Project Sbi

ST.
XAVIERS COLLEGE, RANCHI

(An autonomous college of Ranchi University)

XPRESS CREDIT: HIGH NPA IN XPRESS CREDIT A CONCERN

Internship report submitted to SBI in completion of the requirement of summer
internship at State Bank of India

STATE BANK OF INDIA
RBO HAZARIBAGH

NAME OF THE STUDENT PROJECT MENTOR/
REPORTING OFFICER
AT THE BANK
VIVEK KR GUPTA MR. RAJESH KR. JHA

JUNE 3
RD
2013 TO AUGUST 2
ND
2013

ACKNOWLEDGEMENT

It is a great pleasure for me in submitting the project report on Xpress credit High NPA in
Xpress Credit a concern for the fulfillment of summer internship.

I am much thankful and owe a deep debt gratitude to all those who have helped me in preparing this
project report. Words seem to be inadequate to express my sincere thanks to Mr. Rajesh Kr J ha
(project mentor) for his valuable guidance, constructive criticism, untiring efforts and immense
encouragement during the entire course of study due to which my effort has been rewarded.

I would also like to thanks Mr. O.P Singh( Regional manager RBO) Mr. Ajay Pratap (manager
LPC), Mr. Shrwan Kr Singh(chief manager), Mr. U.S Prasad (Deputive manager PB ), who gave
me an opportunity to learn the recurring acknowledgement of what is working in our lives that can
help us not only to survive but surmount our difficulties.

I express my sincere thanks to whole SBI (Hazaribag branch) for giving me all facility during my
project and guiding me during the whole internship period.

I want to thank all those who have supported me and gave their timely guidance. Last but not least I
am very grateful to Mr. T.S Prasad (Retd.AGM of SBI and presently a visiting faculty of
St .Xaviers college Ranchi) who not only suggested me the right method of study in the project but
also guided at every stage of my work.
He was a philosopher and guide for me in the true sense.

Vivek Kumar Gupta
CONTENTS

EXECUTIVE SUMMARY
SL.NO.
PARTICULARS
PAGE NO.
01. Executive summery 04-07
02. List of charts 08
03. List of tables 09
04. Student profile 10
05. Mentor profile 11
06. Branch profile 12-13
07. Nature of the project 14
08. Objective of the study 15
09. Main report Introduction 16-52
10. Analysis of questioner- questioner
of officials and borrowers

53-75
11. Comparative study 76-82
12. Case study 83-84
13. Special case study 85
14. Research operation 86
15. Objective of the project 87
16. Scope of the study 88
17. Limitation of the study 89
18. Research methodology 90-92
19. Findings/observation 93
20. Conclusion 94
21. Suggestions 95
22. Analysis of questioner for
validation of the recommendation
96-98
23. Bibliography 99
24. Annexure 100-104
OBJECTIVE:
My project concerns Xpress credit, high NPA under Xpress credit a concern, in which I need to
assist what is the total NPA under Xpress credit of different branches, what are the reason for it, who
is responsible for growing NPA and what are the steps to be taken to reduce NPA.
Xpress credit:
The Xpress Credit Scheme was formulated in April 2004 in the form of pre-approved loan, to
employees of leading PSUs and Government organizations. At present the scheme is open to:
Employees of government, semi-government, profit making PSUs, Educational Institutions of
national repute and companies of good standing (based on their CRA rating).
The scheme is built around the concept of check off (the process by which the salary disbursing
officer undertakes to deduct loan installments from the salary of the borrower and remits the same to
the Bank for credit of the loan account)
Xpress Credit has Legitimate personal purpose: Expenses for Domestic or foreign travel,
Medical Treatment, Meeting any financial liabilities and many more.
Employers, Employees, Person having minimum monthly income should satisfy the conditions of
Xpress Credit for being eligible for the loan.
NON PEFORMI NG ASSETS (NPA) CONCEPT
A NPA was defined as a credit facility in respect of which the interest or installment of principle as
remained past due for specific period of time.
We can also understand by the other definition i.e. NPA means the debt which is given to the
doubtful customers by the Bank and is unable to recover is called Non Performing Assets.
If any bank gives loan and is unpaid by the customer till 90 days that account is called as NPA
Account.
ASSET - CLASSIFI CATI ON
Assets can be categorized into four categories (a) standard (b) sub-standard (c) doubtful (d) loss.
Standard assets: the loan a/c which are regular and do not carry more than normal risk are
known as standard assets.
Sub- standard assets: with effect from 31.3.2005 a sub-standard assets is one, which is
classified as NPA for a period not exceeding 12 months.
Doubtful asset: with effect from 31.3.2005 an asset is to be classified as doubtful if it
remained NPA or sub-standard for a period exceeding 12 months.
Loss assets: a loss asset is one where loss has been identified by the bank or internal and
external auditors or the RBI inspection but the amount as not been written off wholly.
I MPACT/EFFECT OF NPA UPON BANKS
NPA are one of the major concerns of sector banks is increasing result in nonperforming
assets. NPA do not generate interest income for the banks, but the same time banks are
required to make provisions for such NPAs from their current profits.
They result in reduced interest income.
Adverse impact on capital adequacy ratio.
Bad effect on goodwill & on equity value.
EARLY SYMPTOMS BY WHICH ONE CAN RECOGNI ZE A PERFORMI NG ASSETS
TURNI NG TO A NON PERFORMI NG ASSET:
1. FINANCIAL
a. Non- payment of very first installment.
b. Bouncing of cheque due to insufficient balance in the a/c.

2. OPERATIONAL AND PHYSICAL
a. If information is received that the borrower has either initiated the process of winding
up or not doing the business
b. External non-controllable factor like natural calamities in the city where the borrower
lives.
3) ATTITUDNAL CHANGE
a. Avoidance of contact with bank.
4) OTHER
a. Change in govt policies.
PREVENTI VE MEASUREMENT FOR NPA
Early recognition of the problem, Identifying borrowers with genuine intent, Timeliness and
adequacy of response, Focus on cash flow, Management effectiveness, multiple financing.

OBSERVATION / FINDING:
In my research I found that The NPA in Xpress credit is not very high as compared to other
segment.
At some extent bank officials are responsible for NPA because bank is worried about mobilizing
more and more business but not concern about maintenance of accounts.
Conclusions:
. To conclude this study we can say about this report that:
1. There is high NPA ratio under Xpress credit.
2. NPAs represent high level of risk and low level of credit appraisal.
3. There are so many preventive measures available those can be adopted to stop an assets or an
a/c becoming NPA.
4. There are some certain guidelines made by RBI for NPAs which are adopted by banks.
5. NPA under Xpress credit is less as compare to other segment (education).
Recommendations/ suggestions:
In my study I have found some limitation. So I can suggest following suggestions or area of
improvement.
Bank should create effectiveness in management of NPAs.
Proper monitoring of a/c should be adopted to control NPAs.
Proper PSS should be done by the bank officials.
Bank should have its own independent credit rating agency which should evaluate the
financial capacity of the borrower before than credit facility.

This all is done after carefully evaluating the financials position of the borrower,
personal interview with the borrower, Case study of the borrower as well as personal
interview with the bank officials of different branches.

CHART NO: PARTI CULARS PAGE- NO:

LIST OF CHARTS

LIST OF TABLES
01 Loan procedure of retail loan 29
1.1 Awareness level of borrower regarding NPA 54
1.2 Bank officials questionnaire analysis 55
1.16 Borrowers question analysis 70
1.21 Borrower questione analysis 75
1.22 Last three years NPA comparison of SBI 76
1.23 Last 10 years overall NPA of hz.bag branch 77
1.24 Last 10 years NPA in p-segment of hz.bag branch 78
1.25 Reason for turning an a/c into NPA 82
1.26 Method of data collection 89
1.27 Recommendation testing 96

STUDENT PROFILE

TABLE- NO:

PARTICULARS

PAGE NO:

01

Last three years NPAs
76

02

Over all NPA over time of hz.bag branch
(10 years)
77

03

Last 10 years p-segment NPA of hz.bag
branch
78

04

Product wise NPA comparison of hz.bag
branch

79

05

Branch wise comparison of NPA in Xpress
credit
80

06

Profession wise NPA comparison
81

07

Reason for turning an a/c into NPA as per
the borrower
82

08

Validity testing of the recommendation(bank
officers views)
96
NAME: Vivek Kumar gupta.

Father name: Rajendra Pd gupta.

Gender: Male.

D.O.B: 15/08/1993

Academic qualification: Pursuing B.Com (insurance honors).

College: St Xaviers college Ranchi.

At present: Pursuing special diploma in Marine insurance.

