A Case Study Analysis On Non-Performing Assets at Union Bank of India

A CASE STUDY ANALYSIS ON NON-PERFORMING ASSETS AT UNION BANK OF INDIA
INTRODUCTION
Banking in India originated in the last decade of the 18th century. The oldest bank in
existence in India is the state bank of India, a government-owned bank that traces its origins
back to June 1806 and that is the largest commercial in the country. Central banking the
responsibility of the reserve bank of India, which in 1935 formally took over these
responsibilities from the imperial bank of India, relegating it to commercial banking
functions. After India’s Independence in 1947, the reserve bank of India was nationalised and
given broader powers. In 1969 the government nationalized the 14 largest commercial banks;
the government nationalized the six next largest in 1980.
As per the Reserve bank of India (RBI), India’s banking sector is sufficiently capitalised and
well-regulated. The financial and economic conditions in the country are far superior to any
other country in the world. Credit, market and liquidity risk studies suggest that Indian banks
are generally resilient and have withstood the global turmoil.
The Indian banking industry has also witnessed the roll out of innovative banking models like
payments and small finance banks. RBI’s new measures may go a long way in helping the
restructuring of the domestic banking industry.
History of Indian Banking Sector:
Banking in India originated in the last decades of the 18th century. The first banks were the
general bank of India, which started in 1786, and the Bank of Hindustan , both of which are
now defunct. The oldest bank in existence in India is the state bank of India, which originated
in the bank of Calcutta in June 1806, which almost immediately became the bank of Bengal.
This is one of the three presidency banks, the other two being the Bank of Bombay and the
Bank of Madras, all three of which were established under the charters from the British east
India Company. For many years the presidential banks acted as quasi-central banks, as did
their successors. The three banks merged in 1925 to form the Imperial Bank of India, which
upon India’s independence became the State bank of India.
Indian merchants in Calcutta established the Union bank in 1839, but it failed in 1848 as a
consequence of the economic crisis of 1848-1849. The Allahabad bank, established in 1865
and is still functioning today, is the oldest Joint Stock bank in India. It was not the first
though. That honour belongs to the Bank of Upper India, which was in 1863 , and which
KRUPANIDHI DEGREE COLLEGE 1

survived until 1913 , when it failed, with some of its assets and liabilities being transferred to
the Alliance Bank of Shimla.
When the American Civil War sopped the supply of cotton to Lancashire from the
Confederate States, promoters opened banks to finance trading in Indian cotton. With large
exposure to speculative ventures, most of the banks opened in India during the period failed.
The depositors lost money and lost interest in keeping deposits with banks. Subsequently,
banking in India remained the exclusive domain of Europeans for next several decades until
the beginning of the 20th century.
Foreign banks too started to arrive, particularly in Calcutta, in 1860s. The Comptoire
d’Escompte de Paris opened a branch in Calcutta in 1860, and another in Bombay in 1862:
branches in Madras and Pondicherry, then a French colony, followed. HSBC established
itself in Bengal in 1869. Calcutta was the most active trading port in India, mainly due to the
trade of the British Empire, and so became a banking centre.
The first entirely Indian Joint Stock bank was the Oudh Commercial Bank, established in
1881 in Faizabad. It failed in 1958. The next was the Punjab National Bank, established in
Lahore, 1895, which has survived to the present and is now one of the biggest banks in India.
Around the turn of the 20th Century, the Indian Economy was passing through a relative
period of stability. Around five decades has elapsed since the indian Mutiny, and the social,
industrial and other infrastructure had improved. Indians had established small banks , most
of which served particular ethnic and religious communities.
The presidency banks dominated banking in India but there were also some exchange banks
and a number of Indian Joint Stock banks. All these banks operated in different sectors of the
economy. The exchange banks, mostly owned by europeans, concentrated on finncing foreign
trade. Indian joint stock banks were generally undercapitalized and lacked he experience and
maturity to compete with the presidency and exchange banks.
The period between 1906 and 1911, saw the establishment of banks inspired by the swadeshi
movement. The Swadeshi movement inspired local businessmen and political figures to
found banks of and for the Indian community. A number of banks established then have
survived to the present such as Bank of Baroda, Bank of India, Corporation bank, Canara
Bank, Central Bank of India and Indian Bank.

The fervour of Swadeshi Movement lead to establishing of many private banks in Dakshin
Kannada an Udupi District which were unifid earlier and known by the name South Canara
district.
From World War I to Independence:
the period during the First World War(1914-1918) through the end of the end of the second
World War(1939-1945), and two years thereafter until the independenceof India were
challenging for Indian banking. The years of the first world war were turbulent, and it took its
toll with banks simply collapsing despite the Indian economy gaining indirect boost due to
war-related economic activities. At least 94 banks in India failed between 1913 and 1918 as
indicated in the following table.
Years Number of Banks that Authorized Capital (Rs. in Paid-up Capital

failed Lakhs) (Rs.in Lakhs)
1913 12 274 35
1914 42 710 109
1915 11 56 5
1916 13 231 4
1917 9 76 25
1918 7 209 1
Post- Independence:
The partition of India in 1947 adversely affected the economies of Punjab and West Bengal,
paralyzing banking activities for months. India’s independence marked the end of a regime of
the Laissez-Faire for the Indian banking. The government of India initiated measures to play
an active role in the economic life of the nation, and he Industrial Policy Resolution adopted
by the government in 1948 envisaged a mixed economy. This resulted into greater
involvement of the state in different segments of the economy including banking and finance.
the major steps to regulate banking included:
● In 1948, the Reserve Bank of India, India’s central banking authority was
nationalized, and it became an institution owned by the Government of India.

● In 1949, the banking regulation act was enacted which empowered the Reserve bank
of India (RBI) “ to regulate, control and inspect the banks in India”
● The banking regulation Act also provided that no new bank or branch of an existing
bank could be operated without a license from the RBI, and no two banks could have
common directors.
however, despite these provisions, control and regulations, banks in India except the State
Bank of India , continued to be owned and operated by private persons. This changed with
the nationalisation of major banks in India on 19th July 1969.
Nationalisation:
By the 1960s the Indian banking industry had become an important tool to facilitate the
development of the Indian economy. The ,then ,Prime minister Indira Gandhi issued an
ordinance and instructed the Government of India to nationalize the 14 largest commercial
banks with effect from the midnight of July 19,1969.
A second dose of nationalization of 6 more commercial banks followed in 1980. The stated
reason for nationalization was to give the government more control of credit delivery. Thus
the government of India controlled around 91% of the banking business of India.
Liberalisation:
this period marked the policy of licensing a small number of private banks, which came to be
known as , tech-savvy banks, and included Global Trust Bank, which later amalgamated
with Oriental Bank of Commerce, UTI bank(now Axis bank), ICICI Bank and HDFC Bank.
The next stage was marked with setting up relaxed norms for Foreign direct investment,
where all foreign Investors in banks may be given voting rights which could exceed the
present cap with certain restrictions.
Currently, banking in India, is fairly mature in terms of supply, product range and reach even
across rural India. The banking industry has been the keen focus for the growth of the
economy through recapitalization of various banks into one such as- all subsidiaries of the
State bank into one, such as State bank of Travancore, State Bank of Bikaner and Jaipur,
State Bank of Patiala have all been clubbed into one as State Bank of India.

Current structure of Banking Industry in India:

TITLE OF THE STUDY
A Case Study Analysis on Non- Performing Assets at Union Bank of India, kalyanpur
branch, Kanpur, Uttar Pradesh
STATEMENT OF THE PROBLEM
Lending in India today has created an investment culture and it plays an important role in
driving the national economy. It provides leverage to an entrepreneur to undertake projects at
a larger rate than what could have been undertaken without the availability of credit. In this
light asset quality management is one of the most critical areas in determining the overall
condition of a bank. When the loans and credit cannot be paid it reflects the banks errors and
flaws in the crediting procedure. Today the present challenge is to manage Non- performing
assets of a bank, which in turn determines the health of the bank.
SCOPE OF THE STUDY
This study is highly significant in the sense that in the current phase of growth moderation in
Indian economy , the issue of rising NPA has assumed critical importance for the banking
industry. It is a well-accepted fact that the quantum of NPAs in loan portfolio of Bank varies
inversely with economic conditions. During slowdown, NPAs rise and impact the
profitability of Banks. If the NPAs of the Banks rise the funds will be blocked and the Banks
will not be in a position to finance a new project. This study is designed to provide accurate
and authorized information regarding the subject matter.
The Union bank of India is one of the oldest banks in the banking sector and provides a wide
range of loans for the various financing needs of the entrepreneurs in the country today.
OBJECTIVES OF THE STUDY
Every task is undertaken with an objective. Without any objective, a task is rendered
meaningless. The basic idea behind selecting the topic of Non-Performing Assets is to study
how banks today provide lending and thereby manage NPAs . It is also to gather practical
knowledge as to why NPAs are a huge burden to the banks.
Thus the basic objective being:
● To understand about Non-performing Assets of banks based on different cases

