NPA in India is around $ 40 billion much higher than govt estimation of $16
billion This difference is largely due to the discrepancy in accounting the NPAs followed by India
and rest of the world The accounting norms of India are less stringent than those of the developed
economies The Indian banks also have the tendency to extend the past due Considering the GDP
India nearly $ 470 billion the NPA are 8 of the total GDP which was better than many Asian
countries The NPA of china was 45 of the GDP While Japan had NPAs of 25 of the GDP
The aggregate level of NPAs in Asia has increased from $ 25 billion in 2007 to
$ 34 billion on 2009 looking to such overall pictures of the market we can say that India is doing
well and the steps taken are looking favorable
Source googlecoin
DATA ANALYZING THE QUETIONNAIRE
Two set of questionnaire were prepared to collect the feedback One set of questionnaire was meant for branches and other set of questionnaire was meant for borrowers
The set of questionnaire were given to the branches under hazaribag (RBO) and collected the feedback of the bankers of P segment and the branch manager
The questionnaire prepared for branch contained 15 questions and the questionnaire prepared for borrower contains 10 questions
The data was collected from 50 bankers and the data analysis of the branch questionnaire is as follows
Question number 1
Does not require any data analysis and information was sought to know the business level of the branches for the purpose of whether particular branch is actively engaged in xpress credit portfolio
Question number 2
Do you think that the borrowers are aware about NPA
Answer
32 of the respondent feel that the borrowers are not aware about NPA and 18 respondents feel that borrowers are aware about NPA
Chart no 11
yes
no
0
5
10
15
20
25
30
35
1832 Column1
Conclusion
Majority of the bank officials feels that the borrowers are not aware about NPA
Question number 3
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Answer
Out of 32 respondent 22 respondents is fully satisfied that lack of knowledge among the borrower regarding NPA is one of the reason for NPA 08 respondent were partially satisfied with it and 02 respondent were not satisfied with it
Chart no 12
fully satisfied(22)69
partially satisfied(8)25
not satisfied(2)6
Sales
Conclusion
Majority of the borrowers feels that lack of knowledge among the borrower regarding NPA is one of the reasons for NPA
Question number 4 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Answer
Out of 50 respondent 30 of the respondent strongly satisfied that these external factors contribute to NPA 10 respondent were partially satisfied with it 5 were not satisfied where as 5 were fully dissatisfied with it
Chart no 13
6020
10
10
fully satisfied(30) partially satisfied(10) not satisfiec(5) fully desatisfied(5)
Conclusion
Most of the respondent thinks that external factrs like willful defaulter change in govt policy contribute to NPA
Question number 5
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Answer
Chart no 14
feedback
fully satisfied(20)partially satisfied(12)not satisfied(12)fully dissatisfied(6)
Conclusion
As per the response of the officials most of the officials feel that internal factors are also responsible for NPA
Question number 6
Do you think that inflation is one of the reasons for NPA
Answer
Out f 50 responses 22 were strongly satisfied 18 were partially satisfied 8 were not satisfied and 2 were fully dissatisfied
Chart no 15
fully satisfied(20)44
partially satisfied(18)36
not satisfied(5)10
fullt dissatisfied(5)10
Conclusion
Growing inflation increasing goods rate is also one of the reason for NPA
Question number 7
Do you think that lack of PSS is also contributed to NPA
Answer
Out of 50 responses 30 were fully satisfied with it 12 were partially satisfied and 8 were fully dissatisfied
Chart no 16
6024
16
Open
fully satisfied(30)Partially satisfied(12)not satisfied(0)fully dissatisfied(8)
Conclusion
Majority of the officiais feels that lack of PSS is one of the reason for NPA This means that the PSS carried out by the bank is not sufficient or not carried out properly
Question number 8
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Answer
Most of the respondent feels that increase in unwanted expenses of the borrwer ls contribute to NPA
Chart no 17
56
12
28
4
FULLY SATISFIED(28)PARTIALLY SATISFIED(6)NOT SATISFIED(14)FULLY DISSATISFIED(2)
Conclusion
As per response of the officials increasing inflation have an adverse effect on the financial sector its working performance as well as on NPA
Question number 9
Do you think that high rate of interest under Xpress credit also contributes to NPA
Answer
Out of 50 respondent 25 respondent were not satisfied 10 were partially satisfied 10 were strongly dissatisfied where as only 5 out of 50 were fully satisfied with it
Chart no 18
strongly satisfied(5)partially satisfied(10)not satisfied(25)fully dissatisfied(10)
Conclusion
Most of the respondents are not satisfied with it They feel that the rate of interest charged by SBI under Xpress credit is not high and it will not contribute to NPS
Question number 10
Do you think that lack of proper planning of the borrower is one of the reason for NPA
Answer
Out of 70 respondent 35 were fully satisfied 5 were not satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 19
fully satisfied(35)70
partially satisfied(10)20
not satisfied(5)10
Conclusion
Most of the respondent feels that the borrowers borrow money from the bank without any proper planning which is one of the most important reason for NPA
Question number 11
Is heavy borrowing also contribute to NPA
Answer
Out of 50 respondent 25 respondent were fully satisfied 12 were partially satisfied 8 were not satisfied were as 5 were fully dissatisfied
Chart no 110
50
24
16
10
fully satisfied(25) partially satisfied(12) not satisfied(8) fully dissatisfied(5)
Question number 12
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Answer
As per the response of the officials 20 were fully satisfied 66were partially satisfied 4 were not satisfied with it were as 10 respondent were fully dissatisfied
Chart no 111
fully satisfied(10)20
partially satisfied(33)66
not satisfied(2)4
fullydissatisfied(5)10
Conclusion
As per the response given by the officials most of the officials were partially satisfied that wrong selection of borrower also contribute to NPA which means that selection process carried out by the bank is not appropriate or there is some difficulties in implementing them
Question number 13
Do you think that poor credit appraisal also contribute to NPA
Answer
Out of 50 respondent 5 were fully satisfied 10 were fully satisfied 30 were not satisfied were as only 5 were fully dissatisfied
Chart no 112
fully satisfied(5)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 14
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Answer
Out of 50 responses 3 were fully satisfied 15 were partially satisfied 25 were not satisfied where as 7 were full dissatisfied
Chart no 113
fully satisfied(3)partiallt satisfied(15)not satisfied(25)fully dissatisfied(7)
Conclusion
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not contribute to NPA This means that the attitude of bank toward the borrower is not inflexible
Question number 15
Do you think that system over load is also one of the causes of NPA
Answer
Out of 50 respondent 28 were fully satisfied 12 were partially satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 114
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
return cannot be verified by the Bank statement of account of the borrower may
be scrutinized to verified income flows
Where the verification is not outsourced the Branch staff
Must do the verification and the report should be added with the loan documents
Flow chart of loan procedure of retail loan
Chart no 01
Disagree
NON PEFORMING ASSETS (NPA) ndash CONCEPT
The three letters ldquoNPArdquostrike terror in banking sector and business circle todayNPA is the short
Form of ldquoNon performing Assetsrdquo
Enquiry about loan
Agreeprovided with check list and
application
submission of documents and application dully
filled up
Documents taken
verification of application and
documebtsCIBIL report
Processing of loan
Sangtion of loan
Document
Control Disbursal of loan
phasewise lumpsum
In banking NPA are loans given to doubtful customers who may or may not repay the
loan on time There are two types of assets viz performing and non performing Performing loans
are standard loans on which both the principle and interest are secured and their return is guaranteed
NPA means the debt which is given by the bank is unable to recover is called
nonperforming assets A NPA account in the books of accounts is an asset as it indicates the amount
received from the defaulters It means if any bank gives loan and is not paid by the customers till 90
days than that account is called as NPA account
DEFINITION
An asset including leased assets becomes nonperforming when it ceases to generate income
for the bank
A NPA was defined as a credit facility in respect of which the interest or installment
of principle as remained ldquopast duerdquo for specific period of time
Source googlecoin
The specific period was reduced in a phased manner as under
wef ndash 31031993 four quarters
wef ndash 31 031994 three quarters
wef - 31031995 two quarters
wef - 31032001 180 days
wef - 31032004 90 days from past due
90 days delinquency is not applicable to agriculture segment
With effect from march 31 2004 NPA shall be a loan or an advance where
1) Term loan interest installment of principle remain over due for 90 days
2) Cash creditover draft an account remain ldquoout of orderrdquo for a period of more than 90 days
3) Bills The bills remain over due for a period more than 90 days
4) Agriculture loan
a The loan has been granted for short duration crop installments of the principle
remain over due for two crop season beyond the due date
b If the loan has been granted for long duration crop installment of the principle
remain over due for one crop season beyond the due date
Source Rbiorgin
CLASSIFICATION OF LOANS
In India loans are classified on following basis
Performing assets
Loans where the interest and or principle not remain overdue for more then 90 days
Non-performing assets
Any loan repayment remains over due for more than 90 days is considered as NPA
According to the securitization and re construction of financial assets and enforcement of
security interest ordinance2002 ldquonon performing assetsrdquo(NPA) means an assets or ac of
borrower which has been classified by the bank as sub-standard doubtful or loss asset in
accordance with the guidelines relating to asset classification issued by RBI
Source googlecoin
ASSET - CLASSIFICATION
Assets can be categorized into four categories (a) standard (b) sub-standard
(c) doubtful (d) loss The last three categories are classified as npa based on the the period for
which the asset has remained non-performing and the realisability of the dues
Standard assets the loan ac which are regular and do not carry more than normal risk are
known as standard assets there could be ac which though have not become npa but are
irregular Such ac are called special mention ac
Sub- standard assets with effect from 3132005 a sub-standard assets is one which is
classified as NPA for a period not exceeding 12 months
Doubtful asset with effect from 3132005 an asset is to be classified as doubtful if it
remained npa or sub-standard for a period exceeding 12 months
Loss assets a loss asset is one where loss has been identified by the bank or internal and
external auditors or the RBI inspection but the amount as not been written off wholly In
other words such an asset is considered uncollectable and such little value that its
continuance as a bankable asset is not warranted although there may be some salvage or
recoverable value
NPA IDENTIFICATION NORMS
With effect from 31st march 2004 a loan or advance become npa when
a Interest or installment of the principle remains overdue for a period more then 90
days in respect of term loan
b The ac remain out of order for a period more 90days in respect of over draft cash
cash credit
c The bill remains overdue for a period more than 90 days in case of bills purchased
and discounted
d With effect from Sept 2004 loan granted for short duration crops will be treated as
NPA if the installment of principle or interest there on remains overdue for two crop
season and loan granted for long duration will be treated as NPA if the installment
remains overdue for one crop season
Out of order
An account will be treated as out as out of order if the outstanding balance remain
continuously in excess of the sanctioned limitdrawing power In cases where the
outstanding balance in the principle operating ac is less than the sanctioned limit but
there are no credit continuously for 90 days as on the date of balance sheet or the
credit are not enough to cover the interest debited during the same period
Overdue
An amount due to the bank under any credit facility is overdue it is not paid on the due
date fixed by the bank
The date of npa will be actual date on which sippage occurred as mentioned below
For term and demand loan ac
The date on which the installment of the principle have
remaine overdue for a period more then 90 days
For over draft and cash credit ac
The date on which the ac completed period of more than 90
days of being continuously out of order
Source wwwRBI Org in
PROVISING NORMS
There is time lag between an ac becoming doubtful for recovery the realization of security and
erosion over a loan period of time in its value So RBI directives now requiresthe banks to make
provisions in their balance sheet for all non- standard loan asset Provisioning is made on all types of
assets ie Standard sub-standard doubtful and loss assets
1 Standard assets RBI vides its circular dated 151108 revised the provisioning requirements
For all type of standard assets it has been reduced to a uniform level of 040of outstanding
at global basis except in the case of direct advance to agriculture and SME sector which
shall continue to attract a provisioning of 025 The provision toward standard assets need
not to be netted from gross advances but shown separately as ldquo contigent provisionsrdquo against
standard assets under other liquidities and provisions others in schedule 5 of the balance
sheet
2 Sub-standard assets- In respect of sub-standard assets the rate of provision is 10 of
outstanding balance without considering ECGC guarantee cover or securities available
However if the loan was unsecured from the begining there would be additional provision of
10 ie total provision would be 20 of the outstanding balance Unsecured exposure is
defined as an exposure where the realizable value of the security as assessed by the
bankreserve banks inspecting officers is not more than 10 ab-intio of the outstanding
exposure
3 Doubtful assets In case of doubtful assets while making provision realizable value of
security is to be considered 100 provision is made for unsecured portion In case of
secured portion the rate of provision depend on age of doubtful assets as under
Age of doubtful assets Provision as of secured portion
Doubtful up to 1 year D1 20 of RVS( realizable value of security)
Doubtful for more than 1 year D2 30 of RVS
Doubtful for more than 3 years D2 100 of RVS
Thus if an ac is doubtful for more than 3 years than 100 of the provision is to be made
both from secured and unsecured portion If an advance has been guaranteed by DICGC
CGFTECGC and is doubtful than provision on secured portion will be as in other cases but
provision on unsecured portion will be made after deducting the claim value
4 LOSS ASSET 100 of the outstanding amount while making provision on NPAs amount
lying in suspense ac and derecognized interest should be deducted from gross advance and
provision be made on balance amount
5 OVERALL PROVISION With a view to improving the improving the provisioning cover
and enhancing the soundness of the individual banks RBI has proposed in oct- 09 policy that
bank should augment their provisions and ensure that their total provisioning coverage ratio
including floating provisions is not less than 70
Source wwwRBIorgin
IMPACTEFFECT OF NPA UPON BANKS
A strong banking sector is important for flourishing economy The failure of banking sector
may have an adverse impact on other sector NPA are one of the major concerns of sector
banks is increasing result in nonperforming assets The NPA impact drastically to the
working of banks The efficiency of bank not always reflected by the size of its balance sheet
but by the level of return on its assetsNPA do not generate interest income for the banks but
the same time banks are required to make provisions for such NPAs from their current
profits
They erode current profits through provisioning requirement
They result in reduced interest income
They require higher provisioning requirements effecting profits and accretion to capital
Adverse impact on capital adequacy ratio
Roe and Roa goes down because NPA do not earn
Banks rating gets effect
Banks cost of raising funds goes up
Bad effect on goodwill
Bad effect on equity value
EARLY SYMPTOMS BY WHICH ONE CAN RECOGNIZE A PERFORMING
ASSETS TURNING TO A NON PERFORMING ASSET
Four categories of early symptoms
1) FINANCIAL
(a) Non- payment of very first installment
(b) Bouncing of cheque due to insufficient balance in the ac
(c) Irregularity in installment
(d) Irregularity of operations in ac
(e) Unpaid overdue bill
(f) Declining current ratio
2) OPERATIONAL AND PHYSICAL
(a) If information is received that the borrower has either initiated the process of winding up or not doing the business
(b) Over-due receivable
(c) Stock statement not submitted on time
(d) External non-controllable factor like natural calamities in the city where the borrower lives
(e) Non- payment of salary
(3) ATTITUDNAL CHANGE
(a) Use for personal comfort stocks and shares by borrowers
(b) Avoidance of contact with bank
(c) Problem between partners
(4) OTHER
(a) Change in govt policies
(b) Death of the borrower
(c) Delay in salary
PREVENTIVE MEASUREMENT FOR NPA
Early recognition of the problem
Invariably by the time banks start their efforts to get involved
in a revival process its too late to retrieve the situation ndash both in terms of rehabilitation of the
project and the recovery of banks dues Identification of the weakness regardless of the fact
that it may not have become NPA is imperative Assessment of the potential of revival may
be done on the basis of a techno-economic viability study Restructuring should be attempted
where after an objective assessment of the promoterrsquos intention banks are convinced of a
turn around with in a scheduled facilitate winding upselling of units earlier so as to recover
whatever is possible through means before the security position becomes worse
Identifying borrowers with genuine intent
Identifying borrower with genuine intent from those who
are non-serious with commitment or stake in revival is a challenge confronting bankers Here
the role of front line officials at branch level is paramount as they are the ones who have
intelligent inputs with regard to promoters lsquo sincerity and capability to achieve turnaround
Based on this objective assessment bank should decide as quickly as possible whether it
would be worthwhile to commit additional finance
In this regard banks may consider having
ldquospecial investigationrdquo of all financial transaction or business transaction books of account
order to ascertain real factor that contributed to sickness of borrower Bank may have panel
of technical experts with proven expertise and task record of preparing techno-economic
study of the project of the borrowers
Borrowers having genuine problems due to temporary mismatch in find flow or sudden
requirement of additional fund may entertained at branch level for this purpose a special
limit to such type of cases should be decided This will obviate the need to route the
additional funding through the controlling officers in deserving cases and avert many
accounts sleeping into NPA category
Timeliness and adequacy of response
Longer the delay in response greater the enjury to the
account and the asset Time is a crucial element in any restructuring or rehabilitation activity
The response decided on the basis of techno- economic study and promoterrsquos commitment
has to be adequate in terms of extend of additional funding and relaxations etc under the
restructuring exercise The package of assistance may be flexible and bank may look at the
exit option
Focus on cash flow
While financing at the time of restructuring the banks may not be guided
by the conventional fund flow analysis only which could yield a potentially misleading
picture Appraisal for fresh credit requirement may be done by analyzing fond flow in
conjunction with the cash flow rather than only on the basis of fund flow
Source wwwAskcom
Management effectiveness
The general perception among the borrower is lack of finance that
leads to sickness and NPAs but this may not be the case all the time Management effectiveness
advance business condition is a very important aspect that affects a borrowing units fortunes A bank
may commit a multiple finance to an align unit only after basic viability of the enterprise also in the
context of quality of management is examined and confirmed It will be useful to have consultant
appointed as early as possible to examine this aspect A proper techno-economic viability study thus
become the basis on which any future action can be considered
Multiple financing
A) During the exercise for assessment of viability and restructuring a pragmatic and unified
approach by all the leading banks as also sharing of all relevant information on the
borrower would go a long way toward overall success of rehabilitation exercise given the
probability of successfailure
B) In some default cases Where the unit is still working The bank should make sure that it
captures the cash flow and insure that such cash are used for working capital purpose
Toward this end there should be a continuous flow of information among consortium
member A bank which is not a part of consortium may not be allowed to offer credit
facility to such defaulting clients Current account facility may also be denied at non-
consortium banks to such clients and violation may attract penal action The credit
information bureau of india (CIBIL) may be very useful for meaningful information
exchange on defaulting borrowers once the setup become fully operational
C) In a forum of lenders the priority of each lender will be different While one set of lender
may be willing to wait for longer time to recover its dues another lender may have a much
shorter timeframe in mind So it is possible that the letter categories of lenders may be
willing to exit even at a cost by a discounted settlement of the exposure There for any plan
for restructuringrehabilitation may takes into account
D) Corporate debt restructuring it has been institutionalized in 2001 to provide a timely and
transparent system for restructuring the corporate debt of RS 20 crores and above with the
banks on a voluntary basis and outside a legal framework Under this system bank are
greatly benefit in terms of restructuring of large standard accounts (potential NPAs) and
viable sub-standard account with multiple banking arrangement
NPA MANAGEMENT- RESOLUTION
Compromise settlement schemes
Restructuringrescheduling
Lok adalat
Corporate debt restructuring cell
Debt recovery Tribunals (DRT)
Proceeding under the code of civil procedure
Board of industrial and financial reconstruction
National company law Tribunal (NCLT)
Sale of NPA to other bank
Sale of NPA to ARCSC under securitization and reconstruction of financial assets for
enforcement of security interest Act 2000 (SRFAESI)
Liquidation
Source wwwRBIorgin
NPA MANAGEMENT IN INDIA
Formation of the credit information bureau (India) limited (CIBIL)
Release of willful defaulterrsquos listRBI also releases a list of borrowers with aggregate
outstanding of RS 1 crore and above against whom bank have filed suit for recovery of their
fund
Reporting of frauds to RBI
Norms of lenders labiality- framing of fair practices code with regard to lenders lability to
be followed by banks
Risk assessment and Risk management
RBI has advised banks to all cases of willful defaulters in case of 1 crore and above and
files suits in such cases
Responding quick mortality cases
Special mention accounts for early identification for bad debt loans and advances over due
for less than one or two quarters would come under this category However these accounts do
not need provisioning
INTERNATIONAL PRACTICES ON NPA MANAGEMENT
Subsequent to the Asian currency crisis which severely crippled the financial system In
addition to the above some of the more recent and aggressive step to NPAs have been taken
by Taiwan Taiwanese financial institution have been encouraged to merge and form bank
based AMCs through the recent introduction of financial holding company act and financial
institution Asian countries the magnitude of NPAs in Asian financial institution was brought
to light Driven by the need to proactively tackle the soaring NPAs level the respective govt
embarked upon a program of substantial reform This involves setting up processes for early
identification and resolution of NPAs The table below provides a cross country comparison
of approaches used for NPA resolution Mergers Act A long side the ministry of finance has
followed a carrot and strict policy of specifying the required NPA ratio for banks while also
providing flexibility in modes of NPA assets resolution and a conduct
ive regulatory and tax environment Deferred loss write-off provisions have been instituted to
provide breathing space for lenders to absorb NPA write-off While it is too early to
comment on success of NPA resolution process in Taiwan the early sign are encouraging
Detailed below are some key NPA management approaches adopted by banks in South East
Asian countries
1 Credit risk mitigation
2 Early warning systems
3 Assets management companies
Increasing willingness to sell NPAs to AMCs
Effective resolution strategy
Appointment of special administrators
4 Out of court restructuring
Source wwwgooglecom
DIFFICULTIES WITH NON PERFORMING ASSETS
I Owners do not receive a market return on their capital In the worst case if the bank
fails owner lose their assets
II Depositors do not receive a market return on savings In the worst case if the bank
fails depositors lose their assets or uninsured balance Banks also redistribute losses
to other borrowers by charging higher rate of interest
III Non-performing loans epitomize bad investors They misallocate credit from good
projects which do not receive funding to failed project
IV 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
shortage the shortage can jam payments across the country
b Illiquidity constraints banks in paying depositors eg cashing their paychecks
c Undercapitalized banks exceed the bank capital base
Lending by bank has been politicized It is common knowledge
that loans are given to various industrial houses on common consideration and
viability of project but on political consideration In normal circumstances banks
before extending any loan would make a thorough study of the actual need of the
party considered the prospect of the business in which it is engaged Since it is
not looked into many of the loans becomes NPA
REASONS F0R AN ACCOUNT BECOMING NPA
Those attribute to borrower
Failure to bring in required capital
Lack of proper planning
Unwanted expenses
Lack of expertise
Poor credit collection
Miss management
Heavy borrowing
Lack of knowledge regarding NPA
Willful defaulters
Death of the borrower
Those attribute to banks
Wrong selection of borrower
Poor credit appraisal
Unhelpful in supervision
Too inflexible attitude
System overload
Lack of motivation
Delay in sanction
Lack of trained staff
Lack of commitment to recovery
Lack of personal visit to the borrower office
Lack of personal visit to the borrowerrsquos residence
Other
Fast changing technology
Unhelpful attitude of govt
Increase in material cost
Government policies
Taxation law
Political hostility
INDIAN ECONOMY AND NPA
Undoubtedly the world economy has slowed down recession is at its peak globally stock markets
have tumbled and business itself getting hard to do The Indian economy has been much affected due
to high fiscal deficit poor infrastructure facilities sticky legal system cutting of exposures to
emerging market by FIIs etc
Further international rating agencies like standard and poor
have lowered Indiarsquos credit rating to sub- investment grade Such negative aspects have often
outweighed positive such as increasing for reserve and a manageable inflation rate
Under such situation I go without saying that banks are no exception
and are bound to face the heat of global down turn One would be surprise to know that banks and
financial institution in India holds non-performing assets worth Rs 1 10000 crores Bankers have
realized that unless the level of NPA is reduced drastically they will find it difficult to survive
The actual level of NPA in India is around $ 40 billion much higher than govt estimation of $16
billion This difference is largely due to the discrepancy in accounting the NPAs followed by India
and rest of the world The accounting norms of India are less stringent than those of the developed
economies The Indian banks also have the tendency to extend the past due Considering the GDP
India nearly $ 470 billion the NPA are 8 of the total GDP which was better than many Asian
countries The NPA of china was 45 of the GDP While Japan had NPAs of 25 of the GDP
The aggregate level of NPAs in Asia has increased from $ 25 billion in 2007 to
$ 34 billion on 2009 looking to such overall pictures of the market we can say that India is doing
well and the steps taken are looking favorable
Source googlecoin
DATA ANALYZING THE QUETIONNAIRE
Two set of questionnaire were prepared to collect the feedback One set of questionnaire was meant for branches and other set of questionnaire was meant for borrowers
The set of questionnaire were given to the branches under hazaribag (RBO) and collected the feedback of the bankers of P segment and the branch manager
The questionnaire prepared for branch contained 15 questions and the questionnaire prepared for borrower contains 10 questions
The data was collected from 50 bankers and the data analysis of the branch questionnaire is as follows
Question number 1
Does not require any data analysis and information was sought to know the business level of the branches for the purpose of whether particular branch is actively engaged in xpress credit portfolio
Question number 2
Do you think that the borrowers are aware about NPA
Answer
32 of the respondent feel that the borrowers are not aware about NPA and 18 respondents feel that borrowers are aware about NPA
Chart no 11
yes
no
0
5
10
15
20
25
30
35
1832 Column1
Conclusion
Majority of the bank officials feels that the borrowers are not aware about NPA
Question number 3
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Answer
Out of 32 respondent 22 respondents is fully satisfied that lack of knowledge among the borrower regarding NPA is one of the reason for NPA 08 respondent were partially satisfied with it and 02 respondent were not satisfied with it
Chart no 12
fully satisfied(22)69
partially satisfied(8)25
not satisfied(2)6
Sales
Conclusion
Majority of the borrowers feels that lack of knowledge among the borrower regarding NPA is one of the reasons for NPA
Question number 4 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Answer
Out of 50 respondent 30 of the respondent strongly satisfied that these external factors contribute to NPA 10 respondent were partially satisfied with it 5 were not satisfied where as 5 were fully dissatisfied with it
Chart no 13
6020
10
10
fully satisfied(30) partially satisfied(10) not satisfiec(5) fully desatisfied(5)
Conclusion
Most of the respondent thinks that external factrs like willful defaulter change in govt policy contribute to NPA
Question number 5
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Answer
Chart no 14
feedback
fully satisfied(20)partially satisfied(12)not satisfied(12)fully dissatisfied(6)
Conclusion
As per the response of the officials most of the officials feel that internal factors are also responsible for NPA
Question number 6
Do you think that inflation is one of the reasons for NPA
Answer
Out f 50 responses 22 were strongly satisfied 18 were partially satisfied 8 were not satisfied and 2 were fully dissatisfied
Chart no 15
fully satisfied(20)44
partially satisfied(18)36
not satisfied(5)10
fullt dissatisfied(5)10
Conclusion
Growing inflation increasing goods rate is also one of the reason for NPA
Question number 7
Do you think that lack of PSS is also contributed to NPA
Answer
Out of 50 responses 30 were fully satisfied with it 12 were partially satisfied and 8 were fully dissatisfied
Chart no 16
6024
16
Open
fully satisfied(30)Partially satisfied(12)not satisfied(0)fully dissatisfied(8)
Conclusion
Majority of the officiais feels that lack of PSS is one of the reason for NPA This means that the PSS carried out by the bank is not sufficient or not carried out properly
Question number 8
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Answer
Most of the respondent feels that increase in unwanted expenses of the borrwer ls contribute to NPA
Chart no 17
56
12
28
4
FULLY SATISFIED(28)PARTIALLY SATISFIED(6)NOT SATISFIED(14)FULLY DISSATISFIED(2)
Conclusion
As per response of the officials increasing inflation have an adverse effect on the financial sector its working performance as well as on NPA
Question number 9
Do you think that high rate of interest under Xpress credit also contributes to NPA
Answer
Out of 50 respondent 25 respondent were not satisfied 10 were partially satisfied 10 were strongly dissatisfied where as only 5 out of 50 were fully satisfied with it
Chart no 18
strongly satisfied(5)partially satisfied(10)not satisfied(25)fully dissatisfied(10)
Conclusion
Most of the respondents are not satisfied with it They feel that the rate of interest charged by SBI under Xpress credit is not high and it will not contribute to NPS
Question number 10
Do you think that lack of proper planning of the borrower is one of the reason for NPA
Answer
Out of 70 respondent 35 were fully satisfied 5 were not satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 19
fully satisfied(35)70
partially satisfied(10)20
not satisfied(5)10
Conclusion
Most of the respondent feels that the borrowers borrow money from the bank without any proper planning which is one of the most important reason for NPA
Question number 11
Is heavy borrowing also contribute to NPA
Answer
Out of 50 respondent 25 respondent were fully satisfied 12 were partially satisfied 8 were not satisfied were as 5 were fully dissatisfied
Chart no 110
50
24
16
10
fully satisfied(25) partially satisfied(12) not satisfied(8) fully dissatisfied(5)
Question number 12
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Answer
As per the response of the officials 20 were fully satisfied 66were partially satisfied 4 were not satisfied with it were as 10 respondent were fully dissatisfied
Chart no 111
fully satisfied(10)20
partially satisfied(33)66
not satisfied(2)4
fullydissatisfied(5)10
Conclusion
As per the response given by the officials most of the officials were partially satisfied that wrong selection of borrower also contribute to NPA which means that selection process carried out by the bank is not appropriate or there is some difficulties in implementing them
Question number 13
Do you think that poor credit appraisal also contribute to NPA
Answer
Out of 50 respondent 5 were fully satisfied 10 were fully satisfied 30 were not satisfied were as only 5 were fully dissatisfied
Chart no 112
fully satisfied(5)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 14
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Answer
Out of 50 responses 3 were fully satisfied 15 were partially satisfied 25 were not satisfied where as 7 were full dissatisfied
Chart no 113
fully satisfied(3)partiallt satisfied(15)not satisfied(25)fully dissatisfied(7)
Conclusion
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not contribute to NPA This means that the attitude of bank toward the borrower is not inflexible
Question number 15
Do you think that system over load is also one of the causes of NPA
Answer
Out of 50 respondent 28 were fully satisfied 12 were partially satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 114
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
NON PEFORMING ASSETS (NPA) ndash CONCEPT
The three letters ldquoNPArdquostrike terror in banking sector and business circle todayNPA is the short
Form of ldquoNon performing Assetsrdquo
Enquiry about loan
Agreeprovided with check list and
application
submission of documents and application dully
filled up
Documents taken
verification of application and
documebtsCIBIL report
Processing of loan
Sangtion of loan
Document
Control Disbursal of loan
phasewise lumpsum
In banking NPA are loans given to doubtful customers who may or may not repay the
loan on time There are two types of assets viz performing and non performing Performing loans
are standard loans on which both the principle and interest are secured and their return is guaranteed
NPA means the debt which is given by the bank is unable to recover is called
nonperforming assets A NPA account in the books of accounts is an asset as it indicates the amount
received from the defaulters It means if any bank gives loan and is not paid by the customers till 90
days than that account is called as NPA account
DEFINITION
An asset including leased assets becomes nonperforming when it ceases to generate income
for the bank
A NPA was defined as a credit facility in respect of which the interest or installment
of principle as remained ldquopast duerdquo for specific period of time
Source googlecoin
The specific period was reduced in a phased manner as under
wef ndash 31031993 four quarters
wef ndash 31 031994 three quarters
wef - 31031995 two quarters
wef - 31032001 180 days
wef - 31032004 90 days from past due
90 days delinquency is not applicable to agriculture segment
With effect from march 31 2004 NPA shall be a loan or an advance where
1) Term loan interest installment of principle remain over due for 90 days
2) Cash creditover draft an account remain ldquoout of orderrdquo for a period of more than 90 days
3) Bills The bills remain over due for a period more than 90 days
4) Agriculture loan
a The loan has been granted for short duration crop installments of the principle
remain over due for two crop season beyond the due date
b If the loan has been granted for long duration crop installment of the principle
remain over due for one crop season beyond the due date
Source Rbiorgin
CLASSIFICATION OF LOANS
In India loans are classified on following basis
Performing assets
Loans where the interest and or principle not remain overdue for more then 90 days
Non-performing assets
Any loan repayment remains over due for more than 90 days is considered as NPA
According to the securitization and re construction of financial assets and enforcement of
security interest ordinance2002 ldquonon performing assetsrdquo(NPA) means an assets or ac of
borrower which has been classified by the bank as sub-standard doubtful or loss asset in
accordance with the guidelines relating to asset classification issued by RBI
Source googlecoin
ASSET - CLASSIFICATION
Assets can be categorized into four categories (a) standard (b) sub-standard
(c) doubtful (d) loss The last three categories are classified as npa based on the the period for
which the asset has remained non-performing and the realisability of the dues
Standard assets the loan ac which are regular and do not carry more than normal risk are
known as standard assets there could be ac which though have not become npa but are
irregular Such ac are called special mention ac
Sub- standard assets with effect from 3132005 a sub-standard assets is one which is
classified as NPA for a period not exceeding 12 months
Doubtful asset with effect from 3132005 an asset is to be classified as doubtful if it
remained npa or sub-standard for a period exceeding 12 months
Loss assets a loss asset is one where loss has been identified by the bank or internal and
external auditors or the RBI inspection but the amount as not been written off wholly In
other words such an asset is considered uncollectable and such little value that its
continuance as a bankable asset is not warranted although there may be some salvage or
recoverable value
NPA IDENTIFICATION NORMS
With effect from 31st march 2004 a loan or advance become npa when
a Interest or installment of the principle remains overdue for a period more then 90
days in respect of term loan
b The ac remain out of order for a period more 90days in respect of over draft cash
cash credit
c The bill remains overdue for a period more than 90 days in case of bills purchased
and discounted
d With effect from Sept 2004 loan granted for short duration crops will be treated as
NPA if the installment of principle or interest there on remains overdue for two crop
season and loan granted for long duration will be treated as NPA if the installment
remains overdue for one crop season
Out of order
An account will be treated as out as out of order if the outstanding balance remain
continuously in excess of the sanctioned limitdrawing power In cases where the
outstanding balance in the principle operating ac is less than the sanctioned limit but
there are no credit continuously for 90 days as on the date of balance sheet or the
credit are not enough to cover the interest debited during the same period
Overdue
An amount due to the bank under any credit facility is overdue it is not paid on the due
date fixed by the bank
The date of npa will be actual date on which sippage occurred as mentioned below
For term and demand loan ac
The date on which the installment of the principle have
remaine overdue for a period more then 90 days
For over draft and cash credit ac
The date on which the ac completed period of more than 90
days of being continuously out of order
Source wwwRBI Org in
PROVISING NORMS
There is time lag between an ac becoming doubtful for recovery the realization of security and
erosion over a loan period of time in its value So RBI directives now requiresthe banks to make
provisions in their balance sheet for all non- standard loan asset Provisioning is made on all types of
assets ie Standard sub-standard doubtful and loss assets
1 Standard assets RBI vides its circular dated 151108 revised the provisioning requirements
For all type of standard assets it has been reduced to a uniform level of 040of outstanding
at global basis except in the case of direct advance to agriculture and SME sector which
shall continue to attract a provisioning of 025 The provision toward standard assets need
not to be netted from gross advances but shown separately as ldquo contigent provisionsrdquo against
standard assets under other liquidities and provisions others in schedule 5 of the balance
sheet
2 Sub-standard assets- In respect of sub-standard assets the rate of provision is 10 of
outstanding balance without considering ECGC guarantee cover or securities available
However if the loan was unsecured from the begining there would be additional provision of
10 ie total provision would be 20 of the outstanding balance Unsecured exposure is
defined as an exposure where the realizable value of the security as assessed by the
bankreserve banks inspecting officers is not more than 10 ab-intio of the outstanding
exposure
3 Doubtful assets In case of doubtful assets while making provision realizable value of
security is to be considered 100 provision is made for unsecured portion In case of
secured portion the rate of provision depend on age of doubtful assets as under
Age of doubtful assets Provision as of secured portion
Doubtful up to 1 year D1 20 of RVS( realizable value of security)
Doubtful for more than 1 year D2 30 of RVS
Doubtful for more than 3 years D2 100 of RVS
Thus if an ac is doubtful for more than 3 years than 100 of the provision is to be made
both from secured and unsecured portion If an advance has been guaranteed by DICGC
CGFTECGC and is doubtful than provision on secured portion will be as in other cases but
provision on unsecured portion will be made after deducting the claim value
4 LOSS ASSET 100 of the outstanding amount while making provision on NPAs amount
lying in suspense ac and derecognized interest should be deducted from gross advance and
provision be made on balance amount
5 OVERALL PROVISION With a view to improving the improving the provisioning cover
and enhancing the soundness of the individual banks RBI has proposed in oct- 09 policy that
bank should augment their provisions and ensure that their total provisioning coverage ratio
including floating provisions is not less than 70
Source wwwRBIorgin
IMPACTEFFECT OF NPA UPON BANKS
A strong banking sector is important for flourishing economy The failure of banking sector
may have an adverse impact on other sector NPA are one of the major concerns of sector
banks is increasing result in nonperforming assets The NPA impact drastically to the
working of banks The efficiency of bank not always reflected by the size of its balance sheet
but by the level of return on its assetsNPA do not generate interest income for the banks but
the same time banks are required to make provisions for such NPAs from their current
profits
They erode current profits through provisioning requirement
They result in reduced interest income
They require higher provisioning requirements effecting profits and accretion to capital
Adverse impact on capital adequacy ratio
Roe and Roa goes down because NPA do not earn
Banks rating gets effect
Banks cost of raising funds goes up
Bad effect on goodwill
Bad effect on equity value
EARLY SYMPTOMS BY WHICH ONE CAN RECOGNIZE A PERFORMING
ASSETS TURNING TO A NON PERFORMING ASSET
Four categories of early symptoms
1) FINANCIAL
(a) Non- payment of very first installment
(b) Bouncing of cheque due to insufficient balance in the ac
(c) Irregularity in installment
(d) Irregularity of operations in ac
(e) Unpaid overdue bill
(f) Declining current ratio
2) OPERATIONAL AND PHYSICAL
(a) If information is received that the borrower has either initiated the process of winding up or not doing the business
(b) Over-due receivable
(c) Stock statement not submitted on time
(d) External non-controllable factor like natural calamities in the city where the borrower lives
(e) Non- payment of salary
(3) ATTITUDNAL CHANGE
(a) Use for personal comfort stocks and shares by borrowers
(b) Avoidance of contact with bank
(c) Problem between partners
(4) OTHER
(a) Change in govt policies
(b) Death of the borrower
(c) Delay in salary
PREVENTIVE MEASUREMENT FOR NPA
Early recognition of the problem
Invariably by the time banks start their efforts to get involved
in a revival process its too late to retrieve the situation ndash both in terms of rehabilitation of the
project and the recovery of banks dues Identification of the weakness regardless of the fact
that it may not have become NPA is imperative Assessment of the potential of revival may
be done on the basis of a techno-economic viability study Restructuring should be attempted
where after an objective assessment of the promoterrsquos intention banks are convinced of a
turn around with in a scheduled facilitate winding upselling of units earlier so as to recover
whatever is possible through means before the security position becomes worse
Identifying borrowers with genuine intent
Identifying borrower with genuine intent from those who
are non-serious with commitment or stake in revival is a challenge confronting bankers Here
the role of front line officials at branch level is paramount as they are the ones who have
intelligent inputs with regard to promoters lsquo sincerity and capability to achieve turnaround
Based on this objective assessment bank should decide as quickly as possible whether it
would be worthwhile to commit additional finance
In this regard banks may consider having
ldquospecial investigationrdquo of all financial transaction or business transaction books of account
order to ascertain real factor that contributed to sickness of borrower Bank may have panel
of technical experts with proven expertise and task record of preparing techno-economic
study of the project of the borrowers
Borrowers having genuine problems due to temporary mismatch in find flow or sudden
requirement of additional fund may entertained at branch level for this purpose a special
limit to such type of cases should be decided This will obviate the need to route the
additional funding through the controlling officers in deserving cases and avert many
accounts sleeping into NPA category
Timeliness and adequacy of response
Longer the delay in response greater the enjury to the
account and the asset Time is a crucial element in any restructuring or rehabilitation activity
The response decided on the basis of techno- economic study and promoterrsquos commitment
has to be adequate in terms of extend of additional funding and relaxations etc under the
restructuring exercise The package of assistance may be flexible and bank may look at the
exit option
Focus on cash flow
While financing at the time of restructuring the banks may not be guided
by the conventional fund flow analysis only which could yield a potentially misleading
picture Appraisal for fresh credit requirement may be done by analyzing fond flow in
conjunction with the cash flow rather than only on the basis of fund flow
Source wwwAskcom
Management effectiveness
The general perception among the borrower is lack of finance that
leads to sickness and NPAs but this may not be the case all the time Management effectiveness
advance business condition is a very important aspect that affects a borrowing units fortunes A bank
may commit a multiple finance to an align unit only after basic viability of the enterprise also in the
context of quality of management is examined and confirmed It will be useful to have consultant
appointed as early as possible to examine this aspect A proper techno-economic viability study thus
become the basis on which any future action can be considered
Multiple financing
A) During the exercise for assessment of viability and restructuring a pragmatic and unified
approach by all the leading banks as also sharing of all relevant information on the
borrower would go a long way toward overall success of rehabilitation exercise given the
probability of successfailure
B) In some default cases Where the unit is still working The bank should make sure that it
captures the cash flow and insure that such cash are used for working capital purpose
Toward this end there should be a continuous flow of information among consortium
member A bank which is not a part of consortium may not be allowed to offer credit
facility to such defaulting clients Current account facility may also be denied at non-
consortium banks to such clients and violation may attract penal action The credit
information bureau of india (CIBIL) may be very useful for meaningful information
exchange on defaulting borrowers once the setup become fully operational
C) In a forum of lenders the priority of each lender will be different While one set of lender
may be willing to wait for longer time to recover its dues another lender may have a much
shorter timeframe in mind So it is possible that the letter categories of lenders may be
willing to exit even at a cost by a discounted settlement of the exposure There for any plan
for restructuringrehabilitation may takes into account
D) Corporate debt restructuring it has been institutionalized in 2001 to provide a timely and
transparent system for restructuring the corporate debt of RS 20 crores and above with the
banks on a voluntary basis and outside a legal framework Under this system bank are
greatly benefit in terms of restructuring of large standard accounts (potential NPAs) and
viable sub-standard account with multiple banking arrangement
NPA MANAGEMENT- RESOLUTION
Compromise settlement schemes
Restructuringrescheduling
Lok adalat
Corporate debt restructuring cell
Debt recovery Tribunals (DRT)
Proceeding under the code of civil procedure
Board of industrial and financial reconstruction
National company law Tribunal (NCLT)
Sale of NPA to other bank
Sale of NPA to ARCSC under securitization and reconstruction of financial assets for
enforcement of security interest Act 2000 (SRFAESI)
Liquidation
Source wwwRBIorgin
NPA MANAGEMENT IN INDIA
Formation of the credit information bureau (India) limited (CIBIL)
Release of willful defaulterrsquos listRBI also releases a list of borrowers with aggregate
outstanding of RS 1 crore and above against whom bank have filed suit for recovery of their
fund
Reporting of frauds to RBI
Norms of lenders labiality- framing of fair practices code with regard to lenders lability to
be followed by banks
Risk assessment and Risk management
RBI has advised banks to all cases of willful defaulters in case of 1 crore and above and
files suits in such cases
Responding quick mortality cases
Special mention accounts for early identification for bad debt loans and advances over due
for less than one or two quarters would come under this category However these accounts do
not need provisioning
INTERNATIONAL PRACTICES ON NPA MANAGEMENT
Subsequent to the Asian currency crisis which severely crippled the financial system In
addition to the above some of the more recent and aggressive step to NPAs have been taken
by Taiwan Taiwanese financial institution have been encouraged to merge and form bank
based AMCs through the recent introduction of financial holding company act and financial
institution Asian countries the magnitude of NPAs in Asian financial institution was brought
to light Driven by the need to proactively tackle the soaring NPAs level the respective govt
embarked upon a program of substantial reform This involves setting up processes for early
identification and resolution of NPAs The table below provides a cross country comparison
of approaches used for NPA resolution Mergers Act A long side the ministry of finance has
followed a carrot and strict policy of specifying the required NPA ratio for banks while also
providing flexibility in modes of NPA assets resolution and a conduct
ive regulatory and tax environment Deferred loss write-off provisions have been instituted to
provide breathing space for lenders to absorb NPA write-off While it is too early to
comment on success of NPA resolution process in Taiwan the early sign are encouraging
Detailed below are some key NPA management approaches adopted by banks in South East
Asian countries
1 Credit risk mitigation
2 Early warning systems
3 Assets management companies
Increasing willingness to sell NPAs to AMCs
Effective resolution strategy
Appointment of special administrators
4 Out of court restructuring
Source wwwgooglecom
DIFFICULTIES WITH NON PERFORMING ASSETS
I Owners do not receive a market return on their capital In the worst case if the bank
fails owner lose their assets
II Depositors do not receive a market return on savings In the worst case if the bank
fails depositors lose their assets or uninsured balance Banks also redistribute losses
to other borrowers by charging higher rate of interest
III Non-performing loans epitomize bad investors They misallocate credit from good
projects which do not receive funding to failed project
IV 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
shortage the shortage can jam payments across the country
b Illiquidity constraints banks in paying depositors eg cashing their paychecks
c Undercapitalized banks exceed the bank capital base
Lending by bank has been politicized It is common knowledge
that loans are given to various industrial houses on common consideration and
viability of project but on political consideration In normal circumstances banks
before extending any loan would make a thorough study of the actual need of the
party considered the prospect of the business in which it is engaged Since it is
not looked into many of the loans becomes NPA
REASONS F0R AN ACCOUNT BECOMING NPA
Those attribute to borrower
Failure to bring in required capital
Lack of proper planning
Unwanted expenses
Lack of expertise
Poor credit collection
Miss management
Heavy borrowing
Lack of knowledge regarding NPA
Willful defaulters
Death of the borrower
Those attribute to banks
Wrong selection of borrower
Poor credit appraisal
Unhelpful in supervision
Too inflexible attitude
System overload
Lack of motivation
Delay in sanction
Lack of trained staff
Lack of commitment to recovery
Lack of personal visit to the borrower office
Lack of personal visit to the borrowerrsquos residence
Other
Fast changing technology
Unhelpful attitude of govt
Increase in material cost
Government policies
Taxation law
Political hostility
INDIAN ECONOMY AND NPA
Undoubtedly the world economy has slowed down recession is at its peak globally stock markets
have tumbled and business itself getting hard to do The Indian economy has been much affected due
to high fiscal deficit poor infrastructure facilities sticky legal system cutting of exposures to
emerging market by FIIs etc
Further international rating agencies like standard and poor
have lowered Indiarsquos credit rating to sub- investment grade Such negative aspects have often
outweighed positive such as increasing for reserve and a manageable inflation rate
Under such situation I go without saying that banks are no exception
and are bound to face the heat of global down turn One would be surprise to know that banks and
financial institution in India holds non-performing assets worth Rs 1 10000 crores Bankers have
realized that unless the level of NPA is reduced drastically they will find it difficult to survive
The actual level of NPA in India is around $ 40 billion much higher than govt estimation of $16
billion This difference is largely due to the discrepancy in accounting the NPAs followed by India
and rest of the world The accounting norms of India are less stringent than those of the developed
economies The Indian banks also have the tendency to extend the past due Considering the GDP
India nearly $ 470 billion the NPA are 8 of the total GDP which was better than many Asian
countries The NPA of china was 45 of the GDP While Japan had NPAs of 25 of the GDP
The aggregate level of NPAs in Asia has increased from $ 25 billion in 2007 to
$ 34 billion on 2009 looking to such overall pictures of the market we can say that India is doing
well and the steps taken are looking favorable
Source googlecoin
DATA ANALYZING THE QUETIONNAIRE
Two set of questionnaire were prepared to collect the feedback One set of questionnaire was meant for branches and other set of questionnaire was meant for borrowers
The set of questionnaire were given to the branches under hazaribag (RBO) and collected the feedback of the bankers of P segment and the branch manager
The questionnaire prepared for branch contained 15 questions and the questionnaire prepared for borrower contains 10 questions
The data was collected from 50 bankers and the data analysis of the branch questionnaire is as follows
Question number 1
Does not require any data analysis and information was sought to know the business level of the branches for the purpose of whether particular branch is actively engaged in xpress credit portfolio
Question number 2
Do you think that the borrowers are aware about NPA
Answer
32 of the respondent feel that the borrowers are not aware about NPA and 18 respondents feel that borrowers are aware about NPA
Chart no 11
yes
no
0
5
10
15
20
25
30
35
1832 Column1
Conclusion
Majority of the bank officials feels that the borrowers are not aware about NPA
Question number 3
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Answer
Out of 32 respondent 22 respondents is fully satisfied that lack of knowledge among the borrower regarding NPA is one of the reason for NPA 08 respondent were partially satisfied with it and 02 respondent were not satisfied with it
Chart no 12
fully satisfied(22)69
partially satisfied(8)25
not satisfied(2)6
Sales
Conclusion
Majority of the borrowers feels that lack of knowledge among the borrower regarding NPA is one of the reasons for NPA
Question number 4 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Answer
Out of 50 respondent 30 of the respondent strongly satisfied that these external factors contribute to NPA 10 respondent were partially satisfied with it 5 were not satisfied where as 5 were fully dissatisfied with it
Chart no 13
6020
10
10
fully satisfied(30) partially satisfied(10) not satisfiec(5) fully desatisfied(5)
Conclusion
Most of the respondent thinks that external factrs like willful defaulter change in govt policy contribute to NPA
Question number 5
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Answer
Chart no 14
feedback
fully satisfied(20)partially satisfied(12)not satisfied(12)fully dissatisfied(6)
Conclusion
As per the response of the officials most of the officials feel that internal factors are also responsible for NPA
Question number 6
Do you think that inflation is one of the reasons for NPA
Answer
Out f 50 responses 22 were strongly satisfied 18 were partially satisfied 8 were not satisfied and 2 were fully dissatisfied
Chart no 15
fully satisfied(20)44
partially satisfied(18)36
not satisfied(5)10
fullt dissatisfied(5)10
Conclusion
Growing inflation increasing goods rate is also one of the reason for NPA
Question number 7
Do you think that lack of PSS is also contributed to NPA
Answer
Out of 50 responses 30 were fully satisfied with it 12 were partially satisfied and 8 were fully dissatisfied
Chart no 16
6024
16
Open
fully satisfied(30)Partially satisfied(12)not satisfied(0)fully dissatisfied(8)
Conclusion
Majority of the officiais feels that lack of PSS is one of the reason for NPA This means that the PSS carried out by the bank is not sufficient or not carried out properly
Question number 8
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Answer
Most of the respondent feels that increase in unwanted expenses of the borrwer ls contribute to NPA
Chart no 17
56
12
28
4
FULLY SATISFIED(28)PARTIALLY SATISFIED(6)NOT SATISFIED(14)FULLY DISSATISFIED(2)
Conclusion
As per response of the officials increasing inflation have an adverse effect on the financial sector its working performance as well as on NPA
Question number 9
Do you think that high rate of interest under Xpress credit also contributes to NPA
Answer
Out of 50 respondent 25 respondent were not satisfied 10 were partially satisfied 10 were strongly dissatisfied where as only 5 out of 50 were fully satisfied with it
Chart no 18
strongly satisfied(5)partially satisfied(10)not satisfied(25)fully dissatisfied(10)
Conclusion
Most of the respondents are not satisfied with it They feel that the rate of interest charged by SBI under Xpress credit is not high and it will not contribute to NPS
Question number 10
Do you think that lack of proper planning of the borrower is one of the reason for NPA
Answer
Out of 70 respondent 35 were fully satisfied 5 were not satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 19
fully satisfied(35)70
partially satisfied(10)20
not satisfied(5)10
Conclusion
Most of the respondent feels that the borrowers borrow money from the bank without any proper planning which is one of the most important reason for NPA
Question number 11
Is heavy borrowing also contribute to NPA
Answer
Out of 50 respondent 25 respondent were fully satisfied 12 were partially satisfied 8 were not satisfied were as 5 were fully dissatisfied
Chart no 110
50
24
16
10
fully satisfied(25) partially satisfied(12) not satisfied(8) fully dissatisfied(5)
Question number 12
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Answer
As per the response of the officials 20 were fully satisfied 66were partially satisfied 4 were not satisfied with it were as 10 respondent were fully dissatisfied
Chart no 111
fully satisfied(10)20
partially satisfied(33)66
not satisfied(2)4
fullydissatisfied(5)10
Conclusion
As per the response given by the officials most of the officials were partially satisfied that wrong selection of borrower also contribute to NPA which means that selection process carried out by the bank is not appropriate or there is some difficulties in implementing them
Question number 13
Do you think that poor credit appraisal also contribute to NPA
Answer
Out of 50 respondent 5 were fully satisfied 10 were fully satisfied 30 were not satisfied were as only 5 were fully dissatisfied
Chart no 112
fully satisfied(5)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 14
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Answer
Out of 50 responses 3 were fully satisfied 15 were partially satisfied 25 were not satisfied where as 7 were full dissatisfied
Chart no 113
fully satisfied(3)partiallt satisfied(15)not satisfied(25)fully dissatisfied(7)
Conclusion
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not contribute to NPA This means that the attitude of bank toward the borrower is not inflexible
Question number 15
Do you think that system over load is also one of the causes of NPA
Answer
Out of 50 respondent 28 were fully satisfied 12 were partially satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 114
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
In banking NPA are loans given to doubtful customers who may or may not repay the
loan on time There are two types of assets viz performing and non performing Performing loans
are standard loans on which both the principle and interest are secured and their return is guaranteed
NPA means the debt which is given by the bank is unable to recover is called
nonperforming assets A NPA account in the books of accounts is an asset as it indicates the amount
received from the defaulters It means if any bank gives loan and is not paid by the customers till 90
days than that account is called as NPA account
DEFINITION
An asset including leased assets becomes nonperforming when it ceases to generate income
for the bank
A NPA was defined as a credit facility in respect of which the interest or installment
of principle as remained ldquopast duerdquo for specific period of time
Source googlecoin
The specific period was reduced in a phased manner as under
wef ndash 31031993 four quarters
wef ndash 31 031994 three quarters
wef - 31031995 two quarters
wef - 31032001 180 days
wef - 31032004 90 days from past due
90 days delinquency is not applicable to agriculture segment
With effect from march 31 2004 NPA shall be a loan or an advance where
1) Term loan interest installment of principle remain over due for 90 days
2) Cash creditover draft an account remain ldquoout of orderrdquo for a period of more than 90 days
3) Bills The bills remain over due for a period more than 90 days
4) Agriculture loan
a The loan has been granted for short duration crop installments of the principle
remain over due for two crop season beyond the due date
b If the loan has been granted for long duration crop installment of the principle
remain over due for one crop season beyond the due date
Source Rbiorgin
CLASSIFICATION OF LOANS
In India loans are classified on following basis
Performing assets
Loans where the interest and or principle not remain overdue for more then 90 days
Non-performing assets
Any loan repayment remains over due for more than 90 days is considered as NPA
According to the securitization and re construction of financial assets and enforcement of
security interest ordinance2002 ldquonon performing assetsrdquo(NPA) means an assets or ac of
borrower which has been classified by the bank as sub-standard doubtful or loss asset in
accordance with the guidelines relating to asset classification issued by RBI
Source googlecoin
ASSET - CLASSIFICATION
Assets can be categorized into four categories (a) standard (b) sub-standard
(c) doubtful (d) loss The last three categories are classified as npa based on the the period for
