Aveneu Park, Starling, Australia

Non defined as credit facility in respect of the

Non Performing Assets in Commercial
Bank

·      Introduction

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Non Performing assets (NPAs) is affecting the execution of the credit
institutions both financially and psychological. Non performing assets (NPAs)
is not only non-performance but also makes the banker and non-banking
performing as it;

1.       Prevent recycling of funds.

2.       Reject income from assets by
interest.

3.       Making profit by provision.

NPAs come-out in non-performance of a
part of loan where no recovery or less recovery of income to the lender. Its
plays disaster on the mental make-up of the banker where in the banker try to
go slow on lending , fearing future NPAs , it may direction to delay of credit
result in lay off- take of lendable funds. NPAs are in indispensable burden on
the banking industry, Hence the success of a bank depends upon method of
managing NPA and keeping them within tolerance power.

The various feature of well
functioning of financial system , maintenance of NPAs by commercial banks
classified as a important one, NPAs after a certain level are cause for concern
for all entrepreneur involved, because credit is important for economic
development. Banks raise tools not just on new deposits, also by reduplicate
the fund getting from present borrowers. Thus, a loan becomes non-performing,
it recycling of credit and in turn credit creation power of banks. Apart from
this, NPAs shows profitability , since higher NPAs wants higher provisioning
which say a large part of profit require to be kept aside as provision against
loans.

Since 1992, the banking sector rules
were introduced which faced new dares in ever changing scenario. The vital
challenges were “4 Cs” that is credit, customer, computer and capital
restructuring.

Objective and Methodology

Study of Non-performing Assets of
Commercial Banks in India with the following objective,

·        
To
discuss the conceptual framework of non-performing assets in banking.

·        
To
examine the nature and the problem of the non-performing and effect on the
performance of commercial banks in India.

·        
To
highlights the trend Gross NPA and Net NPA in commercial banks in India.

·        
To
loan valuation.

·        
To
strategy for speedy recovery f NPA in commercial banks in India.

·        
To
recovery from big corporate houses with new mechanism.

Non-Performing Asset (NPA)

A “Non-Performing Assets” was defined
as credit facility in respect of the interest with or installment of principal
has yet to ‘past due’ for a specified time period. The specific time period
reduced in four quarters during year ending 31st March 1993, three
quarters during year ending 31st March 1994, two quarters during
year ending 31st March 1995. One quarter the year 31st
March 2004.

     due to improvement
in the payment and settlement systems recovery climate, up-gradation of
technology in       the banking system.
It was decided by RBI to dispense with ‘past due’ or NPA since date concept
with effect from 31st March 2001.

1.      
Interest
and installment of principal remain over due for a period of more than 180 days
( 90 days 31st march 2004) in respect of term loan.

2.      
The
account remains out of order for a period more than 180 days (90 days 31st
march 2004) in respect of an overdraft and cash credit.

3.      
The
bill remains over due for a period more than 180 days (90 days 31st
march 2004) in respect of biils purchased and discounted.

4.      
Interest
and installment of principal remains over due for two harvest season but for a
period not extending two half year in case of prepaid granted for agriculture
purpose

And amount received remains overdue for period more than 180
days (90 days 31st march 2004) in respect of other account.

Loan Assets for Assets Classification

LOAN ASSETS

Performing Assets (PA)
Assets (NPA)

Non-Performing

1.      
Standard Assets

1.      
Sub-Standard
Assets

2.      
Doubtful Assets

 

 

Reasons for NPAs in Banks

INTERNAL FACTORS

·        
Taking
up new projects

·        
Helping
/ promoting.

·        
Cost
overcome during the plan implementation.

·        
Inefficient
management.

·        
Distorted
labour relation.

·        
Technical
problems.

·        
Product
obsolescencs.

·        
Poor
credit Appraisals.

