Project on Non Performing Assets in Banks

CONTENTS

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

b) Questionnaire

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70

1

EXECUTIVE SUMMARY

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 make students competent enough to face real world, there is a

requirement of course for undergoing training for six to eight weeks with some

reputed organization. This exposure to real life situation gives an insight to the

students the kind of pressure and problems they can expect to face during their

career.

For the requirement of undergoing training I sent my request for training to HDFC

BANK and fortunately it was accepted. I was assigned the project “a study of

investment behavior of people in respect to demographic features i.e. Age and

Occupation.

There are lot many investment avenues are available these days to invest money

like Insurance, Bank Deposits, Equity Market etc. The report studies the various

investment avenues preferred by people and the various factors like Age and

Occupation that influence the investment behavior of people.

Chapter gives the introduction to investment. It provides information about the

various investment options available to the investor like mutual funds, bonds,

shares, real estate, bank deposits etc. Next chapter describes the industry profile

stating about investment management, investment banking & major players. Then

comes the turn of company profile where the History, Mission & the Products

offered by HDFC Bank are discussed. Some of the products offered are saving

account, current account, fixed deposit, anywhere banking, online broking,

insurance, lockers etc.

2

Series of steps were undertaken in order to study the investment behavior of people.

Descriptive research design & Non probability convenient sampling technique is

used.

3

INTRODUCTION

INTRODUCTIONINTRODUCTION

The accumulation of huge non-performing assets in banks has assumed The accumulation of huge non-performing assets in banks has assumed

great importance. The depth of the problem of bad debts was first realized only ingreat importance. The depth of the problem of bad debts was first realized only in

early 1990s. The magnitude of NPAs in banks and financial institutions is overearly 1990s. The magnitude of NPAs in banks and financial institutions is over

Rs.1,50,000 crores. Rs.1,50,000 crores.

While gross NPA reflects the quality of the loans made by banks, net While gross NPA reflects the quality of the loans made by banks, net

NPA shows the actual burden of banks. Now it is increasingly evident that theNPA shows the actual burden of banks. Now it is increasingly evident that the

major defaulters are the big borrowers coming from the non-priority sector. Themajor defaulters are the big borrowers coming from the non-priority sector. The

banks and financial institutions have to take the initiative to reduce NPAs in a timebanks and financial institutions have to take the initiative to reduce NPAs in a time

bound strategic approach.bound strategic approach.

Public sector banks figure prominently in the debate not only because Public sector banks figure prominently in the debate not only because

they dominate the banking industries, but also since they have much larger NPAsthey dominate the banking industries, but also since they have much larger NPAs

compared with the private sector banks. This raises a concern in the industry andcompared with the private sector banks. This raises a concern in the industry and

academia because it is generally felt that NPAs reduce the profitability of a banks,academia because it is generally felt that NPAs reduce the profitability of a banks,

weaken its financial health and erode its solvency.weaken its financial health and erode its solvency.

For the recovery of NPAs a broad framework has evolved for the For the recovery of NPAs a broad framework has evolved for the

management of NPAs under which several options are provided for debt recoverymanagement of NPAs under which several options are provided for debt recovery

and restructuring. Banks and FIs have the freedom to design and implement theirand restructuring. Banks and FIs have the freedom to design and implement their

own policies for recovery and write-off incorporating compromise and negotiatedown policies for recovery and write-off incorporating compromise and negotiated

settlements.settlements.

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5

COMPANY PROFILE

ABOUT HDFC

The Housing Development Finance Corporation Limited (HDFC) was

amongst the first to receive an 'in principle' approval from the

Reserve Bank of India (RBI) to set up a bank in the private sector, as

part of the RBI's liberalization of the Indian Banking Industry in 1994.

The bank was incorporated in August 1994 in the name of 'HDFC

Bank Limited', with its registered office in Mumbai, India. HDFC Bank

commenced operations as a Scheduled Commercial Bank in January

1995.

HDFC is India's premier housing finance company and enjoys an

impeccable track record in India as well as in international markets.

Since its inception in 1977, the Corporation has maintained a

consistent and healthy growth in its operations to remain the market

leader in mortgages. Its outstanding loan portfolio covers well over a

million dwelling units. HDFC has developed significant expertise in

retail mortgage loans to different market segments and also has a

large corporate client base for its housing related credit facilities.

With its experience in the financial markets, a strong market

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reputation, large shareholder base and unique consumer franchise,

HDFC was ideally positioned to promote a bank in the Indian environment.

HDFC Bank began operations in 1995 with a simple mission : to be a

“ World Class Indian Bank.” We realized that only a single minded

focus on product quality and service excellence would help us get

there. Today, we are proud to say that we are well on our way

towards that goal.

As of March 31, 2008, the Bank’s distribution network was at 761

Branches and 1977 ATMs in 327 cities as against 684 branches

and 1,605 ATMs in 320 cities as of March 31, 2007.

Against the regulatory approvals for new branches in hand, the

Bank expects to further expand the branch network by around 150

branches by June 30, 2008. During the year, the Bank stepped up

retail customer acquisition with deposit accounts increasing from

6.2 million to 8.7 million and total cards issued (debit and credit

cards) increasing from 7 million to 9.2 million.

PERSONAL BANKING

Loan Product Deposit Product Investment & Insurance

Auto Loan Loan Against

Security Loan Against

Property

Saving a/c Current a/c Fixed deposit Demat a/c Safe Deposit

Mutual Fund Bonds Knowledge Centre Insurance General and Health

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Personal loan Credit card 2-wheeler loan Commercial

vehicles finance Home loans Retail business

banking Tractor loan Working Capital

Finance Construction

Equipment Finance Health Care

Finance Education Loan Gold Loan

Lockers Insurance Equity and

Derivatives Mudra Gold Bar

Cards Payment Services Access To Bank

Credit Card Debit Card Prepaid Card

-------------------------------- Forex Services--------------------------------

Product & Services Trade Services Forex service

Branch Locater RBI Guidelines

NetSafe Merchant Prepaid Refill Billpay Visa Billpay InstaPay DirectPay VisaMoney

Transfer e–Monies

Electronic Funds Transfer

Online Payment of Direct Tax

NetBanking OneView InstaAlertMobileBanking ATM Phone Banking Email Statements Branch Network

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WHOLESALE BANKING

Corporate Small and Medium Enterprises

Financial Institutions and Trusts

Funded Services

Non Funded Services

Value Added Services

Internet Banking

Funded Services Non Funded

Services Specialized Services Value added

services Internet Banking

BANKS Clearing Sub-

Membership RTGS –

submembership Fund Transfer ATM Tie-ups Corporate Salary a/c Tax CollectionFinancial Institutions

Mutual Funds

Stock Brokers

Insurance Companies

Commodities Business

Trusts

HDFC’s main goals are to :-

The primary objective of HDFC is to enhance residential housing stock and to promote home ownership.