which the asset has remained non-performing and the realisability of the dues
Standard assets the loan ac which are regular and do not carry more than normal risk are
known as standard assets there could be ac which though have not become npa but are
irregular Such ac are called special mention ac
Sub- standard assets with effect from 3132005 a sub-standard assets is one which is
classified as NPA for a period not exceeding 12 months
Doubtful asset with effect from 3132005 an asset is to be classified as doubtful if it
remained npa or sub-standard for a period exceeding 12 months
Loss assets a loss asset is one where loss has been identified by the bank or internal and
external auditors or the RBI inspection but the amount as not been written off wholly In
other words such an asset is considered uncollectable and such little value that its
continuance as a bankable asset is not warranted although there may be some salvage or
recoverable value
NPA IDENTIFICATION NORMS
With effect from 31st march 2004 a loan or advance become npa when
a Interest or installment of the principle remains overdue for a period more then 90
days in respect of term loan
b The ac remain out of order for a period more 90days in respect of over draft cash
cash credit
c The bill remains overdue for a period more than 90 days in case of bills purchased
and discounted
d With effect from Sept 2004 loan granted for short duration crops will be treated as
NPA if the installment of principle or interest there on remains overdue for two crop
season and loan granted for long duration will be treated as NPA if the installment
remains overdue for one crop season
Out of order
An account will be treated as out as out of order if the outstanding balance remain
continuously in excess of the sanctioned limitdrawing power In cases where the
outstanding balance in the principle operating ac is less than the sanctioned limit but
there are no credit continuously for 90 days as on the date of balance sheet or the
credit are not enough to cover the interest debited during the same period
Overdue
An amount due to the bank under any credit facility is overdue it is not paid on the due
date fixed by the bank
The date of npa will be actual date on which sippage occurred as mentioned below
For term and demand loan ac
The date on which the installment of the principle have
remaine overdue for a period more then 90 days
For over draft and cash credit ac
The date on which the ac completed period of more than 90
days of being continuously out of order
Source wwwRBI Org in
PROVISING NORMS
There is time lag between an ac becoming doubtful for recovery the realization of security and
erosion over a loan period of time in its value So RBI directives now requiresthe banks to make
provisions in their balance sheet for all non- standard loan asset Provisioning is made on all types of
assets ie Standard sub-standard doubtful and loss assets
1 Standard assets RBI vides its circular dated 151108 revised the provisioning requirements
For all type of standard assets it has been reduced to a uniform level of 040of outstanding
at global basis except in the case of direct advance to agriculture and SME sector which
shall continue to attract a provisioning of 025 The provision toward standard assets need
not to be netted from gross advances but shown separately as ldquo contigent provisionsrdquo against
standard assets under other liquidities and provisions others in schedule 5 of the balance
sheet
2 Sub-standard assets- In respect of sub-standard assets the rate of provision is 10 of
outstanding balance without considering ECGC guarantee cover or securities available
However if the loan was unsecured from the begining there would be additional provision of
10 ie total provision would be 20 of the outstanding balance Unsecured exposure is
defined as an exposure where the realizable value of the security as assessed by the
bankreserve banks inspecting officers is not more than 10 ab-intio of the outstanding
exposure
3 Doubtful assets In case of doubtful assets while making provision realizable value of
security is to be considered 100 provision is made for unsecured portion In case of
secured portion the rate of provision depend on age of doubtful assets as under
Age of doubtful assets Provision as of secured portion
Doubtful up to 1 year D1 20 of RVS( realizable value of security)
Doubtful for more than 1 year D2 30 of RVS
Doubtful for more than 3 years D2 100 of RVS
Thus if an ac is doubtful for more than 3 years than 100 of the provision is to be made
both from secured and unsecured portion If an advance has been guaranteed by DICGC
CGFTECGC and is doubtful than provision on secured portion will be as in other cases but
provision on unsecured portion will be made after deducting the claim value
4 LOSS ASSET 100 of the outstanding amount while making provision on NPAs amount
lying in suspense ac and derecognized interest should be deducted from gross advance and
provision be made on balance amount
5 OVERALL PROVISION With a view to improving the improving the provisioning cover
and enhancing the soundness of the individual banks RBI has proposed in oct- 09 policy that
bank should augment their provisions and ensure that their total provisioning coverage ratio
including floating provisions is not less than 70
Source wwwRBIorgin
IMPACTEFFECT OF NPA UPON BANKS
A strong banking sector is important for flourishing economy The failure of banking sector
may have an adverse impact on other sector NPA are one of the major concerns of sector
banks is increasing result in nonperforming assets The NPA impact drastically to the
working of banks The efficiency of bank not always reflected by the size of its balance sheet
but by the level of return on its assetsNPA do not generate interest income for the banks but
the same time banks are required to make provisions for such NPAs from their current
profits
They erode current profits through provisioning requirement
They result in reduced interest income
They require higher provisioning requirements effecting profits and accretion to capital
Adverse impact on capital adequacy ratio
Roe and Roa goes down because NPA do not earn
Banks rating gets effect
Banks cost of raising funds goes up
Bad effect on goodwill
Bad effect on equity value
EARLY SYMPTOMS BY WHICH ONE CAN RECOGNIZE A PERFORMING
ASSETS TURNING TO A NON PERFORMING ASSET
Four categories of early symptoms
1) FINANCIAL
(a) Non- payment of very first installment
(b) Bouncing of cheque due to insufficient balance in the ac
(c) Irregularity in installment
(d) Irregularity of operations in ac
(e) Unpaid overdue bill
(f) Declining current ratio
2) OPERATIONAL AND PHYSICAL
(a) If information is received that the borrower has either initiated the process of winding up or not doing the business
(b) Over-due receivable
(c) Stock statement not submitted on time
(d) External non-controllable factor like natural calamities in the city where the borrower lives
(e) Non- payment of salary
(3) ATTITUDNAL CHANGE
(a) Use for personal comfort stocks and shares by borrowers
(b) Avoidance of contact with bank
(c) Problem between partners
(4) OTHER
(a) Change in govt policies
(b) Death of the borrower
(c) Delay in salary
PREVENTIVE MEASUREMENT FOR NPA
Early recognition of the problem
Invariably by the time banks start their efforts to get involved
in a revival process its too late to retrieve the situation ndash both in terms of rehabilitation of the
project and the recovery of banks dues Identification of the weakness regardless of the fact
that it may not have become NPA is imperative Assessment of the potential of revival may
be done on the basis of a techno-economic viability study Restructuring should be attempted
where after an objective assessment of the promoterrsquos intention banks are convinced of a
turn around with in a scheduled facilitate winding upselling of units earlier so as to recover
whatever is possible through means before the security position becomes worse
Identifying borrowers with genuine intent
Identifying borrower with genuine intent from those who
are non-serious with commitment or stake in revival is a challenge confronting bankers Here
the role of front line officials at branch level is paramount as they are the ones who have
intelligent inputs with regard to promoters lsquo sincerity and capability to achieve turnaround
Based on this objective assessment bank should decide as quickly as possible whether it
would be worthwhile to commit additional finance
In this regard banks may consider having
ldquospecial investigationrdquo of all financial transaction or business transaction books of account
order to ascertain real factor that contributed to sickness of borrower Bank may have panel
of technical experts with proven expertise and task record of preparing techno-economic
study of the project of the borrowers
Borrowers having genuine problems due to temporary mismatch in find flow or sudden
requirement of additional fund may entertained at branch level for this purpose a special
limit to such type of cases should be decided This will obviate the need to route the
additional funding through the controlling officers in deserving cases and avert many
accounts sleeping into NPA category
Timeliness and adequacy of response
Longer the delay in response greater the enjury to the
account and the asset Time is a crucial element in any restructuring or rehabilitation activity
The response decided on the basis of techno- economic study and promoterrsquos commitment
has to be adequate in terms of extend of additional funding and relaxations etc under the
restructuring exercise The package of assistance may be flexible and bank may look at the
exit option
Focus on cash flow
While financing at the time of restructuring the banks may not be guided
by the conventional fund flow analysis only which could yield a potentially misleading
picture Appraisal for fresh credit requirement may be done by analyzing fond flow in
conjunction with the cash flow rather than only on the basis of fund flow
Source wwwAskcom
Management effectiveness
The general perception among the borrower is lack of finance that
leads to sickness and NPAs but this may not be the case all the time Management effectiveness
advance business condition is a very important aspect that affects a borrowing units fortunes A bank
may commit a multiple finance to an align unit only after basic viability of the enterprise also in the
context of quality of management is examined and confirmed It will be useful to have consultant
appointed as early as possible to examine this aspect A proper techno-economic viability study thus
become the basis on which any future action can be considered
Multiple financing
A) During the exercise for assessment of viability and restructuring a pragmatic and unified
approach by all the leading banks as also sharing of all relevant information on the
borrower would go a long way toward overall success of rehabilitation exercise given the
probability of successfailure
B) In some default cases Where the unit is still working The bank should make sure that it
captures the cash flow and insure that such cash are used for working capital purpose
Toward this end there should be a continuous flow of information among consortium
member A bank which is not a part of consortium may not be allowed to offer credit
facility to such defaulting clients Current account facility may also be denied at non-
consortium banks to such clients and violation may attract penal action The credit
information bureau of india (CIBIL) may be very useful for meaningful information
exchange on defaulting borrowers once the setup become fully operational
C) In a forum of lenders the priority of each lender will be different While one set of lender
may be willing to wait for longer time to recover its dues another lender may have a much
shorter timeframe in mind So it is possible that the letter categories of lenders may be
willing to exit even at a cost by a discounted settlement of the exposure There for any plan
for restructuringrehabilitation may takes into account
D) Corporate debt restructuring it has been institutionalized in 2001 to provide a timely and
transparent system for restructuring the corporate debt of RS 20 crores and above with the
banks on a voluntary basis and outside a legal framework Under this system bank are
greatly benefit in terms of restructuring of large standard accounts (potential NPAs) and
viable sub-standard account with multiple banking arrangement
NPA MANAGEMENT- RESOLUTION
Compromise settlement schemes
Restructuringrescheduling
Lok adalat
Corporate debt restructuring cell
Debt recovery Tribunals (DRT)
Proceeding under the code of civil procedure
Board of industrial and financial reconstruction
National company law Tribunal (NCLT)
Sale of NPA to other bank
Sale of NPA to ARCSC under securitization and reconstruction of financial assets for
enforcement of security interest Act 2000 (SRFAESI)
Liquidation
Source wwwRBIorgin
NPA MANAGEMENT IN INDIA
Formation of the credit information bureau (India) limited (CIBIL)
Release of willful defaulterrsquos listRBI also releases a list of borrowers with aggregate
outstanding of RS 1 crore and above against whom bank have filed suit for recovery of their
fund
Reporting of frauds to RBI
Norms of lenders labiality- framing of fair practices code with regard to lenders lability to
be followed by banks
Risk assessment and Risk management
RBI has advised banks to all cases of willful defaulters in case of 1 crore and above and
files suits in such cases
Responding quick mortality cases
Special mention accounts for early identification for bad debt loans and advances over due
for less than one or two quarters would come under this category However these accounts do
not need provisioning
INTERNATIONAL PRACTICES ON NPA MANAGEMENT
Subsequent to the Asian currency crisis which severely crippled the financial system In
addition to the above some of the more recent and aggressive step to NPAs have been taken
by Taiwan Taiwanese financial institution have been encouraged to merge and form bank
based AMCs through the recent introduction of financial holding company act and financial
institution Asian countries the magnitude of NPAs in Asian financial institution was brought
to light Driven by the need to proactively tackle the soaring NPAs level the respective govt
embarked upon a program of substantial reform This involves setting up processes for early
identification and resolution of NPAs The table below provides a cross country comparison
of approaches used for NPA resolution Mergers Act A long side the ministry of finance has
followed a carrot and strict policy of specifying the required NPA ratio for banks while also
providing flexibility in modes of NPA assets resolution and a conduct
ive regulatory and tax environment Deferred loss write-off provisions have been instituted to
provide breathing space for lenders to absorb NPA write-off While it is too early to
comment on success of NPA resolution process in Taiwan the early sign are encouraging
Detailed below are some key NPA management approaches adopted by banks in South East
Asian countries
1 Credit risk mitigation
2 Early warning systems
3 Assets management companies
Increasing willingness to sell NPAs to AMCs
Effective resolution strategy
Appointment of special administrators
4 Out of court restructuring
Source wwwgooglecom
DIFFICULTIES WITH NON PERFORMING ASSETS
I Owners do not receive a market return on their capital In the worst case if the bank
fails owner lose their assets
II Depositors do not receive a market return on savings In the worst case if the bank
fails depositors lose their assets or uninsured balance Banks also redistribute losses
to other borrowers by charging higher rate of interest
III Non-performing loans epitomize bad investors They misallocate credit from good
projects which do not receive funding to failed project
IV 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
shortage the shortage can jam payments across the country
b Illiquidity constraints banks in paying depositors eg cashing their paychecks
c Undercapitalized banks exceed the bank capital base
Lending by bank has been politicized It is common knowledge
that loans are given to various industrial houses on common consideration and
viability of project but on political consideration In normal circumstances banks
before extending any loan would make a thorough study of the actual need of the
party considered the prospect of the business in which it is engaged Since it is
not looked into many of the loans becomes NPA
REASONS F0R AN ACCOUNT BECOMING NPA
Those attribute to borrower
Failure to bring in required capital
Lack of proper planning
Unwanted expenses
Lack of expertise
Poor credit collection
Miss management
Heavy borrowing
Lack of knowledge regarding NPA
Willful defaulters
Death of the borrower
Those attribute to banks
Wrong selection of borrower
Poor credit appraisal
Unhelpful in supervision
Too inflexible attitude
System overload
Lack of motivation
Delay in sanction
Lack of trained staff
Lack of commitment to recovery
Lack of personal visit to the borrower office
Lack of personal visit to the borrowerrsquos residence
Other
Fast changing technology
Unhelpful attitude of govt
Increase in material cost
Government policies
Taxation law
Political hostility
INDIAN ECONOMY AND NPA
Undoubtedly the world economy has slowed down recession is at its peak globally stock markets
have tumbled and business itself getting hard to do The Indian economy has been much affected due
to high fiscal deficit poor infrastructure facilities sticky legal system cutting of exposures to
emerging market by FIIs etc
Further international rating agencies like standard and poor
have lowered Indiarsquos credit rating to sub- investment grade Such negative aspects have often
outweighed positive such as increasing for reserve and a manageable inflation rate
Under such situation I go without saying that banks are no exception
and are bound to face the heat of global down turn One would be surprise to know that banks and
financial institution in India holds non-performing assets worth Rs 1 10000 crores Bankers have
realized that unless the level of NPA is reduced drastically they will find it difficult to survive
The actual level of NPA in India is around $ 40 billion much higher than govt estimation of $16
billion This difference is largely due to the discrepancy in accounting the NPAs followed by India
and rest of the world The accounting norms of India are less stringent than those of the developed
economies The Indian banks also have the tendency to extend the past due Considering the GDP
India nearly $ 470 billion the NPA are 8 of the total GDP which was better than many Asian
countries The NPA of china was 45 of the GDP While Japan had NPAs of 25 of the GDP
The aggregate level of NPAs in Asia has increased from $ 25 billion in 2007 to
$ 34 billion on 2009 looking to such overall pictures of the market we can say that India is doing
well and the steps taken are looking favorable
Source googlecoin
DATA ANALYZING THE QUETIONNAIRE
Two set of questionnaire were prepared to collect the feedback One set of questionnaire was meant for branches and other set of questionnaire was meant for borrowers
The set of questionnaire were given to the branches under hazaribag (RBO) and collected the feedback of the bankers of P segment and the branch manager
The questionnaire prepared for branch contained 15 questions and the questionnaire prepared for borrower contains 10 questions
The data was collected from 50 bankers and the data analysis of the branch questionnaire is as follows
Question number 1
Does not require any data analysis and information was sought to know the business level of the branches for the purpose of whether particular branch is actively engaged in xpress credit portfolio
Question number 2
Do you think that the borrowers are aware about NPA
Answer
32 of the respondent feel that the borrowers are not aware about NPA and 18 respondents feel that borrowers are aware about NPA
Chart no 11
yes
no
0
5
10
15
20
25
30
35
1832 Column1
Conclusion
Majority of the bank officials feels that the borrowers are not aware about NPA
Question number 3
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Answer
Out of 32 respondent 22 respondents is fully satisfied that lack of knowledge among the borrower regarding NPA is one of the reason for NPA 08 respondent were partially satisfied with it and 02 respondent were not satisfied with it
Chart no 12
fully satisfied(22)69
partially satisfied(8)25
not satisfied(2)6
Sales
Conclusion
Majority of the borrowers feels that lack of knowledge among the borrower regarding NPA is one of the reasons for NPA
Question number 4 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Answer
Out of 50 respondent 30 of the respondent strongly satisfied that these external factors contribute to NPA 10 respondent were partially satisfied with it 5 were not satisfied where as 5 were fully dissatisfied with it
Chart no 13
6020
10
10
fully satisfied(30) partially satisfied(10) not satisfiec(5) fully desatisfied(5)
Conclusion
Most of the respondent thinks that external factrs like willful defaulter change in govt policy contribute to NPA
Question number 5
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Answer
Chart no 14
feedback
fully satisfied(20)partially satisfied(12)not satisfied(12)fully dissatisfied(6)
Conclusion
As per the response of the officials most of the officials feel that internal factors are also responsible for NPA
Question number 6
Do you think that inflation is one of the reasons for NPA
Answer
Out f 50 responses 22 were strongly satisfied 18 were partially satisfied 8 were not satisfied and 2 were fully dissatisfied
Chart no 15
fully satisfied(20)44
partially satisfied(18)36
not satisfied(5)10
fullt dissatisfied(5)10
Conclusion
Growing inflation increasing goods rate is also one of the reason for NPA
Question number 7
Do you think that lack of PSS is also contributed to NPA
Answer
Out of 50 responses 30 were fully satisfied with it 12 were partially satisfied and 8 were fully dissatisfied
Chart no 16
6024
16
Open
fully satisfied(30)Partially satisfied(12)not satisfied(0)fully dissatisfied(8)
Conclusion
Majority of the officiais feels that lack of PSS is one of the reason for NPA This means that the PSS carried out by the bank is not sufficient or not carried out properly
Question number 8
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Answer
Most of the respondent feels that increase in unwanted expenses of the borrwer ls contribute to NPA
Chart no 17
56
12
28
4
FULLY SATISFIED(28)PARTIALLY SATISFIED(6)NOT SATISFIED(14)FULLY DISSATISFIED(2)
Conclusion
As per response of the officials increasing inflation have an adverse effect on the financial sector its working performance as well as on NPA
Question number 9
Do you think that high rate of interest under Xpress credit also contributes to NPA
Answer
Out of 50 respondent 25 respondent were not satisfied 10 were partially satisfied 10 were strongly dissatisfied where as only 5 out of 50 were fully satisfied with it
Chart no 18
strongly satisfied(5)partially satisfied(10)not satisfied(25)fully dissatisfied(10)
Conclusion
Most of the respondents are not satisfied with it They feel that the rate of interest charged by SBI under Xpress credit is not high and it will not contribute to NPS
Question number 10
Do you think that lack of proper planning of the borrower is one of the reason for NPA
Answer
Out of 70 respondent 35 were fully satisfied 5 were not satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 19
fully satisfied(35)70
partially satisfied(10)20
not satisfied(5)10
Conclusion
Most of the respondent feels that the borrowers borrow money from the bank without any proper planning which is one of the most important reason for NPA
Question number 11
Is heavy borrowing also contribute to NPA
Answer
Out of 50 respondent 25 respondent were fully satisfied 12 were partially satisfied 8 were not satisfied were as 5 were fully dissatisfied
Chart no 110
50
24
16
10
fully satisfied(25) partially satisfied(12) not satisfied(8) fully dissatisfied(5)
Question number 12
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Answer
As per the response of the officials 20 were fully satisfied 66were partially satisfied 4 were not satisfied with it were as 10 respondent were fully dissatisfied
Chart no 111
fully satisfied(10)20
partially satisfied(33)66
not satisfied(2)4
fullydissatisfied(5)10
Conclusion
As per the response given by the officials most of the officials were partially satisfied that wrong selection of borrower also contribute to NPA which means that selection process carried out by the bank is not appropriate or there is some difficulties in implementing them
Question number 13
Do you think that poor credit appraisal also contribute to NPA
Answer
Out of 50 respondent 5 were fully satisfied 10 were fully satisfied 30 were not satisfied were as only 5 were fully dissatisfied
Chart no 112
fully satisfied(5)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 14
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Answer
Out of 50 responses 3 were fully satisfied 15 were partially satisfied 25 were not satisfied where as 7 were full dissatisfied
Chart no 113
fully satisfied(3)partiallt satisfied(15)not satisfied(25)fully dissatisfied(7)
Conclusion
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not contribute to NPA This means that the attitude of bank toward the borrower is not inflexible
Question number 15
Do you think that system over load is also one of the causes of NPA
Answer
Out of 50 respondent 28 were fully satisfied 12 were partially satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 114
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
wef - 31032004 90 days from past due
90 days delinquency is not applicable to agriculture segment
With effect from march 31 2004 NPA shall be a loan or an advance where
1) Term loan interest installment of principle remain over due for 90 days
2) Cash creditover draft an account remain ldquoout of orderrdquo for a period of more than 90 days
3) Bills The bills remain over due for a period more than 90 days
4) Agriculture loan
a The loan has been granted for short duration crop installments of the principle
remain over due for two crop season beyond the due date
b If the loan has been granted for long duration crop installment of the principle
remain over due for one crop season beyond the due date
Source Rbiorgin
CLASSIFICATION OF LOANS
In India loans are classified on following basis
Performing assets
Loans where the interest and or principle not remain overdue for more then 90 days
Non-performing assets
Any loan repayment remains over due for more than 90 days is considered as NPA
According to the securitization and re construction of financial assets and enforcement of
security interest ordinance2002 ldquonon performing assetsrdquo(NPA) means an assets or ac of
borrower which has been classified by the bank as sub-standard doubtful or loss asset in
accordance with the guidelines relating to asset classification issued by RBI
Source googlecoin
ASSET - CLASSIFICATION
Assets can be categorized into four categories (a) standard (b) sub-standard
(c) doubtful (d) loss The last three categories are classified as npa based on the the period for
which the asset has remained non-performing and the realisability of the dues
Standard assets the loan ac which are regular and do not carry more than normal risk are
known as standard assets there could be ac which though have not become npa but are
irregular Such ac are called special mention ac
Sub- standard assets with effect from 3132005 a sub-standard assets is one which is
classified as NPA for a period not exceeding 12 months
Doubtful asset with effect from 3132005 an asset is to be classified as doubtful if it
remained npa or sub-standard for a period exceeding 12 months
Loss assets a loss asset is one where loss has been identified by the bank or internal and
external auditors or the RBI inspection but the amount as not been written off wholly In
other words such an asset is considered uncollectable and such little value that its
continuance as a bankable asset is not warranted although there may be some salvage or
recoverable value
NPA IDENTIFICATION NORMS
With effect from 31st march 2004 a loan or advance become npa when
a Interest or installment of the principle remains overdue for a period more then 90
days in respect of term loan
b The ac remain out of order for a period more 90days in respect of over draft cash
cash credit
c The bill remains overdue for a period more than 90 days in case of bills purchased
and discounted
d With effect from Sept 2004 loan granted for short duration crops will be treated as
NPA if the installment of principle or interest there on remains overdue for two crop
season and loan granted for long duration will be treated as NPA if the installment
remains overdue for one crop season
Out of order
An account will be treated as out as out of order if the outstanding balance remain
continuously in excess of the sanctioned limitdrawing power In cases where the
outstanding balance in the principle operating ac is less than the sanctioned limit but
there are no credit continuously for 90 days as on the date of balance sheet or the
credit are not enough to cover the interest debited during the same period
Overdue
An amount due to the bank under any credit facility is overdue it is not paid on the due
date fixed by the bank
The date of npa will be actual date on which sippage occurred as mentioned below
For term and demand loan ac
The date on which the installment of the principle have
remaine overdue for a period more then 90 days
For over draft and cash credit ac
The date on which the ac completed period of more than 90
days of being continuously out of order
Source wwwRBI Org in
PROVISING NORMS
There is time lag between an ac becoming doubtful for recovery the realization of security and
erosion over a loan period of time in its value So RBI directives now requiresthe banks to make
provisions in their balance sheet for all non- standard loan asset Provisioning is made on all types of
assets ie Standard sub-standard doubtful and loss assets
1 Standard assets RBI vides its circular dated 151108 revised the provisioning requirements
For all type of standard assets it has been reduced to a uniform level of 040of outstanding
at global basis except in the case of direct advance to agriculture and SME sector which
shall continue to attract a provisioning of 025 The provision toward standard assets need
not to be netted from gross advances but shown separately as ldquo contigent provisionsrdquo against
standard assets under other liquidities and provisions others in schedule 5 of the balance
sheet
2 Sub-standard assets- In respect of sub-standard assets the rate of provision is 10 of
outstanding balance without considering ECGC guarantee cover or securities available
However if the loan was unsecured from the begining there would be additional provision of
10 ie total provision would be 20 of the outstanding balance Unsecured exposure is
defined as an exposure where the realizable value of the security as assessed by the
bankreserve banks inspecting officers is not more than 10 ab-intio of the outstanding
exposure
3 Doubtful assets In case of doubtful assets while making provision realizable value of
security is to be considered 100 provision is made for unsecured portion In case of
secured portion the rate of provision depend on age of doubtful assets as under
Age of doubtful assets Provision as of secured portion
Doubtful up to 1 year D1 20 of RVS( realizable value of security)
Doubtful for more than 1 year D2 30 of RVS
Doubtful for more than 3 years D2 100 of RVS
Thus if an ac is doubtful for more than 3 years than 100 of the provision is to be made
both from secured and unsecured portion If an advance has been guaranteed by DICGC
CGFTECGC and is doubtful than provision on secured portion will be as in other cases but
provision on unsecured portion will be made after deducting the claim value
4 LOSS ASSET 100 of the outstanding amount while making provision on NPAs amount
lying in suspense ac and derecognized interest should be deducted from gross advance and
provision be made on balance amount
5 OVERALL PROVISION With a view to improving the improving the provisioning cover
and enhancing the soundness of the individual banks RBI has proposed in oct- 09 policy that
bank should augment their provisions and ensure that their total provisioning coverage ratio
including floating provisions is not less than 70
Source wwwRBIorgin
IMPACTEFFECT OF NPA UPON BANKS
A strong banking sector is important for flourishing economy The failure of banking sector
may have an adverse impact on other sector NPA are one of the major concerns of sector
banks is increasing result in nonperforming assets The NPA impact drastically to the
working of banks The efficiency of bank not always reflected by the size of its balance sheet
but by the level of return on its assetsNPA do not generate interest income for the banks but
the same time banks are required to make provisions for such NPAs from their current
profits
They erode current profits through provisioning requirement
They result in reduced interest income
They require higher provisioning requirements effecting profits and accretion to capital
Adverse impact on capital adequacy ratio
Roe and Roa goes down because NPA do not earn
Banks rating gets effect
Banks cost of raising funds goes up
Bad effect on goodwill
Bad effect on equity value
EARLY SYMPTOMS BY WHICH ONE CAN RECOGNIZE A PERFORMING
ASSETS TURNING TO A NON PERFORMING ASSET
Four categories of early symptoms
1) FINANCIAL
(a) Non- payment of very first installment
(b) Bouncing of cheque due to insufficient balance in the ac
(c) Irregularity in installment
(d) Irregularity of operations in ac
(e) Unpaid overdue bill
(f) Declining current ratio
2) OPERATIONAL AND PHYSICAL
(a) If information is received that the borrower has either initiated the process of winding up or not doing the business
(b) Over-due receivable
(c) Stock statement not submitted on time
(d) External non-controllable factor like natural calamities in the city where the borrower lives
(e) Non- payment of salary
(3) ATTITUDNAL CHANGE
(a) Use for personal comfort stocks and shares by borrowers
(b) Avoidance of contact with bank
(c) Problem between partners
(4) OTHER
(a) Change in govt policies
(b) Death of the borrower
(c) Delay in salary
PREVENTIVE MEASUREMENT FOR NPA
Early recognition of the problem
Invariably by the time banks start their efforts to get involved
in a revival process its too late to retrieve the situation ndash both in terms of rehabilitation of the
project and the recovery of banks dues Identification of the weakness regardless of the fact
that it may not have become NPA is imperative Assessment of the potential of revival may
be done on the basis of a techno-economic viability study Restructuring should be attempted
where after an objective assessment of the promoterrsquos intention banks are convinced of a
turn around with in a scheduled facilitate winding upselling of units earlier so as to recover
whatever is possible through means before the security position becomes worse
Identifying borrowers with genuine intent
Identifying borrower with genuine intent from those who
are non-serious with commitment or stake in revival is a challenge confronting bankers Here
the role of front line officials at branch level is paramount as they are the ones who have
intelligent inputs with regard to promoters lsquo sincerity and capability to achieve turnaround
Based on this objective assessment bank should decide as quickly as possible whether it
would be worthwhile to commit additional finance
In this regard banks may consider having
ldquospecial investigationrdquo of all financial transaction or business transaction books of account
order to ascertain real factor that contributed to sickness of borrower Bank may have panel
of technical experts with proven expertise and task record of preparing techno-economic
study of the project of the borrowers
Borrowers having genuine problems due to temporary mismatch in find flow or sudden
requirement of additional fund may entertained at branch level for this purpose a special
limit to such type of cases should be decided This will obviate the need to route the
additional funding through the controlling officers in deserving cases and avert many
accounts sleeping into NPA category
Timeliness and adequacy of response
Longer the delay in response greater the enjury to the
account and the asset Time is a crucial element in any restructuring or rehabilitation activity
The response decided on the basis of techno- economic study and promoterrsquos commitment
has to be adequate in terms of extend of additional funding and relaxations etc under the
restructuring exercise The package of assistance may be flexible and bank may look at the
exit option
Focus on cash flow
While financing at the time of restructuring the banks may not be guided
by the conventional fund flow analysis only which could yield a potentially misleading
picture Appraisal for fresh credit requirement may be done by analyzing fond flow in
conjunction with the cash flow rather than only on the basis of fund flow
Source wwwAskcom
Management effectiveness
The general perception among the borrower is lack of finance that
leads to sickness and NPAs but this may not be the case all the time Management effectiveness
advance business condition is a very important aspect that affects a borrowing units fortunes A bank
may commit a multiple finance to an align unit only after basic viability of the enterprise also in the
context of quality of management is examined and confirmed It will be useful to have consultant
appointed as early as possible to examine this aspect A proper techno-economic viability study thus
become the basis on which any future action can be considered
Multiple financing
A) During the exercise for assessment of viability and restructuring a pragmatic and unified
approach by all the leading banks as also sharing of all relevant information on the
borrower would go a long way toward overall success of rehabilitation exercise given the
probability of successfailure
B) In some default cases Where the unit is still working The bank should make sure that it
captures the cash flow and insure that such cash are used for working capital purpose
Toward this end there should be a continuous flow of information among consortium
member A bank which is not a part of consortium may not be allowed to offer credit
facility to such defaulting clients Current account facility may also be denied at non-
consortium banks to such clients and violation may attract penal action The credit
information bureau of india (CIBIL) may be very useful for meaningful information
exchange on defaulting borrowers once the setup become fully operational
C) In a forum of lenders the priority of each lender will be different While one set of lender
may be willing to wait for longer time to recover its dues another lender may have a much
shorter timeframe in mind So it is possible that the letter categories of lenders may be
willing to exit even at a cost by a discounted settlement of the exposure There for any plan
for restructuringrehabilitation may takes into account
D) Corporate debt restructuring it has been institutionalized in 2001 to provide a timely and
transparent system for restructuring the corporate debt of RS 20 crores and above with the
banks on a voluntary basis and outside a legal framework Under this system bank are
greatly benefit in terms of restructuring of large standard accounts (potential NPAs) and
viable sub-standard account with multiple banking arrangement
NPA MANAGEMENT- RESOLUTION
Compromise settlement schemes
Restructuringrescheduling
Lok adalat
Corporate debt restructuring cell
Debt recovery Tribunals (DRT)
Proceeding under the code of civil procedure
Board of industrial and financial reconstruction
National company law Tribunal (NCLT)
Sale of NPA to other bank
Sale of NPA to ARCSC under securitization and reconstruction of financial assets for
enforcement of security interest Act 2000 (SRFAESI)
Liquidation
Source wwwRBIorgin
NPA MANAGEMENT IN INDIA
Formation of the credit information bureau (India) limited (CIBIL)
Release of willful defaulterrsquos listRBI also releases a list of borrowers with aggregate
outstanding of RS 1 crore and above against whom bank have filed suit for recovery of their
fund
Reporting of frauds to RBI
Norms of lenders labiality- framing of fair practices code with regard to lenders lability to
be followed by banks
Risk assessment and Risk management
RBI has advised banks to all cases of willful defaulters in case of 1 crore and above and
files suits in such cases
Responding quick mortality cases
Special mention accounts for early identification for bad debt loans and advances over due
for less than one or two quarters would come under this category However these accounts do
not need provisioning
INTERNATIONAL PRACTICES ON NPA MANAGEMENT
Subsequent to the Asian currency crisis which severely crippled the financial system In
addition to the above some of the more recent and aggressive step to NPAs have been taken
by Taiwan Taiwanese financial institution have been encouraged to merge and form bank
based AMCs through the recent introduction of financial holding company act and financial
institution Asian countries the magnitude of NPAs in Asian financial institution was brought
to light Driven by the need to proactively tackle the soaring NPAs level the respective govt
embarked upon a program of substantial reform This involves setting up processes for early
identification and resolution of NPAs The table below provides a cross country comparison
of approaches used for NPA resolution Mergers Act A long side the ministry of finance has
followed a carrot and strict policy of specifying the required NPA ratio for banks while also
providing flexibility in modes of NPA assets resolution and a conduct
ive regulatory and tax environment Deferred loss write-off provisions have been instituted to
provide breathing space for lenders to absorb NPA write-off While it is too early to
comment on success of NPA resolution process in Taiwan the early sign are encouraging
Detailed below are some key NPA management approaches adopted by banks in South East
Asian countries
1 Credit risk mitigation
2 Early warning systems
3 Assets management companies
Increasing willingness to sell NPAs to AMCs
Effective resolution strategy
Appointment of special administrators
4 Out of court restructuring
Source wwwgooglecom
DIFFICULTIES WITH NON PERFORMING ASSETS
I Owners do not receive a market return on their capital In the worst case if the bank
fails owner lose their assets
II Depositors do not receive a market return on savings In the worst case if the bank
fails depositors lose their assets or uninsured balance Banks also redistribute losses
to other borrowers by charging higher rate of interest
III Non-performing loans epitomize bad investors They misallocate credit from good
projects which do not receive funding to failed project
IV 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
shortage the shortage can jam payments across the country
b Illiquidity constraints banks in paying depositors eg cashing their paychecks
c Undercapitalized banks exceed the bank capital base
Lending by bank has been politicized It is common knowledge
that loans are given to various industrial houses on common consideration and
viability of project but on political consideration In normal circumstances banks
before extending any loan would make a thorough study of the actual need of the
party considered the prospect of the business in which it is engaged Since it is
not looked into many of the loans becomes NPA
REASONS F0R AN ACCOUNT BECOMING NPA
Those attribute to borrower
Failure to bring in required capital
Lack of proper planning
Unwanted expenses
Lack of expertise
Poor credit collection
Miss management
Heavy borrowing
Lack of knowledge regarding NPA
Willful defaulters
Death of the borrower
Those attribute to banks
Wrong selection of borrower
Poor credit appraisal
Unhelpful in supervision
Too inflexible attitude
System overload
Lack of motivation
Delay in sanction
Lack of trained staff
Lack of commitment to recovery
Lack of personal visit to the borrower office
Lack of personal visit to the borrowerrsquos residence
Other
Fast changing technology
Unhelpful attitude of govt
Increase in material cost
Government policies
Taxation law
Political hostility
INDIAN ECONOMY AND NPA
Undoubtedly the world economy has slowed down recession is at its peak globally stock markets
have tumbled and business itself getting hard to do The Indian economy has been much affected due
to high fiscal deficit poor infrastructure facilities sticky legal system cutting of exposures to
emerging market by FIIs etc
Further international rating agencies like standard and poor
have lowered Indiarsquos credit rating to sub- investment grade Such negative aspects have often
outweighed positive such as increasing for reserve and a manageable inflation rate
Under such situation I go without saying that banks are no exception
and are bound to face the heat of global down turn One would be surprise to know that banks and
financial institution in India holds non-performing assets worth Rs 1 10000 crores Bankers have
realized that unless the level of NPA is reduced drastically they will find it difficult to survive
The actual level of NPA in India is around $ 40 billion much higher than govt estimation of $16
billion This difference is largely due to the discrepancy in accounting the NPAs followed by India
and rest of the world The accounting norms of India are less stringent than those of the developed
economies The Indian banks also have the tendency to extend the past due Considering the GDP
India nearly $ 470 billion the NPA are 8 of the total GDP which was better than many Asian
countries The NPA of china was 45 of the GDP While Japan had NPAs of 25 of the GDP
The aggregate level of NPAs in Asia has increased from $ 25 billion in 2007 to
$ 34 billion on 2009 looking to such overall pictures of the market we can say that India is doing
well and the steps taken are looking favorable
Source googlecoin
DATA ANALYZING THE QUETIONNAIRE
Two set of questionnaire were prepared to collect the feedback One set of questionnaire was meant for branches and other set of questionnaire was meant for borrowers
The set of questionnaire were given to the branches under hazaribag (RBO) and collected the feedback of the bankers of P segment and the branch manager
The questionnaire prepared for branch contained 15 questions and the questionnaire prepared for borrower contains 10 questions
The data was collected from 50 bankers and the data analysis of the branch questionnaire is as follows
Question number 1
Does not require any data analysis and information was sought to know the business level of the branches for the purpose of whether particular branch is actively engaged in xpress credit portfolio
Question number 2
Do you think that the borrowers are aware about NPA
Answer
32 of the respondent feel that the borrowers are not aware about NPA and 18 respondents feel that borrowers are aware about NPA
Chart no 11
yes
no
0
5
10
15
20
25
30
35
1832 Column1
Conclusion
Majority of the bank officials feels that the borrowers are not aware about NPA
Question number 3
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Answer
Out of 32 respondent 22 respondents is fully satisfied that lack of knowledge among the borrower regarding NPA is one of the reason for NPA 08 respondent were partially satisfied with it and 02 respondent were not satisfied with it
Chart no 12
fully satisfied(22)69
partially satisfied(8)25
not satisfied(2)6
Sales
Conclusion
Majority of the borrowers feels that lack of knowledge among the borrower regarding NPA is one of the reasons for NPA
Question number 4 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Answer
Out of 50 respondent 30 of the respondent strongly satisfied that these external factors contribute to NPA 10 respondent were partially satisfied with it 5 were not satisfied where as 5 were fully dissatisfied with it
Chart no 13
6020
10
10
fully satisfied(30) partially satisfied(10) not satisfiec(5) fully desatisfied(5)
Conclusion
Most of the respondent thinks that external factrs like willful defaulter change in govt policy contribute to NPA
Question number 5
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Answer
Chart no 14
feedback
fully satisfied(20)partially satisfied(12)not satisfied(12)fully dissatisfied(6)
Conclusion
As per the response of the officials most of the officials feel that internal factors are also responsible for NPA
Question number 6
Do you think that inflation is one of the reasons for NPA
Answer
Out f 50 responses 22 were strongly satisfied 18 were partially satisfied 8 were not satisfied and 2 were fully dissatisfied
Chart no 15
fully satisfied(20)44
partially satisfied(18)36
not satisfied(5)10
fullt dissatisfied(5)10
Conclusion
Growing inflation increasing goods rate is also one of the reason for NPA
Question number 7
Do you think that lack of PSS is also contributed to NPA
Answer
Out of 50 responses 30 were fully satisfied with it 12 were partially satisfied and 8 were fully dissatisfied
Chart no 16
6024
16
Open
fully satisfied(30)Partially satisfied(12)not satisfied(0)fully dissatisfied(8)
Conclusion
Majority of the officiais feels that lack of PSS is one of the reason for NPA This means that the PSS carried out by the bank is not sufficient or not carried out properly
Question number 8
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Answer
Most of the respondent feels that increase in unwanted expenses of the borrwer ls contribute to NPA
Chart no 17
56
12
28
4
FULLY SATISFIED(28)PARTIALLY SATISFIED(6)NOT SATISFIED(14)FULLY DISSATISFIED(2)
Conclusion
As per response of the officials increasing inflation have an adverse effect on the financial sector its working performance as well as on NPA
Question number 9
Do you think that high rate of interest under Xpress credit also contributes to NPA
Answer
Out of 50 respondent 25 respondent were not satisfied 10 were partially satisfied 10 were strongly dissatisfied where as only 5 out of 50 were fully satisfied with it
Chart no 18
strongly satisfied(5)partially satisfied(10)not satisfied(25)fully dissatisfied(10)
Conclusion
Most of the respondents are not satisfied with it They feel that the rate of interest charged by SBI under Xpress credit is not high and it will not contribute to NPS
Question number 10
Do you think that lack of proper planning of the borrower is one of the reason for NPA
Answer
Out of 70 respondent 35 were fully satisfied 5 were not satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 19
fully satisfied(35)70
partially satisfied(10)20
not satisfied(5)10
Conclusion
Most of the respondent feels that the borrowers borrow money from the bank without any proper planning which is one of the most important reason for NPA
Question number 11
Is heavy borrowing also contribute to NPA
Answer
Out of 50 respondent 25 respondent were fully satisfied 12 were partially satisfied 8 were not satisfied were as 5 were fully dissatisfied
Chart no 110
50
24
16
10
fully satisfied(25) partially satisfied(12) not satisfied(8) fully dissatisfied(5)
Question number 12
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Answer
As per the response of the officials 20 were fully satisfied 66were partially satisfied 4 were not satisfied with it were as 10 respondent were fully dissatisfied
Chart no 111
fully satisfied(10)20
partially satisfied(33)66
not satisfied(2)4
fullydissatisfied(5)10
Conclusion
As per the response given by the officials most of the officials were partially satisfied that wrong selection of borrower also contribute to NPA which means that selection process carried out by the bank is not appropriate or there is some difficulties in implementing them
Question number 13
Do you think that poor credit appraisal also contribute to NPA
Answer
Out of 50 respondent 5 were fully satisfied 10 were fully satisfied 30 were not satisfied were as only 5 were fully dissatisfied
Chart no 112
fully satisfied(5)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 14
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Answer
Out of 50 responses 3 were fully satisfied 15 were partially satisfied 25 were not satisfied where as 7 were full dissatisfied
Chart no 113
fully satisfied(3)partiallt satisfied(15)not satisfied(25)fully dissatisfied(7)
Conclusion
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not contribute to NPA This means that the attitude of bank toward the borrower is not inflexible
Question number 15
Do you think that system over load is also one of the causes of NPA
Answer
Out of 50 respondent 28 were fully satisfied 12 were partially satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 114
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Loans where the interest and or principle not remain overdue for more then 90 days
Non-performing assets
Any loan repayment remains over due for more than 90 days is considered as NPA
According to the securitization and re construction of financial assets and enforcement of
security interest ordinance2002 ldquonon performing assetsrdquo(NPA) means an assets or ac of
borrower which has been classified by the bank as sub-standard doubtful or loss asset in
accordance with the guidelines relating to asset classification issued by RBI
Source googlecoin
ASSET - CLASSIFICATION
Assets can be categorized into four categories (a) standard (b) sub-standard
(c) doubtful (d) loss The last three categories are classified as npa based on the the period for
which the asset has remained non-performing and the realisability of the dues
Standard assets the loan ac which are regular and do not carry more than normal risk are
known as standard assets there could be ac which though have not become npa but are
irregular Such ac are called special mention ac
Sub- standard assets with effect from 3132005 a sub-standard assets is one which is
classified as NPA for a period not exceeding 12 months
Doubtful asset with effect from 3132005 an asset is to be classified as doubtful if it
remained npa or sub-standard for a period exceeding 12 months
Loss assets a loss asset is one where loss has been identified by the bank or internal and
external auditors or the RBI inspection but the amount as not been written off wholly In
other words such an asset is considered uncollectable and such little value that its
continuance as a bankable asset is not warranted although there may be some salvage or
recoverable value
NPA IDENTIFICATION NORMS
With effect from 31st march 2004 a loan or advance become npa when
a Interest or installment of the principle remains overdue for a period more then 90
days in respect of term loan
b The ac remain out of order for a period more 90days in respect of over draft cash
cash credit
c The bill remains overdue for a period more than 90 days in case of bills purchased
and discounted
d With effect from Sept 2004 loan granted for short duration crops will be treated as
NPA if the installment of principle or interest there on remains overdue for two crop
season and loan granted for long duration will be treated as NPA if the installment
remains overdue for one crop season
Out of order
An account will be treated as out as out of order if the outstanding balance remain
continuously in excess of the sanctioned limitdrawing power In cases where the
outstanding balance in the principle operating ac is less than the sanctioned limit but
there are no credit continuously for 90 days as on the date of balance sheet or the
credit are not enough to cover the interest debited during the same period
Overdue
An amount due to the bank under any credit facility is overdue it is not paid on the due
date fixed by the bank
The date of npa will be actual date on which sippage occurred as mentioned below
For term and demand loan ac
The date on which the installment of the principle have
remaine overdue for a period more then 90 days
For over draft and cash credit ac
The date on which the ac completed period of more than 90
days of being continuously out of order
Source wwwRBI Org in
PROVISING NORMS
There is time lag between an ac becoming doubtful for recovery the realization of security and
erosion over a loan period of time in its value So RBI directives now requiresthe banks to make
provisions in their balance sheet for all non- standard loan asset Provisioning is made on all types of
assets ie Standard sub-standard doubtful and loss assets
1 Standard assets RBI vides its circular dated 151108 revised the provisioning requirements
For all type of standard assets it has been reduced to a uniform level of 040of outstanding
at global basis except in the case of direct advance to agriculture and SME sector which
shall continue to attract a provisioning of 025 The provision toward standard assets need
not to be netted from gross advances but shown separately as ldquo contigent provisionsrdquo against
standard assets under other liquidities and provisions others in schedule 5 of the balance
sheet
2 Sub-standard assets- In respect of sub-standard assets the rate of provision is 10 of
outstanding balance without considering ECGC guarantee cover or securities available
However if the loan was unsecured from the begining there would be additional provision of
10 ie total provision would be 20 of the outstanding balance Unsecured exposure is
defined as an exposure where the realizable value of the security as assessed by the
bankreserve banks inspecting officers is not more than 10 ab-intio of the outstanding
exposure
3 Doubtful assets In case of doubtful assets while making provision realizable value of
security is to be considered 100 provision is made for unsecured portion In case of
secured portion the rate of provision depend on age of doubtful assets as under
Age of doubtful assets Provision as of secured portion
Doubtful up to 1 year D1 20 of RVS( realizable value of security)
Doubtful for more than 1 year D2 30 of RVS
Doubtful for more than 3 years D2 100 of RVS
Thus if an ac is doubtful for more than 3 years than 100 of the provision is to be made
both from secured and unsecured portion If an advance has been guaranteed by DICGC
CGFTECGC and is doubtful than provision on secured portion will be as in other cases but
provision on unsecured portion will be made after deducting the claim value
4 LOSS ASSET 100 of the outstanding amount while making provision on NPAs amount
lying in suspense ac and derecognized interest should be deducted from gross advance and
provision be made on balance amount
5 OVERALL PROVISION With a view to improving the improving the provisioning cover
and enhancing the soundness of the individual banks RBI has proposed in oct- 09 policy that
bank should augment their provisions and ensure that their total provisioning coverage ratio
including floating provisions is not less than 70
Source wwwRBIorgin
IMPACTEFFECT OF NPA UPON BANKS
A strong banking sector is important for flourishing economy The failure of banking sector
may have an adverse impact on other sector NPA are one of the major concerns of sector
banks is increasing result in nonperforming assets The NPA impact drastically to the
working of banks The efficiency of bank not always reflected by the size of its balance sheet
but by the level of return on its assetsNPA do not generate interest income for the banks but
the same time banks are required to make provisions for such NPAs from their current
profits
They erode current profits through provisioning requirement
They result in reduced interest income
They require higher provisioning requirements effecting profits and accretion to capital
Adverse impact on capital adequacy ratio
Roe and Roa goes down because NPA do not earn
Banks rating gets effect
Banks cost of raising funds goes up
Bad effect on goodwill
Bad effect on equity value
EARLY SYMPTOMS BY WHICH ONE CAN RECOGNIZE A PERFORMING
ASSETS TURNING TO A NON PERFORMING ASSET
Four categories of early symptoms
1) FINANCIAL
(a) Non- payment of very first installment
(b) Bouncing of cheque due to insufficient balance in the ac
(c) Irregularity in installment
(d) Irregularity of operations in ac
(e) Unpaid overdue bill
(f) Declining current ratio
2) OPERATIONAL AND PHYSICAL
(a) If information is received that the borrower has either initiated the process of winding up or not doing the business
(b) Over-due receivable
(c) Stock statement not submitted on time
(d) External non-controllable factor like natural calamities in the city where the borrower lives
(e) Non- payment of salary
(3) ATTITUDNAL CHANGE
(a) Use for personal comfort stocks and shares by borrowers
(b) Avoidance of contact with bank
(c) Problem between partners
(4) OTHER
(a) Change in govt policies
(b) Death of the borrower
(c) Delay in salary
PREVENTIVE MEASUREMENT FOR NPA
Early recognition of the problem
Invariably by the time banks start their efforts to get involved
in a revival process its too late to retrieve the situation ndash both in terms of rehabilitation of the
project and the recovery of banks dues Identification of the weakness regardless of the fact
that it may not have become NPA is imperative Assessment of the potential of revival may
be done on the basis of a techno-economic viability study Restructuring should be attempted
where after an objective assessment of the promoterrsquos intention banks are convinced of a
turn around with in a scheduled facilitate winding upselling of units earlier so as to recover
whatever is possible through means before the security position becomes worse
Identifying borrowers with genuine intent
Identifying borrower with genuine intent from those who
are non-serious with commitment or stake in revival is a challenge confronting bankers Here
the role of front line officials at branch level is paramount as they are the ones who have
intelligent inputs with regard to promoters lsquo sincerity and capability to achieve turnaround
Based on this objective assessment bank should decide as quickly as possible whether it
would be worthwhile to commit additional finance
In this regard banks may consider having
ldquospecial investigationrdquo of all financial transaction or business transaction books of account
order to ascertain real factor that contributed to sickness of borrower Bank may have panel
of technical experts with proven expertise and task record of preparing techno-economic
study of the project of the borrowers
Borrowers having genuine problems due to temporary mismatch in find flow or sudden
requirement of additional fund may entertained at branch level for this purpose a special
limit to such type of cases should be decided This will obviate the need to route the
additional funding through the controlling officers in deserving cases and avert many
accounts sleeping into NPA category
Timeliness and adequacy of response
Longer the delay in response greater the enjury to the
account and the asset Time is a crucial element in any restructuring or rehabilitation activity
The response decided on the basis of techno- economic study and promoterrsquos commitment
has to be adequate in terms of extend of additional funding and relaxations etc under the
restructuring exercise The package of assistance may be flexible and bank may look at the
exit option
Focus on cash flow
While financing at the time of restructuring the banks may not be guided
by the conventional fund flow analysis only which could yield a potentially misleading
picture Appraisal for fresh credit requirement may be done by analyzing fond flow in
conjunction with the cash flow rather than only on the basis of fund flow
Source wwwAskcom
Management effectiveness
The general perception among the borrower is lack of finance that
leads to sickness and NPAs but this may not be the case all the time Management effectiveness
advance business condition is a very important aspect that affects a borrowing units fortunes A bank
may commit a multiple finance to an align unit only after basic viability of the enterprise also in the
context of quality of management is examined and confirmed It will be useful to have consultant
appointed as early as possible to examine this aspect A proper techno-economic viability study thus
become the basis on which any future action can be considered
Multiple financing
A) During the exercise for assessment of viability and restructuring a pragmatic and unified
approach by all the leading banks as also sharing of all relevant information on the
borrower would go a long way toward overall success of rehabilitation exercise given the
probability of successfailure
B) In some default cases Where the unit is still working The bank should make sure that it
captures the cash flow and insure that such cash are used for working capital purpose
Toward this end there should be a continuous flow of information among consortium
member A bank which is not a part of consortium may not be allowed to offer credit
facility to such defaulting clients Current account facility may also be denied at non-
consortium banks to such clients and violation may attract penal action The credit
information bureau of india (CIBIL) may be very useful for meaningful information
exchange on defaulting borrowers once the setup become fully operational
C) In a forum of lenders the priority of each lender will be different While one set of lender
may be willing to wait for longer time to recover its dues another lender may have a much
shorter timeframe in mind So it is possible that the letter categories of lenders may be
willing to exit even at a cost by a discounted settlement of the exposure There for any plan
for restructuringrehabilitation may takes into account
D) Corporate debt restructuring it has been institutionalized in 2001 to provide a timely and
transparent system for restructuring the corporate debt of RS 20 crores and above with the
banks on a voluntary basis and outside a legal framework Under this system bank are
greatly benefit in terms of restructuring of large standard accounts (potential NPAs) and
viable sub-standard account with multiple banking arrangement
NPA MANAGEMENT- RESOLUTION
Compromise settlement schemes
Restructuringrescheduling
Lok adalat
Corporate debt restructuring cell
Debt recovery Tribunals (DRT)
Proceeding under the code of civil procedure
Board of industrial and financial reconstruction
National company law Tribunal (NCLT)
Sale of NPA to other bank
Sale of NPA to ARCSC under securitization and reconstruction of financial assets for
enforcement of security interest Act 2000 (SRFAESI)
Liquidation
Source wwwRBIorgin
NPA MANAGEMENT IN INDIA
Formation of the credit information bureau (India) limited (CIBIL)
Release of willful defaulterrsquos listRBI also releases a list of borrowers with aggregate
outstanding of RS 1 crore and above against whom bank have filed suit for recovery of their
fund
Reporting of frauds to RBI
Norms of lenders labiality- framing of fair practices code with regard to lenders lability to
be followed by banks
Risk assessment and Risk management
RBI has advised banks to all cases of willful defaulters in case of 1 crore and above and
files suits in such cases
Responding quick mortality cases
Special mention accounts for early identification for bad debt loans and advances over due
for less than one or two quarters would come under this category However these accounts do
not need provisioning
INTERNATIONAL PRACTICES ON NPA MANAGEMENT
Subsequent to the Asian currency crisis which severely crippled the financial system In
addition to the above some of the more recent and aggressive step to NPAs have been taken
by Taiwan Taiwanese financial institution have been encouraged to merge and form bank
based AMCs through the recent introduction of financial holding company act and financial
institution Asian countries the magnitude of NPAs in Asian financial institution was brought
to light Driven by the need to proactively tackle the soaring NPAs level the respective govt
