a study on non performing assets of commercial bank of india

8/12/2019 a study on non performing assets of commercial bank of india

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PROJECT REPORT ON

A STUDY OF NON PERFORMING ASSETS IN INDIAN COMMERCIAL

BANKS

A STUDY OF NON PERFORMING ASSETS IN INDIAN COMMERCIAL BANKS

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SUBMITTED BY

RAVI JAISWAL

(13/154)

(213!215)

Submitted in fulfillment of the requirement of award of PGDM degree at

ICBM ! SC"OOL OF BUSINESS E#CELLENCE

"YDERABAD

DECLARATION

I$ R%&' J%'%* student of ICBMS!hool of Business E"!ellen!e# $%derabad# hereb%

de!lare that the &ro'e!t re&ort entitled +A STUDY OF NON PERFORMING


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ASSETS IN INDIAN COMMERCIAL BANK,S-is the wor( underta(en b% me for

+CENTRAL BANK OF INDIA- $$%derabad during the a!ademi! %ear )*+,)*+-

and submitted to ICBMSBE. It is an original and bonafide re!ord of wor( done b%

me during the !ourse of summer internshi& &ro'e!t wor( of PGDM &rogram and all

!ontents and fa!ts are &re&ared and &resented b% me without an% bias.

I also de!lare that it has not &re/iousl% formed the basis for the award to me for an%

degree0di&loma asso!iate shi fellowshi& or other similar title# of an% institute0so!iet%.

P*%.0 ( RAVI

JAISWAL )

D% 0


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CERTIFICATE

This is to !ertif% that the &ro'e!t entitled +A STUDY OF NON PERFORMING

ASSETS IN INDIAN COMMERCIAL BANKS- with referen!e to C%* B%

6 I7'%$ 8%* B%.9$ ":7%;%7being submitted b% R%&' J%'%*$ a student of

ICBM!SBE bearing 1oll 2o 13/154 and was su!!essfull% !ondu!ted at C%*

B% 6 I7'%$ 8%* B%.9$ ":7%;%7 from +) Ma%3+4 to )5 6une3+4 for the

&artial fulfillment for the award of Post Graduate Di&loma in Management 7PGDM8.

To the best of m% (nowledge this is an original &ie!e of wor(.

I wish his all the /er% best in his !areer endea/ors.

P6< S % C%* B% O6 I7'% $8%* B%.9$ $%derabad for &ro/iding ano&&ortunit% to gain /aluable &ra!ti!al e"&erien!e in the !om&an%# b% underta(ing the

!urrent stud%.

S&e!ial than(s goes to m% mentor A< P6< G< K'9% and also than(s toP6

C92C;USI92

G;9SS:1Y

:22EU1E +

:22EU1E )

*? @


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@ BIB;I9G1:P$Y @? F

Table No. Title of table Page No.

+.+ Publi! se!tor Ban(s )**5)**F 49 50

+.) Pri/ate se!tor Ban(s )**5)**F 50 - 51

+., Publi! se!tor Ban(s )**F)*+* 51 52

+.4 Pri/ate se!tor Ban(s )**F)*+* 52 53

+.- Publi! se!tor Ban(s )*+*)*++ 54 55

+.@ Pri/ate se!tor Ban(s )*+*)*++ 55 56

+. Publi! se!tor Ban(s )*++)*+) 56 57

+.5 Pri/ate se!tor Ban(s )*++)*+) 57 58

+.F Publi! se!tor Ban(s )*+))*+, 58 59

+.+* Pri/ate se!tor Ban(s )*+))*+, 60

+.++ Publi! se!tor Ban(s )*+,)*+4 61 62

+.+) Pri/ate se!tor Ban(s )*+,)*+4 62 63

).+ :gri!ulture ;oan of Publi! Se!tor Ban(s 64 65

).) Medium and small s!ale industries ;oan of Publi! Se!tor Ban(s 65 66

)., 1etails ;oan of Publi! Se!tor Ban(s 67

,.+ C:G1 68 69


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C"APTER!1INTRODUCTION


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INTRODUCTION0!

The ban(ing s%stem &la%s a signifi!ant and !ommendable role in the growth and

de/elo&ment of e!onom% and its !om&onents. The ban(ing s%stem mobili=es the funds

from the sur&lus units and distributes them to defi!it se!tors for their &rodu!ti/e and

effi!ient utili=ation. The ban(ing se!tor in India !om&rise of &ubli! se!tor ban(#

&ri/ate se!tor ban(s and foreign se!tor ban(s. Publi! se!tor ban(s are those in whi!h

ma'orit% of equit% holding is with go/ernment and in!ludes SBI grou& 7State ban( and

its subsidiaries8 and nationali=ed ban(s. Modern trade and !ommer!e would almost

be im&ossible without the a/ailabilit% ofsuitable ban(ing ser/i!es and it fa!ilitates it

in innumerable wa%s. Ban(s &la% an im&ortant role in the mobili=ation# allo!ation of

!a&ital# &rogress and de/elo&ment of an e!onom%. The modern ban(ing is not onl%

!onfined to traditional business of the a!!e&ting and lending mone% but ha/e

di/ersified their a!ti/ities into new fields of o&erations li(e mer!hant ban(ing# leasing#

housing finan!e# mutual funds and /enture !a&ital. The% ha/e introdu!ed a number of

inno/ati/e s!hemes for mobili=ing de&osits. In addition to the abo/e the% are

&ro/iding /aluable ser/i!es to their !ustomers# issuing drafts# tra/eler !heques# gift

!heques# a!!e&ting /aluables for safe !ustod% and modern ban(ing fa!ilities.

The main business of ban(ing is to a!!e&t de&osits for the &ur&ose of lending# so it

mobili=es funds b% issuing !laims against itself and lends this mone% to others in the

form of loans whi!h are assets for ban(s. The liabilities and assets of ban(s are in the

form of !laims unli(e other forms of business. The mobili=ed mone% is lent in the

form of loans whi!h is ma'or and main a!ti/it% of ban(ing and !om&rises the largest

asset in the asset &ortfolio of the ban(.

The mone% lent are !alled loans or ad/an!es whi!h earn in!ome for the ban( in the


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form of interest# in addition to this ban(s in/ests a &ortion of mone% in se!urities 7both

debt and equit%8 and a minor &ortion of total funds is in/ested in real assets li(e land#

building for !arr%ing the o&erations of ban(ing.

The mone% is ad/an!ed in the form of loans and in/ested in se!urities in e"&e!tation

of

in!ome and re&a%ment of &rin!i&le at &eriodi! inter/als as &er the !ontra!tual

obligations

between the lender and borrower. The assets whi!h is &erforming as &er the

!ontra!tual

obligations i.e. &a%ment of interest and re&a%ment of &rin!i&al as and when it fall due#

it is !alled &erforming asset or standard asset. The asset whi!h fails to meet obligation

of &a%ment of interest and re&a%ment of &rin!i&al within a s&e!ified date from due

date is !alled non &erforming asset or non standard asset.

2on&erforming asset 72P:8 is one of the ma'or !on!ern and &roblem for ban(s in

India.

2P:s refle!t the degree of ris( and qualit% of assets of ban( and &rofitabilit% of a

ban(. :

high le/el of 2P:s suggests high &robabilit% of a large number of !redit defaults that

affe!t the &rofitabilit% and networth of ban(s and also erodes the /alue of the asset.

The 2P: growth in/ol/es redu!ed in!ome from assets and the ne!essit% of &ro/isions#

whi!h redu!es the o/erall &rofits and shareholders /alue . The le/el of non&erforming

assets is at the alarming rate in Indian ban(ing !om&arati/el% to other !ountries. This

le/el is mu!h higher in !ase of &ubli! se!tor ban(s due to their dire!tional !redit to

&riorit% se!tor &ro'e!ts and so!ial de/elo&ment &ro'e!ts. The &ubli! se!tor ban(s &la%

an immense role in the de/elo&ment and growth from the /er% in!e&tion. The &ubli!

se!tor ban(s whi!h were o&erating on so!ial model b% mobili=ing the huge resour!es

and dire!ting them to so!ial and &riorit% se!tors for so!ial and e!onomi! de/elo&ment


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of the !ountr%. Due to their so!io e!onomi! role# there was high le/el of 2P: s s in

their asset &ortfolio. :fter the liberali=ation in +FF+# the% fa!ed high le/el !om&etition

from &ri/ate and foreign ban(s. Due to this fier!e !om&etition and !hallenge on their

sur/i/al# the% were for!ed to im&ro/e the &erforman!e and wea(ness. The biggest

wea(ness and &roblem the% fa!ed was huge 2P: S in their &ortfolio. This stud% aims

to !he!( what is the &osition and le/el of non&erforming assets of nationali=ed ban(s

whi!h is !ore and heart of &ubli! se!tor ban(ing in India and whi!h handles the ma'or

&ortion of ban(ing business in India.