To acquire by purchase, lease, exchange, hire or otherwise lands & property or any interest in the same in India.

To advance money to any person/ persons, company or corporation, society or association either at interest without, and or with or without any security and in particular to advance money to shareholders of the company or to oth4r persons to enable the person to erect, or purchase, or enlarge, or repair any house or building or any part or portions thereof or to purchase any freehold or leasehold or any lands or estate or property in India upon the terms and conditions as laid by the company.

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10

NON- PERFORMING ASSETS

NON PERFORMING ASSETS (NPA)

WHAT IS A NPA (NON PERFORMING ASSETS) ?

Action for enforcement of security interest can be initiated only if the secured asset is classified as Nonperforming asset.

Non performing asset means an asset or account of borrower ,which has been classified by bank or financial institution as sub –standard , doubtful or loss asset, in accordance with the direction or guidelines relating to assets classification issued by RBI .

An amount due under any credit facility is treated as “past due” when it is not been paid within 30 days from the due date. Due to the improvement in the payment and settlement system, recovery climate, up gradation of technology in the banking system etc, it was decided to dispense with “past due “concept, with effect from March 31, 2001. Accordingly as from that date, a Non performing asset shell be an advance where

i. Interest and/or installment of principal remain overdue for a period of more than 180 days in respect of a term loan,

ii. The account remains ‘out of order ‘ for a period of more than 180 days ,in respect of an overdraft/cash credit (OD/CC)

iii. The bill remains overdue for a period of more than 180 days in case of bill purchased or discounted.

iv. Interest and/or principal remains overdue for two harvest season but for a period not exceeding two half years in case of an advance granted for agricultural purpose ,and

v. Any amount to be received remains overdue for a period of more than 180 days in respect of other accounts

With a view to moving towards international best practices and to ensure greater transparency, it has been decided to adopt ’90 days overdue ‘norms for identification of NPAs ,from the year ending March 31,2004,a non performing asset shell be a loan or an advance where;

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i. Interest and/or installment of principal remain overdue for a period of more than 90 days in respect of a term loan,

ii. The account remains ‘out of order ‘ for a period of more than 90 days ,in respect of an overdraft/cash credit (OD/CC)

iii. The bill remains overdue for a period of more than 90 days in case of bill purchased or discounted.

iv. Interest and/or principal remains overdue for two harvest season but for a period not exceeding two half years in case of an advance granted for agricultural purpose ,and

v. Any amount to be received remains overdue for a period of more than 90 days in respect of other accounts

Out of order

An account should be treated as out of order if the outstanding balance remains continuously in excess of sanctioned limit /drawing power. in case where the out standing balance in the principal operating account is less than the sanctioned amount /drawing power, but there are no credits continuously for six months as on the date of balance sheet or credit are not enough to cover the interest debited during the same period ,these account should be treated as ‘out of order’.

Overdue

Any amount due to the bank under any credit facility is ‘overdue’ if it is not paid on due date fixed by the bank.

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FACTORS FOR RISE IN NPAs

The banking sector has been facing the serious problems of the rising NPAs. But the problem of NPAs is more in public sector banks when compared to private sector banks and foreign banks. The NPAs in PSB are growing due to external as well as internal factors.

EXTERNAL FACTORS :-----------------------------------

Ineffective recovery tribunal

The Govt. has set of numbers of recovery tribunals, which works for recovery of loans and advances. Due to their negligence and ineffectiveness in their work the bank suffers the consequence of non-recover, their by reducing their profitability and liquidity.

Willful Defaults

There are borrowers who are able to payback loans but are intentionally withdrawing it. These groups of people should be identified and proper measures should be taken in order to get back the money extended to them as advances and loans.

Natural calamities

This is the measure factor, which is creating alarming rise in NPAs of the PSBs. every now and then India is hit by major natural calamities thus making the borrowers unable to pay back there loans. Thus the bank has to make large amount of provisions in order to compensate those loans, hence end up the fiscal with a reduced profit.

Mainly ours farmers depends on rain fall for cropping. Due to irregularities of rain fall the farmers are not to achieve the production level thus they are not repaying the loans.

Industrial sickness

Improper project handling , ineffective management , lack of adequate resources , lack of advance technology , day to day changing govt. Policies

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give birth to industrial sickness. Hence the banks that finance those industries ultimately end up with a low recovery of their loans reducing their profit and liquidity.

Lack of demand

Entrepreneurs in India could not foresee their product demand and starts production which ultimately piles up their product thus making them unable to pay back the money they borrow to operate these activities. The banks recover the amount by selling of their assets, which covers a minimum label. Thus the banks record the non recovered part as NPAs and has to make provision for it.

Change on Govt. policies

With every new govt. banking sector gets new policies for its operation. Thus it has to cope with the changing principles and policies for the regulation of the rising of NPAs.

The fallout of handloom sector is continuing as most of the weavers Co-operative societies have become defunct largely due to withdrawal of state patronage. The rehabilitation plan worked out by the Central government to revive the handloom sector has not yet been implemented. So the over dues due to the handloom sectors are becoming NPAs.

INTERNAL FACTORS :----------------------------------

Defective Lending process

There are three cardinal principles of bank lending that have been followed by the commercial banks since long.

i. Principles of safetyii. Principle of liquidityiii. Principles of profitability

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i. Principles of safety :-

By safety it means that the borrower is in a position to repay the loan both principal and interest. The repayment of loan depends upon the borrowers:

a. Capacity to pay

b. Willingness to pay

Capacity to pay depends upon: 1. Tangible assets

2. Success in business

Willingness to pay depends on: 1. Character 2. Honest 3. Reputation of borrower

The banker should, there fore take utmost care in ensuring that the enterprise or business for which a loan is sought is a sound one and the borrower is capable of carrying it out successfully .he should be a person of integrity and good character.

Inappropriate technology

Due to inappropriate technology and management information system, market driven decisions on real time basis can not be taken. Proper MIS and financial accounting system is not implemented in the banks, which leads to poor credit collection, thus NPA. All the branches of the bank should be computerized.

Improper SWOT analysis

The improper strength, weakness, opportunity and threat analysis is another reason for rise in NPAs. While providing unsecured advances the banks

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depend more on the honesty, integrity, and financial soundness and credit worthiness of the borrower.