embarked upon a program of substantial reform This involves setting up processes for early
identification and resolution of NPAs The table below provides a cross country comparison
of approaches used for NPA resolution Mergers Act A long side the ministry of finance has
followed a carrot and strict policy of specifying the required NPA ratio for banks while also
providing flexibility in modes of NPA assets resolution and a conduct
ive regulatory and tax environment Deferred loss write-off provisions have been instituted to
provide breathing space for lenders to absorb NPA write-off While it is too early to
comment on success of NPA resolution process in Taiwan the early sign are encouraging
Detailed below are some key NPA management approaches adopted by banks in South East
Asian countries
1 Credit risk mitigation
2 Early warning systems
3 Assets management companies
Increasing willingness to sell NPAs to AMCs
Effective resolution strategy
Appointment of special administrators
4 Out of court restructuring
Source wwwgooglecom
DIFFICULTIES WITH NON PERFORMING ASSETS
I Owners do not receive a market return on their capital In the worst case if the bank
fails owner lose their assets
II Depositors do not receive a market return on savings In the worst case if the bank
fails depositors lose their assets or uninsured balance Banks also redistribute losses
to other borrowers by charging higher rate of interest
III Non-performing loans epitomize bad investors They misallocate credit from good
projects which do not receive funding to failed project
IV 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
shortage the shortage can jam payments across the country
b Illiquidity constraints banks in paying depositors eg cashing their paychecks
c Undercapitalized banks exceed the bank capital base
Lending by bank has been politicized It is common knowledge
that loans are given to various industrial houses on common consideration and
viability of project but on political consideration In normal circumstances banks
before extending any loan would make a thorough study of the actual need of the
party considered the prospect of the business in which it is engaged Since it is
not looked into many of the loans becomes NPA
REASONS F0R AN ACCOUNT BECOMING NPA
Those attribute to borrower
Failure to bring in required capital
Lack of proper planning
Unwanted expenses
Lack of expertise
Poor credit collection
Miss management
Heavy borrowing
Lack of knowledge regarding NPA
Willful defaulters
Death of the borrower
Those attribute to banks
Wrong selection of borrower
Poor credit appraisal
Unhelpful in supervision
Too inflexible attitude
System overload
Lack of motivation
Delay in sanction
Lack of trained staff
Lack of commitment to recovery
Lack of personal visit to the borrower office
Lack of personal visit to the borrowerrsquos residence
Other
Fast changing technology
Unhelpful attitude of govt
Increase in material cost
Government policies
Taxation law
Political hostility
INDIAN ECONOMY AND NPA
Undoubtedly the world economy has slowed down recession is at its peak globally stock markets
have tumbled and business itself getting hard to do The Indian economy has been much affected due
to high fiscal deficit poor infrastructure facilities sticky legal system cutting of exposures to
emerging market by FIIs etc
Further international rating agencies like standard and poor
have lowered Indiarsquos credit rating to sub- investment grade Such negative aspects have often
outweighed positive such as increasing for reserve and a manageable inflation rate
Under such situation I go without saying that banks are no exception
and are bound to face the heat of global down turn One would be surprise to know that banks and
financial institution in India holds non-performing assets worth Rs 1 10000 crores Bankers have
realized that unless the level of NPA is reduced drastically they will find it difficult to survive
The actual level of NPA in India is around $ 40 billion much higher than govt estimation of $16
billion This difference is largely due to the discrepancy in accounting the NPAs followed by India
and rest of the world The accounting norms of India are less stringent than those of the developed
economies The Indian banks also have the tendency to extend the past due Considering the GDP
India nearly $ 470 billion the NPA are 8 of the total GDP which was better than many Asian
countries The NPA of china was 45 of the GDP While Japan had NPAs of 25 of the GDP
The aggregate level of NPAs in Asia has increased from $ 25 billion in 2007 to
$ 34 billion on 2009 looking to such overall pictures of the market we can say that India is doing
well and the steps taken are looking favorable
Source googlecoin
DATA ANALYZING THE QUETIONNAIRE
Two set of questionnaire were prepared to collect the feedback One set of questionnaire was meant for branches and other set of questionnaire was meant for borrowers
The set of questionnaire were given to the branches under hazaribag (RBO) and collected the feedback of the bankers of P segment and the branch manager
The questionnaire prepared for branch contained 15 questions and the questionnaire prepared for borrower contains 10 questions
The data was collected from 50 bankers and the data analysis of the branch questionnaire is as follows
Question number 1
Does not require any data analysis and information was sought to know the business level of the branches for the purpose of whether particular branch is actively engaged in xpress credit portfolio
Question number 2
Do you think that the borrowers are aware about NPA
Answer
32 of the respondent feel that the borrowers are not aware about NPA and 18 respondents feel that borrowers are aware about NPA
Chart no 11
yes
no
0
5
10
15
20
25
30
35
1832 Column1
Conclusion
Majority of the bank officials feels that the borrowers are not aware about NPA
Question number 3
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Answer
Out of 32 respondent 22 respondents is fully satisfied that lack of knowledge among the borrower regarding NPA is one of the reason for NPA 08 respondent were partially satisfied with it and 02 respondent were not satisfied with it
Chart no 12
fully satisfied(22)69
partially satisfied(8)25
not satisfied(2)6
Sales
Conclusion
Majority of the borrowers feels that lack of knowledge among the borrower regarding NPA is one of the reasons for NPA
Question number 4 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Answer
Out of 50 respondent 30 of the respondent strongly satisfied that these external factors contribute to NPA 10 respondent were partially satisfied with it 5 were not satisfied where as 5 were fully dissatisfied with it
Chart no 13
6020
10
10
fully satisfied(30) partially satisfied(10) not satisfiec(5) fully desatisfied(5)
Conclusion
Most of the respondent thinks that external factrs like willful defaulter change in govt policy contribute to NPA
Question number 5
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Answer
Chart no 14
feedback
fully satisfied(20)partially satisfied(12)not satisfied(12)fully dissatisfied(6)
Conclusion
As per the response of the officials most of the officials feel that internal factors are also responsible for NPA
Question number 6
Do you think that inflation is one of the reasons for NPA
Answer
Out f 50 responses 22 were strongly satisfied 18 were partially satisfied 8 were not satisfied and 2 were fully dissatisfied
Chart no 15
fully satisfied(20)44
partially satisfied(18)36
not satisfied(5)10
fullt dissatisfied(5)10
Conclusion
Growing inflation increasing goods rate is also one of the reason for NPA
Question number 7
Do you think that lack of PSS is also contributed to NPA
Answer
Out of 50 responses 30 were fully satisfied with it 12 were partially satisfied and 8 were fully dissatisfied
Chart no 16
6024
16
Open
fully satisfied(30)Partially satisfied(12)not satisfied(0)fully dissatisfied(8)
Conclusion
Majority of the officiais feels that lack of PSS is one of the reason for NPA This means that the PSS carried out by the bank is not sufficient or not carried out properly
Question number 8
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Answer
Most of the respondent feels that increase in unwanted expenses of the borrwer ls contribute to NPA
Chart no 17
56
12
28
4
FULLY SATISFIED(28)PARTIALLY SATISFIED(6)NOT SATISFIED(14)FULLY DISSATISFIED(2)
Conclusion
As per response of the officials increasing inflation have an adverse effect on the financial sector its working performance as well as on NPA
Question number 9
Do you think that high rate of interest under Xpress credit also contributes to NPA
Answer
Out of 50 respondent 25 respondent were not satisfied 10 were partially satisfied 10 were strongly dissatisfied where as only 5 out of 50 were fully satisfied with it
Chart no 18
strongly satisfied(5)partially satisfied(10)not satisfied(25)fully dissatisfied(10)
Conclusion
Most of the respondents are not satisfied with it They feel that the rate of interest charged by SBI under Xpress credit is not high and it will not contribute to NPS
Question number 10
Do you think that lack of proper planning of the borrower is one of the reason for NPA
Answer
Out of 70 respondent 35 were fully satisfied 5 were not satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 19
fully satisfied(35)70
partially satisfied(10)20
not satisfied(5)10
Conclusion
Most of the respondent feels that the borrowers borrow money from the bank without any proper planning which is one of the most important reason for NPA
Question number 11
Is heavy borrowing also contribute to NPA
Answer
Out of 50 respondent 25 respondent were fully satisfied 12 were partially satisfied 8 were not satisfied were as 5 were fully dissatisfied
Chart no 110
50
24
16
10
fully satisfied(25) partially satisfied(12) not satisfied(8) fully dissatisfied(5)
Question number 12
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Answer
As per the response of the officials 20 were fully satisfied 66were partially satisfied 4 were not satisfied with it were as 10 respondent were fully dissatisfied
Chart no 111
fully satisfied(10)20
partially satisfied(33)66
not satisfied(2)4
fullydissatisfied(5)10
Conclusion
As per the response given by the officials most of the officials were partially satisfied that wrong selection of borrower also contribute to NPA which means that selection process carried out by the bank is not appropriate or there is some difficulties in implementing them
Question number 13
Do you think that poor credit appraisal also contribute to NPA
Answer
Out of 50 respondent 5 were fully satisfied 10 were fully satisfied 30 were not satisfied were as only 5 were fully dissatisfied
Chart no 112
fully satisfied(5)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 14
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Answer
Out of 50 responses 3 were fully satisfied 15 were partially satisfied 25 were not satisfied where as 7 were full dissatisfied
Chart no 113
fully satisfied(3)partiallt satisfied(15)not satisfied(25)fully dissatisfied(7)
Conclusion
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not contribute to NPA This means that the attitude of bank toward the borrower is not inflexible
Question number 15
Do you think that system over load is also one of the causes of NPA
Answer
Out of 50 respondent 28 were fully satisfied 12 were partially satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 114
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Sub- standard assets with effect from 3132005 a sub-standard assets is one which is
classified as NPA for a period not exceeding 12 months
Doubtful asset with effect from 3132005 an asset is to be classified as doubtful if it
remained npa or sub-standard for a period exceeding 12 months
Loss assets a loss asset is one where loss has been identified by the bank or internal and
external auditors or the RBI inspection but the amount as not been written off wholly In
other words such an asset is considered uncollectable and such little value that its
continuance as a bankable asset is not warranted although there may be some salvage or
recoverable value
NPA IDENTIFICATION NORMS
With effect from 31st march 2004 a loan or advance become npa when
a Interest or installment of the principle remains overdue for a period more then 90
days in respect of term loan
b The ac remain out of order for a period more 90days in respect of over draft cash
cash credit
c The bill remains overdue for a period more than 90 days in case of bills purchased
and discounted
d With effect from Sept 2004 loan granted for short duration crops will be treated as
NPA if the installment of principle or interest there on remains overdue for two crop
season and loan granted for long duration will be treated as NPA if the installment
remains overdue for one crop season
Out of order
An account will be treated as out as out of order if the outstanding balance remain
continuously in excess of the sanctioned limitdrawing power In cases where the
outstanding balance in the principle operating ac is less than the sanctioned limit but
there are no credit continuously for 90 days as on the date of balance sheet or the
credit are not enough to cover the interest debited during the same period
Overdue
An amount due to the bank under any credit facility is overdue it is not paid on the due
date fixed by the bank
The date of npa will be actual date on which sippage occurred as mentioned below
For term and demand loan ac
The date on which the installment of the principle have
remaine overdue for a period more then 90 days
For over draft and cash credit ac
The date on which the ac completed period of more than 90
days of being continuously out of order
Source wwwRBI Org in
PROVISING NORMS
There is time lag between an ac becoming doubtful for recovery the realization of security and
erosion over a loan period of time in its value So RBI directives now requiresthe banks to make
provisions in their balance sheet for all non- standard loan asset Provisioning is made on all types of
assets ie Standard sub-standard doubtful and loss assets
1 Standard assets RBI vides its circular dated 151108 revised the provisioning requirements
For all type of standard assets it has been reduced to a uniform level of 040of outstanding
at global basis except in the case of direct advance to agriculture and SME sector which
shall continue to attract a provisioning of 025 The provision toward standard assets need
not to be netted from gross advances but shown separately as ldquo contigent provisionsrdquo against
standard assets under other liquidities and provisions others in schedule 5 of the balance
sheet
2 Sub-standard assets- In respect of sub-standard assets the rate of provision is 10 of
outstanding balance without considering ECGC guarantee cover or securities available
However if the loan was unsecured from the begining there would be additional provision of
10 ie total provision would be 20 of the outstanding balance Unsecured exposure is
defined as an exposure where the realizable value of the security as assessed by the
bankreserve banks inspecting officers is not more than 10 ab-intio of the outstanding
exposure
3 Doubtful assets In case of doubtful assets while making provision realizable value of
security is to be considered 100 provision is made for unsecured portion In case of
secured portion the rate of provision depend on age of doubtful assets as under
Age of doubtful assets Provision as of secured portion
Doubtful up to 1 year D1 20 of RVS( realizable value of security)
Doubtful for more than 1 year D2 30 of RVS
Doubtful for more than 3 years D2 100 of RVS
Thus if an ac is doubtful for more than 3 years than 100 of the provision is to be made
both from secured and unsecured portion If an advance has been guaranteed by DICGC
CGFTECGC and is doubtful than provision on secured portion will be as in other cases but
provision on unsecured portion will be made after deducting the claim value
4 LOSS ASSET 100 of the outstanding amount while making provision on NPAs amount
lying in suspense ac and derecognized interest should be deducted from gross advance and
provision be made on balance amount
5 OVERALL PROVISION With a view to improving the improving the provisioning cover
and enhancing the soundness of the individual banks RBI has proposed in oct- 09 policy that
bank should augment their provisions and ensure that their total provisioning coverage ratio
including floating provisions is not less than 70
Source wwwRBIorgin
IMPACTEFFECT OF NPA UPON BANKS
A strong banking sector is important for flourishing economy The failure of banking sector
may have an adverse impact on other sector NPA are one of the major concerns of sector
banks is increasing result in nonperforming assets The NPA impact drastically to the
working of banks The efficiency of bank not always reflected by the size of its balance sheet
but by the level of return on its assetsNPA do not generate interest income for the banks but
the same time banks are required to make provisions for such NPAs from their current
profits
They erode current profits through provisioning requirement
They result in reduced interest income
They require higher provisioning requirements effecting profits and accretion to capital
Adverse impact on capital adequacy ratio
Roe and Roa goes down because NPA do not earn
Banks rating gets effect
Banks cost of raising funds goes up
Bad effect on goodwill
Bad effect on equity value
EARLY SYMPTOMS BY WHICH ONE CAN RECOGNIZE A PERFORMING
ASSETS TURNING TO A NON PERFORMING ASSET
Four categories of early symptoms
1) FINANCIAL
(a) Non- payment of very first installment
(b) Bouncing of cheque due to insufficient balance in the ac
(c) Irregularity in installment
(d) Irregularity of operations in ac
(e) Unpaid overdue bill
(f) Declining current ratio
2) OPERATIONAL AND PHYSICAL
(a) If information is received that the borrower has either initiated the process of winding up or not doing the business
(b) Over-due receivable
(c) Stock statement not submitted on time
(d) External non-controllable factor like natural calamities in the city where the borrower lives
(e) Non- payment of salary
(3) ATTITUDNAL CHANGE
(a) Use for personal comfort stocks and shares by borrowers
(b) Avoidance of contact with bank
(c) Problem between partners
(4) OTHER
(a) Change in govt policies
(b) Death of the borrower
(c) Delay in salary
PREVENTIVE MEASUREMENT FOR NPA
Early recognition of the problem
Invariably by the time banks start their efforts to get involved
in a revival process its too late to retrieve the situation ndash both in terms of rehabilitation of the
project and the recovery of banks dues Identification of the weakness regardless of the fact
that it may not have become NPA is imperative Assessment of the potential of revival may
be done on the basis of a techno-economic viability study Restructuring should be attempted
where after an objective assessment of the promoterrsquos intention banks are convinced of a
turn around with in a scheduled facilitate winding upselling of units earlier so as to recover
whatever is possible through means before the security position becomes worse
Identifying borrowers with genuine intent
Identifying borrower with genuine intent from those who
are non-serious with commitment or stake in revival is a challenge confronting bankers Here
the role of front line officials at branch level is paramount as they are the ones who have
intelligent inputs with regard to promoters lsquo sincerity and capability to achieve turnaround
Based on this objective assessment bank should decide as quickly as possible whether it
would be worthwhile to commit additional finance
In this regard banks may consider having
ldquospecial investigationrdquo of all financial transaction or business transaction books of account
order to ascertain real factor that contributed to sickness of borrower Bank may have panel
of technical experts with proven expertise and task record of preparing techno-economic
study of the project of the borrowers
Borrowers having genuine problems due to temporary mismatch in find flow or sudden
requirement of additional fund may entertained at branch level for this purpose a special
limit to such type of cases should be decided This will obviate the need to route the
additional funding through the controlling officers in deserving cases and avert many
accounts sleeping into NPA category
Timeliness and adequacy of response
Longer the delay in response greater the enjury to the
account and the asset Time is a crucial element in any restructuring or rehabilitation activity
The response decided on the basis of techno- economic study and promoterrsquos commitment
has to be adequate in terms of extend of additional funding and relaxations etc under the
restructuring exercise The package of assistance may be flexible and bank may look at the
exit option
Focus on cash flow
While financing at the time of restructuring the banks may not be guided
by the conventional fund flow analysis only which could yield a potentially misleading
picture Appraisal for fresh credit requirement may be done by analyzing fond flow in
conjunction with the cash flow rather than only on the basis of fund flow
Source wwwAskcom
Management effectiveness
The general perception among the borrower is lack of finance that
leads to sickness and NPAs but this may not be the case all the time Management effectiveness
advance business condition is a very important aspect that affects a borrowing units fortunes A bank
may commit a multiple finance to an align unit only after basic viability of the enterprise also in the
context of quality of management is examined and confirmed It will be useful to have consultant
appointed as early as possible to examine this aspect A proper techno-economic viability study thus
become the basis on which any future action can be considered
Multiple financing
A) During the exercise for assessment of viability and restructuring a pragmatic and unified
approach by all the leading banks as also sharing of all relevant information on the
borrower would go a long way toward overall success of rehabilitation exercise given the
probability of successfailure
B) In some default cases Where the unit is still working The bank should make sure that it
captures the cash flow and insure that such cash are used for working capital purpose
Toward this end there should be a continuous flow of information among consortium
member A bank which is not a part of consortium may not be allowed to offer credit
facility to such defaulting clients Current account facility may also be denied at non-
consortium banks to such clients and violation may attract penal action The credit
information bureau of india (CIBIL) may be very useful for meaningful information
exchange on defaulting borrowers once the setup become fully operational
C) In a forum of lenders the priority of each lender will be different While one set of lender
may be willing to wait for longer time to recover its dues another lender may have a much
shorter timeframe in mind So it is possible that the letter categories of lenders may be
willing to exit even at a cost by a discounted settlement of the exposure There for any plan
for restructuringrehabilitation may takes into account
D) Corporate debt restructuring it has been institutionalized in 2001 to provide a timely and
transparent system for restructuring the corporate debt of RS 20 crores and above with the
banks on a voluntary basis and outside a legal framework Under this system bank are
greatly benefit in terms of restructuring of large standard accounts (potential NPAs) and
viable sub-standard account with multiple banking arrangement
NPA MANAGEMENT- RESOLUTION
Compromise settlement schemes
Restructuringrescheduling
Lok adalat
Corporate debt restructuring cell
Debt recovery Tribunals (DRT)
Proceeding under the code of civil procedure
Board of industrial and financial reconstruction
National company law Tribunal (NCLT)
Sale of NPA to other bank
Sale of NPA to ARCSC under securitization and reconstruction of financial assets for
enforcement of security interest Act 2000 (SRFAESI)
Liquidation
Source wwwRBIorgin
NPA MANAGEMENT IN INDIA
Formation of the credit information bureau (India) limited (CIBIL)
Release of willful defaulterrsquos listRBI also releases a list of borrowers with aggregate
outstanding of RS 1 crore and above against whom bank have filed suit for recovery of their
fund
Reporting of frauds to RBI
Norms of lenders labiality- framing of fair practices code with regard to lenders lability to
be followed by banks
Risk assessment and Risk management
RBI has advised banks to all cases of willful defaulters in case of 1 crore and above and
files suits in such cases
Responding quick mortality cases
Special mention accounts for early identification for bad debt loans and advances over due
for less than one or two quarters would come under this category However these accounts do
not need provisioning
INTERNATIONAL PRACTICES ON NPA MANAGEMENT
Subsequent to the Asian currency crisis which severely crippled the financial system In
addition to the above some of the more recent and aggressive step to NPAs have been taken
by Taiwan Taiwanese financial institution have been encouraged to merge and form bank
based AMCs through the recent introduction of financial holding company act and financial
institution Asian countries the magnitude of NPAs in Asian financial institution was brought
to light Driven by the need to proactively tackle the soaring NPAs level the respective govt
embarked upon a program of substantial reform This involves setting up processes for early
identification and resolution of NPAs The table below provides a cross country comparison
of approaches used for NPA resolution Mergers Act A long side the ministry of finance has
followed a carrot and strict policy of specifying the required NPA ratio for banks while also
providing flexibility in modes of NPA assets resolution and a conduct
ive regulatory and tax environment Deferred loss write-off provisions have been instituted to
provide breathing space for lenders to absorb NPA write-off While it is too early to
comment on success of NPA resolution process in Taiwan the early sign are encouraging
Detailed below are some key NPA management approaches adopted by banks in South East
Asian countries
1 Credit risk mitigation
2 Early warning systems
3 Assets management companies
Increasing willingness to sell NPAs to AMCs
Effective resolution strategy
Appointment of special administrators
4 Out of court restructuring
Source wwwgooglecom
DIFFICULTIES WITH NON PERFORMING ASSETS
I Owners do not receive a market return on their capital In the worst case if the bank
fails owner lose their assets
II Depositors do not receive a market return on savings In the worst case if the bank
fails depositors lose their assets or uninsured balance Banks also redistribute losses
to other borrowers by charging higher rate of interest
III Non-performing loans epitomize bad investors They misallocate credit from good
projects which do not receive funding to failed project
IV 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
shortage the shortage can jam payments across the country
b Illiquidity constraints banks in paying depositors eg cashing their paychecks
c Undercapitalized banks exceed the bank capital base
Lending by bank has been politicized It is common knowledge
that loans are given to various industrial houses on common consideration and
viability of project but on political consideration In normal circumstances banks
before extending any loan would make a thorough study of the actual need of the
party considered the prospect of the business in which it is engaged Since it is
not looked into many of the loans becomes NPA
REASONS F0R AN ACCOUNT BECOMING NPA
Those attribute to borrower
Failure to bring in required capital
Lack of proper planning
Unwanted expenses
Lack of expertise
Poor credit collection
Miss management
Heavy borrowing
Lack of knowledge regarding NPA
Willful defaulters
Death of the borrower
Those attribute to banks
Wrong selection of borrower
Poor credit appraisal
Unhelpful in supervision
Too inflexible attitude
System overload
Lack of motivation
Delay in sanction
Lack of trained staff
Lack of commitment to recovery
Lack of personal visit to the borrower office
Lack of personal visit to the borrowerrsquos residence
Other
Fast changing technology
Unhelpful attitude of govt
Increase in material cost
Government policies
Taxation law
Political hostility
INDIAN ECONOMY AND NPA
Undoubtedly the world economy has slowed down recession is at its peak globally stock markets
have tumbled and business itself getting hard to do The Indian economy has been much affected due
to high fiscal deficit poor infrastructure facilities sticky legal system cutting of exposures to
emerging market by FIIs etc
Further international rating agencies like standard and poor
have lowered Indiarsquos credit rating to sub- investment grade Such negative aspects have often
outweighed positive such as increasing for reserve and a manageable inflation rate
Under such situation I go without saying that banks are no exception
and are bound to face the heat of global down turn One would be surprise to know that banks and
financial institution in India holds non-performing assets worth Rs 1 10000 crores Bankers have
realized that unless the level of NPA is reduced drastically they will find it difficult to survive
The actual level of NPA in India is around $ 40 billion much higher than govt estimation of $16
billion This difference is largely due to the discrepancy in accounting the NPAs followed by India
and rest of the world The accounting norms of India are less stringent than those of the developed
economies The Indian banks also have the tendency to extend the past due Considering the GDP
India nearly $ 470 billion the NPA are 8 of the total GDP which was better than many Asian
countries The NPA of china was 45 of the GDP While Japan had NPAs of 25 of the GDP
The aggregate level of NPAs in Asia has increased from $ 25 billion in 2007 to
$ 34 billion on 2009 looking to such overall pictures of the market we can say that India is doing
well and the steps taken are looking favorable
Source googlecoin
DATA ANALYZING THE QUETIONNAIRE
Two set of questionnaire were prepared to collect the feedback One set of questionnaire was meant for branches and other set of questionnaire was meant for borrowers
The set of questionnaire were given to the branches under hazaribag (RBO) and collected the feedback of the bankers of P segment and the branch manager
The questionnaire prepared for branch contained 15 questions and the questionnaire prepared for borrower contains 10 questions
The data was collected from 50 bankers and the data analysis of the branch questionnaire is as follows
Question number 1
Does not require any data analysis and information was sought to know the business level of the branches for the purpose of whether particular branch is actively engaged in xpress credit portfolio
Question number 2
Do you think that the borrowers are aware about NPA
Answer
32 of the respondent feel that the borrowers are not aware about NPA and 18 respondents feel that borrowers are aware about NPA
Chart no 11
yes
no
0
5
10
15
20
25
30
35
1832 Column1
Conclusion
Majority of the bank officials feels that the borrowers are not aware about NPA
Question number 3
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Answer
Out of 32 respondent 22 respondents is fully satisfied that lack of knowledge among the borrower regarding NPA is one of the reason for NPA 08 respondent were partially satisfied with it and 02 respondent were not satisfied with it
Chart no 12
fully satisfied(22)69
partially satisfied(8)25
not satisfied(2)6
Sales
Conclusion
Majority of the borrowers feels that lack of knowledge among the borrower regarding NPA is one of the reasons for NPA
Question number 4 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Answer
Out of 50 respondent 30 of the respondent strongly satisfied that these external factors contribute to NPA 10 respondent were partially satisfied with it 5 were not satisfied where as 5 were fully dissatisfied with it
Chart no 13
6020
10
10
fully satisfied(30) partially satisfied(10) not satisfiec(5) fully desatisfied(5)
Conclusion
Most of the respondent thinks that external factrs like willful defaulter change in govt policy contribute to NPA
Question number 5
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Answer
Chart no 14
feedback
fully satisfied(20)partially satisfied(12)not satisfied(12)fully dissatisfied(6)
Conclusion
As per the response of the officials most of the officials feel that internal factors are also responsible for NPA
Question number 6
Do you think that inflation is one of the reasons for NPA
Answer
Out f 50 responses 22 were strongly satisfied 18 were partially satisfied 8 were not satisfied and 2 were fully dissatisfied
Chart no 15
fully satisfied(20)44
partially satisfied(18)36
not satisfied(5)10
fullt dissatisfied(5)10
Conclusion
Growing inflation increasing goods rate is also one of the reason for NPA
Question number 7
Do you think that lack of PSS is also contributed to NPA
Answer
Out of 50 responses 30 were fully satisfied with it 12 were partially satisfied and 8 were fully dissatisfied
Chart no 16
6024
16
Open
fully satisfied(30)Partially satisfied(12)not satisfied(0)fully dissatisfied(8)
Conclusion
Majority of the officiais feels that lack of PSS is one of the reason for NPA This means that the PSS carried out by the bank is not sufficient or not carried out properly
Question number 8
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Answer
Most of the respondent feels that increase in unwanted expenses of the borrwer ls contribute to NPA
Chart no 17
56
12
28
4
FULLY SATISFIED(28)PARTIALLY SATISFIED(6)NOT SATISFIED(14)FULLY DISSATISFIED(2)
Conclusion
As per response of the officials increasing inflation have an adverse effect on the financial sector its working performance as well as on NPA
Question number 9
Do you think that high rate of interest under Xpress credit also contributes to NPA
Answer
Out of 50 respondent 25 respondent were not satisfied 10 were partially satisfied 10 were strongly dissatisfied where as only 5 out of 50 were fully satisfied with it
Chart no 18
strongly satisfied(5)partially satisfied(10)not satisfied(25)fully dissatisfied(10)
Conclusion
Most of the respondents are not satisfied with it They feel that the rate of interest charged by SBI under Xpress credit is not high and it will not contribute to NPS
Question number 10
Do you think that lack of proper planning of the borrower is one of the reason for NPA
Answer
Out of 70 respondent 35 were fully satisfied 5 were not satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 19
fully satisfied(35)70
partially satisfied(10)20
not satisfied(5)10
Conclusion
Most of the respondent feels that the borrowers borrow money from the bank without any proper planning which is one of the most important reason for NPA
Question number 11
Is heavy borrowing also contribute to NPA
Answer
Out of 50 respondent 25 respondent were fully satisfied 12 were partially satisfied 8 were not satisfied were as 5 were fully dissatisfied
Chart no 110
50
24
16
10
fully satisfied(25) partially satisfied(12) not satisfied(8) fully dissatisfied(5)
Question number 12
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Answer
As per the response of the officials 20 were fully satisfied 66were partially satisfied 4 were not satisfied with it were as 10 respondent were fully dissatisfied
Chart no 111
fully satisfied(10)20
partially satisfied(33)66
not satisfied(2)4
fullydissatisfied(5)10
Conclusion
As per the response given by the officials most of the officials were partially satisfied that wrong selection of borrower also contribute to NPA which means that selection process carried out by the bank is not appropriate or there is some difficulties in implementing them
Question number 13
Do you think that poor credit appraisal also contribute to NPA
Answer
Out of 50 respondent 5 were fully satisfied 10 were fully satisfied 30 were not satisfied were as only 5 were fully dissatisfied
Chart no 112
fully satisfied(5)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 14
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Answer
Out of 50 responses 3 were fully satisfied 15 were partially satisfied 25 were not satisfied where as 7 were full dissatisfied
Chart no 113
fully satisfied(3)partiallt satisfied(15)not satisfied(25)fully dissatisfied(7)
Conclusion
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not contribute to NPA This means that the attitude of bank toward the borrower is not inflexible
Question number 15
Do you think that system over load is also one of the causes of NPA
Answer
Out of 50 respondent 28 were fully satisfied 12 were partially satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 114
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
b The ac remain out of order for a period more 90days in respect of over draft cash
cash credit
c The bill remains overdue for a period more than 90 days in case of bills purchased
and discounted
d With effect from Sept 2004 loan granted for short duration crops will be treated as
NPA if the installment of principle or interest there on remains overdue for two crop
season and loan granted for long duration will be treated as NPA if the installment
remains overdue for one crop season
Out of order
An account will be treated as out as out of order if the outstanding balance remain
continuously in excess of the sanctioned limitdrawing power In cases where the
outstanding balance in the principle operating ac is less than the sanctioned limit but
there are no credit continuously for 90 days as on the date of balance sheet or the
credit are not enough to cover the interest debited during the same period
Overdue
An amount due to the bank under any credit facility is overdue it is not paid on the due
date fixed by the bank
The date of npa will be actual date on which sippage occurred as mentioned below
For term and demand loan ac
The date on which the installment of the principle have
remaine overdue for a period more then 90 days
For over draft and cash credit ac
The date on which the ac completed period of more than 90
days of being continuously out of order
Source wwwRBI Org in
PROVISING NORMS
There is time lag between an ac becoming doubtful for recovery the realization of security and
erosion over a loan period of time in its value So RBI directives now requiresthe banks to make
provisions in their balance sheet for all non- standard loan asset Provisioning is made on all types of
assets ie Standard sub-standard doubtful and loss assets
1 Standard assets RBI vides its circular dated 151108 revised the provisioning requirements
For all type of standard assets it has been reduced to a uniform level of 040of outstanding
at global basis except in the case of direct advance to agriculture and SME sector which
shall continue to attract a provisioning of 025 The provision toward standard assets need
not to be netted from gross advances but shown separately as ldquo contigent provisionsrdquo against
standard assets under other liquidities and provisions others in schedule 5 of the balance
sheet
2 Sub-standard assets- In respect of sub-standard assets the rate of provision is 10 of
outstanding balance without considering ECGC guarantee cover or securities available
However if the loan was unsecured from the begining there would be additional provision of
10 ie total provision would be 20 of the outstanding balance Unsecured exposure is
defined as an exposure where the realizable value of the security as assessed by the
bankreserve banks inspecting officers is not more than 10 ab-intio of the outstanding
exposure
3 Doubtful assets In case of doubtful assets while making provision realizable value of
security is to be considered 100 provision is made for unsecured portion In case of
secured portion the rate of provision depend on age of doubtful assets as under
Age of doubtful assets Provision as of secured portion
Doubtful up to 1 year D1 20 of RVS( realizable value of security)
Doubtful for more than 1 year D2 30 of RVS
Doubtful for more than 3 years D2 100 of RVS
Thus if an ac is doubtful for more than 3 years than 100 of the provision is to be made
both from secured and unsecured portion If an advance has been guaranteed by DICGC
CGFTECGC and is doubtful than provision on secured portion will be as in other cases but
provision on unsecured portion will be made after deducting the claim value
4 LOSS ASSET 100 of the outstanding amount while making provision on NPAs amount
lying in suspense ac and derecognized interest should be deducted from gross advance and
provision be made on balance amount
5 OVERALL PROVISION With a view to improving the improving the provisioning cover
and enhancing the soundness of the individual banks RBI has proposed in oct- 09 policy that
bank should augment their provisions and ensure that their total provisioning coverage ratio
including floating provisions is not less than 70
Source wwwRBIorgin
IMPACTEFFECT OF NPA UPON BANKS
A strong banking sector is important for flourishing economy The failure of banking sector
may have an adverse impact on other sector NPA are one of the major concerns of sector
banks is increasing result in nonperforming assets The NPA impact drastically to the
working of banks The efficiency of bank not always reflected by the size of its balance sheet
but by the level of return on its assetsNPA do not generate interest income for the banks but
the same time banks are required to make provisions for such NPAs from their current
profits
They erode current profits through provisioning requirement
They result in reduced interest income
They require higher provisioning requirements effecting profits and accretion to capital
Adverse impact on capital adequacy ratio
Roe and Roa goes down because NPA do not earn
Banks rating gets effect
Banks cost of raising funds goes up
Bad effect on goodwill
Bad effect on equity value
EARLY SYMPTOMS BY WHICH ONE CAN RECOGNIZE A PERFORMING
ASSETS TURNING TO A NON PERFORMING ASSET
Four categories of early symptoms
1) FINANCIAL
(a) Non- payment of very first installment
(b) Bouncing of cheque due to insufficient balance in the ac
(c) Irregularity in installment
(d) Irregularity of operations in ac
(e) Unpaid overdue bill
(f) Declining current ratio
2) OPERATIONAL AND PHYSICAL
(a) If information is received that the borrower has either initiated the process of winding up or not doing the business
(b) Over-due receivable
(c) Stock statement not submitted on time
(d) External non-controllable factor like natural calamities in the city where the borrower lives
(e) Non- payment of salary
(3) ATTITUDNAL CHANGE
(a) Use for personal comfort stocks and shares by borrowers
(b) Avoidance of contact with bank
(c) Problem between partners
(4) OTHER
(a) Change in govt policies
(b) Death of the borrower
(c) Delay in salary
PREVENTIVE MEASUREMENT FOR NPA
Early recognition of the problem
Invariably by the time banks start their efforts to get involved
in a revival process its too late to retrieve the situation ndash both in terms of rehabilitation of the
project and the recovery of banks dues Identification of the weakness regardless of the fact
that it may not have become NPA is imperative Assessment of the potential of revival may
be done on the basis of a techno-economic viability study Restructuring should be attempted
where after an objective assessment of the promoterrsquos intention banks are convinced of a
turn around with in a scheduled facilitate winding upselling of units earlier so as to recover
whatever is possible through means before the security position becomes worse
Identifying borrowers with genuine intent
Identifying borrower with genuine intent from those who
are non-serious with commitment or stake in revival is a challenge confronting bankers Here
the role of front line officials at branch level is paramount as they are the ones who have
intelligent inputs with regard to promoters lsquo sincerity and capability to achieve turnaround
Based on this objective assessment bank should decide as quickly as possible whether it
would be worthwhile to commit additional finance
In this regard banks may consider having
ldquospecial investigationrdquo of all financial transaction or business transaction books of account
order to ascertain real factor that contributed to sickness of borrower Bank may have panel
of technical experts with proven expertise and task record of preparing techno-economic
study of the project of the borrowers
Borrowers having genuine problems due to temporary mismatch in find flow or sudden
requirement of additional fund may entertained at branch level for this purpose a special
limit to such type of cases should be decided This will obviate the need to route the
additional funding through the controlling officers in deserving cases and avert many
accounts sleeping into NPA category
Timeliness and adequacy of response
Longer the delay in response greater the enjury to the
account and the asset Time is a crucial element in any restructuring or rehabilitation activity
The response decided on the basis of techno- economic study and promoterrsquos commitment
has to be adequate in terms of extend of additional funding and relaxations etc under the
restructuring exercise The package of assistance may be flexible and bank may look at the
exit option
Focus on cash flow
While financing at the time of restructuring the banks may not be guided
by the conventional fund flow analysis only which could yield a potentially misleading
picture Appraisal for fresh credit requirement may be done by analyzing fond flow in
conjunction with the cash flow rather than only on the basis of fund flow
Source wwwAskcom
Management effectiveness
The general perception among the borrower is lack of finance that
leads to sickness and NPAs but this may not be the case all the time Management effectiveness
advance business condition is a very important aspect that affects a borrowing units fortunes A bank
may commit a multiple finance to an align unit only after basic viability of the enterprise also in the
context of quality of management is examined and confirmed It will be useful to have consultant
appointed as early as possible to examine this aspect A proper techno-economic viability study thus
become the basis on which any future action can be considered
Multiple financing
A) During the exercise for assessment of viability and restructuring a pragmatic and unified
approach by all the leading banks as also sharing of all relevant information on the
borrower would go a long way toward overall success of rehabilitation exercise given the
probability of successfailure
B) In some default cases Where the unit is still working The bank should make sure that it
captures the cash flow and insure that such cash are used for working capital purpose
Toward this end there should be a continuous flow of information among consortium
member A bank which is not a part of consortium may not be allowed to offer credit
facility to such defaulting clients Current account facility may also be denied at non-
consortium banks to such clients and violation may attract penal action The credit
information bureau of india (CIBIL) may be very useful for meaningful information
exchange on defaulting borrowers once the setup become fully operational
C) In a forum of lenders the priority of each lender will be different While one set of lender
may be willing to wait for longer time to recover its dues another lender may have a much
shorter timeframe in mind So it is possible that the letter categories of lenders may be
willing to exit even at a cost by a discounted settlement of the exposure There for any plan
for restructuringrehabilitation may takes into account
D) Corporate debt restructuring it has been institutionalized in 2001 to provide a timely and
transparent system for restructuring the corporate debt of RS 20 crores and above with the
banks on a voluntary basis and outside a legal framework Under this system bank are
greatly benefit in terms of restructuring of large standard accounts (potential NPAs) and
viable sub-standard account with multiple banking arrangement
NPA MANAGEMENT- RESOLUTION
Compromise settlement schemes
Restructuringrescheduling
Lok adalat
Corporate debt restructuring cell
Debt recovery Tribunals (DRT)
Proceeding under the code of civil procedure
Board of industrial and financial reconstruction
National company law Tribunal (NCLT)
Sale of NPA to other bank
Sale of NPA to ARCSC under securitization and reconstruction of financial assets for
enforcement of security interest Act 2000 (SRFAESI)
Liquidation
Source wwwRBIorgin
NPA MANAGEMENT IN INDIA
Formation of the credit information bureau (India) limited (CIBIL)
Release of willful defaulterrsquos listRBI also releases a list of borrowers with aggregate
outstanding of RS 1 crore and above against whom bank have filed suit for recovery of their
fund
Reporting of frauds to RBI
Norms of lenders labiality- framing of fair practices code with regard to lenders lability to
be followed by banks
Risk assessment and Risk management
RBI has advised banks to all cases of willful defaulters in case of 1 crore and above and
files suits in such cases
Responding quick mortality cases
Special mention accounts for early identification for bad debt loans and advances over due
for less than one or two quarters would come under this category However these accounts do
not need provisioning
INTERNATIONAL PRACTICES ON NPA MANAGEMENT
Subsequent to the Asian currency crisis which severely crippled the financial system In
addition to the above some of the more recent and aggressive step to NPAs have been taken
by Taiwan Taiwanese financial institution have been encouraged to merge and form bank
based AMCs through the recent introduction of financial holding company act and financial
institution Asian countries the magnitude of NPAs in Asian financial institution was brought
to light Driven by the need to proactively tackle the soaring NPAs level the respective govt
embarked upon a program of substantial reform This involves setting up processes for early
identification and resolution of NPAs The table below provides a cross country comparison
of approaches used for NPA resolution Mergers Act A long side the ministry of finance has
followed a carrot and strict policy of specifying the required NPA ratio for banks while also
providing flexibility in modes of NPA assets resolution and a conduct
ive regulatory and tax environment Deferred loss write-off provisions have been instituted to
provide breathing space for lenders to absorb NPA write-off While it is too early to
comment on success of NPA resolution process in Taiwan the early sign are encouraging
Detailed below are some key NPA management approaches adopted by banks in South East
Asian countries
1 Credit risk mitigation
2 Early warning systems
3 Assets management companies
Increasing willingness to sell NPAs to AMCs
Effective resolution strategy
Appointment of special administrators
4 Out of court restructuring
Source wwwgooglecom
DIFFICULTIES WITH NON PERFORMING ASSETS
I Owners do not receive a market return on their capital In the worst case if the bank
fails owner lose their assets
II Depositors do not receive a market return on savings In the worst case if the bank
fails depositors lose their assets or uninsured balance Banks also redistribute losses
to other borrowers by charging higher rate of interest
III Non-performing loans epitomize bad investors They misallocate credit from good
projects which do not receive funding to failed project
IV 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
shortage the shortage can jam payments across the country
b Illiquidity constraints banks in paying depositors eg cashing their paychecks
c Undercapitalized banks exceed the bank capital base
Lending by bank has been politicized It is common knowledge
that loans are given to various industrial houses on common consideration and
viability of project but on political consideration In normal circumstances banks
before extending any loan would make a thorough study of the actual need of the
party considered the prospect of the business in which it is engaged Since it is
not looked into many of the loans becomes NPA
REASONS F0R AN ACCOUNT BECOMING NPA
Those attribute to borrower
Failure to bring in required capital
Lack of proper planning
Unwanted expenses
Lack of expertise
Poor credit collection
Miss management
Heavy borrowing
Lack of knowledge regarding NPA
Willful defaulters
Death of the borrower
Those attribute to banks
Wrong selection of borrower
Poor credit appraisal
Unhelpful in supervision
Too inflexible attitude
System overload
Lack of motivation
Delay in sanction
Lack of trained staff
Lack of commitment to recovery
Lack of personal visit to the borrower office
Lack of personal visit to the borrowerrsquos residence
Other
Fast changing technology
Unhelpful attitude of govt
Increase in material cost
Government policies
Taxation law
Political hostility
INDIAN ECONOMY AND NPA
Undoubtedly the world economy has slowed down recession is at its peak globally stock markets
have tumbled and business itself getting hard to do The Indian economy has been much affected due
to high fiscal deficit poor infrastructure facilities sticky legal system cutting of exposures to
emerging market by FIIs etc
Further international rating agencies like standard and poor
have lowered Indiarsquos credit rating to sub- investment grade Such negative aspects have often
outweighed positive such as increasing for reserve and a manageable inflation rate
Under such situation I go without saying that banks are no exception
and are bound to face the heat of global down turn One would be surprise to know that banks and
financial institution in India holds non-performing assets worth Rs 1 10000 crores Bankers have
realized that unless the level of NPA is reduced drastically they will find it difficult to survive
The actual level of NPA in India is around $ 40 billion much higher than govt estimation of $16
billion This difference is largely due to the discrepancy in accounting the NPAs followed by India
and rest of the world The accounting norms of India are less stringent than those of the developed
economies The Indian banks also have the tendency to extend the past due Considering the GDP
India nearly $ 470 billion the NPA are 8 of the total GDP which was better than many Asian
countries The NPA of china was 45 of the GDP While Japan had NPAs of 25 of the GDP
The aggregate level of NPAs in Asia has increased from $ 25 billion in 2007 to
$ 34 billion on 2009 looking to such overall pictures of the market we can say that India is doing
well and the steps taken are looking favorable
Source googlecoin
DATA ANALYZING THE QUETIONNAIRE
Two set of questionnaire were prepared to collect the feedback One set of questionnaire was meant for branches and other set of questionnaire was meant for borrowers
The set of questionnaire were given to the branches under hazaribag (RBO) and collected the feedback of the bankers of P segment and the branch manager
The questionnaire prepared for branch contained 15 questions and the questionnaire prepared for borrower contains 10 questions
The data was collected from 50 bankers and the data analysis of the branch questionnaire is as follows
Question number 1
Does not require any data analysis and information was sought to know the business level of the branches for the purpose of whether particular branch is actively engaged in xpress credit portfolio
Question number 2
Do you think that the borrowers are aware about NPA
Answer
32 of the respondent feel that the borrowers are not aware about NPA and 18 respondents feel that borrowers are aware about NPA
Chart no 11
yes
no
0
5
10
15
20
25
30
35
1832 Column1
Conclusion
Majority of the bank officials feels that the borrowers are not aware about NPA
Question number 3
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Answer
Out of 32 respondent 22 respondents is fully satisfied that lack of knowledge among the borrower regarding NPA is one of the reason for NPA 08 respondent were partially satisfied with it and 02 respondent were not satisfied with it
Chart no 12
fully satisfied(22)69
partially satisfied(8)25
not satisfied(2)6
Sales
Conclusion
Majority of the borrowers feels that lack of knowledge among the borrower regarding NPA is one of the reasons for NPA
Question number 4 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Answer
Out of 50 respondent 30 of the respondent strongly satisfied that these external factors contribute to NPA 10 respondent were partially satisfied with it 5 were not satisfied where as 5 were fully dissatisfied with it
Chart no 13
6020
10
10
fully satisfied(30) partially satisfied(10) not satisfiec(5) fully desatisfied(5)
Conclusion
Most of the respondent thinks that external factrs like willful defaulter change in govt policy contribute to NPA
Question number 5
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Answer
Chart no 14
feedback
fully satisfied(20)partially satisfied(12)not satisfied(12)fully dissatisfied(6)
Conclusion
As per the response of the officials most of the officials feel that internal factors are also responsible for NPA
Question number 6
Do you think that inflation is one of the reasons for NPA
Answer
Out f 50 responses 22 were strongly satisfied 18 were partially satisfied 8 were not satisfied and 2 were fully dissatisfied
Chart no 15
fully satisfied(20)44
partially satisfied(18)36
not satisfied(5)10
fullt dissatisfied(5)10
Conclusion
Growing inflation increasing goods rate is also one of the reason for NPA
Question number 7
Do you think that lack of PSS is also contributed to NPA
Answer
Out of 50 responses 30 were fully satisfied with it 12 were partially satisfied and 8 were fully dissatisfied
Chart no 16
6024
16
Open
fully satisfied(30)Partially satisfied(12)not satisfied(0)fully dissatisfied(8)
Conclusion
Majority of the officiais feels that lack of PSS is one of the reason for NPA This means that the PSS carried out by the bank is not sufficient or not carried out properly
Question number 8
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Answer
Most of the respondent feels that increase in unwanted expenses of the borrwer ls contribute to NPA
Chart no 17
56
12
28
4
FULLY SATISFIED(28)PARTIALLY SATISFIED(6)NOT SATISFIED(14)FULLY DISSATISFIED(2)
Conclusion
As per response of the officials increasing inflation have an adverse effect on the financial sector its working performance as well as on NPA
Question number 9
Do you think that high rate of interest under Xpress credit also contributes to NPA
Answer
Out of 50 respondent 25 respondent were not satisfied 10 were partially satisfied 10 were strongly dissatisfied where as only 5 out of 50 were fully satisfied with it
Chart no 18
strongly satisfied(5)partially satisfied(10)not satisfied(25)fully dissatisfied(10)
Conclusion
Most of the respondents are not satisfied with it They feel that the rate of interest charged by SBI under Xpress credit is not high and it will not contribute to NPS
Question number 10
Do you think that lack of proper planning of the borrower is one of the reason for NPA
Answer
Out of 70 respondent 35 were fully satisfied 5 were not satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 19
fully satisfied(35)70
partially satisfied(10)20
not satisfied(5)10
Conclusion
Most of the respondent feels that the borrowers borrow money from the bank without any proper planning which is one of the most important reason for NPA
Question number 11
Is heavy borrowing also contribute to NPA
Answer
Out of 50 respondent 25 respondent were fully satisfied 12 were partially satisfied 8 were not satisfied were as 5 were fully dissatisfied
Chart no 110
50
24
16
10
fully satisfied(25) partially satisfied(12) not satisfied(8) fully dissatisfied(5)
Question number 12
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Answer
As per the response of the officials 20 were fully satisfied 66were partially satisfied 4 were not satisfied with it were as 10 respondent were fully dissatisfied
Chart no 111
fully satisfied(10)20
partially satisfied(33)66
not satisfied(2)4
fullydissatisfied(5)10
Conclusion
As per the response given by the officials most of the officials were partially satisfied that wrong selection of borrower also contribute to NPA which means that selection process carried out by the bank is not appropriate or there is some difficulties in implementing them
Question number 13
Do you think that poor credit appraisal also contribute to NPA
Answer
Out of 50 respondent 5 were fully satisfied 10 were fully satisfied 30 were not satisfied were as only 5 were fully dissatisfied
Chart no 112
fully satisfied(5)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 14
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Answer
Out of 50 responses 3 were fully satisfied 15 were partially satisfied 25 were not satisfied where as 7 were full dissatisfied
Chart no 113
fully satisfied(3)partiallt satisfied(15)not satisfied(25)fully dissatisfied(7)
Conclusion
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not contribute to NPA This means that the attitude of bank toward the borrower is not inflexible
Question number 15
Do you think that system over load is also one of the causes of NPA
Answer
Out of 50 respondent 28 were fully satisfied 12 were partially satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 114
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Out of order
An account will be treated as out as out of order if the outstanding balance remain
continuously in excess of the sanctioned limitdrawing power In cases where the
outstanding balance in the principle operating ac is less than the sanctioned limit but
there are no credit continuously for 90 days as on the date of balance sheet or the
credit are not enough to cover the interest debited during the same period
Overdue
An amount due to the bank under any credit facility is overdue it is not paid on the due
date fixed by the bank
The date of npa will be actual date on which sippage occurred as mentioned below
For term and demand loan ac
The date on which the installment of the principle have
remaine overdue for a period more then 90 days
For over draft and cash credit ac
The date on which the ac completed period of more than 90
days of being continuously out of order
Source wwwRBI Org in
PROVISING NORMS
There is time lag between an ac becoming doubtful for recovery the realization of security and
erosion over a loan period of time in its value So RBI directives now requiresthe banks to make
provisions in their balance sheet for all non- standard loan asset Provisioning is made on all types of
assets ie Standard sub-standard doubtful and loss assets
1 Standard assets RBI vides its circular dated 151108 revised the provisioning requirements
For all type of standard assets it has been reduced to a uniform level of 040of outstanding
at global basis except in the case of direct advance to agriculture and SME sector which
shall continue to attract a provisioning of 025 The provision toward standard assets need
not to be netted from gross advances but shown separately as ldquo contigent provisionsrdquo against
standard assets under other liquidities and provisions others in schedule 5 of the balance
sheet
2 Sub-standard assets- In respect of sub-standard assets the rate of provision is 10 of
outstanding balance without considering ECGC guarantee cover or securities available
However if the loan was unsecured from the begining there would be additional provision of
10 ie total provision would be 20 of the outstanding balance Unsecured exposure is
defined as an exposure where the realizable value of the security as assessed by the
bankreserve banks inspecting officers is not more than 10 ab-intio of the outstanding
exposure
3 Doubtful assets In case of doubtful assets while making provision realizable value of
security is to be considered 100 provision is made for unsecured portion In case of
secured portion the rate of provision depend on age of doubtful assets as under
Age of doubtful assets Provision as of secured portion
Doubtful up to 1 year D1 20 of RVS( realizable value of security)
Doubtful for more than 1 year D2 30 of RVS
Doubtful for more than 3 years D2 100 of RVS
Thus if an ac is doubtful for more than 3 years than 100 of the provision is to be made
both from secured and unsecured portion If an advance has been guaranteed by DICGC
CGFTECGC and is doubtful than provision on secured portion will be as in other cases but
provision on unsecured portion will be made after deducting the claim value
4 LOSS ASSET 100 of the outstanding amount while making provision on NPAs amount
lying in suspense ac and derecognized interest should be deducted from gross advance and
provision be made on balance amount
5 OVERALL PROVISION With a view to improving the improving the provisioning cover
and enhancing the soundness of the individual banks RBI has proposed in oct- 09 policy that
bank should augment their provisions and ensure that their total provisioning coverage ratio
including floating provisions is not less than 70
Source wwwRBIorgin
IMPACTEFFECT OF NPA UPON BANKS
A strong banking sector is important for flourishing economy The failure of banking sector
may have an adverse impact on other sector NPA are one of the major concerns of sector
banks is increasing result in nonperforming assets The NPA impact drastically to the
working of banks The efficiency of bank not always reflected by the size of its balance sheet
but by the level of return on its assetsNPA do not generate interest income for the banks but
the same time banks are required to make provisions for such NPAs from their current
profits
They erode current profits through provisioning requirement
They result in reduced interest income
They require higher provisioning requirements effecting profits and accretion to capital
Adverse impact on capital adequacy ratio
Roe and Roa goes down because NPA do not earn
Banks rating gets effect
Banks cost of raising funds goes up
Bad effect on goodwill
Bad effect on equity value
EARLY SYMPTOMS BY WHICH ONE CAN RECOGNIZE A PERFORMING
ASSETS TURNING TO A NON PERFORMING ASSET
Four categories of early symptoms
1) FINANCIAL
(a) Non- payment of very first installment
(b) Bouncing of cheque due to insufficient balance in the ac
(c) Irregularity in installment
(d) Irregularity of operations in ac
(e) Unpaid overdue bill
(f) Declining current ratio
2) OPERATIONAL AND PHYSICAL
(a) If information is received that the borrower has either initiated the process of winding up or not doing the business
(b) Over-due receivable
(c) Stock statement not submitted on time
(d) External non-controllable factor like natural calamities in the city where the borrower lives
(e) Non- payment of salary
(3) ATTITUDNAL CHANGE
(a) Use for personal comfort stocks and shares by borrowers
(b) Avoidance of contact with bank
(c) Problem between partners
(4) OTHER
(a) Change in govt policies
(b) Death of the borrower
(c) Delay in salary
PREVENTIVE MEASUREMENT FOR NPA
Early recognition of the problem
Invariably by the time banks start their efforts to get involved
in a revival process its too late to retrieve the situation ndash both in terms of rehabilitation of the
project and the recovery of banks dues Identification of the weakness regardless of the fact
that it may not have become NPA is imperative Assessment of the potential of revival may
be done on the basis of a techno-economic viability study Restructuring should be attempted
where after an objective assessment of the promoterrsquos intention banks are convinced of a
turn around with in a scheduled facilitate winding upselling of units earlier so as to recover
whatever is possible through means before the security position becomes worse
Identifying borrowers with genuine intent
Identifying borrower with genuine intent from those who
are non-serious with commitment or stake in revival is a challenge confronting bankers Here
the role of front line officials at branch level is paramount as they are the ones who have