OBJECTIVES OF T"E STUDY0!P'>%: ;.'&0

The &rimar% ob'e!ti/e of the ma(ing re&ort is

+To Stud% the !hallenges fa!ed b% &ubli! and &ri/ate se!tor ban(s with 2P:3s in

India.

) To anal%=e the 2P: &osition of sele!ted &ubli! and &ri/ate se!tor ban(s in India.

S.7%: ;.'&0

The se!ondar% ob'e!ti/es of &re&aring this re&ort are


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+ To understand what is 2onPerforming :ssets and what are the underl%ing reasons

for

the emergen!e of the 2P:s.

) To understand the im&a!ts of 2P:s on the o&erations of the Publi! and Pri/ate

Se!tor Ban(s.

, To (now what ste&s are being ta(en b% the Indian ban(ing se!tor to redu!e the

2P:sH

SCOPE OF STUDY0!

+0!Con!e&t of 2onPerforming assets

) Guidelines

, Im&a!t of 2P:3s

4 1easons for 2P:3s

- Pre/enti/e Measures

@ Tools to manage 2P:3s

The s!o&e of the stud% is limited to the anal%sis of 2P:s of all the nationali=ed ban(s

o/er the &eriod of )**F)*+4. It e"amines trend of Gross 2P:s# Gross 2P:s J and

assess the qualit% of 2P: management and ran( them as &er mean of last si" %ears.

The data has been anal%=ed using &er!entage method# and sele!ted statisti!.


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RESEARC" MET"ODOLGY0!

The resear!h methodolog% means the wa% in whi!h we would !om&lete

our &ros&e!ted tas(. Before underta(ing an% tas( it be!omes /er% essential for an%one

to determine the &roblem of stud%. I ha/e ado&ted the following &ro!edure in

!om&leting m% re&ort stud%.

+. ormulating the &roblem

). 1esear!h design

,. Determining the data sour!es

4. :nal%=ing the data

-. Inter&retation

@. Pre&aring resear!h re&ort

7+) F>?*%'@ 9 =;*>I am interested in the ban(ing se!tor and I want to

ma(e m% future in the ban(ing se!tor so de!ided to ma(e m% resear!h stud% on the

ban(ing se!tor. I anal%=ed first the fa!tors that are im&ortant for the ban(ing se!tor

and I !ame to (now that &ro/iding !redit fa!ilit% to the borrower is one of the

im&ortant fa!tors as far as the ban(ing se!tor is !on!erned. 9n the basis of the

anal%=ed fa!tor# I felt that the im&ortant issue right now as far as the !redit fa!ilities

are &ro/ided b% ban( is non&erforming assets. I started (nowing about the basi!s of

the 2P:s and de!ided to stud% on the 2P:s. So# I !hose the to&i!

+N!P6>'@ A 9 @% .9%**@ ;6 9 P?;*'. %7 P'&% S.

B%-''@ 9 7%% ?. The data sour!e !an be &rimar% or se!ondar%. The

&rimar% data are those data whi!h are used for the first time in the stud%. $owe/er

su!h data ta(e &la!e mu!h time and are also e"&ensi/e.


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TIME FRAME0!

The time frame has been ta(en 4@ da%s.

LIMITATION OF T"E STUDY0!

The limitations that I felt in m% stud% are

+It was !riti!al for me to gather the finan!ial data of the e/er% ban( of the Publi! and

Pri/ate Se!tor Ban(s so the better e/aluations of the &erforman!e of the ban(s are

not &ossible.

)Sin!e m% stud% is based on the se!ondar% data# the &ra!ti!al o&erations as related to

the 2P:s are ado&ted b% the ban(s are not learned.

,Sin!e the Indian ban(ing se!tor is so wide so it was not &ossible for me to !o/er all

the ban(s of the Indian ban(ing se!tor.


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C"APTER!2

T"EROTICAL

BACKGROUND

REVIEW OF LITERATURE


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CONCEPTUAL AND T"EORETICAL IDEA OF NPA,

N!P6>'@ A (NPAS) M%'@

:ssets whi!h generate &eriodi!al in!ome are !alled as &erforming assets. :ssets whi!h

do not generate &eriodi!al in!ome are !alled as non&erforming assets. :n asset#

in!luding a leased asset# be!omes non&erforming when it !eases to generate in!ome

for the ban(. : non&erforming asset 72P:8 is a loan or an ad/an!e whereJ

i. interest and0 or instalment of &rin!i&al remain o/erdue for a &eriod of more than F*

da%s in res&e!t of a term loan#

ii. The a!!ount remains Kout of order Kfor more than F* da%s in res&e!t of an

9/erdraft0Cash Credit 79D0CC8#

iii. The bill remains o/erdue for a &eriod of more than F* da%s in the !ase of bills

&ur!hased and dis!ounted#

i/. The instalment of &rin!i&al or interest thereon remains o/erdue for two !ro&

seasons for short duration !ro&s#

/. The instalment of &rin!i&al or interest thereon remains o/erdue for one !ro& season

for

;ong duration !ro&s#

/i. The amount of liquidit% fa!ilit% remains outstanding for more than F* da%s# in

res&e!t of a se!uriti=ation transa!tion underta(en in terms of guidelines on


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se!uriti=ation dated ebruar% +# )**@.

/ii. in res&e!t of deri/ati/e transa!tions# the o/erdue re!ei/ables re&resenting &ositi/e

mar( to mar(et /alue of a deri/ati/e !ontra!t# if these remain un&aid for a &eriod of

F* da%s from the s&e!ified due date for &a%ment.

Ban(s should# !lassif% an a!!ount as 2P: onl% if the interest due and !harged during

an%

Luarter is not ser/i!ed full% within F* da%s from the end of the quarter. :n% amount

due to the ban( under an% !redit fa!ilit% is Ko/erdue if it is not &aid on the due date

fi"ed b% the ban(.

C%? 6 C%' 6 N!P6>'@ A

E%* .%?0 2atural !alamities and !limati! !onditions$ 1e!ession# !hanges in

Go/ernment &oli!ies !hanges in e!onomi! !onditions# Industr% related &roblems#

Im&a!t of liberali=ation on industries# Te!hni!al &roblems

I%* .%?0 Internal defaulters$ a!ult% &ro'e!ts# Most of the &ro'e!t re&orts are

ground realities# &ro&er lin(ages# &rodu!t &ri!ing et!. Some a&&roa!h for the he!(N of

starting a /enture# with &oor (nowledge of &rodu!t ris(s# o/er de&ended on &oorl%

&aid (illed wor(ers and te!hni!ians# Building u& &ressure for san!tions# Ine&t handling

b% ban(er3s la!( of &rofessionalism and a&&raisal standards# 2onobser/an!e of

s%stem# &ro!edures and noninsisten!e of !ollaterals et!# ;a!( of &ost san!tion

monitoring# un!he!(ed di/ersions.

ASSET CLASSIFICATION

C%@' 6 NPA


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Ban(s are required to !lassif% non&erforming assets further into the following three

Categories based on the &eriod for whi!h the asset has remained non&erforming and

the

1eali=e abilit% of the dues

i. Substandard :ssets

ii. Doubtful :ssets

iii. ;oss :ssets

S?;%7%7 A


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auditors or the 1BI ins&e!tion but the amount has not been written off wholl%. In other

words# su!h an asset is !onsidered un!olle!tible and of su!h little /alue that its

!ontinuan!e as a ban( able asset is not warranted although there ma% be some sal/age

or re!o/er% /alue.

