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A Study Of Non-Performing asset Management of Central Bank of India

Chapter 1 INTRODUCTION
1.1 What Is Bank Finance is the life blood of trade commerce & industry. Now a days banking sector acts as the backbone of modern business. Development of any country mainly depends upon the banking. The term bank id derived From the old Italian world BANCA from a French world BANQUE both mean a bench a money exchange table. In olden days, European money lenders or money changes used to display coins of different countries in big heaps on benches or table for the purpose of lending or exchanging a bank is financial institution which deals with de[posit & advances & other related services. It receives money from those who want to save in the from those who of deposit & it lends money to those who need it. Also In simple words we can say that bank is financial institution that undertakes the banking activity. It accept deposit &then lends the same to earn certain profit activities, either directed by loaning of indirectly through. CAPITALMARKET: - A banks links together customers that have capital deficits & customers with capital surplus. Due the their influential status and upon national economies, banks are highly regulated in most countries most nations have institutionalised a system known as fractional reserve bankingin which banks hold only a small reserve of the funds deposited & lend how the rest for profit. They are generally subject to minimum capital requirements bujed on an international set of capital standards known as the Basel accords banking in its modern sense evolved in the 14 th century in rich cities of renaissance Italy but in many ways was q constitution of ideas and concept of credit and lending that had its rootless in the anciet histbanking number of banking dynasties have played central role over many centuries. History of banking the origins of modern banking early renaissance Italy, to the rich cities in the north like Florence Lucca, Siena, Venice & genoas. The Burdick & Peruzzi families dominated banking in 14TH century Florence In essence a bank is designed to ba a safe place to keep your money. If you keep it at home instead, there is a greater chance that it is going to be lost or stolen. But that is just how banking begins. Once the bank has lots of money,

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it can make loans to people & earn interest. I can also pay interest to deposits. I can create new & more convenient ways to pay for things, such as by check money order, bank wire, withdrawal/deposit or credit card. It can exchange one from of currency for onther, making international commerce or travel easier banks are involved in various forms of investment such as the stock market & have special retirement savings accounts.. With tax deferment

features banks therefore become a part of all aspects of fining planning & management. Definition of bank :Oxford dictionary definers a bank as establishment for custody of money. Which it pays out on customers order.

1.2 Features of bank

1) Dealing in money :- Bank is a financial institution which deals peoples money i.e. money depositors.

2) Individual/Firms/Company :- A bank may be a person firms or a company. A banking company means a company which is business of banking.

3) Acceptance of deposit :- A bank accepts money from the people in the form of deposits which are usually repayable on demand or after the expiry of fixed period. It gives safety to the depositors of its customers. It also act as a custodian of funds of its customers.

4) Giving advances:-A bank lends out money in the form of loan to those who require it for different purpose.

5) Payment & withdrawal :- A bank provides early payment & withdrawal facility to its customers in the form of cheques & deposit. It also brings bank money in circulation. This money is in the form of cheques, drafts etc.

6) Agency & utility services :- A bank provides various banking facilities to its customers. They include generally utility services & agency services.

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7) Profit & service orientation :- A bank is a profit seeing institution having service oriented approach.

8) Ever increasing functions :- Banking is an evolutionary concept there is continuous expansion & diversification as regards the functions, services & activities of a bank.

9) Connecting bank :- a bank act as a connecting link between borrowers & lenders of money. Banks collect money from those who have surplus money & give the same to those who are in need of money. 10) Banking business :- A banks main activity should be to do business of banking which should not be subsidiary to any other business.

11) Name identify :- A bank should always add the world bank to do its mane to enable people to know that it is at bank & that it is dealing in money.

1.3 FUNCTION OF BANK

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The Main functions of bank are accepting depots from the public & advancing them loan However besides these functions there are many other functions which these banks perform . All these functions can be divider under the following head 1) Accepting deposit 2) Giving loans 3) Over-draft 4) Discounting bill of exchange 5) Investment of funds 6) Agency functions 7) Miscellaneous function. 1) Accepting deposit :The most important functions of bank is to accept

deposits from the public, various section of society, according to their needs & economic condition, deposit their savings with the banks. For example :- fixed& low income group people deposit their savings in small amounts from the point of view of security, income & saving promotion. On the other hand, traders & businessmen deposit their savings in the banks for the convince of payment. Therefore keeping the needs & interest of various section of society. Banks formulate various deposit schemes

I.

Fixed deposit :- These are the deposit which are deposited for a define period of time. This period is generally not less than one year and, therefore, these are called as long term deposit. These deposit cannot be demanded or withdrawn by the depositors at any time they want. Such deposit accounts are highly useful for traders & big business firms because they have to make payments and accept payments many time in day. Fixed deposit :-These are the deposit its which are deposited for a definite period of time. This period is generally not less than oneyear& therefore, these deposit cannot be stipulated time & therefore these are also called as time deposits.

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The se deposit generally carry a higher rate of interest because banks can use these deposit for a definite time without having the fear of being withdrawn. II. Saving deposit :- In such deposit money upto a certain limit can be deposited &withdrawn once or twice in a week, on such deposit, the rate of interest in very less. As is evident from the name of such deposits their main objective is to mobilise small savings in the form of deposits. These deposits are generally done by salaried people & the people who have fixed & less income.

1) Giving Loans :-The second important functions of banks is to advance loans to its customers. Banks charge intrest from the borrowers and this is the main source of their income. Banks advance loans not only on the basic of the deposit of the public rather they also advance loan on the basis of the depositing the money in the accounts of borrowers. In other words. They create loan out of deposit and deposit out of loan. These is called as credit creation by commercial banks. Modern banks give mostly secured loans for productive purpose. In other eords, at the time of advancing loans , they demand proper security or collateral is equal to the amount of loan. This is done mainly with a view to recover the loan money by selling the security in the event of non-refund of the loan. At times, banks give loan on the basis of personal security also. Therfore such loan are called as unsecured loan. Banks generally give a following types of loan & advances. a) Cash credit ;- In this type of credit scheme, banks advance loans to its customers on the basis of bonds, inventories & other approved securities. Under this scheme, banks enter into an agreement which its customers to which money can be withdrawn many times during year. Under this set up banks open accounts of their customers & deposit the loan money. With these type of loan, credit is created.

b) Demand loans :- These are such loans that can be recycled on demand by the banks. The entire loan amount is paid in lump-sum by crediting is to the loan account of the borrowers, & thus enter loan become chargeable to interest with immediate effect.

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c) Short term loan :- These loans may be given as personal loans, loans to finance working capital or as priority sector advance. These are made again some security and entire loan amount is transfer to the loan account of the borrower. 2) Over draft:- Banks advance loan to its customers up to a certain in amount through overdraft, if there are knoe deposit in the current account for these bank demand security from the customer & harge very high rate of interes

3) Discounting of bills of exchange: - This is the most prevent & important method of advancing loans to the traders for short term purpose. Under this system, banks advance loan to the traders & business firms by discounting their bills. In these way. Businessmen get loans on the basis of their bills of

exchange before the time their maturity.

4) Investment of funds: - The bank invests their surplus fund in the three type of security. Government securities other approved securities, other securities. Government securities include both , central & state government such as treasury bills national saving certificate etc.

Other securities include security of state associated bodies like electricity bords, housing boards, debenture of land development banks units of UTI, shares of Regional rural bonds etc.