Contact no: 7631011853

Email ID: vivek7654595@gmail.com

PROJECT MENTOR PROFILE

NAME: Rajesh Kumar Jha

DESIGNATION: Manager (PB). Hazaribag

WORK PLACE: SBI, Hazaribag

CONTACT NO: 9931833473(personal) / 9771458627(official)

EMAIL ID: rajesh.k.jha@sbi.co.in

SBI HAZARIBAG BRANCH PROFILE:

BRANCH INFORMATION:

Date of opening: 17-10-55
Branch code: 00090
Migration date: 14-12-2006
Circle: Patna
Network: 2
Module name: Dhanbad
Branch type: Regular branch
MICR code: 825002002
License date: 17-10-1954
Controllers Email ID: agm4.zoran@sbi.ci.in

COMMUNICATION ADDRESS:

Address 1: State bank of India
Address 2: Ravindra path
Address 3: NH-33
City: Hazaribag
Pin: 825301

BRANCH MANAGER:

Name: Shrwan Kumar Singh
Designation: Chief Manager
Contact no: 9431140712
Email: shrwan.singh@sbi.co.in

STAFF STRENGTH

Officers: 15
Assistants: 30
Messengers: 12
Guards: 03

ACCOUNTS

Total no of a/c - 60720
S.B a/c 46133
C.A a/c - 510
Advances 7247 Lakhs
Deposits 91408 Lakhs
Total no of ATMS 08

NATURE OF THE PROJECT

Xpress credit is a form of personal loan devised to provide instant credit support to person in need. It
caters mainly salaried person who have their salary a/c with the bank. The loan is a very good source
of increasing retail loan portfolio but also have inherent risk. It is a clear loan without any security
and hence attracts more provisioning also, unexpected events like death of borrower creates problem
of recovery. Sometimes employers shift their salary to other bank intentionally to avoid repayment
and sometime it is difficult to track their transfer and posting.

Despite all positive factors of continuous income and benefit of recovery through
department, the bank is facing the problem of high NPA in Xpress credit.

The study is an endeavor to search the cause of a/cs turning into NPA, analyzing the
efforts of the bank to recover the dues and to suggest the measures to contain the NPA to minimum
or to zero level.

OBJ ECTI VE OF THE STUDY

The objectives of my study are as follows

To know about Xpress credit.

To know about NPA and what are the underlying reasons for emergence of NPA.

To study the impact of NPA on the operation of the bank.

To know about what are the steps taken by the bank to reduce the npa.

To know why NPA are greater challenges to the bank.

To study the general reason for asset becoming NPA.

What are the methods adopted to look after NPA management.

COMPANY PROFI LE OF SBI

The evolution of sbi can be traced back to the first decade of the 19
th
century. It began with the
establishment of bank of culcutta in cuicutta on 2
nd
july 1806. The bank was redesined as the bank of
bangal, three year later on 2
nd
january 1809. It was the first ever joint company of british india
established under the sponsorship of govt of bangal. Subsiquently the bank of madras and bank of
bombay follwed the bank of bangal. These banks were amalgamated to form imperial bank on 27
th

jan 1921.
An important turning point in the history of SBI is the launch of 1
st
five year plan of independence
india in 1951. The plan aimed to serving the indian economy in general and the rural sector of the
countryin particular. There for in order to serve the economy as a whole and the rural sector in
particular all india rural credit survey committee recommended the formation of state partnered
and state sponsored bank. An act was passed in the parliament of india in may 1955. As a result the
sbi was established on 1
st
july 1955.this results in making SBI more powerful as much as quarter of
resourses of indian banking system was controlled by state . later on state bank of india (subsidiary
banks) act was pessedin 1959. This act enabled the sbi to make the 8 state associated bank as its
subsidiaries.

BRANCHES

The corporate centre of SBI is located in Mumbai In order to cater to different function. There is several other
establishments in and outside Mumbai apart from corporate center. The bank boasts of having as many as 14
local head office and 57 zonal offices, located as major cities throughout India. It is recorded that SBI has
more than 10,000 branches will cater to its customer throughout India.

ATM
SBI provides easy access to money to its customers through more than 90000 ATMs in India. The
bank also facilitates the free transaction of money at ATMs of state bank group. You may also
transect money through SBI commercial and international bank ltd by using the state bank ATM
CUM DEBIT CARD. It the only banking company to open its ATM in region of kargil.

Source: SBI.co.in

Xpress credit:

INTRODUCTION-

The Xpress Credit Scheme was formulated in April 2004 in the form of pre-approved loan, to
employees of leading PSUs and Government organizations. At present the scheme is open to
Employees of government, semi-government, profit making PSUs, Educational Institutions of
national repute and companies of good standing (based on their CRA rating). The scheme is built
around the concept of check off (the process by which the salary disbursing officer undertakes to
deduct loan installments from the salary of the borrower and remits the same to the Bank for credit
of the loan account). Xpress Credit Loans may also be sanctioned in those cases where the borrower
gives sufficient PDCs (Post Dated Cheques) for entire tenure of the loan.

Source: Xpress credit circular

PURPOSE:

The loan under the scheme is granted for any legitimate personal purpose (e.g. expenses for
domestic or foreign travel, medical treatment of self or a family member, meeting any financial
liability such as marriage of son/daughter, defraying educational expenses of wards, meeting
margins for purchase of assets etc).


ELI GI BI LI TY

1. EMPLOYERS

-Government

eligible if it satisfies take over norms.

2. EMPLOYEES

length of service

loan from salary as evidenced by 6 months
salary slips/income tax returns of 2 years.

identity to satisfy KYC norms

bank account (at any bank).

Employment in the eligible company.


MI NI MUM NET MONTHLY I NCOME

The minimum Net Monthly Income (NMI) of the employee should beRs.5000/-. It can
Be lowered to Rs.3000/- subject to the condition that the salary accounts of the entire enterprise are
with us. The Branch will ensure to obtain an Undertaking from the borrower that there is no other
deduction from his/her salary which is not reflected in the salary slip. [As per Annexure (B) (v)]

LOAN AMOUNT

a) Minimum: Rs,24,000/=
b) Maximum: 24 Months NMI with a ceiling of Rs.15.00 lacs.

TYPE OF LOAN

Loan/D Term demand Loan (NO OVERDRAFT)

REPAYMENT PERI OD

Maximum 60 months.
EMI / NMI 50%.

REVI EW

Review of loan will be done yearly.

RENEWAL

Renewal of loans will be allowed after 24 months.

CHECK OFF ::

which the salary disbursing officer under takes to deduct the loan
installments from the salary of the borrower and remits the same to the Bank for credit to the loan
account.
Or

For recovery of the loan installments
from his aforesaid account with the SI being synchronized with the date of credit of salary in the
borrowers Savings/Current Account.

AND
there is a severance due to borrowers
transfer, resignation, retirement etc.[ Branch will ensure to obtain the undertaking from the employer
and employee as per Annexure B (I), B (ii) II or B (iii) ]

CATEGORY I

FULL CHECK OFF:

As given under the head CHECKOFF.

AND

Bank before settling the dues of the
borrower on transfer, resignation, retirement etc. [As per Annexure B (IV)]

This stipulation can be waived by the sanctioning authority incase of employees of Central/ State
Government, PSUs, Universities and Reputed Colleges. In case of other employers, the CGM of the
Circle has been permitted to waive the stipulation. But in no case this can be waived for IT sector
employees.

CATEGORY II

PARTIAL CHECK OFF:

As given under the head CHECKOFF

CATEGORY III

WITH NO CHECK OFF:

Bank.

) for
recovery of the loan installments from his aforesaid account twitch the SI being synchronized with
the date of credit of salary in the borrowers Savings/Current Account.

OR

fulfilled but the borrower provides monthly
PDCs (Post Dated Cheques) for entire tenure of the loan provided eligibility criteria are fulfilled.
(Guidelines on Post Dated cheques is annexed as per Annexure A)

I NTEREST RATE:

The Interest rate is based on the category of Check off available

Category I

5% above the base rate i.e. - 9.70 +5 =14.70 ( currently 14.70% p.a.)

Category II

7% above the base rate (currently 16.70 % p.a.)

Note: The GM of the Network is vested with powers to extend the Category II rate to a Category III
borrower only in case of employees of SB1 to SB5 rated companies who maintain their salary
accounts with us. The Category III employees who do not maintain their salary accounts with us but
provide PDCs for the loan should be charged the card rate applicable to Category III and no
deviation should be permitted by Circle GMs.

PENAL INTEREST

Penal interest should not be charged for loans up to Rs.25,000.For Loans above Rs.25000/- if the
irregularity exceeds EMI or installment amount, for a period of one month, then penal interest would
be charged @2% p.a.(over and above the applicable interest
rate) on the overdue amount for the period of default. If part installment or part EMI remains
overdue then penal interest should not be levied.
This provision has been made to avoid application of penal interest on Personal Segment Loan
accounts where EMIs stipulated or installments are being paid regularly by the borrowers.