T:= 6 NPA

G NPA

Gross 2P:s are the sum total of all loan assets that are !lassified as 2P:s as &er 1BI

Guideline as on Balan!e Sheet date. Gross 2P: is ad/an!e whi!h is !onsidered

Irre!o/erable# for ban( has made &ro/isions# and whi!h is still held in ban(sO boo(s of

a!!ount Gross 2P: refle!ts the qualit% of the loans made b% Ban(s. It !onsists of all

the

nonstandard assets li(e as substandard# doubtful# and loss assets. It !an be !al!ulated

withthe hel& of following ratio

Gross 2P:s 1atio Gross 2P:s 0 Gross :d/an!es

N NPA

2et 2P:s are those t%&e of 2P:s in whi!h the ban( has dedu!ted the &ro/ision

regarding

2P:s.2et 2P: shows the a!tual burden of ban(s. Sin!e in India# ban( balan!e sheets

!ontain a huge amount of 2P:s and the &ro!ess of re!o/er% and write off of loans is

/er%

Time !onsuming# the &ro/isions the ban(s ha/e to ma(e against the 2P:s a!!ording

to the Central ban( guidelines# are quite signifi!ant. That is wh% the differen!e

between gross and net 2P: is quite high. It !an be !al!ulated b% following#

2et 2P:s Gross 2P:s ? Pro/isions 0 Gross :d/an!es ? Pro/isions


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C%? 6 NPA

The fa!tors attributed for the !ause of 2P: !an be

Im&ro&er sele!tion of borrower3s a!ti/ities#

monitoring# ;a!( of &ro&er follow u& b% ban(# 1e!ession in the mar(et# Due to natural

!alamities and other un!ertainties .

I>=%. 6 NPA, ;%'@ =%'

The effi!ien!% of a ban( is not refle!ted onl% b% the si=e of its balan!e sheet but also

b% the le/el of return on its assets. The 2P:s do not generate interest in!ome for

ban(s. :t the sametime# ban(s are required to &ro/ide &ro/isions for 2P:s from their

!urrent &rofits. The 2P:s ha/e deleterious im&a!t on the return on assets in the

following wa%s

a. The interest in!ome of ban(s will fall and it is to be a!!ounted onl% on re!ei&tbasis.

b. Ban(s &rofitabilit% is affe!ted ad/ersel% be!ause of the &ro/iding of doubtfuldebts and

Consequent to writing it off as bad debts.

!. 1eturn on in/estments 719I8 is redu!ed.

d. The !a&ital adequa!% ratio is disturbed as 2P:s enter into its !al!ulation.

e. The !ost of !a&ital will go u&.

f. :sset and liabilit% mismat!h will widen.

g. It limits re!%!ling of the funds

C 6 N=6>'@ %

2onPerforming :ssets affe!t the &rofitabilit%# liquidit% and !om&etiti/e fun!tioning

of ban(s and de/elo&mental finan!ial institutions and finall% the &s%!holog% of the

ban(ers in res&e!t of their dis&osition towards !redit deli/er% and !redit e"&ansion.


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2onPerforming assets !ause high !ost for the ban(# as these assets do not im&ro/e

an% of the following

+Profits

)Ca&ital adequa!%

,1edu!tion of other !osts

4Ca&ital mar(et &er!e&tion

The impact of NPAs on the profitability of the banks is summarized in the

following points:-

+. R7?. %'@ .%=%.': 6 9 %02P: s redu!ed the earning !a&a!it% of

the assets and as a result of this return on assets get affe!ted.

). B*. .%='%*02P: s !arr% ris( weight of +** 7to the e"tent it is un!o/ered8.

Therefore the% blo!( !a&ital for maintaining Ca&ital adequa!%. :s 2P: s do not earn

an% in!ome# the% are ad/ersel% affe!ting Ca&ital :dequa!% 1atioN of the ban(.

,. I.?. 6 %77''%* .0 Carr%ing of 2P:3s require in!urren!e of #Cost of

Ca&ital :dequa!%# Cost of funds in 2P:3s and 9&erating !ost for monitoring and

re!o/ering 2P:3s.

4. R7?. EVA0


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V%'? S= 6 R7?.'@ NPA0!

+. Pre&are a loan re!o/er% &oli!% and strategies for redu!ing 2P:s.

). Create s&e!ial re!o/er% !ells as head offi!e0Qonal offi!e0 regional offi!e le/els

identif% !riti!al bran!hes for re!o/er%

,. i" targets of re!o/er% and draw time bound a!tion &rogrammer

4. Sele!t &ro&er te!hniques for sol/ing the &roblem of ea!h 2P:

-. Monitor im&lementing of the time bound a!tion &lan

@. Ta(e !orre!ti/e ste&s when e/er found ne!essar% while monitoring the a!tion &lan

and ma(e !hanges in the original &lan if ne!essar%

W9: % NPA '.%'@

Growing 2P:s is the biggest !hallenge for the ban(ing industr%. : slowing e!onom%

is bound to see an in!rease in 2P:s. 2otwithstanding the e!onomi! wea(ness# the

2P:s of ban(s ha/e registered in!reases sin!e Y )*+) whi!h is a !ause of !on!ern

for us. The 2P: in!reases ha/e been more &ronoun!ed in !ase of the &ubli! se!tor

ban(s. There are /arious fa!tors affe!ting the asset qualit% of SCBs ad/ersel%# su!h as

the !urrent slowdown global and domesti!# &ersistent &oli!% log'ams# dela%ed

!learan!es of /arious &ro'e!ts# aggressi/e e"&ansion b% !or&orate during the high

growth &hase et!. $owe/er# it is the short!omings in the !redit a&&raisal# disbursal and

re!o/er% me!hanism of the ban(s# besides the e!onomi! slowdown that !an in large

&art be held res&onsible for their high le/els of 2P:s. ;a!( of robust /erifi!ation and

s!reening of a&&li!ation# absen!e of su&er/ision following !redit disbursal and

shortfalls in the re!o/er% me!hanism ha/e led to the deterioration of asset qualit% of

these ban(s.


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C7' R%'@ %7 A ?%*':

;et us now see the relationshi& between !redit ratings and asset qualit% of the ban(s.

Credit ratings are forward loo(ing o&inion e"&ressed b% a !redit rating agen!% on theabilit% and willingness of a borrower to &a% his dues in full and on time. More

s&e!ifi!all%# !redit ratings are relati/e ran(ing of borrowers based on the !redit rating

agen!%3s assessment of !reditworthiness of the borrowers within a gi/en uni/erse.

Credit ratings ma% also indi!ate the !redit ris( asso!iated with a s&e!ifi! !redit fa!ilit%

or a s&e!ifi! se!urit%.

$ow does a !redit rating differ from !redit s!ores assigned b% !redit information

!om&aniesH Both !redit rating and !redit s!ores are a measure of !redit ris( and refle!t

the /ar%ing le/el of &robabilit% of default of a gi/en borrower. The differen!e is in the

methodolog% used b% them to assess the !redit ris(.


29/85

summar% indi!ator of ris(s asso!iated with a !redit e"&osure. Su!h a rating framewor(

is the basi! module for de/elo&ing a !redit ris( management s%stem and all ad/an!ed

models0a&&roa!hes are based on this stru!ture.3

The !redit rating assigned b% a ban( !ould be used for the following

a. Indi/idual !redit sele!tion ? to de!ide whether to lend or not to a &arti!ular

borrower.

b. Pri!ing 7!redit s&read8 and s&e!ifi! features of the loan fa!ilit%


30/85

indi!ators# em&lo%ment indi!ators and beha/ioral indi!ators.

Sin!e !redit ratings0s!ores are a measure of !redit ris(# it has a strong lin( with 2P:s.

;oans e"tended b% ban(s are !lassified as 2P:s when the ban( !onsiders that

borrower has not ser/i!ed his debt or is unli(el% to ser/i!e his debt as &er the terms

and !onditions of the !ontra!t. :s su!h 2P:s are manifestation of !redit ris(. Sin!e

!redit ratings are relati/e measure of !redit ris(# the li(elihood of default of a borrower

with a higher !redit rating should be lower than a borrower with a lower !redit rating.

:s a !orollar%# a higher &ro&ortion of borrowers with good !redit rating in the boo(s

of a ban( should translate into lower le/el of 2P:s.


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agen!ies are !arried out b% the SEBI under Se!urities and E"!hange Board of India

7Credit 1ating :gen!ies8 1egulations# +FFF. The regulations issued b% SEBI !o/er

/arious as&e!ts /i=.# registration of rating agen!ies# fit and &ro&er !riteria for rating

agen!ies# rating &ro!ess and methodolog% and its re!ords# trans&aren!% and

dis!losures# a/oidan!e of !onfli!t of interest# !ode of !ondu!t# et!.