intelligent inputs with regard to promoters lsquo sincerity and capability to achieve turnaround
Based on this objective assessment bank should decide as quickly as possible whether it
would be worthwhile to commit additional finance
In this regard banks may consider having
ldquospecial investigationrdquo of all financial transaction or business transaction books of account
order to ascertain real factor that contributed to sickness of borrower Bank may have panel
of technical experts with proven expertise and task record of preparing techno-economic
study of the project of the borrowers
Borrowers having genuine problems due to temporary mismatch in find flow or sudden
requirement of additional fund may entertained at branch level for this purpose a special
limit to such type of cases should be decided This will obviate the need to route the
additional funding through the controlling officers in deserving cases and avert many
accounts sleeping into NPA category
Timeliness and adequacy of response
Longer the delay in response greater the enjury to the
account and the asset Time is a crucial element in any restructuring or rehabilitation activity
The response decided on the basis of techno- economic study and promoterrsquos commitment
has to be adequate in terms of extend of additional funding and relaxations etc under the
restructuring exercise The package of assistance may be flexible and bank may look at the
exit option
Focus on cash flow
While financing at the time of restructuring the banks may not be guided
by the conventional fund flow analysis only which could yield a potentially misleading
picture Appraisal for fresh credit requirement may be done by analyzing fond flow in
conjunction with the cash flow rather than only on the basis of fund flow
Source wwwAskcom
Management effectiveness
The general perception among the borrower is lack of finance that
leads to sickness and NPAs but this may not be the case all the time Management effectiveness
advance business condition is a very important aspect that affects a borrowing units fortunes A bank
may commit a multiple finance to an align unit only after basic viability of the enterprise also in the
context of quality of management is examined and confirmed It will be useful to have consultant
appointed as early as possible to examine this aspect A proper techno-economic viability study thus
become the basis on which any future action can be considered
Multiple financing
A) During the exercise for assessment of viability and restructuring a pragmatic and unified
approach by all the leading banks as also sharing of all relevant information on the
borrower would go a long way toward overall success of rehabilitation exercise given the
probability of successfailure
B) In some default cases Where the unit is still working The bank should make sure that it
captures the cash flow and insure that such cash are used for working capital purpose
Toward this end there should be a continuous flow of information among consortium
member A bank which is not a part of consortium may not be allowed to offer credit
facility to such defaulting clients Current account facility may also be denied at non-
consortium banks to such clients and violation may attract penal action The credit
information bureau of india (CIBIL) may be very useful for meaningful information
exchange on defaulting borrowers once the setup become fully operational
C) In a forum of lenders the priority of each lender will be different While one set of lender
may be willing to wait for longer time to recover its dues another lender may have a much
shorter timeframe in mind So it is possible that the letter categories of lenders may be
willing to exit even at a cost by a discounted settlement of the exposure There for any plan
for restructuringrehabilitation may takes into account
D) Corporate debt restructuring it has been institutionalized in 2001 to provide a timely and
transparent system for restructuring the corporate debt of RS 20 crores and above with the
banks on a voluntary basis and outside a legal framework Under this system bank are
greatly benefit in terms of restructuring of large standard accounts (potential NPAs) and
viable sub-standard account with multiple banking arrangement
NPA MANAGEMENT- RESOLUTION
Compromise settlement schemes
Restructuringrescheduling
Lok adalat
Corporate debt restructuring cell
Debt recovery Tribunals (DRT)
Proceeding under the code of civil procedure
Board of industrial and financial reconstruction
National company law Tribunal (NCLT)
Sale of NPA to other bank
Sale of NPA to ARCSC under securitization and reconstruction of financial assets for
enforcement of security interest Act 2000 (SRFAESI)
Liquidation
Source wwwRBIorgin
NPA MANAGEMENT IN INDIA
Formation of the credit information bureau (India) limited (CIBIL)
Release of willful defaulterrsquos listRBI also releases a list of borrowers with aggregate
outstanding of RS 1 crore and above against whom bank have filed suit for recovery of their
fund
Reporting of frauds to RBI
Norms of lenders labiality- framing of fair practices code with regard to lenders lability to
be followed by banks
Risk assessment and Risk management
RBI has advised banks to all cases of willful defaulters in case of 1 crore and above and
files suits in such cases
Responding quick mortality cases
Special mention accounts for early identification for bad debt loans and advances over due
for less than one or two quarters would come under this category However these accounts do
not need provisioning
INTERNATIONAL PRACTICES ON NPA MANAGEMENT
Subsequent to the Asian currency crisis which severely crippled the financial system In
addition to the above some of the more recent and aggressive step to NPAs have been taken
by Taiwan Taiwanese financial institution have been encouraged to merge and form bank
based AMCs through the recent introduction of financial holding company act and financial
institution Asian countries the magnitude of NPAs in Asian financial institution was brought
to light Driven by the need to proactively tackle the soaring NPAs level the respective govt
embarked upon a program of substantial reform This involves setting up processes for early
identification and resolution of NPAs The table below provides a cross country comparison
of approaches used for NPA resolution Mergers Act A long side the ministry of finance has
followed a carrot and strict policy of specifying the required NPA ratio for banks while also
providing flexibility in modes of NPA assets resolution and a conduct
ive regulatory and tax environment Deferred loss write-off provisions have been instituted to
provide breathing space for lenders to absorb NPA write-off While it is too early to
comment on success of NPA resolution process in Taiwan the early sign are encouraging
Detailed below are some key NPA management approaches adopted by banks in South East
Asian countries
1 Credit risk mitigation
2 Early warning systems
3 Assets management companies
Increasing willingness to sell NPAs to AMCs
Effective resolution strategy
Appointment of special administrators
4 Out of court restructuring
Source wwwgooglecom
DIFFICULTIES WITH NON PERFORMING ASSETS
I Owners do not receive a market return on their capital In the worst case if the bank
fails owner lose their assets
II Depositors do not receive a market return on savings In the worst case if the bank
fails depositors lose their assets or uninsured balance Banks also redistribute losses
to other borrowers by charging higher rate of interest
III Non-performing loans epitomize bad investors They misallocate credit from good
projects which do not receive funding to failed project
IV 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
shortage the shortage can jam payments across the country
b Illiquidity constraints banks in paying depositors eg cashing their paychecks
c Undercapitalized banks exceed the bank capital base
Lending by bank has been politicized It is common knowledge
that loans are given to various industrial houses on common consideration and
viability of project but on political consideration In normal circumstances banks
before extending any loan would make a thorough study of the actual need of the
party considered the prospect of the business in which it is engaged Since it is
not looked into many of the loans becomes NPA
REASONS F0R AN ACCOUNT BECOMING NPA
Those attribute to borrower
Failure to bring in required capital
Lack of proper planning
Unwanted expenses
Lack of expertise
Poor credit collection
Miss management
Heavy borrowing
Lack of knowledge regarding NPA
Willful defaulters
Death of the borrower
Those attribute to banks
Wrong selection of borrower
Poor credit appraisal
Unhelpful in supervision
Too inflexible attitude
System overload
Lack of motivation
Delay in sanction
Lack of trained staff
Lack of commitment to recovery
Lack of personal visit to the borrower office
Lack of personal visit to the borrowerrsquos residence
Other
Fast changing technology
Unhelpful attitude of govt
Increase in material cost
Government policies
Taxation law
Political hostility
INDIAN ECONOMY AND NPA
Undoubtedly the world economy has slowed down recession is at its peak globally stock markets
have tumbled and business itself getting hard to do The Indian economy has been much affected due
to high fiscal deficit poor infrastructure facilities sticky legal system cutting of exposures to
emerging market by FIIs etc
Further international rating agencies like standard and poor
have lowered Indiarsquos credit rating to sub- investment grade Such negative aspects have often
outweighed positive such as increasing for reserve and a manageable inflation rate
Under such situation I go without saying that banks are no exception
and are bound to face the heat of global down turn One would be surprise to know that banks and
financial institution in India holds non-performing assets worth Rs 1 10000 crores Bankers have
realized that unless the level of NPA is reduced drastically they will find it difficult to survive
The actual level of NPA in India is around $ 40 billion much higher than govt estimation of $16
billion This difference is largely due to the discrepancy in accounting the NPAs followed by India
and rest of the world The accounting norms of India are less stringent than those of the developed
economies The Indian banks also have the tendency to extend the past due Considering the GDP
India nearly $ 470 billion the NPA are 8 of the total GDP which was better than many Asian
countries The NPA of china was 45 of the GDP While Japan had NPAs of 25 of the GDP
The aggregate level of NPAs in Asia has increased from $ 25 billion in 2007 to
$ 34 billion on 2009 looking to such overall pictures of the market we can say that India is doing
well and the steps taken are looking favorable
Source googlecoin
DATA ANALYZING THE QUETIONNAIRE
Two set of questionnaire were prepared to collect the feedback One set of questionnaire was meant for branches and other set of questionnaire was meant for borrowers
The set of questionnaire were given to the branches under hazaribag (RBO) and collected the feedback of the bankers of P segment and the branch manager
The questionnaire prepared for branch contained 15 questions and the questionnaire prepared for borrower contains 10 questions
The data was collected from 50 bankers and the data analysis of the branch questionnaire is as follows
Question number 1
Does not require any data analysis and information was sought to know the business level of the branches for the purpose of whether particular branch is actively engaged in xpress credit portfolio
Question number 2
Do you think that the borrowers are aware about NPA
Answer
32 of the respondent feel that the borrowers are not aware about NPA and 18 respondents feel that borrowers are aware about NPA
Chart no 11
yes
no
0
5
10
15
20
25
30
35
1832 Column1
Conclusion
Majority of the bank officials feels that the borrowers are not aware about NPA
Question number 3
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Answer
Out of 32 respondent 22 respondents is fully satisfied that lack of knowledge among the borrower regarding NPA is one of the reason for NPA 08 respondent were partially satisfied with it and 02 respondent were not satisfied with it
Chart no 12
fully satisfied(22)69
partially satisfied(8)25
not satisfied(2)6
Sales
Conclusion
Majority of the borrowers feels that lack of knowledge among the borrower regarding NPA is one of the reasons for NPA
Question number 4 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Answer
Out of 50 respondent 30 of the respondent strongly satisfied that these external factors contribute to NPA 10 respondent were partially satisfied with it 5 were not satisfied where as 5 were fully dissatisfied with it
Chart no 13
6020
10
10
fully satisfied(30) partially satisfied(10) not satisfiec(5) fully desatisfied(5)
Conclusion
Most of the respondent thinks that external factrs like willful defaulter change in govt policy contribute to NPA
Question number 5
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Answer
Chart no 14
feedback
fully satisfied(20)partially satisfied(12)not satisfied(12)fully dissatisfied(6)
Conclusion
As per the response of the officials most of the officials feel that internal factors are also responsible for NPA
Question number 6
Do you think that inflation is one of the reasons for NPA
Answer
Out f 50 responses 22 were strongly satisfied 18 were partially satisfied 8 were not satisfied and 2 were fully dissatisfied
Chart no 15
fully satisfied(20)44
partially satisfied(18)36
not satisfied(5)10
fullt dissatisfied(5)10
Conclusion
Growing inflation increasing goods rate is also one of the reason for NPA
Question number 7
Do you think that lack of PSS is also contributed to NPA
Answer
Out of 50 responses 30 were fully satisfied with it 12 were partially satisfied and 8 were fully dissatisfied
Chart no 16
6024
16
Open
fully satisfied(30)Partially satisfied(12)not satisfied(0)fully dissatisfied(8)
Conclusion
Majority of the officiais feels that lack of PSS is one of the reason for NPA This means that the PSS carried out by the bank is not sufficient or not carried out properly
Question number 8
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Answer
Most of the respondent feels that increase in unwanted expenses of the borrwer ls contribute to NPA
Chart no 17
56
12
28
4
FULLY SATISFIED(28)PARTIALLY SATISFIED(6)NOT SATISFIED(14)FULLY DISSATISFIED(2)
Conclusion
As per response of the officials increasing inflation have an adverse effect on the financial sector its working performance as well as on NPA
Question number 9
Do you think that high rate of interest under Xpress credit also contributes to NPA
Answer
Out of 50 respondent 25 respondent were not satisfied 10 were partially satisfied 10 were strongly dissatisfied where as only 5 out of 50 were fully satisfied with it
Chart no 18
strongly satisfied(5)partially satisfied(10)not satisfied(25)fully dissatisfied(10)
Conclusion
Most of the respondents are not satisfied with it They feel that the rate of interest charged by SBI under Xpress credit is not high and it will not contribute to NPS
Question number 10
Do you think that lack of proper planning of the borrower is one of the reason for NPA
Answer
Out of 70 respondent 35 were fully satisfied 5 were not satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 19
fully satisfied(35)70
partially satisfied(10)20
not satisfied(5)10
Conclusion
Most of the respondent feels that the borrowers borrow money from the bank without any proper planning which is one of the most important reason for NPA
Question number 11
Is heavy borrowing also contribute to NPA
Answer
Out of 50 respondent 25 respondent were fully satisfied 12 were partially satisfied 8 were not satisfied were as 5 were fully dissatisfied
Chart no 110
50
24
16
10
fully satisfied(25) partially satisfied(12) not satisfied(8) fully dissatisfied(5)
Question number 12
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Answer
As per the response of the officials 20 were fully satisfied 66were partially satisfied 4 were not satisfied with it were as 10 respondent were fully dissatisfied
Chart no 111
fully satisfied(10)20
partially satisfied(33)66
not satisfied(2)4
fullydissatisfied(5)10
Conclusion
As per the response given by the officials most of the officials were partially satisfied that wrong selection of borrower also contribute to NPA which means that selection process carried out by the bank is not appropriate or there is some difficulties in implementing them
Question number 13
Do you think that poor credit appraisal also contribute to NPA
Answer
Out of 50 respondent 5 were fully satisfied 10 were fully satisfied 30 were not satisfied were as only 5 were fully dissatisfied
Chart no 112
fully satisfied(5)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 14
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Answer
Out of 50 responses 3 were fully satisfied 15 were partially satisfied 25 were not satisfied where as 7 were full dissatisfied
Chart no 113
fully satisfied(3)partiallt satisfied(15)not satisfied(25)fully dissatisfied(7)
Conclusion
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not contribute to NPA This means that the attitude of bank toward the borrower is not inflexible
Question number 15
Do you think that system over load is also one of the causes of NPA
Answer
Out of 50 respondent 28 were fully satisfied 12 were partially satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 114
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
PROVISING NORMS
There is time lag between an ac becoming doubtful for recovery the realization of security and
erosion over a loan period of time in its value So RBI directives now requiresthe banks to make
provisions in their balance sheet for all non- standard loan asset Provisioning is made on all types of
assets ie Standard sub-standard doubtful and loss assets
1 Standard assets RBI vides its circular dated 151108 revised the provisioning requirements
For all type of standard assets it has been reduced to a uniform level of 040of outstanding
at global basis except in the case of direct advance to agriculture and SME sector which
shall continue to attract a provisioning of 025 The provision toward standard assets need
not to be netted from gross advances but shown separately as ldquo contigent provisionsrdquo against
standard assets under other liquidities and provisions others in schedule 5 of the balance
sheet
2 Sub-standard assets- In respect of sub-standard assets the rate of provision is 10 of
outstanding balance without considering ECGC guarantee cover or securities available
However if the loan was unsecured from the begining there would be additional provision of
10 ie total provision would be 20 of the outstanding balance Unsecured exposure is
defined as an exposure where the realizable value of the security as assessed by the
bankreserve banks inspecting officers is not more than 10 ab-intio of the outstanding
exposure
3 Doubtful assets In case of doubtful assets while making provision realizable value of
security is to be considered 100 provision is made for unsecured portion In case of
secured portion the rate of provision depend on age of doubtful assets as under
Age of doubtful assets Provision as of secured portion
Doubtful up to 1 year D1 20 of RVS( realizable value of security)
Doubtful for more than 1 year D2 30 of RVS
Doubtful for more than 3 years D2 100 of RVS
Thus if an ac is doubtful for more than 3 years than 100 of the provision is to be made
both from secured and unsecured portion If an advance has been guaranteed by DICGC
CGFTECGC and is doubtful than provision on secured portion will be as in other cases but
provision on unsecured portion will be made after deducting the claim value
4 LOSS ASSET 100 of the outstanding amount while making provision on NPAs amount
lying in suspense ac and derecognized interest should be deducted from gross advance and
provision be made on balance amount
5 OVERALL PROVISION With a view to improving the improving the provisioning cover
and enhancing the soundness of the individual banks RBI has proposed in oct- 09 policy that
bank should augment their provisions and ensure that their total provisioning coverage ratio
including floating provisions is not less than 70
Source wwwRBIorgin
IMPACTEFFECT OF NPA UPON BANKS
A strong banking sector is important for flourishing economy The failure of banking sector
may have an adverse impact on other sector NPA are one of the major concerns of sector
banks is increasing result in nonperforming assets The NPA impact drastically to the
working of banks The efficiency of bank not always reflected by the size of its balance sheet
but by the level of return on its assetsNPA do not generate interest income for the banks but
the same time banks are required to make provisions for such NPAs from their current
profits
They erode current profits through provisioning requirement
They result in reduced interest income
They require higher provisioning requirements effecting profits and accretion to capital
Adverse impact on capital adequacy ratio
Roe and Roa goes down because NPA do not earn
Banks rating gets effect
Banks cost of raising funds goes up
Bad effect on goodwill
Bad effect on equity value
EARLY SYMPTOMS BY WHICH ONE CAN RECOGNIZE A PERFORMING
ASSETS TURNING TO A NON PERFORMING ASSET
Four categories of early symptoms
1) FINANCIAL
(a) Non- payment of very first installment
(b) Bouncing of cheque due to insufficient balance in the ac
(c) Irregularity in installment
(d) Irregularity of operations in ac
(e) Unpaid overdue bill
(f) Declining current ratio
2) OPERATIONAL AND PHYSICAL
(a) If information is received that the borrower has either initiated the process of winding up or not doing the business
(b) Over-due receivable
(c) Stock statement not submitted on time
(d) External non-controllable factor like natural calamities in the city where the borrower lives
(e) Non- payment of salary
(3) ATTITUDNAL CHANGE
(a) Use for personal comfort stocks and shares by borrowers
(b) Avoidance of contact with bank
(c) Problem between partners
(4) OTHER
(a) Change in govt policies
(b) Death of the borrower
(c) Delay in salary
PREVENTIVE MEASUREMENT FOR NPA
Early recognition of the problem
Invariably by the time banks start their efforts to get involved
in a revival process its too late to retrieve the situation ndash both in terms of rehabilitation of the
project and the recovery of banks dues Identification of the weakness regardless of the fact
that it may not have become NPA is imperative Assessment of the potential of revival may
be done on the basis of a techno-economic viability study Restructuring should be attempted
where after an objective assessment of the promoterrsquos intention banks are convinced of a
turn around with in a scheduled facilitate winding upselling of units earlier so as to recover
whatever is possible through means before the security position becomes worse
Identifying borrowers with genuine intent
Identifying borrower with genuine intent from those who
are non-serious with commitment or stake in revival is a challenge confronting bankers Here
the role of front line officials at branch level is paramount as they are the ones who have
intelligent inputs with regard to promoters lsquo sincerity and capability to achieve turnaround
Based on this objective assessment bank should decide as quickly as possible whether it
would be worthwhile to commit additional finance
In this regard banks may consider having
ldquospecial investigationrdquo of all financial transaction or business transaction books of account
order to ascertain real factor that contributed to sickness of borrower Bank may have panel
of technical experts with proven expertise and task record of preparing techno-economic
study of the project of the borrowers
Borrowers having genuine problems due to temporary mismatch in find flow or sudden
requirement of additional fund may entertained at branch level for this purpose a special
limit to such type of cases should be decided This will obviate the need to route the
additional funding through the controlling officers in deserving cases and avert many
accounts sleeping into NPA category
Timeliness and adequacy of response
Longer the delay in response greater the enjury to the
account and the asset Time is a crucial element in any restructuring or rehabilitation activity
The response decided on the basis of techno- economic study and promoterrsquos commitment
has to be adequate in terms of extend of additional funding and relaxations etc under the
restructuring exercise The package of assistance may be flexible and bank may look at the
exit option
Focus on cash flow
While financing at the time of restructuring the banks may not be guided
by the conventional fund flow analysis only which could yield a potentially misleading
picture Appraisal for fresh credit requirement may be done by analyzing fond flow in
conjunction with the cash flow rather than only on the basis of fund flow
Source wwwAskcom
Management effectiveness
The general perception among the borrower is lack of finance that
leads to sickness and NPAs but this may not be the case all the time Management effectiveness
advance business condition is a very important aspect that affects a borrowing units fortunes A bank
may commit a multiple finance to an align unit only after basic viability of the enterprise also in the
context of quality of management is examined and confirmed It will be useful to have consultant
appointed as early as possible to examine this aspect A proper techno-economic viability study thus
become the basis on which any future action can be considered
Multiple financing
A) During the exercise for assessment of viability and restructuring a pragmatic and unified
approach by all the leading banks as also sharing of all relevant information on the
borrower would go a long way toward overall success of rehabilitation exercise given the
probability of successfailure
B) In some default cases Where the unit is still working The bank should make sure that it
captures the cash flow and insure that such cash are used for working capital purpose
Toward this end there should be a continuous flow of information among consortium
member A bank which is not a part of consortium may not be allowed to offer credit
facility to such defaulting clients Current account facility may also be denied at non-
consortium banks to such clients and violation may attract penal action The credit
information bureau of india (CIBIL) may be very useful for meaningful information
exchange on defaulting borrowers once the setup become fully operational
C) In a forum of lenders the priority of each lender will be different While one set of lender
may be willing to wait for longer time to recover its dues another lender may have a much
shorter timeframe in mind So it is possible that the letter categories of lenders may be
willing to exit even at a cost by a discounted settlement of the exposure There for any plan
for restructuringrehabilitation may takes into account
D) Corporate debt restructuring it has been institutionalized in 2001 to provide a timely and
transparent system for restructuring the corporate debt of RS 20 crores and above with the
banks on a voluntary basis and outside a legal framework Under this system bank are
greatly benefit in terms of restructuring of large standard accounts (potential NPAs) and
viable sub-standard account with multiple banking arrangement
NPA MANAGEMENT- RESOLUTION
Compromise settlement schemes
Restructuringrescheduling
Lok adalat
Corporate debt restructuring cell
Debt recovery Tribunals (DRT)
Proceeding under the code of civil procedure
Board of industrial and financial reconstruction
National company law Tribunal (NCLT)
Sale of NPA to other bank
Sale of NPA to ARCSC under securitization and reconstruction of financial assets for
enforcement of security interest Act 2000 (SRFAESI)
Liquidation
Source wwwRBIorgin
NPA MANAGEMENT IN INDIA
Formation of the credit information bureau (India) limited (CIBIL)
Release of willful defaulterrsquos listRBI also releases a list of borrowers with aggregate
outstanding of RS 1 crore and above against whom bank have filed suit for recovery of their
fund
Reporting of frauds to RBI
Norms of lenders labiality- framing of fair practices code with regard to lenders lability to
be followed by banks
Risk assessment and Risk management
RBI has advised banks to all cases of willful defaulters in case of 1 crore and above and
files suits in such cases
Responding quick mortality cases
Special mention accounts for early identification for bad debt loans and advances over due
for less than one or two quarters would come under this category However these accounts do
not need provisioning
INTERNATIONAL PRACTICES ON NPA MANAGEMENT
Subsequent to the Asian currency crisis which severely crippled the financial system In
addition to the above some of the more recent and aggressive step to NPAs have been taken
by Taiwan Taiwanese financial institution have been encouraged to merge and form bank
based AMCs through the recent introduction of financial holding company act and financial
institution Asian countries the magnitude of NPAs in Asian financial institution was brought
to light Driven by the need to proactively tackle the soaring NPAs level the respective govt
embarked upon a program of substantial reform This involves setting up processes for early
identification and resolution of NPAs The table below provides a cross country comparison
of approaches used for NPA resolution Mergers Act A long side the ministry of finance has
followed a carrot and strict policy of specifying the required NPA ratio for banks while also
providing flexibility in modes of NPA assets resolution and a conduct
ive regulatory and tax environment Deferred loss write-off provisions have been instituted to
provide breathing space for lenders to absorb NPA write-off While it is too early to
comment on success of NPA resolution process in Taiwan the early sign are encouraging
Detailed below are some key NPA management approaches adopted by banks in South East
Asian countries
1 Credit risk mitigation
2 Early warning systems
3 Assets management companies
Increasing willingness to sell NPAs to AMCs
Effective resolution strategy
Appointment of special administrators
4 Out of court restructuring
Source wwwgooglecom
DIFFICULTIES WITH NON PERFORMING ASSETS
I Owners do not receive a market return on their capital In the worst case if the bank
fails owner lose their assets
II Depositors do not receive a market return on savings In the worst case if the bank
fails depositors lose their assets or uninsured balance Banks also redistribute losses
to other borrowers by charging higher rate of interest
III Non-performing loans epitomize bad investors They misallocate credit from good
projects which do not receive funding to failed project
IV 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
shortage the shortage can jam payments across the country
b Illiquidity constraints banks in paying depositors eg cashing their paychecks
c Undercapitalized banks exceed the bank capital base
Lending by bank has been politicized It is common knowledge
that loans are given to various industrial houses on common consideration and
viability of project but on political consideration In normal circumstances banks
before extending any loan would make a thorough study of the actual need of the
party considered the prospect of the business in which it is engaged Since it is
not looked into many of the loans becomes NPA
REASONS F0R AN ACCOUNT BECOMING NPA
Those attribute to borrower
Failure to bring in required capital
Lack of proper planning
Unwanted expenses
Lack of expertise
Poor credit collection
Miss management
Heavy borrowing
Lack of knowledge regarding NPA
Willful defaulters
Death of the borrower
Those attribute to banks
Wrong selection of borrower
Poor credit appraisal
Unhelpful in supervision
Too inflexible attitude
System overload
Lack of motivation
Delay in sanction
Lack of trained staff
Lack of commitment to recovery
Lack of personal visit to the borrower office
Lack of personal visit to the borrowerrsquos residence
Other
Fast changing technology
Unhelpful attitude of govt
Increase in material cost
Government policies
Taxation law
Political hostility
INDIAN ECONOMY AND NPA
Undoubtedly the world economy has slowed down recession is at its peak globally stock markets
have tumbled and business itself getting hard to do The Indian economy has been much affected due
to high fiscal deficit poor infrastructure facilities sticky legal system cutting of exposures to
emerging market by FIIs etc
Further international rating agencies like standard and poor
have lowered Indiarsquos credit rating to sub- investment grade Such negative aspects have often
outweighed positive such as increasing for reserve and a manageable inflation rate
Under such situation I go without saying that banks are no exception
and are bound to face the heat of global down turn One would be surprise to know that banks and
financial institution in India holds non-performing assets worth Rs 1 10000 crores Bankers have
realized that unless the level of NPA is reduced drastically they will find it difficult to survive
The actual level of NPA in India is around $ 40 billion much higher than govt estimation of $16
billion This difference is largely due to the discrepancy in accounting the NPAs followed by India
and rest of the world The accounting norms of India are less stringent than those of the developed
economies The Indian banks also have the tendency to extend the past due Considering the GDP
India nearly $ 470 billion the NPA are 8 of the total GDP which was better than many Asian
countries The NPA of china was 45 of the GDP While Japan had NPAs of 25 of the GDP
The aggregate level of NPAs in Asia has increased from $ 25 billion in 2007 to
$ 34 billion on 2009 looking to such overall pictures of the market we can say that India is doing
well and the steps taken are looking favorable
Source googlecoin
DATA ANALYZING THE QUETIONNAIRE
Two set of questionnaire were prepared to collect the feedback One set of questionnaire was meant for branches and other set of questionnaire was meant for borrowers
The set of questionnaire were given to the branches under hazaribag (RBO) and collected the feedback of the bankers of P segment and the branch manager
The questionnaire prepared for branch contained 15 questions and the questionnaire prepared for borrower contains 10 questions
The data was collected from 50 bankers and the data analysis of the branch questionnaire is as follows
Question number 1
Does not require any data analysis and information was sought to know the business level of the branches for the purpose of whether particular branch is actively engaged in xpress credit portfolio
Question number 2
Do you think that the borrowers are aware about NPA
Answer
32 of the respondent feel that the borrowers are not aware about NPA and 18 respondents feel that borrowers are aware about NPA
Chart no 11
yes
no
0
5
10
15
20
25
30
35
1832 Column1
Conclusion
Majority of the bank officials feels that the borrowers are not aware about NPA
Question number 3
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Answer
Out of 32 respondent 22 respondents is fully satisfied that lack of knowledge among the borrower regarding NPA is one of the reason for NPA 08 respondent were partially satisfied with it and 02 respondent were not satisfied with it
Chart no 12
fully satisfied(22)69
partially satisfied(8)25
not satisfied(2)6
Sales
Conclusion
Majority of the borrowers feels that lack of knowledge among the borrower regarding NPA is one of the reasons for NPA
Question number 4 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Answer
Out of 50 respondent 30 of the respondent strongly satisfied that these external factors contribute to NPA 10 respondent were partially satisfied with it 5 were not satisfied where as 5 were fully dissatisfied with it
Chart no 13
6020
10
10
fully satisfied(30) partially satisfied(10) not satisfiec(5) fully desatisfied(5)
Conclusion
Most of the respondent thinks that external factrs like willful defaulter change in govt policy contribute to NPA
Question number 5
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Answer
Chart no 14
feedback
fully satisfied(20)partially satisfied(12)not satisfied(12)fully dissatisfied(6)
Conclusion
As per the response of the officials most of the officials feel that internal factors are also responsible for NPA
Question number 6
Do you think that inflation is one of the reasons for NPA
Answer
Out f 50 responses 22 were strongly satisfied 18 were partially satisfied 8 were not satisfied and 2 were fully dissatisfied
Chart no 15
fully satisfied(20)44
partially satisfied(18)36
not satisfied(5)10
fullt dissatisfied(5)10
Conclusion
Growing inflation increasing goods rate is also one of the reason for NPA
Question number 7
Do you think that lack of PSS is also contributed to NPA
Answer
Out of 50 responses 30 were fully satisfied with it 12 were partially satisfied and 8 were fully dissatisfied
Chart no 16
6024
16
Open
fully satisfied(30)Partially satisfied(12)not satisfied(0)fully dissatisfied(8)
Conclusion
Majority of the officiais feels that lack of PSS is one of the reason for NPA This means that the PSS carried out by the bank is not sufficient or not carried out properly
Question number 8
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Answer
Most of the respondent feels that increase in unwanted expenses of the borrwer ls contribute to NPA
Chart no 17
56
12
28
4
FULLY SATISFIED(28)PARTIALLY SATISFIED(6)NOT SATISFIED(14)FULLY DISSATISFIED(2)
Conclusion
As per response of the officials increasing inflation have an adverse effect on the financial sector its working performance as well as on NPA
Question number 9
Do you think that high rate of interest under Xpress credit also contributes to NPA
Answer
Out of 50 respondent 25 respondent were not satisfied 10 were partially satisfied 10 were strongly dissatisfied where as only 5 out of 50 were fully satisfied with it
Chart no 18
strongly satisfied(5)partially satisfied(10)not satisfied(25)fully dissatisfied(10)
Conclusion
Most of the respondents are not satisfied with it They feel that the rate of interest charged by SBI under Xpress credit is not high and it will not contribute to NPS
Question number 10
Do you think that lack of proper planning of the borrower is one of the reason for NPA
Answer
Out of 70 respondent 35 were fully satisfied 5 were not satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 19
fully satisfied(35)70
partially satisfied(10)20
not satisfied(5)10
Conclusion
Most of the respondent feels that the borrowers borrow money from the bank without any proper planning which is one of the most important reason for NPA
Question number 11
Is heavy borrowing also contribute to NPA
Answer
Out of 50 respondent 25 respondent were fully satisfied 12 were partially satisfied 8 were not satisfied were as 5 were fully dissatisfied
Chart no 110
50
24
16
10
fully satisfied(25) partially satisfied(12) not satisfied(8) fully dissatisfied(5)
Question number 12
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Answer
As per the response of the officials 20 were fully satisfied 66were partially satisfied 4 were not satisfied with it were as 10 respondent were fully dissatisfied
Chart no 111
fully satisfied(10)20
partially satisfied(33)66
not satisfied(2)4
fullydissatisfied(5)10
Conclusion
As per the response given by the officials most of the officials were partially satisfied that wrong selection of borrower also contribute to NPA which means that selection process carried out by the bank is not appropriate or there is some difficulties in implementing them
Question number 13
Do you think that poor credit appraisal also contribute to NPA
Answer
Out of 50 respondent 5 were fully satisfied 10 were fully satisfied 30 were not satisfied were as only 5 were fully dissatisfied
Chart no 112
fully satisfied(5)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 14
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Answer
Out of 50 responses 3 were fully satisfied 15 were partially satisfied 25 were not satisfied where as 7 were full dissatisfied
Chart no 113
fully satisfied(3)partiallt satisfied(15)not satisfied(25)fully dissatisfied(7)
Conclusion
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not contribute to NPA This means that the attitude of bank toward the borrower is not inflexible
Question number 15
Do you think that system over load is also one of the causes of NPA
Answer
Out of 50 respondent 28 were fully satisfied 12 were partially satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 114
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Age of doubtful assets Provision as of secured portion
Doubtful up to 1 year D1 20 of RVS( realizable value of security)
Doubtful for more than 1 year D2 30 of RVS
Doubtful for more than 3 years D2 100 of RVS
Thus if an ac is doubtful for more than 3 years than 100 of the provision is to be made
both from secured and unsecured portion If an advance has been guaranteed by DICGC
CGFTECGC and is doubtful than provision on secured portion will be as in other cases but
provision on unsecured portion will be made after deducting the claim value
4 LOSS ASSET 100 of the outstanding amount while making provision on NPAs amount
lying in suspense ac and derecognized interest should be deducted from gross advance and
provision be made on balance amount
5 OVERALL PROVISION With a view to improving the improving the provisioning cover
and enhancing the soundness of the individual banks RBI has proposed in oct- 09 policy that
bank should augment their provisions and ensure that their total provisioning coverage ratio
including floating provisions is not less than 70
Source wwwRBIorgin
IMPACTEFFECT OF NPA UPON BANKS
A strong banking sector is important for flourishing economy The failure of banking sector
may have an adverse impact on other sector NPA are one of the major concerns of sector
banks is increasing result in nonperforming assets The NPA impact drastically to the
working of banks The efficiency of bank not always reflected by the size of its balance sheet
but by the level of return on its assetsNPA do not generate interest income for the banks but
the same time banks are required to make provisions for such NPAs from their current
profits
They erode current profits through provisioning requirement
They result in reduced interest income
They require higher provisioning requirements effecting profits and accretion to capital
Adverse impact on capital adequacy ratio
Roe and Roa goes down because NPA do not earn
Banks rating gets effect
Banks cost of raising funds goes up
Bad effect on goodwill
Bad effect on equity value
EARLY SYMPTOMS BY WHICH ONE CAN RECOGNIZE A PERFORMING
ASSETS TURNING TO A NON PERFORMING ASSET
Four categories of early symptoms
1) FINANCIAL
(a) Non- payment of very first installment
(b) Bouncing of cheque due to insufficient balance in the ac
(c) Irregularity in installment
(d) Irregularity of operations in ac
(e) Unpaid overdue bill
(f) Declining current ratio
2) OPERATIONAL AND PHYSICAL
(a) If information is received that the borrower has either initiated the process of winding up or not doing the business
(b) Over-due receivable
(c) Stock statement not submitted on time
(d) External non-controllable factor like natural calamities in the city where the borrower lives
(e) Non- payment of salary
(3) ATTITUDNAL CHANGE
(a) Use for personal comfort stocks and shares by borrowers
(b) Avoidance of contact with bank
(c) Problem between partners
(4) OTHER
(a) Change in govt policies
(b) Death of the borrower
(c) Delay in salary
PREVENTIVE MEASUREMENT FOR NPA
Early recognition of the problem
Invariably by the time banks start their efforts to get involved
in a revival process its too late to retrieve the situation ndash both in terms of rehabilitation of the
project and the recovery of banks dues Identification of the weakness regardless of the fact
that it may not have become NPA is imperative Assessment of the potential of revival may
be done on the basis of a techno-economic viability study Restructuring should be attempted
where after an objective assessment of the promoterrsquos intention banks are convinced of a
turn around with in a scheduled facilitate winding upselling of units earlier so as to recover
whatever is possible through means before the security position becomes worse
Identifying borrowers with genuine intent
Identifying borrower with genuine intent from those who
are non-serious with commitment or stake in revival is a challenge confronting bankers Here
the role of front line officials at branch level is paramount as they are the ones who have
intelligent inputs with regard to promoters lsquo sincerity and capability to achieve turnaround
Based on this objective assessment bank should decide as quickly as possible whether it
would be worthwhile to commit additional finance
In this regard banks may consider having
ldquospecial investigationrdquo of all financial transaction or business transaction books of account
order to ascertain real factor that contributed to sickness of borrower Bank may have panel
of technical experts with proven expertise and task record of preparing techno-economic
study of the project of the borrowers
Borrowers having genuine problems due to temporary mismatch in find flow or sudden
requirement of additional fund may entertained at branch level for this purpose a special
limit to such type of cases should be decided This will obviate the need to route the
additional funding through the controlling officers in deserving cases and avert many
accounts sleeping into NPA category
Timeliness and adequacy of response
Longer the delay in response greater the enjury to the
account and the asset Time is a crucial element in any restructuring or rehabilitation activity
The response decided on the basis of techno- economic study and promoterrsquos commitment
has to be adequate in terms of extend of additional funding and relaxations etc under the
restructuring exercise The package of assistance may be flexible and bank may look at the
exit option
Focus on cash flow
While financing at the time of restructuring the banks may not be guided
by the conventional fund flow analysis only which could yield a potentially misleading
picture Appraisal for fresh credit requirement may be done by analyzing fond flow in
conjunction with the cash flow rather than only on the basis of fund flow
Source wwwAskcom
Management effectiveness
The general perception among the borrower is lack of finance that
leads to sickness and NPAs but this may not be the case all the time Management effectiveness
advance business condition is a very important aspect that affects a borrowing units fortunes A bank
may commit a multiple finance to an align unit only after basic viability of the enterprise also in the
context of quality of management is examined and confirmed It will be useful to have consultant
appointed as early as possible to examine this aspect A proper techno-economic viability study thus
become the basis on which any future action can be considered
Multiple financing
A) During the exercise for assessment of viability and restructuring a pragmatic and unified
approach by all the leading banks as also sharing of all relevant information on the
borrower would go a long way toward overall success of rehabilitation exercise given the
probability of successfailure
B) In some default cases Where the unit is still working The bank should make sure that it
captures the cash flow and insure that such cash are used for working capital purpose
Toward this end there should be a continuous flow of information among consortium
member A bank which is not a part of consortium may not be allowed to offer credit
facility to such defaulting clients Current account facility may also be denied at non-
consortium banks to such clients and violation may attract penal action The credit
information bureau of india (CIBIL) may be very useful for meaningful information
exchange on defaulting borrowers once the setup become fully operational
C) In a forum of lenders the priority of each lender will be different While one set of lender
may be willing to wait for longer time to recover its dues another lender may have a much
shorter timeframe in mind So it is possible that the letter categories of lenders may be
willing to exit even at a cost by a discounted settlement of the exposure There for any plan
for restructuringrehabilitation may takes into account
D) Corporate debt restructuring it has been institutionalized in 2001 to provide a timely and
transparent system for restructuring the corporate debt of RS 20 crores and above with the
banks on a voluntary basis and outside a legal framework Under this system bank are
greatly benefit in terms of restructuring of large standard accounts (potential NPAs) and
viable sub-standard account with multiple banking arrangement
NPA MANAGEMENT- RESOLUTION
Compromise settlement schemes
Restructuringrescheduling
Lok adalat
Corporate debt restructuring cell
Debt recovery Tribunals (DRT)
Proceeding under the code of civil procedure
Board of industrial and financial reconstruction
National company law Tribunal (NCLT)
Sale of NPA to other bank
Sale of NPA to ARCSC under securitization and reconstruction of financial assets for
enforcement of security interest Act 2000 (SRFAESI)
Liquidation
Source wwwRBIorgin
NPA MANAGEMENT IN INDIA
Formation of the credit information bureau (India) limited (CIBIL)
Release of willful defaulterrsquos listRBI also releases a list of borrowers with aggregate
outstanding of RS 1 crore and above against whom bank have filed suit for recovery of their
fund
Reporting of frauds to RBI
Norms of lenders labiality- framing of fair practices code with regard to lenders lability to
be followed by banks
Risk assessment and Risk management
RBI has advised banks to all cases of willful defaulters in case of 1 crore and above and
files suits in such cases
Responding quick mortality cases
Special mention accounts for early identification for bad debt loans and advances over due
for less than one or two quarters would come under this category However these accounts do
not need provisioning
INTERNATIONAL PRACTICES ON NPA MANAGEMENT
Subsequent to the Asian currency crisis which severely crippled the financial system In
addition to the above some of the more recent and aggressive step to NPAs have been taken
by Taiwan Taiwanese financial institution have been encouraged to merge and form bank
based AMCs through the recent introduction of financial holding company act and financial
institution Asian countries the magnitude of NPAs in Asian financial institution was brought
to light Driven by the need to proactively tackle the soaring NPAs level the respective govt
embarked upon a program of substantial reform This involves setting up processes for early
identification and resolution of NPAs The table below provides a cross country comparison
of approaches used for NPA resolution Mergers Act A long side the ministry of finance has
followed a carrot and strict policy of specifying the required NPA ratio for banks while also
providing flexibility in modes of NPA assets resolution and a conduct
ive regulatory and tax environment Deferred loss write-off provisions have been instituted to
provide breathing space for lenders to absorb NPA write-off While it is too early to
comment on success of NPA resolution process in Taiwan the early sign are encouraging
Detailed below are some key NPA management approaches adopted by banks in South East
Asian countries
1 Credit risk mitigation
2 Early warning systems
3 Assets management companies
Increasing willingness to sell NPAs to AMCs
Effective resolution strategy
Appointment of special administrators
4 Out of court restructuring
Source wwwgooglecom
DIFFICULTIES WITH NON PERFORMING ASSETS
I Owners do not receive a market return on their capital In the worst case if the bank
fails owner lose their assets
II Depositors do not receive a market return on savings In the worst case if the bank
fails depositors lose their assets or uninsured balance Banks also redistribute losses
to other borrowers by charging higher rate of interest
III Non-performing loans epitomize bad investors They misallocate credit from good
projects which do not receive funding to failed project
IV 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
shortage the shortage can jam payments across the country
b Illiquidity constraints banks in paying depositors eg cashing their paychecks
c Undercapitalized banks exceed the bank capital base
Lending by bank has been politicized It is common knowledge
that loans are given to various industrial houses on common consideration and
viability of project but on political consideration In normal circumstances banks
before extending any loan would make a thorough study of the actual need of the
party considered the prospect of the business in which it is engaged Since it is
not looked into many of the loans becomes NPA
REASONS F0R AN ACCOUNT BECOMING NPA
Those attribute to borrower
Failure to bring in required capital
Lack of proper planning
Unwanted expenses
Lack of expertise
Poor credit collection
Miss management
Heavy borrowing
Lack of knowledge regarding NPA
Willful defaulters
Death of the borrower
Those attribute to banks
Wrong selection of borrower
Poor credit appraisal
Unhelpful in supervision
Too inflexible attitude
System overload
Lack of motivation
Delay in sanction
Lack of trained staff
Lack of commitment to recovery
Lack of personal visit to the borrower office
Lack of personal visit to the borrowerrsquos residence
Other
Fast changing technology
Unhelpful attitude of govt
Increase in material cost
Government policies
Taxation law
Political hostility
INDIAN ECONOMY AND NPA
Undoubtedly the world economy has slowed down recession is at its peak globally stock markets
have tumbled and business itself getting hard to do The Indian economy has been much affected due
to high fiscal deficit poor infrastructure facilities sticky legal system cutting of exposures to
emerging market by FIIs etc
Further international rating agencies like standard and poor
have lowered Indiarsquos credit rating to sub- investment grade Such negative aspects have often
outweighed positive such as increasing for reserve and a manageable inflation rate
Under such situation I go without saying that banks are no exception
and are bound to face the heat of global down turn One would be surprise to know that banks and
financial institution in India holds non-performing assets worth Rs 1 10000 crores Bankers have
realized that unless the level of NPA is reduced drastically they will find it difficult to survive
The actual level of NPA in India is around $ 40 billion much higher than govt estimation of $16
billion This difference is largely due to the discrepancy in accounting the NPAs followed by India
and rest of the world The accounting norms of India are less stringent than those of the developed
economies The Indian banks also have the tendency to extend the past due Considering the GDP
India nearly $ 470 billion the NPA are 8 of the total GDP which was better than many Asian
countries The NPA of china was 45 of the GDP While Japan had NPAs of 25 of the GDP
The aggregate level of NPAs in Asia has increased from $ 25 billion in 2007 to
$ 34 billion on 2009 looking to such overall pictures of the market we can say that India is doing
well and the steps taken are looking favorable
Source googlecoin
DATA ANALYZING THE QUETIONNAIRE
Two set of questionnaire were prepared to collect the feedback One set of questionnaire was meant for branches and other set of questionnaire was meant for borrowers
The set of questionnaire were given to the branches under hazaribag (RBO) and collected the feedback of the bankers of P segment and the branch manager
The questionnaire prepared for branch contained 15 questions and the questionnaire prepared for borrower contains 10 questions
The data was collected from 50 bankers and the data analysis of the branch questionnaire is as follows
Question number 1
Does not require any data analysis and information was sought to know the business level of the branches for the purpose of whether particular branch is actively engaged in xpress credit portfolio
Question number 2
Do you think that the borrowers are aware about NPA
Answer
32 of the respondent feel that the borrowers are not aware about NPA and 18 respondents feel that borrowers are aware about NPA
Chart no 11
yes
no
0
5
10
15
20
25
30
35
1832 Column1
Conclusion
Majority of the bank officials feels that the borrowers are not aware about NPA
Question number 3
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Answer
Out of 32 respondent 22 respondents is fully satisfied that lack of knowledge among the borrower regarding NPA is one of the reason for NPA 08 respondent were partially satisfied with it and 02 respondent were not satisfied with it
Chart no 12
fully satisfied(22)69
partially satisfied(8)25
not satisfied(2)6
Sales
Conclusion
Majority of the borrowers feels that lack of knowledge among the borrower regarding NPA is one of the reasons for NPA
Question number 4 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Answer
Out of 50 respondent 30 of the respondent strongly satisfied that these external factors contribute to NPA 10 respondent were partially satisfied with it 5 were not satisfied where as 5 were fully dissatisfied with it
Chart no 13
6020
10
10
fully satisfied(30) partially satisfied(10) not satisfiec(5) fully desatisfied(5)
Conclusion
Most of the respondent thinks that external factrs like willful defaulter change in govt policy contribute to NPA
Question number 5
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Answer
Chart no 14
feedback
fully satisfied(20)partially satisfied(12)not satisfied(12)fully dissatisfied(6)
Conclusion
As per the response of the officials most of the officials feel that internal factors are also responsible for NPA
Question number 6
Do you think that inflation is one of the reasons for NPA
Answer
Out f 50 responses 22 were strongly satisfied 18 were partially satisfied 8 were not satisfied and 2 were fully dissatisfied
Chart no 15
fully satisfied(20)44
partially satisfied(18)36
not satisfied(5)10
fullt dissatisfied(5)10
Conclusion
Growing inflation increasing goods rate is also one of the reason for NPA
Question number 7
Do you think that lack of PSS is also contributed to NPA
Answer
Out of 50 responses 30 were fully satisfied with it 12 were partially satisfied and 8 were fully dissatisfied
Chart no 16
6024
16
Open
fully satisfied(30)Partially satisfied(12)not satisfied(0)fully dissatisfied(8)
Conclusion
Majority of the officiais feels that lack of PSS is one of the reason for NPA This means that the PSS carried out by the bank is not sufficient or not carried out properly
Question number 8
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Answer
Most of the respondent feels that increase in unwanted expenses of the borrwer ls contribute to NPA
Chart no 17
56
12
28
4
FULLY SATISFIED(28)PARTIALLY SATISFIED(6)NOT SATISFIED(14)FULLY DISSATISFIED(2)
Conclusion
As per response of the officials increasing inflation have an adverse effect on the financial sector its working performance as well as on NPA
Question number 9
Do you think that high rate of interest under Xpress credit also contributes to NPA
Answer
Out of 50 respondent 25 respondent were not satisfied 10 were partially satisfied 10 were strongly dissatisfied where as only 5 out of 50 were fully satisfied with it
Chart no 18
strongly satisfied(5)partially satisfied(10)not satisfied(25)fully dissatisfied(10)
Conclusion
Most of the respondents are not satisfied with it They feel that the rate of interest charged by SBI under Xpress credit is not high and it will not contribute to NPS
Question number 10
Do you think that lack of proper planning of the borrower is one of the reason for NPA
Answer
Out of 70 respondent 35 were fully satisfied 5 were not satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 19
fully satisfied(35)70
partially satisfied(10)20
not satisfied(5)10
Conclusion
Most of the respondent feels that the borrowers borrow money from the bank without any proper planning which is one of the most important reason for NPA
Question number 11
Is heavy borrowing also contribute to NPA
Answer
Out of 50 respondent 25 respondent were fully satisfied 12 were partially satisfied 8 were not satisfied were as 5 were fully dissatisfied
Chart no 110
50
24
16
10
fully satisfied(25) partially satisfied(12) not satisfied(8) fully dissatisfied(5)
Question number 12
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Answer
As per the response of the officials 20 were fully satisfied 66were partially satisfied 4 were not satisfied with it were as 10 respondent were fully dissatisfied
Chart no 111
fully satisfied(10)20
partially satisfied(33)66
not satisfied(2)4
fullydissatisfied(5)10
Conclusion
As per the response given by the officials most of the officials were partially satisfied that wrong selection of borrower also contribute to NPA which means that selection process carried out by the bank is not appropriate or there is some difficulties in implementing them
Question number 13
Do you think that poor credit appraisal also contribute to NPA
Answer
Out of 50 respondent 5 were fully satisfied 10 were fully satisfied 30 were not satisfied were as only 5 were fully dissatisfied
Chart no 112
fully satisfied(5)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 14
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Answer
Out of 50 responses 3 were fully satisfied 15 were partially satisfied 25 were not satisfied where as 7 were full dissatisfied
Chart no 113
fully satisfied(3)partiallt satisfied(15)not satisfied(25)fully dissatisfied(7)
Conclusion
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not contribute to NPA This means that the attitude of bank toward the borrower is not inflexible
Question number 15
Do you think that system over load is also one of the causes of NPA
Answer
Out of 50 respondent 28 were fully satisfied 12 were partially satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 114
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
IMPACTEFFECT OF NPA UPON BANKS
A strong banking sector is important for flourishing economy The failure of banking sector
may have an adverse impact on other sector NPA are one of the major concerns of sector
banks is increasing result in nonperforming assets The NPA impact drastically to the
working of banks The efficiency of bank not always reflected by the size of its balance sheet
but by the level of return on its assetsNPA do not generate interest income for the banks but
the same time banks are required to make provisions for such NPAs from their current
profits
They erode current profits through provisioning requirement
They result in reduced interest income
They require higher provisioning requirements effecting profits and accretion to capital
Adverse impact on capital adequacy ratio
Roe and Roa goes down because NPA do not earn
Banks rating gets effect
Banks cost of raising funds goes up
Bad effect on goodwill
Bad effect on equity value
EARLY SYMPTOMS BY WHICH ONE CAN RECOGNIZE A PERFORMING
ASSETS TURNING TO A NON PERFORMING ASSET
Four categories of early symptoms
1) FINANCIAL
(a) Non- payment of very first installment
(b) Bouncing of cheque due to insufficient balance in the ac
(c) Irregularity in installment
(d) Irregularity of operations in ac
(e) Unpaid overdue bill
(f) Declining current ratio
2) OPERATIONAL AND PHYSICAL
(a) If information is received that the borrower has either initiated the process of winding up or not doing the business
(b) Over-due receivable
(c) Stock statement not submitted on time
(d) External non-controllable factor like natural calamities in the city where the borrower lives
(e) Non- payment of salary
(3) ATTITUDNAL CHANGE
(a) Use for personal comfort stocks and shares by borrowers
(b) Avoidance of contact with bank
(c) Problem between partners
(4) OTHER
(a) Change in govt policies
(b) Death of the borrower
(c) Delay in salary
PREVENTIVE MEASUREMENT FOR NPA
Early recognition of the problem
Invariably by the time banks start their efforts to get involved
in a revival process its too late to retrieve the situation ndash both in terms of rehabilitation of the
project and the recovery of banks dues Identification of the weakness regardless of the fact
that it may not have become NPA is imperative Assessment of the potential of revival may
be done on the basis of a techno-economic viability study Restructuring should be attempted
where after an objective assessment of the promoterrsquos intention banks are convinced of a
turn around with in a scheduled facilitate winding upselling of units earlier so as to recover
whatever is possible through means before the security position becomes worse
Identifying borrowers with genuine intent
Identifying borrower with genuine intent from those who
are non-serious with commitment or stake in revival is a challenge confronting bankers Here
the role of front line officials at branch level is paramount as they are the ones who have
intelligent inputs with regard to promoters lsquo sincerity and capability to achieve turnaround
Based on this objective assessment bank should decide as quickly as possible whether it
would be worthwhile to commit additional finance
In this regard banks may consider having
ldquospecial investigationrdquo of all financial transaction or business transaction books of account
order to ascertain real factor that contributed to sickness of borrower Bank may have panel
of technical experts with proven expertise and task record of preparing techno-economic
study of the project of the borrowers
Borrowers having genuine problems due to temporary mismatch in find flow or sudden
requirement of additional fund may entertained at branch level for this purpose a special
limit to such type of cases should be decided This will obviate the need to route the
additional funding through the controlling officers in deserving cases and avert many
accounts sleeping into NPA category
Timeliness and adequacy of response
Longer the delay in response greater the enjury to the
account and the asset Time is a crucial element in any restructuring or rehabilitation activity
The response decided on the basis of techno- economic study and promoterrsquos commitment
has to be adequate in terms of extend of additional funding and relaxations etc under the
restructuring exercise The package of assistance may be flexible and bank may look at the
exit option
Focus on cash flow
While financing at the time of restructuring the banks may not be guided
by the conventional fund flow analysis only which could yield a potentially misleading
picture Appraisal for fresh credit requirement may be done by analyzing fond flow in
conjunction with the cash flow rather than only on the basis of fund flow
Source wwwAskcom
Management effectiveness
The general perception among the borrower is lack of finance that
leads to sickness and NPAs but this may not be the case all the time Management effectiveness
advance business condition is a very important aspect that affects a borrowing units fortunes A bank
may commit a multiple finance to an align unit only after basic viability of the enterprise also in the
context of quality of management is examined and confirmed It will be useful to have consultant
appointed as early as possible to examine this aspect A proper techno-economic viability study thus
become the basis on which any future action can be considered
Multiple financing
A) During the exercise for assessment of viability and restructuring a pragmatic and unified
approach by all the leading banks as also sharing of all relevant information on the
borrower would go a long way toward overall success of rehabilitation exercise given the
probability of successfailure
B) In some default cases Where the unit is still working The bank should make sure that it
captures the cash flow and insure that such cash are used for working capital purpose
Toward this end there should be a continuous flow of information among consortium