SECURITY

The loan is clean in nature and no security is required
.
PROCESSING FEE

1.1 % of the loan amount including tax.

PRE-SANCTI ON PROCESS

The following documents will be obtained before sanction:-

I. Application cum appraisal Form. With a photograph of the borrower duly attested by the
authorized official.

II. It is proposed to put in place an arrangement for verification of the address of the borrower by an
outside agency. A report duly signed by the verification agency (in places where an arrangement is
in place), or by our officer/staff in other places (where verification agency approved by Corporate
Centre is not available) should be complied, based on the following verifications:

I. Verification of the borrowers residence address as given in the loan application
by actually visiting the residence of the borrower.

II. Verification of the borrowers office address as given in the loan application by
actually visiting the office of the borrower.

III. Verification of the borrowers residence telephone number as given in the loan
application by actually calling the residence telephone number of the borrower.

IV. Verification of the borrowers office telephone number as given in the loan.
Application by actually calling the office telephone number of the Borrower.

V. Verification of the IT return of the Borrower with IT department through a
person approved by the Regional Office/Zonal Office, where feasible. Where IT
return cannot be verified by the Bank, statement of account of the borrower may
be scrutinized to verified income flows.

Where the verification is not outsourced, the Branch staff
Must do the verification and the report should be added with the loan documents.

Flow chart of loan procedure of retail loan

Chart no: 01

Disagree

NON PEFORMI NG ASSETS (NPA) CONCEPT

The three letters NPAstrike terror in banking sector and business circle today.NPA is the short
Form of Non performing Assets.

Enquiry
about loan
Agree
provided
with check
list and
application
submission of
documents and
application dully
filled up
Documents
taken
verification of
application and
documebts
CIBIL
report
Processing
of loan
Sangtion
of loan
Document Control
Disbursal
of loan
phasewise/
lumpsum
In banking NPA are loans given to doubtful customers who may or may not repay the
loan on time. There are two types of assets viz. performing and non performing. Performing loans
are standard loans on which both the principle and interest are secured and their return is guaranteed.

NPA means the debt which is given by the bank is unable to recover is called
nonperforming assets. A NPA account in the books of accounts is an asset as it indicates the amount
received from the defaulters. It means if any bank gives loan and is not paid by the customers till 90
days than that account is called as NPA account.

DEFINITION

An asset including leased assets becomes nonperforming when it ceases to generate income
for the bank.

A NPA was defined as a credit facility in respect of which the interest or installment
of principle as remained past due for specific period of time.

Source: google.co.in
The specific period was reduced in a phased manner as under:

w.e.f 31.03.1993: four quarters

w.e.f 31. 03.1994: three quarters

w.e.f - 31.03.1995: two quarters

w.e.f - 31.03.2001: 180 days

w.e.f - 31.03.2004: 90 days from past due

90 days delinquency is not applicable to agriculture segment.

With effect from march 31, 2004 , NPA shall be a loan or an advance where :

1) Term loan: interest/ installment of principle remain over due for 90 days.

2) Cash credit/over draft: an account remain out of order for a period of more than 90 days.

3) Bills: The bills remain over due for a period more than 90 days.

4) Agriculture loan :

a. The loan has been granted for short duration crop: installments of the principle
remain over due for two crop season beyond the due date.

b. If the loan has been granted for long duration crop: installment of the principle
remain over due for one crop season beyond the due date.

Source: Rbi.org.in

CLASSIFI CATI ON OF LOANS

In India loans are classified on following basis:

Performing assets:

Loans where the interest and / or principle not remain overdue for more then 90 days.

Non-performing assets:

Any loan repayment remains over due for more than 90 days is considered as NPA.
According to the securitization and re construction of financial assets and enforcement of
security interest ordinance,2002 non performing assets(NPA) means an assets or a/c of
borrower which has been classified by the bank as sub-standard , doubtful or loss asset in
accordance with the guidelines relating to asset classification issued by RBI .


ASSET - CLASSIFI CATI ON

Assets can be categorized into four categories (a) standard (b) sub-standard
(c) doubtful (d) loss. The last three categories are classified as npa based on the the period for
which the asset has remained non-performing and the realisability of the dues.

Standard assets: the loan a/c which are regular and do not carry more than normal risk are
known as standard assets, there could be a/c which though have not become npa but are
irregular. Such a/c are called special mention a/c.

Sub- standard assets: with effect from 31.3.2005 a sub-standard assets is one, which is
classified as NPA for a period not exceeding 12 months.

Doubtful asset: with effect from 31.3.2005 an asset is to be classified as doubtful if it
remained npa or sub-standard for a period exceeding 12 months.

Loss assets: a loss asset is one where loss has been identified by the bank or internal and
external auditors or the RBI inspection but the amount as not been written off wholly. In
other words such an asset is considered uncollectable and such little value that its
continuance as a bankable asset is not warranted although there may be some salvage or
recoverable value.

NPA I DENTI FI CATI ON NORMS

With effect from 31
st
march 2004 a loan or advance become npa when ;

a. Interest or installment of the principle remains overdue for a period more then 90
days in respect of term loan.

b. The a/c remain out of order for a period more 90days in respect of over draft cash
/cash credit.

c. The bill remains overdue for a period more than 90 days in case of bills purchased
and discounted.

d. With effect from Sept 2004, loan granted for short duration crops will be treated as
NPA if the installment of principle or interest there on remains overdue for two crop
season and loan granted for long duration will be treated as NPA if the installment
remains overdue for one crop season.

Out of order:
An account will be treated as out as out of order if the outstanding balance remain
continuously in excess of the sanctioned limit/drawing power. In cases where the
outstanding balance in the principle operating a/c is less than the sanctioned limit but
there are no credit continuously for 90 days as on the date of balance sheet or the
credit are not enough to cover the interest debited during the same period

Overdue:

An amount due to the bank under any credit facility is overdue it is not paid on the due
date fixed by the bank.

The date of npa will be actual date on which sippage occurred as mentioned below:

For term and demand loan a/c:

The date on which the installment of the principle have
remaine overdue for a period more then 90 days.

For over draft and cash credit a/c:

The date on which the a/c completed period of more than 90
days of being continuously out of order.

Source: www.RBI. Org. in

PROVI SI NG NORMS

There is time lag between an a/c becoming doubtful for recovery, the realization of security and
erosion over a loan period of time in its value. So RBI directives now requiresthe banks to make
provisions in their balance sheet for all non- standard loan asset. Provisioning is made on all types of
assets. i.e. Standard , sub-standard , doubtful and loss assets.

1. Standard assets: RBI vides its circular dated 15.11.08 revised the provisioning requirements.
For all type of standard assets it has been reduced to a uniform level of 0.40%of outstanding
at global basis except in the case of direct advance to agriculture and SME sector, which
shall continue to attract a provisioning of 0.25%. The provision toward standard assets need
not to be netted from gross advances but shown separately as contigent provisions against
standard assets under other liquidities and provisions others in schedule 5 of the balance
sheet.

2. Sub-standard assets- In respect of sub-standard assets the rate of provision is 10% of
outstanding balance without considering, ECGC guarantee cover or securities available.
However if the loan was unsecured from the begining, there would be additional provision of
10%. i.e. total provision would be 20% of the outstanding balance. Unsecured exposure is
defined as an exposure where the realizable value of the security as assessed by the
bank/reserve banks inspecting officers is not more than 10%, ab-intio, of the outstanding
exposure.

3. Doubtful assets: In case of doubtful assets, while making provision, realizable value of
security is to be considered. 100% provision is made for unsecured portion. In case of
secured portion the rate of provision depend on age of doubtful assets as under.

Age of doubtful assets

Provision as% of secured portion

Doubtful up to 1 year; D1

20% of RVS( realizable value of security)

Doubtful for more than 1 year; D2

30% of RVS

Doubtful for more than 3 years; D2

100% of RVS

Thus if an a/c is doubtful for more than 3 years than 100% of the provision is to be made
both from secured and unsecured portion. If an advance has been guaranteed by DICGC/
CGFT/ECGC and is doubtful than provision on secured portion will be as in other cases but
provision on unsecured portion will be made after deducting the claim value.

4. LOSS ASSET: 100% of the outstanding amount while making provision on NPAs amount
lying in suspense a/c and derecognized interest should be deducted from gross advance and
provision be made on balance amount.

5. OVERALL PROVI SI ON: With a view to improving the improving the provisioning cover
and enhancing the soundness of the individual banks. RBI has proposed in oct- 09 policy that
bank should augment their provisions and ensure that their total provisioning coverage ratio
including floating provisions is not less than 70%.

