NON PERFORMING ASSETS IT'S IMPACT OF BANK PROFITABILITY (FOCUSED ON AXIS BANK) Dissertatio S!

"#itte$ to t%e Pa$#as%ree Dr& D&Y& Pati' U i(ersit) i *artia' +!'+i'#e t o+ t%e re,!ire#e ts +or t%e a-ar$ o+ t%e De.ree o+ MASTERS IN BUSINESS ADMINISTRATION

S!"#itte$ ")/ MEENAL K0ADKA (Ro'' No&123142)

Resear5% G!i$e/

Dr&R&Go*a'

De*art#e t o+ B!si ess Ma a.e#e t Pa$#as%ree Dr& D&Y& Pati' U i(ersit) CBD Be'a*!r6 Na(i M!#"ai De5e#"er 3124

NON PERFORMING ASSET AND IT's IMPACTS ON BANK PROFITABILITY FOCUSED ON AXIS BANK

DECLARATION

I hereby declare that the dissertation 7NON PERFORMING ASSET AND ITS IMPACT ON BANK PROFITABILITY (FOCUSED ON AXIS BANK)8 submitted for the MBA Degree at Padmashree Dr. D.Y. Patil Universitys Department of Business Management is my original or! and the

dissertation has not formed the basis for the a ard of any degree" associate ship" fello ship or any other similar titles.

Place# Mumbai Date#

$ignature of the $tudent

Certi+i5ate
%his is to certify that the dissertation entitled & '(' P)*+(*MI', A$$)%$ A'D I%-$ IMPA.% (' BA'/ P*(+I%ABI0I%Y 1+(.U$)D (' A2I$ BA'/3&is the bona fide research or! carried out by Ms. Meenal /had!a"

student of MBA" at Padmashree Dr. D.Y. Patil Universitys Department of Business Management during the year 4556 74558" in partial fulfilment of the re9uirements for the a ard of the Degree of Master in Business Management and that the dissertation has not formed the basis for the a ard previously of any degree" diploma" associate ship" fello ship or any other similar title.

(Dr& R& Go*a')6 Dire5tor6 De*art#e t o+ B!si ess M.t6 Pa$#as%ree Dr& D&Y& Pati' U i(ersit))

P'a5e/ M!#"ai Date/

A59 o-'e$.e#e ts
In the first place" I than! the Padmashree Dr. D. Y. Patil University" Department of Business Management" 'avi Mumbai for giving me an opportunity to or! on this pro:ect. I ould also li!e to than! Dr. *.,(PA0"

Director" Department of Business Management" Padmashree Dr. D.Y. Patil University" 'avi Mumbai for having given me her valuable guidance for the pro:ect. ;ithout his help it ould have been impossible for me to complete the pro:ect. I ould also li!e to than! the various people from the finance field ho have

provided me

ith a lot of information and in fact even sharing some of the hich I have used in this

confidential company documents and data < many of

report and ithout hich this pro:ect could not have been completed. I ould be failing in my duty if I do not ac!no ledge ith a deep sense of

gratitude the sacrifices made by my parents and thus have helped me in completing the pro:ect or! successfully. Place# Mumbai Date# $ignature of the student.

Pre+a5e
;hile searching for a suitable topic for the M.B.A Dissertation" I happened to meet a person from the +inance $ector" ho suggested to me the topic on the

+inancial $ector of India. During the course of the discussion" it transpired that the problems that this sector faces is ith respect to 'on performing asset and

its impact on ban! profitability focused on 1A=is ban!3. %he topics having aroused my curiosity" discussions ere held ith several

people in the retail sector to understand the veracity of the above thought process and also understand the real issues plaguing the industry. All these aspects then resulted in the development of the pro:ect report titled 'on performing asset and its impact on ban! profitability focused on 1A=is ban!3. It is strongly hoped that this pro:ect covers not only the various re9uirements of the Pro:ect $tudy but also of the Industry.

$ignature of the $tudent

I $e:
Topic covered Executive summary Design of the study Introduction Literature review Objectives Profile of the Axis bank !O" analysis Product and services offered by Axis bank #esearch methodology Analysis and inter$retation Im$act on bank $rofitability of %PA &onclusions Abbreviations Page nos.

'ibliogra$hy

EXECUTI;E SUMMARY/ %he future of Indian Ban!ing represents a uni9ue mi=ture of unlimited opportunities amidst impossible challenges. (n the one hand e see the scenario represented by the rapid process of globali>ation presently ta!ing shape bringing the community of nations in the orld

together" transcending geographical boundaries" in the sphere of trade and commerce" and even employment opportunities of individuals. All these indicate ne ly emerging opportunities for Indian Ban!ing. But on the dar!er side e see the accumulated chaos"

brought out by three decades of controlled and division management of the ban!s in the past. It has siphoned profitability of the many ban!s" accumulated enlarged 'PA and threatens .apital Ade9uacy of the Ban!s and their continued stability. 'e Private $ector Ban!s in India can solve their problems only if they assert a spirit of self7initiative and self7reliance through developing their in7house e=pertise. %hey have to imbibe the ban!ing philosophy inherent in de7regulation 'PA is a problem created by the Ban!s and they have to find the cause and the solution 7 ho it as created and ho the

Ban!s are to overcome it. An attempt is made in this study the present situation and to arrive at a solution to solve this problem.

 DESIGN OF T0E STUDY

Tit'e o+ t%e *ro<e5t/ 7No Per+or#i . Assets a $ its i#*a5t o Ba 9 *ro+ita"i'it)8 (Fo5!se$ o A:is Ba 9)

Nee$ For St!$)/ %his study ill help to !no the recent norms of 'PA. %his study helps to !no ho 'PA .ausing Problems to Ban!ing $ector and hat

might be the solution to overcome from this problem and also its impact on Profitability of 'e Private Ban!s.

State#e t o+ t%e *ro"'e#/ Profitability is considered as a benchmar! for evaluating performance of any business enterprise including the ban!ing industry. ?o ever" increasing 'on7 Performing Assets" have a direct impact on profitability of ban!s and financial institutions. 0egally spea!ing ban!s and financial institutions are not allo ed to boo! income on such account

and at the same times they are forced to ma!e provision on such assets. $o %his pro:ect is underta!en to no impact of 'PA on Profitability of 'e Private $ector Ban!s.

LITERATURE RE;IE= Ma.a>i e a#e? CAPITAL MARKET De5& 311@ issue %he article ta!en for reference from this maga>ine and the article is named @$hort term pains" long7 term gainA on Pg.7B. It discusses about the rising 'PAs" increase in provision coverage" sluggish credit off ta!e and d indling treasury income. It states that these measures are going to set ays for better valuations. It tells about ho the B$) Ban!e= has out performed theB$) $ense= by recording robust returns of C6BD. It discusses about various ban!s namelyBan! of

India" Union Ban! of India" $tate Ban! of India" Ban! of Baroda" Pun:ab 'ational Ban! and IndusInd Ban! have reached their all time high during (ct. <'ov. 4558 period. It discusses about the preparedness of various ban!s for reducing 'PAs i.e. by improving capital ade9uacy ratio" increasing the minimum provision coverage ratio" introducing ne policies for broader

interest rate regime" creating more transparent system and e=tending ban!ing reach. It alsodiscusses about the benchmar! prime lending rate 1BP0*3 concept of *BI hich helps to ensure appropriate pricing of loans.

Ma.a>i e a#e? BUSINESS TODAY De5& 311@ iss!e %he maga>ine gives us the data about the various commercial ban!s operating in India and *an!s them according to four groups namely 0arge ban!s" Mid< si>e ban!s" $mall ban!s and Eery $mall ban!s. +rom the data given in the maga>ine done by B%7 /PM, study is clear that despite the global credit crisis continues to ta!e its toll7 last month the C55 th U$ ban! collapsed since 0ehman Brothers the Indian Ban!s continue to do business as usual and the result is given in numbers through this survey.

Resear5% Pa*er ? 7A 5o#*arati(e st!$) o+ No Per+or#a 5e Assets i I $ia8 ") Pras%a t% K Re$$)6 IIMA A%#e$a"a$&B %his article discusses about the financial sector reform in India hich has progress rapidly on aspects li!e interest rate deregulation" reduction in reserve re9uirements" barriers to entry" prudential norms and ris! based supervision but the progress on the structural7institutional aspects has been much slo er and is a cause for concern. It tells about hat changes are re9uired to tac!le the 'PA problem. %his paper also deals ith the e=periences of other Asian countries in handling of 'PAs. It also suggests mechanisms to handle the problem by dra ing on e=periences from other countries

 OBJECTIVES OF STUDY

C. %o study the *BI norms on 'on Performing Assets" and the various reasons for the e=istence of huge level of 'PA in Indian ban!ing. 4. %o !no the performance comparison of 'e Private Ban!s 'on performing asset

for past F years. F. %o !no the impact of non performing assets on profitability of 'e Private Ban!s"

and comparison of credit ris! path of 'e Private Ban!s Ban!s.

ith 6 selected (ld Private

B. %o study the various steps ta!en by the ban!s to bring do n the 'PAs in respective ban! branches. G. %o recommend measures for Improving performance and reduction of 'on Performing Assets.

Resear5% Met%o$o'o.) Pri#ar) Data/ Eie s of the concerned officials ere gathered by directly interacting ith them" and such

data as found very useful hile analy>ing and dra ing conclusions. Se5o $ar) Data/ *ecent *BI norms of 'PA. IBA Bulletin 5f 45C47CF is referred to collect data for 'et 'PA" and Advances. ;eb site of A=is Ban! and other ;eb sites.

P'a o+ a a')sis/ In this study 9uadrant analysis is used on the calculated figures. Li#itatio s/ %he study is based mostly on secondary data. Data has been dra n from :ournals" so information may not be complete.

