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A STUDY OF NON PERFORMING ASSETS IN BANK OF

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INTRODUCTION
The three letters NPA Strike terror in banking sector and business circle today. NPA is
short form of Non Performing Asset. The dreaded NPA rule says simply this: when interest
or other dues to a bank remains unpaid for more than 90 days, the entire bank loan
automatically turns to a non performing asset. The recovery of loan has always been problem
for banks and financial institution. An asset becomes NPA when:
Interest and/or instalment of principal remains overdue for two harvest seasons
but for a period not exceeding two half years in the case of an advance granted
for agricultural purposes, and
Any amount to be received remains overdue for a period of more than 90 days in
respect of other accounts.
For any nation, banking system plays a vital role in the development of its sound economy.
Banking is an important segment of the tertiary sector and acts as a back bone of economic
progress. Banks are supposed to be more directly and positively related to the performance of
the economy. Banks act as a development agency and are the source of hope and aspirations
of the masses. Commercial banks are the major players to develop the economy. A major
threat to banking sector is prevalence of Non-Performing Assets (NPAs). NPAs reflect the
performance of banks. A high level of NPAs suggests high probability of a large number of
credit defaults that affect the profitability and net-worth of banks and also erodes the value of
the asset. The NPA growth involves the necessity of provisions, which reduces the overall
profits and shareholders value. In present scenario NPAs are at the core of financial problem
of the banks. Concrete efforts have to be made to improve recovery performance. The main
reasons of increasing NPAs are the target-oriented approach, which deteriorates the
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qualitative aspect of lending by banks and willful defaults, ineffective supervision of loan
accounts, lack of technical and managerial expertise on the part of borrowers.
The purpose of the study is to identify the causes of loans becoming NPAs and to identify the
action plan to reduce the NPAs in Bank of Baroda.
Definitions:
An asset, including a leased asset, becomes non-performing when it ceases to generate
income for the bank.
A Non-Performing Asset (NPA) was defined as a credit facility in respect of which the
interest and/ or instalment of principal has remained past due for a specified period of time.
A non performing asset (NPA) is a loan or an advance where;
i. Interest and/or installment of principal remain overdue for a period of more
than 90 days in respect of a term loan,
ii. The account remains out of order for a period of more than 90 days ,in
respect of an overdraft/cash credit (OD/CC),
iii. The bill remains overdue for a period of more than 90 days in case of bill
purchased or discounted,
iv. the installment of principal or interest thereon remains overdue for two crop seasons
for short duration crops,
v. the instalment of principal or interest thereon remains overdue for one crop
season for long duration crops,
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vi. the amount of liquidity facility remains outstanding for more than 90 days, in
respect of a securitisation transaction undertaken in terms of guidelines on
securitisation dated February 1, 2006.
vii. in respect of derivative transactions, the overdue receivables representing
positive mark-to-market value of a derivative contract, if these remain unpaid
for a period of 90 days from the specified due date for payment.

In case of interest payments, banks should, classify an account as NPA only if the interest due
and charged during any quarter is not serviced fully within 90 days from the end of the
quarter.

' 'O Ou ut t o of f O Or rd de er r' ' s st ta at tu us s: :
An account should be treated as 'out of order' if the outstanding balance remains
continuously in excess of the sanctioned limit/drawing power. In cases where the outstanding
balance in the principal operating account is less than the sanctioned limit/drawing power, but
there are no credits continuously for six months as on the date of Balance Sheet or credits are
not enough to cover the interest debited during the same period, these accounts should be
treated as 'out of order'.

O Ov ve er rd du ue e : :
Any amount due to the bank under any credit facility is overdue if it is not
paid on the due date fixed by the bank.


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Problems due to NPA:
1. Owners do not receive a market return on their capital .in the worst case, if the banks
fails, owners lose their assets. In modern times this may affect a broad pool of
shareholders.
2. Depositors do not receive a market return on saving. In the worst case if the bank
fails, depositors lose their assets or uninsured balance.
3. Banks redistribute losses to other borrowers by charging higher interest rates, lower
deposit rates and higher lending rates repress saving and financial market, which
hamper economic growth.
4. Nonperforming loans epitomize bad investment. They misallocate credit from good
projects, which do not receive funding, to failed projects. Bad investment ends up in
misallocation of capital, and by extension, labour and natural resources.
Non Performing Asset may spill over the banking system and contract the money stock,
which may lead to economic contraction. This spill over effect can channelize through
liquidity or bank insolvency:
a) When many borrowers fail to pay interest, banks may experience liquidity shortage.
This can jam payment across the country,
b) Illiquidity constraints bank in paying depositors
.c) Undercapitalized banks exceeds the banks capital base.


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Types of NPA
A] Gross NPA
B] Net NPA

A] Gross NPA:
Gross NPAs are the sum total of all loan assets that are classified as NPAs as per RBI
guidelines as on Balance Sheet date. Gross NPA reflects the quality of the loans made by
banks. It consists of all the non standard assets like as sub-standard, doubtful, and loss
assets.
It can be calculated with the help of following ratio:
Gross NPAs Ratio Gross NPAs
Gross Advances

B] Net NPA:
Net NPAs are those type of NPAs in which the bank has deducted the provision regarding
NPAs. Net NPA shows the actual burden of banks. Since in India, bank balance sheets
contain a huge amount of NPAs and the process of recovery and write off of loans is very
time consuming, the provisions the banks have to make against the NPAs according to the
central bank guidelines, are quite significant. That is why the difference between gross and
net NPA is quite high.
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It can be calculated by following:
Net NPAs Gross NPAs Provisions
Gross Advances - Provisions

Asset Classification:
Categories of NPAs
Standard Assets:
Standard assets are the ones in which the bank is receiving interest as well as the principal
amount of the loan regularly from the customer. Here it is also very important that in this case
the arrears of interest and the principal amount of loan do not exceed 90 days at the end of
financial year. If asset fails to be in category of standard asset that is amount due more than
90 days then it is NPA and NPAs are further need to classify in sub categories.
Banks are required to classify non-performing assets further into the following
three categories based on the period for which the asset has remained non-performing and the
reliability of the dues:
(1) Sub-standard Assets
(2) Doubtful Assets
(3) Loss Assets


