Npa Management

In: Business and Management

Submitted By roshanrsp
Words 9503
Pages 39
[pic] Project on Non Performing Assets in Banks

|Chapter no. | Title |Page no. |
| |Executive Summary |2 |
|1 |General Introduction | |
| |Introduction to the Topic |4 |
| |Company Profile |6 |
| |Non performing assets |10 |
|2 | Research Methodology |32 |
|3 | Data Analysis & Interpretation |38 |
|4 | Findings, Suggestions & Conclusions |64 |
|5 | Annexure: | |
| |a) Bibliography |68 |
| |b) Questionnaire |70 |


Studying books and merely passing exams is not worth, the education, knowledge and experience is incomplete without being exposed to what is happening in real.
In order to…...

Similar Documents


...factors like GDP growth rate of the country. Such macroeconomic trends actually influence income generation and timely recovery of the credit extended. So for greater risk sensitivity a model pricing mechanism has been developed to address the macroeconomic changes in the economy for better risk management. It is an obvious fact that risk is inherent in every action. In extending credit to other parties one of the main risks of the Bank is Credit Risk. The possibility of losses associated with diminution in the credit quality of borrowers/counter parties is called credit risk. In a simpler way, credit risk may be defined as the potential threat that a borrower will fail to meet its obligations in accordance with the agreed terms. But for that reason banks cannot stop extending loans to borrowers. For business growth banks are required to find out new avenues to deploy their funds and generate income. Infrastructure sector is one where funding was done previously by government funds and with the assistance of Development Financial Institutions (DFIs) like IDBI & IFCI, who dedicated themselves to finance infrastructure development projects but incurred huge losses due to burgeoning NPAs.. But with changing nature of the FIs in India and all over the world banks are increasingly participating in infrastructure financing now. Here lies the importance of analyzing the performance after properly identifying and measuring the risks associated in an exposure for......

Words: 4387 - Pages: 18

Risk Management

...RESEARCH DESIGN OBJECTIVES OF THE STUDY ➢ Understanding credit risk management conceptually. ➢ Studying the various private banks practicing credit risk management. ➢ To make a depth study of the method in which the private banks in India go about credit risk management. ➢ Studying the difference between retail credit risk management and corporate credit risk management practiced by private banks. ➢ Understanding the importance of the credit risk management and how useful it is to the private banks and how it benefits them in various ways. PURPOSE OF THE STUDY The main reason to select “CREDIT RISK MANAGEMENT” as a topic is to understand the importance of the Role played by credit risk management department and/or practices when the bank lends money to its borrowers. In this project, I have tried to understand the difference between corporate credit risk management and retail credit risk management. The analysis and interviews with industry personnel has given me a practical and real life exposure to the banking scenario as far as the credit risk management goes, whereby I could correlate between the theory and their practical application. RESEARCH METHODOLOGY DATA COLLECTION The data collection i.e. the raw material input for the project has been collected keeping in mind the objectives of the project and accordingly......

Words: 21650 - Pages: 87

Facility Management What is FM • Classic view: FM is focussed on real estate (buildings + environment) and related issues (e.g. cleaning, catering); • Resource view: FM is focussed on resource processes (e.g. human resources, material resources, customer resources, financial resources); FM dealing with resource markets; • Integrative view: FM is the multidiscipline based on the integration of 3 disciplinairy management fields: Resource Management, Service Management, Hospitality Management. FM resources • • • • • • • Human resources Material resources Information resources Financial resources Market resources Production & Logistics resources Development resources (Innovation) FM andHospitality Management • The art of welcoming • The conditioning of behaviour • The conditioning of navigation 3 Strategic FM Challenges • What is the dominant orientation of your organization: enabling or making (facilitating or producing)? • Did your FM make the step from supporting to enabling (from reactive to pro-active)? • Did you make the next step in positioning FM: from facility management to enabling leadership (from marching along the choosen road to marking the shining path) The strategic choices • Facility or make • Example Health care • Take hospitals: – Healing patients – Or – Enabling medical professionals to execute medical interventions Context: what is the world around FM Social Economic: a New Economy Geo-Political: The world is not enough......

Words: 946 - Pages: 4

Npa: Introduction About Npa

...Sector Banks currently 29,715.26crore which has been doubled to the last to last year, and the net profit of the Public Sector Banks is 12,295,47crore. However, the only problem of the Public Sector Banks these days are the increasing level of the non performing assets. The non performing assets of the Public Sector Banks have been increasing regularly year by year. If we glance on the numbers of non performing assets we may come to know that in the year 1997 the NPAs were 47,300crore and reached to 80,246crore in 2002. The only problem that hampers the possible financial performance of the Public Sector Banks is the increasing results of the non performing assets. The non performing assets impacts drastically to the working of the banks. The efficiency of a bank is not always reflected only by the size of its balance sheet but by the level of return on its assets. NPAs do not generate interest income for the banks, but at the same time banks are required to make provisions for such NPAs from their current profits. NPAs have a deleterious effect on the return on assets in several ways – • They erode current profits through provisioning requirements • They result in reduced interest income • They require higher provisioning requirements affecting profits and accretion to capital funds and capacity to increase good quality risk assets in future, and • They limit recycling of funds, set in asset-liability mismatches, etc. The RBI has also tried to develop many schemes and tools......