32/85

O;.'&':0 Basel regulations &res!ribe that the methodolog% for assigning !redit

ratings must be rigorous# s%stemati!# and sub'e!t to some form of /alidation 7ba!(

testing et!.8 based on histori!al e"&erien!e. urther# the ratings should be sub'e!ted to

!ontinuous sur/eillan!e.

1eser/e Ban( assesses this !riteria in terms of fa!tors li(e !redit rating agen!%3s

definition of default and a!tion ta(en on default# histori!al default rates# !ordialit% of

default rates 7i.e.# lower the rating higher the default &robabilit%8# stabilit% of the

ratings 7i.e.# &robabilit% that a gi/en rating remain un!hanged during a gi/en &eriod8#

&redi!ti/e abilit% of the ratings# im&ro/ement to the rating methodolog% to refle!t

!urrent trends et!. 1eser/e Ban( loo(s into the default studies# transition matri!es#

Gini Coeffi!ient et!. of !redit rating agen!ies to !ondu!t the abo/e assessment.

To ensure standardi=ation of default rates# the 1eser/e Ban( of India has mandated

that all rating agen!ies shall use a uniform definition of default as far as the ban( loan

ratings are !on!erned.

I7=7.0 Basel norms state that a !redit rating agen!% should be inde&endent

and not sub'e!ted to &oliti!al or e!onomi! &ressures while rating. The rating &ro!ess

should also be free from !onfli!t of interest that ma% arise due to shareholding &attern

or !om&osition of board of dire!tors.

To assess whether a rating agen!% is inde&endent# 1eser/e Ban( of India e/aluates the

ownershi& and organi=ation stru!ture 7&resen!e of inde&endent dire!tors in the Board

> rating !ommittees8# Inde&enden!e of indi/iduals i.e. !onfli!t of interestbetween

rating fee and qualit% of ratings# !onfli!t of interest with shareholders# !onfli!t of

interest at rating !ommittee le/el# se&aration of business de/elo&ment and rating

a!ti/ities# se&aration of rating business from other business a!ti/ities.

I%'%* A.. / T%=%.:0 Under this &arameter# 1eser/e Ban( e/aluates

whether a !redit rating agen!% ma(es ne!essar% dis!losures with regard to rating

methodologies and rating rationales to both domesti! as well as international users

without an% differentiation.

D'.*?0 During the a!!reditation &ro!ess# the 1eser/e Ban( assesses whether a


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!redit rating agen!% ma(es the following dis!losures rating methodologies# in!luding

the definition of default# the time hori=on# and the meaning of ea!h ratingJ the a!tual

default rates e"&erien!ed in ea!h rating !ategor%J and the transitions of the rating. In

addition the Se!urities and E"!hange Board of India has also mandated a detailed set

of dis!losures b% !redit rating agen!ies.

R?.0 :!!ess to suffi!ient resour!es is an im&ortant fa!tor in determining a

!redit rating agen!ies abilit% to furnish qualit% ratings. 1eser/e Ban( ma(es an

assessment as to whether a !redit rating agen!% has suffi!ient !a&abilities in terms of

human resour!es i.e.# number of em&lo%ees# their qualifi!ations and e"&erien!e et!.

urther# 1eser/e Ban( also loo(s into the te!hnologi!al !a&abilities of the !redit rating

agen!ies before de!iding u&on their a!!reditation. In addition# 1eser/e Ban( requires

!redit rating agen!ies to ha/e a!!ess to /arious sour!es of information on e!onom%#

se!tors# !om&anies# et!.

C7';'*':0 Credibilit% of a rating agen!% is assessed based on the degree of

a!!e&tabilit% of ratings of a rating agen!% b% inde&endent &arties /i=.# in/estors#

insurers# trading &artners et!. 1eser/e Ban( also loo(s into the internal &ro!edures &ut

in &la!e b% the !redit rating agen!ies to &re/ent misuse of !onfidential information

a!quired b% them during their rating e"er!ise. Credit rating agen!%3s adheren!e to

!ode of !ondu!t &res!ribed b% Se!urities and E"!hange Board of India# International

9rgani=ation of Se!urities Commissions 7I9SC98 and :sso!iation of Credit 1ating

:gen!ies in :sia 7:C1::8 are also anal%=ed to determine the !redibilit% of a !redit

rating agen!%.

In addition to a!!rediting !redit rating agen!ies# Basel II framewor( requires that the

ratings assigned b% !redit rating agen!ies shall be ma&&ed to a&&ro&riate ris( weights

a/ailable under the standardi=ed ris( weighting framewor(. Basel II framewor(

requires that national regulators should de!ide whi!h rating !ategories !orres&ond to

whi!h ris( weights. The ma&&ing &ro!ess should be ob'e!ti/e and should result in a

ris( weight assignment !onsistent with the le/el of !redit ris( refle!ted in the ratings.

In India the 1eser/e Ban( has &res!ribed uniform ris( weights for all rating agen!ies.


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Su!h uniform ris( weights are &res!ribed due to relati/el% low &enetration of ratings

and absen!e of suffi!ient histori!al default data.

In addition to the detailed assessment at the time of a!!reditation# the 1eser/e Ban( of

India also !ondu!ts an annual re/iew of a!!reditation of !redit rating agen!ies to

assess their eligibilit% for !ontinued a!!reditation under Basel II framewor(. During

the re/iew e"er!ise# 1eser/e Ban( e/aluates the &ro!esses as well as the out!omes.

The !umulati/e default rates of rated &ortfolio of indi/idual rating agen!% is e/aluated

in !om&arison with the ben!hmar( !umulati/e default rates &ro&osed under the Basel

II framewor(. The !umulati/e default rates of the ban( loan ratings in India are higher

than the ben!hmar(s &ro/ided b% Basel II framewor(.

" >@ ;% .7' %==%'%* %7 CRA, %>

There are essentiall% four issues here where ban(s and C1:s need to wor( together

whi!h will also hel& ban(s to deris( their own &ortfolios as well as monitor their

loans more effe!ti/el%.

irst# Indian ban(s in !onformit% with the Basel II norms ha/e been e"tensi/el% using

the !redit assessment o&inion of e"ternal rating agen!ies for !al!ulating ris( based

!a&ital requirements. E/en though ban(s do not require !redit rating b% e"ternal rating

agen!ies for !al!ulating their !a&ital requirement for all loans 7onl% loans abo/e +*

!rore require !redit rating8# some are seemed to be as(ing !om&anies to get a rating.

This e/identl% is being done to enhan!e their !redit assessments. Luite !learl%# there is

re!ognition of the /alue brought to the table b% C1:s for ban(s whi!h is being used

for &ur&oses be%ond !a&ital adequa!%. $owe/er# ban(s should ta(e into a!!ount the

!ost to the !om&anies and balan!e it against the benefits.


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rating. This will be one useful !he!( whi!h ban(s !an !reate for their entire &ortfolio.

Se!ond# I do see a lot of use in the &rodu!ts offered b% C1:s and there is need to see

how we !an further integrate the two models of !redit ris( assessment of ban(s and

C1:s. There is a suggestion that ban(s should deris( their own &ortfolio b% as(ing

!om&anies loo(ing for long term finan!e to &artl% borrow from the !or&orate debt

mar(et. This wa% the >% '**'@. of C1:s whi!h is mandator% for bond

mar(et borrowing would be an additional in&ut that would !ome in hand% for ban(s

when the% are lending mone% to the entit%. This is e/en more &ertinent toda% be!ause

of :;M issues and the demand for funds that would arise on!e the e!onom% &i!(s u&

and infrastru!ture starts to boom. Ban(s ma% not be able to full% meet the demand for

funds to the borrowers.


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a !redit rating. :s far as the ban( loans are !on!erned there is no su!h mandator%

requirement# e/en though the !a&ital requirements of ban(s with regard to !or&orate

loans are de&endent on !redit ratings. Ban(s ma% at their dis!retion require borrowers

to obtain !redit ratings.

The ad/antages of issuer&a% model is that# ratings on!e assigned and a!!e&ted# are

dis!losed &ubli!l% and is a/ailable for users at free of !harge. Small in/estors and

indi/iduals who wish to in/est in debt se!urities need not &a% for a!!essing the !redit

ratings. :nother ad/antage of this model !ould be that issuers ma% be more

forth!oming in sharing information as the% are the ones who ha/e !ommissioned the

rating. $owe/er# there is an inherent !onfli!t of interest in this model. Sin!e the

in!ome and &rofits of !redit rating agen!ies are de&endent u&on the /olume of ratings

the% assign# there ma% be a tenden!% to assign inflated ratings to a!quire and retain

!lients.