member A bank which is not a part of consortium may not be allowed to offer credit
facility to such defaulting clients Current account facility may also be denied at non-
consortium banks to such clients and violation may attract penal action The credit
information bureau of india (CIBIL) may be very useful for meaningful information
exchange on defaulting borrowers once the setup become fully operational
C) In a forum of lenders the priority of each lender will be different While one set of lender
may be willing to wait for longer time to recover its dues another lender may have a much
shorter timeframe in mind So it is possible that the letter categories of lenders may be
willing to exit even at a cost by a discounted settlement of the exposure There for any plan
for restructuringrehabilitation may takes into account
D) Corporate debt restructuring it has been institutionalized in 2001 to provide a timely and
transparent system for restructuring the corporate debt of RS 20 crores and above with the
banks on a voluntary basis and outside a legal framework Under this system bank are
greatly benefit in terms of restructuring of large standard accounts (potential NPAs) and
viable sub-standard account with multiple banking arrangement
NPA MANAGEMENT- RESOLUTION
Compromise settlement schemes
Restructuringrescheduling
Lok adalat
Corporate debt restructuring cell
Debt recovery Tribunals (DRT)
Proceeding under the code of civil procedure
Board of industrial and financial reconstruction
National company law Tribunal (NCLT)
Sale of NPA to other bank
Sale of NPA to ARCSC under securitization and reconstruction of financial assets for
enforcement of security interest Act 2000 (SRFAESI)
Liquidation
Source wwwRBIorgin
NPA MANAGEMENT IN INDIA
Formation of the credit information bureau (India) limited (CIBIL)
Release of willful defaulterrsquos listRBI also releases a list of borrowers with aggregate
outstanding of RS 1 crore and above against whom bank have filed suit for recovery of their
fund
Reporting of frauds to RBI
Norms of lenders labiality- framing of fair practices code with regard to lenders lability to
be followed by banks
Risk assessment and Risk management
RBI has advised banks to all cases of willful defaulters in case of 1 crore and above and
files suits in such cases
Responding quick mortality cases
Special mention accounts for early identification for bad debt loans and advances over due
for less than one or two quarters would come under this category However these accounts do
not need provisioning
INTERNATIONAL PRACTICES ON NPA MANAGEMENT
Subsequent to the Asian currency crisis which severely crippled the financial system In
addition to the above some of the more recent and aggressive step to NPAs have been taken
by Taiwan Taiwanese financial institution have been encouraged to merge and form bank
based AMCs through the recent introduction of financial holding company act and financial
institution Asian countries the magnitude of NPAs in Asian financial institution was brought
to light Driven by the need to proactively tackle the soaring NPAs level the respective govt
embarked upon a program of substantial reform This involves setting up processes for early
identification and resolution of NPAs The table below provides a cross country comparison
of approaches used for NPA resolution Mergers Act A long side the ministry of finance has
followed a carrot and strict policy of specifying the required NPA ratio for banks while also
providing flexibility in modes of NPA assets resolution and a conduct
ive regulatory and tax environment Deferred loss write-off provisions have been instituted to
provide breathing space for lenders to absorb NPA write-off While it is too early to
comment on success of NPA resolution process in Taiwan the early sign are encouraging
Detailed below are some key NPA management approaches adopted by banks in South East
Asian countries
1 Credit risk mitigation
2 Early warning systems
3 Assets management companies
Increasing willingness to sell NPAs to AMCs
Effective resolution strategy
Appointment of special administrators
4 Out of court restructuring
Source wwwgooglecom
DIFFICULTIES WITH NON PERFORMING ASSETS
I Owners do not receive a market return on their capital In the worst case if the bank
fails owner lose their assets
II Depositors do not receive a market return on savings In the worst case if the bank
fails depositors lose their assets or uninsured balance Banks also redistribute losses
to other borrowers by charging higher rate of interest
III Non-performing loans epitomize bad investors They misallocate credit from good
projects which do not receive funding to failed project
IV 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
shortage the shortage can jam payments across the country
b Illiquidity constraints banks in paying depositors eg cashing their paychecks
c Undercapitalized banks exceed the bank capital base
Lending by bank has been politicized It is common knowledge
that loans are given to various industrial houses on common consideration and
viability of project but on political consideration In normal circumstances banks
before extending any loan would make a thorough study of the actual need of the
party considered the prospect of the business in which it is engaged Since it is
not looked into many of the loans becomes NPA
REASONS F0R AN ACCOUNT BECOMING NPA
Those attribute to borrower
Failure to bring in required capital
Lack of proper planning
Unwanted expenses
Lack of expertise
Poor credit collection
Miss management
Heavy borrowing
Lack of knowledge regarding NPA
Willful defaulters
Death of the borrower
Those attribute to banks
Wrong selection of borrower
Poor credit appraisal
Unhelpful in supervision
Too inflexible attitude
System overload
Lack of motivation
Delay in sanction
Lack of trained staff
Lack of commitment to recovery
Lack of personal visit to the borrower office
Lack of personal visit to the borrowerrsquos residence
Other
Fast changing technology
Unhelpful attitude of govt
Increase in material cost
Government policies
Taxation law
Political hostility
INDIAN ECONOMY AND NPA
Undoubtedly the world economy has slowed down recession is at its peak globally stock markets
have tumbled and business itself getting hard to do The Indian economy has been much affected due
to high fiscal deficit poor infrastructure facilities sticky legal system cutting of exposures to
emerging market by FIIs etc
Further international rating agencies like standard and poor
have lowered Indiarsquos credit rating to sub- investment grade Such negative aspects have often
outweighed positive such as increasing for reserve and a manageable inflation rate
Under such situation I go without saying that banks are no exception
and are bound to face the heat of global down turn One would be surprise to know that banks and
financial institution in India holds non-performing assets worth Rs 1 10000 crores Bankers have
realized that unless the level of NPA is reduced drastically they will find it difficult to survive
The actual level of NPA in India is around $ 40 billion much higher than govt estimation of $16
billion This difference is largely due to the discrepancy in accounting the NPAs followed by India
and rest of the world The accounting norms of India are less stringent than those of the developed
economies The Indian banks also have the tendency to extend the past due Considering the GDP
India nearly $ 470 billion the NPA are 8 of the total GDP which was better than many Asian
countries The NPA of china was 45 of the GDP While Japan had NPAs of 25 of the GDP
The aggregate level of NPAs in Asia has increased from $ 25 billion in 2007 to
$ 34 billion on 2009 looking to such overall pictures of the market we can say that India is doing
well and the steps taken are looking favorable
Source googlecoin
DATA ANALYZING THE QUETIONNAIRE
Two set of questionnaire were prepared to collect the feedback One set of questionnaire was meant for branches and other set of questionnaire was meant for borrowers
The set of questionnaire were given to the branches under hazaribag (RBO) and collected the feedback of the bankers of P segment and the branch manager
The questionnaire prepared for branch contained 15 questions and the questionnaire prepared for borrower contains 10 questions
The data was collected from 50 bankers and the data analysis of the branch questionnaire is as follows
Question number 1
Does not require any data analysis and information was sought to know the business level of the branches for the purpose of whether particular branch is actively engaged in xpress credit portfolio
Question number 2
Do you think that the borrowers are aware about NPA
Answer
32 of the respondent feel that the borrowers are not aware about NPA and 18 respondents feel that borrowers are aware about NPA
Chart no 11
yes
no
0
5
10
15
20
25
30
35
1832 Column1
Conclusion
Majority of the bank officials feels that the borrowers are not aware about NPA
Question number 3
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Answer
Out of 32 respondent 22 respondents is fully satisfied that lack of knowledge among the borrower regarding NPA is one of the reason for NPA 08 respondent were partially satisfied with it and 02 respondent were not satisfied with it
Chart no 12
fully satisfied(22)69
partially satisfied(8)25
not satisfied(2)6
Sales
Conclusion
Majority of the borrowers feels that lack of knowledge among the borrower regarding NPA is one of the reasons for NPA
Question number 4 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Answer
Out of 50 respondent 30 of the respondent strongly satisfied that these external factors contribute to NPA 10 respondent were partially satisfied with it 5 were not satisfied where as 5 were fully dissatisfied with it
Chart no 13
6020
10
10
fully satisfied(30) partially satisfied(10) not satisfiec(5) fully desatisfied(5)
Conclusion
Most of the respondent thinks that external factrs like willful defaulter change in govt policy contribute to NPA
Question number 5
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Answer
Chart no 14
feedback
fully satisfied(20)partially satisfied(12)not satisfied(12)fully dissatisfied(6)
Conclusion
As per the response of the officials most of the officials feel that internal factors are also responsible for NPA
Question number 6
Do you think that inflation is one of the reasons for NPA
Answer
Out f 50 responses 22 were strongly satisfied 18 were partially satisfied 8 were not satisfied and 2 were fully dissatisfied
Chart no 15
fully satisfied(20)44
partially satisfied(18)36
not satisfied(5)10
fullt dissatisfied(5)10
Conclusion
Growing inflation increasing goods rate is also one of the reason for NPA
Question number 7
Do you think that lack of PSS is also contributed to NPA
Answer
Out of 50 responses 30 were fully satisfied with it 12 were partially satisfied and 8 were fully dissatisfied
Chart no 16
6024
16
Open
fully satisfied(30)Partially satisfied(12)not satisfied(0)fully dissatisfied(8)
Conclusion
Majority of the officiais feels that lack of PSS is one of the reason for NPA This means that the PSS carried out by the bank is not sufficient or not carried out properly
Question number 8
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Answer
Most of the respondent feels that increase in unwanted expenses of the borrwer ls contribute to NPA
Chart no 17
56
12
28
4
FULLY SATISFIED(28)PARTIALLY SATISFIED(6)NOT SATISFIED(14)FULLY DISSATISFIED(2)
Conclusion
As per response of the officials increasing inflation have an adverse effect on the financial sector its working performance as well as on NPA
Question number 9
Do you think that high rate of interest under Xpress credit also contributes to NPA
Answer
Out of 50 respondent 25 respondent were not satisfied 10 were partially satisfied 10 were strongly dissatisfied where as only 5 out of 50 were fully satisfied with it
Chart no 18
strongly satisfied(5)partially satisfied(10)not satisfied(25)fully dissatisfied(10)
Conclusion
Most of the respondents are not satisfied with it They feel that the rate of interest charged by SBI under Xpress credit is not high and it will not contribute to NPS
Question number 10
Do you think that lack of proper planning of the borrower is one of the reason for NPA
Answer
Out of 70 respondent 35 were fully satisfied 5 were not satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 19
fully satisfied(35)70
partially satisfied(10)20
not satisfied(5)10
Conclusion
Most of the respondent feels that the borrowers borrow money from the bank without any proper planning which is one of the most important reason for NPA
Question number 11
Is heavy borrowing also contribute to NPA
Answer
Out of 50 respondent 25 respondent were fully satisfied 12 were partially satisfied 8 were not satisfied were as 5 were fully dissatisfied
Chart no 110
50
24
16
10
fully satisfied(25) partially satisfied(12) not satisfied(8) fully dissatisfied(5)
Question number 12
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Answer
As per the response of the officials 20 were fully satisfied 66were partially satisfied 4 were not satisfied with it were as 10 respondent were fully dissatisfied
Chart no 111
fully satisfied(10)20
partially satisfied(33)66
not satisfied(2)4
fullydissatisfied(5)10
Conclusion
As per the response given by the officials most of the officials were partially satisfied that wrong selection of borrower also contribute to NPA which means that selection process carried out by the bank is not appropriate or there is some difficulties in implementing them
Question number 13
Do you think that poor credit appraisal also contribute to NPA
Answer
Out of 50 respondent 5 were fully satisfied 10 were fully satisfied 30 were not satisfied were as only 5 were fully dissatisfied
Chart no 112
fully satisfied(5)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 14
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Answer
Out of 50 responses 3 were fully satisfied 15 were partially satisfied 25 were not satisfied where as 7 were full dissatisfied
Chart no 113
fully satisfied(3)partiallt satisfied(15)not satisfied(25)fully dissatisfied(7)
Conclusion
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not contribute to NPA This means that the attitude of bank toward the borrower is not inflexible
Question number 15
Do you think that system over load is also one of the causes of NPA
Answer
Out of 50 respondent 28 were fully satisfied 12 were partially satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 114
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
EARLY SYMPTOMS BY WHICH ONE CAN RECOGNIZE A PERFORMING
ASSETS TURNING TO A NON PERFORMING ASSET
Four categories of early symptoms
1) FINANCIAL
(a) Non- payment of very first installment
(b) Bouncing of cheque due to insufficient balance in the ac
(c) Irregularity in installment
(d) Irregularity of operations in ac
(e) Unpaid overdue bill
(f) Declining current ratio
2) OPERATIONAL AND PHYSICAL
(a) If information is received that the borrower has either initiated the process of winding up or not doing the business
(b) Over-due receivable
(c) Stock statement not submitted on time
(d) External non-controllable factor like natural calamities in the city where the borrower lives
(e) Non- payment of salary
(3) ATTITUDNAL CHANGE
(a) Use for personal comfort stocks and shares by borrowers
(b) Avoidance of contact with bank
(c) Problem between partners
(4) OTHER
(a) Change in govt policies
(b) Death of the borrower
(c) Delay in salary
PREVENTIVE MEASUREMENT FOR NPA
Early recognition of the problem
Invariably by the time banks start their efforts to get involved
in a revival process its too late to retrieve the situation ndash both in terms of rehabilitation of the
project and the recovery of banks dues Identification of the weakness regardless of the fact
that it may not have become NPA is imperative Assessment of the potential of revival may
be done on the basis of a techno-economic viability study Restructuring should be attempted
where after an objective assessment of the promoterrsquos intention banks are convinced of a
turn around with in a scheduled facilitate winding upselling of units earlier so as to recover
whatever is possible through means before the security position becomes worse
Identifying borrowers with genuine intent
Identifying borrower with genuine intent from those who
are non-serious with commitment or stake in revival is a challenge confronting bankers Here
the role of front line officials at branch level is paramount as they are the ones who have
intelligent inputs with regard to promoters lsquo sincerity and capability to achieve turnaround
Based on this objective assessment bank should decide as quickly as possible whether it
would be worthwhile to commit additional finance
In this regard banks may consider having
ldquospecial investigationrdquo of all financial transaction or business transaction books of account
order to ascertain real factor that contributed to sickness of borrower Bank may have panel
of technical experts with proven expertise and task record of preparing techno-economic
study of the project of the borrowers
Borrowers having genuine problems due to temporary mismatch in find flow or sudden
requirement of additional fund may entertained at branch level for this purpose a special
limit to such type of cases should be decided This will obviate the need to route the
additional funding through the controlling officers in deserving cases and avert many
accounts sleeping into NPA category
Timeliness and adequacy of response
Longer the delay in response greater the enjury to the
account and the asset Time is a crucial element in any restructuring or rehabilitation activity
The response decided on the basis of techno- economic study and promoterrsquos commitment
has to be adequate in terms of extend of additional funding and relaxations etc under the
restructuring exercise The package of assistance may be flexible and bank may look at the
exit option
Focus on cash flow
While financing at the time of restructuring the banks may not be guided
by the conventional fund flow analysis only which could yield a potentially misleading
picture Appraisal for fresh credit requirement may be done by analyzing fond flow in
conjunction with the cash flow rather than only on the basis of fund flow
Source wwwAskcom
Management effectiveness
The general perception among the borrower is lack of finance that
leads to sickness and NPAs but this may not be the case all the time Management effectiveness
advance business condition is a very important aspect that affects a borrowing units fortunes A bank
may commit a multiple finance to an align unit only after basic viability of the enterprise also in the
context of quality of management is examined and confirmed It will be useful to have consultant
appointed as early as possible to examine this aspect A proper techno-economic viability study thus
become the basis on which any future action can be considered
Multiple financing
A) During the exercise for assessment of viability and restructuring a pragmatic and unified
approach by all the leading banks as also sharing of all relevant information on the
borrower would go a long way toward overall success of rehabilitation exercise given the
probability of successfailure
B) In some default cases Where the unit is still working The bank should make sure that it
captures the cash flow and insure that such cash are used for working capital purpose
Toward this end there should be a continuous flow of information among consortium
member A bank which is not a part of consortium may not be allowed to offer credit
facility to such defaulting clients Current account facility may also be denied at non-
consortium banks to such clients and violation may attract penal action The credit
information bureau of india (CIBIL) may be very useful for meaningful information
exchange on defaulting borrowers once the setup become fully operational
C) In a forum of lenders the priority of each lender will be different While one set of lender
may be willing to wait for longer time to recover its dues another lender may have a much
shorter timeframe in mind So it is possible that the letter categories of lenders may be
willing to exit even at a cost by a discounted settlement of the exposure There for any plan
for restructuringrehabilitation may takes into account
D) Corporate debt restructuring it has been institutionalized in 2001 to provide a timely and
transparent system for restructuring the corporate debt of RS 20 crores and above with the
banks on a voluntary basis and outside a legal framework Under this system bank are
greatly benefit in terms of restructuring of large standard accounts (potential NPAs) and
viable sub-standard account with multiple banking arrangement
NPA MANAGEMENT- RESOLUTION
Compromise settlement schemes
Restructuringrescheduling
Lok adalat
Corporate debt restructuring cell
Debt recovery Tribunals (DRT)
Proceeding under the code of civil procedure
Board of industrial and financial reconstruction
National company law Tribunal (NCLT)
Sale of NPA to other bank
Sale of NPA to ARCSC under securitization and reconstruction of financial assets for
enforcement of security interest Act 2000 (SRFAESI)
Liquidation
Source wwwRBIorgin
NPA MANAGEMENT IN INDIA
Formation of the credit information bureau (India) limited (CIBIL)
Release of willful defaulterrsquos listRBI also releases a list of borrowers with aggregate
outstanding of RS 1 crore and above against whom bank have filed suit for recovery of their
fund
Reporting of frauds to RBI
Norms of lenders labiality- framing of fair practices code with regard to lenders lability to
be followed by banks
Risk assessment and Risk management
RBI has advised banks to all cases of willful defaulters in case of 1 crore and above and
files suits in such cases
Responding quick mortality cases
Special mention accounts for early identification for bad debt loans and advances over due
for less than one or two quarters would come under this category However these accounts do
not need provisioning
INTERNATIONAL PRACTICES ON NPA MANAGEMENT
Subsequent to the Asian currency crisis which severely crippled the financial system In
addition to the above some of the more recent and aggressive step to NPAs have been taken
by Taiwan Taiwanese financial institution have been encouraged to merge and form bank
based AMCs through the recent introduction of financial holding company act and financial
institution Asian countries the magnitude of NPAs in Asian financial institution was brought
to light Driven by the need to proactively tackle the soaring NPAs level the respective govt
embarked upon a program of substantial reform This involves setting up processes for early
identification and resolution of NPAs The table below provides a cross country comparison
of approaches used for NPA resolution Mergers Act A long side the ministry of finance has
followed a carrot and strict policy of specifying the required NPA ratio for banks while also
providing flexibility in modes of NPA assets resolution and a conduct
ive regulatory and tax environment Deferred loss write-off provisions have been instituted to
provide breathing space for lenders to absorb NPA write-off While it is too early to
comment on success of NPA resolution process in Taiwan the early sign are encouraging
Detailed below are some key NPA management approaches adopted by banks in South East
Asian countries
1 Credit risk mitigation
2 Early warning systems
3 Assets management companies
Increasing willingness to sell NPAs to AMCs
Effective resolution strategy
Appointment of special administrators
4 Out of court restructuring
Source wwwgooglecom
DIFFICULTIES WITH NON PERFORMING ASSETS
I Owners do not receive a market return on their capital In the worst case if the bank
fails owner lose their assets
II Depositors do not receive a market return on savings In the worst case if the bank
fails depositors lose their assets or uninsured balance Banks also redistribute losses
to other borrowers by charging higher rate of interest
III Non-performing loans epitomize bad investors They misallocate credit from good
projects which do not receive funding to failed project
IV 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
shortage the shortage can jam payments across the country
b Illiquidity constraints banks in paying depositors eg cashing their paychecks
c Undercapitalized banks exceed the bank capital base
Lending by bank has been politicized It is common knowledge
that loans are given to various industrial houses on common consideration and
viability of project but on political consideration In normal circumstances banks
before extending any loan would make a thorough study of the actual need of the
party considered the prospect of the business in which it is engaged Since it is
not looked into many of the loans becomes NPA
REASONS F0R AN ACCOUNT BECOMING NPA
Those attribute to borrower
Failure to bring in required capital
Lack of proper planning
Unwanted expenses
Lack of expertise
Poor credit collection
Miss management
Heavy borrowing
Lack of knowledge regarding NPA
Willful defaulters
Death of the borrower
Those attribute to banks
Wrong selection of borrower
Poor credit appraisal
Unhelpful in supervision
Too inflexible attitude
System overload
Lack of motivation
Delay in sanction
Lack of trained staff
Lack of commitment to recovery
Lack of personal visit to the borrower office
Lack of personal visit to the borrowerrsquos residence
Other
Fast changing technology
Unhelpful attitude of govt
Increase in material cost
Government policies
Taxation law
Political hostility
INDIAN ECONOMY AND NPA
Undoubtedly the world economy has slowed down recession is at its peak globally stock markets
have tumbled and business itself getting hard to do The Indian economy has been much affected due
to high fiscal deficit poor infrastructure facilities sticky legal system cutting of exposures to
emerging market by FIIs etc
Further international rating agencies like standard and poor
have lowered Indiarsquos credit rating to sub- investment grade Such negative aspects have often
outweighed positive such as increasing for reserve and a manageable inflation rate
Under such situation I go without saying that banks are no exception
and are bound to face the heat of global down turn One would be surprise to know that banks and
financial institution in India holds non-performing assets worth Rs 1 10000 crores Bankers have
realized that unless the level of NPA is reduced drastically they will find it difficult to survive
The actual level of NPA in India is around $ 40 billion much higher than govt estimation of $16
billion This difference is largely due to the discrepancy in accounting the NPAs followed by India
and rest of the world The accounting norms of India are less stringent than those of the developed
economies The Indian banks also have the tendency to extend the past due Considering the GDP
India nearly $ 470 billion the NPA are 8 of the total GDP which was better than many Asian
countries The NPA of china was 45 of the GDP While Japan had NPAs of 25 of the GDP
The aggregate level of NPAs in Asia has increased from $ 25 billion in 2007 to
$ 34 billion on 2009 looking to such overall pictures of the market we can say that India is doing
well and the steps taken are looking favorable
Source googlecoin
DATA ANALYZING THE QUETIONNAIRE
Two set of questionnaire were prepared to collect the feedback One set of questionnaire was meant for branches and other set of questionnaire was meant for borrowers
The set of questionnaire were given to the branches under hazaribag (RBO) and collected the feedback of the bankers of P segment and the branch manager
The questionnaire prepared for branch contained 15 questions and the questionnaire prepared for borrower contains 10 questions
The data was collected from 50 bankers and the data analysis of the branch questionnaire is as follows
Question number 1
Does not require any data analysis and information was sought to know the business level of the branches for the purpose of whether particular branch is actively engaged in xpress credit portfolio
Question number 2
Do you think that the borrowers are aware about NPA
Answer
32 of the respondent feel that the borrowers are not aware about NPA and 18 respondents feel that borrowers are aware about NPA
Chart no 11
yes
no
0
5
10
15
20
25
30
35
1832 Column1
Conclusion
Majority of the bank officials feels that the borrowers are not aware about NPA
Question number 3
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Answer
Out of 32 respondent 22 respondents is fully satisfied that lack of knowledge among the borrower regarding NPA is one of the reason for NPA 08 respondent were partially satisfied with it and 02 respondent were not satisfied with it
Chart no 12
fully satisfied(22)69
partially satisfied(8)25
not satisfied(2)6
Sales
Conclusion
Majority of the borrowers feels that lack of knowledge among the borrower regarding NPA is one of the reasons for NPA
Question number 4 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Answer
Out of 50 respondent 30 of the respondent strongly satisfied that these external factors contribute to NPA 10 respondent were partially satisfied with it 5 were not satisfied where as 5 were fully dissatisfied with it
Chart no 13
6020
10
10
fully satisfied(30) partially satisfied(10) not satisfiec(5) fully desatisfied(5)
Conclusion
Most of the respondent thinks that external factrs like willful defaulter change in govt policy contribute to NPA
Question number 5
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Answer
Chart no 14
feedback
fully satisfied(20)partially satisfied(12)not satisfied(12)fully dissatisfied(6)
Conclusion
As per the response of the officials most of the officials feel that internal factors are also responsible for NPA
Question number 6
Do you think that inflation is one of the reasons for NPA
Answer
Out f 50 responses 22 were strongly satisfied 18 were partially satisfied 8 were not satisfied and 2 were fully dissatisfied
Chart no 15
fully satisfied(20)44
partially satisfied(18)36
not satisfied(5)10
fullt dissatisfied(5)10
Conclusion
Growing inflation increasing goods rate is also one of the reason for NPA
Question number 7
Do you think that lack of PSS is also contributed to NPA
Answer
Out of 50 responses 30 were fully satisfied with it 12 were partially satisfied and 8 were fully dissatisfied
Chart no 16
6024
16
Open
fully satisfied(30)Partially satisfied(12)not satisfied(0)fully dissatisfied(8)
Conclusion
Majority of the officiais feels that lack of PSS is one of the reason for NPA This means that the PSS carried out by the bank is not sufficient or not carried out properly
Question number 8
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Answer
Most of the respondent feels that increase in unwanted expenses of the borrwer ls contribute to NPA
Chart no 17
56
12
28
4
FULLY SATISFIED(28)PARTIALLY SATISFIED(6)NOT SATISFIED(14)FULLY DISSATISFIED(2)
Conclusion
As per response of the officials increasing inflation have an adverse effect on the financial sector its working performance as well as on NPA
Question number 9
Do you think that high rate of interest under Xpress credit also contributes to NPA
Answer
Out of 50 respondent 25 respondent were not satisfied 10 were partially satisfied 10 were strongly dissatisfied where as only 5 out of 50 were fully satisfied with it
Chart no 18
strongly satisfied(5)partially satisfied(10)not satisfied(25)fully dissatisfied(10)
Conclusion
Most of the respondents are not satisfied with it They feel that the rate of interest charged by SBI under Xpress credit is not high and it will not contribute to NPS
Question number 10
Do you think that lack of proper planning of the borrower is one of the reason for NPA
Answer
Out of 70 respondent 35 were fully satisfied 5 were not satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 19
fully satisfied(35)70
partially satisfied(10)20
not satisfied(5)10
Conclusion
Most of the respondent feels that the borrowers borrow money from the bank without any proper planning which is one of the most important reason for NPA
Question number 11
Is heavy borrowing also contribute to NPA
Answer
Out of 50 respondent 25 respondent were fully satisfied 12 were partially satisfied 8 were not satisfied were as 5 were fully dissatisfied
Chart no 110
50
24
16
10
fully satisfied(25) partially satisfied(12) not satisfied(8) fully dissatisfied(5)
Question number 12
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Answer
As per the response of the officials 20 were fully satisfied 66were partially satisfied 4 were not satisfied with it were as 10 respondent were fully dissatisfied
Chart no 111
fully satisfied(10)20
partially satisfied(33)66
not satisfied(2)4
fullydissatisfied(5)10
Conclusion
As per the response given by the officials most of the officials were partially satisfied that wrong selection of borrower also contribute to NPA which means that selection process carried out by the bank is not appropriate or there is some difficulties in implementing them
Question number 13
Do you think that poor credit appraisal also contribute to NPA
Answer
Out of 50 respondent 5 were fully satisfied 10 were fully satisfied 30 were not satisfied were as only 5 were fully dissatisfied
Chart no 112
fully satisfied(5)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 14
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Answer
Out of 50 responses 3 were fully satisfied 15 were partially satisfied 25 were not satisfied where as 7 were full dissatisfied
Chart no 113
fully satisfied(3)partiallt satisfied(15)not satisfied(25)fully dissatisfied(7)
Conclusion
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not contribute to NPA This means that the attitude of bank toward the borrower is not inflexible
Question number 15
Do you think that system over load is also one of the causes of NPA
Answer
Out of 50 respondent 28 were fully satisfied 12 were partially satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 114
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
(3) ATTITUDNAL CHANGE
(a) Use for personal comfort stocks and shares by borrowers
(b) Avoidance of contact with bank
(c) Problem between partners
(4) OTHER
(a) Change in govt policies
(b) Death of the borrower
(c) Delay in salary
PREVENTIVE MEASUREMENT FOR NPA
Early recognition of the problem
Invariably by the time banks start their efforts to get involved
in a revival process its too late to retrieve the situation ndash both in terms of rehabilitation of the
project and the recovery of banks dues Identification of the weakness regardless of the fact
that it may not have become NPA is imperative Assessment of the potential of revival may
be done on the basis of a techno-economic viability study Restructuring should be attempted
where after an objective assessment of the promoterrsquos intention banks are convinced of a
turn around with in a scheduled facilitate winding upselling of units earlier so as to recover
whatever is possible through means before the security position becomes worse
Identifying borrowers with genuine intent
Identifying borrower with genuine intent from those who
are non-serious with commitment or stake in revival is a challenge confronting bankers Here
the role of front line officials at branch level is paramount as they are the ones who have
intelligent inputs with regard to promoters lsquo sincerity and capability to achieve turnaround
Based on this objective assessment bank should decide as quickly as possible whether it
would be worthwhile to commit additional finance
In this regard banks may consider having
ldquospecial investigationrdquo of all financial transaction or business transaction books of account
order to ascertain real factor that contributed to sickness of borrower Bank may have panel
of technical experts with proven expertise and task record of preparing techno-economic
study of the project of the borrowers
Borrowers having genuine problems due to temporary mismatch in find flow or sudden
requirement of additional fund may entertained at branch level for this purpose a special
limit to such type of cases should be decided This will obviate the need to route the
additional funding through the controlling officers in deserving cases and avert many
accounts sleeping into NPA category
Timeliness and adequacy of response
Longer the delay in response greater the enjury to the
account and the asset Time is a crucial element in any restructuring or rehabilitation activity
The response decided on the basis of techno- economic study and promoterrsquos commitment
has to be adequate in terms of extend of additional funding and relaxations etc under the
restructuring exercise The package of assistance may be flexible and bank may look at the
exit option
Focus on cash flow
While financing at the time of restructuring the banks may not be guided
by the conventional fund flow analysis only which could yield a potentially misleading
picture Appraisal for fresh credit requirement may be done by analyzing fond flow in
conjunction with the cash flow rather than only on the basis of fund flow
Source wwwAskcom
Management effectiveness
The general perception among the borrower is lack of finance that
leads to sickness and NPAs but this may not be the case all the time Management effectiveness
advance business condition is a very important aspect that affects a borrowing units fortunes A bank
may commit a multiple finance to an align unit only after basic viability of the enterprise also in the
context of quality of management is examined and confirmed It will be useful to have consultant
appointed as early as possible to examine this aspect A proper techno-economic viability study thus
become the basis on which any future action can be considered
Multiple financing
A) During the exercise for assessment of viability and restructuring a pragmatic and unified
approach by all the leading banks as also sharing of all relevant information on the
borrower would go a long way toward overall success of rehabilitation exercise given the
probability of successfailure
B) In some default cases Where the unit is still working The bank should make sure that it
captures the cash flow and insure that such cash are used for working capital purpose
Toward this end there should be a continuous flow of information among consortium
member A bank which is not a part of consortium may not be allowed to offer credit
facility to such defaulting clients Current account facility may also be denied at non-
consortium banks to such clients and violation may attract penal action The credit
information bureau of india (CIBIL) may be very useful for meaningful information
exchange on defaulting borrowers once the setup become fully operational
C) In a forum of lenders the priority of each lender will be different While one set of lender
may be willing to wait for longer time to recover its dues another lender may have a much
shorter timeframe in mind So it is possible that the letter categories of lenders may be
willing to exit even at a cost by a discounted settlement of the exposure There for any plan
for restructuringrehabilitation may takes into account
D) Corporate debt restructuring it has been institutionalized in 2001 to provide a timely and
transparent system for restructuring the corporate debt of RS 20 crores and above with the
banks on a voluntary basis and outside a legal framework Under this system bank are
greatly benefit in terms of restructuring of large standard accounts (potential NPAs) and
viable sub-standard account with multiple banking arrangement
NPA MANAGEMENT- RESOLUTION
Compromise settlement schemes
Restructuringrescheduling
Lok adalat
Corporate debt restructuring cell
Debt recovery Tribunals (DRT)
Proceeding under the code of civil procedure
Board of industrial and financial reconstruction
National company law Tribunal (NCLT)
Sale of NPA to other bank
Sale of NPA to ARCSC under securitization and reconstruction of financial assets for
enforcement of security interest Act 2000 (SRFAESI)
Liquidation
Source wwwRBIorgin
NPA MANAGEMENT IN INDIA
Formation of the credit information bureau (India) limited (CIBIL)
Release of willful defaulterrsquos listRBI also releases a list of borrowers with aggregate
outstanding of RS 1 crore and above against whom bank have filed suit for recovery of their
fund
Reporting of frauds to RBI
Norms of lenders labiality- framing of fair practices code with regard to lenders lability to
be followed by banks
Risk assessment and Risk management
RBI has advised banks to all cases of willful defaulters in case of 1 crore and above and
files suits in such cases
Responding quick mortality cases
Special mention accounts for early identification for bad debt loans and advances over due
for less than one or two quarters would come under this category However these accounts do
not need provisioning
INTERNATIONAL PRACTICES ON NPA MANAGEMENT
Subsequent to the Asian currency crisis which severely crippled the financial system In
addition to the above some of the more recent and aggressive step to NPAs have been taken
by Taiwan Taiwanese financial institution have been encouraged to merge and form bank
based AMCs through the recent introduction of financial holding company act and financial
institution Asian countries the magnitude of NPAs in Asian financial institution was brought
to light Driven by the need to proactively tackle the soaring NPAs level the respective govt
embarked upon a program of substantial reform This involves setting up processes for early
identification and resolution of NPAs The table below provides a cross country comparison
of approaches used for NPA resolution Mergers Act A long side the ministry of finance has
followed a carrot and strict policy of specifying the required NPA ratio for banks while also
providing flexibility in modes of NPA assets resolution and a conduct
ive regulatory and tax environment Deferred loss write-off provisions have been instituted to
provide breathing space for lenders to absorb NPA write-off While it is too early to
comment on success of NPA resolution process in Taiwan the early sign are encouraging
Detailed below are some key NPA management approaches adopted by banks in South East
Asian countries
1 Credit risk mitigation
2 Early warning systems
3 Assets management companies
Increasing willingness to sell NPAs to AMCs
Effective resolution strategy
Appointment of special administrators
4 Out of court restructuring
Source wwwgooglecom
DIFFICULTIES WITH NON PERFORMING ASSETS
I Owners do not receive a market return on their capital In the worst case if the bank
fails owner lose their assets
II Depositors do not receive a market return on savings In the worst case if the bank
fails depositors lose their assets or uninsured balance Banks also redistribute losses
to other borrowers by charging higher rate of interest
III Non-performing loans epitomize bad investors They misallocate credit from good
projects which do not receive funding to failed project
IV 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
shortage the shortage can jam payments across the country
b Illiquidity constraints banks in paying depositors eg cashing their paychecks
c Undercapitalized banks exceed the bank capital base
Lending by bank has been politicized It is common knowledge
that loans are given to various industrial houses on common consideration and
viability of project but on political consideration In normal circumstances banks
before extending any loan would make a thorough study of the actual need of the
party considered the prospect of the business in which it is engaged Since it is
not looked into many of the loans becomes NPA
REASONS F0R AN ACCOUNT BECOMING NPA
Those attribute to borrower
Failure to bring in required capital
Lack of proper planning
Unwanted expenses
Lack of expertise
Poor credit collection
Miss management
Heavy borrowing
Lack of knowledge regarding NPA
Willful defaulters
Death of the borrower
Those attribute to banks
Wrong selection of borrower
Poor credit appraisal
Unhelpful in supervision
Too inflexible attitude
System overload
Lack of motivation
Delay in sanction
Lack of trained staff
Lack of commitment to recovery
Lack of personal visit to the borrower office
Lack of personal visit to the borrowerrsquos residence
Other
Fast changing technology
Unhelpful attitude of govt
Increase in material cost
Government policies
Taxation law
Political hostility
INDIAN ECONOMY AND NPA
Undoubtedly the world economy has slowed down recession is at its peak globally stock markets
have tumbled and business itself getting hard to do The Indian economy has been much affected due
to high fiscal deficit poor infrastructure facilities sticky legal system cutting of exposures to
emerging market by FIIs etc
Further international rating agencies like standard and poor
have lowered Indiarsquos credit rating to sub- investment grade Such negative aspects have often
outweighed positive such as increasing for reserve and a manageable inflation rate
Under such situation I go without saying that banks are no exception
and are bound to face the heat of global down turn One would be surprise to know that banks and
financial institution in India holds non-performing assets worth Rs 1 10000 crores Bankers have
realized that unless the level of NPA is reduced drastically they will find it difficult to survive
The actual level of NPA in India is around $ 40 billion much higher than govt estimation of $16
billion This difference is largely due to the discrepancy in accounting the NPAs followed by India
and rest of the world The accounting norms of India are less stringent than those of the developed
economies The Indian banks also have the tendency to extend the past due Considering the GDP
India nearly $ 470 billion the NPA are 8 of the total GDP which was better than many Asian
countries The NPA of china was 45 of the GDP While Japan had NPAs of 25 of the GDP
The aggregate level of NPAs in Asia has increased from $ 25 billion in 2007 to
$ 34 billion on 2009 looking to such overall pictures of the market we can say that India is doing
well and the steps taken are looking favorable
Source googlecoin
DATA ANALYZING THE QUETIONNAIRE
Two set of questionnaire were prepared to collect the feedback One set of questionnaire was meant for branches and other set of questionnaire was meant for borrowers
The set of questionnaire were given to the branches under hazaribag (RBO) and collected the feedback of the bankers of P segment and the branch manager
The questionnaire prepared for branch contained 15 questions and the questionnaire prepared for borrower contains 10 questions
The data was collected from 50 bankers and the data analysis of the branch questionnaire is as follows
Question number 1
Does not require any data analysis and information was sought to know the business level of the branches for the purpose of whether particular branch is actively engaged in xpress credit portfolio
Question number 2
Do you think that the borrowers are aware about NPA
Answer
32 of the respondent feel that the borrowers are not aware about NPA and 18 respondents feel that borrowers are aware about NPA
Chart no 11
yes
no
0
5
10
15
20
25
30
35
1832 Column1
Conclusion
Majority of the bank officials feels that the borrowers are not aware about NPA
Question number 3
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Answer
Out of 32 respondent 22 respondents is fully satisfied that lack of knowledge among the borrower regarding NPA is one of the reason for NPA 08 respondent were partially satisfied with it and 02 respondent were not satisfied with it
Chart no 12
fully satisfied(22)69
partially satisfied(8)25
not satisfied(2)6
Sales
Conclusion
Majority of the borrowers feels that lack of knowledge among the borrower regarding NPA is one of the reasons for NPA
Question number 4 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Answer
Out of 50 respondent 30 of the respondent strongly satisfied that these external factors contribute to NPA 10 respondent were partially satisfied with it 5 were not satisfied where as 5 were fully dissatisfied with it
Chart no 13
6020
10
10
fully satisfied(30) partially satisfied(10) not satisfiec(5) fully desatisfied(5)
Conclusion
Most of the respondent thinks that external factrs like willful defaulter change in govt policy contribute to NPA
Question number 5
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Answer
Chart no 14
feedback
fully satisfied(20)partially satisfied(12)not satisfied(12)fully dissatisfied(6)
Conclusion
As per the response of the officials most of the officials feel that internal factors are also responsible for NPA
Question number 6
Do you think that inflation is one of the reasons for NPA
Answer
Out f 50 responses 22 were strongly satisfied 18 were partially satisfied 8 were not satisfied and 2 were fully dissatisfied
Chart no 15
fully satisfied(20)44
partially satisfied(18)36
not satisfied(5)10
fullt dissatisfied(5)10
Conclusion
Growing inflation increasing goods rate is also one of the reason for NPA
Question number 7
Do you think that lack of PSS is also contributed to NPA
Answer
Out of 50 responses 30 were fully satisfied with it 12 were partially satisfied and 8 were fully dissatisfied
Chart no 16
6024
16
Open
fully satisfied(30)Partially satisfied(12)not satisfied(0)fully dissatisfied(8)
Conclusion
Majority of the officiais feels that lack of PSS is one of the reason for NPA This means that the PSS carried out by the bank is not sufficient or not carried out properly
Question number 8
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Answer
Most of the respondent feels that increase in unwanted expenses of the borrwer ls contribute to NPA
Chart no 17
56
12
28
4
FULLY SATISFIED(28)PARTIALLY SATISFIED(6)NOT SATISFIED(14)FULLY DISSATISFIED(2)
Conclusion
As per response of the officials increasing inflation have an adverse effect on the financial sector its working performance as well as on NPA
Question number 9
Do you think that high rate of interest under Xpress credit also contributes to NPA
Answer
Out of 50 respondent 25 respondent were not satisfied 10 were partially satisfied 10 were strongly dissatisfied where as only 5 out of 50 were fully satisfied with it
Chart no 18
strongly satisfied(5)partially satisfied(10)not satisfied(25)fully dissatisfied(10)
Conclusion
Most of the respondents are not satisfied with it They feel that the rate of interest charged by SBI under Xpress credit is not high and it will not contribute to NPS
Question number 10
Do you think that lack of proper planning of the borrower is one of the reason for NPA
Answer
Out of 70 respondent 35 were fully satisfied 5 were not satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 19
fully satisfied(35)70
partially satisfied(10)20
not satisfied(5)10
Conclusion
Most of the respondent feels that the borrowers borrow money from the bank without any proper planning which is one of the most important reason for NPA
Question number 11
Is heavy borrowing also contribute to NPA
Answer
Out of 50 respondent 25 respondent were fully satisfied 12 were partially satisfied 8 were not satisfied were as 5 were fully dissatisfied
Chart no 110
50
24
16
10
fully satisfied(25) partially satisfied(12) not satisfied(8) fully dissatisfied(5)
Question number 12
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Answer
As per the response of the officials 20 were fully satisfied 66were partially satisfied 4 were not satisfied with it were as 10 respondent were fully dissatisfied
Chart no 111
fully satisfied(10)20
partially satisfied(33)66
not satisfied(2)4
fullydissatisfied(5)10
Conclusion
As per the response given by the officials most of the officials were partially satisfied that wrong selection of borrower also contribute to NPA which means that selection process carried out by the bank is not appropriate or there is some difficulties in implementing them
Question number 13
Do you think that poor credit appraisal also contribute to NPA
Answer
Out of 50 respondent 5 were fully satisfied 10 were fully satisfied 30 were not satisfied were as only 5 were fully dissatisfied
Chart no 112
fully satisfied(5)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 14
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Answer
Out of 50 responses 3 were fully satisfied 15 were partially satisfied 25 were not satisfied where as 7 were full dissatisfied
Chart no 113
fully satisfied(3)partiallt satisfied(15)not satisfied(25)fully dissatisfied(7)
Conclusion
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not contribute to NPA This means that the attitude of bank toward the borrower is not inflexible
Question number 15
Do you think that system over load is also one of the causes of NPA
Answer
Out of 50 respondent 28 were fully satisfied 12 were partially satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 114
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
PREVENTIVE MEASUREMENT FOR NPA
Early recognition of the problem
Invariably by the time banks start their efforts to get involved
in a revival process its too late to retrieve the situation ndash both in terms of rehabilitation of the
project and the recovery of banks dues Identification of the weakness regardless of the fact
that it may not have become NPA is imperative Assessment of the potential of revival may
be done on the basis of a techno-economic viability study Restructuring should be attempted
where after an objective assessment of the promoterrsquos intention banks are convinced of a
turn around with in a scheduled facilitate winding upselling of units earlier so as to recover
whatever is possible through means before the security position becomes worse
Identifying borrowers with genuine intent
Identifying borrower with genuine intent from those who
are non-serious with commitment or stake in revival is a challenge confronting bankers Here
the role of front line officials at branch level is paramount as they are the ones who have
intelligent inputs with regard to promoters lsquo sincerity and capability to achieve turnaround
Based on this objective assessment bank should decide as quickly as possible whether it
would be worthwhile to commit additional finance
In this regard banks may consider having
ldquospecial investigationrdquo of all financial transaction or business transaction books of account
order to ascertain real factor that contributed to sickness of borrower Bank may have panel
of technical experts with proven expertise and task record of preparing techno-economic
study of the project of the borrowers
Borrowers having genuine problems due to temporary mismatch in find flow or sudden
requirement of additional fund may entertained at branch level for this purpose a special
limit to such type of cases should be decided This will obviate the need to route the
additional funding through the controlling officers in deserving cases and avert many
accounts sleeping into NPA category
Timeliness and adequacy of response
Longer the delay in response greater the enjury to the
account and the asset Time is a crucial element in any restructuring or rehabilitation activity
The response decided on the basis of techno- economic study and promoterrsquos commitment
has to be adequate in terms of extend of additional funding and relaxations etc under the
restructuring exercise The package of assistance may be flexible and bank may look at the
exit option
Focus on cash flow
While financing at the time of restructuring the banks may not be guided
by the conventional fund flow analysis only which could yield a potentially misleading
picture Appraisal for fresh credit requirement may be done by analyzing fond flow in
conjunction with the cash flow rather than only on the basis of fund flow
Source wwwAskcom
Management effectiveness
The general perception among the borrower is lack of finance that
leads to sickness and NPAs but this may not be the case all the time Management effectiveness
advance business condition is a very important aspect that affects a borrowing units fortunes A bank
may commit a multiple finance to an align unit only after basic viability of the enterprise also in the
context of quality of management is examined and confirmed It will be useful to have consultant
appointed as early as possible to examine this aspect A proper techno-economic viability study thus
become the basis on which any future action can be considered
Multiple financing
A) During the exercise for assessment of viability and restructuring a pragmatic and unified
approach by all the leading banks as also sharing of all relevant information on the
borrower would go a long way toward overall success of rehabilitation exercise given the
probability of successfailure
B) In some default cases Where the unit is still working The bank should make sure that it
captures the cash flow and insure that such cash are used for working capital purpose
Toward this end there should be a continuous flow of information among consortium
member A bank which is not a part of consortium may not be allowed to offer credit
facility to such defaulting clients Current account facility may also be denied at non-
consortium banks to such clients and violation may attract penal action The credit
information bureau of india (CIBIL) may be very useful for meaningful information
exchange on defaulting borrowers once the setup become fully operational
C) In a forum of lenders the priority of each lender will be different While one set of lender
may be willing to wait for longer time to recover its dues another lender may have a much
shorter timeframe in mind So it is possible that the letter categories of lenders may be
willing to exit even at a cost by a discounted settlement of the exposure There for any plan
for restructuringrehabilitation may takes into account
D) Corporate debt restructuring it has been institutionalized in 2001 to provide a timely and
transparent system for restructuring the corporate debt of RS 20 crores and above with the
banks on a voluntary basis and outside a legal framework Under this system bank are
greatly benefit in terms of restructuring of large standard accounts (potential NPAs) and
viable sub-standard account with multiple banking arrangement
NPA MANAGEMENT- RESOLUTION
Compromise settlement schemes
Restructuringrescheduling
Lok adalat
Corporate debt restructuring cell
Debt recovery Tribunals (DRT)
Proceeding under the code of civil procedure
Board of industrial and financial reconstruction
National company law Tribunal (NCLT)
Sale of NPA to other bank
Sale of NPA to ARCSC under securitization and reconstruction of financial assets for
enforcement of security interest Act 2000 (SRFAESI)
Liquidation
Source wwwRBIorgin
NPA MANAGEMENT IN INDIA
Formation of the credit information bureau (India) limited (CIBIL)
Release of willful defaulterrsquos listRBI also releases a list of borrowers with aggregate
outstanding of RS 1 crore and above against whom bank have filed suit for recovery of their
fund
Reporting of frauds to RBI
Norms of lenders labiality- framing of fair practices code with regard to lenders lability to
be followed by banks
Risk assessment and Risk management
RBI has advised banks to all cases of willful defaulters in case of 1 crore and above and
files suits in such cases
Responding quick mortality cases
Special mention accounts for early identification for bad debt loans and advances over due
for less than one or two quarters would come under this category However these accounts do
not need provisioning
INTERNATIONAL PRACTICES ON NPA MANAGEMENT
Subsequent to the Asian currency crisis which severely crippled the financial system In
addition to the above some of the more recent and aggressive step to NPAs have been taken
by Taiwan Taiwanese financial institution have been encouraged to merge and form bank
based AMCs through the recent introduction of financial holding company act and financial
institution Asian countries the magnitude of NPAs in Asian financial institution was brought
to light Driven by the need to proactively tackle the soaring NPAs level the respective govt
embarked upon a program of substantial reform This involves setting up processes for early
identification and resolution of NPAs The table below provides a cross country comparison
of approaches used for NPA resolution Mergers Act A long side the ministry of finance has
followed a carrot and strict policy of specifying the required NPA ratio for banks while also
providing flexibility in modes of NPA assets resolution and a conduct
ive regulatory and tax environment Deferred loss write-off provisions have been instituted to
provide breathing space for lenders to absorb NPA write-off While it is too early to
comment on success of NPA resolution process in Taiwan the early sign are encouraging
Detailed below are some key NPA management approaches adopted by banks in South East
Asian countries
1 Credit risk mitigation
2 Early warning systems
3 Assets management companies
Increasing willingness to sell NPAs to AMCs
Effective resolution strategy
Appointment of special administrators
4 Out of court restructuring
Source wwwgooglecom
DIFFICULTIES WITH NON PERFORMING ASSETS
I Owners do not receive a market return on their capital In the worst case if the bank
fails owner lose their assets
II Depositors do not receive a market return on savings In the worst case if the bank
fails depositors lose their assets or uninsured balance Banks also redistribute losses
to other borrowers by charging higher rate of interest
III Non-performing loans epitomize bad investors They misallocate credit from good
projects which do not receive funding to failed project
IV 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
shortage the shortage can jam payments across the country
b Illiquidity constraints banks in paying depositors eg cashing their paychecks
c Undercapitalized banks exceed the bank capital base
Lending by bank has been politicized It is common knowledge
that loans are given to various industrial houses on common consideration and
viability of project but on political consideration In normal circumstances banks
before extending any loan would make a thorough study of the actual need of the
party considered the prospect of the business in which it is engaged Since it is
not looked into many of the loans becomes NPA
REASONS F0R AN ACCOUNT BECOMING NPA
Those attribute to borrower
Failure to bring in required capital
Lack of proper planning
Unwanted expenses
Lack of expertise
Poor credit collection
Miss management
Heavy borrowing
Lack of knowledge regarding NPA
Willful defaulters
Death of the borrower
Those attribute to banks
Wrong selection of borrower
Poor credit appraisal
Unhelpful in supervision
Too inflexible attitude
System overload
Lack of motivation
Delay in sanction
Lack of trained staff
Lack of commitment to recovery
Lack of personal visit to the borrower office
Lack of personal visit to the borrowerrsquos residence
Other
Fast changing technology
Unhelpful attitude of govt
Increase in material cost
Government policies
Taxation law
Political hostility
INDIAN ECONOMY AND NPA
Undoubtedly the world economy has slowed down recession is at its peak globally stock markets
have tumbled and business itself getting hard to do The Indian economy has been much affected due
to high fiscal deficit poor infrastructure facilities sticky legal system cutting of exposures to
emerging market by FIIs etc
Further international rating agencies like standard and poor
have lowered Indiarsquos credit rating to sub- investment grade Such negative aspects have often
outweighed positive such as increasing for reserve and a manageable inflation rate
Under such situation I go without saying that banks are no exception
and are bound to face the heat of global down turn One would be surprise to know that banks and
financial institution in India holds non-performing assets worth Rs 1 10000 crores Bankers have
realized that unless the level of NPA is reduced drastically they will find it difficult to survive
The actual level of NPA in India is around $ 40 billion much higher than govt estimation of $16
billion This difference is largely due to the discrepancy in accounting the NPAs followed by India
and rest of the world The accounting norms of India are less stringent than those of the developed
economies The Indian banks also have the tendency to extend the past due Considering the GDP
India nearly $ 470 billion the NPA are 8 of the total GDP which was better than many Asian
countries The NPA of china was 45 of the GDP While Japan had NPAs of 25 of the GDP
The aggregate level of NPAs in Asia has increased from $ 25 billion in 2007 to
$ 34 billion on 2009 looking to such overall pictures of the market we can say that India is doing
well and the steps taken are looking favorable
Source googlecoin
DATA ANALYZING THE QUETIONNAIRE
Two set of questionnaire were prepared to collect the feedback One set of questionnaire was meant for branches and other set of questionnaire was meant for borrowers
The set of questionnaire were given to the branches under hazaribag (RBO) and collected the feedback of the bankers of P segment and the branch manager
The questionnaire prepared for branch contained 15 questions and the questionnaire prepared for borrower contains 10 questions
The data was collected from 50 bankers and the data analysis of the branch questionnaire is as follows
Question number 1
Does not require any data analysis and information was sought to know the business level of the branches for the purpose of whether particular branch is actively engaged in xpress credit portfolio
Question number 2
Do you think that the borrowers are aware about NPA
Answer
32 of the respondent feel that the borrowers are not aware about NPA and 18 respondents feel that borrowers are aware about NPA
Chart no 11
yes
no
0
5
10
15
20
25
30
35
1832 Column1
Conclusion
Majority of the bank officials feels that the borrowers are not aware about NPA
Question number 3
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Answer
Out of 32 respondent 22 respondents is fully satisfied that lack of knowledge among the borrower regarding NPA is one of the reason for NPA 08 respondent were partially satisfied with it and 02 respondent were not satisfied with it
Chart no 12
fully satisfied(22)69
partially satisfied(8)25
not satisfied(2)6
Sales
Conclusion
Majority of the borrowers feels that lack of knowledge among the borrower regarding NPA is one of the reasons for NPA
Question number 4 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Answer
Out of 50 respondent 30 of the respondent strongly satisfied that these external factors contribute to NPA 10 respondent were partially satisfied with it 5 were not satisfied where as 5 were fully dissatisfied with it
Chart no 13
6020
10
10
fully satisfied(30) partially satisfied(10) not satisfiec(5) fully desatisfied(5)
Conclusion
Most of the respondent thinks that external factrs like willful defaulter change in govt policy contribute to NPA
Question number 5
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Answer
Chart no 14
feedback
fully satisfied(20)partially satisfied(12)not satisfied(12)fully dissatisfied(6)
Conclusion
As per the response of the officials most of the officials feel that internal factors are also responsible for NPA
Question number 6
Do you think that inflation is one of the reasons for NPA
Answer
Out f 50 responses 22 were strongly satisfied 18 were partially satisfied 8 were not satisfied and 2 were fully dissatisfied
Chart no 15
fully satisfied(20)44
partially satisfied(18)36
not satisfied(5)10
fullt dissatisfied(5)10
Conclusion
Growing inflation increasing goods rate is also one of the reason for NPA
Question number 7
Do you think that lack of PSS is also contributed to NPA
Answer
Out of 50 responses 30 were fully satisfied with it 12 were partially satisfied and 8 were fully dissatisfied
Chart no 16
6024
16
Open
fully satisfied(30)Partially satisfied(12)not satisfied(0)fully dissatisfied(8)
Conclusion
Majority of the officiais feels that lack of PSS is one of the reason for NPA This means that the PSS carried out by the bank is not sufficient or not carried out properly
Question number 8
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Answer