+or the analysis only the advances and 'PA percentages of ban!s and operating profit" provisions and contingencies as a into consideration. hole and net profit of 'e P$B is ta!en

NON PERFORMING ASSETS INTRODUCTION It-s a !no n fact that the ban!s and financial institutions in India face the problem of s elling non7performing assets 1'PAs3 and the issue is becoming more and more unmanageable. In order to bring the situation under control" some steps have been ta!en recently. %he $ecuriti>ation and *econstruction of +inancial Assets and )nforcement of $ecurity Interest Act" 4554 as passed by Parliament" hich is an important step to ards

elimination or reduction of 'PAs. Mea i . o+ NPA/ An asset is classified as non7performing asset 1'PAs3 if dues in the form of principal and interest are not paid by the borro er for a period of CH5 days. ?o ever March 455B" default status ith effect from

ould be given to a borro er if dues are not paid for 85 days. If

any advance or credit facilities granted by ban! to a borro er become non7performing" then the ban! ill have to treat all the advancesIcredit facilities granted to that borro er as non7

performing

ithout having any regard to the fact that there may still e=ist certain advances I

credit facility. A debt obligation here the borro er has not paid any previously agreed upon interest and

principal repayments to the designated lender for an e=tended period of time. %he nonperforming asset is therefore not yielding any income to the lender in the form of principal and interest payments.

+or e=ample" a mortgage in default period of non7payment" the lender

ould be considered non7performing. After a prolonged ill force the borro er to li9uidate any assets that ere pledged" the lenders might ere

pledged as part of the debt agreement. If no assets

rite7off

the asset as a bad debt and then sell it at a discount to a collections agency. Reaso s +or t%e e:iste 5e o+ %!.e 'e(e' o+ NPA i t%e i $ia "a 9i . s)ste# (IBS)/ %he origin of the problem of burgeoning 'PAs lies in the 9uality of managing credit ris! by the ban!s concerned. ;hat is needed is having ade9uate preventive measures in place namely" fi=ing pre7sanctioning appraisal responsibility and having an effective post7 disbursement supervision. Ban!s concerned should continuously monitor loans to identify accounts that have potential to become non7performing. %o start ith" performance in terms of profitability is a benchmar! for any business

enterprise including the ban!ing industry. ?o ever" increasing 'PAs have a direct impact on ban!s profitability as legally ban!s are not allo ed to boo! income on such accounts and at the same time ban!s are forced to ma!e provision on such assets as per the *eserve Ban! of India 1*BI3 guidelines.

Also"

ith increasing deposits made by the public in the ban!ing system" the ban!ing

industry cannot afford defaults by borro ers since 'PAs affects the repayment capacity of ban!s. +urther" *eserve Ban! of India 1*BI3 successfully creates e=cess li9uidity in the system through various rate cuts and ban!s fail to utili>e this benefit to its advantage due to the fear of burgeoning non7performing assets.

So#e o+ t%e ot%er reaso s -ere/ After the nationali>ation of ban!s sector became compulsory. Ban!s ere compelled to give credit to even those sectors" hich ere not ise allocation of credit disbursements

considered to be very profitable" !eeping in mind the federal policy. People in the agricultural sector ere hardly interested in returning the loans as they ere confident that the loans governments. %he small scale industries also availed credit even though they performing to the e=tent of returning the loans. Ban!s ere also not in the position to press enough securities to cover the loans in ere not sure of ith the interest ould be ritten off by the successive

calls of timings. )ven if the assets ere provided they proved to be substandard assets as the values

that could be reali>ed ere very lo .

+ree distribution done during @loan mailsA 1congress regime3 also contributed to the heavy increase in 'PAs.

%he slac!ness in effort by the ban! authorities to collect or recover loan advances in time also contributes to the increase in 'PAs.

0ac! of accountability of the officers"

ho sanctioned the loans led to a caste

hole

approach by the officers recovering the loans. 0oans sanctioned to under servicing candidates due to pressure from the ministers and other politicians also led to the non recovery of debts. Poor credit appraisal system" lac! of vision hile sanctioning credit limits. 0ac! of proper monitoring. *ec!less advances to achieve the budgetary targets. 0ac! of sincere corporate culture" inade9uate legal provisions on foreclosure and ban!ruptcy. .hange in economic policiesIenvironment. 0ac! of co7ordination bet een ban!s.

So#e o+ t%e i ter a' +a5tors o+ t%e or.a i>atio 'ea$i . to NPACs are/ Division of funds for e=pansion" diversification" moderni>ation" underta!ing ne pro:ects and for helping associate concerns" this is coupled trends and failure to tap funds in the capital and debt mar!ets. ith recessionary

Business failure1 product" mar!eting etc."3"inefficient management" strained labor relations" inappropriate technology" technical problems" product obsolescence etc."

*ecession " shortage of input" po er shortage" price escalation" accidents" natural calamities" besides e=ternali>ation problem in other countries leading to non payment of overdue.

%imeIcost overrun during the pro:ect implementation stage. ,overnment policies li!e changes in the e=cise duties" pollution control orders. ;illful default" siphoning off of funds" fraud" misappropriation"

promotersIdirectors disputes etc." Deficiencies on the part of the ban!s li!e delay in release of limits and delay in release of paymentsIsubsidies by the government.

NPA i I $ia Ba 9i . S)ste#/ 'PA surfaced suddenly in the Indian ban!ing scenario" around the )ighties" in the midst of turbulent structural changes overta!ing the international ban!ing institutions" and global financial mar!ets hen the

ere undergoing s eeping changes. In fact after it had emerged the

problem of 'PA !ept hidden and gradually s elling unnoticed and unperceived" in the ma>e of defective accounting standards that still continued and opa9ue Balance sheets. ith Indian Ban!s up to the 'ineties

In a dynamic

orld" it is true that ne

ideas and ne

concepts that emerge through such

changes caused by social evolution bring beneficial effects" but only after levying a heavy initial toll. %he process of 9uic!ly integrating ne innovations in the e=isting set7up leads to accustomed to the ne

an immediate disorder and unsettled conditions. People are not models. %hese ne formations ta!e time to configure" and

or! smoothly. %he old is cast

a ay and the ne is found difficult to ad:ust. Marginal and sub7marginal operators are s ept a ay by these convulsions. Ban!s being sensitive institutions entrenched deeply in traditional beliefs and conventions ere unable to ad:ust themselves to the changes. %hey

suffered easy victims to this upheaval in the initial phase. .onse9uently ban!s under ent this transition7syndrome and languished under distress and ban!ing crises surfaced in 9uic! succession one follo ing the other in many countries. But hen the ban!ing industry in the global sphere came out of this metamorphosis to re7ad:ust to the ne order" they emerged revitali>ed and as more vibrant and robust units.

Deregulation in developed capitalist countries particularly in )urope" itnessed a remar!able innovative gro th in the ban!ing industry" hether measured in terms of deposit gro th"

credit gro th" gro th intermediation instruments as ell as in net or!. During all these years the Indian Ban!ing" global conte=t and hose environment as insulated from the

as denominated by $tate controls of directed credit delivery" regulated

interest rates" and investment structure did not participate in this vibrant ban!ing revolution. $uffering the dearth of innovative spirit and cho!ing under undue regimentation" Indian ban!ing as lac!ing ob:ective and prudential systems of business leading from early

stagnation to eventual degeneration and reduced or negative profitability. .ontinued political interference" the absence of competition and total lac! of scientific decision7ma!ing" led to conse9uences :ust the opposite of hat as happening in the estern countries. Imperfect

accounting standards and opa9ue balance sheets served as tools for hiding the shortcomings and failing to reveal the progressive deterioration and structural ea!ness of the country-s

ban!ing institutions to public vie . %his enabled the nationali>ed ban!s to continue to flourish in a deceptive manifestation and false glitter" though stray symptoms of the bre ing ailment ere discernible here and there. %he government hastily introduced the first phase of reforms in the financial and ban!ing sectors after the economic crisis of C88C. %his as an effort to 9uic!ly resurrect the health

of the ban!ing system and bridge the gap bet een Indian and global ban!ing development. Indian Ban!ing" in particular P$Bs suddenly o!e up to the realities of the situation and to face the burden of the surfeit of their oes. $imultaneously ma:or revolutionary transitions

ere ta!ing place in other sectors of the economy on account the ongoing economic reforms intended to ards freeing the Indian economy from government controls and lin!ing it to mar!et driven forces for a 9uic! integration ith the global economy. Import

restrictions ere gradually freed. %ariffs ere brought do n and 9uantitative controls ere removed. %he Indian mar!et ne as opened for free competition to the global players. %he

economic policy in turn revolutionalised the environment of the Indian industry and

business and put them to similar problems of ne mi=ture (f opportunities and challenges. As a result e itness today a scenario of ban!ing" trade and industry in India" all

undergoing the convulsions of total reformation battling to !ic! off the decadence of the past and to gain a ne strength and vigor for effective lin!s ith the global economy. hile a fe

Many are still languishing unable to get released from the old set7up" progressive corporate are ma!ing a niche for themselves in the global conte=t.

During this decade the reforms have covered almost every segment of the financial sector. In particular" it is the ban!ing sector" hich e=perienced ma:or reforms. %he reforms have

ta!en the Indian ban!ing sector far a ay from the days of nationali>ation. Increase in the number of ban!s due to the entry of ne private and foreign ban!sJ increase in the

transparency of the ban!s- balance sheets through the introduction of prudential norms and norms of disclosureJ increase in the role of the mar!et forces due to the deregulated interest rates" together ith rapid computeri>ation and application of the benefits of information

technology to ban!ing operations have all significantly affected the operational environment of the Indian ban!ing sector. In the bac!ground of these comple= changes hen the problem of 'PA as belatedly

recogni>ed for the first time at its pea! velocity during C88478F" there

as resultant chaos ere unable to

and confusion. As the problem in large magnitude erupted suddenly ban!s

analy>e and ma!e a realistic or complete assessment of the surmounting situation. It as not reali>ed that the root of the problem of 'PA as centered else here in multiple layers" as

much outside the ban!ing system" more particularly in the transient economy of the country" as ithin. Ban!ing is not a compartmentali>ed and isolated sector delin!ed from the rest of orld" a distressed national economy shifts

the economy. As has happened else here in the

a part of its negative results to the ban!ing industry. In short" ban!s are made ultimately to finance the losses incurred by constituent industries and businesses. %he unprepared ness and structural ea!ness of our ban!ing system to act to the emerging scenario and de7ris! itself order" trying to s itch over to globali>ation ere only

to the challenges thro n by the ne

aggravating the crisis. Partial perceptions and hasty :udgments led to a policy of ad7hoc7ism" hich characteri>ed the approach of the authorities during the last t o7decades to ards finding solutions to ban!ing ailments and dismantling recovery impediments. .ontinuous concern as e=pressed. *epeated correctional efforts ere e=ecuted" but positive results

ere evading. %he problem as defying a solution.