Source: www.RBI.org.in

I MPACT/EFFECT OF NPA UPON BANKS

A strong banking sector is important for flourishing economy. The failure of banking sector
may have an adverse impact on other sector. NPA are one of the major concerns of sector
banks is increasing result in nonperforming assets. The NPA impact drastically to the
working of banks. The efficiency of bank not always reflected by the size of its balance sheet
but by the level of return on its assets.NPA do not generate interest income for the banks, but
the same time banks are required to make provisions for such NPAs from their current
profits.

They erode current profits through provisioning requirement.

They result in reduced interest income.

They require higher provisioning requirements effecting profits and accretion to capital.

Adverse impact on capital adequacy ratio.

Roe and Roa goes down because NPA do not earn.

Banks rating gets effect.

Banks cost of raising funds goes up.

Bad effect on goodwill.

Bad effect on equity value.

EARLY SYMPTOMS BY WHI CH ONE CAN RECOGNI ZE A PERFORMI NG
ASSETS TURNI NG TO A NON PERFORMI NG ASSET:

Four categories of early symptoms:

1) FINANCIAL

(a) Non- payment of very first installment.
(b) Bouncing of cheque due to insufficient balance in the a/c.
(c) Irregularity in installment.
(d) Irregularity of operations in a/c.
(e) Unpaid overdue bill.
(f) Declining current ratio.

2) OPERATIONAL AND PHYSICAL

(a) If information is received that the borrower has either initiated the process of winding up
or not doing the business

(b) Over-due receivable.

(c) Stock statement not submitted on time.

(d) External non-controllable factor like natural calamities in the city where the borrower
lives.

(e) Non- payment of salary.

(3) ATTITUDNAL CHANGE

(a) Use for personal comfort, stocks and shares by borrowers.

(b) Avoidance of contact with bank.

(c) Problem between partners

(4) OTHER

(a) Change in govt policies.

(b) Death of the borrower.

(c) Delay in salary.

PREVENTI VE MEASUREMENT FOR NPA

Early recognition of the problem:

Invariably, by the time banks start their efforts to get involved
in a revival process, its too late to retrieve the situation both in terms of rehabilitation of the
project and the recovery of banks dues. Identification of the weakness regardless of the fact
that it may not have become NPA, is imperative. Assessment of the potential of revival may
be done on the basis of a techno-economic viability study .Restructuring should be attempted
where, after an objective assessment of the promoters intention, banks are convinced of a
turn around with in a scheduled facilitate winding up/selling of units earlier, so as to recover
whatever is possible through means before the security position becomes worse.

Identifying borrowers with genuine intent:

Identifying borrower with genuine intent from those who
are non-serious with commitment or stake in revival is a challenge confronting bankers. Here
the role of front line officials at branch level is paramount as they are the ones who have
intelligent inputs with regard to promoters sincerity, and capability to achieve turnaround.
Based on this objective assessment, bank should decide as quickly as possible whether it
would be worthwhile to commit additional finance.

In this regard banks may consider having
special investigation of all financial transaction or business transaction, books of account
order to ascertain real factor that contributed to sickness of borrower. Bank may have panel
of technical experts with proven expertise and task record of preparing techno-economic
study of the project of the borrowers.

Borrowers having genuine problems due to temporary mismatch in find flow or sudden
requirement of additional fund may entertained at branch level, for this purpose a special
limit to such type of cases should be decided. This will obviate the need to route the
additional funding through the controlling officers in deserving cases, and avert many
accounts sleeping into NPA category.

Timeliness and adequacy of response:

Longer the delay in response, greater the enjury to the
account and the asset. Time is a crucial element in any restructuring or rehabilitation activity.
The response decided on the basis of techno- economic study and promoters commitment,
has to be adequate in terms of extend of additional funding and relaxations etc. under the
restructuring exercise. The package of assistance may be flexible and bank may look at the
exit option.

Focus on cash flow:

While financing at the time of restructuring the banks may not be guided
by the conventional fund flow analysis only, which could yield a potentially misleading
picture. Appraisal for fresh credit requirement may be done by analyzing fond flow in
conjunction with the cash flow rather than only on the basis of fund flow.

Source: www.Ask.com

Management effectiveness:

The general perception among the borrower is lack of finance that
leads to sickness and NPAs, but this may not be the case all the time. Management effectiveness
advance business condition is a very important aspect that affects a borrowing units fortunes. A bank
may commit a multiple finance to an align unit only after basic viability of the enterprise also in the
context of quality of management is examined and confirmed. It will be useful to have consultant
appointed as early as possible to examine this aspect. A proper techno-economic viability study thus
become the basis on which any future action can be considered.

Multiple financing:

A) During the exercise for assessment of viability and restructuring, a pragmatic and unified
approach by all the leading banks as also sharing of all relevant information on the
borrower would go a long way toward overall success of rehabilitation exercise, given the
probability of success/failure.

B) In some default cases. Where the unit is still working. The bank should make sure that it
captures the cash flow and insure that such cash are used for working capital purpose.
Toward this end there should be a continuous flow of information among consortium
member. A bank which is not a part of consortium, may not be allowed to offer credit
facility to such defaulting clients. Current account facility may also be denied at non-
consortium banks to such clients and violation may attract penal action. The credit
information bureau of india (CIBIL) may be very useful for meaningful information
exchange on defaulting borrowers once the setup become fully operational.

C) In a forum of lenders, the priority of each lender will be different. While one set of lender
may be willing to wait for longer time to recover its dues, another lender may have a much
shorter timeframe in mind. So it is possible that the letter categories of lenders may be
willing to exit even at a cost by a discounted settlement of the exposure. There for any plan
for restructuring/rehabilitation may takes into account.

D) Corporate debt restructuring: it has been institutionalized in 2001 to provide a timely and
transparent system for restructuring the corporate debt of RS. 20 crores and above with the
banks on a voluntary basis and outside a legal framework. Under this system bank are
greatly benefit in terms of restructuring of large standard accounts (potential NPAs) and
viable sub-standard account with multiple banking arrangement.

NPA MANAGEMENT- RESOLUTION

Compromise settlement schemes

Restructuring/rescheduling.

Lok adalat.

Corporate debt restructuring cell.

Debt recovery Tribunals (DRT).

Proceeding under the code of civil procedure.

Board of industrial and financial reconstruction.

National company law Tribunal (NCLT).

Sale of NPA to other bank.

Sale of NPA to ARC/SC under securitization and reconstruction of financial assets for
enforcement of security interest Act 2000 (SRFAESI).

Liquidation.
.

Source: www.RBI.org.in

NPA MANAGEMENT IN INDIA

Formation of the credit information bureau (India) limited (CIBIL).

Release of willful defaulters list.RBI also releases a list of borrowers with aggregate
outstanding of RS. 1 crore and above against whom, bank have filed suit for recovery of their
fund.

Reporting of frauds to RBI.

Norms of lenders labiality- framing of fair practices code with regard to lenders lability to
be followed by banks.

Risk assessment and Risk management.

RBI has advised banks to all cases of willful defaulters in case of 1 crore and above and
files suits in such cases.

. Responding quick mortality cases.

Special mention accounts for early identification for bad debt, loans and advances over due
for less than one or two quarters would come under this category. However these accounts do
not need provisioning.

INTERNATIONAL PRACTICES ON NPA MANAGEMENT

Subsequent to the Asian currency crisis, which severely crippled the financial system In
addition to the above, some of the more recent and aggressive step to NPAs have been taken
by Taiwan. Taiwanese financial institution have been encouraged to merge and form bank
based AMCs through the recent introduction of financial holding company act and financial
institution Asian countries, the magnitude of NPAs in Asian financial institution was brought
to light. Driven by the need to proactively tackle the soaring NPAs level the respective govt
embarked upon a program of substantial reform. This involves setting up processes for early
identification and resolution of NPAs. The table below provides a cross country comparison
of approaches used for NPA resolution. Mergers Act. A long side the ministry of finance has
followed a carrot and strict policy of specifying the required NPA ratio for banks, while also
providing flexibility in modes of NPA assets resolution and a conduct
ive regulatory and tax environment. Deferred loss write-off provisions have been instituted to
provide breathing space for lenders to absorb NPA write-off. While it is too early to
comment on success of NPA resolution process in Taiwan, the early sign are encouraging.
Detailed below are some key NPA management approaches adopted by banks in South East
Asian countries.

1. Credit risk mitigation.

2. Early warning systems.

3. Assets management companies.
Increasing willingness to sell NPAs to AMCs.
Effective resolution strategy.
Appointment of special administrators.

4. Out of court restructuring.
Source: www.google.com

DIFFICULTIES WITH NON PERFORMING ASSETS

I. Owners do not receive a market return on their capital. In the worst case if the bank
fails owner lose their assets.

II. Depositors do not receive a market return on savings. In the worst case if the bank
fails depositors lose their assets or uninsured balance. Banks also redistribute losses
to other borrowers by charging higher rate of interest.

III. Non-performing loans epitomize bad investors. They misallocate credit from good
projects, which do not receive funding, to failed project.