Banks should consider the borrowers own capital investment.

it should collect credit information of the borrowers from_

a. From bankers.b. Enquiry from market/segment of trade, industry, business.c. From external credit rating agencies.

Analyze the balance sheet.

True picture of business will be revealed on analysis of profit/loss a/c and balance sheet.

Purpose of the loan

When bankers give loan, he should analyze the purpose of the loan. To ensure safety and liquidity, banks should grant loan for productive purpose only. Bank should analyze the profitability, viability, long term acceptability of the project while financing.

Poor credit appraisal system

Poor credit appraisal is another factor for the rise in NPAs. Due to poor credit appraisal the bank gives advances to those who are not able to repay it back. They should use good credit appraisal to decrease the NPAs.

Managerial deficiencies

The banker should always select the borrower very carefully and should take tangible assets as security to safe guard its interests. When accepting securities banks should consider the_

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1. Marketability 2. Acceptability3. Safety 4. Transferability.

The banker should follow the principle of diversification of risk based on the famous maxim “do not keep all the eggs in one basket”; it means that the banker should not grant advances to a few big farms only or to concentrate them in few industries or in a few cities. If a new big customer meets misfortune or certain traders or industries affected adversely, the overall position of the bank will not be affected.

Like OSCB suffered loss due to the OTM Cuttack, and Orissa hand loom industries. The biggest defaulters of OSCB are the OTM (117.77lakhs), and the handloom sector Orissa hand loom WCS ltd (2439.60lakhs).

Absence of regular industrial visit

The irregularities in spot visit also increases the NPAs. Absence of regularly visit of bank officials to the customer point decreases the collection of interest and principals on the loan. The NPAs due to willful defaulters can be collected by regular visits.

Re loaning process

Non remittance of recoveries to higher financing agencies and re loaning of the same have already affected the smooth operation of the credit cycle.

Due to re loaning to the defaulters and CCBs and PACs, the NPAs of OSCB is increasing day by day.

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PROBLEMS DUE TO NPA

1. Owners do not receive a market return on there capital .in the worst case, if the banks fails, owners loose their assets. In modern times this may affect a broad pool of shareholders.

2. Depositors do not receive a market return on saving. In the worst case if the bank fails, depositors loose their assets or uninsured balance.

3. Banks redistribute losses to other borrowers by charging higher interest rates, lower deposit rates and higher lending rates repress saving and financial market, which hamper economic growth.

4. Non performing loans epitomize bad investment. They misallocate credit from good projects, which do not receive funding, to failed projects. Bad investment ends up in misallocation of capital, and by extension, labour and natural resources.

Non performing asset may spill over the banking system and contract the money

stock, which may lead to economic contraction. This spill over effect can

channelize through liquidity or bank insolvency:

a) When many borrowers fail to pay interest, banks may experience liquidity

shortage. This can jam payment across the country,

b) Illiquidity constraints bank in paying depositors

.c) Undercapitalized banks exceeds the banks capital base.

The three letters Strike terror in banking sector and business circle today. NPA is

short form of “Non Performing Asset”. The dreaded NPA rule says simply this:

when interest or other due to a bank remains unpaid for more than 90 days, the

entire bank loan automatically turns a non performing asset. The recovery of loan

has always been problem for banks and financial institution. To come out of these

first we need to think is it possible to avoid NPA, no can not be then left is to look

after the factor responsible for it and managing those factors.

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Interest and/or instalment of principal remains overdue for two harvest

seasons but for a period not exceeding two half years in the case of an

advance granted for agricultural purposes, and

Any amount to be received remains overdue for a period of more than 90

days in respect of other accounts.

As a facilitating measure for smooth transition to 90 days norm, banks have been

advised to move over to charging of interest at monthly rests, by April 1, 2002.

However, the date of classification of an advance as NPA should not be changed on

account of charging of interest at monthly rests. Banks should, therefore, continue

to classify an account as NPA only if the interest charged during any quarter is not

serviced fully within 180 days from the end of the quarter with effect from April 1,

2002 and 90 days from the end of the quarter with effect from March 31, 2004.

'Out of Order' status'Out of Order' status ::

An account should be treated as 'out of order' if the outstanding

balance remains continuously in excess of the sanctioned limit/drawing power. In

cases where the outstanding balance in the principal operating account is less than

the sanctioned limit/drawing power, but there are no credits continuously for six

months as on the date of Balance Sheet or credits are not enough to cover the

interest debited during the same period, these accounts should be treated as 'out of

order'.

‘‘ Overdue’:Overdue’:

Any amount due to the bank under any credit facility is ‘overdue’ if it

is not paid on the due date fixed by the bank.

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Impact of NPAImpact of NPA

Profitability:- Profitability:-

NPA means booking of money in terms of bad asset, which

occurred due to wrong choice of client. Because of the money getting

blocked the prodigality of bank decreases not only by the amount of NPA but

NPA lead to opportunity cost also as that much of profit invested in some

return earning project/asset. So NPA doesn’t affect current profit but also

future stream of profit, which may lead to loss of some long-term beneficial

opportunity. Another impact of reduction in profitability is low ROI (return

on investment), which adversely affect current earning of bank.

Liquidity:- Liquidity:-

Money is getting blocked, decreased profit lead to lack of enough cash at hand

which lead to borrowing money for shot\rtes period of time which lead to additional

cost to the company. Difficulty in operating the functions of bank is another cause

of NPA due to lack of money. Routine payments and dues.

Involvement of management:- Involvement of management:-

Time and efforts of management is another indirect cost which bank has to bear due

to NPA. Time and efforts of management in handling and managing NPA would

have diverted to some fruitful activities, which would have given good returns. Now

day’s banks have special employees to deal and handle NPAs, which is additional

cost to the bank.

Credit loss:- Credit loss:-

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Bank is facing problem of NPA then it adversely affect the value of bank in terms

of market credit. It will lose it’s goodwill and brand image and credit which have

negative impact to the people who are putting their money in the banks .

REASONS FOR NPA:REASONS FOR NPA:

Reasons can be divided in to two broad categories:-

A] Internal Factor

B] External Factor

[ A ] Internal Factors:-[ A ] Internal Factors:-

Internal Factors are those, which are internal to the bank and are controllable by

banks.

Poor lending decision:

Non-Compliance to lending norms:

Lack of post credit supervision:

Failure to appreciate good payers:

Excessive overdraft lending:

Non – Transparent accounting policy:

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[ B ] External Factors:-[ B ] External Factors:-

External factors are those, which are external to banks they are not controllable by

banks.