%he threat of 'PA

as being surveyed and summari>ed by *BI and ,overnment of India on the ban!ing industry as a hole

from a remote perception loo!ing at a bird-s7eye7vie

delin!ed from the rest of the economy. *BI loo!s at the ban!ing industry-s average on a macro basis" consolidating and tabulating the data submitted by different institutions. It has collected e=tensive statistics about 'PA in different financial sectors li!e commercial ban!s" financial institutions" urban cooperatives" 'B+. etc. But still it is a distant vie outside the system and not the felt vie of one

of a suffering participant. Individual ban!s inherit

different cultures and they finance diverse sectors of the economy that do not possess identical attributes. %here are distinct diversities as among the 48 public sector ban!s themselves" bet een different geographical regions and bet een different types of customers using ban! credit. %here are three ea! nationali>ed ban!s that have been identified. But

there are also correspondingly t o better performing ban!s li!e .orporation and (B.. %here are also ban!s that have successfully contained 'PA and brought it to single digit li!e $yndicate 1,ross 'PA 6.H6D3 and Andhra 1,ross 'PA K.CFD3. %he scenario is not so simple to be generali>ed for the industry as a common solution for all ban!s and for all times. $imilarly 'PA concerns of individual Ban!s summari>ed as a hole and e=pressed as an hole to prescribe a readymade pac!age of a

average for the entire ban! cannot convey a dependable picture. It is being statistically stated that ban! 2 or Y has C4D gross 'PA. But if are a fe e loo! do n further ithin that Ban! there hich

poc!ets possessing bul! segments of 'PA ranging G5D to 65D gross "

should conse9uently convey that there should also be several other segments ith F to GD or even 'I0 D 'PA" averaging the ban!-s hole performance to C4D. Much criticism is made

about the obligation of 'ationali>ed Ban!s to e=tend priority sector advances. But ban!s have neither fared better in non7priority sector. %he comparative performance under priority and non7priority is only a difference of degree and not that of !ind.

%he assessment of the mi=7of contributing factors includes# C. human factors 1those pertaining 4. to the ban!ers and the credit customers3"

F. environmental imbalances in the economy on account of holesale changes and also B. Inherited problems of Indian ban!ing and industry. Eariable s!ill" efficiency and level integrity prevailing in different branches and in different ban!s accounts for the s eeping disparities bet een inter7ban! and intra7ban! performance. ;e may add that hile the core or base7level 'PA in the industry is due to common

contributory causes" the inter7se variations are on account of the structural and operational disparities. %he heavy concentrated prevalence of 'PA is definitely due to human factors contributing to the same. 'o ban! appears to have conducted studies involving a cross7section of its operating field staff" including the audit and inspection functionaries for a candid and comprehensive introspection based on a survey of the variables of 'PA burden under different categories of sectoral credit" different regions and in individual Branches categori>ed as medium and lo ith high"

incidence of 'PA. ;e do not hear the voice of the operating personnel in

these ban!s candidly e=pressed and e=plaining their failures. )=7ban!ers" i.e. the professional ban!ers ho have retired from service" but possess a depth of inside !no ledge do not out7pour candidly their vie s. After three decades of nationali>ed ban!ing" have some hundreds of retired Ban! e=ecutives in the country" e must

ho can boldly and

independently" but ob:ectively voice their vie s. )veryone is satisfied in blaming the others. Ban! e=ecutives hold - illful defaulters- responsible for all the plague. Industry and business blames the government policies.

Important fact7revealing information for each 'PA account is the gap period bet een the date" hen the advance as originally made and the date of its becoming 'PA. If the gap is ere all right earlier" but economic variance ho are in

long" it is the case of a sunset industry. %hings

in trade cycles or mar!et sentiments have created the 'PA. .redit customers 'PA today" but for years ranging

ere earlier rated as good performers and credit orthy clients

ithin the top G5 or C55. $ignificant part of the 'PA is on account of clout ban!ing

or illfully given bad loans. Infant mortality in credit is solely on account of human factors and absence of human integrity. .redit to different sectors given by the P$Bs in fact represents different products. Advance to ea!er sections belo *s.4G555I7 represents the actual social ban!ing. 'PA in this sector forms H %( C5D of the gross amount. Advance to agriculture" $$I and big industries each calls for different strategies in terms of credit assessment, credit delivery, project implementation, and post advance supervision. 'PA in different sector is not caused by the same resultant factors. .ontaining 9uantum of 'PA is therefore to be programmed by a sector7 ise strategy involving a role of the actively engaged participants ho can tell here

the boot pinches in each case. Business and industry has e9ual responsibility to accept accountability for containment of 'PA. Many of the present defaulters ere once trusted

and valued customers of the ban!s. ;hy have they become unreliable no " or have theyL %he credit portfolio of a nationali>ed ban! also includes a number of lo 7ris! and ris!7free segments" hich cannot create 'PA. $mall personal loans against ban!s- o n deposits and

other tangible and easily mar!etable securities pledged to the ban! and held in its custody are of this category. $uch small loans are universally given in almost all the branches and hence the aggregate constitutes a significant figure. %hen there is food credit given to +.I for food procurement and similar credits given to ma:or public Utilities and Public $ector

Underta!ings of the .entral ,overnment. It is only the residual fragments of Ban! credit that are e=posed to credit failures and reasons for 'PA can be ascertained by scrutini>ing this segment. $econdly 'PA is not a dilemma facing e=clusively the Ban!ers. It is in fact an all pervasive national scourge s aying the entire Indian economy. 'PA is a sore throat of the Indian economy as a hole. %he ban!s are only the ultimate victims" here life cycle of the virus is terminated. 'o " ho does the ,overnment sufferL ;hat about the recurring loss of revenue by ay of

ta=es" e=cise to the government on account of closure of several la!hs of erst hile vibrant industrial units and inefficient usage of costly industrial infrastructure erected ith

considerable investment by the nationL As per statistics collected three years bac! there are over t o and half million small industrial units representing over 85 percent of the total number of industrial units. A ma:ority of the industrial or! force finds employment here

and the sector-s contribution to industrial output is substantial and is estimated at over FG percent hile its share of e=ports is also valued to be around B5 percent. (ut of the 4.G

million" about C5D of the small industries are reported to be sic! involving a ban! credit outstanding around *s.G555 to K555 .rores" at that period. It may be even more no . %hese closed units represent some thousands of displaced employment. )ach closed unit or!ers Previously en:oying gainful

hether large" medium or small occupies costly developed

industrial land. $everal items of machinery form security for the 'PA accounts should either be lying idle or :un!ing out. In other ords" large value of land" machinery and money are

loc!ed up in industrial sic!ness. %hese are the assets created that have turned unproductive and these represent the real physical 'PA" hich indirectly are reflected in the financial

statements of nationali>ed ban!s" as the ultimate financiers of these assets. In the final

analysis it represents instability in industry. 'PA represents the o es of the credit recipients" in turn transferred and par!ed ith the ban!s. *ecogni>ing 'PA as a sore throat of the Indian economy" the field level participants should first address themselves to find the solution. ;hy not representatives of industries and commerce and that of the Indian Ban!s- Association come together and candidly analy>e and find an everlasting solution heralding the real spirit of deregulation and decentrali>ation of management in ban!ing sector" and accepting self7discipline and self7relianceL ;hat are the deficiencies in credit delivery that leads to its misuse" abuse or lossL ?o and abuse at sourceL ?o Ban! along to deal to chec! misuse

ith erring .orporateL In short" the functional staff of the

ith the representatives of business and industry has to accept a candid

introspection and arrive at a code of discipline in any final solution. And preventive action to be successful should start from the credit7recipient level and then e=tend to the ban!ers. *BI and ,overnment of India can positively facilitate the process by providing enabling measures. Do not try to set right industry and ban!s" but help industry and ban!s to set right themselves. %he ne tool of deregulated approach has to be accepted in solving 'PA.

RBI .!i$e'i es o i 5o#e re5o. itio (i terest i 5o#e o NPA) Income *ecognition# Income from 'on Performing Assets should not recogni>e on accrual basis but should be boo!ed as income only hen it is actually received. %herefore

interest should not be charged and ta!en into income account till the account become standard asset.

Interest charged to be stopped Provision to be made

O(er D!e# Any amount due to the Ban! under any credit facility is @(ver dueA if it is not paid on the due date fi=ed by the Ban!. O!t o+ Or$er# An account should be treated as @out of orderA

If the outstanding balance remains continuously in e=cess of the sanctioned limitI dra ing po er.

In cases

here the outstanding balance in the principal operating account is less than

the sanctioned limitI dra ing po er" but there are no credits continuously for 85 days as on the date of Ban!s Balance $heet or ;here are credits are not enough to cover the interest debited during the same period. A 'on Performing Asset shall be an advance here# Ter# Loa # Interest andI or installment of principal remain @over dueA for a period of more than 85 days. Cas% Cre$itD O(er Dra+t# If the account remains out of order for a period more than 85 days. Bi''s# (verdue for a period of more than 85 days. Ot%er a55o! ts# Any amount to be received remains overdue for a period of more than 85 days. S%ort $!ratio 5ro*s# If the installment of principal or interest there on remains overdue for t o crop seasons. Lo . $!ratio 5ro*s# If installment of principal or interest there on remains overdue for (ne .rop season.