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(1) Sub-standard Assets:--
With effect from 31 March 2005, a sub standard asset would be one, which has remained
NPA for a period less than or equal to 12 month. The following features are exhibited by sub
standard assets: the current net worth of the borrowers / guarantor or the current market value
of the security charged is not enough to ensure recovery of the dues to the banks in full; and
the asset has well-defined credit weaknesses that jeopardise the liquidation of the debt and are
characterised by the distinct possibility that the banks will sustain some loss, if deficiencies
are not corrected.
(2) Doubtful Assets:--
A loan classified as doubtful has all the weaknesses inherent in assets that were classified as
sub-standard, with the added characteristic that the weaknesses make collection or liquidation
in full, on the basis of currently known facts, conditions and values highly questionable
and improbable.
With effect from March 31, 2005, an asset would be classified as doubtful if it remained in
the sub-standard category for 12 months.
(3) Loss Assets:--
A loss asset is one which is considered as uncollectible and of such little value that its
continuance as a bankable asset is not warranted- although there may be some salvage or
recovery value. Also, these assets would have been identified as loss assets by the bank or
internal or external auditors or the RBI inspection but the amount would not have been
written-off wholly.
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Impact of NPA on:
Profitability:-
NPA means booking of money in terms of bad asset, which occurred due to wrong
choice of client. Because of the money getting blocked the prodigality of bank decreases not
only by the amount of NPA but NPA lead to opportunity cost also as that much of profit
invested in some return earning project/asset. So NPA not only affect current profit but also
future stream of profit, which may lead to loss of some long-term beneficial opportunity.
Another impact of reduction in profitability is low ROI (return on investment), which
adversely affect current earning of bank.
Liquidity:-
Money is getting blocked, decreased profit lead to lack of enough cash at hand which lead to
borrowing money for shot\rtes period of time which lead to additional cost to the company.
Difficulty in operating the functions of bank is another cause of NPA due to lack of money.
Involvement of management:-
Time and efforts of management is another indirect cost which bank has to bear due to NPA.
Time and efforts of management in handling and managing NPA would have diverted to
some fruitful activities, which would have given good returns. Now days banks have special
employees to deal and handle NPAs, which is additional cost to the bank.
Credit loss:-
Bank is facing problem of NPA then it adversely affect the value of bank in terms of market
credit. It will lose its goodwill and brand image and credit which have negative impact to the
people who are putting their money in the banks.
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UNIT- 2
INDUSTRY PROFILE

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Indian Banking System:
The banking system of a country plays an important role in the economic development of any
country. Banking system comprises of the banking institutions functioning in the country.
Banking system comprises from the central bank to all banking institutions which are
functioning and providing financial facilities to any developmental sector like agriculture,
industries, trade, housing etc.
Under the Indian banking structure central bank in the name of the Reserve Bank of India
which regulates, directs and controls the banking institutions. Separate institutions are
functioning to meet the financial requirement of the different sectors of the economy.
Indigenous bankers and moneylenders do dominant in the unorganized sector. Regional Rural
Banks are meeting the requirement of the rural population. Cooperatives are working to meet
the requirement of medium, short and long-term credit for agriculture sector. Development
banks are meeting the business and industrial requirements. Thus, we can say that the
structure of Indian banking system has an international level banking system which can meet
the economic requirements of globalized world.
The Indian banking structure has a wide and comprehensive form. Apex institutions in the
form of banking institutions are playing important role in the country. The chief regulator of
banking system in our country is the Reserve bank of India. Industrial Development Bank of
India (IDBI) is an apex body in the industrial sector. National Bank of Agriculture and Rural
Development (NABARD) has been working as an apex institution for the agriculture and
rural development. Import-Export Bank of India (EXIM) is an Apex body of international
trade. National Housing Bank (NHB) is an apex institution in field of housing construction.
Thus these four apex institutions are accelerating the banking system by providing refinance
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facilities to commercial banks and other financial institutions along with other banking
services.
The major financial institutions of the Indian Banking system can be seen from the figure.


Present Structure of Indian Banking Industry:
The Indian financial system comprises a large number of commercial and cooperative banks,
specialized developmental banks for industry, agriculture, external trade and housing, social
security institutions, collective investment institutions, etc. The banking system is at the heart
of the financial system.
The Indian banking system has the RBI at the apex. It is the central bank of the country under
which there are the commercial banks including public sector and private sector banks,
foreign banks and local area banks. It also includes regional rural banks as well as
cooperative banks. The structure of the Indian banking system is given in the figure



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INDIAN BANKING SYSTEM


After the overview of the development of the Indian banking sector since 1947, this section
focuses on the structure of the banking system as it presents itself today. In many respects the
current structure can be directly related to the policies described in the previous sections,
including the nationalization of banks in 1969 and 1980 and the opening up of the banking
sector for new players after 1991.
In India, the most important intermediaries in the banking system today are scheduled
commercial banks, co-operative banks, development financial institutions (DFI) and non-
bank financial companies. The large state owned and private sector banks that form part of
the scheduled commercial banks are the most visible representatives of the banking system.
While the scheduled commercial banks hold more that 80% of the banking systems assets,
they represent a minority in term of numbers. The main focus of this study is scheduled
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commercial banks; however, a brief description of the four most important types of
institutions will enable a better overview of the structure of the banking system in India.
Commercial Banks:
In the organized sector of the money market, commercial banks and cooperative banks have
been in existence for the past several decades. A commercial bank which is run for the
benefit of a group of members of the cooperative body, e.g., housing cooperative society. The
commercial banks are spread across the length and breadth of the country, and cater to the
short term needs of industry, trade and commerce and agriculture unlike the developmental
banks which focus on long term needs. These days the commercial banks also look after other
needs of their customers including long term credit requirements.
The banking sector has been undergoing drastic metamorphosis. The rapid progress
witnessed in the realm of banking services has been engineered by the trends in globalization,
liberalization and privatization. The technological revolution and demographic changes have
also helped to change the face of banking in India. More banks are switching over to virtual
banking for the brick and mortar banks, and are providing a vast array of products through
very innovative channels and at highly competitive prices. Banks are now free to quote their
own interest rates in loan/advances and term deposits. They now have to manage their
investments and loans portfolios based on the international norms and practices of risk
management including asset liability management.
Commercial banks operating in India may be categorized into public sector, private sector,
and Indian or foreign banks depending upon the ownership, management and control. They
may also be differentiated as scheduled or non-scheduled banks.

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Banking sector in India:
Public sector bank:
Public Sector Banks (PSBs) are banks where a majority stake (i.e. more than 50%) is held
by a government. The shares of these banks are listed on stock exchanges. There are a total of
26 PSBs in India.
Emergence of public sector banks:
The Central Government entered the banking business with the nationalization of the
Imperial Bank of India in 1955. A 60% stake was taken by the Reserve Bank of India and the
new bank was named as the State Bank of India. The seven other state banks became the
subsidiaries of the new bank when nationalised on 19 July 1960.