5) Agency functions :- Bank function in the form of agents and representative of their customers. Customers give their consent for performance such a

functions. The important functions of these type are as follow.

Bank collect cheques , drafts bills of exchange and give a dividends of the shares for their customers. Banks make a payment for their clients and at a time accept the bills of exchange. Of their customers for which payment is made at the fixed time. Banks pay insurance premium of their customers. Besides this , they also deposit instalment, income-tax interest . Bank purchase & sale securities, shares and debenture on behalf of their customers.

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Bank arrange to send money from one place to another for the convince of their customer

1.4 Meaning of NPA

The three letter NPA strike terror in banking sector and business circle today NPA Of Non-Performing Asset. The dreaded NPA rule says that, when interest or other due to bank. Remain unpaid for more than 90 days the entire bank loan automatically turn as a non-performing Asset the recovery of loan always a problem for bank and financial institution to overcome these first We need to think is it possible to avoid NPA.

NPAs are an inevitable on the banking industry. Banks need to monitor standards asset. To arrest any Account becoming an NPA. Today the success of bank depends upon the methods of managing NPAs and keeping them with in a to lance level.

NPA is non-performing asset is defined as a credit facility in respect of which the interest or installment of Principal has remained past due for specified. Non-Performing Assets, also called NON-Performing loans, are loans made by a bank or finance company.

On which repayment or interest payments are not being made on time. A loan is an asset for a bank as the interest payments and the repayment of the principal create stream of each flows. It is form the interest payments than a bank makes its profits. A high level of Non-Performing Assets compared to similar lenders may be a sign of problems, as may a sudden increase. How ever this needs to be looked at in the context of the type of lending being done

needs to be looked at in the context of the and type of lending being done. Some banks lend to higher risk customers than others and therefore tend to have a higher risk customers than others and therefore tend to have a higher interest rates, increasing spreads. A mortgage lenders will almost certainly have lower non-performing assets than a credit card sealift but the latter will have higher spreads and may well

make a bigger profit on the same assets,even if it eventually has to write off Non-performing loans

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Definition:An asset is classified as non-performing asset (NPAs) if dues in the form of principal and interest are not paid by the borrower for a period of 180 days. However with effects from March 2004 , default status would be given to a borrower if dues are not paid for 90 days. If any advance or credit facilities granted by bank to a borrower become non-performing, then the bank will have to treat all the advance/credit facilities granted to that borrower as nonperforming without having any granted to the fact that there still exist certain advances/credit facilities having performing status. For a bank or a lending institution, an NPA or bad debt is usually a loan that is not producing income. Earlier it was largely applicable to businesses. But things have changed with banks widely extending consumer loans (home , car, personal and education, among others) and strict asset classification norms. If a borrower misses paying his equated monthly installment (EMI) for 90 days, the loan is considered bad, or an NPA are a sign of bad financial health. This has wide-ranging ramification for a bank, especially in the stock market and money market. So, as soon as a debt goes bad, the banks want it either made better or taken out of their books. To begin with it seems appropriate to define Non-performing advances, popularly called NPA A Non Performing advances is defined as An advance where payment of interst or repayment of interest or

repayment of installment of principal (in case of term loans) or both remains unpaid for of two quarters or more. beyond due date. As per recommendation of narasimhan committee, it has been decided that credit facilities granted by banks will be classified in to performing and Non performing asset. NPA is a loan (whether term loan, cash credit, overdraft, or bills discounted) which is in default for more than threemonths.In case of such assets, the income should be shown only on receipt and not shown in the banks book on a due basis. An amount under any of the credit facilities is to be treated as past due when it is remains unpaid for 30 days

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.NPAs have become an issue for banks and financial institutions in India: To Start with, Performance in terms of profitability is a benchmark for any business enterprise including the banking industry. However, increasing NPAs have a direct impact on banks profitability as legally banks are not allowed to book income on such assets as per the Reserve bank of India (RBI) guidelines. Also, with increasing deposits made by the public in the banking system, the banking industry cannot afford defaults by borrower since NPAs affects the repayment capacity of banks. Further, Reserve Bank of India (RBI) successfully creates excess liquidity in the system through various rate cuts and banks fail to utilize this benefit to its advantage due to the fear of burgeoning non-performing assets. The ratio of Non-performing assets to advantage reflects the quality of a banks loan portfolio. A distinction is often made between Gross NPA and NET NPA. NET NPA, which is obtained by deducting from gross NPA items like interest due but not recovered, part payment received and kept in suspense account, etc, is internationally accepted as the more relevant indicator of financial health of the banks. It is the level of non-performing assets which, to a grant extent, different between a good and bad banks. The subject of high NPA levels in banks has also been frequently raised in various areas.

1.5 IMPORTANCE OF NON PERFORMING ASSETS: The one major cause for the current weakened state of banking sector is the level and volume of NPAs. The problem has not been looked at in its proper perspective. Description such as decreased portfolio and figures running into thousands of cores have all led to treating the problem as a major one-time aberration requiring emergency treatment. The casual explanation - politica interface, willful defaults, targeted lending and even fraudulent behavior by banks allowed them selves to be pressurized into lowering their guard in the one area of business that is their bread and butter of existence-risk assessment. Lending to priority medium and small companies is likely to be the banks main activity in the time to come. The bigger, established corporations would have the wide world to choose from and to meet their requirement. The shift to medium-sized borrowers and slightly riskier lending will form prime activity of
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all banks. The problem will then, be to ensure that such lending is justified on a commercial criterion. The high level of NPAs in Indian banking sector is the result of application of prudential norms of accounting from 1992 onwards. The

introduction of CAC is subject to the NPA level being brought down to less than 5% from the present level if around 16%. The government of India already initiated several steps to help banks in reducing their NPAs. Several of these NPAs are still outstanding in the books of accounts because they are not supported by adequate provisions. Introduction of prudential norms on income, recognition, asset classification and provisions during 1992-93 and other steps initiated apart from bringing in transparency in the loan portfolio of banking industry have significantly contributed towards improvement of the pre-sanction appraised and post sanction supervision which is reflected in lowering of the level of fresh accretion of NPAs of banks after 1992. The researcher has undertaken the study of the fast developing CENTRAL bank with reference to its and review, it is necessary to understand financial position of bank. It presents a picture of movement of NPA

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Chapter: 2 CONCEPT OF THE STUDY

2.1 Introduction The concept of non-performing asset refers to which ceases to generate income. In case of bank, all loan and advances are its assets, which can be classified into performing and non-performing assets, which can be classified into performing and non-performing assets. Rbi has advises the banks not to charge interest on those loans and advance classified as non-performing asset. NPA is short form of Non-Performing Asset. The dreated NPA rule say simply this: when Intrest or other due to a bank remains unpaid for than 90 days. The entire bank loan automatically turns non performing assets. The recovery of the loan has always been problem for the bank and financial institutes to come out to this first we need problem for the bank and financial institutes To come out of this first we need to things is it possible to avoid NPA no cannot be then is to look back after the factor responsible for it and managing those factors. Over a long period of time the performance of urban co-operative banks (UCBS) has been deteriorating due to non-recovery of interest and installment on loan portfolio. After the deregulation of Indian economy the government has announced a number of reform measures on the basis of recommendations of Narsimham committee to make banking sector economically viable and competitively strong. The RBI introduced the concept of NPA and certain norms with effect from 1st April 1992. These norms were introduced not only to know the true financial picture in the financial statements but also to take corrective action for improving the performing in the recent years.