An account

ould be classified as 'PA only if the interest charged during any

9uarter is not serviced fully ithin 85 days from the end of the 9uarter.

ASSET CLASSIFICATION Sta $ar$ Assets# Is one hich does not disclose any problem and hich does not carry more than

normal ris!s attached to the business. S!"sta $ar$ Assets# ;hich has remained 'PA for a period of less than or e9ual to C4 months. Do!"t+!' Assets# If it has remained 'PA for a period e=ceeding C4 months. Loss Assets# A loss asset is one here loss has been identified by the ban!.

RBI .!i$e'i es o *ro(isio i . re,!ire#e t o+ "a 9 a$(a 5es/ Loss Assets# C55D of the outstanding amount. Do!"t+!' Assets# C55D of unsecured portion.

Se5!re$ *ortio Up to one year (ne to three years More than F years C. (utstanding stoc! of 'PA as on 6GD .e.f.FCst March" 5K FC.F.455B C55D .e.f.FCst March"56 45D F5D

4. Advances classified as @doubtful more than F yearsA on or after FC.F.455B C55D .e.f.FCst March"5G

S!"sta $ar$ Assets# $ecured portion C5D and unsecured portion 45D on total outstanding. Sta $ar$ Assets# A general provision of 5.B5D 1+or direct Agriculture M $M) $ector 5.4GD3. Provisioning for standard assets ill be done at corporate office centrally. .alculation of 'et 'PA 1'on Performing Asset3 For#!'a/ ,*($$ 'PA 0)$$# Balance in Interest $uspense Account 0)$$# DI.,.I).,. .laims received but pending for ad:ustment 0)$$# Part payment received and !ept in suspense account

Based on annual reports of A=is Ban!7 45C4745CF

Particulars Gross NPA of AXIS for the year 2012-2013 LESS: Balan e fro! "nterest s#s$ense a o#nt Amount 37428 12704 3,

LESS: %I&G&'E&G& &la"!s re e"(e) *#t $en)"n+

for a)-#st!ent LESS: Part $ay!ent re e"(e) an) .e$t "n 2/28

S#s$ense A' NE0 N1N PE23124ING ASSE0S NE0 NPA IN PE2&EN0AGE 217,0 05/76

Cre$it Ris9 a $ NPACs/ Nuite often credit ris! management 1.*M3 is confused result of past action ith managing non7performing

assets 1'PAs3. ?o ever there is an appreciable difference bet een the t o. 'PAs are a hose effects are reali>ed in the present i.e. they represent credit ris! that has already materiali>ed and default has already ta!en place.

(n the other hand managing credit ris! is a much more for ard7loo!ing approach and is mainly concerned ith managing the 9uality of credit portfolio before default ta!es place. In other ords" an attempt is made to avoid possible default by properly managing credit ris!. .onsidering the current global recession and unreliable information in financial statements" there is high credit ris! in the ban!ing and lending business. %o create a defense against such uncertainty" ban!ers are e=pected to develop an effective internal credit ris! models for the purpose of credit ris! management. Usa.e o+ +i a 5ia' state#e ts i assessi . t%e ris9 o+ $e+a!'t +or 'e $ers/ +or ban!s and financial institutions" both the balance sheet and income statement have a !ey role to play by providing valuable information on a borro ers viability. ?o ever" the approach of scrutini>ing financial statements is a bac! ard loo!ing approach. %his is becauseJ the focus of accounting is on past performance and current positions. %he !ey accounting ratios generally used for the purpose of ascertaining the credit orthiness of a business entity are that of debt7e9uity ratio and interest coverage ratio. ?ighly rated companies generally have lo leverage. %his is becauseJ high leverage is follo ed by high fi=ed interest charges" non7payment of hich results into a default.

Ca*ita' A$e,!a5) Ratio (CAR) o+ RBI a $ Base' 5o##ittee o "a 9i . s!*er(isio (BCBS)/ *eserve Ban! of India 1*BI3 has issued capital ade9uacy norms for the Indian ban!s. %he minimum .A* hich the Indian Ban!s are re9uired to meet at all times is set at 8D. It

should be ta!en into consideration that the ban!-s capital refers to the ability of ban! to ithstand losses due to ris! e=posures. %o be more precise" capital charge is a sort of regulatory cost of !eeping loans 1perceived as ris!y3 on the balance sheet of ban!s. %he 9uality of assets of the ban! and its capital are often closely related. Nuality of assets is reflected in the 9uantum of 'PAs. By this" it implies that if the asset 9uality performing assets and vice7versa. Mar!et ris! is the ris! arising due to the fluctuations in value of a portfolio due to the volatility of mar!et prices. (perational ris! refers to losses arising due to comple= system and processes. It is important for a ban! to have a good capital base to ithstand unforeseen losses. It indicates the capability of a ban! to sustain losses arising out of ris!y assets. %he Basel .ommittee on Ban!ing $upervision 1B.B$3 has also laid do n certain minimum ris! based capital standards that apply to all internationally active commercial ban!s. %hat is" ban!-s capital should at least be HD of their ris!7 eighted assets. %his infact helps ban! to provide protection to the depositors and the creditors. %he main ob:ective here is to build a sort of support system to ta!e care of une=pected financial losses thereby ensuring healthy financial mar!ets and protecting depositors. as poor" then higher ould be the 9uantum of non7

I#*a5t o+ e:5ess 'i,!i$it)/ (ne should also not forget that the ban!s are faced ith the problem of increasing

li9uidity in the system. +urther" *eserve Ban! of India 1*BI3 is increasing the li9uidity in the system through various rate cuts. Ban!s can get rid of its e=cess li9uidity by increasing its

lending but" often shy a ay from such an option due to the high ris! of default. In order to promote certain prudential norms for healthy ban!ing practices" most of the developed economies re9uire all ban!s to maintain minimum li9uid and cash reserves broadly classified into .ash *eserve *atio 1.**3 and the $tatutory 0i9uidity *atio 1$0*3. .ash *eserve *atio 1.**3 is the reserve form of cash reserves or by hich the ban!s have to maintain ith itself in the

ay of current account

ith the *eserve Ban! of India 1*BI3"

computed as a certain percentage of its demand and time liabilities. %he ob:ective is to ensure the safety and li9uidity of the deposits ith the ban!s. (n the other hand" $tatutory 0i9uidity *atio 1$0*3 is the one hich every ban!ing company shall maintain in India in the form of cash" gold or unencumbered approved securities" an amount hich shall not" at the close of business on any day be less than such percentage of the total of its demand and time liabilities in India as on the last +riday of the second preceding fortnight" as the *eserve Ban! of India 1*BI3 may specify from time to time. A rate cut 1for instance" decrease in .**3 results into lesser funds to be loc!ed up in *BI-s vaults and further infuses greater funds into a system. ?o ever" almost all the ban!s are facing the problem of bad loans" burgeoning non7performing assets" thinning margins" etc. as a result of hich" ban!s are little reluctant in granting loans to corporates. As such" though in its monetary policy *BI announces rate cut but" such ne s are no longer armly greeted by the ban!ers.

0i.% 5ost o+ +! $s $!e to NPA/ Nuite often genuine borro ers face the difficulties in raising funds from ban!s due to mounting 'PAs. )ither the ban! is reluctant in providing the re9uisite funds to the genuine

borro ers or if the funds are provided" they come at a very high cost to compensate the lenders losses caused due to high level of 'PAs. %herefore" 9uite often corporate prefer to raise funds through commercial papers 1.Ps3 here the interest rate on or!ing capital charged by ban!s is higher. ;ith the enactment of the $ecuriti>ation and *econstruction of +inancial Assets and )nforcement of $ecurity Interest Act" 4554" ban!s can issue notices to the defaulters to pay up the dues and the borro ers ill have to clear their dues ithin K5 days. (nce the ithout the consent of the borro er receives a notice from the concerned ban! and the financial institution" the secured assets mentioned in the notice cannot be sold or transferred lenders. %he main purpose of this notice is to inform the borro er that either the sum due to the ban! or financial institution be paid by the borro er or else the former of the company. %hus the ban!ers under the aforementioned Act ill ta!e action by ay of ta!ing over the possession of assets. Besides assets" ban!s can also ta!eover the management ill have the much needed authority to either sell the assets of the defaulting companies or change their management. But the protection under the said Act only provides a partial solution. ;hat ban!s should ensure is that they should move ith speed and charged ith momentum in disposing off the assets. %his is because as uncertainty increases faced ith the passage of time" there is all possibility that the recoverable value of asset also reduces and it cannot fetch good price. If ith such a situation than the very purpose of getting protection under the ould be defeated and the hope of seeing a must have gro ing $ecuriti>ation Act" 4554

ban!ing sector can easily vanish.

No Per+or#i . Assets o+ Ne- Pri(ate Se5tor Ba 9sASe5tor -ise (3123A3124 $ata) 0DFC Ba 9 Lt$ Se5tor Agriculture $mall $cale Industries (thers A#o! t( i Crore) 44.HG C8.CG C6B.4K Per5e ta.e to tota' F.84 F.4H 48.HH

ICICI Ba 9 Lt$& Se5tor Agriculture $mall $cale Industries (thers A#o! t( i Crore) BG.KG FG.GH CF.5K Per5e ta.e to tota' 4.5G C.K5 5.G8

I $!sI $ Ba 9 Lt$ Se5tor Agriculture $mall $cale Industries (thers Kota9 Ma%i $ra Ba 9 Lt$ Se5tor A#o! t( i Crore) Per5e ta.e to tota' A#o! t( i Crore) CC5.F6 C4.84 4B.H5 Per5e ta.e to tota' BC.5K B.HC 8.4F

Agriculture $mall $cale Industries (thers A:is Ba 9 Se5tor Agriculture $mall $cale Industries (thers

F.4K 7 CG.FK

H.C6 7 FH.B8

A#o! t( i Crore) GK.6C CF.HB 5.F5

Per5e ta.e to tota' CG.C6 F.65 5.5H

Re5o(er) #eas!res/ Broadly spea!ing" recovery measures could be classified into t o categories" namely" legal measures and non7legal measures.