● To identify areas where there are flaws in the credit process and recovery process

● To analyse the effect of NPA on banks financial position based on different cases
TOOLS FOR DATA COLLECTION:
Tools for Data Collection

Primary Data: Data Collection through interview with the Credit Manager
Secondary Data: Data Collection done through bank website, journals, banks
annual reports and records
Type of research Case study analysis
Sample size: 5
Sample Area: Work was done at KANPUR
REVIEW OF LITERATURE
DEFINITIONS OF NPA : 5
1. A Non-performing asset (NPA) is defined as a credit facility in respect of which the

interest and/or installment of principal has remained 'past due' for a specified period
of time.
2.
Derive a meaning from the definition:

Non-Performing Asset is a double-edged sword. While on the other hand , it ceases

generating income for the bank, on the other it takes away a part of the profit earned through
provisioning. It also poses great reputational risk for the banks. Though the NPAs are
inevitable, increasing trend is a matter of great concern, which needs to be addressed on a
war-footing and also on an on-going process.
We must understand how an account/asset will be classified as NPA and the norms for
classification.
Income Recognition, Asset classification and provisioning Norms (IRAC norms)
Nature of loan When it becomes NPA

Term loan Interest and instalment of principal remaining overdue for a period
of 90 days
CC/OD Account remaining ‘out of order’ for 90 days
Bills Remaining overdue for a period of more than 90 days
(purchased/discounted
Agriculture Advance Instalment for principal or interest remaining overdue for two
cropping seasons for short term crops and one cropping season for
long term crops
NPA due to technical reasons
● Review/renewal of regular Ad-hoc limit not done within 180 days from the due
date/date of ad-hoc limit
● Drawings allowed against stock/book debts statement older than 180 days(drawings in
the account based on drawing power calculated from stock statements older than 3
months is deemed as irregular drawings and if such irregular drawing is permitted in
the account for a continuous period of 90 days even though the unit is working.

What is overdue?
In case of To be considered as overdue

Excesses over limit From date of such excesses
/drawing power
Term loans & loans From due dates of instalments
repayable on demand
Temporary overdrafts If amount is remaining outstanding for more than 7 days
Bills ● From due date
● In case of sight bills, if it remains unpaid on presentation
Interest remaining From the last day of the quarter , irrespective of interest of
unadjusted interest charged at monthly intervals
WHAT IS OUT OF ORDER?
● Outstanding balance remaining continuously in excess of sanctioned limit/drawing

power(DP)
● In cases where outstanding balance is less than sanctioned limit/drawing power, but
there are no credits continuously for 90 days as on date of balance sheet or credits are
not enough to cover interest debited during the same period.
Asset classification under NPA
All NPAs are to be classified into the following 3 categories:
Sub Standard Asset NPA less than equal to 12 months

Doubtful Asset NPA exceeding 12 months
Loss Asset A loss asset is one where loss has been identified by bank or
auditors. Such an asset is considered 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

Standard Advances As long as accounts are regular (includes EAS SMA Accounts)
Substandard Advances After 12 months slip to Doubtful
A standard or substandard
advance may also be
classified as loss account Doubtful advances
directly if the value of
security falls below 10% of
the o/s amount
Loss
advances
For the remaining period of its life till recovered may
be classified as loss
What are the income recognition and provisioning norms?
No income to be recognized in NPA accounts. Any unrecovered interest should be reversed

to the account immediately on classification of account as NPA. Further, unrealized interest
has to be controlled in Dummy Ledger.
PROVISIONING:
Substandard Accounts Doubtful accounts Loss accoun
general
provision on upto 1 100%
total outstanding year 25%
15%
unsecured
portion 10%
(additional) above 1 year
and upto 3 years on
40% outstandi
unsecured
exposure in ng
infrastructure more than 3
loans where years 100%
certain safegaurds
such as escrow
a/c are available

GROSS NPA = Total outstanding NPAs
NET NPA = gross NPA less

1. Provision on NPA as per reforms
2. Additional/floating provision
3. ECGC/CGT claim received pending for appropriation
4. Provision due to diminution in fair value in case of
restructured accounts
5. Amount outstanding in uncovered interest account, if any
GROSS NPA %age = Gross NPA/ Gross advances
NET NPA %age = Net NPA / Net Advances (gross advances less provisions as
above)
What is provision coverage ratio?
Meaning and purpose of provision coverage ratio:
Provision coverage ratio refers to the percentage of provision that the bank has set aside,
against the loan amount to meet an eventuality where a loan might have to be written off if it
becomes irrecoverable. It is a measure that indicates the extent to which the bank has
provided (set aside money to bear the loss) against the troubled part of its loan portfolio
1. GNPA+PWO
2. Provision against NPA + provision against diminution in fair value of restructured
assets + technical write off (PWO)
3. Floating provision for advances (not used for tier II) + CGTMSE/ECGC held in
sundry + Amount of recovery if any held in sundry PCR= (2+1)/3
CREDIT MONITORING
Credit monitoring is an inseparable part of bank lending from the date lending activity
commences. There are three cardinal principles of lending that banks follow while taking a
decision in providing credit . these are principles of safety, liquidity and profitability, the
most important being principle to ensure safety of the funds lent. It means the borrower must
repay the loan amount with interest as per loan agreement. Ability to repay the loan depends
upon the borrower’s capacity to pay as well as his willingness to repay.

Objectives of Credit Monitoring
1. Ensure safety of the money lent by the Bank: This is the primary objective of the bank
to ensure safety of the money
2. Credit delivery to take place after complying with all the stipulated terms and
conditions: credit delivery means disbursement of credit facilities to take place after
complying with all the stipulated terms and conditions
3. Procedures of the bank are to be complied with: All the laid down guidelines and
procedures as per the loan policy and instruction circulars are to be complied
4. Assets in standard category to remain standard: Assets should be performing
throughout the life of assets and the quality of it should not degrade
5. Assets should be stress free: within standard category, accounts are to be upgraded
from SMA,EAS-II, EAS-I to pure standard category i.e. to ensure that the accounts
are stress free
6. Accounts do not slip to NPA category: The main purpose of monitoring is that the
assets should not get downgraded
Goals of Credit monitoring
1. Periodical monitoring: Periodic monitoring of the actual performance of the assisted

borrower vis-à-vis the projections accepted at the time of credit sanction. The
performance will include sales, operating profits, inventory, debtors level, cashflow,
DER, DSCR, Break-even point etc.
2. Identify the problem: Where the projections are not met and the actual performance
varies by a wide margin, then we have to identify the problems faced by the borrower
for timely remedial measures like rescheduling/restructuring.
3. Regular interaction: To interact with the borrower on a regular basis to know the day-
to-day operations, specific problems faced by the unit, etc. it will help us in knowing
development of the project and the future plan of action of the customer.
4. Market trend: Watch the market trend regularly and compare it with the performance
with the borrower. The performance of the firm is to be compared with the similar
type units which are there in the market.
5. Assistance: Whether the borrower faces any difficulty in servicing interest in time,
repaying instalments on due date, meeting commitments of non fund based limits in
time and to take remedial measures.

6. Exit option: If assistance to the unit cannot be continued in the long run and if it is felt
that it will jeopardize the interest of the bank, then to resort to exit option, if
workable.
7. Recovery measures: If exit option cannot be worked out and where interest of the
bank is under threat, then to initiate quick appropriate recovery measures in all such
potential NPA accounts.
Monitoring is nothing but Plan-do-check-act cycle which is to be done on continuous basis.
Therefore the assets require continuous monitoring and improvement. Continuous means
never ending or without break. Improvement has to be continuous because quality either gets
better or it gets worse.
Monitoring of borrower:
It is rightly said that the person behind the activity is more important than the activity itself, if
the borrower’s intentions, integrity, character etc., which are, of course, are the personal traits
are impeccable, there are rare chances of bank’s facing problems in recovery of the dues.
The adage “OUT OF SIGHT IS OUT OF MIND” holds true in case of borrowers. When the
banker fails to keep the sight of the borrower, the borrower loses sight of the banker which
results in non- repayment of the loan.
3600 view of borrower:
✓ First: Discover his credibility in the market or his work place.