Most of the respondent feels that increase in unwanted expenses of the borrwer ls contribute to NPA
Chart no 17
56
12
28
4
FULLY SATISFIED(28)PARTIALLY SATISFIED(6)NOT SATISFIED(14)FULLY DISSATISFIED(2)
Conclusion
As per response of the officials increasing inflation have an adverse effect on the financial sector its working performance as well as on NPA
Question number 9
Do you think that high rate of interest under Xpress credit also contributes to NPA
Answer
Out of 50 respondent 25 respondent were not satisfied 10 were partially satisfied 10 were strongly dissatisfied where as only 5 out of 50 were fully satisfied with it
Chart no 18
strongly satisfied(5)partially satisfied(10)not satisfied(25)fully dissatisfied(10)
Conclusion
Most of the respondents are not satisfied with it They feel that the rate of interest charged by SBI under Xpress credit is not high and it will not contribute to NPS
Question number 10
Do you think that lack of proper planning of the borrower is one of the reason for NPA
Answer
Out of 70 respondent 35 were fully satisfied 5 were not satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 19
fully satisfied(35)70
partially satisfied(10)20
not satisfied(5)10
Conclusion
Most of the respondent feels that the borrowers borrow money from the bank without any proper planning which is one of the most important reason for NPA
Question number 11
Is heavy borrowing also contribute to NPA
Answer
Out of 50 respondent 25 respondent were fully satisfied 12 were partially satisfied 8 were not satisfied were as 5 were fully dissatisfied
Chart no 110
50
24
16
10
fully satisfied(25) partially satisfied(12) not satisfied(8) fully dissatisfied(5)
Question number 12
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Answer
As per the response of the officials 20 were fully satisfied 66were partially satisfied 4 were not satisfied with it were as 10 respondent were fully dissatisfied
Chart no 111
fully satisfied(10)20
partially satisfied(33)66
not satisfied(2)4
fullydissatisfied(5)10
Conclusion
As per the response given by the officials most of the officials were partially satisfied that wrong selection of borrower also contribute to NPA which means that selection process carried out by the bank is not appropriate or there is some difficulties in implementing them
Question number 13
Do you think that poor credit appraisal also contribute to NPA
Answer
Out of 50 respondent 5 were fully satisfied 10 were fully satisfied 30 were not satisfied were as only 5 were fully dissatisfied
Chart no 112
fully satisfied(5)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 14
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Answer
Out of 50 responses 3 were fully satisfied 15 were partially satisfied 25 were not satisfied where as 7 were full dissatisfied
Chart no 113
fully satisfied(3)partiallt satisfied(15)not satisfied(25)fully dissatisfied(7)
Conclusion
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not contribute to NPA This means that the attitude of bank toward the borrower is not inflexible
Question number 15
Do you think that system over load is also one of the causes of NPA
Answer
Out of 50 respondent 28 were fully satisfied 12 were partially satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 114
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
additional funding through the controlling officers in deserving cases and avert many
accounts sleeping into NPA category
Timeliness and adequacy of response
Longer the delay in response greater the enjury to the
account and the asset Time is a crucial element in any restructuring or rehabilitation activity
The response decided on the basis of techno- economic study and promoterrsquos commitment
has to be adequate in terms of extend of additional funding and relaxations etc under the
restructuring exercise The package of assistance may be flexible and bank may look at the
exit option
Focus on cash flow
While financing at the time of restructuring the banks may not be guided
by the conventional fund flow analysis only which could yield a potentially misleading
picture Appraisal for fresh credit requirement may be done by analyzing fond flow in
conjunction with the cash flow rather than only on the basis of fund flow
Source wwwAskcom
Management effectiveness
The general perception among the borrower is lack of finance that
leads to sickness and NPAs but this may not be the case all the time Management effectiveness
advance business condition is a very important aspect that affects a borrowing units fortunes A bank
may commit a multiple finance to an align unit only after basic viability of the enterprise also in the
context of quality of management is examined and confirmed It will be useful to have consultant
appointed as early as possible to examine this aspect A proper techno-economic viability study thus
become the basis on which any future action can be considered
Multiple financing
A) During the exercise for assessment of viability and restructuring a pragmatic and unified
approach by all the leading banks as also sharing of all relevant information on the
borrower would go a long way toward overall success of rehabilitation exercise given the
probability of successfailure
B) In some default cases Where the unit is still working The bank should make sure that it
captures the cash flow and insure that such cash are used for working capital purpose
Toward this end there should be a continuous flow of information among consortium
member A bank which is not a part of consortium may not be allowed to offer credit
facility to such defaulting clients Current account facility may also be denied at non-
consortium banks to such clients and violation may attract penal action The credit
information bureau of india (CIBIL) may be very useful for meaningful information
exchange on defaulting borrowers once the setup become fully operational
C) In a forum of lenders the priority of each lender will be different While one set of lender
may be willing to wait for longer time to recover its dues another lender may have a much
shorter timeframe in mind So it is possible that the letter categories of lenders may be
willing to exit even at a cost by a discounted settlement of the exposure There for any plan
for restructuringrehabilitation may takes into account
D) Corporate debt restructuring it has been institutionalized in 2001 to provide a timely and
transparent system for restructuring the corporate debt of RS 20 crores and above with the
banks on a voluntary basis and outside a legal framework Under this system bank are
greatly benefit in terms of restructuring of large standard accounts (potential NPAs) and
viable sub-standard account with multiple banking arrangement
NPA MANAGEMENT- RESOLUTION
Compromise settlement schemes
Restructuringrescheduling
Lok adalat
Corporate debt restructuring cell
Debt recovery Tribunals (DRT)
Proceeding under the code of civil procedure
Board of industrial and financial reconstruction
National company law Tribunal (NCLT)
Sale of NPA to other bank
Sale of NPA to ARCSC under securitization and reconstruction of financial assets for
enforcement of security interest Act 2000 (SRFAESI)
Liquidation
Source wwwRBIorgin
NPA MANAGEMENT IN INDIA
Formation of the credit information bureau (India) limited (CIBIL)
Release of willful defaulterrsquos listRBI also releases a list of borrowers with aggregate
outstanding of RS 1 crore and above against whom bank have filed suit for recovery of their
fund
Reporting of frauds to RBI
Norms of lenders labiality- framing of fair practices code with regard to lenders lability to
be followed by banks
Risk assessment and Risk management
RBI has advised banks to all cases of willful defaulters in case of 1 crore and above and
files suits in such cases
Responding quick mortality cases
Special mention accounts for early identification for bad debt loans and advances over due
for less than one or two quarters would come under this category However these accounts do
not need provisioning
INTERNATIONAL PRACTICES ON NPA MANAGEMENT
Subsequent to the Asian currency crisis which severely crippled the financial system In
addition to the above some of the more recent and aggressive step to NPAs have been taken
by Taiwan Taiwanese financial institution have been encouraged to merge and form bank
based AMCs through the recent introduction of financial holding company act and financial
institution Asian countries the magnitude of NPAs in Asian financial institution was brought
to light Driven by the need to proactively tackle the soaring NPAs level the respective govt
embarked upon a program of substantial reform This involves setting up processes for early
identification and resolution of NPAs The table below provides a cross country comparison
of approaches used for NPA resolution Mergers Act A long side the ministry of finance has
followed a carrot and strict policy of specifying the required NPA ratio for banks while also
providing flexibility in modes of NPA assets resolution and a conduct
ive regulatory and tax environment Deferred loss write-off provisions have been instituted to
provide breathing space for lenders to absorb NPA write-off While it is too early to
comment on success of NPA resolution process in Taiwan the early sign are encouraging
Detailed below are some key NPA management approaches adopted by banks in South East
Asian countries
1 Credit risk mitigation
2 Early warning systems
3 Assets management companies
Increasing willingness to sell NPAs to AMCs
Effective resolution strategy
Appointment of special administrators
4 Out of court restructuring
Source wwwgooglecom
DIFFICULTIES WITH NON PERFORMING ASSETS
I Owners do not receive a market return on their capital In the worst case if the bank
fails owner lose their assets
II Depositors do not receive a market return on savings In the worst case if the bank
fails depositors lose their assets or uninsured balance Banks also redistribute losses
to other borrowers by charging higher rate of interest
III Non-performing loans epitomize bad investors They misallocate credit from good
projects which do not receive funding to failed project
IV 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
shortage the shortage can jam payments across the country
b Illiquidity constraints banks in paying depositors eg cashing their paychecks
c Undercapitalized banks exceed the bank capital base
Lending by bank has been politicized It is common knowledge
that loans are given to various industrial houses on common consideration and
viability of project but on political consideration In normal circumstances banks
before extending any loan would make a thorough study of the actual need of the
party considered the prospect of the business in which it is engaged Since it is
not looked into many of the loans becomes NPA
REASONS F0R AN ACCOUNT BECOMING NPA
Those attribute to borrower
Failure to bring in required capital
Lack of proper planning
Unwanted expenses
Lack of expertise
Poor credit collection
Miss management
Heavy borrowing
Lack of knowledge regarding NPA
Willful defaulters
Death of the borrower
Those attribute to banks
Wrong selection of borrower
Poor credit appraisal
Unhelpful in supervision
Too inflexible attitude
System overload
Lack of motivation
Delay in sanction
Lack of trained staff
Lack of commitment to recovery
Lack of personal visit to the borrower office
Lack of personal visit to the borrowerrsquos residence
Other
Fast changing technology
Unhelpful attitude of govt
Increase in material cost
Government policies
Taxation law
Political hostility
INDIAN ECONOMY AND NPA
Undoubtedly the world economy has slowed down recession is at its peak globally stock markets
have tumbled and business itself getting hard to do The Indian economy has been much affected due
to high fiscal deficit poor infrastructure facilities sticky legal system cutting of exposures to
emerging market by FIIs etc
Further international rating agencies like standard and poor
have lowered Indiarsquos credit rating to sub- investment grade Such negative aspects have often
outweighed positive such as increasing for reserve and a manageable inflation rate
Under such situation I go without saying that banks are no exception
and are bound to face the heat of global down turn One would be surprise to know that banks and
financial institution in India holds non-performing assets worth Rs 1 10000 crores Bankers have
realized that unless the level of NPA is reduced drastically they will find it difficult to survive
The actual level of NPA in India is around $ 40 billion much higher than govt estimation of $16
billion This difference is largely due to the discrepancy in accounting the NPAs followed by India
and rest of the world The accounting norms of India are less stringent than those of the developed
economies The Indian banks also have the tendency to extend the past due Considering the GDP
India nearly $ 470 billion the NPA are 8 of the total GDP which was better than many Asian
countries The NPA of china was 45 of the GDP While Japan had NPAs of 25 of the GDP
The aggregate level of NPAs in Asia has increased from $ 25 billion in 2007 to
$ 34 billion on 2009 looking to such overall pictures of the market we can say that India is doing
well and the steps taken are looking favorable
Source googlecoin
DATA ANALYZING THE QUETIONNAIRE
Two set of questionnaire were prepared to collect the feedback One set of questionnaire was meant for branches and other set of questionnaire was meant for borrowers
The set of questionnaire were given to the branches under hazaribag (RBO) and collected the feedback of the bankers of P segment and the branch manager
The questionnaire prepared for branch contained 15 questions and the questionnaire prepared for borrower contains 10 questions
The data was collected from 50 bankers and the data analysis of the branch questionnaire is as follows
Question number 1
Does not require any data analysis and information was sought to know the business level of the branches for the purpose of whether particular branch is actively engaged in xpress credit portfolio
Question number 2
Do you think that the borrowers are aware about NPA
Answer
32 of the respondent feel that the borrowers are not aware about NPA and 18 respondents feel that borrowers are aware about NPA
Chart no 11
yes
no
0
5
10
15
20
25
30
35
1832 Column1
Conclusion
Majority of the bank officials feels that the borrowers are not aware about NPA
Question number 3
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Answer
Out of 32 respondent 22 respondents is fully satisfied that lack of knowledge among the borrower regarding NPA is one of the reason for NPA 08 respondent were partially satisfied with it and 02 respondent were not satisfied with it
Chart no 12
fully satisfied(22)69
partially satisfied(8)25
not satisfied(2)6
Sales
Conclusion
Majority of the borrowers feels that lack of knowledge among the borrower regarding NPA is one of the reasons for NPA
Question number 4 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Answer
Out of 50 respondent 30 of the respondent strongly satisfied that these external factors contribute to NPA 10 respondent were partially satisfied with it 5 were not satisfied where as 5 were fully dissatisfied with it
Chart no 13
6020
10
10
fully satisfied(30) partially satisfied(10) not satisfiec(5) fully desatisfied(5)
Conclusion
Most of the respondent thinks that external factrs like willful defaulter change in govt policy contribute to NPA
Question number 5
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Answer
Chart no 14
feedback
fully satisfied(20)partially satisfied(12)not satisfied(12)fully dissatisfied(6)
Conclusion
As per the response of the officials most of the officials feel that internal factors are also responsible for NPA
Question number 6
Do you think that inflation is one of the reasons for NPA
Answer
Out f 50 responses 22 were strongly satisfied 18 were partially satisfied 8 were not satisfied and 2 were fully dissatisfied
Chart no 15
fully satisfied(20)44
partially satisfied(18)36
not satisfied(5)10
fullt dissatisfied(5)10
Conclusion
Growing inflation increasing goods rate is also one of the reason for NPA
Question number 7
Do you think that lack of PSS is also contributed to NPA
Answer
Out of 50 responses 30 were fully satisfied with it 12 were partially satisfied and 8 were fully dissatisfied
Chart no 16
6024
16
Open
fully satisfied(30)Partially satisfied(12)not satisfied(0)fully dissatisfied(8)
Conclusion
Majority of the officiais feels that lack of PSS is one of the reason for NPA This means that the PSS carried out by the bank is not sufficient or not carried out properly
Question number 8
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Answer
Most of the respondent feels that increase in unwanted expenses of the borrwer ls contribute to NPA
Chart no 17
56
12
28
4
FULLY SATISFIED(28)PARTIALLY SATISFIED(6)NOT SATISFIED(14)FULLY DISSATISFIED(2)
Conclusion
As per response of the officials increasing inflation have an adverse effect on the financial sector its working performance as well as on NPA
Question number 9
Do you think that high rate of interest under Xpress credit also contributes to NPA
Answer
Out of 50 respondent 25 respondent were not satisfied 10 were partially satisfied 10 were strongly dissatisfied where as only 5 out of 50 were fully satisfied with it
Chart no 18
strongly satisfied(5)partially satisfied(10)not satisfied(25)fully dissatisfied(10)
Conclusion
Most of the respondents are not satisfied with it They feel that the rate of interest charged by SBI under Xpress credit is not high and it will not contribute to NPS
Question number 10
Do you think that lack of proper planning of the borrower is one of the reason for NPA
Answer
Out of 70 respondent 35 were fully satisfied 5 were not satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 19
fully satisfied(35)70
partially satisfied(10)20
not satisfied(5)10
Conclusion
Most of the respondent feels that the borrowers borrow money from the bank without any proper planning which is one of the most important reason for NPA
Question number 11
Is heavy borrowing also contribute to NPA
Answer
Out of 50 respondent 25 respondent were fully satisfied 12 were partially satisfied 8 were not satisfied were as 5 were fully dissatisfied
Chart no 110
50
24
16
10
fully satisfied(25) partially satisfied(12) not satisfied(8) fully dissatisfied(5)
Question number 12
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Answer
As per the response of the officials 20 were fully satisfied 66were partially satisfied 4 were not satisfied with it were as 10 respondent were fully dissatisfied
Chart no 111
fully satisfied(10)20
partially satisfied(33)66
not satisfied(2)4
fullydissatisfied(5)10
Conclusion
As per the response given by the officials most of the officials were partially satisfied that wrong selection of borrower also contribute to NPA which means that selection process carried out by the bank is not appropriate or there is some difficulties in implementing them
Question number 13
Do you think that poor credit appraisal also contribute to NPA
Answer
Out of 50 respondent 5 were fully satisfied 10 were fully satisfied 30 were not satisfied were as only 5 were fully dissatisfied
Chart no 112
fully satisfied(5)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 14
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Answer
Out of 50 responses 3 were fully satisfied 15 were partially satisfied 25 were not satisfied where as 7 were full dissatisfied
Chart no 113
fully satisfied(3)partiallt satisfied(15)not satisfied(25)fully dissatisfied(7)
Conclusion
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not contribute to NPA This means that the attitude of bank toward the borrower is not inflexible
Question number 15
Do you think that system over load is also one of the causes of NPA
Answer
Out of 50 respondent 28 were fully satisfied 12 were partially satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 114
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
The general perception among the borrower is lack of finance that
leads to sickness and NPAs but this may not be the case all the time Management effectiveness
advance business condition is a very important aspect that affects a borrowing units fortunes A bank
may commit a multiple finance to an align unit only after basic viability of the enterprise also in the
context of quality of management is examined and confirmed It will be useful to have consultant
appointed as early as possible to examine this aspect A proper techno-economic viability study thus
become the basis on which any future action can be considered
Multiple financing
A) During the exercise for assessment of viability and restructuring a pragmatic and unified
approach by all the leading banks as also sharing of all relevant information on the
borrower would go a long way toward overall success of rehabilitation exercise given the
probability of successfailure
B) In some default cases Where the unit is still working The bank should make sure that it
captures the cash flow and insure that such cash are used for working capital purpose
Toward this end there should be a continuous flow of information among consortium
member A bank which is not a part of consortium may not be allowed to offer credit
facility to such defaulting clients Current account facility may also be denied at non-
consortium banks to such clients and violation may attract penal action The credit
information bureau of india (CIBIL) may be very useful for meaningful information
exchange on defaulting borrowers once the setup become fully operational
C) In a forum of lenders the priority of each lender will be different While one set of lender
may be willing to wait for longer time to recover its dues another lender may have a much
shorter timeframe in mind So it is possible that the letter categories of lenders may be
willing to exit even at a cost by a discounted settlement of the exposure There for any plan
for restructuringrehabilitation may takes into account
D) Corporate debt restructuring it has been institutionalized in 2001 to provide a timely and
transparent system for restructuring the corporate debt of RS 20 crores and above with the
banks on a voluntary basis and outside a legal framework Under this system bank are
greatly benefit in terms of restructuring of large standard accounts (potential NPAs) and
viable sub-standard account with multiple banking arrangement
NPA MANAGEMENT- RESOLUTION
Compromise settlement schemes
Restructuringrescheduling
Lok adalat
Corporate debt restructuring cell
Debt recovery Tribunals (DRT)
Proceeding under the code of civil procedure
Board of industrial and financial reconstruction
National company law Tribunal (NCLT)
Sale of NPA to other bank
Sale of NPA to ARCSC under securitization and reconstruction of financial assets for
enforcement of security interest Act 2000 (SRFAESI)
Liquidation
Source wwwRBIorgin
NPA MANAGEMENT IN INDIA
Formation of the credit information bureau (India) limited (CIBIL)
Release of willful defaulterrsquos listRBI also releases a list of borrowers with aggregate
outstanding of RS 1 crore and above against whom bank have filed suit for recovery of their
fund
Reporting of frauds to RBI
Norms of lenders labiality- framing of fair practices code with regard to lenders lability to
be followed by banks
Risk assessment and Risk management
RBI has advised banks to all cases of willful defaulters in case of 1 crore and above and
files suits in such cases
Responding quick mortality cases
Special mention accounts for early identification for bad debt loans and advances over due
for less than one or two quarters would come under this category However these accounts do
not need provisioning
INTERNATIONAL PRACTICES ON NPA MANAGEMENT
Subsequent to the Asian currency crisis which severely crippled the financial system In
addition to the above some of the more recent and aggressive step to NPAs have been taken
by Taiwan Taiwanese financial institution have been encouraged to merge and form bank
based AMCs through the recent introduction of financial holding company act and financial
institution Asian countries the magnitude of NPAs in Asian financial institution was brought
to light Driven by the need to proactively tackle the soaring NPAs level the respective govt
embarked upon a program of substantial reform This involves setting up processes for early
identification and resolution of NPAs The table below provides a cross country comparison
of approaches used for NPA resolution Mergers Act A long side the ministry of finance has
followed a carrot and strict policy of specifying the required NPA ratio for banks while also
providing flexibility in modes of NPA assets resolution and a conduct
ive regulatory and tax environment Deferred loss write-off provisions have been instituted to
provide breathing space for lenders to absorb NPA write-off While it is too early to
comment on success of NPA resolution process in Taiwan the early sign are encouraging
Detailed below are some key NPA management approaches adopted by banks in South East
Asian countries
1 Credit risk mitigation
2 Early warning systems
3 Assets management companies
Increasing willingness to sell NPAs to AMCs
Effective resolution strategy
Appointment of special administrators
4 Out of court restructuring
Source wwwgooglecom
DIFFICULTIES WITH NON PERFORMING ASSETS
I Owners do not receive a market return on their capital In the worst case if the bank
fails owner lose their assets
II Depositors do not receive a market return on savings In the worst case if the bank
fails depositors lose their assets or uninsured balance Banks also redistribute losses
to other borrowers by charging higher rate of interest
III Non-performing loans epitomize bad investors They misallocate credit from good
projects which do not receive funding to failed project
IV 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
shortage the shortage can jam payments across the country
b Illiquidity constraints banks in paying depositors eg cashing their paychecks
c Undercapitalized banks exceed the bank capital base
Lending by bank has been politicized It is common knowledge
that loans are given to various industrial houses on common consideration and
viability of project but on political consideration In normal circumstances banks
before extending any loan would make a thorough study of the actual need of the
party considered the prospect of the business in which it is engaged Since it is
not looked into many of the loans becomes NPA
REASONS F0R AN ACCOUNT BECOMING NPA
Those attribute to borrower
Failure to bring in required capital
Lack of proper planning
Unwanted expenses
Lack of expertise
Poor credit collection
Miss management
Heavy borrowing
Lack of knowledge regarding NPA
Willful defaulters
Death of the borrower
Those attribute to banks
Wrong selection of borrower
Poor credit appraisal
Unhelpful in supervision
Too inflexible attitude
System overload
Lack of motivation
Delay in sanction
Lack of trained staff
Lack of commitment to recovery
Lack of personal visit to the borrower office
Lack of personal visit to the borrowerrsquos residence
Other
Fast changing technology
Unhelpful attitude of govt
Increase in material cost
Government policies
Taxation law
Political hostility
INDIAN ECONOMY AND NPA
Undoubtedly the world economy has slowed down recession is at its peak globally stock markets
have tumbled and business itself getting hard to do The Indian economy has been much affected due
to high fiscal deficit poor infrastructure facilities sticky legal system cutting of exposures to
emerging market by FIIs etc
Further international rating agencies like standard and poor
have lowered Indiarsquos credit rating to sub- investment grade Such negative aspects have often
outweighed positive such as increasing for reserve and a manageable inflation rate
Under such situation I go without saying that banks are no exception
and are bound to face the heat of global down turn One would be surprise to know that banks and
financial institution in India holds non-performing assets worth Rs 1 10000 crores Bankers have
realized that unless the level of NPA is reduced drastically they will find it difficult to survive
The actual level of NPA in India is around $ 40 billion much higher than govt estimation of $16
billion This difference is largely due to the discrepancy in accounting the NPAs followed by India
and rest of the world The accounting norms of India are less stringent than those of the developed
economies The Indian banks also have the tendency to extend the past due Considering the GDP
India nearly $ 470 billion the NPA are 8 of the total GDP which was better than many Asian
countries The NPA of china was 45 of the GDP While Japan had NPAs of 25 of the GDP
The aggregate level of NPAs in Asia has increased from $ 25 billion in 2007 to
$ 34 billion on 2009 looking to such overall pictures of the market we can say that India is doing
well and the steps taken are looking favorable
Source googlecoin
DATA ANALYZING THE QUETIONNAIRE
Two set of questionnaire were prepared to collect the feedback One set of questionnaire was meant for branches and other set of questionnaire was meant for borrowers
The set of questionnaire were given to the branches under hazaribag (RBO) and collected the feedback of the bankers of P segment and the branch manager
The questionnaire prepared for branch contained 15 questions and the questionnaire prepared for borrower contains 10 questions
The data was collected from 50 bankers and the data analysis of the branch questionnaire is as follows
Question number 1
Does not require any data analysis and information was sought to know the business level of the branches for the purpose of whether particular branch is actively engaged in xpress credit portfolio
Question number 2
Do you think that the borrowers are aware about NPA
Answer
32 of the respondent feel that the borrowers are not aware about NPA and 18 respondents feel that borrowers are aware about NPA
Chart no 11
yes
no
0
5
10
15
20
25
30
35
1832 Column1
Conclusion
Majority of the bank officials feels that the borrowers are not aware about NPA
Question number 3
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Answer
Out of 32 respondent 22 respondents is fully satisfied that lack of knowledge among the borrower regarding NPA is one of the reason for NPA 08 respondent were partially satisfied with it and 02 respondent were not satisfied with it
Chart no 12
fully satisfied(22)69
partially satisfied(8)25
not satisfied(2)6
Sales
Conclusion
Majority of the borrowers feels that lack of knowledge among the borrower regarding NPA is one of the reasons for NPA
Question number 4 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Answer
Out of 50 respondent 30 of the respondent strongly satisfied that these external factors contribute to NPA 10 respondent were partially satisfied with it 5 were not satisfied where as 5 were fully dissatisfied with it
Chart no 13
6020
10
10
fully satisfied(30) partially satisfied(10) not satisfiec(5) fully desatisfied(5)
Conclusion
Most of the respondent thinks that external factrs like willful defaulter change in govt policy contribute to NPA
Question number 5
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Answer
Chart no 14
feedback
fully satisfied(20)partially satisfied(12)not satisfied(12)fully dissatisfied(6)
Conclusion
As per the response of the officials most of the officials feel that internal factors are also responsible for NPA
Question number 6
Do you think that inflation is one of the reasons for NPA
Answer
Out f 50 responses 22 were strongly satisfied 18 were partially satisfied 8 were not satisfied and 2 were fully dissatisfied
Chart no 15
fully satisfied(20)44
partially satisfied(18)36
not satisfied(5)10
fullt dissatisfied(5)10
Conclusion
Growing inflation increasing goods rate is also one of the reason for NPA
Question number 7
Do you think that lack of PSS is also contributed to NPA
Answer
Out of 50 responses 30 were fully satisfied with it 12 were partially satisfied and 8 were fully dissatisfied
Chart no 16
6024
16
Open
fully satisfied(30)Partially satisfied(12)not satisfied(0)fully dissatisfied(8)
Conclusion
Majority of the officiais feels that lack of PSS is one of the reason for NPA This means that the PSS carried out by the bank is not sufficient or not carried out properly
Question number 8
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Answer
Most of the respondent feels that increase in unwanted expenses of the borrwer ls contribute to NPA
Chart no 17
56
12
28
4
FULLY SATISFIED(28)PARTIALLY SATISFIED(6)NOT SATISFIED(14)FULLY DISSATISFIED(2)
Conclusion
As per response of the officials increasing inflation have an adverse effect on the financial sector its working performance as well as on NPA
Question number 9
Do you think that high rate of interest under Xpress credit also contributes to NPA
Answer
Out of 50 respondent 25 respondent were not satisfied 10 were partially satisfied 10 were strongly dissatisfied where as only 5 out of 50 were fully satisfied with it
Chart no 18
strongly satisfied(5)partially satisfied(10)not satisfied(25)fully dissatisfied(10)
Conclusion
Most of the respondents are not satisfied with it They feel that the rate of interest charged by SBI under Xpress credit is not high and it will not contribute to NPS
Question number 10
Do you think that lack of proper planning of the borrower is one of the reason for NPA
Answer
Out of 70 respondent 35 were fully satisfied 5 were not satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 19
fully satisfied(35)70
partially satisfied(10)20
not satisfied(5)10
Conclusion
Most of the respondent feels that the borrowers borrow money from the bank without any proper planning which is one of the most important reason for NPA
Question number 11
Is heavy borrowing also contribute to NPA
Answer
Out of 50 respondent 25 respondent were fully satisfied 12 were partially satisfied 8 were not satisfied were as 5 were fully dissatisfied
Chart no 110
50
24
16
10
fully satisfied(25) partially satisfied(12) not satisfied(8) fully dissatisfied(5)
Question number 12
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Answer
As per the response of the officials 20 were fully satisfied 66were partially satisfied 4 were not satisfied with it were as 10 respondent were fully dissatisfied
Chart no 111
fully satisfied(10)20
partially satisfied(33)66
not satisfied(2)4
fullydissatisfied(5)10
Conclusion
As per the response given by the officials most of the officials were partially satisfied that wrong selection of borrower also contribute to NPA which means that selection process carried out by the bank is not appropriate or there is some difficulties in implementing them
Question number 13
Do you think that poor credit appraisal also contribute to NPA
Answer
Out of 50 respondent 5 were fully satisfied 10 were fully satisfied 30 were not satisfied were as only 5 were fully dissatisfied
Chart no 112
fully satisfied(5)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 14
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Answer
Out of 50 responses 3 were fully satisfied 15 were partially satisfied 25 were not satisfied where as 7 were full dissatisfied
Chart no 113
fully satisfied(3)partiallt satisfied(15)not satisfied(25)fully dissatisfied(7)
Conclusion
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not contribute to NPA This means that the attitude of bank toward the borrower is not inflexible
Question number 15
Do you think that system over load is also one of the causes of NPA
Answer
Out of 50 respondent 28 were fully satisfied 12 were partially satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 114
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
C) In a forum of lenders the priority of each lender will be different While one set of lender
may be willing to wait for longer time to recover its dues another lender may have a much
shorter timeframe in mind So it is possible that the letter categories of lenders may be
willing to exit even at a cost by a discounted settlement of the exposure There for any plan
for restructuringrehabilitation may takes into account
D) Corporate debt restructuring it has been institutionalized in 2001 to provide a timely and
transparent system for restructuring the corporate debt of RS 20 crores and above with the
banks on a voluntary basis and outside a legal framework Under this system bank are
greatly benefit in terms of restructuring of large standard accounts (potential NPAs) and
viable sub-standard account with multiple banking arrangement
NPA MANAGEMENT- RESOLUTION
Compromise settlement schemes
Restructuringrescheduling
Lok adalat
Corporate debt restructuring cell
Debt recovery Tribunals (DRT)
Proceeding under the code of civil procedure
Board of industrial and financial reconstruction
National company law Tribunal (NCLT)
Sale of NPA to other bank
Sale of NPA to ARCSC under securitization and reconstruction of financial assets for
enforcement of security interest Act 2000 (SRFAESI)
Liquidation
Source wwwRBIorgin
NPA MANAGEMENT IN INDIA
Formation of the credit information bureau (India) limited (CIBIL)
Release of willful defaulterrsquos listRBI also releases a list of borrowers with aggregate
outstanding of RS 1 crore and above against whom bank have filed suit for recovery of their
fund
Reporting of frauds to RBI
Norms of lenders labiality- framing of fair practices code with regard to lenders lability to
be followed by banks
Risk assessment and Risk management
RBI has advised banks to all cases of willful defaulters in case of 1 crore and above and
files suits in such cases
Responding quick mortality cases
Special mention accounts for early identification for bad debt loans and advances over due
for less than one or two quarters would come under this category However these accounts do
not need provisioning
INTERNATIONAL PRACTICES ON NPA MANAGEMENT
Subsequent to the Asian currency crisis which severely crippled the financial system In
addition to the above some of the more recent and aggressive step to NPAs have been taken
by Taiwan Taiwanese financial institution have been encouraged to merge and form bank
based AMCs through the recent introduction of financial holding company act and financial
institution Asian countries the magnitude of NPAs in Asian financial institution was brought
to light Driven by the need to proactively tackle the soaring NPAs level the respective govt
embarked upon a program of substantial reform This involves setting up processes for early
identification and resolution of NPAs The table below provides a cross country comparison
of approaches used for NPA resolution Mergers Act A long side the ministry of finance has
followed a carrot and strict policy of specifying the required NPA ratio for banks while also
providing flexibility in modes of NPA assets resolution and a conduct
ive regulatory and tax environment Deferred loss write-off provisions have been instituted to
provide breathing space for lenders to absorb NPA write-off While it is too early to
comment on success of NPA resolution process in Taiwan the early sign are encouraging
Detailed below are some key NPA management approaches adopted by banks in South East
Asian countries
1 Credit risk mitigation
2 Early warning systems
3 Assets management companies
Increasing willingness to sell NPAs to AMCs
Effective resolution strategy
Appointment of special administrators
4 Out of court restructuring
Source wwwgooglecom
DIFFICULTIES WITH NON PERFORMING ASSETS
I Owners do not receive a market return on their capital In the worst case if the bank
fails owner lose their assets
II Depositors do not receive a market return on savings In the worst case if the bank
fails depositors lose their assets or uninsured balance Banks also redistribute losses
to other borrowers by charging higher rate of interest
III Non-performing loans epitomize bad investors They misallocate credit from good
projects which do not receive funding to failed project
IV 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
shortage the shortage can jam payments across the country
b Illiquidity constraints banks in paying depositors eg cashing their paychecks
c Undercapitalized banks exceed the bank capital base
Lending by bank has been politicized It is common knowledge
that loans are given to various industrial houses on common consideration and
viability of project but on political consideration In normal circumstances banks
before extending any loan would make a thorough study of the actual need of the
party considered the prospect of the business in which it is engaged Since it is
not looked into many of the loans becomes NPA
REASONS F0R AN ACCOUNT BECOMING NPA
Those attribute to borrower
Failure to bring in required capital
Lack of proper planning
Unwanted expenses
Lack of expertise
Poor credit collection
Miss management
Heavy borrowing
Lack of knowledge regarding NPA
Willful defaulters
Death of the borrower
Those attribute to banks
Wrong selection of borrower
Poor credit appraisal
Unhelpful in supervision
Too inflexible attitude
System overload
Lack of motivation
Delay in sanction
Lack of trained staff
Lack of commitment to recovery
Lack of personal visit to the borrower office
Lack of personal visit to the borrowerrsquos residence
Other
Fast changing technology
Unhelpful attitude of govt
Increase in material cost
Government policies
Taxation law
Political hostility
INDIAN ECONOMY AND NPA
Undoubtedly the world economy has slowed down recession is at its peak globally stock markets
have tumbled and business itself getting hard to do The Indian economy has been much affected due
to high fiscal deficit poor infrastructure facilities sticky legal system cutting of exposures to
emerging market by FIIs etc
Further international rating agencies like standard and poor
have lowered Indiarsquos credit rating to sub- investment grade Such negative aspects have often
outweighed positive such as increasing for reserve and a manageable inflation rate
Under such situation I go without saying that banks are no exception
and are bound to face the heat of global down turn One would be surprise to know that banks and
financial institution in India holds non-performing assets worth Rs 1 10000 crores Bankers have
realized that unless the level of NPA is reduced drastically they will find it difficult to survive
The actual level of NPA in India is around $ 40 billion much higher than govt estimation of $16
billion This difference is largely due to the discrepancy in accounting the NPAs followed by India
and rest of the world The accounting norms of India are less stringent than those of the developed
economies The Indian banks also have the tendency to extend the past due Considering the GDP
India nearly $ 470 billion the NPA are 8 of the total GDP which was better than many Asian
countries The NPA of china was 45 of the GDP While Japan had NPAs of 25 of the GDP
The aggregate level of NPAs in Asia has increased from $ 25 billion in 2007 to
$ 34 billion on 2009 looking to such overall pictures of the market we can say that India is doing
well and the steps taken are looking favorable
Source googlecoin
DATA ANALYZING THE QUETIONNAIRE
Two set of questionnaire were prepared to collect the feedback One set of questionnaire was meant for branches and other set of questionnaire was meant for borrowers
The set of questionnaire were given to the branches under hazaribag (RBO) and collected the feedback of the bankers of P segment and the branch manager
The questionnaire prepared for branch contained 15 questions and the questionnaire prepared for borrower contains 10 questions
The data was collected from 50 bankers and the data analysis of the branch questionnaire is as follows
Question number 1
Does not require any data analysis and information was sought to know the business level of the branches for the purpose of whether particular branch is actively engaged in xpress credit portfolio
Question number 2
Do you think that the borrowers are aware about NPA
Answer
32 of the respondent feel that the borrowers are not aware about NPA and 18 respondents feel that borrowers are aware about NPA
Chart no 11
yes
no
0
5
10
15
20
25
30
35
1832 Column1
Conclusion
Majority of the bank officials feels that the borrowers are not aware about NPA
Question number 3
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Answer
Out of 32 respondent 22 respondents is fully satisfied that lack of knowledge among the borrower regarding NPA is one of the reason for NPA 08 respondent were partially satisfied with it and 02 respondent were not satisfied with it
Chart no 12
fully satisfied(22)69
partially satisfied(8)25
not satisfied(2)6
Sales
Conclusion
Majority of the borrowers feels that lack of knowledge among the borrower regarding NPA is one of the reasons for NPA
Question number 4 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Answer
Out of 50 respondent 30 of the respondent strongly satisfied that these external factors contribute to NPA 10 respondent were partially satisfied with it 5 were not satisfied where as 5 were fully dissatisfied with it
Chart no 13
6020
10
10
fully satisfied(30) partially satisfied(10) not satisfiec(5) fully desatisfied(5)
Conclusion
Most of the respondent thinks that external factrs like willful defaulter change in govt policy contribute to NPA
Question number 5
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Answer
Chart no 14
feedback
fully satisfied(20)partially satisfied(12)not satisfied(12)fully dissatisfied(6)
Conclusion
As per the response of the officials most of the officials feel that internal factors are also responsible for NPA
Question number 6
Do you think that inflation is one of the reasons for NPA
Answer
Out f 50 responses 22 were strongly satisfied 18 were partially satisfied 8 were not satisfied and 2 were fully dissatisfied
Chart no 15
fully satisfied(20)44
partially satisfied(18)36
not satisfied(5)10
fullt dissatisfied(5)10
Conclusion
Growing inflation increasing goods rate is also one of the reason for NPA
Question number 7
Do you think that lack of PSS is also contributed to NPA
Answer
Out of 50 responses 30 were fully satisfied with it 12 were partially satisfied and 8 were fully dissatisfied
Chart no 16
6024
16
Open
fully satisfied(30)Partially satisfied(12)not satisfied(0)fully dissatisfied(8)
Conclusion
Majority of the officiais feels that lack of PSS is one of the reason for NPA This means that the PSS carried out by the bank is not sufficient or not carried out properly
Question number 8
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Answer
Most of the respondent feels that increase in unwanted expenses of the borrwer ls contribute to NPA
Chart no 17
56
12
28
4
FULLY SATISFIED(28)PARTIALLY SATISFIED(6)NOT SATISFIED(14)FULLY DISSATISFIED(2)
Conclusion
As per response of the officials increasing inflation have an adverse effect on the financial sector its working performance as well as on NPA
Question number 9
Do you think that high rate of interest under Xpress credit also contributes to NPA
Answer
Out of 50 respondent 25 respondent were not satisfied 10 were partially satisfied 10 were strongly dissatisfied where as only 5 out of 50 were fully satisfied with it
Chart no 18
strongly satisfied(5)partially satisfied(10)not satisfied(25)fully dissatisfied(10)
Conclusion
Most of the respondents are not satisfied with it They feel that the rate of interest charged by SBI under Xpress credit is not high and it will not contribute to NPS
Question number 10
Do you think that lack of proper planning of the borrower is one of the reason for NPA
Answer
Out of 70 respondent 35 were fully satisfied 5 were not satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 19
fully satisfied(35)70
partially satisfied(10)20
not satisfied(5)10
Conclusion
Most of the respondent feels that the borrowers borrow money from the bank without any proper planning which is one of the most important reason for NPA
Question number 11
Is heavy borrowing also contribute to NPA
Answer
Out of 50 respondent 25 respondent were fully satisfied 12 were partially satisfied 8 were not satisfied were as 5 were fully dissatisfied
Chart no 110
50
24
16
10
fully satisfied(25) partially satisfied(12) not satisfied(8) fully dissatisfied(5)
Question number 12
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Answer
As per the response of the officials 20 were fully satisfied 66were partially satisfied 4 were not satisfied with it were as 10 respondent were fully dissatisfied
Chart no 111
fully satisfied(10)20
partially satisfied(33)66
not satisfied(2)4
fullydissatisfied(5)10
Conclusion
As per the response given by the officials most of the officials were partially satisfied that wrong selection of borrower also contribute to NPA which means that selection process carried out by the bank is not appropriate or there is some difficulties in implementing them
Question number 13
Do you think that poor credit appraisal also contribute to NPA
Answer
Out of 50 respondent 5 were fully satisfied 10 were fully satisfied 30 were not satisfied were as only 5 were fully dissatisfied
Chart no 112
fully satisfied(5)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 14
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Answer
Out of 50 responses 3 were fully satisfied 15 were partially satisfied 25 were not satisfied where as 7 were full dissatisfied
Chart no 113
fully satisfied(3)partiallt satisfied(15)not satisfied(25)fully dissatisfied(7)
Conclusion
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not contribute to NPA This means that the attitude of bank toward the borrower is not inflexible
Question number 15
Do you think that system over load is also one of the causes of NPA
Answer
Out of 50 respondent 28 were fully satisfied 12 were partially satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 114
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Compromise settlement schemes
Restructuringrescheduling
Lok adalat
Corporate debt restructuring cell
Debt recovery Tribunals (DRT)
Proceeding under the code of civil procedure
Board of industrial and financial reconstruction
National company law Tribunal (NCLT)
Sale of NPA to other bank
Sale of NPA to ARCSC under securitization and reconstruction of financial assets for
enforcement of security interest Act 2000 (SRFAESI)
Liquidation
Source wwwRBIorgin
NPA MANAGEMENT IN INDIA
Formation of the credit information bureau (India) limited (CIBIL)
Release of willful defaulterrsquos listRBI also releases a list of borrowers with aggregate
outstanding of RS 1 crore and above against whom bank have filed suit for recovery of their
fund
Reporting of frauds to RBI
Norms of lenders labiality- framing of fair practices code with regard to lenders lability to
be followed by banks
Risk assessment and Risk management
RBI has advised banks to all cases of willful defaulters in case of 1 crore and above and
files suits in such cases
Responding quick mortality cases
Special mention accounts for early identification for bad debt loans and advances over due
for less than one or two quarters would come under this category However these accounts do
not need provisioning
INTERNATIONAL PRACTICES ON NPA MANAGEMENT
Subsequent to the Asian currency crisis which severely crippled the financial system In
addition to the above some of the more recent and aggressive step to NPAs have been taken
by Taiwan Taiwanese financial institution have been encouraged to merge and form bank
based AMCs through the recent introduction of financial holding company act and financial
institution Asian countries the magnitude of NPAs in Asian financial institution was brought
to light Driven by the need to proactively tackle the soaring NPAs level the respective govt
embarked upon a program of substantial reform This involves setting up processes for early
identification and resolution of NPAs The table below provides a cross country comparison
of approaches used for NPA resolution Mergers Act A long side the ministry of finance has
followed a carrot and strict policy of specifying the required NPA ratio for banks while also
providing flexibility in modes of NPA assets resolution and a conduct
ive regulatory and tax environment Deferred loss write-off provisions have been instituted to
provide breathing space for lenders to absorb NPA write-off While it is too early to
comment on success of NPA resolution process in Taiwan the early sign are encouraging
Detailed below are some key NPA management approaches adopted by banks in South East
Asian countries
1 Credit risk mitigation
2 Early warning systems
3 Assets management companies
Increasing willingness to sell NPAs to AMCs
Effective resolution strategy
Appointment of special administrators
4 Out of court restructuring
Source wwwgooglecom
DIFFICULTIES WITH NON PERFORMING ASSETS
I Owners do not receive a market return on their capital In the worst case if the bank
fails owner lose their assets
II Depositors do not receive a market return on savings In the worst case if the bank
fails depositors lose their assets or uninsured balance Banks also redistribute losses
to other borrowers by charging higher rate of interest
III Non-performing loans epitomize bad investors They misallocate credit from good
projects which do not receive funding to failed project
IV 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
shortage the shortage can jam payments across the country
b Illiquidity constraints banks in paying depositors eg cashing their paychecks
c Undercapitalized banks exceed the bank capital base
Lending by bank has been politicized It is common knowledge
that loans are given to various industrial houses on common consideration and
viability of project but on political consideration In normal circumstances banks
before extending any loan would make a thorough study of the actual need of the
party considered the prospect of the business in which it is engaged Since it is
not looked into many of the loans becomes NPA
REASONS F0R AN ACCOUNT BECOMING NPA
Those attribute to borrower
Failure to bring in required capital
Lack of proper planning
Unwanted expenses
Lack of expertise
Poor credit collection
Miss management
Heavy borrowing
Lack of knowledge regarding NPA
Willful defaulters
Death of the borrower
Those attribute to banks
Wrong selection of borrower
Poor credit appraisal
Unhelpful in supervision
Too inflexible attitude
System overload
Lack of motivation
Delay in sanction
Lack of trained staff
Lack of commitment to recovery
Lack of personal visit to the borrower office
Lack of personal visit to the borrowerrsquos residence
Other
Fast changing technology
Unhelpful attitude of govt
Increase in material cost
Government policies
Taxation law
Political hostility
INDIAN ECONOMY AND NPA
Undoubtedly the world economy has slowed down recession is at its peak globally stock markets
have tumbled and business itself getting hard to do The Indian economy has been much affected due
to high fiscal deficit poor infrastructure facilities sticky legal system cutting of exposures to
emerging market by FIIs etc
Further international rating agencies like standard and poor
have lowered Indiarsquos credit rating to sub- investment grade Such negative aspects have often
outweighed positive such as increasing for reserve and a manageable inflation rate
Under such situation I go without saying that banks are no exception
and are bound to face the heat of global down turn One would be surprise to know that banks and
financial institution in India holds non-performing assets worth Rs 1 10000 crores Bankers have
realized that unless the level of NPA is reduced drastically they will find it difficult to survive
The actual level of NPA in India is around $ 40 billion much higher than govt estimation of $16
billion This difference is largely due to the discrepancy in accounting the NPAs followed by India
and rest of the world The accounting norms of India are less stringent than those of the developed
economies The Indian banks also have the tendency to extend the past due Considering the GDP
India nearly $ 470 billion the NPA are 8 of the total GDP which was better than many Asian
countries The NPA of china was 45 of the GDP While Japan had NPAs of 25 of the GDP
The aggregate level of NPAs in Asia has increased from $ 25 billion in 2007 to
$ 34 billion on 2009 looking to such overall pictures of the market we can say that India is doing
well and the steps taken are looking favorable
Source googlecoin
DATA ANALYZING THE QUETIONNAIRE
Two set of questionnaire were prepared to collect the feedback One set of questionnaire was meant for branches and other set of questionnaire was meant for borrowers
The set of questionnaire were given to the branches under hazaribag (RBO) and collected the feedback of the bankers of P segment and the branch manager
The questionnaire prepared for branch contained 15 questions and the questionnaire prepared for borrower contains 10 questions
The data was collected from 50 bankers and the data analysis of the branch questionnaire is as follows
Question number 1
Does not require any data analysis and information was sought to know the business level of the branches for the purpose of whether particular branch is actively engaged in xpress credit portfolio
Question number 2
Do you think that the borrowers are aware about NPA
Answer
32 of the respondent feel that the borrowers are not aware about NPA and 18 respondents feel that borrowers are aware about NPA
Chart no 11
yes
no
0
5
10
15
20
25
30
35
1832 Column1
Conclusion
Majority of the bank officials feels that the borrowers are not aware about NPA
Question number 3
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Answer
Out of 32 respondent 22 respondents is fully satisfied that lack of knowledge among the borrower regarding NPA is one of the reason for NPA 08 respondent were partially satisfied with it and 02 respondent were not satisfied with it
Chart no 12
fully satisfied(22)69
partially satisfied(8)25
not satisfied(2)6
Sales
Conclusion
Majority of the borrowers feels that lack of knowledge among the borrower regarding NPA is one of the reasons for NPA
Question number 4 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Answer
Out of 50 respondent 30 of the respondent strongly satisfied that these external factors contribute to NPA 10 respondent were partially satisfied with it 5 were not satisfied where as 5 were fully dissatisfied with it
Chart no 13
6020
10
10
fully satisfied(30) partially satisfied(10) not satisfiec(5) fully desatisfied(5)
Conclusion
Most of the respondent thinks that external factrs like willful defaulter change in govt policy contribute to NPA
Question number 5
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Answer
Chart no 14
feedback
fully satisfied(20)partially satisfied(12)not satisfied(12)fully dissatisfied(6)
Conclusion
As per the response of the officials most of the officials feel that internal factors are also responsible for NPA
Question number 6
Do you think that inflation is one of the reasons for NPA
Answer
Out f 50 responses 22 were strongly satisfied 18 were partially satisfied 8 were not satisfied and 2 were fully dissatisfied
Chart no 15
fully satisfied(20)44
partially satisfied(18)36
not satisfied(5)10
fullt dissatisfied(5)10
Conclusion
Growing inflation increasing goods rate is also one of the reason for NPA
Question number 7
Do you think that lack of PSS is also contributed to NPA
Answer
Out of 50 responses 30 were fully satisfied with it 12 were partially satisfied and 8 were fully dissatisfied
Chart no 16
6024
16
Open
fully satisfied(30)Partially satisfied(12)not satisfied(0)fully dissatisfied(8)
Conclusion
Majority of the officiais feels that lack of PSS is one of the reason for NPA This means that the PSS carried out by the bank is not sufficient or not carried out properly
Question number 8
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Answer
Most of the respondent feels that increase in unwanted expenses of the borrwer ls contribute to NPA
Chart no 17
56
12
28
4
FULLY SATISFIED(28)PARTIALLY SATISFIED(6)NOT SATISFIED(14)FULLY DISSATISFIED(2)
Conclusion
As per response of the officials increasing inflation have an adverse effect on the financial sector its working performance as well as on NPA
Question number 9
Do you think that high rate of interest under Xpress credit also contributes to NPA
Answer
Out of 50 respondent 25 respondent were not satisfied 10 were partially satisfied 10 were strongly dissatisfied where as only 5 out of 50 were fully satisfied with it
Chart no 18
strongly satisfied(5)partially satisfied(10)not satisfied(25)fully dissatisfied(10)
Conclusion
Most of the respondents are not satisfied with it They feel that the rate of interest charged by SBI under Xpress credit is not high and it will not contribute to NPS
Question number 10
Do you think that lack of proper planning of the borrower is one of the reason for NPA
Answer
Out of 70 respondent 35 were fully satisfied 5 were not satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 19
fully satisfied(35)70
partially satisfied(10)20
not satisfied(5)10
Conclusion
Most of the respondent feels that the borrowers borrow money from the bank without any proper planning which is one of the most important reason for NPA
Question number 11
Is heavy borrowing also contribute to NPA
Answer
Out of 50 respondent 25 respondent were fully satisfied 12 were partially satisfied 8 were not satisfied were as 5 were fully dissatisfied
Chart no 110
50
24
16
10
fully satisfied(25) partially satisfied(12) not satisfied(8) fully dissatisfied(5)
Question number 12
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Answer
As per the response of the officials 20 were fully satisfied 66were partially satisfied 4 were not satisfied with it were as 10 respondent were fully dissatisfied
Chart no 111
fully satisfied(10)20
partially satisfied(33)66
not satisfied(2)4
fullydissatisfied(5)10
Conclusion
As per the response given by the officials most of the officials were partially satisfied that wrong selection of borrower also contribute to NPA which means that selection process carried out by the bank is not appropriate or there is some difficulties in implementing them
Question number 13
Do you think that poor credit appraisal also contribute to NPA
Answer
Out of 50 respondent 5 were fully satisfied 10 were fully satisfied 30 were not satisfied were as only 5 were fully dissatisfied
Chart no 112
fully satisfied(5)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 14
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Answer
Out of 50 responses 3 were fully satisfied 15 were partially satisfied 25 were not satisfied where as 7 were full dissatisfied
Chart no 113
fully satisfied(3)partiallt satisfied(15)not satisfied(25)fully dissatisfied(7)
Conclusion
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not contribute to NPA This means that the attitude of bank toward the borrower is not inflexible
Question number 15
Do you think that system over load is also one of the causes of NPA
Answer
Out of 50 respondent 28 were fully satisfied 12 were partially satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 114
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Formation of the credit information bureau (India) limited (CIBIL)
Release of willful defaulterrsquos listRBI also releases a list of borrowers with aggregate
outstanding of RS 1 crore and above against whom bank have filed suit for recovery of their
fund
Reporting of frauds to RBI
Norms of lenders labiality- framing of fair practices code with regard to lenders lability to
be followed by banks
Risk assessment and Risk management
RBI has advised banks to all cases of willful defaulters in case of 1 crore and above and
files suits in such cases
Responding quick mortality cases
Special mention accounts for early identification for bad debt loans and advances over due
for less than one or two quarters would come under this category However these accounts do
not need provisioning
INTERNATIONAL PRACTICES ON NPA MANAGEMENT
Subsequent to the Asian currency crisis which severely crippled the financial system In
addition to the above some of the more recent and aggressive step to NPAs have been taken
by Taiwan Taiwanese financial institution have been encouraged to merge and form bank
based AMCs through the recent introduction of financial holding company act and financial
institution Asian countries the magnitude of NPAs in Asian financial institution was brought
to light Driven by the need to proactively tackle the soaring NPAs level the respective govt
embarked upon a program of substantial reform This involves setting up processes for early
identification and resolution of NPAs The table below provides a cross country comparison
of approaches used for NPA resolution Mergers Act A long side the ministry of finance has
followed a carrot and strict policy of specifying the required NPA ratio for banks while also
providing flexibility in modes of NPA assets resolution and a conduct
ive regulatory and tax environment Deferred loss write-off provisions have been instituted to
provide breathing space for lenders to absorb NPA write-off While it is too early to
comment on success of NPA resolution process in Taiwan the early sign are encouraging
Detailed below are some key NPA management approaches adopted by banks in South East
Asian countries
1 Credit risk mitigation
2 Early warning systems
3 Assets management companies
Increasing willingness to sell NPAs to AMCs
Effective resolution strategy
Appointment of special administrators
4 Out of court restructuring
Source wwwgooglecom
DIFFICULTIES WITH NON PERFORMING ASSETS
I Owners do not receive a market return on their capital In the worst case if the bank
fails owner lose their assets
II Depositors do not receive a market return on savings In the worst case if the bank
fails depositors lose their assets or uninsured balance Banks also redistribute losses
to other borrowers by charging higher rate of interest
III Non-performing loans epitomize bad investors They misallocate credit from good
projects which do not receive funding to failed project
IV 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
shortage the shortage can jam payments across the country
b Illiquidity constraints banks in paying depositors eg cashing their paychecks
c Undercapitalized banks exceed the bank capital base
Lending by bank has been politicized It is common knowledge
that loans are given to various industrial houses on common consideration and
viability of project but on political consideration In normal circumstances banks
before extending any loan would make a thorough study of the actual need of the
party considered the prospect of the business in which it is engaged Since it is
not looked into many of the loans becomes NPA
REASONS F0R AN ACCOUNT BECOMING NPA
Those attribute to borrower
Failure to bring in required capital
Lack of proper planning
Unwanted expenses
Lack of expertise
Poor credit collection
Miss management
Heavy borrowing
Lack of knowledge regarding NPA
Willful defaulters
Death of the borrower
Those attribute to banks
Wrong selection of borrower
Poor credit appraisal
Unhelpful in supervision
Too inflexible attitude
System overload
Lack of motivation
Delay in sanction
Lack of trained staff
Lack of commitment to recovery
Lack of personal visit to the borrower office
Lack of personal visit to the borrowerrsquos residence
Other
Fast changing technology
Unhelpful attitude of govt
Increase in material cost
Government policies
Taxation law
Political hostility
INDIAN ECONOMY AND NPA
Undoubtedly the world economy has slowed down recession is at its peak globally stock markets
have tumbled and business itself getting hard to do The Indian economy has been much affected due
to high fiscal deficit poor infrastructure facilities sticky legal system cutting of exposures to
emerging market by FIIs etc
Further international rating agencies like standard and poor
have lowered Indiarsquos credit rating to sub- investment grade Such negative aspects have often
outweighed positive such as increasing for reserve and a manageable inflation rate
Under such situation I go without saying that banks are no exception
and are bound to face the heat of global down turn One would be surprise to know that banks and