Le.a' Meas!res 2& De"t Re5o(er) Tri"! a's(DRT)/ In the conte=t of recovery from 'PAs" D*% are assuming great importance since efforts are on to set up M more D*% during this year and also to strengthen them. %hough the recovery through D*% is at present less than t o per cent of the claim amount" ban!s and +inancial institutions have to depend heavily on them. )fforts are on to amend the recovery act to assign more po ers to D*%s. More importantly" the borro ers tendency to challenge the verdict of the Appellate %ribunals in the ?igh court to see! natural7:ustice needs to be chec!ed" (ther ise" early recovery efforts through D*%s ould be futile.

$econdly" training of presiding officers of %ribunals about the intricacies of ban!ing practices is very essential. +urther" the numbers of recovery officers have to be enhanced in every D*% for effective recovery. +inally" ban!s and +ls have to come for ard to provide liberal help to D*%s to e9uip them in terms of infrastructure" manpo er" etc. 3& Cor*orate De"t Restr!5t!ri . Bo$)/ A need as felt to special agency to facilitate debt restructuring because there has

been some hesitancy on the part of Ban! and financial institution to implement *BI guidelines on debt restructuring recently three7tire body" .D* has been set up to coordinate corporate debt <restructuring program. It is yet to be operationali>ed .D* consist of +orum ,roup and cell. ;hile the forum evolves broad policy guidelines" the group ta!es decisions on the proposals recommended by the .ell. Initially" the borro er approaches his 0ead ban!I+I ith a re9uest to restructure debt hich in turn puts up the proposal to the .ell. %he .D* .overs only multiple ban!ing accounts en:oying credit facilities e=ceeding *s.45crore. .ases of D*%" BI+* and illful defaults" doubtful and loss accounts and suit7filed cased are outside the purvie of the .D*. %hus standard and sub7standard accounts are only eligible

to see! .D* shelter. Decisions of the group are based on the super ma:ority principle. If 6G percent of the secured creditors agree to the rehabilitation plan" it is binding on the other ban!sI+is. %he .D* is a voluntary system based on debtor7 creditor agreement and inter7creditors agreement. 'o ban!erIborro er can ta!e recourse to any legal action during the stand7still period of 857CH5 days. 0astly" .D* ill observe the *BI ,uideline on Debt *estructuring

issued in March 455K. ;hile the arrangements under .D* seem to be feasible from the debt restructuring perspective" its success depends upon the cooperation e=tended by borro ers and ban!ers" on the one hand" and understanding among ban!s and +inancial institutions" on the other. Doubts are raised about the implementation of these agreements ta!ing into the present or!ing of the loan consortium arrangements. 4& Asset Re5o str!5tio Cor*oratio & It is proposed to set up A*.s in the private sector to ta!e over 'PAs in the public sector ban!s. %he *BI ill be the regulator of these A%.s. %he A*. ill buy 'PAs of the ban!s and financial institutions at the pre7determined discounted value and issue 'PA redemption bonds" hich carry a fi=ed return. A*.s are e=pected to be managed by professionals to hich ill help in redemption of bonds after some time.

effect ma=imum recovery of 'PA"

%he +inance Ministry has finali>ed the draft Bill to set up A*.s. %hough the proposed scheme seems to be attractive" its success ill depend upon the efficiency of D*%s and ea! ban!s" its recovery

courts. +urther" if A*. is going to depend on the staff deputed by chances are doubtful. E& Co#*a ) Mer.ers&

Under the .ompanies Act" C8GK" mergers are permitted. In C866" $ec 647A the Income %a= Act to offer ta= incentives to healthy companies

as inserted in

hich ta!e over the sic!

companies and prepare revival plans.

*esponse to this scheme formalities as per the

instructions of the ?igh .ourt and Income %a= Department. %a= incentives are found to be inade9uate to motivate healthy companies to come for ard and ta!e advantage of the scheme. *ecovery of ban! dues on company7mergers is not assured since hardly 6.H per cent of sic! companies are successfully revived. company mergers in developed countries" a revie Act is called for. )ncouraged by the success achieved in of the scheme under section 647A of I%

No 'e.a' #eas!res / 2& Re#i $er S)ste# %he cheapest mode of recovery is by sending reminders to the borro ers before the loan installment falls due. ,enerally" response to this arrangement particularly from honest borro ers is encouraging. But efforts need to be strengthened in ban!s in sending

reminders on timely basis. 3& ;isit to Borro-erCs B!si ess Pre#iseDResi$e 5e %his is a more dependable measure of recovery. Eisits need to be properly planned. Involvement of staff at all levels in the ban! branch is called for. .osts involved in recovery need to be !ept to the minimum. +re9uent visits are called for in case of hardcore borro ers. (ver the years" it is observed that the number and 9uality of visits are going do n. .onse9uently" the recovery process is affected. 4& Re5o(er) Ca#*s In respect of agricultural advances" recovery camps should be organi>ed during the harvest season. %o ensure ma=imum advantage" recovery camps need to be properly planned. It is also essential to ta!e the help of outsiders" particularly" revenue officers in the state government" local panchayat officials" regional approach to give a ide publicity

of the recovery camps to be organi>ed in the local area" mobili>e as many farmers as possible and motivate the staff to get involved in the recovery drive.

E& Re*%rasi . U *ai$ Loa I sta''#e ts In respect of small advances" ban!ers need to be system pathetic in respect of sincere and hard or!ing borro ers. If such borro ers fail to pay loan installments due to natural calamities or for some other convincing reasons" unpaid loan installments may be

replasedIrescheduled. Ban!ers efforts need to be strengthened in the regard. F& Loa Co#*ro#ise %his is the last resort of recovery. %his should be voluntary. It calls for a hich each ban! is

professional approach in preparing the compromise proposal for

e=pected to introduce a scheme. .ommittee approach should be adopted to decide on the loan compromise. Delays in ta!ing decisions should be avoided. $ettlement 1(%$3 scheme *ecently" one %ime

as introduced by the *BI. %he overall response to the scheme ith its o n (%$ scheme. In

as limited. ?ence" each ban! is e=pected to come out

addition" training of operating staff is essential to change their mindset. +or effective recovery" loan compromise should be ta!en up on priority basis. 6. A**oi t#e t o+ Pro+essio a' A.e 5ies +or Re5o(er) *ecently" IBA has or!ed out certain guidelines for ban!s on matters concerning the appointment of outside professional agencies hose services can be utili>ed to ascertain the hesitancy on

hereabouts of the borro ers and enforcement of securities. %here is some

the part of public sector ban!s in engaging them for recovery purposes due to unpleasant e=periences in certain cases. But during the post < E*$ scenario" it is suggested to see! such outsourcing. %his should be done after e=amining the credentials of the professionals. It is also essential to !eep a constant vigil on their practice.

AXIS BANK INTRODUCTION A=is Ban!" previously called U%I Ban!" as the first of the ne private ban!s to have begun operations in C88B" after the ,overnment of India allo ed ne established. %he Ban! private ban!s to be

as promoted :ointly by the Administrator of the $pecified

Underta!ing of the Unit %rust of India 1U%I7I3" 0ife Insurance .orporation of India 10I.3" ,eneral Insurance .orporation 0td." 'ational Insurance .ompany 0td." %he 'e India

Assurance .ompany" %he (riental Insurance .orporation and United Insurance .ompany 0td. U%I7I holds a special position in the Indian capital mar!ets and has promoted many leading financial institutions in the country. A=is Ban! 0imited is the third largest private sector ban! in India. It offers the entire spectrum of financial services to customer segments covering 0arge and Mid7.orporates" M$M)" Agriculture and *etail Businesses. A=is Ban! has its head9uarters in Mumbai" Maharashtra. A=is Ban! began its operations in C88B" after the ,overnment of India allo ed ne ban!s to be established. %he Ban! private

as promoted :ointly by the Administrator of the Unit

%rust of India 1U%I7I3" 0ife Insurance .orporation of India 10I.3" ,eneral Insurance .orporation 0td." 'ational Insurance .ompany 0td." %he 'e India Assurance

.ompany" %he (riental Insurance .orporation and United India Insurance .ompany. %he Unit %rust of India holds a special position in the Indian capital mar!ets and has promoted many leading financial institutions in the country. As on the year ended FCst March 45CF" A=is Ban! had an operating revenue of CK"4C6 crores and a net profit of G"C68 crores.

A=is Ban! 1erst hile U%I Ban!3 opened its registered office in Ahmedabad and corporate office in Mumbai in December C88F. %he first branch as inaugurated in April C88B in

Ahmedabad by Dr. Manmohan $ingh" then the ?onorable +inance Minister. %he Ban!" as on FCst March 45CF" is capitalised to the e=tent of *est. BK6.8G crores 1other than promoters and ,D*s3 at GB.5HD. 'e about 8.GD share through (rient ,lobal. (n CBth March 45CF an online maga>ine named .obrapost.com released video footage from (peration *ed $pider purporting to sho including A=is ban! apparently a fe employees of several Indian ban!s ith the public holding

Oealand born *ichard .handler o ns

illing to help customers to avoid paying ta=es. After this"

%he government of India and *eserve Ban! of India have ordered an in9uiry. Net-or9/ %he Ban!-s *egistered (ffice is situated in Ahmedabad and its .entral (ffice is located at Mumbai. %he Ban! has an e=tensive net or! of 444G branches and e=tension counters 1as on F5th $eptember 45CF3. %he Ban! has a net or! of CC68K A%Ms 1as on F5th $eptember 45CF3 A=is Ban! operates one of the orlds highest A%M sites at %hegu" $i!!im at a height of B54F.B metres 1CF"455 ft3 above sea level" and has the largest A%M net or! among private ban!s in India.