Socio political pressure:

Chang in industry environment:

Endangers macroeconomic disturbances:

Natural calamities

Industrial sickness

Diversion of funds and willful defaults

Time/ cost overrun in project implementation

Labour problems of borrowed firm

Business failure

Inefficient management

Obsolete technology

Product obsolete

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Types of NPATypes of NPA

A] Gross NPAA] Gross NPA

B] Net NPAB] Net NPA

A] Gross NPA:A] Gross NPA:

Gross NPAs are the sum total of all loan assets that are classified as NPAs as per

RBI guidelines as on Balance Sheet date. Gross NPA reflects the quality of the

loans made by banks. It consists of all the non standard assets like as sub-standard,

doubtful, and loss assets.

It can be calculated with the help of following ratio:

Gross NPAs Ratio Gross NPAs

Gross Advances

B] Net NPA:B] Net NPA:

Net NPAs are those type of NPAs in which the bank has deducted the provision

regarding NPAs. Net NPA shows the actual burden of banks. Since in India, bank

balance sheets contain a huge amount of NPAs and the process of recovery and

write off of loans is very time consuming, the provisions the banks have to make

against the NPAs according to the central bank guidelines, are quite significant.

That is why the difference between gross and net NPA is quite high.

It can be calculated by following_

Net NPAs Gross NPAs – Provisions

Gross Advances - Provisions

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PREVENTIVE MEASUREMENT FOR NPA PREVENTIVE MEASUREMENT FOR NPA

Early Recognition of the Problem:-Early Recognition of the Problem:-

Invariably, by the time banks start their efforts to get involved in a revival process,

it’s too late to retrieve the situation- both in terms of rehabilitation of the project

and recovery of bank’s dues. Identification of weakness in the very beginning that is

: When the account starts showing first signs of 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 promoter’s

intention, banks are convinced of a turnaround within a scheduled timeframe. In

respect of totally unviable units as decided by the bank, it is better to facilitate

winding up/ selling of the unit earlier, so as to recover whatever is possible through

legal means before the security position becomes worse.

Identifying Borrowers with Genuine Intent:-Identifying Borrowers with Genuine Intent:-

Identifying

borrowers with genuine intent from those who are non- serious with no commitment

or stake in revival is a challenge confronting bankers. Here the role of frontline

officials at the branch level is paramount as they are the ones who has intelligent

inputs with regard to promoters’ sincerity, and capability to achieve turnaround.

Base don this objective assessment, banks should decide as quickly as possible

whether it would be worthwhile to commit additional finance.

In this regard banks may consider having “Special Investigation” of all financial

transaction or business transaction, books of account in order to ascertain real

factors that contributed to sickness of the borrower. Banks may have penal of

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technical experts with proven expertise and track record of preparing techno-

economic study of the project of the borrowers.

Borrowers having genuine problems due to temporary mismatch in fund

flow or sudden requirement of additional fund may be entertained at branch level,

and 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 offices

in deserving cases, and help avert many accounts slipping into NPA category.

Timeliness and Adequacy of response:-Timeliness and Adequacy of response:-

Longer the delay in response, grater the injury 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 promoter’s 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 Flows:-Focus on Cash Flows:-

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 requirements may be done by analyzing funds

flow in conjunction with the Cash Flow rather than only on the basis of Funds Flow.

Management Effectiveness:- Management Effectiveness:-

The general perception among borrower is that it is lack of finance that leads to

sickness and NPAs. But this may not be the case all the time. Management

effectiveness in tackling adverse business conditions is a very important aspect that

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affects a borrowing unit’s fortunes. A bank may commit additional finance to an

aling unit only after basic viability of the enterprise also in the context of quality of

management is examined and confirmed. Where the default is due to deeper

malady, viability study or investigative audit should be done – it will be useful to

have consultant appointed as early as possible to examine this aspect. A proper

techno- economic viability study must thus become the basis on which any future

action can be considered.

Multiple Financing:-Multiple Financing:-

A. During the exercise for assessment of viability and restructuring, a

Pragmatic and unified approach by all the lending banks/ FIs 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

success/failure.

B. In some default cases, where the unit is still working, the bank should make

sure that it captures the cash flows (there is a tendency on part of the

borrowers to switch bankers once they default, for fear of getting their cash

flows forfeited), and ensure that such cash flows are used for working capital

purposes. Toward this end, there should be regular flow of information

among consortium members. A bank, which is not part of the consortium,

may not be allowed to offer credit facilities to such defaulting clients. Current

account facilities may also be denied at non-consortium banks to such clients

and violation may attract penal action. The Credit Information Bureau of

India Ltd.(CIBIL) may be very useful for meaningful information exchange

on defaulting borrowers once the setup becomes fully operational.

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C. In a forum of lenders, the priority of each lender will be different. While one

set of lenders may be willing to wait for a 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 a t a cost – by

a discounted settlement of the exposure. Therefore, any plan for

restructuring/rehabilitation may take this aspect into account.

D. Corporate Debt Restructuring mechanism has been institutionalized in

2001 to provide a timely and transparent system for restructuring of the

corporate debt of Rs. 20 crore and above with the banks and FIs on a

voluntary basis and outside the legal framework. Under this system, banks

may greatly benefit in terms of restructuring of large standard accounts

(potential NPAs) and viable sub-standard accounts with consortium/multiple

banking arrangements.

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Tools for recovery of NPAs

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Credit Default

Inability to Inability to PayPay

Willful default

UnviabUnviablele

ViablViablee

Lok AdalatLok AdalatDebt Recovery Debt Recovery TribunalsTribunals

Securitization Act

Asset Asset ReconstructionReconstruction

CompromiCompromisese

RehabilitatiRehabilitationon

Consortium Consortium FinanceFinance

Sole Sole BankerBanker

Corporate Debt Restructuring

Fresh Issue Fresh Issue of Termof Term LoanLoan

Conversion Conversion into WCTLinto WCTL

Fresh WC

Limit

Rephasement Rephasement of Repayment of Repayment

PeriodPeriod

Once NPA occurred, one must come out of it or it should be managed in most

efficient manner. Legal ways and means are there to over come and manage NPAs.

We will look into each one of it.

Willful Default :-Willful Default :-

A] Lok Adalat and Debt Recovery Tribunal

B] Securitization Act

C] Asset Reconstruction

Lok Adalat: Lok Adalat:

Lok Adalat institutions help banks to settle disputes involving account in

“doubtful” and “loss” category, with outstanding balance of Rs. 5 lakh for

compromise settlement under Lok Adalat. Debt recovery tribunals have been

empowered to organize Lok Adalat to decide on cases of NPAs of Rs. 10 lakh and

above. This mechanism has proved to be quite effective for speedy justice and

recovery of small loans. The progress through this channel is expected to pick up in

the coming years.