The next major
nationalisation of banks took place in 1969 when the government of India, under prime
minister Indira Gandhi, nationalised an additional 14 major banks. The total deposits in the
banks nationalised in 1969 amounted to 50 crores. This move increased the presence of
nationalised banks in India, with 84% of the total branches coming under government
control.
The next round of nationalisation took place in April 1980. The government nationalised six
banks. The total deposits of these banks amounted to around 200 crores. This move led to a
further increase in the number of branches in the market, increasing to 91% of the total
branch network of the country. The objectives behind nationalisation where:
To break the ownership and control of banks by a few business families,
To prevent the concentration of wealth and economic power,
To mobilize savings from masses from all parts of the country,
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To cater to the needs of the priority sectors
Public sector banks before the economic liberalization:
The share of the banking sector held by the public banks continued to grow through the
1980s, and by 1991 the public sector banks accounted for 90% of the banking sector. A year
later, in March, 1992, the combined total of branches held by public sector banks was 60,646
across India, and deposits accounted for Rs. 1, 10,000 crores. The majority of these banks
were profitable, with only one out of the 27 public sector banks reporting a loss.
Problem with nationalised banks reporting a combined loss of Rs.1160 crores. However, the
early 2000s saw a reversal of this trend, such that in 2002-03 a profit of Rs. 7780 crores by
the public sector banks: a trend that continued throughout the decade, with a Rs. 16856 crores
profits in 2008-2009.









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List of public sector bank:
Allahabad Bank
Andhra Bank
Bank of Baroda
Bank of India
Bank of Maharashtra
Canara Bank
Central Bank of India
Corporation Bank
Dena Bank
Indian Bank
Indian Overseas Bank
IDBI
Oriental Bank of Commerce
Punjab National Bank
Punjab and Sind Bank
State Bank of India
Syndicate Bank
UCO Bank
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Union Bank of India
United Bank of India
Vijaya Bank
Subsidiaries of State Bank of India:
State Bank of Bikaner and Jaipur
State Bank of Mysore
State Bank of Hyderabad
State Bank of Patiala
State Bank of Travancore
State Bank of Saurashtra and State Bank of Indore are merged with SBI

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COMPANY PROFILE
Bank of Baroda:
Bank of Baroda (BoB) is an Indian state-owned banking and financial services company
headquartered in Vadodara (earlier known as Baroda) in Gujarat, India. It offers a range of
banking products and financial services to corporate and retail customers through its branches
and through its specialised subsidiaries and affiliates in the areas of retail banking, investment
banking, credit cards, and asset management. During the FY 2012-13, Its total global
business was 8,021 billion, making it the second largest bank in India after State Bank of
India.

In addition to its headquarters in its home state of Gujarat, it has a corporate
headquarters in the Bandra Kurla Complex in Mumbai.
Based on 2012 data, it is ranked 715 on Forbes Global 2000 list. BoB has total assets in
excess of 3.58 trillion (short scale), 3,583 billion (long scale), a network of 4283
branches (out of which 4172 branches

are in India) and offices, and over 2000 ATMs.
The bank was founded by the Maharaja of Baroda, H. H. Sir Sayajirao Gaekwad III on 20
July 1908 in the Princely State of Baroda, in Gujarat.

The bank, along with 13 other major
commercial banks of India, was nationalised on 19 July 1969, by the Government of
India and has been designated as a profit-making public sector undertaking (PSU).
Bank of Baroda is one of the Big Four banks of India, along with State Bank of India, ICICI
Bank and Punjab National Bank.



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Board of directors:
Chairman & Managing
Director
Shri S.S Mundra
Executive Director Shri P. Srinivas
Shri Ranjan Dhawan
Shri Bhuwanchandra B. Joshi
Director Dr K.P Krishnan
Shri Maulin Arvind Vaishnav
Regional Director Shri Sudarshan Sen
Director (Workmen
Employee)
Shri Vinil Kumar Saxena
Non-Executive Director &
Chartered Accountant
Shri Surendra Singh Bhandari
Shri Rajib Sekhar Sahu
Company Secretary M.L Jain