   EXTERNAL FACTORS

·        
Recession

·        
Power
shortage

·        
Price
exacerbation

·        
Exchange
rate fluctuation

·        
Change
in government policy

 

TOP 10 BORROWERS LOAN NOT REPAYMENTS

Borrowers

Loan not repayments

1.      
Kingfishar
Airline

2673

2.      
Winsome Diamond
and Jewellary Co. Ltd

2660

3.      
Electrothem
India Ltd.

2211

4.      
Zoom Developers
Pvt. Ldt.

1810

5.      
Sterling
Bio-Tech Ltd.

1732

6.      
S Kumar
Nationwide Ldt.

1692

7.      
Surya Vinayak
Industries Ldt.

1448

8.      
Corporate Ispat
Alloys Ldt.

1360

9.      
Forever
Precious Jewellary and Diamond

1254

10.   
Verum
Indudtries Ldt.

1197

 

 BANK WISE WILLFUL DEFAULTERS
AACOUNTS

Bank

Willful defaulters accounts

1.      
State Bank Of
India

1625

2.      
Bank Of India

643

3.      
Canara Bank

612

4.      
Punjab National
Bank

410

5.      
Oriental Bank
Of Commerce

382

6.      
Uco Bank

594

NET NPAs OUTSTANDING AS PERCENTAGE TO
NET ADVANCES

Year

Net Advances

Net NPAs(Rs)

Net NPAs(%)

2010

34,970

387

1.10

2011

43,106

418

1.10

2012

50,842

649

1.4

2013

58,797

986

1.70

2014

67,352

1426

2.10

 

Showing NPA recovered by commercial banks of India through
One time Settlements and compromise  ( Rs in Crore )

Item

2010

2011

2012

2013

2014

No of Cases Referred

7,78,833

6,16,018

4,76,073

8,40,691

16,36,957

Amount involved

7,235

5,254

1700

6,600

23200

Amount recovered

112

151

200

400

1400

% of Rs recovered

1.55

2.87

11.80

6.10

6.20

 

NPAs Recovered by
Commercial Bank Of India through DRTs

(Rs in Crore)

Item

2010

2011

2012

2013

2014

No of
Cases Referred

6,019

12,872

13,365

13,408

28,258

Amount
involved

9,797

14,092

24,100

31,000

55,300

Amount
recovered

3,133

3,930

4,100

4,400

5,300

% of Rs
recovered

32.00

27.89

17.00

14.10

9.50

 

NPAs Recovered by Commercial Bank Of
India through SARFAESI

(Rs in Crore)

Item

2010

2011

2012

2013

2014

No of
cases referred

78,366

1,18,642

1,40,991

1,19,537

1,94,700

Amount
involved

14,249

30,604

35,300

68,100

94,600

Amount
recovered

4,269

11,561

10,100

18,500

24,400

% of Rs
recovered

30.00

37.78

28.60

27.10

25.80

 

Impact Of NPA

Narasimham committee that mandate identification and reduce
NPAs to b treated as national priority because NPA directly towards credit risk
that bank may face and their efficiency in allocating resources. Earning and
profitability of banks were affected due to NPA no. of accounts. The most
impact of NPA is change in credit growth to bank performance.

1.      Higher provisioning wants on mounting
NPAs adversely affect on capital adequacy ratio and profitability.

2.      The economic value additions (EVA) by
banks get upset because EVA is equal to net operating profit deducted cost of
capital.

3.      NPAs tend to decrease the value of
share sometimes below their book value in capital market.

4.      NPAs affects risk facing ability of
banks

 

 

 

Gross and NET NPAs Scheduled
Commercial Banks

(Rs in Billion)

 

Advances                                       
Non-Performing Assets

Year(end
march)