IV. Non- performing loans may spill over the banking system and contract the money
stock, which may lead to economic contraction. This spillover effect can channelize
through illiquidity or bank insolvency.

a. When many borrowers fail to pay interest. Banks may experience liquidity
shortage; the shortage can jam payments across the country.
b. Illiquidity constraints banks in paying depositors eg .cashing their paychecks.
c. Undercapitalized banks exceed the bank capital base.

Lending by bank has been politicized. It is common knowledge
that loans are given to various industrial houses on common consideration and
viability of project but on political consideration. In normal circumstances banks
before extending any loan would make a thorough study of the actual need of the
party considered, the prospect of the business in which it is engaged. Since it is
not looked into, many of the loans becomes NPA.

REASONS F0R AN ACCOUNT BECOMING NPA

Those attribute to borrower

Failure to bring in required capital.
Lack of proper planning.
Unwanted expenses.
Lack of expertise.
Poor credit collection.
Miss management.
Heavy borrowing.
Lack of knowledge regarding NPA.
Willful defaulters.
Death of the borrower.

Those attribute to banks

Wrong selection of borrower.
Poor credit appraisal.
Unhelpful in supervision.
Too inflexible attitude.
System overload.
Lack of motivation.
Delay in sanction.
Lack of trained staff.
Lack of commitment to recovery.
Lack of personal visit to the borrower office.
Lack of personal visit to the borrowers residence.

Other

Fast changing technology.
Unhelpful attitude of govt.
Increase in material cost.
Government policies.
Taxation law.
Political hostility.

INDIAN ECONOMY AND NPA

Undoubtedly the world economy has slowed down; recession is at its peak globally stock markets
have tumbled and business itself getting hard to do. The Indian economy has been much affected due
to high fiscal deficit, poor infrastructure facilities, sticky legal system, cutting of exposures to
emerging market by FIIs, etc.

Further international rating agencies like, standard and poor
have lowered Indias credit rating to sub- investment grade. Such negative aspects have often
outweighed positive such as increasing for reserve and a manageable inflation rate.

Under such situation I go without saying that banks are no exception
and are bound to face the heat of global down turn. One would be surprise to know that banks and
financial institution in India holds non-performing assets worth Rs. 1, 10,000 crores. Bankers have
realized that unless the level of NPA is reduced drastically, they will find it difficult to survive.

The actual level of NPA in India is around $ 40 billion much higher than govt estimation of $16
billion. This difference is largely due to the discrepancy in accounting the NPAs followed by India
and rest of the world. The accounting norms of India are less stringent than those of the developed
economies. The Indian banks also have the tendency to extend the past due. Considering the GDP
India nearly $ 470 billion, the NPA are 8% of the total GDP, which was better than many Asian
countries. The NPA of china was 45% of the GDP While Japan had NPAs of 25% of the GDP.

The aggregate level of NPAs in Asia has increased from $ 2.5 billion in 2007 to
$ 3.4 billion on 2009 looking to such overall pictures of the market, we can say that India is doing
well and the steps taken are looking favorable.


DATA ANALYZING THE QUETIONNAIRE

Two set of questionnaire were prepared to collect the feedback. One set of questionnaire was meant
for branches and other set of questionnaire was meant for borrowers.

The set of questionnaire were given to the branches under hazaribag, (RBO) and collected the
feedback of the bankers of P segment and the branch manager.

The questionnaire prepared for branch contained 15 questions and the questionnaire prepared for
borrower contains 10 questions.

The data was collected from 50 bankers and the data analysis of the branch questionnaire is as
follows:

Question number 1:
Does not require any data analysis and information was sought to know the business level of the
branches for the purpose of whether particular branch is actively engaged in xpress credit portfolio.
Question number 2:
Do you think that the borrowers are aware about NPA?
Answer:
32 of the respondent feel that the borrowers are not aware about NPA and 18 respondents feel that
borrowers are aware about NPA.

Chart no: 1.1

Conclusion:
Majority of the bank officials feels that the borrowers are not aware about NPA.
Question number 3:
If the answer of question 2, Is yes than .Do you think that lack of knowledge among the borrower
regarding NPA is one of the reason for NPA?

Answer:
Out of 32 respondent 22 respondents is fully satisfied that lack of knowledge among the borrower
regarding NPA is one of the reason for NPA, 08 respondent were partially satisfied with it and 02
respondent were not satisfied with it.

Chart no: 1.2
0
5
10
15
20
25
30
35
yes
no
18
32
Column1

Conclusion:
Majority of the borrowers feels that lack of knowledge among the borrower regarding NPA is one of
the reasons for NPA.

Question number 4: Do you think that external factors like willful defaulters, industrial sickness,
and change in govt. policy contribute to NPA?

Answer:
Out of 50 respondent 30 of the respondent strongly satisfied that these external factors contribute to
NPA. 10 respondent were partially satisfied with it, 5 were not satisfied where as 5 were fully
dissatisfied with it.

fully satisfied(22)
69%
partially satisfied(8)
25%
not satisfied(2)
6%
fully dissatisfied(0)
0%
Sales
Chart no: 1.3

Conclusion:
Most of the respondent thinks that external factrs like willful defaulter, change in govt policy
contribute to NPA.

Question number 5:
Do you think that internal factors like defective lending process, poor credit appraisal system, and
managerial deficiency contribute to NPA?

Answer:

60% 20%
10%
10%
fully satisfied(30) partially satisfied(10) not satisfiec(5) fully desatisfied(5)
Chart no 1.4

Conclusion:
As per the response of the officials, most of the officials feel that internal factors are also responsible
for NPA.
Question number 6:
Do you think that inflation is one of the reasons for NPA?

Answer:
Out f 50 responses 22 were strongly satisfied, 18 were partially satisfied, 8 were not satisfied and 2
were fully dissatisfied.

Chart no 1.5
feedback
fully satisfied(20)
not satisfied(12)

Conclusion:
Growing inflation, increasing goods rate is also one of the reason for NPA.

Question number 7:
Do you think that lack of PSS is also contributed to NPA?
Answer:
Out of 50 responses 30 were fully satisfied with it 12 were partially satisfied and 8 were fully
dissatisfied.
fully satisfied(20)
44%
36%
not
satisfied(5)
10%
fullt dissatisfied(5)
10%
Chart no: 1.6

Conclusion:
Majority of the officiais feels that lack of PSS is one of the reason for NPA. This means that the PSS
carried out by the bank is not sufficient or not carried out properly.

Question number 8:
Do you think that increase in unwanted expenses of the borrower is one of the factor which
contribute to NPA?

Answer:
Most of the respondent feels that increase in unwanted expenses of the borrwer ls contribute to NPA.

Chart no: 1.7
60%
24%
0%
16%
Open
fully satisfied(30)
Partially satisfied(12)
not satisfied(0)

Conclusion:
As per response of the officials increasing inflation have an adverse effect on the financial sector, its
working, performance as well as on NPA.

Question number 9:
Do you think that high rate of interest under Xpress credit also contributes to NPA?

Answer:
Out of 50 respondent 25 respondent were not satisfied, 10 were partially satisfied, 10 were strongly
dissatisfied, where as only 5 out of 50 were fully satisfied with it.

Chart no: 1.8
56%
12%
28%
4%
FULLY SATISFIED(28)
PARTIALLY SATISFIED(6)
NOT SATISFIED(14)
FULLY DISSATISFIED(2)

Conclusion:
Most of the respondents are not satisfied with it. They feel that the rate of interest charged by SBI
under Xpress credit is not high and it will not contribute to NPS.

Question number 10:
Do you think that lack of proper planning of the borrower is one of the reason for NPA?

Answer:
Out of 70 respondent 35 were fully satisfied, 5 were not satisfied, 10 were not satisfied where as no
one is fully dissatisfied.

Chart no: 1.9
strongly satisfied(5)
not satisfied(25)

Conclusion:
Most of the respondent feels that the borrowers borrow money from the bank without any proper
planning, which is one of the most important reason for NPA.

Question number 11:
Is heavy borrowing also contribute to NPA ?

Answer:
Out of 50 respondent 25 respondent were fully satisfied, 12 were partially satisfied, 8 were not
satisfied were as 5 were fully dissatisfied .

Chart no: 1.10
fully satisfied(35)
70%
partially
satisfied(10)
20%
not satisfied(5)
10%
fully
dessatisfied(0)
0%

Question number 12:

Do you think that wrong selection of borrower is one of the factor contribute to NPA?

Answer:
As per the response of the officials 20% were fully satisfied, 66%were partially satisfied, 4% were
not satisfied with it were as 10% respondent were fully dissatisfied.