Debt Recovery Tribunals(DRT):Debt Recovery Tribunals(DRT):

The recovery of debts due to banks and

financial institution passed in March 2000 has helped in strengthening the function

of DRTs. Provision for placement of more than one recovery officer, power to

attach defendant’s property/assets before judgment, penal provision for

disobedience of tribunal’s order or for breach of any terms of order and

appointment of receiver with power of realization, management, protection and

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preservation of property are expected to provide necessary teeth to the DRTs and

speed up the recovery of NPAs in the times to come. DRTs which have been set up

by the Government to facilitate speedy recovery by banks/DFIs, have not been able

make much impact on loan recovery due to variety of reasons like inadequate

number, lack of infrastructure, under staffing and frequent adjournment of cases. It

is essential that DRT mechanism is strengthened and vested with a proper

enforcement mechanism to enforce their orders. Non observation of any order

passed by the tribunal should amount to contempt of court, the DRT should have

right to initiate contempt proceedings. The DRT should empowered to sell asset of

the debtor companies and forward the proceed to the winding – up court for

distribution among the lenders

Inability to Pay

Consortium arrangementsConsortium arrangements:: Asset classification of accounts under consortium should be

based on the record of recovery of the individual member banks and other aspects having a bearing on

the recoverability of the advances. Where the remittances by the borrower under consortium lending

arrangements are pooled with one bank and/or where the bank receiving remittances is not parting with the

share of other member banks, the account will be treated as not serviced in the books of the other member

banks and therefore, be treated as NPA. The banks participating in the consortium should, therefore,

arrange to get their share of recovery transferred from the lead bank or get an express consent from the

lead bank for the transfer of their share of recovery, to ensure proper asset classification in their respective

books.

30

Corporate debt Restructuring (CDR):Corporate debt Restructuring (CDR):

Background Background

In spite of their best efforts and intentions, sometimes corporate find themselves in

financial difficulty because of factors beyond their control and also due to certain

internal reasons. For the revival of the corporate as well as for the safety of the

money lent by the banks and FIs, timely support through restructuring in genuine

cases is called for. However, delay in agreement amongst different lending

institutions often comes in the way of such endeavours.

Based on the experience in other countries like the U.K., Thailand, Korea,

etc. of putting in place institutional mechanism for restructuring of corporate debt

and need for a similar mechanism in India, a Corporate Debt Restructuring System

has been evolved, as under :

Objective

The objective of the Corporate Debt Restructuring (CDR) framework is to

ensure timely and transparent mechanism for restructuring of the corporate debts of

viable entities facing problems, outside the purview of BIFR, DRT and other legal

proceedings, for the benefit of all concerned. In particular, the framework will aim

at preserving viable corporate that are affected by certain internal and external

factors and minimize the losses to the creditors and other stakeholders through an

orderly and coordinated restructuring programme.

31

32

RESEARCH

METHODOLOGY

RESEARCH METHODOLOGY

Research methodology is a way to systematically solve the research problem.

Research methodology constitutes of research methods, selection criterion of

research methods, used in context of research study and explanation of using of a

particular method or technique so that research results are capable of being

evaluated either by researcher himself or by others

TITLE:

“PROCEDURE TO REDUCE NON-PERFORMING ASSETS IN BANKS ”.

OBJECTIVES OF THE STUDY

The basic idea behind undertaking the Grand Project on NPA was to:

To Know the Concept of Non Performing Asset

To know Preventive Measures

To evaluate NPAs (Gross and Net) in different banks.

To analyze financial performance of banks at different level of NPA

To Know the Impact of NPAs

To Know the Reasons for NPAs

33

SIGNIFICANCE OF THE STUDY

This is a limited study which takes into consideration the responses of 100 people.

This data can be exported to take in the trends across the industry. The significance

for the industry lies in studying these trends that emerge from the study. It is a

rapidly changing and evolving sector. People are only beginning to wake up to it’s

vast possibilities. A study like this can attempt to guide the future of the industry

based on current trends.

SCOPE OF THE STUDY

The scope of the study refers to the job that to know about the activities of the

organization. The study means that the analysis of the products of the company on

which he/she has to focus.

Scope of the StudyScope of the Study

Concept of Non Performing Asset

Guidelines

Impact of NPAs

Reasons for NPAs

Preventive Measures

Tools to manage NPAs

During the summer training the volunteer need to find out the corporate strategies

of the running company and The mile stone which the company has covered during

its journey. In the summer training, it is necessary for the student that he /she

involve with the experience guys to get the knowledge about the company. That is

how the company has got the success, Or if it is going in the loss, why.

34

RESEARCH DESIGN

NON-PROBABILITY

EXPLORATORY &DISCRIPTIVE EXPERIMENTAL RESEARCH

The research is primarily both exploratory as well as descriptive in nature. The

sources of information are both primary & secondary.

Primary Data:

Primary data is basically the live data which I collected on field while doing

cold calls with the Distributor and shopkeeper, customers, I shown them list of

question for which I had required their responses. In some cases I got no

response form their side and than on the basis of my previous experiences I

filled those fields.

Source: Main source for the primary data for the project was questionnaires

which I got filled by the customers or some times filled myself on the basis of

discussion with the customers.

Secondary Data:

1 Internet ,

2 Books

3 Journals ,

4 Newspaper,

5 Annual report,

6 Database available in the library,

7 Catalogues and presentations.

35

Tools and Techniques:

As no study could be successfully completed without proper tools and techniques,

same with my project. For the better presentation and right explanation I used tools

of statistics and computer very frequently. And I am very thankful to all those tools

for helping me a lot. Basic tools which I used for project from statistics are-

- Bar Charts

- Pie charts

- Tables

bar charts and pie charts are really useful tools for every research to show the result

in a well clear, ease and simple way. Because I used bar charts and pie charts in

project for showing data in a systematic way, so it need not necessary for any

observer to read all the theoretical detail, simple on seeing the charts any body

could know that what is being said.

Technological Tools

Ms-Access

Ms-Word

Above application software of Microsoft helped me a lot in making project more

interactive and productive.

Microsoft-Excel had a great role in my project, it created for me a situation of “you

sit and get”. I provided it simply all the detail of data and in return it given me all

the relevant information..

36

SAMPLING METHODOLOGY

Sampling Technique:

Initially, a rough draft was prepared keeping in mind the objective of the research.

A pilot study was done in order to know the accuracy of the Questionnaire.

The final Questionnaire was arrived only after certain important changes were done.