The inan!ial Crisis Inquir% Commission 7)*++# Page )+)8# whi!h went into the

!auses of the finan!ial and e!onomi! !risis in the United States# has !on!luded that

R.the business model under whi!h firms issuing se!urities &aid for their ratings

seriousl% undermined the qualit% and integrit% of those ratingsJ the rating agen!ies

&la!ed mar(et share and &rofit !onsiderations abo/e the qualit% and integrit% of their

ratings3. Su!h !on!lusions on the !ontribution of !redit rating agen!ies to the re!ent

finan!ial !risis ha/e led to !alls for tougher regulator% o/ersight on !redit rating

agen!ies.

To !on!lude# we !an see that among the &roa!ti/e ste&s that a ban( !an ta(e to stem

the &roblem of in!reasing le/el of 2P:s and stressed assets# use of !redit ratings is an

im&ortant one. Ban(s !an use the e"ternal ratings as third &art%# &rofessional

assessment# either as a standalone basis or in !ombination with their own internal

ratings. $owe/er# ban(s need to balan!e the use of e"ternal ratings# as the re!ent

finan!ial !risis has highlighted the dangers of o/er de&enden!e on ratings.

NPA ! I>=%. B%*%. S9


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The &roblem of 2P:s in the Indian ban(ing s%stem is one of the foremost and the

most formidable &roblems that had im&a!t the entire ban(ing s%stem. $igher 2P:

ratio trembles the !onfiden!e of in/estors# de&ositors# lenders et!. It also !auses &oor

re!%!ling of funds# whi!h in turn will ha/e deleterious effe!t on the de&lo%ment of

!redit. The nonre!o/er% of loans effe!ts not onl% further a/ailabilit% of !redit but also

finan!ial soundness of the ban(s.

P6'%;'*': 2P:s &ut detrimental im&a!t on the &rofitabilit% as ban(s sto& to earn

in!ome on one hand and attra!t higher &ro/isioning !om&ared to standard assets on

the other hand. 9n an a/erage# ban(s are &ro/iding around )- to ,* additional

&ro/ision on in!remental 2P:s whi!h has dire!t bearing on the &rofitabilit% of the

ban(s.

A (C7') .%.' The in!reased 2P:s &ut &ressure on re!%!ling of funds

and redu!es the abilit% of ban(s for lending more and thus results in lesser interest

in!ome. It !ontra!ts the mone% sto!( whi!h ma% lead to e!onomi! slowdown.

L'%;'*': M%%@>0In the light of high 2P:s# Ban(s tend to lower the interestrates on de&osits on one hand and li(el% to le/% higher interest rates on ad/an!es to

sustain 2IM. This ma% be!ome hurdle in smooth finan!ial intermediation &ro!ess and

ham&ers ban(s3 business as well as e!onomi! growth.

C%='%* A7?%.: :s &er Basel norms# ban(s are required to maintain adequate

!a&ital on ris(weighted assets on an ongoing basis. E/er% in!rease in 2P: le/el adds

to ris( weighted assets whi!h warrant the ban(s to shore u& their !a&ital base further.

Ca&ital has a &ri!e tag ranging from +) to +5 sin!e it is a s!ar!e resour!e.

S9%9*7, .6'7. 2ormall%# shareholders are interested to enhan!e /alue of

their in/estments through higher di/idends and mar(et !a&itali=ation whi!h is &ossible

onl% when the ban( &osts signifi!ant &rofits through im&ro/ed business. The in!reased


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2P: le/el is li(el% to ha/e ad/erse im&a!t on the ban( business as well as &rofitabilit%

thereb% the shareholders do not re!ei/e a mar(et return on their !a&ital and sometimes

it ma% erode their /alue of in/estments. :s &er e"tant guidelines# ban(s whose 2et

2P: le/el is - > abo/e are required to ta(e &rior &ermission from 1BI to de!lare

di/idend and also sti&ulate !a& on di/idend &a%out.

P?;*'. .6'7. Credibilit% of ban(ing s%stem is also affe!ted greatl% due to

higher le/el 2P:s be!ause it sha(es the !onfiden!e of general &ubli! in the soundness

of the ban(ing s%stem. The in!reased 2P:s ma% &ose liquidit% issues whi!h is li(el%

to lead run on ban( b% de&ositors. Thus# the in!reased in!iden!e of 2P:s not onl%

affe!ts the &erforman!e of the ban(s but also affe!t the e!onom% as a whole.

In a nutshell# the high in!iden!e of 2P: has !as!ading im&a!t on all im&ortant

finan!ial ratios of the ban(s /i=.# 2et Interest Margin# 1eturn on :ssets# Profitabilit%#

Di/idend Pa%out# Pro/ision !o/erage ratio# Credit !ontra!tion et!.# whi!h ma% li(el%

to erode the /alue of all sta(eholders in!luding Shareholders# De&ositors# Borrowers#

Em&lo%ees and &ubli! at large.


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REVIEW OF LITERATURE:-

This se!tion &ro/ides an o/er/iew of some of the e"isting literature with regard to the2P:. This literature re/iew hel&s me to better understanding of both resear!h to&i!s

and of the e"isting ga&

10!K97% P% S< (212) : strong Ban(ing Se!tor is essential for a flourishing

e!onom%. Indian ban(ing se!tor emerged stronger during )*+*++ in the aftermath of

global finan!ial meltdown of )**5+* under the wat!hful e%e of its regulator. The

le/el of 2P:Os a!t as an indi!ator showing the !redit ris(s > effi!ien!% of allo!ation of

resour!e. 2P: in/ol/es the ne!essit% of &ro/isions# an% in!rease in whi!h bring down

the o/erall &rofitabilit% of ban(s. :n e"!essi/e rise in interest rates o/er the &ast +5

months has led to a shar& in!rease in non&erforming assets. This not onl% affe!ts the

ban(s but also the e!onom% as a whole. This &a&er deals with understanding the

!on!e&t of 2P:# the !auses and o/er/iew of different se!tors in India.

20!S*&%%% B< %7 V%7'&%*%@%$ G


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finall% the &s%!holog% of the ban(ers in res&e!t of their dis&osition towards !redit

deli/er% and !redit e"&ansion. 2P:s do not generate an% in!ome for the ban(s# but at

the same time ban(s are required to ma(e &ro/isions for su!h 2P:s from their !urrent

&rofits. :&art from internal and e"ternal !om&le"ities# in!reases in 2P:s dire!tl%

affe!ts ban(sO &rofitabilit% sometimes e/en their e"isten!e.

30!M L%: G< %7 G%: L%?% (1H) in +F5,# the &ubli! was gi/en its first

o&&ortunit% to &' ban( asset qualit% in the form of non!&erforming asset

information. The &ur&ose of this stud% is to e/aluate that information. : regression

anal%sis !om&aring the non!&erforming asset statisti!s with e"aminer !lassifi!ations of

% suggests that the non!&erforming asset information !an be a useful aid in

anal%=ing the asset qualit% of ban(s# &arti!ularl% when the information is timel%.

40!P%?*P?7? $ B$S%=% %7 D9%**%$ R'% S'@ A$ Ca&ital 1is(

'@ A is a negati/e finan!ial indi!ator. To &ro/e

em&iri!all%# we &ro&ose a framewor( to measure effi!ien!% of Indian &ubli! se!tor

ban(s.

50!V%?>%$ K


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ban(ing se!tor is the ODire!t ;ending S%stemO b% the 1BI under so!ial ban(ing motto

of the Go/ernment# under whi!h s!heduled !ommer!ial ban(s are required to lend

4* of their total !redit to &riorit% se!tor. The ban(s who ha/e ad/an!ed to the

&riorit% se!tor and rea!hed the target suffo!ated on a!!ount of raising 2P:s# sin!e

long. The &riorit% se!tor 2P:s ha/e registered higher growth both in &er!entage and

in absolute terms %ear after %ear. The &resent &a&er is an attem&t to stud% the &riorit%

se!tor ad/an!es b% the &ubli!# &ri/ate and foreign ban( grou&wise# target a!hie/ed b%

them and a !om&arati/e stud% on &riorit% and non!&riorit% se!tor 2P:s o/er the

&eriod of +* %ears between )**+*) and )*+*++. This &a&er also aims to find out the

!ategories of &riorit% se!tor ad/an!es whi!h !ontribute to the growth of total &riorit%

se!tor 2P:s during the &eriod under stud%.