gross

Net

Amount

Gross as
% of gross advances

As % of
total assets

Amount

Net %of
net advances

As % of
total assets

1996-97

3016.98

2764.21

473.00

15.70

7.00

223.40

8.10

3.30

1997-98

3526.96

3255.22

508.15

14.40

6.40

237.61

7.30

3.00

1998-99

3994.36

3670.12

587.22

14.70

6.20

280.20

7.60

2.90

1999-00

4751.13

4442.92

604.08

12.70

5.50

300.73

6.80

2.70

2000-01

5587.66

5263.28

637.41

11.40

4.90

325.61

6.20

2.50

2001-02

6809.58

6458.59

708.61

10.40

4.60

355.54

5.50

2.30

2002-03

7780.43

7404.73

687.17

8.80

4.10

296.92

4.00

1.80

2003-04

9020.26

8626.43

648.12

7.20

3.30

243.96

2.80

1.20

2004-05

11526.82

11156.63

593.73

5.20

2.50

217.54

2.00

0.90

2005-06

15513.78

15168.11

510.97

3.30

1.80

185.43

1.20

0.70

2006-07

20125.10

19812.37

504.86

2.50

1.50

201.01

1.20

0.60

2007-08

25078.85

24769.36

563.09

2.30

1.30

247.30

1.00

0.60

2008-09

30382.54

29999.25

683.28

2.30

1.30

315.64

1.10

0.60

2009-10

35449.65

34970.91

846.98

2.40

1.40

387.23

1.10

0.60

2010-11

40120.79

42987.04

979.00

2.50

1.40

417.00

1.10

0.60

2011-12

46655.44

50746.00

1423.0

3.10

1.70

649.00

1.40

0.80

 

 

 

 

 

The Gross and NET NPAs Scheduled
Public Sector Banks

(Rs in Billion)

 

Advances                                       
Non-Performing Assets

Year(end
march)

gross

Net

Amount

Gross as
% of gross advances

As % of
total assets

Amount

Net %of
net advances

As % of
total assets

1996-97

2442.14

2209.22

435.77

17.8

7.8

202.85

9.2

3.6

1997-98

2849.71

2604.59

456.53

16.0

7.0

212.32

8.2

3.3

1998-99

3253.28

2977.89

517.10

15.9

6.7

242.11

8.1

3.1

1999-00

379461

3527.14

530.33

14.0

6.0

261.87

7.4

2.9

2000-01

4421.34

4152.07

546.72

12.4

5.3

279.77

6.7

2.7

2001-02

5093.68

4806.81

564.73

11.1

4.9

279.58

5.8

2.4

2002-03

5778.13

5493.51

540.90

9.4

4.2

248.77

4.5

1.9

2003-04

6619.75

6313.83

515.37

7.8

3.5

193.35

3.1

1.3

2004-05

8778.25

8489.12

483.99

5.5

2.7

169.04

2.1

1.0

2005-06

11347.24

11062.88

413.58

3.6

2.1

145.66

1.3

0.7

2006-07

14644.93

14401.46

389.68

2.7

1.6

151.45

1.1

0.6

2007-08

18190.74

17974.01

404.52

2.2

1.3

178.36

1.0

0.6

2008-09

22834.73

22592.12

449.57

2.0

1.2

211.55

0.9

0.6

2009-10

27334.58

27013.00

599.26

2.2

1.3

293.75

1.1

0.7

2010-11

30798.04

3056.32

746.00

2.4

1.4

360.00

1.2

0.7

2011-12

35003.89

38783.00

1172.00

3.3

1.9

591.00

1.7

1.0

 

 

 

 

 

 

 

Finding and recommendation of NPAs management .

For the sake of convenience of the recommendation are groups
as recommendation of Commercial Banks of India.

Findings

·        
1.
Gross NPAs of Commercial Bank Of India increased from Rs 35,449 Cr In 2010 to
Rs 68,757Cr in 2014.

·        
Net
NPAs of Commercial  Bank Of India
increased  from Rs 34,970 Cr in 2010 to
Rs 67,352 Cr in 2014

·        
NAs
as percentage of Net advance that is lowest 1.10% in 2010 and highest 2.10% in
2014, and average % of 2.10% in 2010-2014 during the time of study.

·        
No.
of cases referred at one time settlements and compromise were 7,78,833 in 2010
and in 2014 that was 16,36,957.

·        
Rs
2,263 Cr of NPAs of Commercial Bank Of India through one time settlement during
2010 to 2014.

·        
Rs
20,863 Cr of NPAs of Commercial Bank Of India through DRTs during 2010 to 2014.

·        
Rs
68,830 Cr of NPAs of Commercial Bank Of India through SARFAESI Act 2010 to
2014.

·        
Poor
recovery and defective lending process is the important factor that is
responsible for the rise of NPAs in Banks.

·        
Write
off is part of legal mechanism to reduce NPAs. That reports less profit on one
hand but reduce the no of BPAs amount on the other hand.

 

 

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