0istor) o+ A:is Ba 9 (UTI Ba 9) 2@@47 %he Ban! as incorporated on Frd December and .ertificate of business onCBth

December. %he Ban! transacts ban!ing business of all description. U%I Ban! 0td. as promoted by Unit %rust of India" 0ife Insurance .orporation of India" ,eneral Insurance .orporation of India and its four subsidiaries. %he ban! as the first private sector ban! to get a license under the ne guidelines issued by the *BI. 2@@E < +irst branch of U%I Ban! inaugurated at Ahmedabad by Dr. Manmohan $ingh" ?on-ble +inance Minister" ,overnment of India. 2@@F < .ompletes first profitable year in operation 2@@G < .rosses *s.C555 crore deposit mar! 2@@H 7 %he Ban! obtained license to act as Depository Participant ith '$D0 and

applied for registration ith $)BI to act as P%rustee to Debenture ?olders-. 2@@I < %he Ban! has 4H branches in urban and semi urban areas as on FCst Quly. All the branches are fully computerised and net or!ed through E$A%. A%M services are available in 46 branches. %he Ban! came out ith a public issue of C"G5"55"555 'o. of e9uity shares of *s

C5 each at a premium of *s CC per share aggregating to *s FC.G5 crores and (ffer

for sale of 4"55"55"555 'o. of e9uity shares for cash at a price of *s 4C per share. (ut of the public issue 4"45"555 shares offered to the public. %he company offers A%M cards" using by E$A%. U%I Ban! has launched a ne customers. U%I Ban! ill sign a co7brand agreement ith the mar!et" leader" .itiban! 'A for entering into the highly promising credit card business. U%I Ban! promoted by India-s pioneer mutual fund Unit %rust of India along 0I." ,I. and its four subsidiaries. 2@@@ 7 U%I Ban! and .itiban! have launched an international co7branded credit card. U%I Ban! and .itiban! have come together to launch an international co branded credit card under the Master.ard umbrella. U%I Ban! 0td has inaugurated an off site A%M at Asho! 'agar here" ta!ing the total number of its off site A%Ms to CF.m 3111 7 %he Ban! has announced the launch of %ele7Depository $ervices for its depository clients. U%I Ban! has launch of Pi .onnect-" its Internet ban!ing Product. U%I Ban! has signed a memorandum of understanding e7bro!ing activities of the site. Infinity.com financial $ecurities 0td." an e7bro!ing outfit is typing up Ban! for a ban!ing interface. ith U%I ith e9uitymaster.com for ith retail product ith operational fle=ibility for its hich account7holders can ithdra ere reserved for allotment on preferencial basis to employees of U%I Ban!. Balance of F"B6"H5"555 shares ere

money from any of the ban!-s A%Ms across the country hich are inter7connected

,eo:it $ecurities 0td" the first company to start online trading services" has signed a MoU ith U%I Ban! to enable investors to buyRsell demat stoc!s through the company-s ebsite. Indiabulls has signed a memorandum of understanding ith U%I Ban!. U%I Ban! has entered into an agreement in public and rights issues. U%I Ban! has tied up ith 0M% %rade.com for providing customi>ed online trading solution for bro!ers. 3112 7 U%I Ban! launched a private placement of non7convertible debentures to rise up to *s 6G crore. 7 U%I Ban! has opened t o offsite A%Ms and one e=tension counter ith an A%M in Mangalore" ta!ing its total number of A%Ms across the country to FGG. U%I Ban! has recorded a K4 per cent rise in net profit for the 9uarter ended $eptember F5" 455C" at *s F5.8G crore. +or the second 9uarter ended $eptember F5" 4555" the net profit as *s C8.5H crore. %he total income of the ban! during the 9uarter as up GF per cent at *s FKK.4G crore. 3113A U%I Ban! 0td has informed B$) that $hri B * Bar ale has resigned as a Director of the Ban! .e.f. Qanuary 54" 4554. A . $hah" former chairman of Ban! of Baroda" also retired from the ban!-s board in the third 9uarter of last year. ?is place continues to be vacant. M Damodaran too! over as the director of the board after ta!ing in the reins of U%I. B $ Pandit has also :oined the ban!-s board subse9uent to the retirement of / , Eassal. U%I Ban! 0td has informed that $hri Paul +letcher has been appointed as an Additional Director 'ominee of .D. +inancial $ervice 1Mauritius3 0td of the Ban!.And $hri Donald Pec! has been appointed as an Additional Director 1nominee of $outh Asia *egional +und3 of the Ban!. ith $toc! ?olding .orporation of India

for providing loans against shares to $.?.I0-s customers and funding investors

U%I Ban! 0td has informed that on laying do n the office of .hairman of 0I. on being appointed as .hairman of $)BI" $hri , ' Ba:pai" 'ominee Director of 0I. has resigned as a Director of the Ban!. 3113 A B Paran:pe M Abid ?ussain cease to be the Directors of U%I Ban!. U%I Ban! 0td has informed that in the meeting of the Board of Directors follo ing decisions ere ta!en# Mr Yash Maha:an" Eice .hairman and Managing Director of as Pun:ab %ractors 0td as appointed as an Additional Director ith immediate effect. Mr ' . $inghal former Eice .hairman and Managing Director of $.I.I appointed as an Additional Director ith immediate effect. U%I Ban! 0td has informed B$) that a meeting of the Board of Directors of the Ban! is scheduled to be held on (ctober 4B" 4554 to consider and ta!e on record the unaudited half yearlyI9uarterly financial results of the Ban! for the half yearINuarter ended $eptember F5" 4554. U%I Ban! 0td has informed that $hri Q M %rivedi has been appointed as an alternate director to $hri Donald Pec! ith effect from 'ovember 4" 4554. 3114 A U%I Ban! 0td has informed B$) that at the meeting of the Board of Directors of the company held on Qanuary CK" 455F" $hri * ' Bharad a:" Managing Director of 0I. has been appointed as an Additional Director of the Ban! effect. U%I Ban!" the private sector ban! has opeaned a branch at 'ellore. %he ban!-s .hairman and Managing Director" Dr P.Q. 'aya!" inaugurating the ban! branch at ,% *oad on May 4K. $pea!ing on the occasion" Dr 'aya! said" &%his mar!s another step to ards the e=tensive customer ban!ing focus that services" mar!ed by convenience and closeness to customers. U%I has been authorised to launch CK A%Ms on the ;estern *ail ay $tations of Mumbai Division. e are providing across the country and reinforces our commitment to bring superior ban!ing ith immediate

U%I filed suit against financial institutions I+.I 0td in the debt recovery tribunal at Mumbai to recover *s.HGcr in dues. U%I ban! made an entry to the +ood .redit Programme" it has made an entry into the G8 cluster hich includes private sector" public sector" old private sector and co7 operative ban!s. $hri A:eet Prasad" 'minee of U%I has resigned as the director of the ban!. Ban!s .hairman and MD Dr.P.Q.'aya! inaugurated a ne branch at 'ellore. U%I ban! allots shares under )mployee $toc! (ption $cheme to its employees. U%I Ban! ties up ith U/ govt fund for contract farming $hri B $ Pandit" nominee of the Administrator of the $pecified Underta!ing of the Unit %rust of India 1U%I7I3 has resigned as a director from the Ban! 'ovember 311E A .omes out ith *s. G55 mn Unsecured *edeemable 'on7.onvertible Debenture C4" 455F. .e.f

Issue" issue fully subscribed U%I Ban! 0td has informed that $hri A:eet Prasad" 'ominee of the Administrator of the $pecified Underta!ing of the Unit %rust of India 1U%I 7 I3 has been appointed as an Additional Director of the Ban! .e.f. Qanuary 45" 455B. U%I Ban! opens ne branch in Udupi U%I Ban! ties up ith $hriram ,roup .os Unveils premium payment facility through A%Ms applicable to 0I. M U%I Ban! customers Metal:unction 1MQ37 the online trading and procurement :oint venture of %ata $teel and $teel Authority of India 1$AI037 has roped in U%I Ban! to start off o n e9uipment for %ata $teel. DI)B(0D $ystems Private 0td" a holly o ned subsidiary of Diebold Incorporated" has secured a ma:or contract for the supply of A%Ms and services to U%I Ban!

?$B. completes ac9uisition of CB.KD sta!e in U%I Ban! for SK6.K m U%I Ban! installs A%M in %hiruvananthapuram 0aunches P*emittance .ard- in association money7transfer services. 311F/ U%I Ban! appointed by ,overnment of /arnata!a as the sole ban!er for the Bangalore (ne 1BC3 pro:ect. U%I Ban! launches a po erful version of /isan .redit .ard. U%I Ban! gets listed on the 0ondon $toc! )=change" raises U$S 4F8.F5 million through ,lobal Depositary *eceipts 1,D*s3. U%I Ban! and Ba:a: Allian> :oin hands to distribute general insurance products. U%I Ban! and Eisa International launch Mobile *efill facility 7 Anytime" Any here Pre7Paid Mobile *efill for all Eisa .ardholders in India. 7 U%I Ban! ins International +inancing *evie 1I+*3 Asia TIndia Bond ?ouse ith *emit4India" a ;eb site offering

a ard for the year 455G. 7 U%I Ban! e=tends ban!ing services to the rural mil! producers in Anand and /heda districts in ,u:arat. 311G/ U%I Ban! and U%I Mutual +und to launch a ne service for sale and redemption

of mutual fund schemes through the Ban!s A%Ms across the country. U%I Ban! opens its first international branch in $ingapore. U%I Ban! and 0I. :oin hands to launch an Annuity .ard for group pensioners of 0I.. U%I Ban! ties up its customers. ith ,eo:it +inancial $ervices to offer (nline %rading service to

 S=OT ANAYSIS/ Stre .t% =ea9 ess

A=is Ban! has been in the ban!ing industry since C88B. It has successfully completed C4 years in the Ban!ing industry. %he ban! has a sound net or! i.e Any here Ban!ing facility in BG5 Branches and CH8C A%M-s at strategic locations in India. A=is Ban! stands one among the top ten ban!s in India and is ran!ed Cst in gro th in business %he ban! is having staff. In has a strong customer base. ell e=perienced" trained" most dedicated and committed

%edious follo ed

procedures before

have

to

be

advancing

loans

causing inconvenience to customers.