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History:
19081959
In 1908, Maharaja Sayajirao Gaekwad III, one of the knights of the Maratha Kingdom, set up
the Bank of Baroda (BoB). Two years later, BoB established its first branch in Ahmedabad.
The bank grew domestically, until after World War II. Then in 1953 it crossed the Indian
Ocean to serve the communities of Indians in Kenya and Indians in Uganda by establishing a
branch each in Mombasa and Kampala. The next year it opened a second branch in Kenya,
in Nairobi, and in 1956 it opened a branch in Dar-es-Salaam. Then in 1957 BoB took a giant
step abroad by establishing a branch in London. London was the center of the British
Commonwealth and the most important international banking centre. 1959 saw BoB
complete its first domestic acquisition when it took over Hind Bank.
1960s
In 1961, BoB merged in New Citizen Bank of India. This merger helped it increase its branch
network in Maharashtra. BoB also opened a branch in Fiji. The next year it opened a branch
in Mauritius. Bank of Baroda In 1963, BoB acquired Surat Banking Corporation in Surat,
Gujarat. The next year BoB acquired two banks: Umbergaon Peoples Bank in
southern Gujarat and Tamil Nadu Central Bank in Tamil Nadu state.
In 1965, BoB opened a branch in Guyana. That same year BoB lost its branch in Narayanjanj
(East Pakistan) due to the Indo-Pakistani War of 1965. It is unclear when BoB had opened
the branch. In 1967 it suffered a second loss of branches when the Tanzanian government
nationalised BoBs three branches there (Dar es Salaam, Mwanga, and Moshi), and
transferred their operations to the Tanzanian government-owned National Banking
Corporation.
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In 1969 the Indian government nationalised 14 top banks, including BoB. BoB incorporated
its operations in Uganda as a 51% subsidiary, with the government owning the rest.
1970s
In 1972, BoB acquired Bank of Indias operations in Uganda. Two years later, BoB opened a
branch each in Dubai and Abu Dhabi.
Back in India, in 1975, BoB acquired the majority shareholding and management control of
Bareilly Corporation Bank (est. 1928) and Nainital Bank (est. in 1954), both in Uttar Pradesh.
Since then, Nainital Bank has expanded to Uttarakhand state.
International expansion continued in 1976 with the opening of a branch in Oman and another
in Brussels. The Brussels branch was aimed at Indian firms from Mumbai (Bombay) engaged
in diamond cutting and jewellery having business in Antwerp, a major center for diamond
cutting.
Two years later, BoB opened a branch in New York and another in the Seychelles. Then in
1979, BoB opened a branch in Nassau, the Bahamas.
1980s
In 1980, BoB opened a branch in Bahrain and a representative office in Sydney, Australia.
BoB, Union Bank of India and Indian Bank established IUB International Finance, a licensed
deposit taker, in Hong Kong. Each of the three banks took an equal share. Eventually (in
1998), BoB would buy out its partners.
A second consortium or joint-venture bank followed in 1985. BoB (20%), Bank of
India (20%), Central Bank of India (20%) and ZIMCO (Zambian government; 40%)
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established Indo-Zambia Bank in Lusaka. That same year BoB also opened an Offshore
Banking Unit (OBU) in Bahrain.
Back in India, in 1988, BoB acquired Traders Bank, which had a network of 34 branches in
Delhi.
1990s
In 1990, BoB opened an OBU in Mauritius, but closed its representative office in Sydney.
The next year BoB took over the London branches of Union Bank of India and Punjab &
Sind Bank (P&S). P&Ss branch had been established before 1970 and Union Banks after
1980. The Reserve Bank of India ordered the takeover of the two following the banks'
involvement in the Sethia fraud in 1987 and subsequent losses.
Then in 1992 BoB incorporated its operations in Kenya into a local subsidiary with a small
tranche of shares quoted on the Nairobi Stock Exchange. The next year, BoB closed its OBU
in Bahrain.
In 1996, BoB Bank entered the capital market in December with an Initial Public
Offering (IPO). The Government of India is still the largest shareholder, owning 66% of the
bank's equity.
In 1997, BoB opened a branch in Durban. The next year BoB bought out its partners in IUB
International Finance in Hong Kong. Apparently this was a response to regulatory changes
following Hong Kongs reversion to the Peoples Republic of China. The now wholly owned
subsidiary became Bank of Baroda (Hong Kong), a restricted license bank. BoB also
acquired Punjab Cooperative Bank in a rescue. BoB incorporate wholly owned
subsidiary BOB Capital Markets Ltd. for broking business.
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In 1999, BoB merged in Bareilly Corporation Bank in another rescue. At the time, Bareilly
had 64 branches, including four in Delhi. In Guyana, BoB incorporated its branch as a
subsidiary, Bank of Baroda Guyana. BoB added a branch in Mauritius and closed its Harrow
Branch in London.
2000s
2000: BoB established Bank of Baroda (Botswana).
2002: BoB acquired Benares State Bank (BSB) at the Reserve Bank of Indias
request. BSB was established in 1946 but traced its origins back to 1871 and its
function as the treasury office of the Benares state. In 1964, BSB had acquired
Bareilly Bank (est. 1934), with seven branches; it also had taken over Lucknow Bank
in 1968. The acquisition of BSB brought BoB 105 new branches.
2002: Bank of Baroda (Uganda) was listed on the Uganda Securities
Exchange (USE).
2003: BoB opened an OBU in Mumbai.
2004: BoB acquired the failed Gujarat Local Area Bank, and returned to Tanzania by
establishing a subsidiary in Dar-es-Salaam. BoB also opened a representative office
each in Kuala Lumpur, Malaysia, and Guangdong, China.
2005: BoB built a Global Data Centre (DC) in Mumbai for running its centralized
banking solution (CBS) and other applications in more than 1,900 branches across
India and 20 other countries where the bank operates. BoB also opened a
representative office in Thailand.
2006: BoB established an Offshore Banking Unit (OBU) in Singapore.
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2007: In its centenary year, BoBs total business crossed 2.09 trillion (short scale), its
branches crossed 1000, and its global customer base 29 million people.
2008: BoB opened a branch in Guangzhou, China (02/08/2008) and in Kenton,
Harrow United Kingdom. BoB opened a joint venture life insurance company
with Andhra Bank and Legal and General (UK) called IndiaFirst Life Insurance
Company.
2010s
In 2010, Malaysia awarded a commercial banking license to a locally incorporated bank to be
jointly owned by Bank of Baroda, Indian Overseas Bank and Andhra Bank. That same year,
BoB also opened a branch in New Zealand.
In 2011, BoB opened an Electronic Banking Service Unit (EBSU) was opened at Hamriya
Free Zone, Sharjah (UAE). It also opened four new branches in existing operations in
Uganda, Kenya (2), and Guyana. BoB closed its representative office in Malaysia in
anticipation of the opening of its consortium bank there. BoB received In Principle approval
for the upgrading of its representative office in Australia to a branch.






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Global presence:
Bank of Baroda is operating its financial services in different countries through:
Branches Subsidiaries Joint
Venture
Representative Offices
Australia Botswana Zambia Thailand
Bahamas Ghana Malaysia
Bahrain Guyana
Belgium Kenya
China New Zealand
Fiji Islands Tanzania
Hong Kong Trinidad &
Tobago
Mauritius Uganda
Republic of South
Africa
Seychelles
Singapore
Sultanate of Oman
United Arab
Emirates
United Kingdom
United States of
America


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UNIT- 3
SURVEY OF LITERATURE











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Findings of previous studies:
A large number of researchers have studied the issue of Non Performing Assets (NPAs) in
banking industry .A review of the relevant literature has been described as under: -
1. Prashanth K Reddy (research paper)
(From article-International Journal of Economic Practices and Theories, Vol. 1,
No. 2, 2011 (October), e-ISSN 2247 7225)
Prashanth K. Reddy (2002) in his research paper on the topic, A comparative study
of Nonperforming Assets in India in the Global context examined the similarities and
dissimilarities, remedial measures. Financial sector reform in India has progressed
rapidly on aspects like interest rate deregulation, reduction in reserve requirements,
barriers to entry, prudential norms and risk-based supervision. The study reveals that
the sheltering of weak institutions while liberalizing operational rules of the game is
making implementation of operational changes difficult and ineffective. Changes
required to tackle the NPA problem would have to span the entire gamut of judiciary,
polity and the bureaucracy to be truly effective. This paper deals with the experiences
of other Asian countries in handling of NPAs. It further looks into the effect of the
reforms on the level of NPAs and suggests mechanisms to handle the problem by
drawing on experiences from other countries.