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Mounting NPAs are adversely affecting the profitability, liquidity and solvency position of banking sector. Hence in the context of global competition it is a paramount task for the banks to manage their NPAs more efficiently so that they can change their character from non performing assets to performing assets. With a view to moving towards international best practices and to ensure grater transparency, it has been decided to adopt the 90 days overdue norm for identification of NPAs from the year ending March 31, 2004, a nonperforming asset (NPA) shell be a loan or an advance where; 1. Interest and/or installment of principal remain overdue for a period of more than 90 days in respect of a Term Loan The account remains out of order for a period of more than 90 days, in respect of an overdraft / cash credit(OD/CC),

2.

3. The bill remains overdue for due harvest season but for a period not exceeding two half years in the case of an advance granted for agriculture purpose, and

4. Interest and/or installment of principal remains overdue for two harvest season but for a period not exceeding two half years in the case of an advances granted purpose,

.2.2Classification Of Assets: Assets can be classified as-

Assets

Standard assets

Sub-standard assets

Doubtful assets

Loss assets

Standard assets

Standard assets

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1. Standard Assets :A standard asset is an asset, which is not a non-performing asset. A standard asset is one, which does not carry more that normal risk attached to the business. Such an asset is not a non-performing asset and is performing advance or a standard asset. 2. sub Standard asset:A sub standard asset is one which has remained a NPA for a period less than or equal to 18 months. 3. Doubtful assets:An asset is classified as doubtful asset if it has remained an NPA for a period exceeding 18 months. 4. Loss Assets A loss asset is one where loss has been identified by the bank or the internal or the external auditor or the RBI inspection but the amount has not been written off wholly.

2.3 Provisions Of Norms In order to narrow down the divergences and ensure adequate provisioning by banks it suggested that a banks statutory auditors, if they so desire, could have a dialogue with RBIs Regional Office/ inspectors who carried out the banks inspection during the previous year with regard to the accounts contributing to the difference. Pursuant to this, offices were advised to forward a list of individual advances, where the variance in the provisioning between the RBI and the bank is above cut off levels so that the bank and the statutory auditors take into account assessment of the RBI while making provisions for loan loss, etc The primary responsibility for making adequate provision for any diminution in the value of loan assets, investment or other assets is that of the bank managements and the statuary auditors. assessment made by the statutory

auditors in taking a decision In regard to making adequate and necessary provisions in terms of prudential guidelines.

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In conformity with the prudential norms, provision should be made on the nonperforming asset on the basis of classification of assets into prescribed an account becoming doubtful of recovery its recognition as such the realization of the security and the erosion over time in the value of security charged to the bank, the banks should make provision against sub-standard assets, doubtful assets and loss assets as below: Loss assets: A) The entire assets should written off after necessary from the competent authority and as per the provision of the co-operative societies Act/Rules. If the assets are permitted to remain in the books for any reason, 100 % of the outstanding should be provided for. B) In repent of an asset identified as a loss asset, full provision at 100 % should be made if the expected salvage value of the security is negliable.

Doubtful assets: 100% of the extent to which the advance is not covered by the realizable value of the security to which the bank has a valid recourse and the realizable value estimated on a realistic basis.

2.4 Provisioning Norms against NPAs:In order to improve the quality of assets and robust resilience of banks to handle the future event of downturn and crisis, the provision norms have been further tightened. Accordingly, in additional to the existing

prudential guidleines to segregate the surplus provisions into a pool known as counter cyclical buffer under the provision coverage ratio (PCR) to be reached to 70% for non performing assets(NPAs) as per on dated sep 30, 2010, RBI has now proposed to enhance the provisioning requirement on certain categories of NPAs. As a result it can be observed that there is substantial rise in the quantum of provision to be made against the NPAs. The total amount of additional provision will have a bearing on the profit ability the banks. As such any enhancement in the provision gives rise to different outcomes.

It will improve the quality of assets because logically banks will strengthen the surveillance and monitoring mechanism to keep their provision levels low to insure that their profit ability is not hurt. At the same time it will improve the
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capacity of banks to avoid volatility therefore need to look at in crisis lending to better stability ob banking sector banks therefore need to look at in form the long term sustainability, threw in the short term, it make cut profit pie. A broader angle of interpretation and a proactive measure to streamline credit appraisal and stronger monitoring. Mechanism can improve a sit quality to eventually cut provision. Banks may have to closely follower health of their borrowers and keep a watch on the movement of their credit ratings. The measure speaks high of RBI concern to groom banks to take on higher volume with better credit discipline as banks move toward higher growth trajectory.

2.5 Income Recognition Policy The policy of income recognition has to be objective and based on the record of recovery. Income from non-performing assets (NPA) is not recognized on accrual bases but is booked as income only when it is actually received. Therefore, banks should not take to income account interest on non-performing assets on accrual basis. However, interest on advance against term deposit, NSCs, IVPs, KVPs and life policies may be taken to income account on the due date, provided adequate margin is available in the accounts. Fees and commission earned by the banks as a result of re-negotiation or rescheduling of outstanding debts should be recognized on the accrual basis over the period of time covered by the re-negotiation or rescheduled extension of credit. If government guaranteed advanced become over due and thereby NPA the entrust on such advances should not be taken to income account unless the interest has been realized. Reversal of income on accounts becoming NPAs:

If any advanced including bills purchased and discounted become NPA as at the close of any year, interest accrued and credited to income account in the corresponding pervious year, should be reversed or provided for if the same is not realized. This will apply to government. Guaranteed accounts also. If interest income from asset in respect of a borrower becomes subject to non accrual, fees, commission and similar income with respect to sane borrower
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that have been accrued should ceased to accrue in the current period and should be reversed or provided for if the same is not realizes. This will apply to govt. guaranteed accounts also. Banks undertaking equipment lasing should follow prudential accounting standards. Lease rentals comprise two elements-a finance charge (i.e. interest charge) and towards recovery of the cost of the asset. The interest component alone should be taken to income account, before the asset become NPA, and remained unrealized should be reversed or provided in the current accounting period. 2.6 Effect on profitability The NPA problem is on of the foremost formidable problem that have shaken the entire banking industry. The high level of NPA in banks and financial institution has been a matter of grave concern to the public as bank credit is the catalyst to the economic growth of the country and any bottleneck in the smooth flow of credit, one cause for which is the mounting NPAs is bound to create adverse repercussions in the economy. The efficiency of a bank is not always reflected only by the size of its balance sheet but by the level of return on its assets. NPAs do not generate interests provisions for such for such NPAs from their current profits.

1.

Effects on profitability

a) They erode current profits through provisioning requirement. b) They result in reduced interest income. They require higher provisioning. c) Requirement affecting profits and capacity to increase good quality risk assets in future. d) They limit recycling of funds. e) Bank has to spend for making efforts for recovery such as expenses on notice; follw-up and filing of civil suit & because of this expenses profit get reduced. f) This decline in profit has a bearings on variable like the capital to riskweighted asset ratio (CRAR) with of civil suit& because of this expenses profit get reduced. g) Bank to raise Tier-I capital This is because Tier-I capital consist of statutory and capital reserve that are essential built from profit. h) In the face of declining profit, in order to maintain the stipulated CRAR, the bank may have to raise Tier-2 capitals through bond issue the interest cost then will be higher.