Words: 6989 - Pages: 28

Npa Marcom Plan

...reach and engage audiences nationally who can’t attend, we would live stream or webcast the event to enable people to watch on-line. We also would post informational materials on the OMH website to explain the report and give community leaders tools to inform others in their locales. Telling the Story We also recommend setting the stage for the report’s release by illustrating the problem in a compelling way. For example, HHS Assistant Secretary Koh could kick off the launch by showing a 3-minute video from the documentary “Unnatural Causes: Is Inequality Making Us Sick.” Creation of core materials The event will be supplemented with a number of accompanying materials and activities designed to raise the visibility of the NPA report. Some highlights of what would be made available: • A 2-page policy-oriented document synthesizing the report and highlighting what it is, how it will work, what it means, and next steps; • 5 fact sheets to reach key audiences on the link between health disparities and education, housing, environment, poverty, and health care costs; and • A letter that would be signed by the key Cabinet Secretaries and Administrator of the EPA to accompany the report and sent as a cover letter to Capitol Hill to reflect the significance this effort will have on mobilizing action around disparities. Execution of key promotional strategies including: • Organizing a radio media satellite tour on the day of the event with Dr. Koh......

Words: 1189 - Pages: 5

Npa in Banks

...n Management of Non Performing Assets σ Abstract - In India the magnitude of the problem of bad debts was not taken seriously. Subsequently, following the recommendations of Narasimham committee and Verma committee, some steps have been taken to solve the problem of old NPAs in the balance sheets of the banks. It continues to be expressed from every corner that there has rarely been any systematic evaluation of the best way of tackling the problem. There seems to be no unanimity in the proper policies to be followed in resolving this problem. There is also no consistency in the application of NPA norms, ever since these have been recognized. Non Performing Assets are also called as Non Performing Loans. It is made by a bank or finance company on which repayments or interest payments are not being made on time. A loan is an asset for a bank as the interest payments and the repayment of the principal create a stream of cash flows. It is from the interest payments that a bank makes its profits. The problem of NPA is not limited to only Indian public sector banks, but it prevails in the entire banking industry. Major portion of bad debts in Indian Banks arose out of lending to the priority sector at the dictates of politicians and bureaucrats. If only banks had monitored their loans effectively, the bad debt problem could have been contained if not eliminated. The top management of the banks was forced by politicians and bureaucrats to throw good money...

Words: 2574 - Pages: 11

Finance Management

...Examination Paper of Banking & Financial Services Management IIBM Institute of Business Management Examination Paper Principles & Practices of Banking Section A: Objective Type & Short Questions (30 Marks)    This section consists of Multiple Choice & Short Note type questions. Answer all the questions. Part One carries 1 mark each & Part Two carries 4 marks each. MM.100 Part One: Multiple Choices: 1. Frequency of First Tranche Returns is: a. Weekly b. Monthly c. Monthly/quarterly d. Monthly/quarterly/half-yearly 2. An order for winding up a banking company can be issued by___________ a. The High Court b. The RBI c. The Central Government d. The Supreme court 3. Who shall be natural guardian in case of married minor girl? a. Father b. Brother in law c. Father-in-law d. Husband 4. X a partner in the firm XYZ Co. wants to open a Bank account in the firm‟s name. It will require signatures of: a. All partners b. Any one of the partner c. Managing partner only d. Sleeping partner not required 5. Public limited companies should have minimum shareholders, before Opening Bank account. a. 11 b. 7 c. 5 d. 15 6. If the beneficiary is government then the Expiry of guarantee is governed by the „law of limitation‟ ranging from 3 years to a. 15 years b. 30 years 1 IIBM Institute of Business Management Examination Paper of Banking & Financial Services Management c. 20 years d. 10 years 7. Charge created on LIC Policy is a. Lien b. Hypothecation c. Pledge d. Assignment 8. The device...