✓ Second: Take information from their dwelling place.
✓ Third: Seek some facts from their friends and relatives.
✓ Fourth: Study the credit report between the lines
TOOLS FOR MONITORING HEALTH OF AN ACCOUNT:
The very purpose of credit monitoring is to ensure and sustain the asset quality, value,
productivity and.profitability.it further leads that borrowal accounts should be stress free and
do not slip into NPA category having complied with all laid down procedures conveyed
through sanction terms and conditions. the underlying are certain tools available for
monitoring
1. Stock and book debt statements: submitted by the borrower every month, these
provide details like total value of stocks and book debts, total salrs and purchases

during the month, details of sundry debtors with dates of origin with declaration by
the borrower that reported book debts are not encumbered in any manner. From these
signed statements, a banker has to scrutinize and ensure that unpaid stocks, stocks
received under DA L/C, stocks in book debts older than 90 days do not rank for
drawing power (D/P).
2. M6/Q4 statement: It is a monthly/ quarterly inspection report based on stock and
book debt statements. The authorized bank official has to comment on the authenticity
of account operations and turnover, documentation stipulations and execution,
valuation basis for stocks, excess borrowings over DP, details of insurance policies in
force, overdue bills and installation etc. it also checks on display of bank’s name
board, letter of free access/no lien and updated rent receipt- when the business unit
does not own the premises. Comments here are minor points for the monitoring
official to sustain the follow up action for suitable remedial measures in time.
3. Monthly Select Operational Data (MSOD): it is a powerful monthly tool to
compare and monitor yearly projections with monthly trends in sales, purchases and
gross profit to ensure liquidity, healthy turnover and profitability. It reflects on the
estimates of gross sales, net sales, production value, total debtors and receivables out
of which bills purchased/discounted by the bank comparing the trends with figures up
to the end of the reporting month. It also provides details of sundry creditors,
inventories, stock-in & stock-out during the month and charged to the bank, gross
profit during the month vis-à-vis current accounting year up to the end of the
reporting month. On the basis of these select operational data, the key monitoring
official has to comment on the action taken to overcome poor turnover in the account,
incidence of bills/cheques unpaid, frequency of cash withdrawals.
4. Monthly Monitoring Report (MMR): Its submission is to be ensured every month
through the prescribed format up to Rs. 50.00 lacs to be scrutinized by branch
officials. Apart from basic operating details, it comments on banking arrangement for
meeting credit needs, credit ratings, restructured status if any, credit process audit,
DBC updating, vetting of documents, registration of charge with ROC and its validity.
It also comments on review/renewal status, ledger operations, execution of equitable
mortgage and overall conduct of the account. In an integrated manner, it provides
enough signals for the alert banker to initiate appropriate remedial measures in time.
5. Stock Audit Report: This is a unique tool to monitor the adequacy of current assets
in general and inventory in particular to derive the correct drawing power. It also
comments on production capacity with regard to licensed, installed, utilized capacity,

method of valuation of stock, correctness of drawing power, acceptability level of
inventory and debtors throwing light on holding period. In line with quality of the
credit portfolio concerns, it also scrutinizes and comments on documentation,
registration of charge, diversion of funds, submission of key returns including MSOD
& QPR and profitability of relationship.
6. Concurrent Audit Report: As an instantly available support tool to the field
bankers, it comments on irregularities in fresh sanctions and disbursals, ad-hoc or
casual sanctions, borrowers with inadequate/lapsed insurance cover, time barred
documents, invoked/devolved/expired LC & LG, default in interest & instalments,
status of EAS-I/EAS-II/SMA & restructured accounts, quick mortality cases, asset
classification justification, recoveries in NPA & prudentially written off accounts. It
also focuses discrepancies pertaining to FOREX transactions, debit/credits to
FCNR/NRE/NRO accounts, and compliance of ECGC formalities with comments on
import/export bills unpaid/unrealised beyond 180 days.
7. Other Audit Reports (Internal/statutory/RBI): All audit reports should be viewed
positively as an effective tool to discover the blind areas for monitoring in a proactive
manner. Towards this end, all types of audit reports in common comment on the
quality of assets, prudential exposure norms, asset classification, leakage of income,
compliance of sanction stipulations, renewal/review of working capital/ term loan
through LAS, nature and composition of collateral securities with details of legal
opinion and vetting. It comments on non-conduct of credit process audit, correct
classification of balance sheet items, treatment of equity/quasi-equity/debt, CA
certified promoter’s contribution/capital in the system. It acts as an eye opener to
initiate actions for adequacy of margin, insurance and collateral securities. Even
seems monotonous and repetitive, these reports are boons in disguise.
8. Quarterly Performance Report (QPR): Though not found comfortable and familiar
with field bankers, this effective monitoring tool is applicable to traders & merchants
exporters apart from manufacturers with aggregate limits of Rs. 1 crore and above.
This statement needs to be submitted within 4 weeks from close of each quarter by the
borrower. This also includes half yearly operating fund flow statement. QPR as an
effective tool throws light on performance in terms of production quantity, net sales
(both domestic and exports) in comparison of actual in the reporting quarter vis-à-vis
the annual plan projections. It comments on status of working capital funds with
details of composition of current assets, current liabilities, net working capital and
current ratio at end of the last year in comparison to the same at the end of the quarter
vis-à-vis the change during the current year till end of reporting quarter in line with
the estimates made at the beginning of the current year. It derives trends from the
financing pattern of current assets: shares of bank borrowing, sundry creditors, other
current liabilities and net working capital. It scrutinizes the levels of inventory ,
receivables and sundry creditors through computing the holding periods for all of
these key items in operating cycle. In addition , the half yearly operating fund flow
statement(HOF) comprising of part A and B makes meaningful comparison of long
term surplus/deficit, changes (increase or decrease) in current assets and current
liabilities other than bank borrowings, changes in working capital gap, net
surplus/deficit from both long term and short term funds. It resolves the issue whether
change in bank borrowings is commensurate with change in working capital gap. This
is a powerful tool at the time of review/renewal to ensure permissible bank finance
while focusing on the sound functioning of the unit in desirable directions as per
projections and past trends.
9. Other supportive monitoring tools: Apart from the major monitoring tools
mentioned above, there are other supporting tools in form of :
● Advocate’s vetting report: It contains the empanelled lawyer’s remarks and
certificate of authenticity of the documents executed as per action sanction
stipulations. Emphasis is made on the qualifying remarks on adequacy and
quality of documentation process. Taking a cue from this report, the bank
official need to ensure that all relevant documents have been obtained, charge
created is legally enforceable and all documents are adequately stamped
confirming to law of limitation period.
● Visit report of key officials from controlling office: It comments on NPA
management & recovery with details of position of NPAs at the beginning of
the year, addition of slippages, deductions through cash recovery/up
gradation/write-off etc. vis-à-vis the ceiling level target.
● Asset Quality Management Committee (AQMC) meeting observations: It
emphasises on the follow up and timely renewal of limits for up-gradation to
stress free category by recovering the over dues including the critical amount.
It revisits the justification of moratorium & EMI to ensure that no account

should be under stressed category for technical reasons like non-receipt of

stock/book debt statements, non-review or renewal of limits etc.
● CIBIL report: As a data mine for bankers to get the credit history of both
existing and prospective borrowers , this report provides a scoring pattern in
the range of 300-900 points, out of which 600 and above are treated as good
scores. Factors influencing rating/scoring include payment history,
outstanding debt, length of credit history, number & type of credit accounts,
utilization of sanctioned limits and application of new credit lines. These
factors impact the score either positively or negatively. Factors which cause
negative impact include wilful default, written-off & suit filed history. This
report reflects on the overall commitment and financial character of the
borrower. This report need to be generated and studied both at the time of
new sanction and subsequent review/renewal to ascertain any change in status
affecting the health of the account. Each bank official handling credit
portfolio has wide access to CIBIL website for updated monitoring.
10. Search/Status Report: This report as an effective monitoring tool is made available
by the Registrar of Companies (ROC) for corporate borrowers. Through a search both
in letter & spirit, it comments on the date of registration, date of creation of charge,
amount secured by charge, particulars with short description of property charged,
name of persons entitled to the charge, date of modification of charges and date of
satisfaction of charges. The financing banker is supposed to be the person entitled to
the charge as per search report. It also enables a prudent banker to ensure registration
of charge of company borrowers within 30 days of execution of documents with
ROC.
11. Technical Officers Report
12. Factory Visit Report
13. Collateral Security Inspection
14. Annual Accounts Filed with ROC
15. Various Challans
16. Assessment Orders
17. Review Renewal of Accounts
18. Credit rating
19. F-1 statement
20. M-27 BMDP Statement
21. Consortium Meeting Minutes

22. Credit Process Audit
23. CMA Data
Cut Off Limit For Monitoring:
Limit Monitoring Authority

Up to Rs. 50.00 lacs Branch level
Above Rs. 50.00 lacs up to Rs. 2.00 Cr Regional Office
Above Rs. 2.00 Cr. & up to Rs. 5.00 Cr FGMO
Above Rs. 5.00 Cr CO
Early Warning Signals:
Signals available within the bank:
● Non- compliance with terms of sanction

● Unplanned borrowing for margin contribution
● Delay in payment of interest beyond 15 days
● Instalments overdue beyond 30 days
● Return of cheques for financial reasons
● Reduction in credit summations- not routing entire or pro rata transactions through the
bank, opening of collection of accounts with another bank without prior approval of
appropriate authority
● Longer outstanding in the bills purchased accounts
● Longer Period of credit allowed on sales, Bills negotiated through the bank
outstanding after due dates, frequent return of bills and later or non-realization of
receivables
● Constant utilization of working capital limits to the brim
● Unexplained delay or failure to submit periodical statements such as stock/book debts
statements, MSOD,CMA, QPR, balance sheets etc. and other papers needed for
review of account
● Frequent requests for excess/additional limit or for extension of time for repayment of
interests/instalments.