O**ort! ities ,lobal aspirations of Indian consumers and gro ing integration ith '*Is. %he ban! can optimi>e the gro th opportunities arising out of retail ban!ing and small and medium enterprises 1$M)s3. +urther e=pansion of A%Ms net or!s and possible arrangements of sharing net or!s of other ban!s by issuing mutual funds and insurance.

T%reats Ban! is facing competition from its other Private $ector Ban!s and even the foreign Ban!s .hanging ,overnment economic policies of ill have serious impact

on interest rates and reserve ratio maintained ith *BI

 PRODUCT AND SER;ICES OFFERED BY AXIS BANK/ Tra(e' 5!rre 5) 5ar$/ A=is Ban! as the first Indian Ban! to launch the %ravel .urrency .ard. %his is a secure" ay to carry money and ma!e payments hen on foreign shores

convenient and hassle7free

and aims to ma!e traveling abroad a truly memorable e=perience. A=is Ban! is the first Ban! in India to achieve a loading of U$ Dollar (ne Billion. %he .ard is accepted orld ide and is available in nine currency options. Cor*orate Cre$it Car$/ A=is Ban! .orporateIPurchase .ard $olution offers best7in7class customi>able product features" comprehensive reporting and e=pense management tools as ell as round7the7cloc! service. It helps your corporate save time and money by simplifying your purchase" bill payment and e=pense management processes. %o facilitate the above" the Ban! also appoints a dedicated *elationship Manager to ensure prompt response to all service related 9ueries. Sa'ar) Pro$!5t At A=is Ban! e provide tailor7made privileges to our $alary Account holders ith a range herein

of ban!ing" investment and lending solutions under one roof. It is a uni9ue offering e offer not :ust the best products but also the choice of ho you

ant to give them to your

employees. ;hile the same salary account variant can be offered to all employees" you can also give them the freedom to choose a higher salary account variant and the associated privileges" as per their net salary eligibilty.

S#a'' J Me$i!# E ter*rises At A=is Ban! e understand that timely availability of credit is an integral ingredient to

success. ;ith this in mind our ongoing endeavour is to be a financial partner that lets businesses focus on business hile their financing needs are in safe hands ith the ban!. I +rastr!5t!re B!si ess %he Ban! has consulted" financed and e=ecuted a ide range of pro:ects ranging across

roads" high ays" bridges and other large scale Infrastructure pro:ects. (ur e=pertise covers ris! management and mitigation" financial planning and sourcing of funds" pro:ect advisory and negotiations. B!si ess Ba 9i . %he Ban! offers a ide range of current account product and cash management solutions for corporate" institutional" central and state government departments as customers. Treas!r) A=is Ban! has bulit a strong inetgrated %reasury boo! across domestic and global mar!ets by effectively managing li9uidity and ma=imi>ing income by trading in financial mar!ets. O 'i e Tra$i . A=is Directs F7in7C (nline %rading Account offers seamless integration bet een your $avings" Demat M %rading accounts" all three of hich are re9uired to trade online. %he ell as small business

$avings and Demat accounts are offered by A=is Ban! hile the trading account is held ith A=is $ecurities and $ales 0td. %his arrangement allo s hassle free and seamless direct debitIcredit of fundsIshares" to and from the customers account.

Forei. E:5%a .e U %ravel .ard U (ut ard *emittances U +oreign .urrency Demand Drafts U +oreign .urrency .ash U +oreign .urrency %ravelers .he9ues U India %ravel .ard A.ri B!si ess Loa s /isan Po er UPo er ,old UArthia Po er U Agro Po er Loa s U ?ome 0oans U .ar 0oans U Personal 0oans U 0oan Against Property I (est#e t Pro$!5ts U ,old and $ilver Mohur U Mutual +unds U 0ife Insurance U ,eneral Insurance

C!rre t A55o! ts B!si ess Pri#e U Business Advantage .urrent Account U Business $elect .urrent Account U Business .lassic .urrent Account U Business ,lobal .urrent Account B!si ess Priorit) U Business Privilege .urrent Account U .hannel (ne .urrent Account B!si ess =ea't% U .lub G5 .urrent Account NRI ser(i5es In A=is Ban!" reali>e that as an '*I" customer ban!ing needs are special. And in !eeping ith this philosophy" and offer valued '*I customers a plethora of services customi>ed to their needs" such as %he entire bou9uet of '*I Deposit Products M $ervices. International Debit .ard ith Accident Insurance cover +ree Internet Ban!ing facility Portfolio Investment scheme for capital mar!et transactions. .orrespondent Ban!ingI*emittance arrangements in all ma:or currencies

Ca*ita' #ar9ets Depository $ervices e Depository $ervices Debenture %rusteeship .learing ban! for '$)IB$)I(%).I .learing Members for Derivatives $egment Bro!er +inancing Issue Management MMA Advisory IP( +unding (nline %rading Go(er #e t B!si ess A=is Ban! is the +irst Private $ector Ban! to be authorised by the *eserve Ban! of India 1*BI3 and ,overnment of India for collecting %a=es on behalf of a $tate ,overnment. %he Ban! is handling .ollection of .ommercial %a=es in the t in cities of ?yderabad and $ecunderabad for ,ovt. of Andhra Pradesh since Quly 455C. A=is ban! 1U%I Ban!3 is no authorised by *eserve Ban! of India and ,ovt. of India for ith

conducting all .entral ,overnment and $tate ,overnment Business commencing

(ctober C" 455F. %he authorisation means the Ban! can underta!e the follo ing business on behalf of .entral and $tate ,overnments#

Treas!r) +oreign )=change Des! International Ban!ing Money Mar!et Des! .onstituent $,0 +acility *etail ,7sec
%e$os"t 2ate Ne7sletter 3ore"+n E8 han+e

 RESEARC0 MET0ODOLOGY Pri#ar) Data/ Eie s of the concerned officials ere gathered by directly interacting ith them" and such

data as found very useful hile analy>ing and dra ing conclusions. Se5o $ar) Data/ *ecent *BI norms of 'PA. IBA Bulletin 5f 455G75K is referred to collect data for 'et 'PA" and Advances. ;eb site of A=is Ban! and other ;eb sites.

P'a o+ a a')sis/ In this study 9uadrant analysis is used on the calculated figures. Li#itatio s/ %he study is based mostly on secondary data. Data has been dra n from :ournals" so information may not be complete. +or the analysis only the advances and 'PA percentages of ban!s and operating profit" provisions and contingencies as a hole and net profit of 'e P$Bs are ta!en into consideration.

 INTERPRETATION AND ANALYSIS/ I#*a5t o+ Pro(isio s a $ Co ti .e 5ies o Net Pro+it o+ Ne- Pri(ate Ba 9s& Per+or#a 5e 5o#*ariso o+ Ne- Pri(ate Se5tor Ba 9s O*erati . Pro+it o+ 4 )ears

$ 'o

Ban!s

(perating Profit 1 in .rore3 45C57CC 45CC7C4 CFBB 48GK B5C CFF GKK 45C47CF C868 BK8C 44G 4CC 88B

C 4 F B G

?D+. Ban! 0td I.I.I Ban! 0td Indusind Ban! 0td. /ota! Mahindra Ban! 0td. A=is ban!

C55H 4BHC BBG C46 K8H

I ter*retatio # As

e seen in graph I.I.I Ban! 0td. (perating Profit is increasing year by

year follo ed by ?D+. Ban! 0td.

Per+or#a 5e 5o#*ariso o+ Ne- Pri(ate Se5tor Ba 9s Pro(isio s a $ Co ti .e 5ies o+ 4 )ears

$ 'o

Ban!s

Provisions and .ontingencies 1 in .rore3 45C57CC 45CC7C4 K6H 8GC C8C B8 4FC 45C47CF CC5H 4CGC CHH 84 G58

C 4 F B G

?D+. Ban! 0td I.I.I Ban! 0td Indusind Ban! 0td. /ota! Mahindra Ban! 0td. A=is Ban! 0td

B8H HBB CHF BH B45

I ter*retatio / I.I.I Ban! 0td ma!ing large Provisions for losses compares to ?D+. Ban! 0td and A=is Ban! may be because of their credit orthiness.

Per+or#a 5e 5o#*ariso o+ Ne- Pri(ate Se5tor Ba 9s Net Pro+it 4 )ears $ 'o Ban!s 45C57CC C 4 F B G ?D+. Ban! 0td I.I.I Ban! 0td Indusind Ban! 0td. /ota! Mahindra Ban! 0td. A=is Ban! 0td GC5 CKF6 4K4 68 46H 'et Profit 1in .rore3 45CC7C4 KKK 455G 4C5 HG FFG 45C47CF H6C 4GB5 F6 CCH BHG

I ter*retatio / I.I.I Ban! 0td and ?D+. Ban! 0%D 'et Profit is Increasing )ven though lot of Money has spent on Provision and .ontingency. It may be because of their ris! ta!ing ability.