Words: 2600 - Pages: 11

Non Performing Asset Npa

...composite for major industrial sectors such as aerospace, defense, renewable energy, wind energy, and railways. Rank: 14 Murli Industries & Exports Limited Loan not repaid: Rs 884 crore Nagpur-based Murli industries is leading manufactures of all types of paper & paper boards, cement, edible oil, pulps, solvent and power. Rank: 15 National Agricultural Co-Operative Loan not repaid: Rs 862 crore Nafed is the government’s procurement agency for non-cereal crops such as cotton, oilseeds and pulses. According to a report in Business Standard, loans to National Agricultural Cooperative Marketing Federation of India (Nafed) by several state-run banks have turned bad,  and banks have classified these as non-performing assets (NPAs). The overall exposure of these banks to Nafed stands at about Rs 2,000 crore (Rs 20 billion). Rank: 16 STCL Limited Loan not repaid: Rs 860 crore STCL (formerly called as Spices Trading Corporation Limited) is a subsidiary of State Trading Corporation of India based in Bangalore. The government has recommended winding up of this loss making public sector company, as it cannot be revived. Rank: 17 Surya Pharma Loan not repaid: Rs 726 crore Surya Phamaceutical started in 1992 and it is an integrated pharmaceuticals company. It focuses on contract research and manufacturing. Rank: 18 Zylog Systems (India) Limited Loan not repaid: Rs 715 crore Zylog Systems (India) Limited is an Information Technology company registered......

Words: 2296 - Pages: 10

Credit Risk Management

...CREDIT RISK MANAGEMENT Banks are in the business of risk management and, hence, are incentivized to develop sophisticated risk management systems. The basic components of risk management system are identifying the risks the bank is exposed to, assessing their magnitude, monitoring them, controlling/mitigating them using a variety of procedures and setting aside capital for potential losses. RBI prescribed risk management framework in terms of: a) Asset-Liability Management practices. b) Credit Risk Management. c) Operational Risk Management. d) Stress testing by Indian Banks in the perspective of international practices. BANKING RISKS: It can be categorized into: i) Business-related Risks. ii) Capital-related Risks. Business Related Risks: The business related risks to which banks are exposed are associated with their operational activities and market environment. They fall into six categories: namely, a) Credit Risk b) Market Risk c) Country Risk d) Business Environment Risk e) Operational Risk f) Group Risk Note: Market Risk comprising of interest rate risk, foreign exchange risk, equity price risk; commodity price risk and liquidity risk; Credit Risk: Credit risk, a major risk faced by banks, is inherent to any business of lending funds to individuals, corporate, trade, industry, agriculture, transport, or banks/financial institutions. It is defined as the possibility of loses associated with a diminution in the......

Words: 4669 - Pages: 19

Impact of Wilful Defaulter on Npa

...NON-PERFORMING ASSET An asset becomes non-performing when it ceases to generate income for the bank or financial institution. In the past RBI had sets guidelines for an asset to be classified as an NPA. An asset was considered as non-performing asset based on the concept of Past Due; a credit in respect of which interest/instalment of principal remained past due for a specific period of time. The specific period was reduced in a phased manner. An amount was considered as past due if it remained outstanding for 30 days beyond the due date. Starting from April 2001, the past due concept was removed and the period to be reckoned for calculation of non-payment started from the due date of payment. From the financial year 2003-04, in order to move towards international best practices, the RBI adopted the 90-days-overdue norms for identification of NPAs. With effect from March 31, 2004, a non-performing asset has been defined as a loan or an advance where:- * Interest/instalment of principal remains overdue for a period of more than 90 days in respect of a Term Loan * The account remains Out of order for a period of more than 90 days, in respect of an Overdraft / Cash Credit facility * The bill remains overdue for a period of more than 90 days in the case of bills purchased and discounted * In the case of direct agricultural advances, an annexure Annex 1 lists the types of advances which are to be treated in a special way as advised in the overdue norm.......

Words: 2538 - Pages: 11

Npa in Indian Bank

...Determinants of NPAs in the Indian Public Sector Banks: A Critique of Policy Reforms Dr. Pradip Kumar Biswas* and Ashis Taru Deb** The paper analyzes the process leading to formation and perpetuation of high levels of NPAs in Indian Public Sector Banks (PSBs). It distinguishes between random and non-random reasons of NPA formation in PSBs. It points out that a high degree of arbitrariness is involved in defining NPAs as it fails to capture diversity in terms of the seasonal and cyclical nature of the economic activities in India. The study conceptualizes random reasons for default in a simplified framework of a Poisson process. It then argues that the non-random reasons go beyond the conventional paradigm of interim, ex-ante and ex-post information asymmetries and incomplete contracts. It points out that the financial notion of NPA as a mere risk phenomenon is inadequate, because a number of reasons leading to non-random generation of NPA are related to the dimension of uncertainty. It highlighted that the use of a secondary asset market may take care of NPA problem, but it requires a number of conditions for its use, which hardly exist in India. The study observes a number of reasons for generation of NPAs which are important and peculiar to India. This is followed by a critical evaluation of the series of policy measures that have been adopted to improve the NPA scenario since liberalization. While one set of policies granting greater autonomy to the PSBs are proved to be......