● Ad-hoc/excess/bill purchase overdue, LC devolvement/guarantee invocation

● Lack of transparency in borrower’s dealings with the bank/avoiding to meet bank
officials
● Constant failure or willingness to mention unpaid stock in stock statements or age of
book debts in book debt statement.
Signals to be noticed during inspection/visits:
● Delay in project implementation

● Installations of sub-standard machinery or machinery not as per the project
report/approved quotations.
● Frequent break down in plant/machinery
● Production noticeably below projected level of capacity utilization
● Labour problem and frequent interruptions in manufacturing
● Non-availability of vital spare parts/major raw material
● Production of unplanned items without reporting to the bank
● Disposal/replacement of vital plant and machinery without bank’s knowledge
● Downward trend in sales
● Higher rate of rejection at process stage/final stage/after sales.
● Delay or failure to pay statutory dues
● Diversion of working capital for capital expenditure or for other use
● Abnormal increase in debtors and creditors
● Increase in inventory, which may include large quantity of slow and non-moving
items
● General decline in the particular industry combined with many failures
● Rapid turnover of key personnel
● Filing of law suits against the company by its customers, creditors, employees etc.
● Unjustified rapid expansion within a short time without appropriate financial tie up
● Sudden /frequent changes in management/infighting within the management
● Reduction in profit/unit starting incurring losses
● Dependence on single or few buyers/no alternate market for product
● Threat of action against the borrower from statutory bodies e.g. pollution control,
Labour Welfare department, Income tax/Sales tax/Octroi/Excise/custom departments,
etc.
● Poor/dubious record maintenance

● Loss of key product lines, franchises, distribution rights or sources of supply

● Speculative inventory acquisition not in line with normal purchasing practices
● Poor maintenance of plant/machinery
● Lack of planning/poor planning
● Apathy of promoters/owners in running the business
● Adverse market reports on the borrower/concern
● Loss of crucial customers
Remedies available:
● Discussion with borrower/guarantor

● Recovery of overdue amounts to avoid slippages
● Timely restructuring of the account
● Ad-hoc limits to tide over temporary problems
● Seeking additional collaterals/guarantees
● Borrowers to pump more funds in to the system
● Detailed stock inspection by outside agency
● Reduction of limits
● Exit option
● Taking possession of securities
● Recalling the advance/action under SARFAESIA
NPA CREATORS:
INTERNAL REASONS EXTERNAL REASONS BANK SPECIFIC REASONS
Diversion of Recession Lack of

funds Power proper due
Time/cost Shortages diligence
overrun in project Price escalation Lack of
KRUPANIDHIBusiness
DEGREE COLLEGE Accidents regular 20
failure Natural monitoring
Inefficiency in calamities through
management Change in inspections
HOW TO MANAGE NPA?
● Identification of accounts turning to NPA

● Preventing slippages
● Systematically initiating and pursuing appropriate recovery measures- both legal and
non-legal measures.
● One time settlement
● Write off/ Prudential write off
● Sale of assets
● Initiating steps for up gradation
Borrower Recovery Quadrant

1. Willing to pay/capacity to 4. Not willing to pay/capacity

pay to pay
No problem with the borrower, a Wilful Defaulter. stringent
simple phone call or contact will set measures for recovery
things right.
NPA
BORROWER
2. Willing to pay/no or less 3. Not Willing to pay/No

capacity to pay capacity to pay
Restructuring of loans, Most difficult borrower. last
rescheduling/giving time,OTS, options to be explored like OTS,
mergers/amalgamations etc. write off etc.
Options available for Recovery:
Legal Measures:
● Lok Adalat- up to Rs. 20.00 lacs

● Civil suits – Attachment before judgement
● Summary suits- When there is no security other than DPN
● Recovery through revenue recovery acts (not in all states)
● Debt Recovery Tribunal- DRT- for dues of Rs. 10.00 lacs and above
● Securitization and reconstruction of financial assets and enforcement of Security
interest act 2002 (SARFAESI) Attachment and sale of assets by Banks without
intervention of court
Non-Legal Measures:
● Reminders
● Personal follow up
● Recovery camps
● Rehabilitation of sick units

● Corporate debt restructuring

● Loan Compromise/OTS
● Appropriation of subsidy if any
● Write off
● Persuasion through guarantors/friends/relatives
● Recovery through specialized branches
● Recovery through recovery agents
● Securitization of debts and selling to ARC (Asset reconstruction Companies)
● Sale of NPAs to other banks/NBFCs like Kotak Mahindra Bank and Standard
Chartered Bank- NPA should not be more than 2 years old
Painting on Walls:
Public Notice of Bank’s charge/ mortgage over the property is to be affixed on the properties
conspicuously, in the following format: In all NPA accounts where it has been decided to
initiate SARFAECI action. In all NPA accounts where symbolic possession has been taken
under SARFAESI Act, 2002
PUBLIC NOTICE
THIS PROPERTY IS CHARGED/MORTGAGED TO UNION BANK OF INDIA … BRANCH, AS A

SECURITY FOR THE LOANS, PRIOR PERMISSION OF THE BANK IN WRITING HAS TO BE TAKEN IF
ANYBODY WANTS TO DEAL WITH THE PROPERTY.
Branch manager/Authorized Officer
Minimum settlement Amounts to be recovered:
Points Scored Methodology for calculation of settlement amount

17 & above Outstanding in running ledger + interest @ 9% (simple)
12 to 16 Outstanding in running ledger + interest @ 7% (simple)
8 to11 Outstanding in running ledger
4 to 7 50% to 75% outstanding in running ledger
2 to 3 25% to 50% outstanding in running ledger
0 to 1 As much as possible
Deciding the realisability of security based on marketability

Parameter Yardstick
Easily marketable Like residential/commercial premises located in Metro/Urban or
prime location
Not easily marketable Tenanted premises or Industrial land/building
Very difficult to market Like agricultural land
Concept of NPV (Net Present Value):
Formula:
NPV = Realisable value of available securities less cost of realisation (up to 10%)
( 1+ R/100)n
R = rate of interest (present BPLR to be considered)
n = Time period for which the value is discounted (maximum up to 3 years)
Points/score for various parameters under the modular approach as also the system of
awarding points/score shall be as follows:
S. No Parameters Points
1. Realisable value of security( fair market value as given by valuer
(no distress value)
a) Exceeds the crystallized dues(running ledger balance +
interest @ 9%
i. Easily marketable 10
ii. Not easily marketable 8
iii. Very difficult to market 7
b) Exceeds 75% and up to 100% of the crystallized dues
(Running ledger balance + Interest @ 9%)

i. Easily Marketable
5
c) Exceeds 50% up to 75% of the crystallized dues (Running

ledger Balance + Interest at 9% simple)
ii. Not easily Marketable 5
2
d) Exceeds 25% & up to 50% of the crystallized dues ( running
ledger balance + Interest @ 9% simple)
0
e) 25% or less of the crystallized dues
i. Easily marketable
0
2 Aggregate means of the borrowers/guarantors ( to be calculated
excluding securities charged to us)
i. More than crystallized dues
ii. Exceeds 75% and up to 100% of crystallized dues 4
iii. Exceeds 50% and up to 75% of crystallized dues 3
iv. Exceeds 25% and up to 50% of crystallized dues 2
v. Less than 25% of the crystallized dues 1
0
3 Age of NPA (no. of years remained as NPA)
i. Up to 2 years 3
ii. More than 2 and up to 5 years 2