Chart no: 1.11
50%
24%
16%
10%
fully satisfied(25) partially satisfied(12) not satisfied(8) fully dissatisfied(5)

Conclusion:
As per the response given by the officials, most of the officials were partially satisfied that wrong
selection of borrower also contribute to NPA, which means that selection process carried out by the
bank is not appropriate or there is some difficulties in implementing them.

Question number 13:
Do you think that poor credit appraisal also contribute to NPA?

Answer:
Out of 50 respondent 5 were fully satisfied, 10 were fully satisfied, 30 were not satisfied were as
only 5 were fully dissatisfied.

Chart no: 1.12
fully satisfied(10)
20%
partially
satisfied(33)
66%
not satisfied(2)
4%
fullydissatisfied(5)
10%

Question number 14:

Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA?

Answer:

Out of 50 responses 3 were fully satisfied, 15 were partially satisfied, 25 were not satisfied where as
7 were full dissatisfied.

Chart no: 1.13
fully satisfied(5)
not satisfied(30)

Conclusion:
Out of all respondent most of the respondent feels that the inflexible attitude of the bank does not
contribute to NPA. This means that the attitude of bank toward the borrower is not inflexible.

Question number 15:
Do you think that system over load is also one of the causes of NPA?

Answer:
Out of 50 respondent 28 were fully satisfied, 12 were partially satisfied, 10 were not satisfied where
as no one is fully dissatisfied.

Chart no: 1.14
fully satisfied(3)
partiallt satisfied(15)
not satisfied(25)

Conclusion:
Most of the officials feel that system over load is also one of the factors for NPA, which means that
a single employee has to do a lot of work due to which they dont have time to look on bad accounts
or the accounts in NPA.
Question number 16:
Do you think that poor follow-up is one of the reasons for NPA?

Answer:
As per the responses given by the officials 34 were fully satisfied, 12 were partially satisfied, 4 were
not satisfied where as no one is fully dissatisfied.

Chart no: 1.15
fully satisfied(28)
not satisfied(10)

Conclusion:
According to the officials most of them feels that they were not able to carry on the follow-up
properly. If they carry out the follow-up properly they were able to control NPA.

Question number 17:
What do you suggest to decrease the NPA level under Xpress credit?

Answer:
I have received many feedbacks and my suggestion is based on the feedback received from these
branch officials.

BORROWER QUESTIONNAIRE
fully satisfied(34)
not satisfied(4)

Following feedback in the form of questionnaire we asked from different borrower.

Question number 1:
Do not require any data analysis.

Question number 2:
Are you satisfied with the service provided by SBI?

Answer:
Out of 70 respondent, 25 were fully satisfied, 10 were partially satisfied, 30 were not satisfied where
as 5 were fully dissatisfied.

Chart no: 1.16

Question number 3:
Do you think that the rate of interest charged by SBI under xpress credit is high?

Answer:
Out of 70 respondent 15 were fully satisfied, 12 were partially satisfied, 35 were not satisfied where
as on 8 were fully dissatisfied.

Chart no 1.17
fully satisfied(25)
not satisfied(30)

Conclusion:
Most of the respondent feels that the rate of interest charged by SBI is high.

Question number 4:
Do you think that it is important to repay the loan on time?

Answer:
Out of 70 borrowers 35 were fully satisfied, 20 partially satisfied, 15 were not satisfied and no one is
fully dissatisfied.

Chart no: 1.18
fully satisfied(15)
not satisfied(35)

Question number 5:
Have any of the officers visited your resident to verify your residential address?

Answer:
Most of the borrower replied that no one had come to verify the residential address.

Chart no: 1.19
fully
satisfied(35
)
partially
satisfied(20)
not
satisfied(15
)
responses

Conclusion:
The PSS is not carried out properly by the bank.

Question number 6:
Have any of the official had visited your office to verify the office address?

Answer:
Out of 70 respondent 42 were not agree and 28 were agree about it.

0
10
20
30
40
50
yes(22)
no(48)
A
x
i
s

T
i
t
l
e

yes(22) no(48)
response 22 48
response
Chart no: 1.20

Question number 7:
Are you aware about NPA?

Answer:

Out of 70 respondent 25 were aware about Xpress credit where as 45 were no aware about it.

Chart no: 1.21
0
5
10
15
20
25
30
35
40
45
yes(28) no(42)
Series 1

Question number 8:
As your account is in NPA what the reason behind it?

Answer:
I received my feedback and the reasons for NPA are based on it.

COMPARATIVE STUDY

yes(25)
no(45)
Last three years net NPA ratio of SBI:
Table no: 1.

YEAR

NET NPA RATIO

2010-11

1.63

2011-12

1.82

2012-13

2.1
Chart no:1.22

Conclusion: The net NPA ratio of SBI is increasing with each financial year and it will cause a great
terror to Indian financial system.
Source: SBI annual report
OVER ALL NPA LEVEL OVER TIME OF HAZARIBAG (90)
0
0.5
1
1.5
2
2.5
2010-11 2011-12 2012-13
1.63
1.82
2.1
NET NPA RATIO
DATE NPA IN % OUT AMT(L)
Table no: 2
GRAPHICAL REPRESENTATION:
Chart no: 1.23

Conclusion:
From the above data I conclude that the Overall NPA of Hazaribag branch is little bit high as
compare to last year but as compare to other year the NPA keeps on decreasing which is good.
PER-SEGMENT NPA LEVEL OVER TIME OF HAZARIBAG (90)
Table no: 03
0
2
4
6
8
10
12
31.3.13 31.3.12 31.3.11 31.3.10 31.3.09 31.3.08 31.3.07 31.3.06 31.3.06 31.3.04
A
x
i
s

T
i
t
l
e

Axis Title
NPA
NPA
31.03.13 2.35% 174.37
31.03 12 2.15% 126.14
31.03 .11 3.19% 151.23
31.03 10 6.28% 276.64
31.03.09 8.37% 371.7
31.03.08 8.0% 304.66
31.03.07 2.73% 94.23
31.03.06 4.35% 126.38
31.03.05 8.59% 212.69
31.03.04 10.16% 165.91
DATE NPA IN % OUT AMT(L)
GRAPHICAL REPRESENTATION:
Chart no: 1.24

Conclusion:
The NPA under personal segment of hazaribag branch is little bit high (1.5%) but as compare
to last few years the NPA keeps on decreasing accept 2007-08 because this year shows the huge
growth in NPA( i.e.: 07%to 4.9%). We can say that the NPA of any branch is not high if its
NPA is below 01%.

PRODUCTS WISE NPA COMPARISION OF SBI HAZARIBAG BRANCH.

Different segments to be compared are:
1. Xpress credit.
2. Education loan.
1.5
1.64
1.56
2.32
4.6
4.9
0.7
1.82
4.43 4.43
0
1
2
3
4
5
6
31.3.13 31.3.12 31.3.11 31.3.10 31.3.09 31.3.08 31.3.07 31.3.06 31.3.05 31.3.04
PER NPA
PER NPA
31.03.13 1.5% 85.68
31.03 12 1.64% 75.76
31.03 .11 1.56% 61.15
31.03 10 2.32% 87.12
31.03.09 4.6% 153.26
31.03.08 4.9% 154.26
31.03.07 0.7% 19.75
31.03.06 1.82% 40.14
31.03.05 4.43% 72.86
31.03.04 4.43% 53.91
3. Car loan.
4. Home loan.

Table no: 4.

Segment

Total accounts

Total no of accounts
under NPA

Xpress credit

882

10

Edu- loan

283

14

Car- loan

340

08

Home- loan

289

05

Conclusion:
The total no of accounts under Xpress credit is the highest but the accounts under NPA are less as
compare to other segments. The highest no of NPA accounts are under education loan. There is no
doubt that there is high NPA under Xpress credit but as compare to other segment it is low.

BRANCH WISE COMPARISION OF NPA IN XPRESS CREDIT ON SAMPLT
BASIS

Branches to be compared are:

1. Hazaribag branch.
2. Chatra.
3. Maru bazaar.
4. Novadi.

Table no: 5.

Branch

Total a/c

Total NPA a/c

Total advances

Hazaribag

882

10

21.39 cr.

Chatra

824

18

14.05 cr.

Maru bazaar

138

02

3.36 cr.

Novadi

600

04

12.19 cr.

PROFESSION WISE NPAS COMPARISION

Group of people belonging to different professions whose a/c are in NPAs

Out of 70 a/c I have noted that there are different type of people belonging to different
profession whose a/c are in NPA and banks has to take some strong steps against these
people.

Table no: 6.

Profession

Police

Health
dept

Advocate

Teacher

Engineer

Other

No of NPAs
a/cs.

25

06

06

20

06

07

Conclusion:
The professional group, which has the highest no a/c under NPAs, is police and teacher.
Bank has to take some more steps against these professional groups to reduce the NPAs.