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2. Narrow banking

a) Narrow banking means only operation with the existing assets base & not expanding

b) The business. If NPs are high RBI may ask a bank to do only narrow banking. c) RBI may impose adverse restriction on business of bank if NPA percentage is very d) high. For Example-Restriction on opening new branches, Expansion of

international operation may be curtain

3. Effects on efficiency

a) When NPAs are very high all productivity ration of the bank such as ROI (Return On Investment) Productivity per employee and profitability ration are adversely affected. b) The most important business implication of the NPAs is that it lead to the credit risk management assuming priority over other aspects of banks functioning. The banks whole machinery would thus be pre-occupied with recovery procedure rather that concentrating on expanding business. c) Implication can be psychological like play safe attitude and risk aversion, lower moral and disinclination to take decision at all level of staff in the bank. Factors affecting rise in NPAs: The banking sector has been facing the serious problem 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. 1. External factor The government has set of number of recovery tribunals, which works for recovery of loan and advances. Due to their negligence and ineffectiveness in their profitability and liquidity.

Willful Defaults There are borrowers who are able to payback loans but intentionally withdrawing it. measure. These groups of people should be identified and proper

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Should be taken in order to get back the money extended to them as advances and laons. 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 government

policies give birth to industrial sickness. Hence the banks that finance those industries ultimately end up with a low recovery of 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 borrow to operate these activities. The banks recover the amount by selling of their assets, which covers a minimum label. Thus.

INTERNAL FACTORS the banks record the non recovered part as NPAs and has to make provision for it. Change on Government 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 4. Internal factor Defective lending process There are three cardinal principles of bank lending that have been followed by commercial banks since long. I. II. III. Principles of safety Principles of liquidity Principles of profit ability
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2.7 Principles of safety By safety means that the borrower is in a position to repay the loan both principles an interest. The repay of loan depends upon the borrowers. a. Capacity to pay b. Willingness to pay

a) Capacity to pay depend upon: 1) Tangible assets 2) Success in business Willingness to pay depend on: 1) Character 2) Honest 3) Reputation of borrower The banker should, therefore take out must 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 in appropriate technology and management information system, market driven decision real time cant be taken. MIS and financial accounting system is not implemented in the bank which leads to poor credit collection, thus NPA all the branches of the bank should be computerized. 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, the should analyze the purpose to the loan. To ensure safety and liquidity, banks should grant loan for productive purpose only should analyses the profitability, viability, long term ace tabooed of the project while financing. Poor credit appraisal system: Poor credit appraisal is another factor for the fire in NPAs. Due to poor credit appraisal; the bank gives advances to those who are not able to repay back. They should use good credit appraisal to decrease the NPAs.
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Managerial defectiveness: The banker should always select the borrower very carefully and should take tangible assets as security to safe guard its interest. When accepting securities banks should consider the 1. Marketability 2. Accepting 3. Safety 4. Transferability The Banker should follow the principal of diversification of risk based on the famous maxim 2 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 then in few industries or in a few cities. If a few big customer meets misfortune or certain traders or industries affected adversely, the overall position of the bank will not be affected. 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 the NPA is increasing day by day. 2.8 Implication of NPA 1. The most important of the NPA is that a bank neither credit the income nor debit to loss, unless either recovered or identified as loss. 2. If a borrower has multiple accounts, all accounts would be considered NPA if one account becomes NPA. 3. The securitization and Reconstruction of financial Assets and Enforcement of Security Interest Ordinance, 2002 (the ordinance) was promulgated on 21.06.2002 and became effective immediately. The far-reaching consequences can be one hand, the Banks and Financial Institutions will find the said Ordinance quite handy. On the other hand, the opportunity to defend will come to defaulters at very high cost. The purpose of the Ordinance is to check the menace of Non-performing Assets (the NPAs) that have been increasing by leaps and bounds. The Ordinance was badly needed to Project the interest of the Banks and Financial Institutions. Process of NPA Recovery:Every bank in order to recover the dues has a recovery process set for them. The usual legal recovery process adopted by the bank in the following nature.

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Legal Process of Recovery

Personal visit to the Borrower

Notice to Guarantors

Authority Letter to lawyer

Demanding amount through notice

Receiving amount from client

Not receiving amount

File case in court Debit note for expenses

Completion of

Recovery expenses Lawyers argue before issuing Stopped recovery process after receiving

Argument in court if court satisfied, issue

Police station serving the summons to

During the project work I came across with cases of compromising proposals. Thus these cases are taken in order to the practice feel of the Banks compromises offer and recovery process adopted thereaft

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Chapter3 BANK PROFILE
3.1 Introduction of central bank of India Central Bank of India

Type Industry

BSE&NSE:CENTRALBK Financial Commercial banks 21 December 1911; 102 years ago Mumbai, India Shri. Rajeev Rishi, Chairman & Managing Director 19149.50 crore

Founded Headquarters Key people

Revenue Website

(US$3.1 billion) (2010-11)[1] www.centralbankofindia.co.in

Central Bank of India, Mumbai Central Bank of India a government-owned bank, is one of the oldest and largest commercial banks in India. It is based in The bank has 4100 branches and 270 extension counters across 27 Indian states and three Union Territories. At present, Central Bank of India has one overseas office, which is a joint venture with Bank of India, Bank of Baroda, and the Zambian government. The Zambian government holds 40 per cent stake and each of the banks has 20 per cent. Recently it has also opened a representative office at Nairobi, Kenya. Central bank of India is one of 18 Public Sector banks in India to get recapitalisation finance from the government over the next 24 months. Central Bank of India has approached the Reserve Bank of India (RBI) for permission to open representative offices in five more locations - Singapore, Dubai, Doha, London and Hong Kong.

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As on 31 March 2011, the bank's reserves and surplus stood at 6,868.85 crore. Its total business at the end of the last fiscal amounted to 2,09,757.33 crore.

3.2 History It was established on 21 December 1911 by Sir Sorabji Pochkhanawala with Sir Pherozeshah Mehta as Chairman and claims to have been the first commercial Indian bank completely owned and managed by Indians. In 1923, it acquired the Tata Industrial Bank in the wake of the failure of the Alliance Bank of Simla. In 1969, the Indian Governmentnationalized the bank on 19 July, together with 13 others. In the 1980s the managers of the London branches of Central Bank of India, Punjab National Bank, and Union Bank of India were caught up in a fraud in which they made dubious loans to the Bangladeshi jute trader Rajender Singh Sethia. The regulatory authorities in England and India forced all three Indian banks to close their London branches. Central Bank of India was one of first bank to issue credit cards in the year 1980 in collaboration with MasterCard Central Bank of India announces Financial Result for year ended 2013-Total Business Rs.402000 Cr. Net ProfitRs.1015 Cr. On August 1st Central Bank of India appoints new CMD Rajiv Rishi, who was previously ED of Indian Bank and General Manager of OBC. Raj Kumar Goyal new ED of the bank.1st November 2013 Bank open 2nd Representative Office at Hongkong.