A a')sis o+ a"o(e $ata/ As e see the above graphs" I.I.I Ban! 0td (perating Profit is increasing year by year

follo ed by ?D+. Ban! 0td. A=is Ban!" (perating Profit is decreased in 45CC7C4 but its suddenly increased to 88Bcrore in 45C4745CF. )ven Indusind Ban! 0td (perating Profit is go on Decreasing . Provisions and .ontingencies made by I.I.I Ban! 0td and ?D+. Ban! 0td is .omparatively high it may be because of ris! ta!ing ability and have strong financial bac!ground ith more e=perience" And also these ban!s are able to provide ade9uate e seen A=is ban!" 1U%I Ban! 0td3 (perating Profit in in 45CC7C4 but

finance to Different $ectors. As

45CC7C4 decreased and in 45C47CF increased so the Provisions made is lo

high in 45C47CF it may be because of large advances made by ban! in 45C47CF. Indusind Ban! (perating Profit coming do n year by year. /ota! Mahindra is performing better enough ne=t to I.I.I Ban!" ?D+. Ban!" A=is ban!. I.I.I Ban! 0td" ?D+. Ban! 0td and U%I Ban! 0td had comparatively high 'et Profit it may be because of ris! ta!ing ability and strong financial bac!ground ith more e=perience. Indusind Ban! have to adopt different strategy to increase net profit as it incurring loss from past F years.

A a')sis o+ Gross a $ Net NPA ") ta9i . 4 )ears A$(a 5es *ai$ ") Ne- Pri(ate Se5tor Ba 9& 0DFC Ba 9 Lt$ Ban!s ,ross Advances 45C57CC 45CC7C4 45C47CF CH5KB 4G86K FKFG6 ,ross 'PA FFK BF8 G58 ,ross 'PA1D3 C.HK C.K8 C.B5 'et Advances C66BG 4GGKK FG5KC 'et 'PA 4H KC CGG 'et 'PA1D3 5.CK 5.4B 5.BB

I ter*retatio / +rom the above table e can see that ,ross 'PA of ?D+. Ban! 0td has decreasing from

C.HK to C.B5 from 45C57CC to 45C47CF. %his accomplishment is on account of credit gro th" hich as higher than the gro th of ,ross 'PA and not through appreciable recovery of e seen

'PA. %here is neither reduction nor even containment of the threat because as increase in 'et 'PA from Past F years.

ICICI Ba 9 Lt$

Ban!s

,ross Advances

,ross 'PA F5K5 F84G 444F

,ross 'PA1D3 B.65 B.46 C.G5

'et Advances KB8BH 8CB5G CBKCKF

'et 'PA CB4F CG5G C5GF

'et 'PA1D3 4.C8 C.KG 5.64

45C57CC 45CC7C4 45C47CF

KGC5K 8C845 CBH455

I ter*retatio / +rom above table e can see that ,ross 'PA of I.I.I Ban! 0td has decreasing from B.65 to C.G5 from 45C57CC to 45C47CF. %his accomplishment is on account of credit gro th" hich

as higher than the gro th of ,ross 'PA and not through appreciable recovery of 'PA. %here is neither reduction nor even containment of the threat. I.I.I Ban! 0td is providing high advances compare to other ban!s in 45C47CF.

 I $!si $ Ba 9 Lt$ Ban!s ,ross Advances 45C57CC 45CC7C4 45C47CF 6HBH 858F 8F6K ,ross 'PA 4G8 F4C 4K8 ,ross 'PA1D3 F.F F.GF 4.85 'et Advances 6F5C 8555 8FC5 'et 'PA 4C4 4BB C8G 'et 'PA1D3 4.85 4.6C 4.58

I ter*retatio / Indusind Ban! need to adopt strategy in reducing 'PA as its advances ere more in 45CC7C4 and also ,ross 'PA has increased it may be because of their credit orth. And again it

decreases ,ross 'PA in 45C47CF this ups and do n can affect credit orthiness of the ban!. Kota9 Ma%i $ra Ba 9 Lt$& Ban!s ,ross Advances 45C57CC 45CC7C4 45C47CF 4C5G B5GH KFGF ,ross 'PA 45 4H FH ,ross 'PA1D3 5.8G 5.K8 5.K5 'et Advances 4586 B5C6 KFB8 'et 'PA F CG CG 'et 'PA1D3 5.CB 5.F6 5.4B

I ter*retatio /

/ota! Mahindra Ban! 0td 'et 'PA is Increasing from 45C57CC to 45C47CF and again it decreases to 5.4B in 45C47CF. it implied that 'PA of /ota! Mahindra Ban! are in ups and do n it may be because of any natural calamities or change in recovery measures etc. but ,ross 'PA and 'et 'PA of /ota! Mahindra Ban! is less than CD. $o its good sign to Ban!. A:is "a 9 (UTI Ba 9 Lt$) Ban!s ,ross Advances 45C57CC 45CC7C4 45C47CF 8FHK CGK4H 44B55 ,ross 'PA 46G FCC F6B ,ross 'PA1D3 4.8F C.88 C.65 'et Advances 8FKF CGK5F 44FCB 'et 'PA CC4 4C6 4CH 'et 'PA1D3 C.45 C.F8 5.8H

I ter*retatio A=is Ban! " ,ross and 'et 'PA has decreases from 4.8F to C.65 and C.45 to 5.8H respectively from 45C57CC to 45C47CF. %his accomplishment is on account of credit gro th" hich as higher than the gro th of ,ross 'PA and not through appreciable recovery of

'PA. %here is neither reduction nor even containment of the threat.

Per+or#a 5e Co#*ariso o+ Net NPA o+ Ne- Pri(ate Se5tor Ba 9s Ne- PSBCs 3121A22 3122A23 3123A24

?D+. Ban!

5.CK

5.4B

5.BB

I.I.I Ban!

4.4C

C.KG

5.64

Indusind Ban!

4.64

4.6C

4.58

/ota! Mahindra Ban!

5.C6

5.F6

5.4B

A=is Ban!

C.48

C.F8

5.8H

I ter*retatio / +rom above chart e can see that ?D+. Ban! 0td has strong financial bac!ground and

credit orthiness so it can provide more advances to people and also it is efficient enough to recover those advances so its 'et 'PA has coming do n and it is less than CD. $o ?D+. is performing ell. In 45C57CC" I.I.I Ban! 0td 'et 'PA is more but its declining slo ly and came to 5.64 from 4.4C in 45C47CF. it may be because of its credit I.I.I Ban! 0td is real ris! ta!er so orthiness and strong recovery measures. ith other small ban!s because it

e cannot compare it

providing high advances compare to other ban!s.

Indusind Ban! 0td 'et 'PA almost same for 45C57CC to 45CC7C4 and declines to 4.58 in 45C47CF. As /ota! Mahindra Ban! 0td providing comparatively lo its 'PA is lo compare to other Ban!s. )ven A=is Ban! is performing previous year. ell in recovering debts so its 'PA came do n from advances to avoid credit ris! so

 IMPACT OF NPACS ON BANKS' PROFITS AND LENDING PRO=ESS/ &%he efficiency of a ban! is not al ays reflected only by the si>e of its balance sheet but by the level of return on its assets. 'PAs do not generate interest income for the ban!s" but at the same time ban!s are re9uired to ma!e provisions for such 'PAs from their current profits. 'PAs have a deleterious effect on the return on assets in several ays 7

%hey erode current profits through provisioning re9uirements %hey result in reduced interest income %hey re9uire higher provisioning re9uirements affecting profits and accretion to capital funds and capacity to increase good 9uality ris! assets in future" and

%hey limit recycling of funds" set in asset7liability mismatches" etc there is at times a tendency among some of the ban!s to understate the level of 'PAs in order to reduce the provisioning and boost up bottom lines. It ould only postpone the In the

conte=t of crippling effect on a ban!-s operations in all spheres" asset 9uality has been placed as one of the most important parameters in the measurement of a ban!-s performance under the .AM)0$ supervisory rating system of *BI.

 CONCLUSION An attempt is made in this study to present a comprehensive picture of non7performing advances of 'e Private ban!s in India" touching upon various 9uantitative and 9ualitative ith some policy and strategic here 'PA levels are very high

trends in the post reform period" besides carrying out implications. Undoubtedly India is one of the fe countries

as there is an increase in the percentage of gross advances eroding their Profit by ma:or basic points" after netting the provision. 'e Private Ban!s 'PA has come do n i.e. less than CD. ;hile compare to old Private hose 'PA is more than GD. It may be because of the proportion of credit ris!

Ban!s

among the priority sector advances is double that of non7priority advances implying the irrationality of 1administered3 price controls" hich still e=ists in some form. )=ternal factors out eigh the internal factors contributing to this high accumulation of 'PAs. If the ban!s have to survive in the competitive and increasingly globali>e mar!et conditions they should be helped both by the *BI and the government in the form of faster recovery climate" especially for the legal processes of enforcement of contracts. %he 9uadrant analysis of credit ris! clearly identifies that G 'e comparatively performing ell Private ban!s are

hen compare to old selected P$Bs. It also offers scope for

mergers and ac9uisitions among the ban!s to be better prepared for high ris! credit mar!eting in India. And also 9uadrant analysis helps to identify profitability position of 'e Private Ban!s by using advances provided and 'on Performing Assets. Unless 'e Private Ban!s adopt proper $trategy to prevent huge level of 'PAs" it go on

affecting Profitability of Ban!s.

 A""re(iatio !se$/

IBA# Indian Ban!ing Association 'PA# 'on Performing Assets PBs# Private Ban!s U%I Ban! 0td# Unit %rust of India Ban! I.I.I Ban! 0td # Industrial .redit and Investment .orporation of India ?D+. Ban! 0td.# ?ousing Development +inance .orporation Ban! 0td

Bibliograph

In)"an Ban."n+ Asso "at"on 9IBA: B#llet"n 2012 ;e*s"tes ! ! ! ! 7775In)"an*an."n+asso "at"on5 o! 7775a8"s*an.5 o! 7775Goo+le5 o! htt$:''7775r*"5or+5"n's r"$ts'P#*l" at"ons<"e75as$8=")>14,2/