iii. More than 5 and up to 8 years 1

iv. More than 8 years 0
4 Legal position of the bank
i. No defects/deficiencies in documents & mortgage is 2
in order
ii. Documents are defective & mortgage not enforceable 0
IMPACT OF NPA
NPA does not only affect the bank but it has a bad impact on the public in general. It
adversely affects the economy and hampers growth of the nation.
Impact on the Bank:
NPA level of the bank shows the strength and performance of the bank and has a direct
impact on the bank
i. Stops generating Income: When an account turns to NPA, banks stop charging
interest in the loan accounts which is why it is called non- performing.
ii. Provisioning: bank will not only stop charging interest but has to make a provision
from the income earned by other assets. Besides the mandatory provision for different
class of assets, RBI has prescribed the banks for additional/voluntary minimum PCR
(Provision Coverage ratio) of 70% on total NPA to strengthen the financial soundness
of the banks.
iii. Profitability: Higher the NPA higher will be the provisions, which reduces overall
profitability of the banks.
iv. Yield on Advances: Yield on advances will be low due to high level of NPA
v. Interest Rate: High level of NPAs results in low yield on advances and there will be
pressure on margin which leads to charging high rate of interest on other accounts. It
will have the impact on not only acquiring the new customers but to retain the
existing customers also.
vi. Recycling of Funds: Funds are blocked and cannot be recycled and used for further
lending/requirements
vii. Liquidity: Bank’s liquidity management is the process of generating the funds to
meet contractual or relationship obligations at reasonable prices at all times. New loan
demand, existing loan commitments, and deposit withdrawals are the basic

contractual and relationship obligations that bank must meet. If the account turns bad
there will be liquidity crisis in the bank
viii. Affect ALM: Recycling of funds is affected due to which there will be asset liability
mismatch thereby posing risk of liquidity. Therefore to meet the payment of the
liability, bank has to borrow funds from market at higher rate of interest. Since the
funds are blocked and the deposits are maturing on a continuous basis, it will affect
the ALM (Asset Liability Management)
ix. Reputation Risk: Banks with high NPAs may get branded as Banks without controls
which are a reputational risk to the bank. It reflects on decision making capability and
inability to manage and monitor the assets.
x. Cost of funds: Due to the liquidity problem, borrowing from the market at higher
interest will interest the cost of fund.
xi. Wastage of man hours: A lot of time and energy is required in monitoring and
follow up of stressed assets which would otherwise have been utilized for acquiring
new business for the bank.
xii. Cost involved in follow up: Stressed assets require not only provisioning but there is
a good amount of cost involved in follow up and monitoring of the account. The
carrying cost of NPA accounts will be high
xiii. Affects bank’s rating: Credit rating agencies do the CAMELS ratings of the banks.
C stands for Capital, A stands for asset quality, M stands for Management, E stands
for earning, L stands for liquidity and S stands for Sensitivity to market risk. Rating is
affected mainly on asset quality and earning of the bank and both are mutually related
to each other.
xiv. Providing of Capital: To maintain the capital adequacy ratio we have to keep an
maintain the required capital as the risk weight for NPA accounts are high.
xv. Net Worth: Due to the high provisioning requirements the net worth of banks will be
adversely affected.
xvi. Book Value per share: Net worth (Excluding revaluation reserve and intangible
assets) divided by equity multiplied by ten. If the net worth is affected, the book value
of share will also be affected.
xvii. EPS: Earning per share is net profit divided by equity multiplied by ten. Therefore if
the profit will decrease our EPS also will decrease.

xviii. Share Prices: Share prices of a bank depend on the NPA level of the bank only as we
have seen in case of SBI in June-12 quarter. Though the profit of SBI has doubled due
to rise in NPA level share price has fallen down.
xix. Adverse effect on other businesses: Other business of the bank will be adversely
affected due to the high level of NPAs.
xx. Adversely affects dividend Pay-out: Due to the effect on profitability, Dividend
payout will also be affected accordingly
xxi. Quality of manpower: This will have the impact on the quality of existing as well as
newly recruited staff also.
Impact on Borrower:
i. Reputation & image in the market: If the account turns into NPA the reputation
and image in the market will be at stake as they are unable to meet their liability on
time.
ii. Bad credit rating: the credit rating of the borrower will go down and reports
generated in CIBIL will have a poor rating
iii. High interest rate: stressed assets will be having poor rating thereby the cost of
borrowing will be high. The bank will charge higher interest rate as well as penal
interest on poorly rated assets or bad quality assets.
iv. Question on ability: If the account turns into NPA, it means the promoters or
partners are not capable of running the project successfully and unable to manage the
funds
v. No access to credit: Due to the poor credit rating or default in one of the project the
borrower will be branded as ‘failure’ and will not ne able to avail the credit from any
other financial institution.
vi. Problem in new/other venture: The borrower will be having problem in starting
the new venture in respect of credit, labour, purchaser, supplier, buyer, etc.
vii. Availability of manpower: Due to the bad image in the market, people may not be
ready to get associated with the firm who is having bad image in the market.
viii. Quality of goods/services: Because of the problems stated above the firm will not
be able to maintain quality of goods/services.
ix. Customers: Adverse impact will result in shifting of the customer loyalty towards
the firm/company

x. Holding/Subsidiary/Sister Concern: The impact on one company has similar effect

on their holding/subsidiary/sister concerns also.
Impact on Economy:
In the current phase of growth moderation in Indian Economy, the issue of rising NPA has
assumed critical importance for the banking industry. It is a well-accepted fact that the
quantum of NPAs in loan portfolio of banks varies inversely with economic conditions.
During slowdown, NPAs rise and impact the profitability of the banks. If the NPAs of the
Banks rise the and impact the profitability of the banks. If the NPAs of the Banks rise the
funds will be blocked and the banks will not be in a position to finance a new project. Due to
the stressed assets of banks, the economy of a country will be affected in a number of ways
which are as below:
i. Less investment: Due to high level of stressed assets in a particular project/area

others also will be hesitant to invest in those sectors therefore, there will be less
investments.
ii. Credit Creation: At macro level, high NPAs have choked off the supply line of
credit to potential borrowers. Availability of credit to SMEs at competitive rates is
affected including enterprising spirits. There will not be credit creation in the
economy thereby, affecting the growth and ultimately it will paralyze the country.
iii. Asset Creation: Due to less investment, no asset creation will happen thereby capital
formation will be affected.
iv. Less production: due to the less investment in project production will suffer.
v. Increase in unemployment: If there is less investment and no new project there will
be blockage of employment opportunity.
vi. Effect on GDP growth: If there is stressed assets or a high level of NPAs in the
banks huge amount of funds is blocked in the system which would otherwise have
been invested effectively to generate employment and income thereby contributing to
the GDP in the economy.
vii. Down-gradation of rating: international rating agencies release the rating of the
country for the purpose of investments. If there is high level of NPAs or stressed
assets in the banks the country will be having poor rating accordingly and this will
also affect not only the investments but our exports and imports will also suffer.

viii. Reputation risk: poor rating of a country will affect their reputation and ultimately
affecting foreign assistance/WB/UN.
ix. Insecurity in the society: There will be a general insecure feeling in the society that
the similar type of firm may fail at any point of time and will not get the job in future.
Impact on Employee:
Apart from the impact on banks, borrowers and economy , it also has direct impact on the
employee of the firm which is as below:
i. Insecurity: The employee or the firm will feel insecure in the sense that if the firm is
not able to meet the commitments/obligations of banks then how their future is
secured. Kingfisher airlines is a classic example
ii. Morale: Morale of th staff members will be low in the sense that the firm is a
defaulter and there will be pressure from the bank to make the accounts regular.
iii. Start thinking of other alternatives: The employee will start looking for other
opportunities as the firm is not in a good condition
iv. Efficiency will be affected: The employees efficiency will be affected and will not be
giving their 100% to the firm due to the reasons mentioned above.
v. No incentive: If the firm is not performing well the staff may not get any incentive as
the firm itself is in problem and is not able to meet the liabilities/commitments. On
time and there may be chances of salary reduction too
vi. Career: The career/future of the employee will be adversely affected as the firm is
not performing well in which they are working presently.
vii. Personal/ social life: There will be adverse impact on their personal life where they
will also be questioned for their non- performance for which they are not at all
responsible.
LIMITATIONS OF THE STUDY

● Time constraint.
● A busy schedule of the employees also affects while collecting data from them.
● Employees are not allowed to provide sensitive and in-depth information.
● The study area is based on Union bank Of India , location Kanpur (UP)
● The study is based on only 5 different cases of NPA
COMPANY PROFILE:
Core Members Designation
Shri. B Sreenievasa Rao Chief Financial Officer
Shri D. C. Chauhan Chief Compliance officer
Shri Mangesh Mandrekar Company secretary