3.3 Bank Details Central Bank of India, a public sector banking institution is one of the oldest and largest commercial banks in India. The bank has their branches in 27 States and four Union Territories in India. The Bank's main business is taking

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deposits, lending money and making investments. They also offer a wide range of general banking services to our customers, including credit cards, debit cards, cash management and remittance services and collection services. The Bank distributes third party life and non-life insurance policies and mutual funds on an agency basis. They act as agent for various state governments and the Government of India on numerous matters including the collection of taxes and the payment of pensions. They also issue traveller's cheques and gift cheques. The Bank's deposit taking and lending business is divided into three main areas, namely retail, agriculture and corporate. The retail business provides financial products and services, such as loans and advances for housing, retail trade, automobiles, consumer durables, education and other personal loans to their retail customers. The agricultural banking business offers direct financing to farmers for production and investment, as well as indirect financing for infrastructure development and credit to suppliers of agricultural inputs. The Bank provides commercial banking products and services to corporate and commercial customers, including mid-sized and small businesses and government entities. The Bank sponsors 7 Regional Rural Banks in collaboration with the state governments of Madhya Pradesh, Chhattisgarh, Bihar, Maharashtra, Uttar Pradesh and Rajasthan. Also, they entered into agency agreements with Life Insurance Corporation of India and The New India Assurance Company Ltd to distribute their various insurance products, for which they are paid a fee. In order to develop rural entrepreneurship, the Bank launched a Rural Development and Self Employment Training Institute (Rudseti) at Hoshangabad. This provided intensive entrepreneurship training to the rural youth and enables them to take to vocational activities. Also, the Bank launched Financial Literacy and Credit Counseling Centre at Vadkun in Thane, which provides free counseling to the villagers on the various banking products, both deposits and loans and also counseling to distressed borrowers, irrespective of whether they are bank's clients or not. Central Bank of India was incorporated on December 21, 1911 as The Central Bank of India Ltd and was founded by Sir Sorabji Pochkhanawala. In May 1, 1929, the Bank incorporated The Central Bank Executor and Trustee Company Ltd (now known as Central bank Financial and Custodial Services Ltd) as a subsidiary of the Bank to undertake the trustee and executor business and act as executors, administrators and trustees and executes private and public trusts, including, religious and charitable trusts.

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In the year 1969, the Bank was nationalized along with 13 other major commercial banks and the Bank is currently owned by the Government of India. The Bank was renamed as Central Bank of India. The Bank introduced the credit card in the name 'Centralcard' in the year 1980. In the year 1984, Indo-Zambia Bank Ltd, a joint venture Bank was incorporated under the laws of the Republic of Zambia, which carries out banking activities in Zambia.In the year 1991, the Bank incorporated Cent Bank Home Finance Ltd (formerly known as Apna Ghar Vitta Nigam Ltd), a housing finance institution registered with the National Housing Bank as a subsidiary of the Bank for providing long term finance for the purchase or construction of houses in India. In the year 1994, Quick Cheque Collection Service (QCC) & Express Service was set up to enable speedy collection of outstation cheques. In the year 2007, the Bank restructured their entire paid up capital by conversion of an amount aggregating Rs 8,000 million out of the equity share capital of Rs 11,241.40 million into perpetual non-cumulative preference share capital, while retaining the balance amount aggregating Rs 3,241.41 million as equity share capital of the Bank. The Bank entered into agreements with UTI Asset Management Company Pvt Ltd and Tata Asset Management Ltd for the sale of their mutual fund products, for which the Bank is paid on a commission basis and fee basis, respectively. During the year 2007-08, the Bank opened 96 branches and 1 new extension counters, upgraded 22 extension counters to full fledged branches and merged 4 branches and 3 extension counters with the base office. The Bank launched two retail lending scheme, such as Cent Udaan, which is the scheme for educational loan for commercial pilot training courses and Cent Swabhiman, a reverse mortgage loan scheme for senior citizens, in which senior citizens can monetise their residential property by mortgaging the same and in turn get periodic payments or lumpsum payment. In May 2007, the Bank entered into an agreement with Franklin Templeton Asset Management (India) Pvt Ltd to distribute units of schemes of Franklin Templeton Mutual Fund. In July 2007, the Bank entered capital market with their maiden initial public offer. The IPO received stupendous response and was successfully oversubscribed by 62.07 times-the highest ever subscription received by any bank in India. After this issue, the Government of India's shareholding in the Bank reduced to 80.20%. In March 15, 2008, the Bank entered into a MoU with SME Rating Agency of India Ltd for rating of SME borrowers.

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Central Bank of India was conferred with the 1st Award under National Awards for Excellence in MSE Lending based on their outstanding performance in lending to Micro and Small Enterprises during the year 200708. In December 29, 2008, Kotak Mahindra Asset Management Company, one of India's leading mutual fund houses, entered into a distribution tie-up with Central Bank of India. Under the agreement Central Bank of India will offer the entire bouquet of Kotak Mutual Fund products from their branches. During the year 2008-09, the Bank opened 190 branches and 22 Extension Counters were upgraded into full-fledged branches. Also, two branches namely, Cuffe Parade branch and Versova Road branch were merged with Colaba Causeway branch and Seven Bunglows branch respectively. In August 2008, the Bank launched two premium visa credit card products Visa Platinum and Visa Gold credit cards. They completed roll-out of 400 ATMs by October 2008 as per Phase-l implementation. During the year, 3 RRBs namely Satpura Kshetriya Gramin Bank, Chambal Gwalior Kshetriya Gramin Bank and Ratlam Mandsaur Kshetriya Gramin Bank in Madhya Pradesh were amalgamated and formed a new entity with the name as Satpura Narmada Kshetriya Gramin Bank. Also, 2 RRBs namely Uttar Bihar Kshetriya Gramin Bank and Kosi Kshetriya Gramin Bank in Bihar were amalgamated and formed a new entity with the name Uttar Bihar Gramin Bank. During the year 2009-10, the Bank opened 49 branches, upgraded 11 extension counters to full fledged branches and merged 1 branch. As per the Government of India notification, 2 RRBs namely Ballia Kshetriya Gramin Bank and Etawaha Kshetriya Gramin Bank in Uttar Pradesh were amalgamated and formed a new entity with the name as Ballia Etawaha Gramin Bank. During the year, the Bank introduced new schemes to cater to market demand. These are Short Term Loan to companies eligible for issuance of Commercial Paper, Production Equipment Finance Scheme, Mibor linked short term loan for large corporate and Cent Swabhiman Plus (Annuity product) Cent Doctor and Cent Personal Gold Loan for Retail segments. Also, they commenced loan syndication which has elicited good response from the market. In March 2009, the Bank launched prepaid CentGift Cards and got license for issuance of prepaid Travel Cards in foreign currency. They entered into tie-up arrangement with HCL Infosystems Ltd., for providing need based finance for purchase HCL computers and also joined hands with Future Group for marketing Retail products to the customers at Big Bazaar Departmental Store all over India.

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During the year 2010-11, the company opened 82 new branches and upgraded 53 extension counters into full fledged branches. They also opened 17 Mid Corporate branches and 1 Asset Recovery Branch. They opened 2 temporary branches for Common Wealth Games at Delhi which were closed. The ATM network was being expanded on a large scale. Banks ATM network in year 2010-11 was expanded from 400 to 1006. The Bank has increased their paid-up capital by way of issue of Preference Shares in the form of Perpetual Non-Cumulative Preference Shares (PNCPS) to the tune of Rs 250 crore to Government of India. In August 2011, the Bank entered into an agency tie-up with Cholamandalam MS General Insurance Company for selling their insurance products. The products will be customised for the Bank and will be sold through 3,728 bank branches. The Bank is in the process of installing additional 900 ATMs including 150 bio-metric ATMs. They are also planned to install 1000 ATMs in rural areas and 1500 off site ATMs. The Bank is also in the process for having NEFT, direct Tax payment facility through ATMs.