REASON FOR TURNING AN A/C INTO NPAs:
Table no: 07
Reason for NPA No of a/c
Death 02
Health problem 10
Loss of salary 12

As per the feedback of the borrowers I derive the following reasons for turning an a/c into NPAs. In
my study I found that the data available regarding the borrowers is inappropriate.
Chart no: 1.25

CASE STUDY

Top 50 NPA accounts under Hazaribag RBO out of which 3 accounts are of Xpress credit.
0
2
4
6
8
10
12
14
16
18
20
Death Health
problem
loss of salary willful
defaulter
not found delay in
sallary
2
10
12
10
20
16
no of a/c
Transferred/willful defaulters 10
Not found 20
Delay in salary 16

Details of the 3 NPA accounts:
1)
Name: Rajendra Tiwari
Account no: 31961318929
A/C type: TL Xpress credit
Outstanding amount: 335342.00
Limit amount: 5Lakhs
Date of NPA: 1/31/13
Branch name: Hazaribag branch
Problem: Not paying the installment
Reason for NPA: Transferred
Observation:
He is a willful defaulter as he got transferred to Gram Vikash Jamsedpur and opened a new
a/c in another bank .which proves that he is a willful defaulter.

2)
Name: shiv dher Singh
Account no: 31617765960
Outstanding amount: 335342.00
Limit amount: 4.5 lakhs
Branch name: hazaribag branch
Problem: repayment of loan amount
Reason for NPA: delay in salary
Observation:
As per my study he is willful defaulter because his financial condition was good. Ha has money
to live his life happily, but dont have money to repay the loan back to the bank.

3)
Name: Md. Azimudin
Account no: 31845747053
A/C type: BR-TL Xpress credit
Outstanding: 380417.00
Limit amount: 5 lakhs
Branch Name: Chatra branch
Reason for NPA: Death
Observation:
As per my study, the financial condition of his family was not good due to which his they were
not able to pay the loan back

SPECIAL CASE STUDY
Name: Chandraket singh
Account no: 30751713480
Branch name: hazaribag
Limit: 7 lakhs
Outstanding amount: 3, 34,629.00
Date of sanction: 29/04/09
NPA Date: 30/09/11
At present: The account has been written-off and at present a new AUCA a/c has been opened.
Name: Chandraket singh
Account no: 30782800515
Branch name: PBB
Limit: 3 lakhs
Outstanding amount: 28,601.02
Date of sanction: 04/06/09
Repayment date: June 2013
At Present: IRAC-3
Observation:
It is a glaring example of poor PSS/ over confidence/influence syndrome. The two personal loans
were within a span of 3 months. Although the borrower is a willful defaulter, he was in eco hardship
due to non-picking up of business profit of his new enterprise i.e. hotel canary inn.
As found in the survey, this case study testified the hypothesis of multiple financing and careless
PSS as the reasons of Xpress credit accounts becoming NPA.
The borrower is an influence person of Hazaribag with political clout. This might have been the
reason for his success in his endeavor to get his loans sanctioned by various branches. It seems that
legal actions are also not working properly.

RESEARCH OPERATION:

Significance of the study:

The main aim of any person is to utilization of money in the best manner since India is
country where more than half of the population has problem of running the family in the most
efficient manner. However Indian people face large no of problem till the development of full-
fledged banking sector. The Indian banking sector comes into the developing nature mostly after
1991 policy. The banking sector has really helped the Indian people to utilize the single money in the
best manner as they want.

The banks not only accept the deposit of the people but also provide them credit facility for
their development. Indian banking sector has the nation in developing the business and service
sectors. But recently the banks are facing the problem of credit risk. It is found that many general
people and business people borrow from the banks but due to some genuine or other reasons are not
able to repay back is known is known as known as non performing assets. Many banks are facing the
problem of NPAs which hammer the business of the banks. Due to NPAs the income of the banks is
reduced and the banks have to make the large no of provisions that would curtail the profit of the
banks and due to that the financial performance of the bank would not show good results.

The main aim behind making this report is to know how SBI is operating its business
and how NPAs play its role to the operation of SBI bank. My study is also focusing on existing
system in India to solve the problem of NPAs. Thus the study would help the decision maker to
understand the financial performance and growth of SBI as compared to the NPAs.

OBJ ECTI VE OF THE STUDY

The objectives of my study are as follows

To know about Xpress credit.

To know about NPA and what are the underlying reasons for emergence of NPA.

To study the impact of NPA on the operation of the bank.

To know about what are the steps taken by the bank to reduce the NPAs.

To know why NPA are greater challenges to the bank.

To study the general reason for asset becoming NPA.

What are the methods adopted to look after NPA management.

Scope of the study:

The scope of the study is as given below:

Bank can improve their financial position or can increase their income from credit with the help of
this project.

This project can be applicable to know the reasons of increase in NPAs.

This project also gives light upon impact of NPAs.

Concept of NPAs can be made clear.

To present a picture of movement of NPA in SBI.

Need of the study:

Following types of need arises for this study:

To know what kind of role NPAs are playing upon the operations of the banks.

To know the variables available to control NPAs.

The need also has been felt to study the financial performance of the bank.

Limitations of the study:

The limitations that I felt in my study are:

The data collected by me was not sufficient for report study.

The practical operations as related to NPAs are adopted by the banks are not learned.

Insufficient data about the borrower in the system due which I was not able to contact all of
them.

The solutions are not applicable for every bank.

Period of study:

The period of my study was of 2 months (3
rd
June to 3
rd
Aug).

Research refers to the search for knowledge. Ine can also define research as specific and systematic
search for pertinent information on a specific topic. It is an art of specific investigation.

Research methodology:

The research methodology is a systematic way of studying a research problem. The
research methodology means a way in which we can complete our prospected task. Before
undertaking any task it becomes very essential for anyone to determine the problem of study. I have
adopted following procedure in completing my report study.

1.Research problem.
2.Research design.
3.Determining the data source.
4.Analyzing the data.
5.Interpretation.
6.Preparing research report.

1. Research problem:

The topic that I got for the research study is Xpress credit- high NPA in Xpress credit a
concern. Providing credit facility is one of the most important factors as far as banking sector
is concerned. As my training is at bank I have the got the project upon high NPA a concern.
This is my problem to be studied.

2. Research design:

The research design tells about the mode with which the entire project is prepared. My
research design for this study is basically analytical, because I have utilized the large no of
data of the banking sector. In this project theoretical study is also attempted.

3. Determining the data source:

The data source can be primary or secondary. The primary data are those data which are used
for the first time in the study. However such data such take much time and are also expensive.
Whereas secondary data are those data which are all ready available in the market these data are
easy to search and are not expensive too. For my study I have utilize both type of data

Chart no: 1.26

4. Tools used for analysis of data:

Type of data

Primary data

Secondary data
Observation
method
Interview method
Questionnaire
method
Schedule method
Web site
The data collected were analyzed with the help of statistical tools like ratio analysis and trend
analysis. Tables are used represent the consolidated data. Graphical representations are also used
for batter comprehension and representation.

5. Analyzing the data:
The primary and secondary data both would never be useful until they are edited and
studied and analyzed. When a person receives a data many useful data would also be there. So,
I analyzed the data and edited it and turned it into a useful manner so, that it become useful for
my report study.

6. Interpretation of data:
With the use of analyzed data I manage to prepare my project report, but analyzing
the data would not help my study to reach towards its objectives. The interpretation of the data is
required so that the other can understand the crux of the study in more simple without any
problem so I have added the chapter of analysis that would explain other to understand my study
in simple way.

7. Project writing:

This is the last step in preparing the research report. The objective of the report writing
was to report the finding of study to the concerned authority.

OBSERVATION / FINDING:

In my research I found the following things:

The NPA in Xpress credit is high.

The NPA in Xpress credit is not very high as compared to other segment.

A break chunk of NPA a/c, police, teachers under Xpress credit because when transferred
they do not communicate to the lending branch and open a new a/c at the place of posting
and avail another credit.

Study indicates that major NPA increases due to willful defaulter.

Lack of knowledge among the borrower is also one of the reasons which contribute to NPA.

It also indicates that borrowers are mostly responsible for it.

Less no of staffs in the bank is also one of the reasons for NPA.

NPA is also increasing because of delay in salary due to allocation of funds.

At some extent bank officials are responsible for NPA because bank is worried about
mobilizing more and more a/c but not concern about maintenance of accounts.

Defective lending and lack of PSS also contribute to NPA.