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2. RBI turns heat on banks to check bad loans. (news paper article.)
(from Hindustan Times (New Delhi, India) October 13, 2011)
State-owned banks have witnessed a surge in the level of bad assets (loans) or NPAs
in recent times. The gross non-performing assets (NPA) of public sector banks stood
at Rs. 71,047 crores for the period ended March, 2011. A loan that stops earning
interest after 90 days is defined as an NPA.
According to CRISIL(Credit Rating Information Services of India Ltd), the Indian
arm of global ratings major Standard and Poors, a slowdown in economic growth and
increases in equated monthly installments (EMIs) resulting from subsequent rate hikes
by the RBI, would also increase banks NPAs. Rising interest rates would increase the
EMIs of home loan borrowers alone by about Rs. 6000 crores annually, the study
said. Banks, however, are optimistic. There is no cause for concern as of now. We
are focusing on recovery and we have registered a very healthy recovery, TM
Bhasin, chairman and managing director, Indian Bank, told Hindustan Times.
In the wake of surging NPA levels, banks have decided to get tough on willful
defaulters borrowers who have not repaid their dues despite having the capacity to
do so. An estimated Rs. 11,000 crores of funds is locked up with willful defaulters.
The central bank has also asked banks to monitor their asset qualities on
a regular basis, especially with interest rates steadily inching upwards.
Finance minister Pranab Mukherjee, in his last meeting with bank chairmen, had
asked SBI to look into its asset quality. He is also said to have sought an explanation
from banks on the reason for the rise in the level of bad assets.
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There has been a substantial increase in bad loans and this is primarily because
public sector banks have been very lenient on willful defaulters, said CH
Venkatachalam, general secretary, All India Bank Employees Association.
3. Dr. A. Shyamala (research paper)
(From article-Dr. A. Shyamala NPAS IN INDIAN BANKING SECTOR:
IMPACT ON PROFITABILITY: Indian Streams Research Journal (June;
2012))
Findings of the study indicated that Indian banking sector is facing a serious problem
of NPA is comparatively higher in public sector banks. To improve the efficiency and
profitability, various steps have been taken by the government to reduce the NPA. It is
highly impossible to have zero percentage NPA. But at least Indian banks can try
competing with foreign banks to maintain international standard.
4. Siraj.K.K and Prof. (Dr). P. Sudarsanan Pillai (research paper)
(From article-International Journal of Marketing, Financial Services &
Management Research-ISSN 2277- 3622 Vol.2, No. 9, September (2013))
The researchers found that Non Performing Assets endangered negative impact on
banking stability and growth. Issue of NPA and its impact on erosion of profit and
quality of asset was not seriously considered in Indian banking prior to 1991. There
are many reasons cited for the alarming level of NPA in Indian banking sector. Asset
quality was not prime concern in Indian banking sector till 1991, but was mainly
focused on performance objectives such as opening wide networks/branches,
development of rural areas, priority sector lending, higher employment generation,
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etc. The accounting treatment also failed to project the problem of NPA, as interest on
loan accounts were accounted on accrual basis.








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UNIT 4
RESEARCH METHODOLOGY



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Research:
Research is a process in which the researcher wishes to find out the end result for a given
problem and thus the solution helps in future course of action. The research has been defined
as A careful investigation or enquiry especially through search for new facts in branch of
knowledge
The study has been done in one of the leading Public sector bank. This study is based on
secondary data, which have been obtained from published sources i.e. Annual report for the
period of 10 years (i.e. from 2004-13).
Statement of problem:
NPAs always affect the profit & also the prestige of bank, so here the research problem is to
identify the causes for the NPA and to identify the action plan to reduce the NPA.
Background of the problem:
NPAs always have adverse effect on the profitability of the bank & thereby increasing the
level of sub-standard assets. Banks have to take adequate measures to reduce NPA levels
since banks have responsibility to the various stake holders. This in turn would provide
chances of recovery from NPAs.
Objectives of the study:
To understand the reasons for NPAs.
To assess the impact of NPA on banks profitability.
To suggest ways and needs to reduce NPA and its growth.
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Hypothesis:
Ho (Null) = There is no significant relationship between gross NPA & operating profit.
H
1
(Alternate) = There is significant relationship between gross NPA & operating profit.
Sampling plan & methodology:
Ten years data was collected with respect to gross NPAs & net profit & 6 years data was
obtained with respect to Standard, sub-standard, Doubtful & loss assets.
Type of study:
This is a descriptive cum analytical study.
Data collection source:
Primary: Primary data is a type of information that is obtained directly from first-hand
sources by means of surveys, observation or experimentation. It is a data that has not been
previously published and is derived from a new or original research study and collected at the
source.
Secondary: Secondary data is all the information collected for purposes other than the
completion of a research project and it is used to gain initial insight into the research
problem. It is classified in terms of its source either internal or external.
The data for the current study was collected mainly from secondary sources like Companys
annual reports & records, Newspapers/Magazines were all used to collect information.
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Limitations of the study:
This study is limited to ten years data.
Time was the major constraint for the study.
Statistical tool used:
Correlation Analysis
Correlation Analysis:
Meaning:
Correlation analysis measures the relationship between two items, like, NPAs and Net profits
of Bank of Baroda. The resulting value (called the "correlation coefficient") shows if changes
in one item (e.g., NPAs) will result in changes in the other item (e.g., Net Profits).
Objective:
The main objective of this topic is to measure the degree of relationship between the
variables under consideration. The correlation analysis refers to the techniques used in
measuring the closeness of the relationship between the variables.
Definition:
When the relationship is of quantitative nature, the appropriate statistical tool for
discovering & measuring the relationship & expressing it in brief formula is known as
correlation.
----- Croxton & Cowden
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Thus correlation is a statistical device which helps in analyzing the covariance between two
or more variables. It is one of the most common & most useful statistics
Interpretation:
When comparing the correlation between two items, one item is called the "dependent" item
and the other the "independent" item. The goal is to see if a change in the independent item
(which are NPAs) will result in a change in the dependent item (usually Net Profits). This
information helps you understand an indicator's predictive abilities.
Correlation coefficient can be calculated manually using the following formula:

The quantity r, called the linear correlation coefficient, measures the strength and the
direction of a linear relationship between two variables. The linear correlation
coefficient is sometimes referred to as the Pearson product moment correlation
coefficient in honor of its developer Karl Pearson.
It can also be calculated with the help of excel option.


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UNIT 5
DATA ANALYSIS AND INTERPRETATION

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Definition:
Analysis of data is a process of inspecting, cleaning, transforming, and modeling data with
the goal of discovering useful information, suggesting conclusions, and supporting decision
making. Data analysis has multiple facets and approaches, encompassing diverse techniques
under a variety of names, in different business, science, and social science domains.
Data pertaining to gross NPAs, net profit & total advances was collected for 10 years & then
data pertaining to standard, sub-standard, doubtful & loss assets was collected for 6 years.
The data so collected were analysed & have been depicted in the following graph.
Table no:1 Year wise Net profit from 2004-13(in Crs.)









YEAR Net Profit (Rs.in
Crs.)
2004 9,669,959
2005 6,768,399
2006 8,269,597
2007 10,264,645
2008 14,355,215
2009 22,272,018
2010 30,583,310
2011 42,416,797
2012 50,069,562
2013 44,807,200
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Graph 1 Showing net profit from 2004-13(in Crs)


I nterpretation: The graph depicts that the net profits during the years shown increment except in the years 2005 & 2013.


0
20000000
40000000
60000000
1
2
3
4
5
6
7
8
9
10
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
9,669,959
6,768,399 8,269,597
10,264,645
14,355,215
22,272,018
30,583,310
42,416,797
50,069,562
44,807,200
YEAR Net Profit
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Table no: 2 Year wise advances from 2004-13(in Crs.)