0!M?9:$ K< V< B9%? G?=%$ L&*


43/85

&ortion of the total % in ban(s. These % generate huge interest in!ome for

ban(s whi!h to a large e"tent determines the finan!ial &erforman!e of ban(s.

$owe/er# some of these loans usuall% fall into non!&erforming status and ad/ersel%

affe!t the &erforman!e of ban(s. In /iew of the !riti!al role ban(s &la% in an e!onom%#

it is essential to identif% &roblems that affe!t the &erforman!e of these institutions.

This is be!ause non!&erforming loans !an affe!t the abilit% of ban(s to &la% their role

in the de/elo&ment of the e!onom%. : !ase stud% resear!h design of CBQ Ban(

;imited was em&lo%ed. Inter/iews and questionnaires were used to !olle!t data for the

stud%. The &a&er re/ealed that e"ternal fa!tors are more &re/alent in !ausing non

&erforming loans in CBQ Ban( ;imited. The ma'or fa!tors !ausing non&erforming

loans were natural disasters# go/ernment &oli!% and the integrit% of the borrower.

0!T N


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&arameter in the anal%sis of finan!ial &erforman!e of a ban( as it results in de!reasing

margin and higher &ro/isioning requirements for doubtful debts. The redu!tion of non

&erforming asset is ne!essar% to im&ro/e &rofitabilit% of ban(s and !om&l% with the

!a&ital adequa!% norms as &er the Basel :!!ord.,

110!K%&'9%< N (212)$ em&hasi=ed on the assessment of non&erforming assets on

&rofitabilit% its magnitude and im&a!t. Credit of total ad/an!es was in the form of

doubtful assets in the &ast and has an ad/erse im&a!t on &rofitabilit% of all Publi!

Se!tor Ban(s affe!ted at /er% large e"tent when non&erforming assets wor( with

other ban(ing and also affe!t &rodu!ti/it% and effi!ien!% of the ban(ing grou&s. The

stud% obser/ed that there is in!rease in ad/an!es o/er the &eriod of the stud%.

120! CII (Confederation of Indian Industry ) 2014 :-For addressing te

!ress"re of Non-Perfor#ing $ssets %NP$& on te ealt of te 'ndian

ban(ing s)ste#* +'' as s"ggested 5-!oint a,tion !lan to te

inistr) of Finan,e and te /'. 't ill el! in dealing it te

deterioration in asset "alit) and red",ing te stress on te ban(s

balan,e seets.

Te 5 !oint a,tion !lan fo,"ses "!on %1& ea#!ing te +or!orate

ebt estr",t"ring %+& #e,anis#* %2& +reating a s!e,ial

resol"tion #e,anis# for te infrastr",t"re se,tor* %3& etting "! of

a National $sset anage#ent +o#!an)* %4& iberaliing nor#s to

'n,rease ,a!italiation of $sset e,onstr",tion +o#!anies* and %5&

'#!roing te ee,tieness of te insolen,) regi#e and

i#!le#entation of legal fra#eor(.

+,2P: management in Publi! Se!tor ban(s7)*+48By Pravin Palande/Forbes IndiaIndian ban(s ha/e brought ;%7 *%down to ).4 o/er +* %ears# but now the% need

to be !areful

The &ast three months ha/e been tough for Indian ban(ing. $igh ' %and


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http://business.in.com/http://business.in.com/


45/85

threats of a global re!ession ha/e ta(en their toll on ban( sto!(s. The 2SE ban(ing

inde" fell +- !om&ared with the N'6:,++ slide in the &ast three months. Indian

ban(s# ironi!all%# ha/e ne/er been in a better state of health in the &ast +* %ears.

: re!ent stud% b% B C?*'@ G?=7BCG8 found that bad loans fell from a

&ea( of ++.4 in )**+ to 'ust ).4 in )*+*# showing the effi!ien!% of management of

!a&ital. In fa!t# Indian ban(s ha/e been &erforming better in !ontrolling defaults with

onl% *.@ of loans handed out last %ear turning sti!(%# !om&ared to + in the US and

China. Indian ban(s also ha/e a !osttoin!ome ratio of 4# whi!h is lower than

German%# ran!e and the US.


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46/85

C"APTER !3

COMPANY PROFILE

C%* B% O6 I7'%

Established in +F++# Central Ban( of India was the first Indian !ommer!ial ban(

whi!h was wholl% owned and managed b% Indians. The establishment of the Ban( was

the ultimate reali=ation of the dream of Sir Sorab'i Po!h(hanawala# founder of the


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Ban(. Sir Phero=esha Mehta was the first Chairman of a trul% OSwadeshi Ban(O. In

fa!t# su!h was the e"tent of &ride felt b% Sir Sorab'i Po!h(hanawala that he

&ro!laimed Central Ban( of India as the O&ro&ert% of the nation and the !ountr%Os

assetO. $e also added that OCentral Ban( of India li/es on &eo&leOs faith and regards

itself as the &eo&leOs own ban(O.

During the &ast +*) %ears of histor% the Ban( has weathered man% storms and fa!ed

man% !hallenges. The Ban( !ould su!!essfull% transform e/er% threat into business

o&&ortunit% and e"!elled o/er its &eers in the Ban(ing industr%.

: number of inno/ati/e and unique ban(ing a!ti/ities ha/e been laun!hed b% Central

Ban( of India and a brief mention of some of its &ioneering ser/i!es are as under

+F)+ Introdu!tion to the $ome Sa/ings Safe De&osit S!heme to build sa/ing0thrift

habits in all se!tions of the so!iet%.

+F)4 :n E"!lusi/e ;adies De&artment to !ater to the Ban(Os women !lientele.

+F)@ Safe De&osit ;o!(er fa!ilit% and 1u&ee Tra/ellers Cheques.

+F)F Setting u& of the E"e!utor and Trustee De&artment.

+F,) De&osit Insuran!e Benefit S!heme.

+F@) 1e!urring De&osit S!heme.

Subsequentl%# e/en after the nationali=ation of the Ban( in the %ear +F@F# Central

Ban( !ontinued to introdu!e a number of inno/ati/e ban(ing ser/i!es as under

+F@ The Mer!hant Ban(ing Cell was established.

+F5* Central !ard# the !redit !ard of the Ban( was introdu!ed.

+F5@ OPlatinum 6ubilee Mone% Ba!( De&osit S!hemeO was laun!hed.

+F5F The housing subsidiar% Cent Ban( $ome inan!e ;td. was started with its

headquarters at Bho&al in Madh%a Pradesh.

+FF4 Lui!( Cheque Colle!tion Ser/i!e 7LCC8 > E"&ress Ser/i!e was set u& to

enable s&eed% !olle!tion of outstation !heques.

urther in line with the guidelines from 1eser/e Ban( of India as also the

Go/ernment of India# Central Ban( has been &la%ing an in!reasingl% a!ti/e role in

&romoting the (e% thrust areas of agri!ulture# small s!ale industries as also medium


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and large industries. The Ban( also introdu!ed a number of Self Em&lo%ment

S!hemes to &romote em&lo%ment among the edu!ated %outh.

:mong the Publi! Se!tor Ban(s# Central Ban( of India !an be trul% des!ribed as an

:ll India Ban(# due to distribution of its large networ( in ) out of )F States as also in

, out of Union Territories in India. Central Ban( of India holds a /er% &rominent

&la!e among the Publi! Se!tor Ban(s on a!!ount of its networ( of 4,,@ Bran!hes#

:sset 1e!o/er% Bran!hes 7:1B8 F#1etail :sset Bran!hes 71:B8 +- and )@ e"tension

!ounters along with satelite bran!hes at /arious !entres throughout the length and

breadth of the !ountr%.

CustomersO !onfiden!e in Central Ban( of IndiaOs wide ranging ser/i!es !an /er% well

be 'udged from the list of ma'or !or&orate !lients su!h as ICICI# IDBI# UTI# ;IC#

$DC as also almost all ma'or !or&orate houses in the !ountr%.

C=% V''

To emerge as a strong# /ibrant and &roa!ti/e Ban(0inan!ial Su&er Mar(et and to

&ositi/el% !ontribute to the emerging needs of the e!onom% through !onsistent

harmoni=ation of human# finan!ial and te!hnologi!al resour!es and effe!ti/e ris(

!ontrol s%stems.