Words: 19466 - Pages: 78

Research About Npa and Profitability

...massive NPA issue in nationalized banks in India. Net Worth relation with NPAs Net worth gets depleted by annual operating losses or a substantial decrease in asset values relative to liabilities. Banks are required to categorize non-performing assets further into three units on the period for which the asset has remained non-performing and the reliability of the dues: (i) Sub-standard Assets, (ii) Doubtful Assets, and (iii) Loss Assets. According to RBI directives, all banks are required to maintain NPAs both on gross and net basis. It is usually expressed in percentage term. NPAs= [(Gross or Net NPAs) / Total Advances]*100. NPA’s Relation with Capital Adequacy Ratio(CRAR) Capital adequacy ratio is used to protect depositors and promote the stability and efficiency of financial systems around the world. Correlation Analysis is one of the major objectives of the financial reform agenda was to securitization of the banking capitals by means of capital adequacy norms so that the magnitudes of NPA as a proportion to total deposit (NPA/D) will fall and as a result of that the overall C-D(Credit to deposit) ratio will rise.High level of CRAR to provide sufficient cushion for any unexpected losses, in relation to capital adequacy requirements. NPA’s Relation with efficiency  Lack of operational efficiency in bank to handle the loan portfolio affects profitability, liquidity and solvency position of nationalized banks which in turn affect Non-performing Assets (NPA)......

Words: 319 - Pages: 2

Analytical Study of Npa of Three Nationalised and Three Foreign Banks

...| ANALYTICAL STUDY OF NPA OF THREE NATIONALISED AND THREE FOREIGN BANKS | | | Deep Majumder | Apeksha Shriyan | Non-performing Asset is an important parameter in the analysis of financial performance of a bank as it results in decreasing margin and higher provisioning requirements for doubtful debts. It affects the liquidity and profitability of the bank. The main objective of the present study is to find out the loop holes in the mechanism of controlling NPA. The data has been analysed by using tables and pie charts. The important point to be noted that if the level of NPA declines the profitability of the banks will increase. | INTRODUCTION The banking industry has undergone remarkable changes after the first phase of economic liberalization in 1991 and hence credit management. The primary function of the banks is to lend loans to various sectors such as agriculture, housing, personal and industry and to take deposits. Now the lending of the loans involves higher risk as there is always a risk of default involved. Now the present scenario of lending has changed as banks become more cautious about lending loans, the reason being the rising amount of non-performing assets. Earlier the Narasimham committee-I clearly pointed out that the reduced profitability of the banks are due to the NPA and thus recommended that it should be phased out. NON PERFORMING ASSET An asset, including a leased asset, becomes non- performing when it ceases to generate......

Words: 2637 - Pages: 11

Banking Management

... Executive Summary The last decade has seen many positive developments in the Indian banking sector. The policy makers, which comprise the Reserve Bank of India (RBI), Ministry of Finance and related government and financial sector regulatory entities, have made several notable efforts to improve regulation in the sector. The sector now compares favourably with banking sectors in the region on metrics like growth, profitability and non-performing assets (NPAs). A few banks have established an outstanding track record of innovation, growth and value creation. This is reflected in their market valuation. However, improved regulations, innovation, growth and value creation in the sector remain limited to a small part of it. The cost of banking intermediation in India is higher and bank penetration is far lower than in other markets. India’s banking industry must strengthen itself significantly if it has to support the modern and vibrant economy which India aspires to be. While the onus for this change lies mainly with bank managements, an enabling policy and regulatory framework will also be critical to their success. The failure to respond to changing market realities has stunted the development of the financial sector in many developing countries. A weak banking structure has been unable to fuel continued growth, which has harmed the long-term health of their economies. In this “white paper”, we emphasise the need to act both decisively and quickly to build an enabling,......

Words: 2077 - Pages: 9

How Npa Can Be Reduced

...facilities sanctioned under rehabilitation packages approved by BIFRV term lending institutions. If the rehabilitation program runs smoothly, it may be necessary to make provision even after one year for additional facilities provided statutory auditors are also satisfied about the progress of rehabilitation programmed. If the unit becomes viable the entire outstanding will become standard assets. Although the rehabilitation of sick units is long drawn procedure, it may be encouraged where units are potentially viable and the management is reliable. However non-viable sick units should be liquidated to get funds for recycling    j without avoidable loss of time in decision-making.                                                3) Acquisition of sick unit by healthy units:                                                If a healthy unit acquires a sick unit, the outstanding loan amount of sick unit may be transferred to the healthy unit and the entire NPA may be even wiped    off. Therefore banks should encourage mergers, the acquisition of a sick unit Wherever they felt it may reduce the NPA'S.                                                       4) Compromise with borrowers: A compromise may be called a negotiated settlement in which the borrower agrees to pay a certain amount to the bank after getting certain concessions. A large number of compromise proposals are being approved by banks with a view to reducing the NPA's and recycling the funds instead of......

Words: 922 - Pages: 4