3 4 3.4 logo of bank

3.5 Products and Services offered by Bank Central Bank offers wide variety of Loans Products and services in India ton suit your requirements with convenience of networked branches/ ATMs and facility of E-channels like internet and Mobile Banking, Central Bank brings banking at your Doorstep.

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Select any of our loan product and provide your details online and our representative will contact for getting loans.

1.

Home loans

2. Car loans 3. Personal loans 4. Commercia vehicle loans 5. Two Wheeler loans

1. HOME LOANS :Home loan Amount- restricted to a maximum of 80% of the cost of the property or the cost of construction as applicable. Tenor- Maximum tenure of your home loan can be 20 years. However, in case of salaried customers it is capped at retirement age. Home Loan Repayment Terms In our endeavor to make taking a Home loan an easy process for you, we at CENTRAL BANK address all your queries about the repayment terms of loan with respect to tenure, home loan EMIS, methods of home loan EMI payments and Pre EMI intrest. THE REPAYMENT TENURE Repayment tenure is the tenure for the number of year for which the loan gets sanctioned. We offer you a wide range of option for the tenure of the loan. You can take a home loan for up to 20 years provided you do not reach the age of 65 years or retire within that period. Loan repayment An EMI refers to an equated monthly installment. It is a fixed amount which you pay every month towards your loan. repayment and interest payment. Repayment starting Emi payments start from the month following the month in which the full disbursement has been made. It comprises of both, principal

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EMI payment The EMI to be paid every month through post-dated cheques (PDCS) or Electronic Clearing System (ECS).If you are opting for PDCS upfront. The PDCS are to dated on the 1st of every month. However, if you receive your salary a few days later, we provide, we provide the flexibility of dating the cheques for the 10 month. In case you have an CENTRAL BANk saving account you can also go in for the facility of Auto Debit. PDC bounces: IN the case of a bound cheque or delayed payment, Charge and outstanding dues will be charged as per the prevalling company policy. You can replace old PDCS with new ones within 5-7 working days. Pre-EMI Intrest In the case of part disbursement ofthe loan, monthly interest is payble only on the disbursed amount. This interest is called pre- EMI intresest (PEMI) and is payble monthly till the final disbursement is made, after which the EMIs would commerce.

2. CAR LOANS Loan amount The minimu loan amount for taking a new car loan is rs. 1,00,000. The Maximum loan amount will depend upon the price of the car, model variant, profile of the customer, etc. Documentation At CENTRAL BANK car loans, offer of the most convenient, flexible & quick car loan of the click mouse. Keeping Your convenience in mind, we ask you for Minimal mandatory documents for the sanctioning of your car loan. Income proof Salaried individuals Latest Salary Slip and 2 years From 16/ Income tax returns.

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Self Employed individuals Income Tax Returns of 2 previous financial years. Partnership Firms, societies & Companies Income Tax returns of 2 previous financial years along with complete financial/ audit report. Documents supporting customer information Identify proof, signature proof and address proofs as per CENTRAL BANK norms(our representive will help you choose suitable documents) Other document: Partnership Fiems: Partnership deed and letter signed by all partners authorininsing one partner to execute the required Car loans documentation. Societies and Companies: Resolution by board of Directors (or such managing body) & Memorandum & Articles of Association (or Society Trust deed.)

3. PERSONAL LOANS CENTRAL BANK personal loan: Loan up to Rs. 10nlakhs. No security/ Guarantor required. Faster processing. Minimum Documentation. Attractive rates of interest. Flexible repayment option of 12-48 months.

4.

COMMERCIAL WEHICLE LOANS Loan Amount:-

The loan depends on applicants requirement Funding can be to extent of 100% of the chasis values: body funding can only be extend on special requirement.

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Repayment:The tenure of the loan may vary from 12 to 60 months, depending upon the nature of the deal and the repayment capacity. Repayment can be made through post-dated cheques (PDCs)/ ECS or through Auto_debit in the case of CENTRAL bank account holders. Prepayment of the loan is allowed, at a charge indicated on the Service Charges PageIn the event of an accident, you need to inform our local representive of it.

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Chapter4 RESEARCH METHODOLOGY
4.1 RESEARCH METHODOLORY Research is a common parlance refer to search for knowledge. One can also define research as a scientific and systematic search for pertinent information on a particular topic. Infect, research is an art of scientific

investigation. Research methodology is a way of systematically solve the problem. It also includes the type of data required and the type of method of

data analysis and interpretation to be used. The system of collecting data for research projects is known as research methodology. The data may be collected for either theoretical or practical research for example management research may be strategically conceptualized along with operational planning methods the change management. Some

important factor in research methodology include validity of research data. Formulating of research question along with sampling weather probable or non probable is followed by measurement that includes surveys. This is

followed by research design, which may be either experimental or quasi experimental. 4.2 PROBLEM DEFINATION:The researcher has studied the NPA management strategies and practise, various measures for controlling NPA in the bank, and process of NPA management in bank with care of that not getting affected to profitability of bank. 4.3 OBJECTIVES OF THE STUDY To identify significant strategy for NPA management. To study the past trends of NPA. To calculate the rate of NPA in banking. To analyze financial performance of banks at different level of NPAs

4.4 REASERCH DESIGN:Exploratory research design is use when researcher is unfamiliar with the problem. It is design to analyses inside the stu Sample Unit The researcher has selected CENTRAL BANK OF INDIA
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4.5 SOURCES OF DATA COLLECTION:Primary Data The researcher has collected the primary data about NPA management by personally visiting the CENTRAL BANK at main branch Amravati and conduct the personal interview with branch manager. Secondary data With this, researcher has also collected secondary data from various published sources from books, CENTRAL BANKS annual report, Various Research articles and RBIs and CENTRAL Bank website. 4.6 RESEARCH PROCESS

IDENTIFICATION AND FORMULATION OF PROBLEM

REVIEW RESEARCH FINDING

REVIEW CONCEPT OF THE THEORY

RESEARCH DESIGN

COLLECTION OF DATA

ANALYSIS OF DATA

INTERPRITATION OF DATA
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4.7 RESEARCH TOOLS AND TECHNIQUES In this research the tool and technique was used for data evaluation was Interview with branch manager, visit to the bank. 4.8 LIMITATIONS:To conduct research systematically the following limitation have occurred. The study is restricted only for CENTRAL Bank of India Approximate values are used for the analyzing. Hence the results also reveal the approximate values. The data analysis is on the of home loans, car loans, personal loans, commercial vehicle loans and two wheeler loans provided by CENTRAL Bank. The period of study is also restricted for 3 years.

4.9 SCOPE OF THE STUDY: The study is laid on macro level and to find the impact of NPAs in CENTRAL BANK. It also analysis the efficiency of recovery measures undertaken by CENTRAK BANK. Keeping in view the important CENTRAL BANK in rural development of economic significant of CENTRAL bank operates in the economy of the country in bank. In this study it covers how NPAs level will affect the profit of the bank. It shows reason of the bank. It shows reason of NPAs and Preventive Measures. It gives the opportunity to studying the

various kind of loan and its having eligibility and how to sanction it.