Thus my sampling came out to be judgment and convenient

Sampling Unit:

The respondent who were asked to fill out questionnaires are the sampling units.

These comprise of employees of MNC, Govt. Employees, Self Employed etc.

Sample size:

The sample size was restricted to only 100, which comprised of mainly peoples

from different regions of BHOPAL due to time constraints.

Sampling Area :

The area of the research was Bhopal.

37

38

DATA ANALYSIS

&INTERPRETATI

ON

G ender:

Classification of Customers Based On Sex

Sex No. of respondents Percentage %

Male 35 35

Female 65 65

total 100 100

I nterpretation:

35% of the respondents are male and 65% of the respondents are female.

From the above table we can conclude that, the majority of the respondents were

belongs to female group.

39

O ccupation:

Analysis of Occupation of the Respondents

Occupation No. of. respondents Percentage

%

Business 20 20

Employee 10 10

House wife 65 65

Others 05 05

Total 100 100

I nterpretation:

20% of the respondents are business, 10% of the respondents are employees,

and 65% of the respondents are house wives, 05% of the respondents are others

group.

40

I ncome:

Analysis of Monthly Income of the Respondents

Monthly income No. of respondents Percentage %

Below 5000 38 38

5001-10000 30 30

10001-15000 21 21

15001 & above 11 11

Total 100 100

I nterpretation:

As per the data 38% of the respondents earn per month below 5000, 30% of the

respondents earn 5001 to 10000, 21% of the respondents earn above 10001 to

15000. 11% of the respondents earn 15000 & above. From the above table we can

conclude that majority of the respondents’ monthly income group of below 5000

and more than 5000 to 10000.

41

1. DO YOU KNOW THE NON PERFORMING ASSETS OF BANK

Opinions No. of Respondents Percentage (%)

Yes 10 10

No 90 90

Total 100 100

I nterpretation:

Only 10% of the respondents said that they know about NON

PERFORMING ASSETS while 90% don’t know about NON PERFORMING

ASSETS

42

2. IT IS POSSIBLE TO ELIMINATE TOTALLY THE NPAS IN THE BANKING

BUSINESS

Analysis of Recommendations

Recommended No. of Respondents Percentage (%)

Yes 95 95

No 05 05

Total 100 100

I nterpretation:

Out of 100 respondent , 95% of the respondents were recommended It is

possible to eliminate totally the npas in the banking business while only 5% told It

is not

43

3. EFFECTIVE INSPECTION SYSTEM SHOULD BE IMPLEMENTED

Option Percentage of respondents

Yes 64

No 36

INTERPRETATION

Out of 100 respondent 64 % respondent were satisfied with effective inspection system should be implemented while 36% told no.

44

4. DO YOU THINK OPERATING STAFF SHOULD SCRUTINIZE THE LEVEL OF INVENTORIES/RECEIVABLES REGULARLY

Option Percentage of respondents

Yes 78

No 22

INTERPRETATION

Out of 100 respondent 78 % respondent are satisfied with the statement thatoperating staff should scrutinize the level of inventories/receivables regularlywhile only 22% were not satisfied.

5. DO YOU THINK LARGE EXPOSURE ON BIG CORPORATE OR SINGLE PROJECT SHOULD BE AVOIDED

45

Option Percentage of respondents

Yes 24

No 76

INTERPRETATION

Out of 100 respondent only 24% think large exposure on big corporate or single project should be avoidedWhile 76% don’t think about that.

6. UNEVEN SCALE OF REPAYMENT SCHEDULE WITH HIGHER REPAYMENT IN THE INITIAL YEARS NORMALLY IS PREFERRED

46

RESPONSE NO. OF RESPONDENT

S

SHARE (%)

Satisfied 45 45%

Not satisfied 55 55%

Not Responded 0 0.0%

Total 100 100%

INTERPRETATION

45% of the respondents are satisfied with uneven scale of repayment schedule with higher repayment in the initial years normally is preferred55% of the respondents are not satisfied with that statement.

47

7. ARE YOU SATISFIED WITH STATEMENT THE BANKS SHOULD NOT ONLY TAKE STEPS FOR REDUCING PRESENT NPAS, BUT NECESSARY PRECAUTION SHOULD ALSO BE TAKEN TO AVOID FUTURE NPAS

RESPONSE NO. OF RESPONDENT

S

SHARE (%)

Satisfied 60 60%

Not satisfied 40 40%

Not Responded 0 0.0%

Total 100 100%

INTERPRETATION

60% of the respondents were think the banks should not only take steps for reducing present NPAs, but necessary precaution should also be taken to avoid future NPAs . 40% of the respondents are not satisfied with that statement.

48

8. DO YOU THINK THAT NECESSARY PRECAUTION SHOULD ALSO BE

TAKEN TO AVOID FUTURE NPAS?

RESPONSE NO. OF RESPONDENT

S

SHARE (%)

Yes 70 70%

No 30 30%

Total 100 100%

INTERPRETATION

Out Of the sample size of 100 surveyed respondents 70% of the respondents think

that necessary precaution should also be taken to avoid future NPA 30% don’t think

that.

49

9.DO YOU THINK THERE IS SIGNIFICANT RELATIONSHIP BETWEEN GROSS NPA OF A BANK TO ITS OPERATING PROFIT?

RESPONSE NO. OF RESPONDENTS

SHARE (%)

Yes 87 87%

no 13 13%

Total 100 100%

INTERPRETATION

Out of 100 respondent 87% think there is significant relationship between gross NPA of a bank to its operating profit only 13% don’t think there is significant relationship between gross npa of a bank to its operating profit.

50

10. DO YOU THINK THE BANK WILL ALWAYS FACE THE PROBLEM OF NPA BECAUSE OF POOR RECOVERY OF ADVANCES GRANTED BY THE BANK

RESPONSE NO. OF RESPONDENT

S

SHARE (%)

YES 45 45%

NO 55 55%

Not Responded 0 0.0%

Total 100 100%

INTERPRETATION

Out of 100 respondent 55% respondent think the bank will always face the problem of npa because of poor recovery of advances granted by the bank while 45% don’t think.

51

ANALYSIS

For the purpose of analysis and comparison between private sector and public sector

banks, we take five-five banks in both sector to compare the non performing assets

of banks. For understanding we further bifurcate the non performing assets in

priority sector and non priority sector, gross NPA and net NPA in percentage as

well as in rupees, deposit – investment – advances.

Deposit – Investment – Advances is the first in the analysis because due to these we

can understand the where the bank stands in the competitive market. As at end of

march 2008, in private sector ICICI Bank is the highest deposit-investment-

advances figures in rupees crore, second is HDFC Bank and KOTAK Bank has

least figures.