Shri A Narayanan Board Secretary
A Glorious Past - A Brighter Future

Union Bank of India was established on 11th November 1919 with its headquarters in the city
of Bombay now known as Mumbai
The Head Office building of the Bank in Mumbai was inaugurated by Mahatma Gandhi, the
Father of the nation in the year 1921, and he said on the occasion:
"We should have the ability to carry on a big bank, to manage efficiently crore of rupees in
the course of our national activities. Though we have not many banks amongst us, it does not
follow that we are not capable of efficiently managing crore and tens of crore of rupees."
His prescient words anticipated the growth of the bank that has taken place in the decades
that followed. The Bank now operates through over 4200+ branches across the country. The
Bank's core values of prudent management without ignoring opportunities is reflected in the
fact that the Bank has shown uninterrupted profit during all 96 years of its operations.
Union Bank has been playing a very proactive role in the economic growth of India and it
extends credit for the requirements of different sectors of economy. Industries, exports,
trading, agriculture, infrastructure and the individual segments are sectors in which the bank
has deployed credit to spur economic growth and to earn from a well diversified portfolio of
assets.
Resources are mobilized through Current, Savings and Term Deposits and through refinance
and borrowings from abroad. The Bank has a large clientele base of over 5.7 crores.
On the technology front the Bank has taken early initiatives and 100% of its branches are
computerized. The Bank has also introduced Core Banking Solution with connectivity
between branches. 100% of the business of the Bank is under Core Banking Solution making
it a leader among its peers in infusion of technology. Many innovative products are
developed using the technology platform to offer an array of choices to customers, adding
speed and convenience to transactions. Technology will also enable the Bank to derive
substantial cost reduction while creating the requisite capacity to handle the ever increasing
volume of business in a competitive environment that offers immense opportunities.
At the end of March 2015 the Bank achieved total business level of Rs. 5,79,627 crore
(Rupees five lakh seventy Nine thousand six hundred and twenty seven crore).
Behind all these achievements is a dedicated team of staff, which is truly cosmopolitan in its
composition. Many generations of members of staff have contributed in building up the
strong edifice of the Bank. The present team of over 36,000 members of staff distinguishes
itself with its customer centricity, willingness to learn and adherence to values enabling us to
be recognized as a caring organization where people enjoy their work and relationship with
customers.
Vision:
“To become the bank of first choice in our chosen areas by building beneficial and lasting
relationship with customers through a process of continuous improvement.”
Mission:
● To be a customer centric organization known for its differentiated customer service

● To offer a comprehensive range of products to meet all financial needs of customers
● To be a top creator of shareholder wealth through focus on profitable growth
● To be a young organization leveraging on technology & an experienced workforce
● To be the most trusted bank, admired by all stakeholders
● To be a leader in the area of financial inclusion
Joint Ventures/Subsidiaries:
In our Corporate Mission Statement, one of the points is “To offer a comprehensive range of
products to meet all financial needs of customers”. In order to move towards our cherished
goal of becoming a financial supermarket, Union Bank of India has setup Joint Ventures with
multinational companies which are well known and recognized as among the leaders in their
area of expertise
● Star Union Dai-ichi: Union Bank of India is distributing Life Insurance products
under corporate agency tie-up with Star Union Dai-Ichi Life Insurance Co. Ltd. (SUD
Life Insurance) which is a Joint Venture of Union Bank of India, Bank of India (two
leading Public Sector Banks in India) & Dai-ichi Life Holding Inc., Japan (a leading
Japanese Life Insurer in the Life Insurance market).
The Company has an authorized capital of Rs. 250.00 Crores. Consequent to increase
in FDI limit in insurance sector, in terms of revised shareholding pattern, shareholding
of Union Bank of India, Bank of India & Dai-ichi Life Holding Inc. is 26%; 30%;
44% respectively.

Star Union Dai-ichi Life, with the strength of the domestic partners in the Indian
financial sector coupled with Dai-ichi Life’s strong domain expertise, is expected to
become a strong player in the Indian Life Insurance market in the long run. The
Company offers various life insurance products to cater to the needs of different
Customer Groups.
● Union Asset Management Company: Union Mutual Fund (Formally Union KBC
Mutual Fund) is sponsored by Union Bank of India. The Mutual Fund was originally
co-sponsored by Union Bank of India and KBC Participations Renta, a 100%
subsidiary of KBC Asset Management NV, Belgium.Union Bank of India acquired
the entire shareholding held by KBC Participations Renta in Union Asset
Management Company Private Limited (Formally Union KBC Asset Management
Company Private Limited) and Union Trustee Company Private Limited (Formally
Union KBC Trustee Company Private Limited), which constituted 49% (forty nine
per cent) of: (a) the paid-up equity share capital of Union Asset Management
Company Private Limited; and (b) the paid-up equity share capital of Union Trustee
Company Private Limited. The Board of Directors of Union Asset Management
Company Private Limited and Union Trustee Company Private Limited approved the
aforesaid transfer of shares on September 20, 2016. Consequently, Union Bank of
India has become the sole Sponsor of Union Mutual Fund.
Products:
Personal Corporate
Accounts and Corporate Loans

Deposits Loan Syndication and
Loans— Debt Restructuring
a)Retail b)MSME Corporate FAQs
Wealth Other services
Management-
Insurance, Mutual
funds and Demat
International
Account
Schemes /Products/
Government
Services
KRUPANIDHISchemes
DEGREE COLLEGE 34
NRI services
Financial
Treasury and other
Inclusions
Services available for Customers:
Digital Banking:
Application Based Banking:
1. Umobile
2. mPassbook and Selfie
3. Ucontrol
4. BHIM Union Bank Pay
5. Digipurse
6. Union Sahyog
7. BHIM Aadhar – Union Bank
Internet Banking:
1. Overview
2. Online security
3. Demo
4. Bharat Bill Payment System
5. Pay Tax Online
6. Online Shopping
Self Service Banking:
1. Credit card Log-in: Union Credit Card Bill

2. Online Account Opening: Savings Account
3. Online Loan Application: a) Home loan
b) Vehicle Loan
c) Education Loan
d) Loan against Property
e) Agriculture Loan
f) Apply Online MSME loan (up to 200 lacs)
g) Pradhan Mantri Mudra Yojana
h) Online Debit Card Application
4. Loan Application Status
5. Green Pin
6. Self ATM Pin Generation through IVR

7. Link your Aadhar: a) Link your Aadhar

b) Consent Form for Aadhar and Mobile Seeding
c) Check your Aadhar Linked Status
d) Aadhar Authentication
8. Tabulous Banking
9. Call Centre 24x7: a) Call Centre Overview
b) Union Reach- IVR Banking
10. Digigaon
11. Union Cashless Campus
12. ATM Banking
13. SMS Banking
14. Point Of Sale Terminal
15. IMPS
16. Various Cards

ORGANISATIONAL STRUCTURE:

Non-Performing Assets on Home Loans at Union bank:
1.Union Home:
Features:
 Purchase/construction of house/flat
 Purchase of plot and construction of house thereon
 Repairs/improvements/ extension of the existing residential property
 Take-over of housing loan availed from another bank/FI
Eligibility:
 Indian citizen above 21 years

 Individual, either singly or jointly with other family members viz. father, mother, son
and/or spouse, who have regular sources of income as co-applicants.
 Siblings, i.e. Brother-sister, brother-brother, sister-sister can be permitted as a
applicants/co-applicants subject to the property must be in the joint names of the
siblings
 NRIs are also eligible for the home loan.
Quantum of Loan:
 Depending on repayment capacity of the borrower and value of property

 Maximum Rs. 30 lakhs for repairs
Margin, i.e. your share:
 20% of the total cost of the purchase/construction of the house/flat for loans upto Rs.
75 lakhs
 25% of the total cost of the purchase/construction of house/flat for loans Rs. 75 lakhs
to up to Rs. 2 crores
 35% of the total cost of the purchase/construction of house/flat for loans above Rs. 2
crores
 20% of total cost of the repairs
Moratorium Period:
 Moratorium period up to 36 months
Repayment:
 Repayment period of up to 30 years

 10 years in case of repairs
 Flexible methods of repayment
Rate of interest and processing charges:
 50% concession in processing charges based on CIBIL score, valid till 31.03.2019
 Valuation/Legal/Stamp Duty/CERSA/Memorandum registration charges as per
actuals
Repayment Penalty:
 Floating Rate loans

 There is no prepayment penalty if loan is prepaid from own verifiable sources or

taken over by other banks/FIs
 Fixed Rate Loans
 There is no prepayment penalty if loan is prepaid from own verifiable sources
 A take-over penalty of 2% is charged on the average outstanding balance of the
preceding 12 months if the loan is taken over by any other bank/FI or adjusted by the
borrower in lumpsum from any third party/source ( except genuine scale)
Security:
 Equitable mortgage (EM) of the residential property

 If the house/flat proposed to be purchased is yet to be constructed or is under
construction, interim security may be required (till the period of completion)
Guarantee:
 Third party guarantee is not mandatory for resident loan

 One/two guarantors of the Indian Residents, having means equivalent to that of that
loan amount, is to be provided by the NRI applicant
Insurance:
 Property insurance is compulsory to the tune of the value of the property
(list of documents)
UNION AWAS :
Purpose:
One can avail the Union Awas to purchase/construction of house, purchase of plot from
government agencies and also for repairs/improvements/extention of the existing residential
property.