financial institution in India holds non-performing assets worth Rs 1 10000 crores Bankers have
realized that unless the level of NPA is reduced drastically they will find it difficult to survive
The actual level of NPA in India is around $ 40 billion much higher than govt estimation of $16
billion This difference is largely due to the discrepancy in accounting the NPAs followed by India
and rest of the world The accounting norms of India are less stringent than those of the developed
economies The Indian banks also have the tendency to extend the past due Considering the GDP
India nearly $ 470 billion the NPA are 8 of the total GDP which was better than many Asian
countries The NPA of china was 45 of the GDP While Japan had NPAs of 25 of the GDP
The aggregate level of NPAs in Asia has increased from $ 25 billion in 2007 to
$ 34 billion on 2009 looking to such overall pictures of the market we can say that India is doing
well and the steps taken are looking favorable
Source googlecoin
DATA ANALYZING THE QUETIONNAIRE
Two set of questionnaire were prepared to collect the feedback One set of questionnaire was meant for branches and other set of questionnaire was meant for borrowers
The set of questionnaire were given to the branches under hazaribag (RBO) and collected the feedback of the bankers of P segment and the branch manager
The questionnaire prepared for branch contained 15 questions and the questionnaire prepared for borrower contains 10 questions
The data was collected from 50 bankers and the data analysis of the branch questionnaire is as follows
Question number 1
Does not require any data analysis and information was sought to know the business level of the branches for the purpose of whether particular branch is actively engaged in xpress credit portfolio
Question number 2
Do you think that the borrowers are aware about NPA
Answer
32 of the respondent feel that the borrowers are not aware about NPA and 18 respondents feel that borrowers are aware about NPA
Chart no 11
yes
no
0
5
10
15
20
25
30
35
1832 Column1
Conclusion
Majority of the bank officials feels that the borrowers are not aware about NPA
Question number 3
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Answer
Out of 32 respondent 22 respondents is fully satisfied that lack of knowledge among the borrower regarding NPA is one of the reason for NPA 08 respondent were partially satisfied with it and 02 respondent were not satisfied with it
Chart no 12
fully satisfied(22)69
partially satisfied(8)25
not satisfied(2)6
Sales
Conclusion
Majority of the borrowers feels that lack of knowledge among the borrower regarding NPA is one of the reasons for NPA
Question number 4 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Answer
Out of 50 respondent 30 of the respondent strongly satisfied that these external factors contribute to NPA 10 respondent were partially satisfied with it 5 were not satisfied where as 5 were fully dissatisfied with it
Chart no 13
6020
10
10
fully satisfied(30) partially satisfied(10) not satisfiec(5) fully desatisfied(5)
Conclusion
Most of the respondent thinks that external factrs like willful defaulter change in govt policy contribute to NPA
Question number 5
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Answer
Chart no 14
feedback
fully satisfied(20)partially satisfied(12)not satisfied(12)fully dissatisfied(6)
Conclusion
As per the response of the officials most of the officials feel that internal factors are also responsible for NPA
Question number 6
Do you think that inflation is one of the reasons for NPA
Answer
Out f 50 responses 22 were strongly satisfied 18 were partially satisfied 8 were not satisfied and 2 were fully dissatisfied
Chart no 15
fully satisfied(20)44
partially satisfied(18)36
not satisfied(5)10
fullt dissatisfied(5)10
Conclusion
Growing inflation increasing goods rate is also one of the reason for NPA
Question number 7
Do you think that lack of PSS is also contributed to NPA
Answer
Out of 50 responses 30 were fully satisfied with it 12 were partially satisfied and 8 were fully dissatisfied
Chart no 16
6024
16
Open
fully satisfied(30)Partially satisfied(12)not satisfied(0)fully dissatisfied(8)
Conclusion
Majority of the officiais feels that lack of PSS is one of the reason for NPA This means that the PSS carried out by the bank is not sufficient or not carried out properly
Question number 8
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Answer
Most of the respondent feels that increase in unwanted expenses of the borrwer ls contribute to NPA
Chart no 17
56
12
28
4
FULLY SATISFIED(28)PARTIALLY SATISFIED(6)NOT SATISFIED(14)FULLY DISSATISFIED(2)
Conclusion
As per response of the officials increasing inflation have an adverse effect on the financial sector its working performance as well as on NPA
Question number 9
Do you think that high rate of interest under Xpress credit also contributes to NPA
Answer
Out of 50 respondent 25 respondent were not satisfied 10 were partially satisfied 10 were strongly dissatisfied where as only 5 out of 50 were fully satisfied with it
Chart no 18
strongly satisfied(5)partially satisfied(10)not satisfied(25)fully dissatisfied(10)
Conclusion
Most of the respondents are not satisfied with it They feel that the rate of interest charged by SBI under Xpress credit is not high and it will not contribute to NPS
Question number 10
Do you think that lack of proper planning of the borrower is one of the reason for NPA
Answer
Out of 70 respondent 35 were fully satisfied 5 were not satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 19
fully satisfied(35)70
partially satisfied(10)20
not satisfied(5)10
Conclusion
Most of the respondent feels that the borrowers borrow money from the bank without any proper planning which is one of the most important reason for NPA
Question number 11
Is heavy borrowing also contribute to NPA
Answer
Out of 50 respondent 25 respondent were fully satisfied 12 were partially satisfied 8 were not satisfied were as 5 were fully dissatisfied
Chart no 110
50
24
16
10
fully satisfied(25) partially satisfied(12) not satisfied(8) fully dissatisfied(5)
Question number 12
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Answer
As per the response of the officials 20 were fully satisfied 66were partially satisfied 4 were not satisfied with it were as 10 respondent were fully dissatisfied
Chart no 111
fully satisfied(10)20
partially satisfied(33)66
not satisfied(2)4
fullydissatisfied(5)10
Conclusion
As per the response given by the officials most of the officials were partially satisfied that wrong selection of borrower also contribute to NPA which means that selection process carried out by the bank is not appropriate or there is some difficulties in implementing them
Question number 13
Do you think that poor credit appraisal also contribute to NPA
Answer
Out of 50 respondent 5 were fully satisfied 10 were fully satisfied 30 were not satisfied were as only 5 were fully dissatisfied
Chart no 112
fully satisfied(5)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 14
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Answer
Out of 50 responses 3 were fully satisfied 15 were partially satisfied 25 were not satisfied where as 7 were full dissatisfied
Chart no 113
fully satisfied(3)partiallt satisfied(15)not satisfied(25)fully dissatisfied(7)
Conclusion
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not contribute to NPA This means that the attitude of bank toward the borrower is not inflexible
Question number 15
Do you think that system over load is also one of the causes of NPA
Answer
Out of 50 respondent 28 were fully satisfied 12 were partially satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 114
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Subsequent to the Asian currency crisis which severely crippled the financial system In
addition to the above some of the more recent and aggressive step to NPAs have been taken
by Taiwan Taiwanese financial institution have been encouraged to merge and form bank
based AMCs through the recent introduction of financial holding company act and financial
institution Asian countries the magnitude of NPAs in Asian financial institution was brought
to light Driven by the need to proactively tackle the soaring NPAs level the respective govt
embarked upon a program of substantial reform This involves setting up processes for early
identification and resolution of NPAs The table below provides a cross country comparison
of approaches used for NPA resolution Mergers Act A long side the ministry of finance has
followed a carrot and strict policy of specifying the required NPA ratio for banks while also
providing flexibility in modes of NPA assets resolution and a conduct
ive regulatory and tax environment Deferred loss write-off provisions have been instituted to
provide breathing space for lenders to absorb NPA write-off While it is too early to
comment on success of NPA resolution process in Taiwan the early sign are encouraging
Detailed below are some key NPA management approaches adopted by banks in South East
Asian countries
1 Credit risk mitigation
2 Early warning systems
3 Assets management companies
Increasing willingness to sell NPAs to AMCs
Effective resolution strategy
Appointment of special administrators
4 Out of court restructuring
Source wwwgooglecom
DIFFICULTIES WITH NON PERFORMING ASSETS
I Owners do not receive a market return on their capital In the worst case if the bank
fails owner lose their assets
II Depositors do not receive a market return on savings In the worst case if the bank
fails depositors lose their assets or uninsured balance Banks also redistribute losses
to other borrowers by charging higher rate of interest
III Non-performing loans epitomize bad investors They misallocate credit from good
projects which do not receive funding to failed project
IV 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
shortage the shortage can jam payments across the country
b Illiquidity constraints banks in paying depositors eg cashing their paychecks
c Undercapitalized banks exceed the bank capital base
Lending by bank has been politicized It is common knowledge
that loans are given to various industrial houses on common consideration and
viability of project but on political consideration In normal circumstances banks
before extending any loan would make a thorough study of the actual need of the
party considered the prospect of the business in which it is engaged Since it is
not looked into many of the loans becomes NPA
REASONS F0R AN ACCOUNT BECOMING NPA
Those attribute to borrower
Failure to bring in required capital
Lack of proper planning
Unwanted expenses
Lack of expertise
Poor credit collection
Miss management
Heavy borrowing
Lack of knowledge regarding NPA
Willful defaulters
Death of the borrower
Those attribute to banks
Wrong selection of borrower
Poor credit appraisal
Unhelpful in supervision
Too inflexible attitude
System overload
Lack of motivation
Delay in sanction
Lack of trained staff
Lack of commitment to recovery
Lack of personal visit to the borrower office
Lack of personal visit to the borrowerrsquos residence
Other
Fast changing technology
Unhelpful attitude of govt
Increase in material cost
Government policies
Taxation law
Political hostility
INDIAN ECONOMY AND NPA
Undoubtedly the world economy has slowed down recession is at its peak globally stock markets
have tumbled and business itself getting hard to do The Indian economy has been much affected due
to high fiscal deficit poor infrastructure facilities sticky legal system cutting of exposures to
emerging market by FIIs etc
Further international rating agencies like standard and poor
have lowered Indiarsquos credit rating to sub- investment grade Such negative aspects have often
outweighed positive such as increasing for reserve and a manageable inflation rate
Under such situation I go without saying that banks are no exception
and are bound to face the heat of global down turn One would be surprise to know that banks and
financial institution in India holds non-performing assets worth Rs 1 10000 crores Bankers have
realized that unless the level of NPA is reduced drastically they will find it difficult to survive
The actual level of NPA in India is around $ 40 billion much higher than govt estimation of $16
billion This difference is largely due to the discrepancy in accounting the NPAs followed by India
and rest of the world The accounting norms of India are less stringent than those of the developed
economies The Indian banks also have the tendency to extend the past due Considering the GDP
India nearly $ 470 billion the NPA are 8 of the total GDP which was better than many Asian
countries The NPA of china was 45 of the GDP While Japan had NPAs of 25 of the GDP
The aggregate level of NPAs in Asia has increased from $ 25 billion in 2007 to
$ 34 billion on 2009 looking to such overall pictures of the market we can say that India is doing
well and the steps taken are looking favorable
Source googlecoin
DATA ANALYZING THE QUETIONNAIRE
Two set of questionnaire were prepared to collect the feedback One set of questionnaire was meant for branches and other set of questionnaire was meant for borrowers
The set of questionnaire were given to the branches under hazaribag (RBO) and collected the feedback of the bankers of P segment and the branch manager
The questionnaire prepared for branch contained 15 questions and the questionnaire prepared for borrower contains 10 questions
The data was collected from 50 bankers and the data analysis of the branch questionnaire is as follows
Question number 1
Does not require any data analysis and information was sought to know the business level of the branches for the purpose of whether particular branch is actively engaged in xpress credit portfolio
Question number 2
Do you think that the borrowers are aware about NPA
Answer
32 of the respondent feel that the borrowers are not aware about NPA and 18 respondents feel that borrowers are aware about NPA
Chart no 11
yes
no
0
5
10
15
20
25
30
35
1832 Column1
Conclusion
Majority of the bank officials feels that the borrowers are not aware about NPA
Question number 3
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Answer
Out of 32 respondent 22 respondents is fully satisfied that lack of knowledge among the borrower regarding NPA is one of the reason for NPA 08 respondent were partially satisfied with it and 02 respondent were not satisfied with it
Chart no 12
fully satisfied(22)69
partially satisfied(8)25
not satisfied(2)6
Sales
Conclusion
Majority of the borrowers feels that lack of knowledge among the borrower regarding NPA is one of the reasons for NPA
Question number 4 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Answer
Out of 50 respondent 30 of the respondent strongly satisfied that these external factors contribute to NPA 10 respondent were partially satisfied with it 5 were not satisfied where as 5 were fully dissatisfied with it
Chart no 13
6020
10
10
fully satisfied(30) partially satisfied(10) not satisfiec(5) fully desatisfied(5)
Conclusion
Most of the respondent thinks that external factrs like willful defaulter change in govt policy contribute to NPA
Question number 5
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Answer
Chart no 14
feedback
fully satisfied(20)partially satisfied(12)not satisfied(12)fully dissatisfied(6)
Conclusion
As per the response of the officials most of the officials feel that internal factors are also responsible for NPA
Question number 6
Do you think that inflation is one of the reasons for NPA
Answer
Out f 50 responses 22 were strongly satisfied 18 were partially satisfied 8 were not satisfied and 2 were fully dissatisfied
Chart no 15
fully satisfied(20)44
partially satisfied(18)36
not satisfied(5)10
fullt dissatisfied(5)10
Conclusion
Growing inflation increasing goods rate is also one of the reason for NPA
Question number 7
Do you think that lack of PSS is also contributed to NPA
Answer
Out of 50 responses 30 were fully satisfied with it 12 were partially satisfied and 8 were fully dissatisfied
Chart no 16
6024
16
Open
fully satisfied(30)Partially satisfied(12)not satisfied(0)fully dissatisfied(8)
Conclusion
Majority of the officiais feels that lack of PSS is one of the reason for NPA This means that the PSS carried out by the bank is not sufficient or not carried out properly
Question number 8
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Answer
Most of the respondent feels that increase in unwanted expenses of the borrwer ls contribute to NPA
Chart no 17
56
12
28
4
FULLY SATISFIED(28)PARTIALLY SATISFIED(6)NOT SATISFIED(14)FULLY DISSATISFIED(2)
Conclusion
As per response of the officials increasing inflation have an adverse effect on the financial sector its working performance as well as on NPA
Question number 9
Do you think that high rate of interest under Xpress credit also contributes to NPA
Answer
Out of 50 respondent 25 respondent were not satisfied 10 were partially satisfied 10 were strongly dissatisfied where as only 5 out of 50 were fully satisfied with it
Chart no 18
strongly satisfied(5)partially satisfied(10)not satisfied(25)fully dissatisfied(10)
Conclusion
Most of the respondents are not satisfied with it They feel that the rate of interest charged by SBI under Xpress credit is not high and it will not contribute to NPS
Question number 10
Do you think that lack of proper planning of the borrower is one of the reason for NPA
Answer
Out of 70 respondent 35 were fully satisfied 5 were not satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 19
fully satisfied(35)70
partially satisfied(10)20
not satisfied(5)10
Conclusion
Most of the respondent feels that the borrowers borrow money from the bank without any proper planning which is one of the most important reason for NPA
Question number 11
Is heavy borrowing also contribute to NPA
Answer
Out of 50 respondent 25 respondent were fully satisfied 12 were partially satisfied 8 were not satisfied were as 5 were fully dissatisfied
Chart no 110
50
24
16
10
fully satisfied(25) partially satisfied(12) not satisfied(8) fully dissatisfied(5)
Question number 12
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Answer
As per the response of the officials 20 were fully satisfied 66were partially satisfied 4 were not satisfied with it were as 10 respondent were fully dissatisfied
Chart no 111
fully satisfied(10)20
partially satisfied(33)66
not satisfied(2)4
fullydissatisfied(5)10
Conclusion
As per the response given by the officials most of the officials were partially satisfied that wrong selection of borrower also contribute to NPA which means that selection process carried out by the bank is not appropriate or there is some difficulties in implementing them
Question number 13
Do you think that poor credit appraisal also contribute to NPA
Answer
Out of 50 respondent 5 were fully satisfied 10 were fully satisfied 30 were not satisfied were as only 5 were fully dissatisfied
Chart no 112
fully satisfied(5)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 14
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Answer
Out of 50 responses 3 were fully satisfied 15 were partially satisfied 25 were not satisfied where as 7 were full dissatisfied
Chart no 113
fully satisfied(3)partiallt satisfied(15)not satisfied(25)fully dissatisfied(7)
Conclusion
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not contribute to NPA This means that the attitude of bank toward the borrower is not inflexible
Question number 15
Do you think that system over load is also one of the causes of NPA
Answer
Out of 50 respondent 28 were fully satisfied 12 were partially satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 114
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
II Depositors do not receive a market return on savings In the worst case if the bank
fails depositors lose their assets or uninsured balance Banks also redistribute losses
to other borrowers by charging higher rate of interest
III Non-performing loans epitomize bad investors They misallocate credit from good
projects which do not receive funding to failed project
IV 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
shortage the shortage can jam payments across the country
b Illiquidity constraints banks in paying depositors eg cashing their paychecks
c Undercapitalized banks exceed the bank capital base
Lending by bank has been politicized It is common knowledge
that loans are given to various industrial houses on common consideration and
viability of project but on political consideration In normal circumstances banks
before extending any loan would make a thorough study of the actual need of the
party considered the prospect of the business in which it is engaged Since it is
not looked into many of the loans becomes NPA
REASONS F0R AN ACCOUNT BECOMING NPA
Those attribute to borrower
Failure to bring in required capital
Lack of proper planning
Unwanted expenses
Lack of expertise
Poor credit collection
Miss management
Heavy borrowing
Lack of knowledge regarding NPA
Willful defaulters
Death of the borrower
Those attribute to banks
Wrong selection of borrower
Poor credit appraisal
Unhelpful in supervision
Too inflexible attitude
System overload
Lack of motivation
Delay in sanction
Lack of trained staff
Lack of commitment to recovery
Lack of personal visit to the borrower office
Lack of personal visit to the borrowerrsquos residence
Other
Fast changing technology
Unhelpful attitude of govt
Increase in material cost
Government policies
Taxation law
Political hostility
INDIAN ECONOMY AND NPA
Undoubtedly the world economy has slowed down recession is at its peak globally stock markets
have tumbled and business itself getting hard to do The Indian economy has been much affected due
to high fiscal deficit poor infrastructure facilities sticky legal system cutting of exposures to
emerging market by FIIs etc
Further international rating agencies like standard and poor
have lowered Indiarsquos credit rating to sub- investment grade Such negative aspects have often
outweighed positive such as increasing for reserve and a manageable inflation rate
Under such situation I go without saying that banks are no exception
and are bound to face the heat of global down turn One would be surprise to know that banks and
financial institution in India holds non-performing assets worth Rs 1 10000 crores Bankers have
realized that unless the level of NPA is reduced drastically they will find it difficult to survive
The actual level of NPA in India is around $ 40 billion much higher than govt estimation of $16
billion This difference is largely due to the discrepancy in accounting the NPAs followed by India
and rest of the world The accounting norms of India are less stringent than those of the developed
economies The Indian banks also have the tendency to extend the past due Considering the GDP
India nearly $ 470 billion the NPA are 8 of the total GDP which was better than many Asian
countries The NPA of china was 45 of the GDP While Japan had NPAs of 25 of the GDP
The aggregate level of NPAs in Asia has increased from $ 25 billion in 2007 to
$ 34 billion on 2009 looking to such overall pictures of the market we can say that India is doing
well and the steps taken are looking favorable
Source googlecoin
DATA ANALYZING THE QUETIONNAIRE
Two set of questionnaire were prepared to collect the feedback One set of questionnaire was meant for branches and other set of questionnaire was meant for borrowers
The set of questionnaire were given to the branches under hazaribag (RBO) and collected the feedback of the bankers of P segment and the branch manager
The questionnaire prepared for branch contained 15 questions and the questionnaire prepared for borrower contains 10 questions
The data was collected from 50 bankers and the data analysis of the branch questionnaire is as follows
Question number 1
Does not require any data analysis and information was sought to know the business level of the branches for the purpose of whether particular branch is actively engaged in xpress credit portfolio
Question number 2
Do you think that the borrowers are aware about NPA
Answer
32 of the respondent feel that the borrowers are not aware about NPA and 18 respondents feel that borrowers are aware about NPA
Chart no 11
yes
no
0
5
10
15
20
25
30
35
1832 Column1
Conclusion
Majority of the bank officials feels that the borrowers are not aware about NPA
Question number 3
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Answer
Out of 32 respondent 22 respondents is fully satisfied that lack of knowledge among the borrower regarding NPA is one of the reason for NPA 08 respondent were partially satisfied with it and 02 respondent were not satisfied with it
Chart no 12
fully satisfied(22)69
partially satisfied(8)25
not satisfied(2)6
Sales
Conclusion
Majority of the borrowers feels that lack of knowledge among the borrower regarding NPA is one of the reasons for NPA
Question number 4 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Answer
Out of 50 respondent 30 of the respondent strongly satisfied that these external factors contribute to NPA 10 respondent were partially satisfied with it 5 were not satisfied where as 5 were fully dissatisfied with it
Chart no 13
6020
10
10
fully satisfied(30) partially satisfied(10) not satisfiec(5) fully desatisfied(5)
Conclusion
Most of the respondent thinks that external factrs like willful defaulter change in govt policy contribute to NPA
Question number 5
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Answer
Chart no 14
feedback
fully satisfied(20)partially satisfied(12)not satisfied(12)fully dissatisfied(6)
Conclusion
As per the response of the officials most of the officials feel that internal factors are also responsible for NPA
Question number 6
Do you think that inflation is one of the reasons for NPA
Answer
Out f 50 responses 22 were strongly satisfied 18 were partially satisfied 8 were not satisfied and 2 were fully dissatisfied
Chart no 15
fully satisfied(20)44
partially satisfied(18)36
not satisfied(5)10
fullt dissatisfied(5)10
Conclusion
Growing inflation increasing goods rate is also one of the reason for NPA
Question number 7
Do you think that lack of PSS is also contributed to NPA
Answer
Out of 50 responses 30 were fully satisfied with it 12 were partially satisfied and 8 were fully dissatisfied
Chart no 16
6024
16
Open
fully satisfied(30)Partially satisfied(12)not satisfied(0)fully dissatisfied(8)
Conclusion
Majority of the officiais feels that lack of PSS is one of the reason for NPA This means that the PSS carried out by the bank is not sufficient or not carried out properly
Question number 8
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Answer
Most of the respondent feels that increase in unwanted expenses of the borrwer ls contribute to NPA
Chart no 17
56
12
28
4
FULLY SATISFIED(28)PARTIALLY SATISFIED(6)NOT SATISFIED(14)FULLY DISSATISFIED(2)
Conclusion
As per response of the officials increasing inflation have an adverse effect on the financial sector its working performance as well as on NPA
Question number 9
Do you think that high rate of interest under Xpress credit also contributes to NPA
Answer
Out of 50 respondent 25 respondent were not satisfied 10 were partially satisfied 10 were strongly dissatisfied where as only 5 out of 50 were fully satisfied with it
Chart no 18
strongly satisfied(5)partially satisfied(10)not satisfied(25)fully dissatisfied(10)
Conclusion
Most of the respondents are not satisfied with it They feel that the rate of interest charged by SBI under Xpress credit is not high and it will not contribute to NPS
Question number 10
Do you think that lack of proper planning of the borrower is one of the reason for NPA
Answer
Out of 70 respondent 35 were fully satisfied 5 were not satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 19
fully satisfied(35)70
partially satisfied(10)20
not satisfied(5)10
Conclusion
Most of the respondent feels that the borrowers borrow money from the bank without any proper planning which is one of the most important reason for NPA
Question number 11
Is heavy borrowing also contribute to NPA
Answer
Out of 50 respondent 25 respondent were fully satisfied 12 were partially satisfied 8 were not satisfied were as 5 were fully dissatisfied
Chart no 110
50
24
16
10
fully satisfied(25) partially satisfied(12) not satisfied(8) fully dissatisfied(5)
Question number 12
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Answer
As per the response of the officials 20 were fully satisfied 66were partially satisfied 4 were not satisfied with it were as 10 respondent were fully dissatisfied
Chart no 111
fully satisfied(10)20
partially satisfied(33)66
not satisfied(2)4
fullydissatisfied(5)10
Conclusion
As per the response given by the officials most of the officials were partially satisfied that wrong selection of borrower also contribute to NPA which means that selection process carried out by the bank is not appropriate or there is some difficulties in implementing them
Question number 13
Do you think that poor credit appraisal also contribute to NPA
Answer
Out of 50 respondent 5 were fully satisfied 10 were fully satisfied 30 were not satisfied were as only 5 were fully dissatisfied
Chart no 112
fully satisfied(5)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 14
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Answer
Out of 50 responses 3 were fully satisfied 15 were partially satisfied 25 were not satisfied where as 7 were full dissatisfied
Chart no 113
fully satisfied(3)partiallt satisfied(15)not satisfied(25)fully dissatisfied(7)
Conclusion
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not contribute to NPA This means that the attitude of bank toward the borrower is not inflexible
Question number 15
Do you think that system over load is also one of the causes of NPA
Answer
Out of 50 respondent 28 were fully satisfied 12 were partially satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 114
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Failure to bring in required capital
Lack of proper planning
Unwanted expenses
Lack of expertise
Poor credit collection
Miss management
Heavy borrowing
Lack of knowledge regarding NPA
Willful defaulters
Death of the borrower
Those attribute to banks
Wrong selection of borrower
Poor credit appraisal
Unhelpful in supervision
Too inflexible attitude
System overload
Lack of motivation
Delay in sanction
Lack of trained staff
Lack of commitment to recovery
Lack of personal visit to the borrower office
Lack of personal visit to the borrowerrsquos residence
Other
Fast changing technology
Unhelpful attitude of govt
Increase in material cost
Government policies
Taxation law
Political hostility
INDIAN ECONOMY AND NPA
Undoubtedly the world economy has slowed down recession is at its peak globally stock markets
have tumbled and business itself getting hard to do The Indian economy has been much affected due
to high fiscal deficit poor infrastructure facilities sticky legal system cutting of exposures to
emerging market by FIIs etc
Further international rating agencies like standard and poor
have lowered Indiarsquos credit rating to sub- investment grade Such negative aspects have often
outweighed positive such as increasing for reserve and a manageable inflation rate
Under such situation I go without saying that banks are no exception
and are bound to face the heat of global down turn One would be surprise to know that banks and
financial institution in India holds non-performing assets worth Rs 1 10000 crores Bankers have
realized that unless the level of NPA is reduced drastically they will find it difficult to survive
The actual level of NPA in India is around $ 40 billion much higher than govt estimation of $16
billion This difference is largely due to the discrepancy in accounting the NPAs followed by India
and rest of the world The accounting norms of India are less stringent than those of the developed
economies The Indian banks also have the tendency to extend the past due Considering the GDP
India nearly $ 470 billion the NPA are 8 of the total GDP which was better than many Asian
countries The NPA of china was 45 of the GDP While Japan had NPAs of 25 of the GDP
The aggregate level of NPAs in Asia has increased from $ 25 billion in 2007 to
$ 34 billion on 2009 looking to such overall pictures of the market we can say that India is doing
well and the steps taken are looking favorable
Source googlecoin
DATA ANALYZING THE QUETIONNAIRE
Two set of questionnaire were prepared to collect the feedback One set of questionnaire was meant for branches and other set of questionnaire was meant for borrowers
The set of questionnaire were given to the branches under hazaribag (RBO) and collected the feedback of the bankers of P segment and the branch manager
The questionnaire prepared for branch contained 15 questions and the questionnaire prepared for borrower contains 10 questions
The data was collected from 50 bankers and the data analysis of the branch questionnaire is as follows
Question number 1
Does not require any data analysis and information was sought to know the business level of the branches for the purpose of whether particular branch is actively engaged in xpress credit portfolio
Question number 2
Do you think that the borrowers are aware about NPA
Answer
32 of the respondent feel that the borrowers are not aware about NPA and 18 respondents feel that borrowers are aware about NPA
Chart no 11
yes
no
0
5
10
15
20
25
30
35
1832 Column1
Conclusion
Majority of the bank officials feels that the borrowers are not aware about NPA
Question number 3
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Answer
Out of 32 respondent 22 respondents is fully satisfied that lack of knowledge among the borrower regarding NPA is one of the reason for NPA 08 respondent were partially satisfied with it and 02 respondent were not satisfied with it
Chart no 12
fully satisfied(22)69
partially satisfied(8)25
not satisfied(2)6
Sales
Conclusion
Majority of the borrowers feels that lack of knowledge among the borrower regarding NPA is one of the reasons for NPA
Question number 4 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Answer
Out of 50 respondent 30 of the respondent strongly satisfied that these external factors contribute to NPA 10 respondent were partially satisfied with it 5 were not satisfied where as 5 were fully dissatisfied with it
Chart no 13
6020
10
10
fully satisfied(30) partially satisfied(10) not satisfiec(5) fully desatisfied(5)
Conclusion
Most of the respondent thinks that external factrs like willful defaulter change in govt policy contribute to NPA
Question number 5
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Answer
Chart no 14
feedback
fully satisfied(20)partially satisfied(12)not satisfied(12)fully dissatisfied(6)
Conclusion
As per the response of the officials most of the officials feel that internal factors are also responsible for NPA
Question number 6
Do you think that inflation is one of the reasons for NPA
Answer
Out f 50 responses 22 were strongly satisfied 18 were partially satisfied 8 were not satisfied and 2 were fully dissatisfied
Chart no 15
fully satisfied(20)44
partially satisfied(18)36
not satisfied(5)10
fullt dissatisfied(5)10
Conclusion
Growing inflation increasing goods rate is also one of the reason for NPA
Question number 7
Do you think that lack of PSS is also contributed to NPA
Answer
Out of 50 responses 30 were fully satisfied with it 12 were partially satisfied and 8 were fully dissatisfied
Chart no 16
6024
16
Open
fully satisfied(30)Partially satisfied(12)not satisfied(0)fully dissatisfied(8)
Conclusion
Majority of the officiais feels that lack of PSS is one of the reason for NPA This means that the PSS carried out by the bank is not sufficient or not carried out properly
Question number 8
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Answer
Most of the respondent feels that increase in unwanted expenses of the borrwer ls contribute to NPA
Chart no 17
56
12
28
4
FULLY SATISFIED(28)PARTIALLY SATISFIED(6)NOT SATISFIED(14)FULLY DISSATISFIED(2)
Conclusion
As per response of the officials increasing inflation have an adverse effect on the financial sector its working performance as well as on NPA
Question number 9
Do you think that high rate of interest under Xpress credit also contributes to NPA
Answer
Out of 50 respondent 25 respondent were not satisfied 10 were partially satisfied 10 were strongly dissatisfied where as only 5 out of 50 were fully satisfied with it
Chart no 18
strongly satisfied(5)partially satisfied(10)not satisfied(25)fully dissatisfied(10)
Conclusion
Most of the respondents are not satisfied with it They feel that the rate of interest charged by SBI under Xpress credit is not high and it will not contribute to NPS
Question number 10
Do you think that lack of proper planning of the borrower is one of the reason for NPA
Answer
Out of 70 respondent 35 were fully satisfied 5 were not satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 19
fully satisfied(35)70
partially satisfied(10)20
not satisfied(5)10
Conclusion
Most of the respondent feels that the borrowers borrow money from the bank without any proper planning which is one of the most important reason for NPA
Question number 11
Is heavy borrowing also contribute to NPA
Answer
Out of 50 respondent 25 respondent were fully satisfied 12 were partially satisfied 8 were not satisfied were as 5 were fully dissatisfied
Chart no 110
50
24
16
10
fully satisfied(25) partially satisfied(12) not satisfied(8) fully dissatisfied(5)
Question number 12
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Answer
As per the response of the officials 20 were fully satisfied 66were partially satisfied 4 were not satisfied with it were as 10 respondent were fully dissatisfied
Chart no 111
fully satisfied(10)20
partially satisfied(33)66
not satisfied(2)4
fullydissatisfied(5)10
Conclusion
As per the response given by the officials most of the officials were partially satisfied that wrong selection of borrower also contribute to NPA which means that selection process carried out by the bank is not appropriate or there is some difficulties in implementing them
Question number 13
Do you think that poor credit appraisal also contribute to NPA
Answer
Out of 50 respondent 5 were fully satisfied 10 were fully satisfied 30 were not satisfied were as only 5 were fully dissatisfied
Chart no 112
fully satisfied(5)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 14
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Answer
Out of 50 responses 3 were fully satisfied 15 were partially satisfied 25 were not satisfied where as 7 were full dissatisfied
Chart no 113
fully satisfied(3)partiallt satisfied(15)not satisfied(25)fully dissatisfied(7)
Conclusion
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not contribute to NPA This means that the attitude of bank toward the borrower is not inflexible
Question number 15
Do you think that system over load is also one of the causes of NPA
Answer
Out of 50 respondent 28 were fully satisfied 12 were partially satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 114
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Political hostility
INDIAN ECONOMY AND NPA
Undoubtedly the world economy has slowed down recession is at its peak globally stock markets
have tumbled and business itself getting hard to do The Indian economy has been much affected due
to high fiscal deficit poor infrastructure facilities sticky legal system cutting of exposures to
emerging market by FIIs etc
Further international rating agencies like standard and poor
have lowered Indiarsquos credit rating to sub- investment grade Such negative aspects have often
outweighed positive such as increasing for reserve and a manageable inflation rate
Under such situation I go without saying that banks are no exception
and are bound to face the heat of global down turn One would be surprise to know that banks and
financial institution in India holds non-performing assets worth Rs 1 10000 crores Bankers have
realized that unless the level of NPA is reduced drastically they will find it difficult to survive
The actual level of NPA in India is around $ 40 billion much higher than govt estimation of $16
billion This difference is largely due to the discrepancy in accounting the NPAs followed by India
and rest of the world The accounting norms of India are less stringent than those of the developed
economies The Indian banks also have the tendency to extend the past due Considering the GDP
India nearly $ 470 billion the NPA are 8 of the total GDP which was better than many Asian
countries The NPA of china was 45 of the GDP While Japan had NPAs of 25 of the GDP
The aggregate level of NPAs in Asia has increased from $ 25 billion in 2007 to
$ 34 billion on 2009 looking to such overall pictures of the market we can say that India is doing
well and the steps taken are looking favorable
Source googlecoin
DATA ANALYZING THE QUETIONNAIRE
Two set of questionnaire were prepared to collect the feedback One set of questionnaire was meant for branches and other set of questionnaire was meant for borrowers
The set of questionnaire were given to the branches under hazaribag (RBO) and collected the feedback of the bankers of P segment and the branch manager
The questionnaire prepared for branch contained 15 questions and the questionnaire prepared for borrower contains 10 questions
The data was collected from 50 bankers and the data analysis of the branch questionnaire is as follows
Question number 1
Does not require any data analysis and information was sought to know the business level of the branches for the purpose of whether particular branch is actively engaged in xpress credit portfolio
Question number 2
Do you think that the borrowers are aware about NPA
Answer
32 of the respondent feel that the borrowers are not aware about NPA and 18 respondents feel that borrowers are aware about NPA
Chart no 11
yes
no
0
5
10
15
20
25
30
35
1832 Column1
Conclusion
Majority of the bank officials feels that the borrowers are not aware about NPA
Question number 3
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Answer
Out of 32 respondent 22 respondents is fully satisfied that lack of knowledge among the borrower regarding NPA is one of the reason for NPA 08 respondent were partially satisfied with it and 02 respondent were not satisfied with it
Chart no 12
fully satisfied(22)69
partially satisfied(8)25
not satisfied(2)6
Sales
Conclusion
Majority of the borrowers feels that lack of knowledge among the borrower regarding NPA is one of the reasons for NPA
Question number 4 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Answer
Out of 50 respondent 30 of the respondent strongly satisfied that these external factors contribute to NPA 10 respondent were partially satisfied with it 5 were not satisfied where as 5 were fully dissatisfied with it
Chart no 13
6020
10
10
fully satisfied(30) partially satisfied(10) not satisfiec(5) fully desatisfied(5)
Conclusion
Most of the respondent thinks that external factrs like willful defaulter change in govt policy contribute to NPA
Question number 5
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Answer
Chart no 14
feedback
fully satisfied(20)partially satisfied(12)not satisfied(12)fully dissatisfied(6)
Conclusion
As per the response of the officials most of the officials feel that internal factors are also responsible for NPA
Question number 6
Do you think that inflation is one of the reasons for NPA
Answer
Out f 50 responses 22 were strongly satisfied 18 were partially satisfied 8 were not satisfied and 2 were fully dissatisfied
Chart no 15
fully satisfied(20)44
partially satisfied(18)36
not satisfied(5)10
fullt dissatisfied(5)10
Conclusion
Growing inflation increasing goods rate is also one of the reason for NPA
Question number 7
Do you think that lack of PSS is also contributed to NPA
Answer
Out of 50 responses 30 were fully satisfied with it 12 were partially satisfied and 8 were fully dissatisfied
Chart no 16
6024
16
Open
fully satisfied(30)Partially satisfied(12)not satisfied(0)fully dissatisfied(8)
Conclusion
Majority of the officiais feels that lack of PSS is one of the reason for NPA This means that the PSS carried out by the bank is not sufficient or not carried out properly
Question number 8
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Answer
Most of the respondent feels that increase in unwanted expenses of the borrwer ls contribute to NPA
Chart no 17
56
12
28
4
FULLY SATISFIED(28)PARTIALLY SATISFIED(6)NOT SATISFIED(14)FULLY DISSATISFIED(2)
Conclusion
As per response of the officials increasing inflation have an adverse effect on the financial sector its working performance as well as on NPA
Question number 9
Do you think that high rate of interest under Xpress credit also contributes to NPA
Answer
Out of 50 respondent 25 respondent were not satisfied 10 were partially satisfied 10 were strongly dissatisfied where as only 5 out of 50 were fully satisfied with it
Chart no 18
strongly satisfied(5)partially satisfied(10)not satisfied(25)fully dissatisfied(10)
Conclusion
Most of the respondents are not satisfied with it They feel that the rate of interest charged by SBI under Xpress credit is not high and it will not contribute to NPS
Question number 10
Do you think that lack of proper planning of the borrower is one of the reason for NPA
Answer
Out of 70 respondent 35 were fully satisfied 5 were not satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 19
fully satisfied(35)70
partially satisfied(10)20
not satisfied(5)10
Conclusion
Most of the respondent feels that the borrowers borrow money from the bank without any proper planning which is one of the most important reason for NPA
Question number 11
Is heavy borrowing also contribute to NPA
Answer
Out of 50 respondent 25 respondent were fully satisfied 12 were partially satisfied 8 were not satisfied were as 5 were fully dissatisfied
Chart no 110
50
24
16
10
fully satisfied(25) partially satisfied(12) not satisfied(8) fully dissatisfied(5)
Question number 12
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Answer
As per the response of the officials 20 were fully satisfied 66were partially satisfied 4 were not satisfied with it were as 10 respondent were fully dissatisfied
Chart no 111
fully satisfied(10)20
partially satisfied(33)66
not satisfied(2)4
fullydissatisfied(5)10
Conclusion
As per the response given by the officials most of the officials were partially satisfied that wrong selection of borrower also contribute to NPA which means that selection process carried out by the bank is not appropriate or there is some difficulties in implementing them
Question number 13
Do you think that poor credit appraisal also contribute to NPA
Answer
Out of 50 respondent 5 were fully satisfied 10 were fully satisfied 30 were not satisfied were as only 5 were fully dissatisfied
Chart no 112
fully satisfied(5)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 14
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Answer
Out of 50 responses 3 were fully satisfied 15 were partially satisfied 25 were not satisfied where as 7 were full dissatisfied
Chart no 113
fully satisfied(3)partiallt satisfied(15)not satisfied(25)fully dissatisfied(7)
Conclusion
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not contribute to NPA This means that the attitude of bank toward the borrower is not inflexible
Question number 15
Do you think that system over load is also one of the causes of NPA
Answer
Out of 50 respondent 28 were fully satisfied 12 were partially satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 114
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
INDIAN ECONOMY AND NPA
Undoubtedly the world economy has slowed down recession is at its peak globally stock markets
have tumbled and business itself getting hard to do The Indian economy has been much affected due
to high fiscal deficit poor infrastructure facilities sticky legal system cutting of exposures to
emerging market by FIIs etc
Further international rating agencies like standard and poor
have lowered Indiarsquos credit rating to sub- investment grade Such negative aspects have often
outweighed positive such as increasing for reserve and a manageable inflation rate
Under such situation I go without saying that banks are no exception
and are bound to face the heat of global down turn One would be surprise to know that banks and
financial institution in India holds non-performing assets worth Rs 1 10000 crores Bankers have
realized that unless the level of NPA is reduced drastically they will find it difficult to survive
The actual level of NPA in India is around $ 40 billion much higher than govt estimation of $16
billion This difference is largely due to the discrepancy in accounting the NPAs followed by India
and rest of the world The accounting norms of India are less stringent than those of the developed
economies The Indian banks also have the tendency to extend the past due Considering the GDP
India nearly $ 470 billion the NPA are 8 of the total GDP which was better than many Asian
countries The NPA of china was 45 of the GDP While Japan had NPAs of 25 of the GDP
The aggregate level of NPAs in Asia has increased from $ 25 billion in 2007 to
$ 34 billion on 2009 looking to such overall pictures of the market we can say that India is doing
well and the steps taken are looking favorable
Source googlecoin
DATA ANALYZING THE QUETIONNAIRE
Two set of questionnaire were prepared to collect the feedback One set of questionnaire was meant for branches and other set of questionnaire was meant for borrowers
The set of questionnaire were given to the branches under hazaribag (RBO) and collected the feedback of the bankers of P segment and the branch manager
The questionnaire prepared for branch contained 15 questions and the questionnaire prepared for borrower contains 10 questions
The data was collected from 50 bankers and the data analysis of the branch questionnaire is as follows
Question number 1
Does not require any data analysis and information was sought to know the business level of the branches for the purpose of whether particular branch is actively engaged in xpress credit portfolio
Question number 2
Do you think that the borrowers are aware about NPA
Answer
32 of the respondent feel that the borrowers are not aware about NPA and 18 respondents feel that borrowers are aware about NPA
Chart no 11
yes
no
0
5
10
15
20
25
30
35
1832 Column1
Conclusion
Majority of the bank officials feels that the borrowers are not aware about NPA
Question number 3
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Answer
Out of 32 respondent 22 respondents is fully satisfied that lack of knowledge among the borrower regarding NPA is one of the reason for NPA 08 respondent were partially satisfied with it and 02 respondent were not satisfied with it
Chart no 12
fully satisfied(22)69
partially satisfied(8)25
not satisfied(2)6
Sales
Conclusion
Majority of the borrowers feels that lack of knowledge among the borrower regarding NPA is one of the reasons for NPA
Question number 4 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Answer
Out of 50 respondent 30 of the respondent strongly satisfied that these external factors contribute to NPA 10 respondent were partially satisfied with it 5 were not satisfied where as 5 were fully dissatisfied with it
Chart no 13
6020
10
10
fully satisfied(30) partially satisfied(10) not satisfiec(5) fully desatisfied(5)
Conclusion
Most of the respondent thinks that external factrs like willful defaulter change in govt policy contribute to NPA
Question number 5
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Answer
Chart no 14
feedback
fully satisfied(20)partially satisfied(12)not satisfied(12)fully dissatisfied(6)
Conclusion
As per the response of the officials most of the officials feel that internal factors are also responsible for NPA
Question number 6
Do you think that inflation is one of the reasons for NPA
Answer
Out f 50 responses 22 were strongly satisfied 18 were partially satisfied 8 were not satisfied and 2 were fully dissatisfied
Chart no 15
fully satisfied(20)44
partially satisfied(18)36
not satisfied(5)10
fullt dissatisfied(5)10
Conclusion
Growing inflation increasing goods rate is also one of the reason for NPA
Question number 7
Do you think that lack of PSS is also contributed to NPA
Answer
Out of 50 responses 30 were fully satisfied with it 12 were partially satisfied and 8 were fully dissatisfied
Chart no 16
6024
16
Open
fully satisfied(30)Partially satisfied(12)not satisfied(0)fully dissatisfied(8)
Conclusion
Majority of the officiais feels that lack of PSS is one of the reason for NPA This means that the PSS carried out by the bank is not sufficient or not carried out properly
Question number 8
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Answer
Most of the respondent feels that increase in unwanted expenses of the borrwer ls contribute to NPA
Chart no 17
56
12
28
4
FULLY SATISFIED(28)PARTIALLY SATISFIED(6)NOT SATISFIED(14)FULLY DISSATISFIED(2)
Conclusion
As per response of the officials increasing inflation have an adverse effect on the financial sector its working performance as well as on NPA
Question number 9
Do you think that high rate of interest under Xpress credit also contributes to NPA
Answer
Out of 50 respondent 25 respondent were not satisfied 10 were partially satisfied 10 were strongly dissatisfied where as only 5 out of 50 were fully satisfied with it
Chart no 18
strongly satisfied(5)partially satisfied(10)not satisfied(25)fully dissatisfied(10)
Conclusion
Most of the respondents are not satisfied with it They feel that the rate of interest charged by SBI under Xpress credit is not high and it will not contribute to NPS
Question number 10
Do you think that lack of proper planning of the borrower is one of the reason for NPA
Answer
Out of 70 respondent 35 were fully satisfied 5 were not satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 19
fully satisfied(35)70
partially satisfied(10)20
not satisfied(5)10
Conclusion
Most of the respondent feels that the borrowers borrow money from the bank without any proper planning which is one of the most important reason for NPA
Question number 11
Is heavy borrowing also contribute to NPA
Answer
Out of 50 respondent 25 respondent were fully satisfied 12 were partially satisfied 8 were not satisfied were as 5 were fully dissatisfied
Chart no 110
50
24
16
10
fully satisfied(25) partially satisfied(12) not satisfied(8) fully dissatisfied(5)
Question number 12
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Answer
As per the response of the officials 20 were fully satisfied 66were partially satisfied 4 were not satisfied with it were as 10 respondent were fully dissatisfied
Chart no 111
fully satisfied(10)20
partially satisfied(33)66
not satisfied(2)4
fullydissatisfied(5)10
Conclusion
As per the response given by the officials most of the officials were partially satisfied that wrong selection of borrower also contribute to NPA which means that selection process carried out by the bank is not appropriate or there is some difficulties in implementing them
Question number 13
Do you think that poor credit appraisal also contribute to NPA
Answer
Out of 50 respondent 5 were fully satisfied 10 were fully satisfied 30 were not satisfied were as only 5 were fully dissatisfied
Chart no 112
fully satisfied(5)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 14
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Answer
Out of 50 responses 3 were fully satisfied 15 were partially satisfied 25 were not satisfied where as 7 were full dissatisfied
Chart no 113
fully satisfied(3)partiallt satisfied(15)not satisfied(25)fully dissatisfied(7)
Conclusion
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not contribute to NPA This means that the attitude of bank toward the borrower is not inflexible
Question number 15
Do you think that system over load is also one of the causes of NPA
Answer
Out of 50 respondent 28 were fully satisfied 12 were partially satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 114
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
DATA ANALYZING THE QUETIONNAIRE
Two set of questionnaire were prepared to collect the feedback One set of questionnaire was meant for branches and other set of questionnaire was meant for borrowers
The set of questionnaire were given to the branches under hazaribag (RBO) and collected the feedback of the bankers of P segment and the branch manager
The questionnaire prepared for branch contained 15 questions and the questionnaire prepared for borrower contains 10 questions
The data was collected from 50 bankers and the data analysis of the branch questionnaire is as follows
Question number 1
Does not require any data analysis and information was sought to know the business level of the branches for the purpose of whether particular branch is actively engaged in xpress credit portfolio
Question number 2
Do you think that the borrowers are aware about NPA
Answer
32 of the respondent feel that the borrowers are not aware about NPA and 18 respondents feel that borrowers are aware about NPA
Chart no 11
yes
no
0
5
10
15
20
25
30
35
1832 Column1
Conclusion
Majority of the bank officials feels that the borrowers are not aware about NPA
Question number 3
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Answer
Out of 32 respondent 22 respondents is fully satisfied that lack of knowledge among the borrower regarding NPA is one of the reason for NPA 08 respondent were partially satisfied with it and 02 respondent were not satisfied with it
Chart no 12
fully satisfied(22)69
partially satisfied(8)25
not satisfied(2)6
Sales
Conclusion
Majority of the borrowers feels that lack of knowledge among the borrower regarding NPA is one of the reasons for NPA
Question number 4 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Answer
Out of 50 respondent 30 of the respondent strongly satisfied that these external factors contribute to NPA 10 respondent were partially satisfied with it 5 were not satisfied where as 5 were fully dissatisfied with it
Chart no 13
6020
10
10
fully satisfied(30) partially satisfied(10) not satisfiec(5) fully desatisfied(5)
Conclusion
Most of the respondent thinks that external factrs like willful defaulter change in govt policy contribute to NPA
Question number 5
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Answer
Chart no 14
feedback
fully satisfied(20)partially satisfied(12)not satisfied(12)fully dissatisfied(6)
Conclusion
As per the response of the officials most of the officials feel that internal factors are also responsible for NPA
Question number 6
Do you think that inflation is one of the reasons for NPA
Answer
Out f 50 responses 22 were strongly satisfied 18 were partially satisfied 8 were not satisfied and 2 were fully dissatisfied
Chart no 15
fully satisfied(20)44
partially satisfied(18)36
not satisfied(5)10
fullt dissatisfied(5)10
Conclusion
Growing inflation increasing goods rate is also one of the reason for NPA
Question number 7
Do you think that lack of PSS is also contributed to NPA
Answer
Out of 50 responses 30 were fully satisfied with it 12 were partially satisfied and 8 were fully dissatisfied
Chart no 16
6024
16
Open
fully satisfied(30)Partially satisfied(12)not satisfied(0)fully dissatisfied(8)
Conclusion
Majority of the officiais feels that lack of PSS is one of the reason for NPA This means that the PSS carried out by the bank is not sufficient or not carried out properly
Question number 8
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Answer
Most of the respondent feels that increase in unwanted expenses of the borrwer ls contribute to NPA
Chart no 17
56
12
28
4
FULLY SATISFIED(28)PARTIALLY SATISFIED(6)NOT SATISFIED(14)FULLY DISSATISFIED(2)
Conclusion
As per response of the officials increasing inflation have an adverse effect on the financial sector its working performance as well as on NPA
Question number 9
Do you think that high rate of interest under Xpress credit also contributes to NPA
Answer
Out of 50 respondent 25 respondent were not satisfied 10 were partially satisfied 10 were strongly dissatisfied where as only 5 out of 50 were fully satisfied with it
Chart no 18
strongly satisfied(5)partially satisfied(10)not satisfied(25)fully dissatisfied(10)
Conclusion
Most of the respondents are not satisfied with it They feel that the rate of interest charged by SBI under Xpress credit is not high and it will not contribute to NPS
Question number 10
Do you think that lack of proper planning of the borrower is one of the reason for NPA
Answer
Out of 70 respondent 35 were fully satisfied 5 were not satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 19
fully satisfied(35)70
partially satisfied(10)20
not satisfied(5)10
Conclusion
Most of the respondent feels that the borrowers borrow money from the bank without any proper planning which is one of the most important reason for NPA
Question number 11
Is heavy borrowing also contribute to NPA
Answer
Out of 50 respondent 25 respondent were fully satisfied 12 were partially satisfied 8 were not satisfied were as 5 were fully dissatisfied
Chart no 110
50
24
16
10
fully satisfied(25) partially satisfied(12) not satisfied(8) fully dissatisfied(5)
Question number 12
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Answer
As per the response of the officials 20 were fully satisfied 66were partially satisfied 4 were not satisfied with it were as 10 respondent were fully dissatisfied
Chart no 111
fully satisfied(10)20
partially satisfied(33)66
not satisfied(2)4
fullydissatisfied(5)10
Conclusion
As per the response given by the officials most of the officials were partially satisfied that wrong selection of borrower also contribute to NPA which means that selection process carried out by the bank is not appropriate or there is some difficulties in implementing them
Question number 13
Do you think that poor credit appraisal also contribute to NPA
Answer
Out of 50 respondent 5 were fully satisfied 10 were fully satisfied 30 were not satisfied were as only 5 were fully dissatisfied
Chart no 112
fully satisfied(5)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 14
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Answer
Out of 50 responses 3 were fully satisfied 15 were partially satisfied 25 were not satisfied where as 7 were full dissatisfied
Chart no 113
fully satisfied(3)partiallt satisfied(15)not satisfied(25)fully dissatisfied(7)
Conclusion
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not contribute to NPA This means that the attitude of bank toward the borrower is not inflexible
Question number 15
Do you think that system over load is also one of the causes of NPA
Answer
Out of 50 respondent 28 were fully satisfied 12 were partially satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 114
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Two set of questionnaire were prepared to collect the feedback One set of questionnaire was meant for branches and other set of questionnaire was meant for borrowers
The set of questionnaire were given to the branches under hazaribag (RBO) and collected the feedback of the bankers of P segment and the branch manager
The questionnaire prepared for branch contained 15 questions and the questionnaire prepared for borrower contains 10 questions
The data was collected from 50 bankers and the data analysis of the branch questionnaire is as follows
Question number 1
Does not require any data analysis and information was sought to know the business level of the branches for the purpose of whether particular branch is actively engaged in xpress credit portfolio
Question number 2
Do you think that the borrowers are aware about NPA
Answer
32 of the respondent feel that the borrowers are not aware about NPA and 18 respondents feel that borrowers are aware about NPA
Chart no 11
yes
no
0
5
10
15
20
25
30
35
1832 Column1
Conclusion
Majority of the bank officials feels that the borrowers are not aware about NPA
Question number 3
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Answer
Out of 32 respondent 22 respondents is fully satisfied that lack of knowledge among the borrower regarding NPA is one of the reason for NPA 08 respondent were partially satisfied with it and 02 respondent were not satisfied with it
Chart no 12
fully satisfied(22)69
partially satisfied(8)25
not satisfied(2)6
Sales
Conclusion
Majority of the borrowers feels that lack of knowledge among the borrower regarding NPA is one of the reasons for NPA
Question number 4 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Answer
Out of 50 respondent 30 of the respondent strongly satisfied that these external factors contribute to NPA 10 respondent were partially satisfied with it 5 were not satisfied where as 5 were fully dissatisfied with it
Chart no 13
6020
10
10
fully satisfied(30) partially satisfied(10) not satisfiec(5) fully desatisfied(5)
Conclusion
Most of the respondent thinks that external factrs like willful defaulter change in govt policy contribute to NPA
Question number 5
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Answer
Chart no 14
feedback
fully satisfied(20)partially satisfied(12)not satisfied(12)fully dissatisfied(6)
Conclusion
As per the response of the officials most of the officials feel that internal factors are also responsible for NPA
Question number 6
Do you think that inflation is one of the reasons for NPA
Answer
Out f 50 responses 22 were strongly satisfied 18 were partially satisfied 8 were not satisfied and 2 were fully dissatisfied
Chart no 15
fully satisfied(20)44
partially satisfied(18)36
not satisfied(5)10
fullt dissatisfied(5)10
Conclusion
Growing inflation increasing goods rate is also one of the reason for NPA
Question number 7
Do you think that lack of PSS is also contributed to NPA
Answer
Out of 50 responses 30 were fully satisfied with it 12 were partially satisfied and 8 were fully dissatisfied
Chart no 16
6024
16
Open
fully satisfied(30)Partially satisfied(12)not satisfied(0)fully dissatisfied(8)
Conclusion
Majority of the officiais feels that lack of PSS is one of the reason for NPA This means that the PSS carried out by the bank is not sufficient or not carried out properly
Question number 8
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Answer
Most of the respondent feels that increase in unwanted expenses of the borrwer ls contribute to NPA
Chart no 17
56
12
28
4
FULLY SATISFIED(28)PARTIALLY SATISFIED(6)NOT SATISFIED(14)FULLY DISSATISFIED(2)
Conclusion
As per response of the officials increasing inflation have an adverse effect on the financial sector its working performance as well as on NPA
Question number 9
Do you think that high rate of interest under Xpress credit also contributes to NPA
Answer
Out of 50 respondent 25 respondent were not satisfied 10 were partially satisfied 10 were strongly dissatisfied where as only 5 out of 50 were fully satisfied with it
Chart no 18
strongly satisfied(5)partially satisfied(10)not satisfied(25)fully dissatisfied(10)
Conclusion
Most of the respondents are not satisfied with it They feel that the rate of interest charged by SBI under Xpress credit is not high and it will not contribute to NPS
Question number 10
Do you think that lack of proper planning of the borrower is one of the reason for NPA
Answer
Out of 70 respondent 35 were fully satisfied 5 were not satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 19
fully satisfied(35)70
partially satisfied(10)20
not satisfied(5)10
Conclusion
Most of the respondent feels that the borrowers borrow money from the bank without any proper planning which is one of the most important reason for NPA
Question number 11
Is heavy borrowing also contribute to NPA
Answer
Out of 50 respondent 25 respondent were fully satisfied 12 were partially satisfied 8 were not satisfied were as 5 were fully dissatisfied
Chart no 110
50
24
16
10
fully satisfied(25) partially satisfied(12) not satisfied(8) fully dissatisfied(5)
Question number 12
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Answer
As per the response of the officials 20 were fully satisfied 66were partially satisfied 4 were not satisfied with it were as 10 respondent were fully dissatisfied
Chart no 111
fully satisfied(10)20
partially satisfied(33)66
not satisfied(2)4
fullydissatisfied(5)10
Conclusion