CONCLUSIONS

Conclusion reveals the explanation about what the report has cover and what is the essence of the
study. What my project report covers is concluded below. The problem statement on which I focused
my study is High NPA in Xpress credit a concern. The Indian banking sector is the important
service sector that helps the people of India to achieve the socio economic objective. The Indian
banking sector has helped the business and service sector to develop by providing them credit
facilities and other financial related facility. The Indian banking sector is developing with good
appreciate as compare to other global bench mark banks. The Indian banking system is classified
into scheduled and non- scheduled banks. The bank play very important role in developing the
nation in terms of providing good financial services. The SBI bank has also shown good
performance in last few years. The only problem the bank is facing today is the problem of non-
performing assets. Non- performing assets means those assets which are classified as bad assets
which are not possibly be returned back to the bank by the borrower. If the proper management of
the NPAs is not undertaken it would hamper the business of the bank. The NPAs would destroy the
current profit, interest income due to large provision of the NPAs and would reduce the smooth
functioning of the recycling of the funds. If we analyze the past year data we may come to know that
the NPAs have increased very drastically. The RBI is also trying to take no of measures but the ratio
of NPA is not decreasing. The bank has to must find out the measure to reduce the evolving problem
of NPA. If the concept of NPAs is taken very lightly it would be dangerous for the bank. The
reduction of the NPAs would help the bank to boost up their profit, smooth recycling of the fund in
the nation. This would help the nation to develop more banking branches and developing the
economy by providing the batter financial services to the nation.
As the name suggests itself, NPAs are those assets which never generate profit to the banks and are
threats for banks. Bank should try their best to manage these non ceasing assets, because it is very
difficult to vanish these assets. Compromise is one of the measures to reduce NPAs. It has its
limitation and may have adverse effect and hence has to use judiciously with proper understanding
of the genuine problem and concerns of each other. To conclude this study we can say about this
report that:
1. There is high NPA ratio under Xpress credit.
2. NPAs represent high level of risk and low level of credit appraisal.
3. There are so many preventive measures available those can be adopted to stop an assets or an
a/c becoming NPA.
4. There are some certain guidelines made by RBI for NPAs which are adopted by banks.
5. NPA under Xpress credit is less as compare to other segment (education).

RECOMMENDATIONS/ SUGGESTIONS

In my study I have found some limitation. So I can suggest following suggestions or area of
improvement.

Bank should give stress upon credit appraisal.

The credit should be backed up by securitization.

Bank should create effectiveness in management of NPAs.

Credit officer should focus upon cash flow and judge in a realistic manner.

Proper monitoring of a/c should be adopted to control NPAs.

Banks should try their best to recover NPAs.

The problem should be identified very early so that company can try their best to stop an
assets and a/c becoming NPAs.

There should be placement of right person on the right table.

Proper PSS should be done by the bank officials.

Bank should have its own independent credit rating agency which should evaluate the
financial capacity of the borrower before than credit facility.

The credit rating agency should regularly evaluate the financial condition of the clients.

There must be a separate department for NPAs recovery.

Bank should increase the no staffs in the bank.

QUESTIONNAIRE TO TEST THE VELIDATION OF RECOMMENDATION:

A set of question was prepared for bank officials to collect the feedback to determine/test whether
the recommendation given by me to the bank to reduce NPA is valid or not. For this I have taken the
feedback of 50 officials.

Question no 1.
Bank should give stress upon credit appraisal. Is it is a proper recommendation to reduce NPA?
Answer:
Fully satisfied , partially satisfied , not satisfied , fully dissatisfied .
Question no 2.
The credit should be backed up with securitization. Is it is an alternative to reduce NPA?
Answer:
Fully satisfied , partially satisfied ,, not satisfied , fully dissatisfied .
Question no 3.
Bank should create effectiveness in management of NPAs. Do you think it is an appropriate
suggestion to reduce NPAs?
Answer:
Fully satisfied, partially satisfied, not satisfied, fully dissatisfied .
Question no 4.
Do you think that proper monitoring of a/c should be adapted to reduce NPA?
Answer:
Fully satisfied, partially satisfied, not satisfied, fully dissatisfied .

Question no 5.
Bank should try their best to recover NPA. Is it is a proper recommendation?
Answer:
Fully satisfied, partially satisfied, not satisfied, fully dissatisfied.

Question no 6.
Do you think that early determination of problem is an alternative to reduce NPA?
Answer:
Question no 7.
Do you think that there must be a separate dept for NPA recovery?
Answer:
Question no 8.
Do you think that proper PSS is an alternative to reduce NPA?
Answer:
Question no 9.
Do you think placement of right person on right table is an alternative to reduce?
Answer:
Question no 10.
Do you think bank should have its separate credit rating agency to determine the financial position
of borrower?
Answer:
DATA ANALYSIS
Altogether 50 branch officials were interviewed on the above parameters. The data collected was as
under:
Table no: 08
Que
no.
Suggestion. Fully
satisfied
Partially
satisfied
Not
satisfied
Fully
dissatisfied
Total
01. Stress upon credit appraisal 32 14 04 00 50
02. Credit should backed up with
securitization
25 16 08 01 50
03. Create effectiveness in management
of NPA
40 08 02 00 50
04. Proper monitoring of a/c 42 08 00 00 50
05. Bank should try their best to
recover NPA
38 09 02 01 50
06. Early determination of problem 47 03 00 00 50
07. There must be a separate dept for
NPA recovery
39 06 03 02 50
08. Proper PSS before lending 50 00 00 00 50
09. Placement of right people on right
table
24 12 08 06 50
10. Separate credit rating agency 28 10 08 04 50
Total 365 86 35 14 500
Chart no: 1.27

Conclusion: As per the response of the officers 73% were fully satisfied, which means that the
recommendation given by me to reduce NPA is appropriate.

BIBLIOGRAPHY:

Books:

C.R Kothari, research methodology. New Delhi, Vikash publication house Pvt. Ltd2007.

IBFC vision (a monthly newspaper of Indian institute of banking and finance).

fully satisfied
73%
partially satisfied
17%
not satisfied
7%
fully dissatisfied
3%
Annual report of SBI 2012-13

Websites:

www.google.co.in

www.wiki.answer.com

www.sbi.co.in

www.rbi.org.in

http://en:wikipedia.orm

www.ask.com

Xpress credit circular

ANNEXTURE

Bank officials questionnaire:

Question number 1:
Do you think that the borrowers are aware about NPA?

Question number 2:
If the answer of question 2, Is yes than .Do you think that lack of knowledge among the borrower
regarding NPA is one of the reason for NPA?

Question number 3: Do you think that external factors like willful defaulters, industrial sickness,
and change in govt. policy contribute to NPA?
Question number 4:
Do you think that internal factors like defective lending process, poor credit appraisal system, and
managerial deficiency contribute to NPA?
Question number 5:
Do you think that inflation is one of the reasons for NPA?
Question number 6:
Do you think that lack of PSS is also contributed to NPA?

Question number 7:
Do you think that increase in unwanted expenses of the borrower is one of the factor which
contribute to NPA?

Question number 8:
Do you think that high rate of interest under Xpress credit also contributes to NPA?

Question number 9:
Do you think that lack of proper planning of the borrower is one of the reasons for NPA?

Question number 10:
Is heavy borrowing also contributed to NPA?

Question number 11:

Do you think that wrong selection of borrower is one of the factor contribute to NPA?

Question number 12:
Do you think that poor credit appraisal also contribute to NPA?

Question number 13:

Do you think that inflexible attitude of the bank toward the borrower also contribute to NPA?

Question number 14:
Do you think that system over load is also one of the causes of NPA?

Question number 15:
Do you think that poor follow-up is one of the reasons for NPA?
Question number 16:
What do you suggest to decrease the NPA level under Xpress credit?

Borrowers questionnaire:

Question number 1:
Are you satisfied with the service provided by SBI?

Question number 2:
Do you think that the rate of interest charged by SBI under xpress credit is high?

Question number 3:
Do you think that it is important to repay the loan on time?

Question number 4:
Have any of the officers visited your resident to verify your residential address?

Question number 5:
Have any of the official had visited your office to verify the office address?

Question number 6:
Are you aware about NPA?

Question number 7:
As your account is in NPA what the reason behind it is?

QUESTIONNAIRE TO TEST THE VALIDATION OF RECOMMENDATION:

Question no 1.
Bank should give stress upon credit appraisal. Is it is a proper recommendation to reduce NPA?

Question no 2.
The credit should be backed up with securitization. Is it is an alternative to reduce NPA?

Question no 3.
Bank should create effectiveness in management of NPAs. Do you think it is an appropriate
suggestion to reduce NPAs?

Question no 4.
Do you think that proper monitoring of a/c should be adapted to reduce NPA?

Question no 5.
Bank should try their best to recover NPA. Is it is a proper recommendation?

Question no 6.
Do you think that early determination of problem is an alternative to reduce NPA?

Question no 7.
Do you think that there must be a separate dept for NPA recovery?

Question no 8.
Do you think that proper PSS is an alternative to reduce NPA?

Question no 9.
Do you think placement of right person on right table is an alternative to reduce?

Question no 10.
Do you think bank should have its separate credit rating agency to determine the financial position
of borrower?

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