C=% M''

To transform the !ustomer ban(ing e"&erien!e into a fruitful and en'o%able one.

To le/erage te!hnolog% for effi!ient and effe!ti/e deli/er% of all ban(ing ser/i!es.

To ha/e bouquet of &rodu!t and ser/i!es tailormade to meet !ustomers as&irations.

The &anIndia s&read of bran!hes a!ross all the state of the !ountr% will be utili=ed to

further the so!io e!onomi! ob'e!ti/e of the Go/ernment of India with em&hasis on

inan!ial In!lusion.

T9 ;.'& 6 9 C%* B% 6 I7'% % % 6**0

To hel& ensure the monetar% stabilit% of the !ountr%.

To assist in regulating the finan!ial s%stem of the !ountr%#

To formulate# im&lement and monitor the monetar% &oli!%.


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49/85

To maintain the liquidit% in the !ountr%.

To ensure adequate flow of !redits.

Pres!ribes &arameters for ban(ing in the !ountr%.

Maintain &ubli! !onfiden!e in the s%stem.

To manage the foreign e"!hange Management :!t.

To fa!ilitate e"ternal trade.

Issue and e"!hange !urren!%.

Maintain su&&l% of !urren!%.

9wn and o&erate the de&ositor% and e"!hange for go/ernment bonds.

Ban(er to the go/ernment

DIRECTORS OF CENTRAL BANK OF INDIA

1- hri! "a#ee$ "is

(Chairman & Managing Director)

) S9' R% K?>% G:%* , S9' A'>9 C9%?9%

E"e!uti/e Dire!tor E"e!uti/e Dire!tor

4 S9' B


50/85

5 S9' G?>%'@9 F S9' M< P< S9%%*%

Dire!tor Dire!tor

+* S9' K'9% S9' 11! S9' S< B< R7

Dire!tor 9ffi!er Em&lo%ee Dire!tor

+) S9' G?;% K?>% J9' 13S>< N


51/85

ar,*2013 ar, *2012 ar,*2011

+a!ital iabilities

Total are +a!ital 2661.58 2353.12 2021.1"it) are +a!ital 1044.58 736.12 404.1

are $!!li,ation one) 0 0 2025.6

Pre are +a!ital 1617 1617 161

eseres 12651.27 8201.45 4898.1

eol"tion eseres 0 1896.96 1928.4

Net :ort 15312.85 12451.53 10873

e!osits 226038.31 196173.33 179356.0

/orroings 18305.51 12919.6 12887.9

Total debts 244343.82 209092.93 192244.9;ter iabilities 8472.87 8255.29 6639.9

Total iabilities 268129.54 2229799.75 209757.3

$T

+as < /alan,e it /' 13560.17 13114.18 140819

/alan,e it /an(s* one) at ,all 532.04 1012.42 1200.8

$dan,es 171935.84 147512.85 129725.4

'nest#ents 72603.79 59243.24 54504.4

=ross /lo,( 2684.75 3770.8 3559.3

$,,"#"lated e!re,iation 0 1296.89 1133.9

Net /lo,( 2684.75 2473.91 2425.3

+a!ital :or( in Progress 0 0

;ter $ssets 6812.95 6443.11 7819.2

Total $ssets 268129.54 229799.74 209757.3

+ontingent iabilities 46881.78 50885.06 36569.7

/ills For +olle,tion 18732.82 14183.44 9755.7

/oo( al"e 131.11 121.42 131o"r,e > ion =lobal ol"tions i#ited

PERFORMANCE "IG"LIG"TS! FY 213!14


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: %ear of !onsolidation for the Ban(.

Growth moderated in tune with the Mar(et situation.

Shedding of Unremunerati/e Business

$igh Cost Bul( De&osits

;ow Yield 0 $ighl% Pri!e Sensiti/e :d/an!es

o!us on :gri!ulture# SME > 1etail :d/an!es &aid off

1obust growth witnessed in all the abo/e , &referred Se!tors

Mo/ing towards rea!hing the regulator% target of 4* under Priorit% Se!tor

:d/an!es.

2P:s !ontained at Se&tember0De!ember )*+, le/els.

Minimi=ation of Costs and Ma"imi=ation of 1e/enue started %ielding desired

results

Total Business of the Ban( in!reased to 1s. 4#),#,F* !rore from 1s. 4#*)#))

!rore in Mar!h )*+,# re!ording growth of -.)- .

Total De&osits of the Ban( in!reased to 1s. )#4*#*@F !rore from 1s. )#)@#*,5

!rore in Mar!h )*+,#re!ording growth of @.)+ .


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53/85

Total :d/an!es stood at 1s. +#5,#,)+ !rore against 1s. +#@#),4 !rore in

Mar!h )*+,# re!ording growth of 4.*) .

C:S: in!reased to 1s. 5*#*++ !rore from 1s. ,#-5+ !rore in Mar!h )*+,#

re!ording growth of 5.4 .

Share of C:S: in total de&osits stood at ,,.,, as against ,).-- in Mar!h

)*+,.

Core De&osits in!reased to 1s. +#5#+@4 !rore from 1s. +#*#F-, !rore in

Mar!h )*+,# re!ording growth of F.45 .

Total In!ome in!reased to 1s. )@#,-* !rore from 1s. ),#-)5 !rore in Mar!h

)*+, re!ording growth of ++.FF .

Pro/ision Co/erage 1atio has im&ro/ed from 4.- to -*.@5

.

C1:1 under B:SE;II is at ++.F@ with Tier I at 5.+) whereas C1:1

under B:SE; III is F.5 with Tier I at ., .

2IM im&ro/ed from ).@- in Y )*+)+, to )., in Y )*+,+4.


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54/85

CHAPTER- 4

DATA!ANALYSIS

INTERPRETATION

1


55/85

;riental /an( of+o##er,e

105812 6906472 1.53 7

P"n?ab and ind /an( 16104 2969810 0.54 1

P"n?ab National /an( 276746 15609845 1.77 10)ndi,ate /an( 159454 8249504 1.93 12@+; /an( 153951 6966905 2.21 16@nion /an( of 'ndia 192335 9826485 1.96 14@nited /an( of 'ndia 101956 3572745 2.85 20Ai?a)a /an( 69882 3587463 1.95 13A(erae Total 134$1% ..$3$1$ 1).,

I=%'0

In this table +.+


56/85

I=%'0

In this table +.) whi!h is of )**5)**F of &ri/ate se!tor ban(s .In whi!h is on +stran(

with *.@5. Performan!e of this ban(s are better than &ubli! ban(s be!ause their

Gross ad/an!es are less than &ubli! se!tor ban(s that3s wh% their Gross 2P:3s are

going down Year b% %ear

1


57/85

;riental /an( of+o##er,e

20615 3273867 0.63 1

P"n?ab and ind /an( 321441 18830611 1.71 9

P"n?ab National /an( 200459 8255913 2.43 16)ndi,ate /an( 166502 7756826 2.15 12@+; /an( 266387 11827270 2.25 13@nion /an( of 'ndia 137230 4275590 3.21 18@nited /an( of 'ndia 99445 4193453 2.37 15Ai?a)a /an( 212939 13858359 1.54 6A(erae Total 1..3,# .31$1 #)$3

I=%'0

In this table +., whi!h is of Y )**F)*+* in whi!h 9riental ban( of !ommer!e7Gross:d/an!es ,),5@ la(hs in whi!h Gross 2P:3s is )*@+- la(hs whi!h is *.@, of

Gross :d/an!es8on +stran(.


58/85

As on 0arc! 31"#$1$

&ross 'PAs&ross Ad(ances&)'PAs *Rank

$Cis /an( td. 129542 9300534 1.39 5

eelo!#ent +redit/an(

31918 367259 8.69 9

DF+ /an( 180717 12528339 1.44 6

'+'+' /an( 926742 14210056 6.52 8

'nd"sland /an( 25547 2070423 1.23 3

Eota( aindra /an( 76734 2117788 3.62 7

es /an( 6020 2224034 0.27 1

'N= A)s)a /an( 22415 1850951 1.21 2

so"t 'ndian /an( 21100 1597005 1.32 4

A(erae total 1,.,% ,14$.1$ #)+

I=%'0

In this table +.4 whi!h shows the 2P:3s of &ri/ate ban(s in whi!h Yes ban( on + st

ran( among all &ri/ate ban(. Gross ad/an!es of %es ban( is )))4*,4 in whi!h Gross

2P:3s is @*)* la(hs #Gross 2P:3s *.) of Gross ad/an!es. DCB is on Fthran( in

&ri/ate ban(s with 5.@F Gross 2P:3s.. Pri/ate se!tor ban(s &erforman!e are better

be!ause the% are gi/en more for agri!ulture.