YEAR
Advances (Rs.in
Crs.)
2004 35,600.88
2005 43,400.38
2006 59,911.78
2007 83,620.87
2008 1,06,701.32
2009 1,43,985.9
2010 1,75,035.29
2011 2,28,676.36
2012 2,87,377.29
2013 3,28,185.76
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Graph 2 showing advances from 2004-13(in Crs.)

I nterpretation: The above graph shows that advances kept on increasing till 2013 without any downfall in any of the year.



0
100000
200000
300000
400000
1
2
3
4
5
6
7
8
9
10
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
35,600.88
43,400.38
59,911.78
83,620.87
106,701.32
143,985.90
175,035.29
228,676.36
287,377.29
328,185.76
YEAR Advances
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Table no: 3 Year wise Standard assets from 2008-13(in Crs.)


YEAR 2008 2009 2010 2011 2012 2013
STANDARD
ASSETS (in Crs.)
105690.44 143001.94 174736.43 228273.03 286542.59 324828.74
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Graph 3 showing standard assets from 2008-13(in Crs.)









I nterpretation: The graph shows that there has been a considerable increment in standard assets from 2008-13.

0
100000
200000
300000
400000
1
2
3
4
5
6
2008
2009
2010
2011
2012
2013
105690.44
143001.94
174736.43
228273.03
286542.59
324828.74
YEAR STANDARD ASSETS
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Table no: 4 Year wise Sub-standard assets from 2008-13(in Crs.)


YEAR 2008 2009 2010 2011 2012 2013
SUB-STANDARD ASSETS
(in Crs.)
366.12 665.26 894.83 1097.23 2661.82 4981.15
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Graph 4 showing sub-standard assets from 2008-13(in Crs.)










I nterpretation: The graph depicts a vigorous increment in sub-standard assets from 2008 & reaches its highest peak in 2013.
0
1000
2000
3000
4000
5000
1
2
3
4
5
6
2008
2009
2010
2011
2012
2013
366.12 665.26
894.83
1,097.23
2661.82
4981.15
YEAR SUB-STANDARD ASSETS
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Table no: 5 Year wise Doubtful assets from 2008-13(in Crs.)


YEAR 2008 2009 2010 2011 2012 2013
DOUBTFUL ASSETS
(in Crs.)
887.65 832.32 743.22 1336.64 1318.71 2628.33
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Graph 5 showing doubtful assets from 2008-13(in Crs.)







I nterpretation: In the above graph there has been a downfall in the doubtful assets from 2008 to 2010 & again increases except in 2012.
0
500
1000
1500
2000
2500
3000
1
2
3
4
5
6
2008
2009
2010
2011
2012
2013
887.65
832.32
743.22
1,336.64
1,318.71
2628.33
YEAR DOUBTFUL ASSETS
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Table no: 6 Year wise loss assets from 2008-13(in Crs.)


YEAR 2008 2009 2010 2011 2012 2013
LOSS ASSETS
(in Crs.)
727.61 345.34 762.64 718.63 484.22 373.1
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Graph 6 showing loss assets from 2008-13(in Crs.)







I nterpretation: The above graph shows that there has been reduction in the loss assets but falls down suddenly to lowest level in 2009 & became
highest in 2010 & again starts falling down constantly till 2013.
0
500
1000
1500
2000
2500
1
2
3
4
5
6
2008
2009
2010
2011
2012
2013
727.61
345.34
762.64
718.63
484.22
373.1
YEAR LOSS ASSETS
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Table no: 7 Year wise Gross NPA from 2004-13(in Crs.)








YEAR Gross NPAs (Rs. in Crs.)
2004 3979.86
2005 3321.81
2006 2390.14
2007 2092.14
2008 1981.38
2009 1842.92
2010 2400.69
2011 3152.5
2012 4464.75
2013 7982.58
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Graph 7 showing total NPA from 2004-13(in Crs.)








I nterpretation: Graph showing downfall of gross NPAs from 2004 to 2009 then again it showed increment till it reaches its highest peak.
0
2000
4000
6000
8000
1
2
3
4
5
6
7
8
9
10
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
3979.86
3321.81
2390.14
2092.14
1981.38
1842.92
2400.69
3152.5
4464.75
7982.58
YEARS TOTAL NPA
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Hypothesis Testing:
Statisticians follow a formal process to determine whether to reject or accept a null
hypothesis, based on sample data. This process is called hypothesis testing which consists of
four steps:
State the hypothesis, This involves stating the null and alternative hypothesis. The
hypothesis are stated in such a way that they are mutually exclusive i.e., if one is true,
the other must be false.
Formulate an analysis plan, The analysis plan describes how to use sample data to
evaluate the null hypothesis. The evaluation often focuses around a single test
statistics.
Analyze sample data, Find the value of the test statistic (i.e., Correlation coefficient
which is denoted by r) described in the analysis plan.
Interpret results, Apply the decision rule described in the analysis plan. If the value
of the test statistic is unlikely, based on the null hypothesis, reject the null hypothesis.
The actual test begins by considering two Hypothesis. They are called the null hypothesis &
the alternate hypothesis. These hypothesis contain opposing view points.
Ho: The null hypothesis: It is a statement about a population that will be assumed to be true
unless it can be shown to be correct beyond a reasonable doubt. Stating the Null Hypothesis
is the starting point of any hypothesis testing question solution & the necessary information
tends to be in the first sentence of the problem.

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H
1
: The alternate hypothesis: The Alternate Hypothesis accompanies the Null Hypothesis
as the starting point to answering hypothesis testing questions & it is the stated or assumed
value of a population parameter if the Null Hypothesis (H0) is rejected (through testing).

The following null hypothesis was formulated for the study:
Ho (Null) = There is no significant relationship between gross NPA & net profit.
H
1
(Alternate) = There is significant relationship between gross NPA & net profit.
Correlation analysis was done to find out the relationship between gross NPA and Net
profit.
For the current research study, significance of correlation coefficient was used to accept or
reject null hypothesis. 5 % sig level was used.