Eligibility:
 Indian citizen above 21 years having regular source of income not less than Rs. 48000
p.a
siblings
Quantum of Loan:
 For purchase or construction of house, maximum loan amount up to Rs. 7 lakhs for
semi urban areas and up to Rs. 5 lakhs for rural areas
 For repairs of house, maximum loan amount up to Rs. 3 lakhs for semi urban areas
and up to Rs. 2 lakhs for rural areas
Margin, i.e your share:
 20% of the total cost of the purchase/construction of house

 20% of the total cost of the plot
 20% of the total cost of the repairs/renovations
Moratorium Period:
 Moratorium Period of up to 36 months
Repayment:


Rate of Interest and Processing Charges:
 No processing charges ( offer valid till 31/03/2017 )

 Valuation/Legal/Stamp Duty/CERSA/Memorandum registration charges as per
actuals
Prepayment Penalty:
 There is NO prepayment penalty if loan is adjusted by the borrower from his own
verifiable legitimate sources
 A penalty of 2% on the average balance of the preceding 12 months, if the loan is
taken over
Security:

 If the house proposed to be purchased is yet to be constructed or is under construction,
interim security may be required (till the period of its completion)
Guarantee:
 A guarantee of sufficient means is required

Insurance:
 Property insurance is compulsory to the tune of the loan amount
UNION SMART SAVE:
Features and Benefits:

Under the smart save product, over and above the regular EMI for the loan, customers can
deposit additional amount with an option to withdraw such excess amount at a later date as
per their Requirement.
As the excess funds helping reducing the loan outstanding, a lower interest is charged in the
loan account (till such excess funds are available in the account). In the ther words this option
helps the customers to maximise their savings on interest without sacrificing ones financial
liquidity)
Purpose:
 Purchase/construction of house/flat
 Purchase of plot and construction of the house thereon
 Repairs/improvements/extension of the existing residential property
 Take-over of housing loan availed from the another bank/FI
Eligibility:
 Indian citizen above 21 years

siblings
 NRIs are also eligible for the home loan.
Quantum of Loan:
 Depending on repayment capacity of the borrower and value of property

 Maximum Rs. 30 Lakhs for Repairs

 20% of the total cost of the purchase/construction of house/flat for loans up to Rs.
75% lakhs
lakhs to Rs. 2 crores
crores
 20% of total cost of the repairs
Moratorium Period:
 Moratorium Period of up to 36 months
Repayment:

Rate of interest and Processing Charges:
 No processing charges(offer valid till 31/03/2017)

 Valuation/ Legal/stamp Duty/CERSA/ Memorandum register charges as per actuals
Prepayment Penalty:
 Floating rate loans:

taken over by the other banks/FIs
 Fixed rate loans:
 There is no prepayment penalty if loan is prepaid from own verifiable sources
 A take-over penalty of 2% is charged on the average outstanding balance of the
preceding 12 months if loanis taken over by any other bank/FI or adjusted by the
borrower in lumpsum from third party/source (except genuine sale)

Security:

 If the house/flat proposed to be purchased is yet to be constructed or is under
construction, interim security may be required (till the period of its completion)
Guarantee:
 Third party guarantee is not mandatory for resident Indian

 One/two guarantors of Indian Residents, having means equivalent to that of the loan
amount, is to be provided by the NRI applicant
Insurance:
 Property insurance is compulsory to the tune of the value of the property
UNION TOP-UP:
 Facilitates existing home loan borrowers to vail additional loan, who have repairs 24
EMIs in the existing loan account, to meet any expenditure with respect to the house
such as repairs, renovations, furnishing etc
Loan Quantum:
 Minimum- Rs. 0.50 lakh

 Maximum- Depending upon the repayment capacity (subject to Outstanding under
Union Home Loan and proposed top-up loan put together should not exceed the
original housing loan limit)
 The processing charges applicable are 0.50% of the loan amount

 EM of the existing housing loan will be extended as security

 Repayment tenure of upto % years or residual period of housing loan,whichever is

earlier
PRADHAN MANTRI AWAS YOJANA(PMAY)
Purpose:
To fulfil the housing requirement of urban poor including slum dwellers by providing central
assistance from the government. The central assistance will be provided for:
 Purchase of new/old Residential Unit
 Construction of a residential Unit
 Purchase of plot and construction of a residential Uni thereon
 Extension of existing Residential unit i.e addition of rooms,kitchen,toilet,etc
 Take-over of housing loan vailed from another bank/FI
Eligibility:
 Resident Indian citizen and Non Resident Indian, age group of 21 – 70

years belonging to economically weaker section (EWS - household income less than
Rs.3.00 lakh per annum) or Low Income Group (LIG- household income more than
Rs.3.00 lakh and upto Rs.6.00 lakh) or Middle Income Group (MIG-I – household
income more than Rs.6.00 lakh and upto Rs.12.00 lakh) or Middle Income Group
(MIG-II- household income more than Rs.12.00 lakh and upto Rs.18.00 lakh
 Siblings, i.e. brother-sister, brother-brother, sister-sister can be permitted as a
siblings.
 For EWS/LIG, in case of new purchase, the Property should be in the name of female
head of the family or in the joint name of male head of the family and his wife. Only
in cases where there is no adult female member in the family, the house can be in the
name of male member of the family.

 In case of EWS/LIG, if the plot is purchased in the name of male person of the family
before the validity of the scheme i.e. 17.06.2015, it will be covered under PMAY.
 The property proposed to be acquired / constructed should be in Statutory Town as
per Census 2011 (To see the list click here)
 The applicant or his/her family members should not own any pucca house/dwelling
unit in any part of the country.
 The applicant or his/her family members should not be a beneficiary of any other
components of Pradhan Mantri Awas Yojna.
Area of Construction:
Category EWS LIG MIG-I MIG-II
Area of construction <=30 Sq. <=60 Sq. Meters <=160 Sq. <= 200 Sq.
Meters Meters Meters
Note:
 However, in case of new purchase of house by EWS/LIG, the larger area may be
allowed than the prescribed area. But when the loan is for extension of house by
EWS/LIG, the extension must be within the prescribed area.
 No extension will be allowed for MIG- I/MIG-I
Income Proof:
 Latest salary slip/Form 16/ITR for the last 3 years to be submitted
 In case applicant does not possess any of the above, a self certificate by applicant
regarding income must be submitted.
Quantum of loan
Category EWS LIG MIG-I MIG-II

Loan amount eligible for Rs. 6.00 Rs. 6.00 Rs. 9.00 Rs. 12.00
subsidy Lakhs lakhs lakhs Lakhs
Interest Subsidy 6.50% 6.50% 4.00% 3.00%

Note:
 For EWS/LIG, the maximum quantum of loan is restricted to Rs.30 lakh subject to
repayment capacity of the applicant/s supported by acceptable income proof
i.e.Latest Salary Slip/Form16/ITR for the last 3 years.
 The maximum quantum of loan is restricted to Rs.6.00 lakh, where self declaration of
applicant is considered as income proof.
 GOI will provide interest subsidy to eligible home loan borrower for 20 years only.
 The Interest subsidy will be limited to the amount mentioned in each category
(EWS/LIG/MIG I/MIG II), even if the loan amount exceeds the maximum
ceiling specify for subsidy.
Margin:
 For EWS/LIG:
For Purchase/construction of Residential Unit 10%
For purchase of plot 20%
 For MIG-I/MIG-II:
Quantum of Loan Margin
Up to 75 lakh 20%
Up to 75 lakh & up to 200% 25%
 For Purchase of Plot:
Margin(on registered value) for From Govt. Agencies Private entities

loans
Up to 200 lakhs 25% 35%

 For repairs and renovations of up to 18 months for EWS/LIG and 36 months for MIG-
I/MIG-II
 In case of purchase of completed residential unit,no moratorium is permitted.
Repayment:

 Repayment to be made as per EMI method only.
 Servicing of interest during moratorium period is mandatory.
Rate of Interest and Processing charges:
 No processing charges for loan amount eligible for interest subsidy mentioned
under each category (EWS/LIG/MIG I/MIG II).
 However, for higher loan amount, normal processing charges will be applicable
for loan amount, exceeding the prescribed limit, for each category i.e. 0.50% of
the loan amount subject to a maximum of Rs. 15000/- plus GST.
 Rs.1000/- per application in case of EWS/LIG & Rs.2000/- per application in case
of MIG-I/MIG-II will be reimbursed by GOI through CNA(NHB) towards
processing charges.
 All other charges like Valuation / Legal / Stamp Duty / CERSAI / Memorandum
of registration to be borne by the applicant.
Note:
 No processing charges ( offer valid till 31/03/2018)
Prepayment Penalty:

taken over by other banks/FI

Security:
 Equitable mortgage (E.M.) of the residential property. 

 If the house/ flat proposed to be purchased is yet to be constructed or is under
construction, interim security may be required (till the period of its
completion).
Guarantee:
 Third party guarantee is not mandatory for Resident Indian. 