In public sector banks Punjab National Bank has highest deposit-investment-

advances but when we look at graph first three means Bank of Baroda and Bank of

India are almost the similar in numbers and Dena Bank is stands for last in public

sector bank. When we compare the private sector banks with public sector banks

among these banks, we can understand the more number of people prefer to choose

public sector banks for deposit-investment.

But when we compare the private sector bank ICICI Bank with the public sector

banks ICICI Bank is more deposit-investment figures and first in the all banks.

52

DEPOSIT-INVESTMENT-ADVANCES ( RS.CRORE) of both sector banks

and comparison among them, year 2007-08.

BANK DEPOSIT INVESTMENT ADVANCES

AXIS 87626 33705 59661

HDFC 100769 49394 63427

ICICI 244431 111454 225616

KOTAK 16424 9142 15552

INDUSIND 19037 6630 12795

TOTAL 468287 210325 377051

53

BANK DEPOSIT INVESTMENT ADVANCES

BOB 152034 43870 106701

BOI 150012 41803 113476

DENA 33943 10282 23024

PNB 166457 53992 119502

UBI 103859 33823 74348

TOTAL 606305 183770 437051

54

ICICI BANK AND PUNJAB NATIONAL BANK :-

BANK DEPOSIT INVESTMENT ADVANCES

ICICI BANK 244431 111454 225616

PNB 166457 53992 119502

There are two concepts related to non-performing assets_ gross and net. Gross

refers to all NPAs on a bank’s balance sheet irrespective of the provisions made. It

consists of all the non standard assets, viz. sub standard, doubtful, and loss assets.

A loan asset is classified as ‘ sub standard” if it remains NPA up to a period of 18

months; “ doubtful” if it remains NPA for more than 18 months; and loss,

without any waiting period, where the dues are considered not collectible or

marginally collectible.

55

Net NPA is gross NPA less provisions. Since in India, bank balance sheets

contains a huge amount of NPAs and the process of recovery and write off of loans

is very time consuming, the provisions the banks have to make against the NPA

according to the central bank guidelines, are quite significant.

Here, we can see that there are huge difference between gross and net NPA. While

gross NPA reflects the quality of the loans made by banks, net NPA shows the

actual burden of banks. The requirements for provisions are :

100% for loss assets

100% of the unsecured portion plus 20-50% of the secured portion,

depending on the period for which the account has remained in the doubtful

category

10% general provision on the outstanding balance under the sub standard

category.

Here, there are gross and net NPA data for 2006-07 and 2007-08 we taken for

comparison among banks. These data are NPA AS PERCENTAGE OF TOTAL

ASSETS. As we discuss earlier that gross NPA reflects the quality of the loans

made by banks. Among all the ten banks Dena Banks has highest gross NPA as a

percentage of total assets in the year 2006-07 and also net NPA. Punjab National

Bank shows vast difference between gross and net NPA. There is almost same

figures between BOI and BOB.

56

YEAR 2007-08

BANK GROSS NPA NET NPA

BOB 1.46 0.35

BOI 1.48 0.45

DENA 2.37 1.16

PNB 2.09 0.45

UBI 1.82 0.59

57

2007-08

BANK GROSS NPA NET NPA

BOB 1.10 0.27

BOI 1.08 0.33

DENA 1.48 0.56

PNB 1.67 0.38

UBI 1.34 0.10

2006-07

BANK GROSS NPA NET NPA

AXIS 0.57 0.36

HDFC 0.72 0.22

ICICI 1.20 0.58

KOTAK 1.39 1.09

INDUSIND 1.64 1.31

58

2007-08

BANK GROSS NPA NET NPA

AXIS 0.45 0.23

HDFC 0.68 0.22

ICICI 1.90 0.87

KOTAK 1.55 0.98

INDUSIND 1.69 1.25

59

COMPARISON OF GROSS NPA WITH ALL BANKS FOR THE YEAR

2007-08. The growing NPAs affects the health of banks, profitability and

efficiency. In the long run, it eats up the net worth of the banks. We can say

that NPA is not a healthy sign for financial institutions. Here we take all the

ten banks gross NPA together for better understanding. Average of these ten

banks gross NPAs is 1.29 as percentage of total assets. So if we compare in

private sector banks AXIS and HDFC Bank are below average of all banks

and in public sector BOB and BOI. Average of these five private sector

banks gross NPA is 1.25 and average of public sector banks is 1.33. Which

is higher in compare of private sector banks.

GROSS NPA :-

COMPARISON OF NET NPA WITH ALL BANKS FOR THE YEAR

2007-08. Average of these ten bank’s net NPA is 0.56. And in the public

sector banks all these five banks are below this. But in private sector banks

there are three banks are above average. The difference between private and

public banks average is also vast. Private sector banks net NPA average is

0.71 and in public sector banks it is 0.41 as percentage of total assets. As we

know that net NPA shows actual burden of banks. IndusInd bank has highest

net NPA figure and HDFC Bank has lowest in comparison.

60

NET NPA of banks:-

PRIORITY –NON PRIORITY SECTOR

When we further bifurcate NPA in priority sector and Non priority sector.

Agriculture + small + others are priority sector. In private sector banks ICICI Bank

has the highest NPA in both sector in compare to other private sector banks.

Around 72% of NPA is with ICICI Bank with Rs.1359 crore in priority sector and

around 78% in non priority sector. We can see that in private sector banks , banks

has more NPA in non priority sector than priority sector.

BANK AGRI

( 1 )

SMALL

( 2 )

OTHERS

( 3 )

PRIORITY

SECTOR

( 1+2+3 )

NON-

PRIORITY

AXIS 109.12 14.76 86.71 210.59 275.06

HDFC 36.12 110.56 47.70 194.41 709.23

ICICI 981.85 23.35 354.13 1359.34 6211.12

KOTAK 10.00 33.84 4.04 47.87 405.20

INDUSIND 30.44 3.18 30.02 63.64 328.67

TOTAL 1167.53 185.69 522.60 1875.85 7929.28

61

BANK PRIORITY SECTOR

(ADVANCED

RS.CRORE )

NPA

BOB 5469 350

BOI 3269 325

DENA 1160 106

PNB 3772 443

UBI 1924 197

When we talk about public sector banks they are more in priority sector and they

given advanced to weaker sector or industries. Public sector banks give more loans

to Agriculture , small scale and others units and as a result we see that there are

more number of NPA in public sector banks than in private sector banks. BOB

62

given more advanced to priority sector in 2007-08 than other four banks and Dena

Bank is in least.