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59/85

1


60/85

I=%'0 I

n this table +.- of Y )*+*)*++ of &ubli! ban(s in whi!h !or&oration ban( is on + st

ran( 7 Gross :d/an!es 5)+,4- la(hs in whi!h Gross 2P:3s is F*), la(hs whi!h is

*.F+ of Gross ad/an!es8.U!o ban( is on )*thran( 7Gross ad/an!es F,)4@)4 la(hs in

whi!h Gross 2P:3s ,*F*+ la(hs whi!h is ,.,+ of Gross ad/an!es. Central ban( of

India is on +*thran( with +.5) Gross 2P:3s.+entral /an( of 'ndia did #",

better tan !reio"s )ear.

1


61/85

so"t 'ndian /an( 23034 2065879 1.11 5

A(erae total 1+#.4 +,41+3 #)11

I=%'0

In this table +.@ of &ri/ate se!tor ban(s in whi!h Yes ban( is on +stran( 7Gross

ad/an!es ,44,-*+ la(hs in whi!h Gross 2P:3s is 5*-, la(hs whi!h is *.), of Gross

ad/an!es8 DCB is on Fthran( with -.5@ Gross 2P:3s. Main reason behind their

&erforman!e is !olle!ting their loan from the !ustomer.

1


62/85

'ndian ;erseas /an( 355370 12741890 2.79 12;riental /an( of+o##er,e

358090 11304980 3.17 17

P"n?ab and ind /an( 76340 4636860 1.65 2P"n?ab National /an( 868990 27610770 3.15 15)ndi,ate /an( 305070 11095330 2.75 11@+; /an( 401970 10783990 3.73 19@nion /an( of 'ndia 542220 17184960 3.16 16@nited /an( of 'ndia 217640 6387300 3.41 18Ai?a)a /an( 171850 5867100 2.93 14A(erae Total 3#,. 1#13,.%3 #)+%

I=%'

In this table +. whi!h is of Y )*++)*+) of &ubli! se!tors ban( in whi!h

Cor&oration Ban( is on +stran( 7 Gross ad/an!es +**5)-,* la(hs in whi!h Gross 2P:

is +)4)* la(hs whi!h is +.)@ 9f Gross :d/an!es8. Central ban( of India is on )* th

ran( with 4.5,.In this %ear ban( gi/en more and more

1


63/85

eelo!#ent +redit /an( 24180 549670 4.40 8

DF+ /an( 181490 19096890 0.95 3

'+'+' /an( 929260 19233380 4.83 9

'nd"sland /an( 34710 3531640 0.98 5Eota( aindra /an( 61420 3945190 1.56 7

es /an( 8390 3805500 0.22 1

'N= A)s)a /an( 14950 2883350 0.52 2

so"t 'ndian /an( 26720 2747320 0.97 4

A(erae total 1+14+$ .#$31 1).3

I=%'

In this table +.5 whi!h is of Y )*++)*+) of &ri/ate se!tors ban( in whi!h Yes Ban(

is on +stran( 7 Gross ad/an!es ,5*--**la(hs in whi!h Gross 2P: is 5,F*la(hs

whi!h is *.)) 9f Gross :d/an!es8. ICICI Ban( is on Fthran( with 4.5, 2P:'@ A (NPA)0

:n asset# in!luding a leased asset# be!omes non &erforming when it !eases to generate

in!ome for the ban(.

N NPA

Gross 2P: ? 7Balan!e in Interest Sus&ense a!!ount V DICGC0ECGC !laims re!ei/ed

and held &ending ad'ustment V Part &a%ment re!ei/ed and (e&t in sus&ense a!!ount V

Total &ro/isions held8.


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ANN%&'"% (REPORTING FORMAT FOR NPA! GROSS AND NET

NAME OF T"E BANK

POSITION AS ON !!!!!!!!!P$T'+@$

1& =ross $dan,ed

2&=ross NP$I 3&=ross NP$ as B of =ross $dan,es

4& Total ded",tion %aJbJ,Jd&

%a& /alan,e in interest s"s!ense aH,II

%b& '+=+H+=+ ,lai#s re,eied and eld !endingad?"st#ent% , &!art !a)#ent re,eied and (e!t in s"s!ense aH,

%d& Total !roision eld III

5& Net adan,ed %1-4&

6& Net NP$ %2-4&

7& Net NP$ as a B of Net $dan,es

IeC,l"ding te,ni,al rite-o of rs KKKKKK,rore.

II/an(s i, do not #aintain an interests"s!ense aH, to!ar( te a,,"red interest on NP$s #a) f"rnis tea#o"nt of interest re,eiable on NP$s.


Page

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ANN%&'"%:- )


Page

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83/85

C"APTER !

BIBILIOGRAP"Y

BIBILOGRAP"Y

+. :nantharam I%er.T.2# 7+FFF8# Ban( su&er/ision and the management of 2on

Performing :d/an!esN# The 6ournal of the Indian Institute of Ban(ers# &.F

). Mittal. D.M. 7)**58# KMone%# Ban(ing# International Trade and Publi! inan!e

K7Ele/enth Edition8# $imala%a Publishing $ouse.

,. Meena(shi 1a'ee/ and $ P Mahesh 7)*+)8 ban(ing se!tor reforms and 2P: a

stud% of Indian !ommer!ial ban(s# wor(ing &a&er )-)#institute for so!ial !hange

and e!onomi! !hange# Bangalore# ISB2 F55+F++*54

4. 1a'araman# I.#S.Bhaumi(# and 2. Bhatia 7+FFF8# 2P: ariations :!ross Indian

Commer!ial Ban(s Some indings# E!onomi! and Politi!al


84/85

@. 1a'ni Salu'a and 1oshan ;al 7)*+*8# Com&arati/e :nal%sis on 2onLPerforming

:ssets 72P:s8 of Publi! Se!tor# Pri/ate Se!tor and oreign Ban(s in IndiaN#

International 6ournal of 1esear!h in Commer!e > Management 7I61CM8# /ol +#

issue no. 72o/ember8 ISS2 *F@)+5,.

. 1a'u D.2.M.# 7)**F8# E/aluation of the Performan!e of State Ban( of India with

s&e!ial referen!e to 2onPerforming :ssets 72P:s8N# inan!e India# Indian

Institute of inan!e# ol. III# 2o.,# Pages F5-F5F.

5. 1amesh.A.# Sudha(ar.:# 2P: Management in Publi! Se!tor Ban(s : Stud%

of Canara Ban( and State Ban( of IndiaN# International 6ournal of 1esear!h in

Commer!e > Management# ol. ,7++8# )*+)# && 444F# ISS2 *F@)+5,

F. Sandee& :ggarwal# Parul Mittal 7)*+)8 2on Performing :ssest Com&arati/e

Position of Publi! and Pri/ate Se!tor Ban(s in IndiaN# International 6ournal of

Business and Management Tomorrow ol. ) 2o.+#&& +.

+*. Sharma# Meena# 7)**)8# Managing 2onPerforming :ssets through :sset

1e!onstru!tion Com&aniesN# Ed.Boo(# E!onomi! 1eforms in India# from irst to

Se!ond Generation and be%ond# Dee& and Dee& Publi!ations# 2ew Delhi

++. ibha 6ain 7)**8# 2on Performing :ssets in Commer!ial ban(sN# 1egal

Publi!ations# 2ew Delhi

+). i/e( Sri/asta/a+ Dee&a( Bansal 7)*+)8 : Stud% of trends of 2onPerforming

:ssets in Pri/ate Ban(s in IndiaN S$I S$:ATI International 6ournal in

Multidis!i&linar% and :!ademi! 1esear!h 7SSI6M:18 ol. )# 2o. )# Mar!h:&ril

7ISS2 ))5 ? -F,8

+,.www.rbi.org.in

+4. Google

+-. :ll Ban(


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+@. www.mone%!ontrol.!om

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a study on non performing assets of commercial bank of india

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