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Data of NPA and Net profit of Bank of Baroda for 10 years
Here ten years data has been analysed in which Gross NPAs are independent variables and
NET PROFITs are dependent variable. The relationship between these two variables is
found out using correlation analysis.
S.NO YEARS X GROSS NPA (in
Crs.)
Y NET PROFIT (in
Crs.)
1 2013 7982.58 44,807,200
2 2012 4464.75 50,069,562
3 2011 3152.5 42,416,797
4 2010 2400.69 30,583,310
5 2009 1842.92 22,272,018
6 2008 1981.38 14,355,215
7 2007 2092.14 10,264,645
8 2006 2390.14 8,269,597
9 2005 3321.81 6,768,399
10 2004 3979.86 9,669,959
TOTAL

33608.77 2,39,476,702

Correlation coefficient was calculated using excel 2007 option. Calculated r value = .557
As per the table of critical values for Pearsons correlation, the value of r is .707. The calculated
value of r is less than the table value. Hence null hypothesis was accepted & concluded that there
is no relation between the gross NPA & Net Profit.
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UNIT 6
FINDINGS OF THE STUDY





















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Findings (Results of the study):
From the above data analysis it was observed that net profits kept on rising except in 2005,
2006 & 2013, as the net profit declined in the very recent year i.e. on 2013, so the bank
needs to increase its profitability by taking appropriate measures through proper
management of NPA.
It was also observed that advances kept on increasing from 2004 to 2013, which depicted
that banks position is also good for sanctioning loans.
The standard assets also shown rise from 2008 to 2013, which lead to total advances.
The sub-standard assets was at its highest peak which reveals that chances for recovery of
NPA are high.
The doubtful assets also shown rise which means that bank should take corrective action
recovery through policy to reduce the level of doubtful assets.
The loss assets got declined this year which means that bank has taken appropriate
measures thereby reducing the level of loss assets.
The Gross NPAs shown increment in the very recent year i.e. on 2013 due to ongoing
slowdown in the industrial sector which would be recovered by improvement in assets
quality.



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Suggestions and recommendations:
1. Bank should have its own independent credit rating agency which should evaluate the financial
capacity of the borrower before that credit facility.
2. Special accounts should be made of the clients where monthly loan concentration report should
be made.
3. There should be proper monitoring of the restructuring accounts because there is every
possibility of the loan slipping into NPAs category.
4. Proper training is important for the staff of the bank at the appropriate level either ongoing
process, so that they should deal with the problem of NPAs and steps should to be taken to reduce
the NPAS.
5. It is recommended that the proper documentation and verification should be made before
sanctioning the loan.
6. Constant interaction has to be maintained with the customers to keep track of their loan
payment.
7. Strict measure has to be taken while issuing or sanctioning the loan. The measure can include
verification of sanctioning the loan, job and salary slips, and verification of securities.
8. When all possible attempt for recovery is failed then only option is to proceed with legal action
along with speed otherwise it would be costly.
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9. It is also wise for the bank to carry out special investigative audit of all financial and business
transaction and books of accounts of the borrower company when there is possibility of the
diversion of the funds and mismanagement.
10. Independent settlement procedure should be more strict and faster and the decision made by
the settlement committee should be binding both borrower and lenders and any one of them
failing to follow the decision of the statements committee should be punished severely.
11. The bank should come out with new innovative methods to recover NPAs and should
motivate customers to pay their dues in time.
12. Willful default of bank loans should be made a criminal offence.
13. Identifying reasons for turning of each accounts of branch into NPAs is the most important
factor for upgrading the asset quality because that would help to initiate suitable steps to upgrade
the accounts.
14. The bank must focus on recovery from those borrowers who have the capacity to repay but are
not repaying initiation of coercive action a few such borrowers may help.
15.The recovery machine of the bank has to be in streamlined targets should have fixed offence
supervisors not only for recovery in general but also in terms of upgrading numbers of existing
NPAs.




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Conclusion:
The issue of Non-Performing Assets (NPAs) has been an area of concern for all economies &
reduction in NPAs has become synonymous with functional efficiency of financial intermediaries.
Although NPAs are a balance sheet issue of individual banks and financial institutions, it has
wider macroeconomic implications. It is important that, if resolution strategies for recovery of
dues from NPAs are not put in place quickly and efficiently, these assets would deteriorate in
value over time and only scrap value would be realized at the end. It should, however, be kept in
mind that NPAs are an integral part of the business financial sector and the players are in as they
are in the business of taking risk and their earnings reflect the risk they take. They operate in an
environment, where there would be defaults as well as deterioration in portfolio value, as market
movements can never be predicted with certainty. It is in this context, that countries have adopted
regulatory measures and the guiding structure has been provided by the Basel guidelines.
So we conclude that NON-PERFORMING ASSETS are like black spots on diamond. They affect
the profit of bank and also the financial health of bank. If it is not controlled or managed properly
then it affects the banks growth.






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UNIT - 7
BIBILIOGRAPHY










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REFERENCES:
Research Methodology: Methods &Techniques-CR Kothari.
Report on trend and progress of banking in India 2013-12, 2011- 2012.
Annual report of Bank of Baroda from March 2008-13.
Balance sheet, Profit and loss account and accounts of NPA for 10 years from 2004 to
2013.
Master Circular No. DBOD.No.BP.BC.9/21.04.048/2012-13 dated July 2, 2012
(International Journal of Marketing, Financial Services & Management Research-
ISSN 2277- 3622 Vol.2, No. 9, September (2013)) - Siraj.K.K and Prof. (Dr). P.
Sudarsanan Pillai
(Dr. A. Shyamala NPAS IN INDIAN BANKING SECTOR: IMPACT ON
PROFITABILITY: Indian Streams Research Journal (June; 2012)) -Dr. A. Shyamala
(International Journal of Economic Practices and Theories, Vol. 1, No. 2, 2011
(October), e-ISSN 2247 7225) -Prashanth K Reddy

WEBSITE:
www.bank of baroda.com
www.rbi.org.in
www.abhinavjournal.com
www.financialexpress.com India
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UNIT 8
APPENDIX- I (COPY OF SYNOPSIS)

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ANNAMALAI UNIVERSITY
PROFORMA FOR APPROVAL OF

PROJECT PROPOSAL
(Strike out whichever is not applicable)


Scrutinised by Approved / To Resubmitted
Head Management Wing



Enrolment Number: 2491200037
1. Name and Address of the
Student



: TAMAL SARKAR
Ramaiah Institute of Management & Sciences (RIMS)
# 15, New, B.E.L. Road, MSR Nagar,
MSRIT Post, Bangalore
Karnataka 560054
2. Subject Area of the Project : FINANCE
3. Title of the Project
(In capital letters)
: STUDY OF NON PERFORMING ASSETS IN BANKOF
BARODA
4. Name and Official Address of
the Research Supervisor.
(Bio-Data should be enclosed)
: Prof. Padma S. Rao
Ramaiah Institute of Management & Sciences (RIMS)
# 15, New, B.E.L. Road, MSR Nagar,
MSRIT Post, Bangalore
Karnataka 560054
Signature of the Student :
Date :
Signature of the Research Supervisor:
Name:
Academic Year :
Number of Candidates:
(Number of candidates should not exceed Five for a Research
supervisor in an academic year)
Encl : 1. Synopsis
2. Bio- Data of the Research Supervisor
(for office use only)
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INTRODUCTION
Area of project work: Finance
Introduction to the topic:
The three letters NPA Strike terror in banking sector and business circle today. NPA is
short form of Non Performing Asset. The dreaded NPA rule says simply this: when interest
or other dues to a bank remains unpaid for more than 90 days, the entire bank loan
automatically turns to a non performing asset. The recovery of loan has always been problem
for banks and financial institution. An asset becomes NPA when:
Interest and/or instalment of principal remains overdue for two harvest seasons
but for a period not exceeding two half years in the case of an advance granted
for agricultural purposes, and
Any amount to be received remains overdue for a period of more than 90 days in
respect of other accounts.