But when there are comparison between private bank and public sector bank still

ICICI Bank has more NPA in both priority and non priority sector with the

comparison of public sector banks. Large NPA in ICICI Bank because the strategy

of bank that risk-reward attitude and initiative in each sector. Above we also

discuss that ICICI Bank has highest deposit-investment-advance than other banks.

Now, when we compare the all public sector banks and public sector banks on

priority and non-priority sector than the figures are really shocking. Because in

compare of private sector banks, public sector banks numbers are very large.

SECTOR

PUBLIC SECTOR NEW PRIVATE

2006-07 2007-08 2006-07 2007-08

PRIORITY 22954 25287 1468 2080

PUBLIC 490 299 3 0

NON PRT 15158 14163 4800 8339

TOTAL 38602 39749 6271 10419

Here, there are huge difference between private and public sector banks NPA.

There is increase in new private sector banks NPA of Rs.4148 cr in 2007-08 which

is almost 66% rise than previous year. In public sector banks the numbers are not

increased like private sector banks.

63

64

FINDINGSUGGESTIONCONCLUSION

FINDING

For the purpose of analysis and comparison between private sector and public sector

banks, we take five-five banks in both sector to compare the non performing assets

of banks. For understanding we further bifurcate the non performing assets in

priority sector and non priority sector, gross NPA and net NPA in percentage as

well as in rupees, deposit – investment – advances.

55% respondent think the bank will always face the problem of npa because of poor

recovery of advances granted by the bank while 45% don’t think.

45% of the respondents are satisfied with uneven scale of repayment schedule with

higher repayment in the initial years normally is preferred

55% of the respondents are not satisfied with that statement

60% of the respondents were think the banks should not only take steps for reducing

present NPAs, but necessary precaution should also be taken to avoid future NPAs .

40% of the respondents are not satisfied with that statement.

Deposit – Investment – Advances is the first in the analysis because due to these we

can understand the where the bank stands in the competitive market. As at end of

march 2008, in private sector ICICI Bank is the highest deposit-investment-

advances figures in rupees crore, second is HDFC Bank and KOTAK Bank has

least figures.

In public sector banks Punjab National Bank has highest deposit-investment-

advances but when we look at graph first three means Bank of Baroda and Bank of

India are almost the similar in numbers and Dena Bank is stands for last in public

sector bank. When we compare the private sector banks with public sector banks

among these banks, we can understand the more number of people prefer to choose

public sector banks for deposit-investment. comparison of net npa with all banks for

the year 2007-08. Average of these ten bank’s net NPA is 0.56. And in the public

sector banks all these five banks are below this. But in private sector banks there are

three banks are above average

65

SUGGESTION

Effective inspection system should be implemented.

Operating staff should scrutinize the level of inventories/receivables regularly.

Large exposure on big corporate or single project should be avoided.

Uneven scale of repayment schedule with higher repayment in the initial years normally is preferred.

Large exposure on big corporate or single project should be avoided

66

CONCLUSION

It is not possible to eliminate totally the NPAs in the banking business but can only be minimized. It is always wise it follow the proper policy appraisal, supervision and follow-up of advances to avoid NPAs.

  The banks should not only take steps for reducing present NPAs, but

necessary precaution should also be taken to avoid future NPAs.

The bank has achieved its target because the net profit is also increased and there is a decrease in NPAs. So it is in better position compared to last year

 

67

68

BIBLIOGRAPH

Y

BIBLIOGRAPHY

Marketing Management Philip Kotler, The Millennium Edition, Prentice Hall

Of India Private Limited, New Delhi.

Marketing Research: G.C Brek, Tata Mc Graw-Hill Publishing Company

Limited, New Delhi

Periodical: Business Word

Research Methodology: C.R.Kothari , 2nd edition.

S.N Murty and U Bhojanna

Website Address:

www.hdfcbank.com

www.scribed.com

www.googlesearch.com

69

70

QUESTIONNAI

RE

QUESTIONNIRE

I am student of first year MBA of the G.G.I.T.M. Bhopal, I am doing project on

“Procedure to reduce non performing assets in banks” as a part of study. I request

you to provide the required information for the completion of my study.

Promise that the information is used exclusively for academic purpose only.

1. personal profile: A. Name:

B. Address:

C: Sex: Male: [ ] Female [ ]

G: Age: [ ]

1.DO YOU KNOW THE NON PERFORMING ASSETS OF BANK

1) YES 2) NO

2.IT IS POSSIBLE TO ELIMINATE TOTALLY THE NPAS IN THE BANKING BUSINESS

1) YES 2) NO

3.EFFECTIVE INSPECTION SYSTEM SHOULD BE IMPLEMENTED.

1) YES 2) NO

4.DO YOU THINK OPERATING STAFF SHOULD SCRUTINIZE THE LEVEL OF INVENTORIES/RECEIVABLES REGULARLY

1) YES 2) NO

71

5.DO YOU THINK LARGE EXPOSURE ON BIG CORPORATE OR SINGLE PROJECT SHOULD BE AVOIDED

1) YES 2) NO

6.UNEVEN SCALE OF REPAYMENT SCHEDULE WITH HIGHER REPAYMENT IN THE INITIAL YEARS NORMALLY IS PREFERRED

1) YES 2) NO

7.DO YOU THINKTHE BANKS SHOULD NOT ONLY TAKE STEPS FOR REDUCING PRESENT NPAS, BUT NECESSARY PRECAUTION SHOULD ALSO BE TAKEN TO AVOID FUTURE NPAS

1) YES 2) NO

8.NECESSARY PRECAUTION SHOULD ALSO BE TAKEN TO AVOID FUTURE NPAS.

1) YES 2) NO

9.DO YOU THINK THERE IS SIGNIFICANT RELATIONSHIP BETWEEN GROSS NPA OF A BANK TO ITS OPERATING PROFIT.

1) YES 2) NO

10.THE BANK WILL ALWAYS FACE THE PROBLEM OF NPA BECAUSE OF POOR RECOVERY OF ADVANCES GRANTED BY THE BANK

1) YES 2) NO

11.NON PERFORMING ASSETS ARE MORE IN

1) PRIORITY SECTOR2) NON PRIORITY SECTOR

72

12.WHAT ARE THE METHODS ADOPTED BY THE BANK TO LOOK AFTER NPA MANAGEMENT

……………………………………………………………………………………………………………………………………………………………………………………........................................

13.WHAT IS THE CRITERIA TO RECOVER THE ADVANCES FROM THE BANK……………………………………………………………………………………………………………………………………………………………………………………………………………....

73