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Chapter 5 DATA ANALYSIS & INTERPRITATION

5.1) Total NPAs for the year 2011, 2012, and 2013:

Table: 5.1 Year 2010-11 2011-12 2012-13 Amount 847.29 4556.77 4987.55 Graph 5.1

(Rs.In Lakhs)

Total NPAs for the year 20112013


5000 4000 3000 2000 1000 0 2010-11 2011-12 2012-13 847.29 4556.77 4987.55

(Source: Secondary Data) Analysis of Data: The graph shows the total amount of defaulter of the Central bank of India during past three years. The amount of default has decrease as the years have passed over. There has been a drastic increase from year 2011-2013. Interpretation: From the above analyze data it is interpreted that bank NPA in the year 2010-11 was 847.29, and then drastic increase in the NPA in the year 2011-12 was reached at 4556.77 and in the year 4987.55.

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Calculation of NPA ratio during year 2010-11, 2011-12, 2012-13 Year-2012-13 Net NPA = 4987.55 Loan = 178748.79 Net NPA Loan

NPA ratio=

4987.55 178748.79

= 0.0280

Year-2011-12 Net NPA = 4556.77 Loan = 6443.11 Net NPA Loan

NPA ratio =

= 4556.77 6443.11

= 0.707

Year-2010-11 Net NPA = 847.29 Loan = 7819.24 Net NPA Loan

NPA ratio=

847.29 7819.24 = 0.108

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Table no. 5.2: NPA ratio during 2010-11, 2011-12, and 2012-13

Year 2010-11 2011-12 2012-13

NPA ratio 0.108 0.707 0.0280

Graph No. 5.2: NPA ratio during 2010-11, 2011-12, 2012-13

NPA ratio
0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 2010-11 2011-12 2012-13 0.108 0.028 0.707

(Source: Secondary Data) Analysis of Data: The graph shows NPA ratio in the last three years, and the more ratio was for 201112. Interpretation: From the above analyze data it is interpreted that bank NPA ratio in the year 201011 was 0.108, and then drastic increase in the NPA in the year 2011-12 was reached at 2011-12 and in the year 0.028.

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Calculation of Gross NPA ratio during year 2010-11, 2011-12, 2012-13 Year-2012-13 Gross NPA = 8456.18 Gross Adv. = 172321.94 Gross NPA = Gross NPA *100 Gross Adv

= 8456.18 172321.94

*100

= 4.91%

Year-2011-12 Gross NPA = 7273.46 Gross Adv. = 147718.08 Gross NPA = Gross NPA *100 Gross Adv

= 7273.46 147718.08

*100

= 4.92% Year-2010-11 Gross NPA = 2394.53 Gross Adv. = 129840.57 Gross NPA = Gross NPA *100 Gross Adv

= 2394.53 129840.57

*100

= 1.84%

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Table no. 5.3: Gross NPA ratio during 2010-11, 2011-12, 2012-13 Year Gross NPA ratio

2010-11 2011-12 2012-13

4.91 4.92 1.84

Graph No. 5.3: Gross NPA ratio during 2010-11, 2011-12, 2012-13

Gross NPA ratio


4.91 5 4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 2010-11 2011-12 2012-13 1.84 4.92

(Source: Secondary Data) Analysis of Data: The graph shows Gross NPA ratio in the last three years, and the more ratio was for 2011-12. Interpretation: From the above analyze data it is interpreted that bank gross NPA ratio in the year 2010-11 was 4.91, and then increase in the NPA in the year 2011-12 was 4.92 2011-12 and in the year 1.84.

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Year wise analysis: 5.2) Total Deposits and Advance: Table 5.4 Year 2010-11 2011-12 2012-13 Deposits 79378.55 196235.32 226279.07 Advances 129840.57 147718.08 172321.94

Graph 5.4
250000

226279.07 196235.32 172321.94


150000

200000

147718.08 129840.57

100000

79378.55

50000

0 2010-11 2011-12 2012-13

Deposits

Advances

(Source: Secondary data) Analysis of Data: This graph shows that total loan and advances in the last three years, mostly loan advance for the year is 2012-13. Interpretation: From the above analyze data it is to be interpreted that in the year 2012-13 the maximum deposits and advances was granted by bank, in the year the advances was 172321.94 & deposits was 226219.07. Other two years having less deposits and advances

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Advance during year 2009-10 Table: 5.5 Type of Loan Home loan Car loan Personal Loan Commercial vehicle loan Two wheeler loan Amount 207.56 47.38 478.56 38.6 14.67 ( Rs. In Lakhs)

Graph no. 5.5

Advance during Year 2009-10


600 500 400 300 207.56 200 100 0 Home loan Car loan Personal Loan Commercial vehicle loan Two wheeler loan 47.38 478.56

38.6

14.67

(Source: Secondary data) Analysis of Data: This graph shows that for the year 2009-10 maximum loan were being granted as the personal loan. The minimum being granted for two wheeler loan, the home loan is near to personal loan and higher than car loan & commercial vehicle loan. Interpretation: From the above analyze data it is to be interpreted that in the year 2009-10 the maximum loan was granted by bank for personal loan about Rs. 478.56 lakhs and minimum for two wheeler loan about Rs. 14.67 lakhs. .

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5.6) Advance during year 2010-11: Table: 5.6 Type of Loan Home loan Car loan Personal Loan Commercial vehicle loan Two wheeler loan ( Rs. In Lakhs) Amount 167.34 105.89 306.75 55.90 79.8

Graph: 5.6

Advance during Year 2010-11


350 300 250 200 150 100 54.9 50 0 Home loan Car loan Personal Loan Commercial vehicle loan Two wheeler loan 167.34 105.89 79.8 306.75

(Source: Secondary data) Analysis of Data: This graph shows that for the year 2010-11 maximum loan were being granted as the personal loan. The minimum being granted for commercial vehicle loan, the home loan is near to personal loan and higher than two wheeler loan & car loan. Interpretation: From the above analyze data it is to be interpreted that in the year 2010-11 the maximum loan was granted by bank for personal loan about Rs. 306.75 lakhs and minimum for commercial vehicle loan about Rs. 54.9 lakhs.

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.5.7) Advance during year 2011-12: Table: 5.7 Type of Loan Home loan Car loan Personal Loan Commercial vehicle loan Two wheeler loan ( Rs. In Lakhs) Amount 647.45 126.5 229.12 68.31 208.07

Graph: 5.7

Advance during Year 2011-12


700 600 500 400 300 200 100 0 Home loan Car loan Personal Loan Commercial vehicle loan Two wheeler loan 126.5 68.31 229.12 208.07 647.45

(Source: Secondary data) Analysis of Data: This graph shows that for the year 2011-12 maximum loan were being granted as the home loan. The minimum being granted for commercial vehicle loan, the personal loan is near to home loan and much greater than two wheeler loan & car loan. Interpretation: From the above analyze data it is to be interpreted that in the year 2011-12 the maximum loan was granted by bank for home loan about Rs. 647.45 lakhs and minimum for commercial

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5.8) Advance during year 2012-13: Table: 5.8 Type of Loan Home loan Car loan Personal Loan Commercial vehicle loan Two wheeler loan ( Rs. In Lakhs) Amount 448.56 201.39 59.89 103.67 19.10

Graph: 5.8

Advance during Year 2012-13


500 450 400 350 300 250 200 150 100 50 0 Home loan Car loan Personal Loan Commercial vehicle loan Two wheeler loan 59.89 19.1 103.67 201.39 448.56

(Source: Secondary data) Analysis of Data: This graph shows that for the year 2012-13 maximum loan were being granted as the home loan. The minimum being granted for personal loan and two wheeler loan, the car loan is near to home loan loan and much greater than commercial vehicle loan. Interpretation: From the above analyze data it is to be interpreted that in the year 2012-13 the maximum loan was granted by bank for home loan about Rs. 448.56 lakhs and minimum for two wheeler loan about Rs. 19.1 lakhs.