For any nation, banking system plays a vital role in the development of its sound economy.
Banking is an important segment of the tertiary sector and acts as a back bone of economic
progress. Banks are supposed to be more directly and positively related to the performance of
the economy. Banks act as a development agency and are the source of hope and aspirations
of the masses. Commercial banks are the major players to develop the economy. A major
threat to banking sector is prevalence of Non-Performing Assets (NPAs). NPAs reflect the
performance of banks. A high level of NPAs suggests high probability of a large number of
credit defaults that affect the profitability and net-worth of banks and also erodes the value of
the asset. The NPA growth involves the necessity of provisions, which reduces the overall
profits and shareholders value (Parul Khanna, 2012). In present scenario NPAs are at the
core of financial problem of the banks. Concrete efforts have to be made to improve recovery
performance. The main reasons of increasing NPAs are the target-oriented approach, which
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deteriorates the qualitative aspect of lending by banks and willful defaults, ineffective
supervision of loan accounts, lack of technical and managerial expertise on the part of
borrowers (Kamini Rai, 2012).
The purpose of the study is to identify the causes of loans becoming NPAs and to identify the
action plan to reduce the NPAs in Bank of Baroda.

Bank of Baroda:
Bank of Baroda (BoB) is the highest profit-making public sector undertaking (PSU) bank in
India and the second largest PSU bank in terms of number of total business in India. Based
in Vadodara, India, it is the country's first largest public sector lender in terms of annual
profit. BoB is ranked 715 on Forbes Global 2000 list. BoB has total assets in excess of Rs.
3.58 trillion (short scale), or Rs. 3,583 billion, a network of 4261 branches (out of which
4168 branches are in India) and offices, and over 2000 ATMs. It plans to open 400 new
branches in the coming year. It offers a wide range of banking products and financial services
to corporate and retail customers through its delivery channels and through its specialized
subsidiaries and affiliates in the areas of investment banking, credit cards and asset
management. Its total global business was Rs. 7,003.30 billion as of 30 Sep 2012. Its
headquarter is in Vadodara and corporate headquarter is in Bandra Kurla Complex Mumbai.
Statement of research problem:
The problem is stated as
Study of Non Performing Assets (NPAs) in Bank of Baroda.




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REVIEW OF LITERATURE
Findings of previous studies:
A large number of researchers have studied the issue of Non Performing Assets (NPAs) in
banking industry .A review of the relevant literature has been described as under: -

5. Prashanth K Reddy (research paper)
(From article-International Journal of Economic Practices and Theories, Vol. 1, No. 2,
2011 (October), e-ISSN 2247 7225)
Prashanth K. Reddy (2002) in his research paper on the topic, A comparative study of
Nonperforming Assets in India in the Global context examined the similarities and
dissimilarities, remedial measures. Financial sector reform in India has progressed rapidly on
aspects like interest rate deregulation, reduction in reserve requirements, barriers to entry,
prudential norms and risk-based supervision. The study reveals that the sheltering of weak
institutions while liberalizing operational rules of the game is making implementation of
operational changes difficult and ineffective. Changes required to tackle the NPA problem
would have to span the entire gamut of judiciary, polity and the bureaucracy to be truly
effective. This paper deals with the experiences of other Asian countries in handling of
NPAs. It further looks into the effect of the reforms on the level of NPAs and suggests
mechanisms to handle the problem by drawing on experiences from other countries.

6. Dr. A. Shyamala (research paper)
(From article-Dr. A. Shyamala NPAS IN INDIAN BANKING SECTOR: IMPACT ON
PROFITABILITY: Indian Streams Research Journal (June; 2012))
Findings of the study indicated that Indian banking sector is facing a serious problem of NPA
is comparatively higher in public sectors banks. To improve the efficiency and profitability,
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66

the NPA has to be scheduled various steps have been taken by government to reduce the
NPA. It is highly impossible to have zero percentage NPA. But at least Indian banks can try
competing with foreign banks to maintain international standard.

7. Siraj.K.K and Prof. (Dr). P. Sudarsanan Pillai (research paper)
(From article-International Journal of Marketing, Financial Services & Management
Research-ISSN 2277- 3622 Vol.2, No. 9, September (2013))
The researchers found that Non Performing Assets endangered negative impact on banking
stability and growth. Issue of NPA and its impact on erosion of profit and quality of asset was
not seriously considered in Indian banking prior to 1991. There are many reasons cited for the
alarming level of NPA in Indian banking sector. Asset quality was not prime concern in
Indian banking sector till 1991, but was mainly focused on performance objectives such as
opening wide networks/branches, development of rural areas, priority sector lending, higher
employment generation, etc. The accounting treatment also failed to project the problem of
NPA, as interest on loan accounts were accounted on accrual basis (Siraj K.K. and P.
Sudarsanan Pillai, 2012).


RESEARCH METHODOLOGY
Objectives of the study:
To understand the reasons for NPAs.
To assess the impact of NPA on banks profitability.
To suggest ways and needs to reduce NPA and its growth.


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67

Hypothesis:
Ho = There is no significant relationship between gross NPA & net profit.
H
1
= There is significant relationship between gross NPA & net profit.

Statistical tools to be used:
Correlation Analysis

Sampling plan & methodology:
Data collection:
This is a descriptive cum analytical study based on secondary data which will be collected
from the following sources:
Company Records and Reports.
Newspapers/Magazines.
Various Websites.
Research Design:
Descriptive research procedure is used for describing the recent situations in the bank and
analytical research to analyze the results by using appropriate research tools.








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68

PROPOSED PLAN OF WORK
Data collection:
Data will be collected for ten years from banks annual reports & other related documents
from 2004-13.
Data presenting and evaluation:
The data so collected will be analysed by calculating correlation coefficient.

Hypothesis testing:
Based on significance of correlation coefficient, null hypothesis will be tested to reject or
accept.

EXPECTATIONS
The current study would throw a light on the banks position in respect of non-performing
assets. It is expected that it would also help to pin point the reasons for loans becoming NPAs
& the actions taken by the banks to reduce NPAs.

REFERENCES
Research Methodology: Methods &Techniques-CR Kothari.
Report on trend and progress of banking in India 2011-12, 2010- 2011.
Annual report of Bank of Baroda from March 2008-09 to 2011-12.
WEBSITE:
www.bank of baroda.com