As per the response given by the officials most of the officials were partially satisfied that wrong selection of borrower also contribute to NPA which means that selection process carried out by the bank is not appropriate or there is some difficulties in implementing them
Question number 13
Do you think that poor credit appraisal also contribute to NPA
Answer
Out of 50 respondent 5 were fully satisfied 10 were fully satisfied 30 were not satisfied were as only 5 were fully dissatisfied
Chart no 112
fully satisfied(5)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 14
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Answer
Out of 50 responses 3 were fully satisfied 15 were partially satisfied 25 were not satisfied where as 7 were full dissatisfied
Chart no 113
fully satisfied(3)partiallt satisfied(15)not satisfied(25)fully dissatisfied(7)
Conclusion
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not contribute to NPA This means that the attitude of bank toward the borrower is not inflexible
Question number 15
Do you think that system over load is also one of the causes of NPA
Answer
Out of 50 respondent 28 were fully satisfied 12 were partially satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 114
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
yes
no
0
5
10
15
20
25
30
35
1832 Column1
Conclusion
Majority of the bank officials feels that the borrowers are not aware about NPA
Question number 3
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Answer
Out of 32 respondent 22 respondents is fully satisfied that lack of knowledge among the borrower regarding NPA is one of the reason for NPA 08 respondent were partially satisfied with it and 02 respondent were not satisfied with it
Chart no 12
fully satisfied(22)69
partially satisfied(8)25
not satisfied(2)6
Sales
Conclusion
Majority of the borrowers feels that lack of knowledge among the borrower regarding NPA is one of the reasons for NPA
Question number 4 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Answer
Out of 50 respondent 30 of the respondent strongly satisfied that these external factors contribute to NPA 10 respondent were partially satisfied with it 5 were not satisfied where as 5 were fully dissatisfied with it
Chart no 13
6020
10
10
fully satisfied(30) partially satisfied(10) not satisfiec(5) fully desatisfied(5)
Conclusion
Most of the respondent thinks that external factrs like willful defaulter change in govt policy contribute to NPA
Question number 5
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Answer
Chart no 14
feedback
fully satisfied(20)partially satisfied(12)not satisfied(12)fully dissatisfied(6)
Conclusion
As per the response of the officials most of the officials feel that internal factors are also responsible for NPA
Question number 6
Do you think that inflation is one of the reasons for NPA
Answer
Out f 50 responses 22 were strongly satisfied 18 were partially satisfied 8 were not satisfied and 2 were fully dissatisfied
Chart no 15
fully satisfied(20)44
partially satisfied(18)36
not satisfied(5)10
fullt dissatisfied(5)10
Conclusion
Growing inflation increasing goods rate is also one of the reason for NPA
Question number 7
Do you think that lack of PSS is also contributed to NPA
Answer
Out of 50 responses 30 were fully satisfied with it 12 were partially satisfied and 8 were fully dissatisfied
Chart no 16
6024
16
Open
fully satisfied(30)Partially satisfied(12)not satisfied(0)fully dissatisfied(8)
Conclusion
Majority of the officiais feels that lack of PSS is one of the reason for NPA This means that the PSS carried out by the bank is not sufficient or not carried out properly
Question number 8
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Answer
Most of the respondent feels that increase in unwanted expenses of the borrwer ls contribute to NPA
Chart no 17
56
12
28
4
FULLY SATISFIED(28)PARTIALLY SATISFIED(6)NOT SATISFIED(14)FULLY DISSATISFIED(2)
Conclusion
As per response of the officials increasing inflation have an adverse effect on the financial sector its working performance as well as on NPA
Question number 9
Do you think that high rate of interest under Xpress credit also contributes to NPA
Answer
Out of 50 respondent 25 respondent were not satisfied 10 were partially satisfied 10 were strongly dissatisfied where as only 5 out of 50 were fully satisfied with it
Chart no 18
strongly satisfied(5)partially satisfied(10)not satisfied(25)fully dissatisfied(10)
Conclusion
Most of the respondents are not satisfied with it They feel that the rate of interest charged by SBI under Xpress credit is not high and it will not contribute to NPS
Question number 10
Do you think that lack of proper planning of the borrower is one of the reason for NPA
Answer
Out of 70 respondent 35 were fully satisfied 5 were not satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 19
fully satisfied(35)70
partially satisfied(10)20
not satisfied(5)10
Conclusion
Most of the respondent feels that the borrowers borrow money from the bank without any proper planning which is one of the most important reason for NPA
Question number 11
Is heavy borrowing also contribute to NPA
Answer
Out of 50 respondent 25 respondent were fully satisfied 12 were partially satisfied 8 were not satisfied were as 5 were fully dissatisfied
Chart no 110
50
24
16
10
fully satisfied(25) partially satisfied(12) not satisfied(8) fully dissatisfied(5)
Question number 12
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Answer
As per the response of the officials 20 were fully satisfied 66were partially satisfied 4 were not satisfied with it were as 10 respondent were fully dissatisfied
Chart no 111
fully satisfied(10)20
partially satisfied(33)66
not satisfied(2)4
fullydissatisfied(5)10
Conclusion
As per the response given by the officials most of the officials were partially satisfied that wrong selection of borrower also contribute to NPA which means that selection process carried out by the bank is not appropriate or there is some difficulties in implementing them
Question number 13
Do you think that poor credit appraisal also contribute to NPA
Answer
Out of 50 respondent 5 were fully satisfied 10 were fully satisfied 30 were not satisfied were as only 5 were fully dissatisfied
Chart no 112
fully satisfied(5)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 14
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Answer
Out of 50 responses 3 were fully satisfied 15 were partially satisfied 25 were not satisfied where as 7 were full dissatisfied
Chart no 113
fully satisfied(3)partiallt satisfied(15)not satisfied(25)fully dissatisfied(7)
Conclusion
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not contribute to NPA This means that the attitude of bank toward the borrower is not inflexible
Question number 15
Do you think that system over load is also one of the causes of NPA
Answer
Out of 50 respondent 28 were fully satisfied 12 were partially satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 114
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
fully satisfied(22)69
partially satisfied(8)25
not satisfied(2)6
Sales
Conclusion
Majority of the borrowers feels that lack of knowledge among the borrower regarding NPA is one of the reasons for NPA
Question number 4 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Answer
Out of 50 respondent 30 of the respondent strongly satisfied that these external factors contribute to NPA 10 respondent were partially satisfied with it 5 were not satisfied where as 5 were fully dissatisfied with it
Chart no 13
6020
10
10
fully satisfied(30) partially satisfied(10) not satisfiec(5) fully desatisfied(5)
Conclusion
Most of the respondent thinks that external factrs like willful defaulter change in govt policy contribute to NPA
Question number 5
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Answer
Chart no 14
feedback
fully satisfied(20)partially satisfied(12)not satisfied(12)fully dissatisfied(6)
Conclusion
As per the response of the officials most of the officials feel that internal factors are also responsible for NPA
Question number 6
Do you think that inflation is one of the reasons for NPA
Answer
Out f 50 responses 22 were strongly satisfied 18 were partially satisfied 8 were not satisfied and 2 were fully dissatisfied
Chart no 15
fully satisfied(20)44
partially satisfied(18)36
not satisfied(5)10
fullt dissatisfied(5)10
Conclusion
Growing inflation increasing goods rate is also one of the reason for NPA
Question number 7
Do you think that lack of PSS is also contributed to NPA
Answer
Out of 50 responses 30 were fully satisfied with it 12 were partially satisfied and 8 were fully dissatisfied
Chart no 16
6024
16
Open
fully satisfied(30)Partially satisfied(12)not satisfied(0)fully dissatisfied(8)
Conclusion
Majority of the officiais feels that lack of PSS is one of the reason for NPA This means that the PSS carried out by the bank is not sufficient or not carried out properly
Question number 8
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Answer
Most of the respondent feels that increase in unwanted expenses of the borrwer ls contribute to NPA
Chart no 17
56
12
28
4
FULLY SATISFIED(28)PARTIALLY SATISFIED(6)NOT SATISFIED(14)FULLY DISSATISFIED(2)
Conclusion
As per response of the officials increasing inflation have an adverse effect on the financial sector its working performance as well as on NPA
Question number 9
Do you think that high rate of interest under Xpress credit also contributes to NPA
Answer
Out of 50 respondent 25 respondent were not satisfied 10 were partially satisfied 10 were strongly dissatisfied where as only 5 out of 50 were fully satisfied with it
Chart no 18
strongly satisfied(5)partially satisfied(10)not satisfied(25)fully dissatisfied(10)
Conclusion
Most of the respondents are not satisfied with it They feel that the rate of interest charged by SBI under Xpress credit is not high and it will not contribute to NPS
Question number 10
Do you think that lack of proper planning of the borrower is one of the reason for NPA
Answer
Out of 70 respondent 35 were fully satisfied 5 were not satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 19
fully satisfied(35)70
partially satisfied(10)20
not satisfied(5)10
Conclusion
Most of the respondent feels that the borrowers borrow money from the bank without any proper planning which is one of the most important reason for NPA
Question number 11
Is heavy borrowing also contribute to NPA
Answer
Out of 50 respondent 25 respondent were fully satisfied 12 were partially satisfied 8 were not satisfied were as 5 were fully dissatisfied
Chart no 110
50
24
16
10
fully satisfied(25) partially satisfied(12) not satisfied(8) fully dissatisfied(5)
Question number 12
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Answer
As per the response of the officials 20 were fully satisfied 66were partially satisfied 4 were not satisfied with it were as 10 respondent were fully dissatisfied
Chart no 111
fully satisfied(10)20
partially satisfied(33)66
not satisfied(2)4
fullydissatisfied(5)10
Conclusion
As per the response given by the officials most of the officials were partially satisfied that wrong selection of borrower also contribute to NPA which means that selection process carried out by the bank is not appropriate or there is some difficulties in implementing them
Question number 13
Do you think that poor credit appraisal also contribute to NPA
Answer
Out of 50 respondent 5 were fully satisfied 10 were fully satisfied 30 were not satisfied were as only 5 were fully dissatisfied
Chart no 112
fully satisfied(5)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 14
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Answer
Out of 50 responses 3 were fully satisfied 15 were partially satisfied 25 were not satisfied where as 7 were full dissatisfied
Chart no 113
fully satisfied(3)partiallt satisfied(15)not satisfied(25)fully dissatisfied(7)
Conclusion
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not contribute to NPA This means that the attitude of bank toward the borrower is not inflexible
Question number 15
Do you think that system over load is also one of the causes of NPA
Answer
Out of 50 respondent 28 were fully satisfied 12 were partially satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 114
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Chart no 13
6020
10
10
fully satisfied(30) partially satisfied(10) not satisfiec(5) fully desatisfied(5)
Conclusion
Most of the respondent thinks that external factrs like willful defaulter change in govt policy contribute to NPA
Question number 5
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Answer
Chart no 14
feedback
fully satisfied(20)partially satisfied(12)not satisfied(12)fully dissatisfied(6)
Conclusion
As per the response of the officials most of the officials feel that internal factors are also responsible for NPA
Question number 6
Do you think that inflation is one of the reasons for NPA
Answer
Out f 50 responses 22 were strongly satisfied 18 were partially satisfied 8 were not satisfied and 2 were fully dissatisfied
Chart no 15
fully satisfied(20)44
partially satisfied(18)36
not satisfied(5)10
fullt dissatisfied(5)10
Conclusion
Growing inflation increasing goods rate is also one of the reason for NPA
Question number 7
Do you think that lack of PSS is also contributed to NPA
Answer
Out of 50 responses 30 were fully satisfied with it 12 were partially satisfied and 8 were fully dissatisfied
Chart no 16
6024
16
Open
fully satisfied(30)Partially satisfied(12)not satisfied(0)fully dissatisfied(8)
Conclusion
Majority of the officiais feels that lack of PSS is one of the reason for NPA This means that the PSS carried out by the bank is not sufficient or not carried out properly
Question number 8
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Answer
Most of the respondent feels that increase in unwanted expenses of the borrwer ls contribute to NPA
Chart no 17
56
12
28
4
FULLY SATISFIED(28)PARTIALLY SATISFIED(6)NOT SATISFIED(14)FULLY DISSATISFIED(2)
Conclusion
As per response of the officials increasing inflation have an adverse effect on the financial sector its working performance as well as on NPA
Question number 9
Do you think that high rate of interest under Xpress credit also contributes to NPA
Answer
Out of 50 respondent 25 respondent were not satisfied 10 were partially satisfied 10 were strongly dissatisfied where as only 5 out of 50 were fully satisfied with it
Chart no 18
strongly satisfied(5)partially satisfied(10)not satisfied(25)fully dissatisfied(10)
Conclusion
Most of the respondents are not satisfied with it They feel that the rate of interest charged by SBI under Xpress credit is not high and it will not contribute to NPS
Question number 10
Do you think that lack of proper planning of the borrower is one of the reason for NPA
Answer
Out of 70 respondent 35 were fully satisfied 5 were not satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 19
fully satisfied(35)70
partially satisfied(10)20
not satisfied(5)10
Conclusion
Most of the respondent feels that the borrowers borrow money from the bank without any proper planning which is one of the most important reason for NPA
Question number 11
Is heavy borrowing also contribute to NPA
Answer
Out of 50 respondent 25 respondent were fully satisfied 12 were partially satisfied 8 were not satisfied were as 5 were fully dissatisfied
Chart no 110
50
24
16
10
fully satisfied(25) partially satisfied(12) not satisfied(8) fully dissatisfied(5)
Question number 12
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Answer
As per the response of the officials 20 were fully satisfied 66were partially satisfied 4 were not satisfied with it were as 10 respondent were fully dissatisfied
Chart no 111
fully satisfied(10)20
partially satisfied(33)66
not satisfied(2)4
fullydissatisfied(5)10
Conclusion
As per the response given by the officials most of the officials were partially satisfied that wrong selection of borrower also contribute to NPA which means that selection process carried out by the bank is not appropriate or there is some difficulties in implementing them
Question number 13
Do you think that poor credit appraisal also contribute to NPA
Answer
Out of 50 respondent 5 were fully satisfied 10 were fully satisfied 30 were not satisfied were as only 5 were fully dissatisfied
Chart no 112
fully satisfied(5)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 14
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Answer
Out of 50 responses 3 were fully satisfied 15 were partially satisfied 25 were not satisfied where as 7 were full dissatisfied
Chart no 113
fully satisfied(3)partiallt satisfied(15)not satisfied(25)fully dissatisfied(7)
Conclusion
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not contribute to NPA This means that the attitude of bank toward the borrower is not inflexible
Question number 15
Do you think that system over load is also one of the causes of NPA
Answer
Out of 50 respondent 28 were fully satisfied 12 were partially satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 114
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Chart no 14
feedback
fully satisfied(20)partially satisfied(12)not satisfied(12)fully dissatisfied(6)
Conclusion
As per the response of the officials most of the officials feel that internal factors are also responsible for NPA
Question number 6
Do you think that inflation is one of the reasons for NPA
Answer
Out f 50 responses 22 were strongly satisfied 18 were partially satisfied 8 were not satisfied and 2 were fully dissatisfied
Chart no 15
fully satisfied(20)44
partially satisfied(18)36
not satisfied(5)10
fullt dissatisfied(5)10
Conclusion
Growing inflation increasing goods rate is also one of the reason for NPA
Question number 7
Do you think that lack of PSS is also contributed to NPA
Answer
Out of 50 responses 30 were fully satisfied with it 12 were partially satisfied and 8 were fully dissatisfied
Chart no 16
6024
16
Open
fully satisfied(30)Partially satisfied(12)not satisfied(0)fully dissatisfied(8)
Conclusion
Majority of the officiais feels that lack of PSS is one of the reason for NPA This means that the PSS carried out by the bank is not sufficient or not carried out properly
Question number 8
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Answer
Most of the respondent feels that increase in unwanted expenses of the borrwer ls contribute to NPA
Chart no 17
56
12
28
4
FULLY SATISFIED(28)PARTIALLY SATISFIED(6)NOT SATISFIED(14)FULLY DISSATISFIED(2)
Conclusion
As per response of the officials increasing inflation have an adverse effect on the financial sector its working performance as well as on NPA
Question number 9
Do you think that high rate of interest under Xpress credit also contributes to NPA
Answer
Out of 50 respondent 25 respondent were not satisfied 10 were partially satisfied 10 were strongly dissatisfied where as only 5 out of 50 were fully satisfied with it
Chart no 18
strongly satisfied(5)partially satisfied(10)not satisfied(25)fully dissatisfied(10)
Conclusion
Most of the respondents are not satisfied with it They feel that the rate of interest charged by SBI under Xpress credit is not high and it will not contribute to NPS
Question number 10
Do you think that lack of proper planning of the borrower is one of the reason for NPA
Answer
Out of 70 respondent 35 were fully satisfied 5 were not satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 19
fully satisfied(35)70
partially satisfied(10)20
not satisfied(5)10
Conclusion
Most of the respondent feels that the borrowers borrow money from the bank without any proper planning which is one of the most important reason for NPA
Question number 11
Is heavy borrowing also contribute to NPA
Answer
Out of 50 respondent 25 respondent were fully satisfied 12 were partially satisfied 8 were not satisfied were as 5 were fully dissatisfied
Chart no 110
50
24
16
10
fully satisfied(25) partially satisfied(12) not satisfied(8) fully dissatisfied(5)
Question number 12
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Answer
As per the response of the officials 20 were fully satisfied 66were partially satisfied 4 were not satisfied with it were as 10 respondent were fully dissatisfied
Chart no 111
fully satisfied(10)20
partially satisfied(33)66
not satisfied(2)4
fullydissatisfied(5)10
Conclusion
As per the response given by the officials most of the officials were partially satisfied that wrong selection of borrower also contribute to NPA which means that selection process carried out by the bank is not appropriate or there is some difficulties in implementing them
Question number 13
Do you think that poor credit appraisal also contribute to NPA
Answer
Out of 50 respondent 5 were fully satisfied 10 were fully satisfied 30 were not satisfied were as only 5 were fully dissatisfied
Chart no 112
fully satisfied(5)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 14
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Answer
Out of 50 responses 3 were fully satisfied 15 were partially satisfied 25 were not satisfied where as 7 were full dissatisfied
Chart no 113
fully satisfied(3)partiallt satisfied(15)not satisfied(25)fully dissatisfied(7)
Conclusion
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not contribute to NPA This means that the attitude of bank toward the borrower is not inflexible
Question number 15
Do you think that system over load is also one of the causes of NPA
Answer
Out of 50 respondent 28 were fully satisfied 12 were partially satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 114
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
fully satisfied(20)44
partially satisfied(18)36
not satisfied(5)10
fullt dissatisfied(5)10
Conclusion
Growing inflation increasing goods rate is also one of the reason for NPA
Question number 7
Do you think that lack of PSS is also contributed to NPA
Answer
Out of 50 responses 30 were fully satisfied with it 12 were partially satisfied and 8 were fully dissatisfied
Chart no 16
6024
16
Open
fully satisfied(30)Partially satisfied(12)not satisfied(0)fully dissatisfied(8)
Conclusion
Majority of the officiais feels that lack of PSS is one of the reason for NPA This means that the PSS carried out by the bank is not sufficient or not carried out properly
Question number 8
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Answer
Most of the respondent feels that increase in unwanted expenses of the borrwer ls contribute to NPA
Chart no 17
56
12
28
4
FULLY SATISFIED(28)PARTIALLY SATISFIED(6)NOT SATISFIED(14)FULLY DISSATISFIED(2)
Conclusion
As per response of the officials increasing inflation have an adverse effect on the financial sector its working performance as well as on NPA
Question number 9
Do you think that high rate of interest under Xpress credit also contributes to NPA
Answer
Out of 50 respondent 25 respondent were not satisfied 10 were partially satisfied 10 were strongly dissatisfied where as only 5 out of 50 were fully satisfied with it
Chart no 18
strongly satisfied(5)partially satisfied(10)not satisfied(25)fully dissatisfied(10)
Conclusion
Most of the respondents are not satisfied with it They feel that the rate of interest charged by SBI under Xpress credit is not high and it will not contribute to NPS
Question number 10
Do you think that lack of proper planning of the borrower is one of the reason for NPA
Answer
Out of 70 respondent 35 were fully satisfied 5 were not satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 19
fully satisfied(35)70
partially satisfied(10)20
not satisfied(5)10
Conclusion
Most of the respondent feels that the borrowers borrow money from the bank without any proper planning which is one of the most important reason for NPA
Question number 11
Is heavy borrowing also contribute to NPA
Answer
Out of 50 respondent 25 respondent were fully satisfied 12 were partially satisfied 8 were not satisfied were as 5 were fully dissatisfied
Chart no 110
50
24
16
10
fully satisfied(25) partially satisfied(12) not satisfied(8) fully dissatisfied(5)
Question number 12
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Answer
As per the response of the officials 20 were fully satisfied 66were partially satisfied 4 were not satisfied with it were as 10 respondent were fully dissatisfied
Chart no 111
fully satisfied(10)20
partially satisfied(33)66
not satisfied(2)4
fullydissatisfied(5)10
Conclusion
As per the response given by the officials most of the officials were partially satisfied that wrong selection of borrower also contribute to NPA which means that selection process carried out by the bank is not appropriate or there is some difficulties in implementing them
Question number 13
Do you think that poor credit appraisal also contribute to NPA
Answer
Out of 50 respondent 5 were fully satisfied 10 were fully satisfied 30 were not satisfied were as only 5 were fully dissatisfied
Chart no 112
fully satisfied(5)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 14
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Answer
Out of 50 responses 3 were fully satisfied 15 were partially satisfied 25 were not satisfied where as 7 were full dissatisfied
Chart no 113
fully satisfied(3)partiallt satisfied(15)not satisfied(25)fully dissatisfied(7)
Conclusion
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not contribute to NPA This means that the attitude of bank toward the borrower is not inflexible
Question number 15
Do you think that system over load is also one of the causes of NPA
Answer
Out of 50 respondent 28 were fully satisfied 12 were partially satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 114
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Chart no 16
6024
16
Open
fully satisfied(30)Partially satisfied(12)not satisfied(0)fully dissatisfied(8)
Conclusion
Majority of the officiais feels that lack of PSS is one of the reason for NPA This means that the PSS carried out by the bank is not sufficient or not carried out properly
Question number 8
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Answer
Most of the respondent feels that increase in unwanted expenses of the borrwer ls contribute to NPA
Chart no 17
56
12
28
4
FULLY SATISFIED(28)PARTIALLY SATISFIED(6)NOT SATISFIED(14)FULLY DISSATISFIED(2)
Conclusion
As per response of the officials increasing inflation have an adverse effect on the financial sector its working performance as well as on NPA
Question number 9
Do you think that high rate of interest under Xpress credit also contributes to NPA
Answer
Out of 50 respondent 25 respondent were not satisfied 10 were partially satisfied 10 were strongly dissatisfied where as only 5 out of 50 were fully satisfied with it
Chart no 18
strongly satisfied(5)partially satisfied(10)not satisfied(25)fully dissatisfied(10)
Conclusion
Most of the respondents are not satisfied with it They feel that the rate of interest charged by SBI under Xpress credit is not high and it will not contribute to NPS
Question number 10
Do you think that lack of proper planning of the borrower is one of the reason for NPA
Answer
Out of 70 respondent 35 were fully satisfied 5 were not satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 19
fully satisfied(35)70
partially satisfied(10)20
not satisfied(5)10
Conclusion
Most of the respondent feels that the borrowers borrow money from the bank without any proper planning which is one of the most important reason for NPA
Question number 11
Is heavy borrowing also contribute to NPA
Answer
Out of 50 respondent 25 respondent were fully satisfied 12 were partially satisfied 8 were not satisfied were as 5 were fully dissatisfied
Chart no 110
50
24
16
10
fully satisfied(25) partially satisfied(12) not satisfied(8) fully dissatisfied(5)
Question number 12
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Answer
As per the response of the officials 20 were fully satisfied 66were partially satisfied 4 were not satisfied with it were as 10 respondent were fully dissatisfied
Chart no 111
fully satisfied(10)20
partially satisfied(33)66
not satisfied(2)4
fullydissatisfied(5)10
Conclusion
As per the response given by the officials most of the officials were partially satisfied that wrong selection of borrower also contribute to NPA which means that selection process carried out by the bank is not appropriate or there is some difficulties in implementing them
Question number 13
Do you think that poor credit appraisal also contribute to NPA
Answer
Out of 50 respondent 5 were fully satisfied 10 were fully satisfied 30 were not satisfied were as only 5 were fully dissatisfied
Chart no 112
fully satisfied(5)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 14
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Answer
Out of 50 responses 3 were fully satisfied 15 were partially satisfied 25 were not satisfied where as 7 were full dissatisfied
Chart no 113
fully satisfied(3)partiallt satisfied(15)not satisfied(25)fully dissatisfied(7)
Conclusion
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not contribute to NPA This means that the attitude of bank toward the borrower is not inflexible
Question number 15
Do you think that system over load is also one of the causes of NPA
Answer
Out of 50 respondent 28 were fully satisfied 12 were partially satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 114
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
56
12
28
4
FULLY SATISFIED(28)PARTIALLY SATISFIED(6)NOT SATISFIED(14)FULLY DISSATISFIED(2)
Conclusion
As per response of the officials increasing inflation have an adverse effect on the financial sector its working performance as well as on NPA
Question number 9
Do you think that high rate of interest under Xpress credit also contributes to NPA
Answer
Out of 50 respondent 25 respondent were not satisfied 10 were partially satisfied 10 were strongly dissatisfied where as only 5 out of 50 were fully satisfied with it
Chart no 18
strongly satisfied(5)partially satisfied(10)not satisfied(25)fully dissatisfied(10)
Conclusion
Most of the respondents are not satisfied with it They feel that the rate of interest charged by SBI under Xpress credit is not high and it will not contribute to NPS
Question number 10
Do you think that lack of proper planning of the borrower is one of the reason for NPA
Answer
Out of 70 respondent 35 were fully satisfied 5 were not satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 19
fully satisfied(35)70
partially satisfied(10)20
not satisfied(5)10
Conclusion
Most of the respondent feels that the borrowers borrow money from the bank without any proper planning which is one of the most important reason for NPA
Question number 11
Is heavy borrowing also contribute to NPA
Answer
Out of 50 respondent 25 respondent were fully satisfied 12 were partially satisfied 8 were not satisfied were as 5 were fully dissatisfied
Chart no 110
50
24
16
10
fully satisfied(25) partially satisfied(12) not satisfied(8) fully dissatisfied(5)
Question number 12
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Answer
As per the response of the officials 20 were fully satisfied 66were partially satisfied 4 were not satisfied with it were as 10 respondent were fully dissatisfied
Chart no 111
fully satisfied(10)20
partially satisfied(33)66
not satisfied(2)4
fullydissatisfied(5)10
Conclusion
As per the response given by the officials most of the officials were partially satisfied that wrong selection of borrower also contribute to NPA which means that selection process carried out by the bank is not appropriate or there is some difficulties in implementing them
Question number 13
Do you think that poor credit appraisal also contribute to NPA
Answer
Out of 50 respondent 5 were fully satisfied 10 were fully satisfied 30 were not satisfied were as only 5 were fully dissatisfied
Chart no 112
fully satisfied(5)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 14
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Answer
Out of 50 responses 3 were fully satisfied 15 were partially satisfied 25 were not satisfied where as 7 were full dissatisfied
Chart no 113
fully satisfied(3)partiallt satisfied(15)not satisfied(25)fully dissatisfied(7)
Conclusion
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not contribute to NPA This means that the attitude of bank toward the borrower is not inflexible
Question number 15
Do you think that system over load is also one of the causes of NPA
Answer
Out of 50 respondent 28 were fully satisfied 12 were partially satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 114
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
strongly satisfied(5)partially satisfied(10)not satisfied(25)fully dissatisfied(10)
Conclusion
Most of the respondents are not satisfied with it They feel that the rate of interest charged by SBI under Xpress credit is not high and it will not contribute to NPS
Question number 10
Do you think that lack of proper planning of the borrower is one of the reason for NPA
Answer
Out of 70 respondent 35 were fully satisfied 5 were not satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 19
fully satisfied(35)70
partially satisfied(10)20
not satisfied(5)10
Conclusion
Most of the respondent feels that the borrowers borrow money from the bank without any proper planning which is one of the most important reason for NPA
Question number 11
Is heavy borrowing also contribute to NPA
Answer
Out of 50 respondent 25 respondent were fully satisfied 12 were partially satisfied 8 were not satisfied were as 5 were fully dissatisfied
Chart no 110
50
24
16
10
fully satisfied(25) partially satisfied(12) not satisfied(8) fully dissatisfied(5)
Question number 12
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Answer
As per the response of the officials 20 were fully satisfied 66were partially satisfied 4 were not satisfied with it were as 10 respondent were fully dissatisfied
Chart no 111
fully satisfied(10)20
partially satisfied(33)66
not satisfied(2)4
fullydissatisfied(5)10
Conclusion
As per the response given by the officials most of the officials were partially satisfied that wrong selection of borrower also contribute to NPA which means that selection process carried out by the bank is not appropriate or there is some difficulties in implementing them
Question number 13
Do you think that poor credit appraisal also contribute to NPA
Answer
Out of 50 respondent 5 were fully satisfied 10 were fully satisfied 30 were not satisfied were as only 5 were fully dissatisfied
Chart no 112
fully satisfied(5)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 14
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Answer
Out of 50 responses 3 were fully satisfied 15 were partially satisfied 25 were not satisfied where as 7 were full dissatisfied
Chart no 113
fully satisfied(3)partiallt satisfied(15)not satisfied(25)fully dissatisfied(7)
Conclusion
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not contribute to NPA This means that the attitude of bank toward the borrower is not inflexible
Question number 15
Do you think that system over load is also one of the causes of NPA
Answer
Out of 50 respondent 28 were fully satisfied 12 were partially satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 114
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
fully satisfied(35)70
partially satisfied(10)20
not satisfied(5)10
Conclusion
Most of the respondent feels that the borrowers borrow money from the bank without any proper planning which is one of the most important reason for NPA
Question number 11
Is heavy borrowing also contribute to NPA
Answer
Out of 50 respondent 25 respondent were fully satisfied 12 were partially satisfied 8 were not satisfied were as 5 were fully dissatisfied
Chart no 110
50
24
16
10
fully satisfied(25) partially satisfied(12) not satisfied(8) fully dissatisfied(5)
Question number 12
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Answer
As per the response of the officials 20 were fully satisfied 66were partially satisfied 4 were not satisfied with it were as 10 respondent were fully dissatisfied
Chart no 111
fully satisfied(10)20
partially satisfied(33)66
not satisfied(2)4
fullydissatisfied(5)10
Conclusion
As per the response given by the officials most of the officials were partially satisfied that wrong selection of borrower also contribute to NPA which means that selection process carried out by the bank is not appropriate or there is some difficulties in implementing them
Question number 13
Do you think that poor credit appraisal also contribute to NPA
Answer
Out of 50 respondent 5 were fully satisfied 10 were fully satisfied 30 were not satisfied were as only 5 were fully dissatisfied
Chart no 112
fully satisfied(5)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 14
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Answer
Out of 50 responses 3 were fully satisfied 15 were partially satisfied 25 were not satisfied where as 7 were full dissatisfied
Chart no 113
fully satisfied(3)partiallt satisfied(15)not satisfied(25)fully dissatisfied(7)
Conclusion
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not contribute to NPA This means that the attitude of bank toward the borrower is not inflexible
Question number 15
Do you think that system over load is also one of the causes of NPA
Answer
Out of 50 respondent 28 were fully satisfied 12 were partially satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 114
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
50
24
16
10
fully satisfied(25) partially satisfied(12) not satisfied(8) fully dissatisfied(5)
Question number 12
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Answer
As per the response of the officials 20 were fully satisfied 66were partially satisfied 4 were not satisfied with it were as 10 respondent were fully dissatisfied
Chart no 111
fully satisfied(10)20
partially satisfied(33)66
not satisfied(2)4
fullydissatisfied(5)10
Conclusion
As per the response given by the officials most of the officials were partially satisfied that wrong selection of borrower also contribute to NPA which means that selection process carried out by the bank is not appropriate or there is some difficulties in implementing them
Question number 13
Do you think that poor credit appraisal also contribute to NPA
Answer
Out of 50 respondent 5 were fully satisfied 10 were fully satisfied 30 were not satisfied were as only 5 were fully dissatisfied
Chart no 112
fully satisfied(5)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 14
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Answer
Out of 50 responses 3 were fully satisfied 15 were partially satisfied 25 were not satisfied where as 7 were full dissatisfied
Chart no 113
fully satisfied(3)partiallt satisfied(15)not satisfied(25)fully dissatisfied(7)
Conclusion
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not contribute to NPA This means that the attitude of bank toward the borrower is not inflexible
Question number 15
Do you think that system over load is also one of the causes of NPA
Answer
Out of 50 respondent 28 were fully satisfied 12 were partially satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 114
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
fully satisfied(10)20
partially satisfied(33)66
not satisfied(2)4
fullydissatisfied(5)10
Conclusion
As per the response given by the officials most of the officials were partially satisfied that wrong selection of borrower also contribute to NPA which means that selection process carried out by the bank is not appropriate or there is some difficulties in implementing them
Question number 13
Do you think that poor credit appraisal also contribute to NPA
Answer
Out of 50 respondent 5 were fully satisfied 10 were fully satisfied 30 were not satisfied were as only 5 were fully dissatisfied
Chart no 112
fully satisfied(5)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 14
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Answer
Out of 50 responses 3 were fully satisfied 15 were partially satisfied 25 were not satisfied where as 7 were full dissatisfied
Chart no 113
fully satisfied(3)partiallt satisfied(15)not satisfied(25)fully dissatisfied(7)
Conclusion
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not contribute to NPA This means that the attitude of bank toward the borrower is not inflexible
Question number 15
Do you think that system over load is also one of the causes of NPA
Answer
Out of 50 respondent 28 were fully satisfied 12 were partially satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 114
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
fully satisfied(5)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 14
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Answer
Out of 50 responses 3 were fully satisfied 15 were partially satisfied 25 were not satisfied where as 7 were full dissatisfied
Chart no 113
fully satisfied(3)partiallt satisfied(15)not satisfied(25)fully dissatisfied(7)
Conclusion
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not contribute to NPA This means that the attitude of bank toward the borrower is not inflexible
Question number 15
Do you think that system over load is also one of the causes of NPA
Answer
Out of 50 respondent 28 were fully satisfied 12 were partially satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 114
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
fully satisfied(3)partiallt satisfied(15)not satisfied(25)fully dissatisfied(7)
Conclusion
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not contribute to NPA This means that the attitude of bank toward the borrower is not inflexible
Question number 15
Do you think that system over load is also one of the causes of NPA
Answer
Out of 50 respondent 28 were fully satisfied 12 were partially satisfied 10 were not satisfied where as no one is fully dissatisfied
Chart no 114
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
fully satisfied(28)partially satisfied(12)not satisfied(10)fully dissatisfied(0)
Conclusion
Most of the officials feel that system over load is also one of the factors for NPA which means that a single employee has to do a lot of work due to which they donrsquot have time to look on bad accounts or the accounts in NPA
Question number 16
Do you think that poor follow-up is one of the reasons for NPA
Answer
As per the responses given by the officials 34 were fully satisfied 12 were partially satisfied 4 were not satisfied where as no one is fully dissatisfied
Chart no 115
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
fully satisfied(34)partially satisfied(12)not satisfied(4)fully dissatisfied(0)
Conclusion
According to the officials most of them feels that they were not able to carry on the follow-up properly If they carry out the follow-up properly they were able to control NPA
Question number 17
What do you suggest to decrease the NPA level under Xpress credit
Answer
I have received many feedbacks and my suggestion is based on the feedback received from these branch officials
BORROWER QUESTIONNAIRE
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Following feedback in the form of questionnaire we asked from different borrower
Question number 1
Do not require any data analysis
Question number 2
Are you satisfied with the service provided by SBI
Answer
Out of 70 respondent 25 were fully satisfied 10 were partially satisfied 30 were not satisfied where as 5 were fully dissatisfied
Chart no 116
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
fully satisfied(25)partially satisfied(10)not satisfied(30)fully dissatisfied(5)
Question number 3
Do you think that the rate of interest charged by SBI under xpress credit is high
Answer
Out of 70 respondent 15 were fully satisfied 12 were partially satisfied 35 were not satisfied where as on 8 were fully dissatisfied
Chart no 117
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
fully satisfied(15)partially satisfied(12)not satisfied(35)fully dissatisfied(8)
Conclusion
Most of the respondent feels that the rate of interest charged by SBI is high
Question number 4
Do you think that it is important to repay the loan on time
Answer
Out of 70 borrowers 35 were fully satisfied 20 partially satisfied 15 were not satisfied and no one is fully dissatisfied
Chart no 118
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
fully satisfied(35)
partially sat-isfied(20)
not satisfied(15)
responses
Question number 5
Have any of the officers visited your resident to verify your residential address
Answer
Most of the borrower replied that no one had come to verify the residential address
Chart no 119
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
yes(22) no(48)
response 22 48
2575
125175225275325375425475
response
Axis Title
Conclusion
The PSS is not carried out properly by the bank
Question number 6
Have any of the official had visited your office to verify the office address
Answer
Out of 70 respondent 42 were not agree and 28 were agree about it
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Chart no 120
yes(28) no(42)0
5
10
15
20
25
30
35
40
45
Series 1
Question number 7
Are you aware about NPA
Answer
Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it
Chart no 121
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
yes(25)no(45)
Question number 8
As your account is in NPA what the reason behind it
Answer
I received my feedback and the reasons for NPA are based on it
COMPARATIVE STUDY
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Last three years net NPA ratio of SBI
Table no 1
YEAR NET NPA RATIO
2010-11 163
2011-12 182
2012-13 21
Chart no122
2010-11 2011-12 2012-130
05
1
15
2
25
163182
21
NET NPA RATIO
Conclusion The net NPA ratio of SBI is increasing with each financial year and it will cause a great terror to Indian financial system
Source SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
DATE NPA IN OUT AMT(L)
310313 235 17437
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
3103 12 215 12614
3103 11 319 15123
3103 10 628 27664
310309 837 3717
310308 80 30466
310307 273 9423
310306 435 12638
310305 859 21269
310304 1016 16591
Table no 2
GRAPHICAL REPRESENTATION
Chart no 123
31313 31312 31311 31310 31309 31308 31307 31306 31306 313040
2
4
6
8
10
12 NPA
NPA
Axis Title
Axis Title
Conclusion
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as compare to last year but as compare to other year the NPA keeps on decreasing which is good
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no 03
DATE NPA IN OUT AMT(L) 310313 15 8568 3103 12 164 7576 3103 11 156 6115
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
3103 10 232 8712 310309 46 15326 310308 49 15426 310307 07 1975 310306 182 4014 310305 443 7286 310304 443 5391
GRAPHICAL REPRESENTATION
Chart no 124
31313 31312 31311 31310 31309 31308 31307 31306 31305 313040
1
2
3
4
5
6
15 164 156
232
4649
0700000000000001
182
443 443
PER NPA
PER NPA
Conclusion
The NPA under personal segment of hazaribag branch is little bit high (15) but as compare to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge growth in NPA( ie 07to 49) We can say that the NPA of any branch is not high if itrsquos NPA is below 01
PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH
Different segments to be compared are
1 Xpress credit2 Education loan3 Car loan4 Home loan
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Table no 4
Segment
Total accounts
Total no of accounts under NPA
Xpress credit
882
10
Edu- loan
283
14
Car- loan
340
08
Home- loan
289
05
Conclusion
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as compare to other segments The highest no of NPA accounts are under education loan There is no doubt that there is high NPA under Xpress credit but as compare to other segment it is low
BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT BASIS
Branches to be compared are
1 Hazaribag branch2 Chatra3 Maru bazaar4 Novadi
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Table no 5
Branch
Total ac
Total NPA ac
Total advances
Hazaribag
882 10 2139 cr
Chatra
824 18
1405 cr
Maru bazaar
138 02 336 cr
Novadi
600
04 1219 cr
PROFESSION WISE NPAS COMPARISION
Group of people belonging to different professions whose ac are in NPAs
Out of 70 ac I have noted that there are different type of people belonging to different profession whose ac are in NPA and banks has to take some strong steps against these people
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Table no 6
Profession Police
Health dept
Advocate
Teacher Engineer
Other
No of NPAs acs
25
06
06
20 06
07
ConclusionThe professional group which has the highest no ac under NPAs is police and teacher Bank has to take some more steps against these professional groups to reduce the NPAs
REASON FOR TURNING AN AC INTO NPAs
Table no 07
Reason for NPA No of ac
Death 02
Health problem 10
Loss of salary 12
Transferredwillful defaulters 10
Not found 20
Delay in salary 16
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
As per the feedback of the borrowers I derive the following reasons for turning an ac into NPAs In my study I found that the data available regarding the borrowers is inappropriate
Chart no 125
Death Health problem loss of salary willful defaulter not found delay in sallary0
2
4
6
8
10
12
14
16
18
20
2
10
12
10
20
16
no of ac
CASE STUDY
Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit
Details of the 3 NPA accounts
1)
Name Rajendra Tiwari
Account no 31961318929
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Outstanding amount 33534200
Limit amount 5Lakhs
Date of NPA 13113
Branch name Hazaribag branch
Problem Not paying the installment
Reason for NPA Transferred
Observation
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new ac in another bank which proves that he is a willful defaulter
2)
Name shiv dher Singh
Account no 31617765960
AC type TL Xpress credit
Outstanding amount 33534200
Limit amount 45 lakhs
Date of NPA 103112
Branch name hazaribag branch
Problem repayment of loan amount
Reason for NPA delay in salary
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Observation
As per my study he is willful defaulter because his financial condition was good Ha has money to live his life happily but donrsquot have money to repay the loan back to the bank
3)
Name Md Azimudin
Account no 31845747053
AC type BR-TL Xpress credit
Outstanding 38041700
Limit amount 5 lakhs
Branch Name Chatra branch
Date of NPA 43013
Reason for NPA Death
Observation
As per my study the financial condition of his family was not good due to which his they were not able to pay the loan back
SPECIAL CASE STUDY
Name Chandraket singh
Account no 30751713480
AC type TL Xpress credit
Branch name hazaribag
Limit 7 lakhs
Outstanding amount 3 3462900
Date of sanction 290409
NPA Date 300911
At present The account has been written-off and at present a new AUCA ac has been opened
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Name Chandraket singh
Account no 30782800515
AC type TL Xpress credit
Branch name PBB
Limit 3 lakhs
Outstanding amount 2860102
Date of sanction 040609
Repayment date June 2013
At Present IRAC-3
Observation
It is a glaring example of poor PSS over confidenceinfluence syndrome The two personal loans were within a span of 3 months Although the borrower is a willful defaulter he was in eco hardship due to non-picking up of business profit of his new enterprise ie ldquohotel canary innrdquo
As found in the survey this case study testified the hypothesis of multiple financing and careless PSS as the reasons of Xpress credit accounts becoming NPA
The borrower is an influence person of Hazaribag with political clout This might have been the reason for his success in his endeavor to get his loans sanctioned by various branches It seems that legal actions are also not working properly
RESEARCH OPERATION
Significance of the study
The main aim of any person is to utilization of money in the best manner since India is country where more than half of the population has problem of running the family in the most efficient manner However Indian people face large no of problem till the development of full-fledged banking sector The Indian banking sector comes into the developing nature mostly after 1991 policy The banking sector has really helped the Indian people to utilize the single money in the best manner as they want
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
The banks not only accept the deposit of the people but also provide them credit facility for their development Indian banking sector has the nation in developing the business and service sectors But recently the banks are facing the problem of credit risk It is found that many general people and business people borrow from the banks but due to some genuine or other reasons are not able to repay back is known is known as known as non performing assets Many banks are facing the problem of NPAs which hammer the business of the banks Due to NPAs the income of the banks is reduced and the banks have to make the large no of provisions that would curtail the profit of the banks and due to that the financial performance of the bank would not show good results
The main aim behind making this report is to know how SBI is operating its business and how NPAs play its role to the operation of SBI bank My study is also focusing on existing system in India to solve the problem of NPAs Thus the study would help the decision maker to understand the financial performance and growth of SBI as compared to the NPAs
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
OBJECTIVE OF THE STUDY
The objectives of my study are as follows
To know about Xpress credit
To know about NPA and what are the underlying reasons for emergence of NPA
To study the impact of NPA on the operation of the bank
To know about what are the steps taken by the bank to reduce the NPAs
To know why NPA are greater challenges to the bank
To study the general reason for asset becoming NPA
What are the methods adopted to look after NPA management
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Scope of the study
The scope of the study is as given below
Bank can improve their financial position or can increase their income from credit with the help of this project
This project can be applicable to know the reasons of increase in NPAs
This project also gives light upon impact of NPAs
Concept of NPAs can be made clear
To present a picture of movement of NPA in SBI
Need of the study
Following types of need arises for this study
To know what kind of role NPAs are playing upon the operations of the banks
To know the variables available to control NPAs
The need also has been felt to study the financial performance of the bank
Limitations of the study
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
The limitations that I felt in my study are
The data collected by me was not sufficient for report study
The practical operations as related to NPAs are adopted by the banks are not learned
Insufficient data about the borrower in the system due which I was not able to contact all of them
The solutions are not applicable for every bank
Period of study
The period of my study was of 2 months (3rd June to 3rd Aug)
Research refers to the search for knowledge Ine can also define research as specific and systematic search for pertinent information on a specific topic It is an art of specific investigation
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Research methodology
The research methodology is a systematic way of studying a research problem The research methodology means a way in which we can complete our prospected task Before undertaking any task it becomes very essential for anyone to determine the problem of study I have adopted following procedure in completing my report study
1 Research problem2 Research design3 Determining the data source4 Analyzing the data5 Interpretation6 Preparing research report
1 Research problem
The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a concern Providing credit facility is one of the most important factors as far as banking sector is concerned As my training is at bank I have the got the project upon high NPA a concern This is my problem to be studied
2 Research design
The research design tells about the mode with which the entire project is prepared My research design for this study is basically analytical because I have utilized the large no of data of the banking sector In this project theoretical study is also attempted
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
3 Determining the data source
The data source can be primary or secondary The primary data are those data which are used for the first time in the study However such data such take much time and are also expensive Whereas secondary data are those data which are all ready available in the market these data are easy to search and are not expensive too For my study I have utilize both type of data
Chart no 126
4 Tools used for analysis of data
Type of data
Primary data Secondary data
Observation method
Interview method
Questionnaire method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
The data collected were analyzed with the help of statistical tools like ratio analysis and trend analysis Tables are used represent the consolidated data Graphical representations are also used for batter comprehension and representation
5 Analyzing the data
The primary and secondary data both would never be useful until they are edited and studied and analyzed When a person receives a data many useful data would also be there So I analyzed the data and edited it and turned it into a useful manner so that it become useful for my report study
6 Interpretation of data
With the use of analyzed data I manage to prepare my project report but analyzing the data would not help my study to reach towards its objectives The interpretation of the data is required so that the other can understand the crux of the study in more simple without any problem so I have added the chapter of analysis that would explain other to understand my study in simple way
7 Project writing
This is the last step in preparing the research report The objective of the report writing was to report the finding of study to the concerned authority
OBSERVATION FINDING
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
In my research I found the following things
The NPA in Xpress credit is high
The NPA in Xpress credit is not very high as compared to other segment
A break chunk of NPA ac police teachers under Xpress credit because when transferred they do not communicate to the lending branch and open a new ac at the place of posting and avail another credit
Study indicates that major NPA increases due to willful defaulter
Lack of knowledge among the borrower is also one of the reasons which contribute to NPA
It also indicates that borrowers are mostly responsible for it
Less no of staffs in the bank is also one of the reasons for NPA
NPA is also increasing because of delay in salary due to allocation of funds
At some extent bank officials are responsible for NPA because bank is worried about mobilizing more and more ac but not concern about maintenance of accounts
Defective lending and lack of PSS also contribute to NPA
CONCLUSIONS
Conclusion reveals the explanation about what the report has cover and what is the essence of the study What my project report covers is concluded below The problem statement on which I focused
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
my study is ldquoHigh NPA in Xpress credit a concernrdquo The Indian banking sector is the important service sector that helps the people of India to achieve the socio economic objective The Indian banking sector has helped the business and service sector to develop by providing them credit facilities and other financial related facility The Indian banking sector is developing with good appreciate as compare to other global bench mark banks The Indian banking system is classified into scheduled and non- scheduled banks The bank play very important role in developing the
nation in terms of providing good financial services The SBI bank has also shown good performance in last few years The only problem the bank is facing today is the problem of non- performing assets Non- performing assets means those assets which are classified as bad assets which are not possibly be returned back to the bank by the borrower If the proper management of the NPAs is not undertaken it would hamper the business of the bank The NPAs would destroy the current profit interest income due to large provision of the NPAs and would reduce the smooth functioning of the recycling of the funds If we analyze the past year data we may come to know that the NPAs have increased very drastically The RBI is also trying to take no of measures but the ratio of NPA is not decreasing The bank has to must find out the measure to reduce the evolving problem of NPA If the concept of NPAs is taken very lightly it would be dangerous for the bank The reduction of the NPAs would help the bank to boost up their profit smooth recycling of the fund in the nation This would help the nation to develop more banking branches and developing the economy by providing the batter financial services to the nation
As the name suggests itself NPAs are those assets which never generate profit to the banks and are threats for banks Bank should try their best to manage these non ceasing assets because it is very difficult to vanish these assets Compromise is one of the measures to reduce NPAs It has its limitation and may have adverse effect and hence has to use judiciously with proper understanding of the genuine problem and concerns of each other To conclude this study we can say about this report that
1 There is high NPA ratio under Xpress credit2 NPAs represent high level of risk and low level of credit appraisal3 There are so many preventive measures available those can be adopted to stop an assets or an
ac becoming NPA4 There are some certain guidelines made by RBI for NPAs which are adopted by banks5 NPA under Xpress credit is less as compare to other segment (education)
RECOMMENDATIONS SUGGESTIONS
In my study I have found some limitation So I can suggest following suggestions or area of improvement
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Bank should give stress upon credit appraisal
The credit should be backed up by securitization
Bank should create effectiveness in management of NPAs
Credit officer should focus upon cash flow and judge in a realistic manner
Proper monitoring of ac should be adopted to control NPAs
Banks should try their best to recover NPAs
The problem should be identified very early so that company can try their best to stop an assets and ac becoming NPAs
There should be placement of right person on the right table
Proper PSS should be done by the bank officials
Bank should have its own independent credit rating agency which should evaluate the financial capacity of the borrower before than credit facility
The credit rating agency should regularly evaluate the financial condition of the clients
There must be a separate department for NPAs recovery
Bank should increase the no staffs in the bank
QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
A set of question was prepared for bank officials to collect the feedback to determinetest whether the recommendation given by me to the bank to reduce NPA is valid or not For this I have taken the feedback of 50 officials
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 7
Do you think that there must be a separate dept for NPA recovery
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Answer
Fully satisfied partially satisfied not satisfied fully dissatisfied
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters The data collected was as under
Table no 08
Que no
Suggestion Fully satisfied
Partially satisfied
Not satisfied
Fully dissatisfied
Total
01 Stress upon credit appraisal 32 14 04 00 50
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
02 Credit should backed up with securitization
25 16 08 01 50
03 Create effectiveness in management of NPA
40 08 02 00 50
04 Proper monitoring of ac 42 08 00 00 5005 Bank should try their best to
recover NPA 38 09 02 01 50
06 Early determination of problem 47 03 00 00 5007 There must be a separate dept for
NPA recovery 39 06 03 02 50
08 Proper PSS before lending 50 00 00 00 5009 Placement of right people on right
table 24 12 08 06 50
10 Separate credit rating agency 28 10 08 04 50Total 365 86 35 14 500
Chart no 127
fully satisfied73
partially satisfied17
not satis-fied7
fully dissatisfied3
Conclusion As per the response of the officers 73 were fully satisfied which means that the recommendation given by me to reduce NPA is appropriate
BIBLIOGRAPHY
Books
CR Kothari research methodology New Delhi Vikash publication house Pvt Ltd2007
IBFC vision (a monthly newspaper of Indian institute of banking and finance)
Annual report of SBI 2012-13
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Websites
wwwgooglecoin
wwwwikianswercom
wwwsbicoin
wwwrbiorgin
httpenwikipediaorm
wwwaskcom
Xpress credit circular
ANNEXTURE
Bank officialrsquos questionnaire
Question number 1
Do you think that the borrowers are aware about NPA
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Question number 2
If the answer of question 2 Is yes than Do you think that lack of knowledge among the borrower regarding NPA is one of the reason for NPA
Question number 3 Do you think that external factors like willful defaulters industrial sickness and change in govt policy contribute to NPA
Question number 4
Do you think that internal factors like defective lending process poor credit appraisal system and managerial deficiency contribute to NPA
Question number 5
Do you think that inflation is one of the reasons for NPA
Question number 6
Do you think that lack of PSS is also contributed to NPA
Question number 7
Do you think that increase in unwanted expenses of the borrower is one of the factor which contribute to NPA
Question number 8
Do you think that high rate of interest under Xpress credit also contributes to NPA
Question number 9
Do you think that lack of proper planning of the borrower is one of the reasons for NPA
Question number 10
Is heavy borrowing also contributed to NPA
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Question number 11
Do you think that wrong selection of borrower is one of the factor contribute to NPA
Question number 12
Do you think that poor credit appraisal also contribute to NPA
Question number 13
Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA
Question number 14
Do you think that system over load is also one of the causes of NPA
Question number 15
Do you think that poor follow-up is one of the reasons for NPA
Question number 16
What do you suggest to decrease the NPA level under Xpress credit
Borrowerrsquos questionnaire
Question number 1
Are you satisfied with the service provided by SBI
Question number 2
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Do you think that the rate of interest charged by SBI under xpress credit is high
Question number 3
Do you think that it is important to repay the loan on time
Question number 4
Have any of the officers visited your resident to verify your residential address
Question number 5
Have any of the official had visited your office to verify the office address
Question number 6
Are you aware about NPA
Question number 7
As your account is in NPA what the reason behind it is
QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION
Question no 1
Bank should give stress upon credit appraisal Is it is a proper recommendation to reduce NPA
Question no 2
The credit should be backed up with securitization Is it is an alternative to reduce NPA
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower
Question no 3
Bank should create effectiveness in management of NPAs Do you think it is an appropriate suggestion to reduce NPAs
Question no 4
Do you think that proper monitoring of ac should be adapted to reduce NPA
Question no 5
Bank should try their best to recover NPA Is it is a proper recommendation
Question no 6
Do you think that early determination of problem is an alternative to reduce NPA
Question no 7
Do you think that there must be a separate dept for NPA recovery
Question no 8
Do you think that proper PSS is an alternative to reduce NPA
Question no 9
Do you think placement of right person on right table is an alternative to reduce
Question no 10
Do you think bank should have its separate credit rating agency to determine the financial position of borrower