 One/two guarantors of Indian Residents, having means equivalent to that of the
loan amount, is to be provided by the NRI applicant.
Insurance:
 Property insurance is compulsory to the tune of the value of the property. 
Let us assume a case under the Pradhan Mantri Awas Yojana:
VEHICLE LOAN:
UNION MILES:
Purpose:
This scheme is a special scheme to purchase a new or old (up to 3 years) four-wheeler,
and two-wheeler.
Eligibility:
A person has to meet the following criteria to avail the loan:
 Resident Indian citizen and Non-Resident Indians (NRIs) holding valid
license.
 Minimum age - 18 years and maximum age - 70 years.
 Individual, either singly or jointly with other family members viz. father,
mother, son, spouse or daughter as co-applicants.
 Companies / Firms for purchase of vehicle for usage by their Directors /
employees

Quantum of Loan:
Vehicle Maximum Quantum of
Loan
New 4- wheeler Rs. 125 lakh
Old 4- wheeler (not older than 3 years) Rs. 20 lakh
New 2- wheeler Rs. 10 lakh
 15 % of on-road price (Vehicle Cost + Registration Charges +

Insurance + Road Tax)
 40 % of old vehicle's valuation cost
Repayment:
Repayment Period Maximum repayment tenure
New 4- wheeler 7 years
Old 4- wheeler (not older than 3years) 5 years
 50% concession in processing charges based on CIBIL score,

valid till 31.03.2019
Prepayment:

 There is NO prepayment penalty if the loan is adjusted by the borrower from his own
taken over by any other Bank /FI or adjusted by the borrower in lumpsum from any
third source/party (except genuine sale).
Security:
 Hypothecation of vehicle purchased out of Bank's finance

 Bank's lien to be noted with the Road Transport authorities
Guarantee:
 Guarantee of the spouse is required.

 In case borrower is unmarried, 3rd party guarantee of sufficient means
 In case of NRIs guarantee of one/two local resident Indian of sufficient means is
required
 In case of companies guarantee of one promoter/director is required.
UNION MILES- FOR BSNL EMPLOYEES:
Eligibility:
A person has to meet the following criteria to avail the loan:
 Should be permanent employee of BSNL or employee on permanent deputation from

Department of Telecom (DOT) to BSNL having regular source of income and having
salary account with our bank.
 Individual, either singly or jointly with spouse
Quantum of Loan:
Maximum quantum of loan

New 4-wheeler Rs. 125 Lakh
Old 4-wheelers (not older

Rs. 20 Lakh
than 3 years)
New 2-wheeler Rs. 10 Lakh
 15 % of ex-showroom price for New 4-wheeler
 10 % of ex-showroom price for New 2-wheeler
 33 % of old vehicles valuation
Repayment:
Repayment period Maximum repayment tenure
Old 4- wheeler (not older than 3 years) 5 years
New 2-wheeler 5 years
 No processing charges
Prepayment Penalty:
 There is NO prepayment penalty if the loan is adjusted by the borrower from his own
taken over by any other Bank/FI or adjusted by the borrower in lumpsum from any
third source/party (except genuine sale)

Security:
 Hypothecation of vehicle purchased out of bank’s finance

 Bank’s lein to be noted with the Road Transport authorities
Guarantee:
 Guarantee of the spouse is required

 In case, borrower is unmarried, 3rd party guarantee of sufficient means
PERSONAL LOAN:
Union Personal Scheme for Salaried Individual other than Government Employees:
Purpose:
There are many among us who might be facing difficulty in purchasing by paying a lumpsum
amount. But we would be comfortable paying small instalments on a monthly basis. The
Union Personal loan plays an important role here. It helps you to avail loan to meet personal
expenses such as purchase of consumer durable, etc.
Eligibilty:
Tie-Up (A1) Non-Tie-Up (A2)
 Permanent/confirmed employees of  Permanent/confirmed employees of

reputed private institutes/ reputed private institutes/organization
organisations in India in India
 These organizations/institutes should  The applicant should be customer of
be operating within the jurisdiction of the bank for at least 6 months prior to
respective ZLCC considering the loan proposal
 Applicant may or may not maintain  Applicant should necessarily maintain
salary account with us salary account with us.
Note:
 Minimum age of the applicant should be 18 years

 The applicant has reasonable residual service to ensure that the entire loan is repaid
one year prior to retirement
 Government employees and staff members of our bank are not eligible under the
schemes
Quantum:
Tie-Up (A1) Non Tie-Up (A2)
 Maximum of Rs.10 lakh  Maximum of Rs.5 lakh (new/First time borrowers)

 Maximum rs.10 Lakh (Existing borrowers with a
satisfactory repayment record of 2 years)
Margin : Nil
Rate of Interest:
Tie-Up(A1) Non-Tie-Up (A2)
1Y-MCLR+ 4.00% (floating) 1Y-MCLR+5.00% (floating)
Processing Charges:
 0.50% of the loan amount, subject to minimum of Rs. 500, plus applicable GST
Repayment Tenure:
The maximum repayment period will be earlier of the following two:
 5 years
 One year prior to retirement
Security:
 No security other than the guarantees
Guarantee:

 Guarantee of one co-employee- however , one employee should not be guarantor for
more than two employees
 Guarantee of spouse- However, if the applicangt is unmarried/widow/widower, then
guarantee of a 3rd party having equivalent means and having Transunion CIBIL score
of minimum 700 & above (equivalent score with other credit bureau) to be obtained.
Note:
 Monile number and PAN are mandatory, whereas Aadhar is mandatory except for
exempted states from North-Eastern Region.
UNION PERSONAL- NON SALARIED:
Purpose:
There are many among us who not in service & earn their livelihood by doing business.

A Case Study Analysis On Non-Performing Assets at Union Bank of India

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A CASE STUDY ANALYSIS ON NON-PERFORMING ASSETS AT UNION BANK OF INDIA

History of Indian Banking Sector:

KRUPANIDHI DEGREE COLLEGE 1

KRUPANIDHI DEGREE COLLEGE 2

From World War I to Independence:

Years Number of Banks that Authorized Capital (Rs. in Paid-up Capital

KRUPANIDHI DEGREE COLLEGE 3

KRUPANIDHI DEGREE COLLEGE 4

Current structure of Banking Industry in India:

KRUPANIDHI DEGREE COLLEGE 5

TITLE OF THE STUDY

STATEMENT OF THE PROBLEM

SCOPE OF THE STUDY

OBJECTIVES OF THE STUDY

Thus the basic objective being:

● To understand about Non-performing Assets of banks based on different cases

KRUPANIDHI DEGREE COLLEGE 6

TOOLS FOR DATA COLLECTION:

Tools for Data Collection

Sample Area: Work was done at KANPUR

1. A Non-performing asset (NPA) is defined as a credit facility in respect of which the

Derive a meaning from the definition:

KRUPANIDHI DEGREE COLLEGE 7

Non-Performing Asset is a double-edged sword. While on the other hand , it ceases

Income Recognition, Asset classification and provisioning Norms (IRAC norms)

Nature of loan When it becomes NPA

NPA due to technical reasons

KRUPANIDHI DEGREE COLLEGE 8

In case of To be considered as overdue

WHAT IS OUT OF ORDER?

● Outstanding balance remaining continuously in excess of sanctioned limit/drawing

All NPAs are to be classified into the following 3 categories:

Sub Standard Asset NPA less than equal to 12 months

KRUPANIDHI DEGREE COLLEGE 9

Substandard Advances After 12 months slip to Doubtful

What are the income recognition and provisioning norms?

No income to be recognized in NPA accounts. Any unrecovered interest should be reversed

Substandard Accounts Doubtful accounts Loss accoun

KRUPANIDHI DEGREE COLLEGE 10

GROSS NPA = Total outstanding NPAs

NET NPA = gross NPA less

What is provision coverage ratio?

Meaning and purpose of provision coverage ratio:

KRUPANIDHI DEGREE COLLEGE 11

Objectives of Credit Monitoring

1. Periodical monitoring: Periodic monitoring of the actual performance of the assisted

KRUPANIDHI DEGREE COLLEGE 12

3600 view of borrower:

✓ First: Discover his credibility in the market or his work place.

KRUPANIDHI DEGREE COLLEGE 13

comments on production capacity with regard to licensed, installed, utilized capacity,

KRUPANIDHI DEGREE COLLEGE 16

should be under stressed category for technical reasons like non-receipt of

21. Consortium Meeting Minutes

Cut Off Limit For Monitoring:

Limit Monitoring Authority

Early Warning Signals:

Signals available within the bank:

● Non- compliance with terms of sanction

KRUPANIDHI DEGREE COLLEGE 18

● Ad-hoc/excess/bill purchase overdue, LC devolvement/guarantee invocation

● Delay in project implementation

KRUPANIDHI DEGREE COLLEGE 19