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5.9) THE TOTAL LOAN SANCTION IN THE LAST FOUR YEARS

Table 5.9: Home Loan sanction

Sr. No. 1 2 3 4

Year 2012-13 2011-12 2010-11 200910

Sanction Amount 5018.56 6157.48 1667.43 2071.65

Graph 5.9: Home Loan sanction

Home loan Sanction Amount


7000 6157.48 6000 5018.56 5000 4000 3000 2071.65 2000 1000 0 2012-13 2011-12 2010-11 2009-10 1667.43

(Source: Secondary data) Analysis of Data: This graph shows the amount of home loan sanction in the last four years and it shows that most home loan sanction in the year 2011-12. Interpretation: From the above analyze data it is to be interpreted that maximum 6157.48 loan sanction in 2011-12, then secondly 5018.56 in the year 2012-13, in the year 2009-10 it was 2071.65 and in the 2010-11 it was 1667.43.

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A Study Of Non-Performing asset Management of Central Bank of India


Table no 5.10: Car Loan sanction

Sr. No. 1 2 3 4

Year 2012-13 2011-12 2010-11 2009-10

Sanction Amount 1851.39 1265.12 1051.98 470.83

Graph no. 5.10: Car Loan sanction

Car loan Sanction Amount


2000 1800 1600 1400 1200 1000 800 600 400 200 0 2012-13 2011-12 2010-11 2009-10 470.83 1265.12 1051.98 1851.39

(Source: Secondary data) Analysis of Data: This graph shows the amount of car loan sanction in the last four years and it shows that most car loan sanctions in the year 2012-13. Interpretation: From the above analyze data it is to be interpreted that maximum 1851.39 in the year 2012-13, 1265.12 in the 2011-12, 1051.98 in the 2010-11 and 470.83 in the 2009-10.

P. R. Patil College of Engineering & Technology, Amravati

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A Study Of Non-Performing asset Management of Central Bank of India


Table no 5.11: Personal Loan Sanction

Sr. No. 1 2 3 4

Year 2012-13 2011-12 2010-11 2009-10

Sanction Amount 603.98 2180.91 3117.75 4780.56

Graph no 5.11: Personal Loan Sanction

Personal loan Sanction Amount


6000 5000 4000 3117.75 3000 2180.91 2000 1000 0 2012-13 2011-12 2010-11 2009-10 4780.56

603.98

(Source: Secondary data) Analysis of Data: This graph shows the amount of Personal loan sanction in the last four years and it shows that most personal loan sanctions in the year 2009-10. Interpretation: From the above analyze data it is to be interpreted that maximum 4780.56 in the year 2009-10, 2180.91 in the 2011-12, 3117.75 in the 2010-11 and 603.98 in the 2012-13.

P. R. Patil College of Engineering & Technology, Amravati

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A Study Of Non-Performing asset Management of Central Bank of India


Table no. 5.12: Commercial Loan Sanction

Sr. No. 1 2 3 4

Year 2012-13 2011-12 2010-11 2009-10

Sanction Amount 1137.67 679.83 540.09 381.73

Graph no. 5.12: Commercial Loan sanction

Commercial loan Sanction Amount


1200 1000 800 600 400 200 0 2012-13 2011-12 2010-11 2009-10 1137.67

679.83 540.09 381.73

(Source: Secondary data) Analysis of Data: This graph shows the amount of commercial loan sanction in the last four years and it shows that most commercial loan sanctions in the year 2012-13. Interpretation: From the above analyze data it is to be interpreted that maximum 1137.67 in the year 2012-13, 679.83 in the 2011-12, 540.09 in the 2010-11 and 381.73 in the 2009-10.

P. R. Patil College of Engineering & Technology, Amravati

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A Study Of Non-Performing asset Management of Central Bank of India


Table no 5. 13: Two wheeler Loan sanction

Sr. No. 1 2 3 4

Year 2012-13 2011-12 2010-11 2009-10

Sanction Amount 201.15 2280.07 798.00 138.96

Graph no 5.13: Two wheeler Loan sanction

Two wheeler loan Sanction Amount


2500 2280.07 2000

1500

1000

798

500 201.15 0 2012-13 2011-12 2010-11 2009-10 138.96

(Source: Secondary data) Analysis of Data: This graph shows the amount of Two-wheeler loan sanction in the last four years and it shows that most Two-wheeler loan sanctions in the year 2011-12. Interpretation: From the above analyze data it is to be interpreted that maximum 2280.07 in the year 2011-12, 798 in the 2010-11, 138.96 in the 2009-10 and 201.15 in the 2012-13.

P. R. Patil College of Engineering & Technology, Amravati

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A Study Of Non-Performing asset Management of Central Bank of India


Chapter 6 CONCLUSION & SUGGESTIONS
6.1CONCLUSION 1. As the advance were maximum than the deposit for the respective 3 years, Ex It shows the bank was found in loss because bank have granted more of advances as compared to the deposit. 2. In the study of three year performance of the bank it is followed that the NPAs level had followed a continuously decrease. 3. In the year 2010-2011 the NPAs level was higher which reduced in next two years. 4. In the year 2011-12 NPA ratio shows that the level is higher which to reduced in the other two years. 5. It has been observed that the NPA level is highest in 2010-11 and 2012-13 . 6. More amount & advances are granted in the year 2011-12 considering at the concerned loans for the period of study. 7. From the ratio analysis, it was found that the NPA ratio is highest than gross NPA ratio. Which is good for the bank . 8. Due to compulsory lending to the priority sector NPA is more in central bank of India. 9. The recovery of non-performing asset is slow due to sluggish level system proving in India. 10. Recognition of an account becoming an is not done in time. 11. To be followed by bank.

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A Study Of Non-Performing asset Management of Central Bank of India


6.2) SUGGESTIONS: 1. The bank must take great care while granting of car loan, personal loan, home loan and two wheeler loans. 2. The security of the proposal should be done considering all the point and related aspects. 3. The security and the financial position must be given due importance. 4. The system of MPBF is a good one. It must be followed to reduce the risk on losses After granting a loan the frequent follow up must be taken by bank or frequent visit must be given to the clients, borrowers. 5. The assets given as a mortgage must be properly valued. Not overvalued or undervalued. 6. During granting loan bank should analyze borrowers financial condition. 7. Banks have to find out the original reason for the loan.

P. R. Patil College of Engineering & Technology, Amravati

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A Study Of Non-Performing asset Management of Central Bank of India

BIBLIOGRAPHY

P. R. Patil College of Engineering & Technology, Amravati

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