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Name of Student Title of the Project

: SHIPRA NEGI : Non Performing Assets with banks necessitates thorough examination both extensively and intensively with reference to their identification, management and resolution.


: It is evident that Indian Banking industry plays a major role in improving the socioeconomic condition of the public in general as also building a sound and viable infrastructure of the nation as a whole. However, to keep pace with the above ideas , the Indian banks have to take appropriate and urgent measures to reduce the burden of rising trend in the cost of financial intermediation specially the Non Performing Assets (NPAs) being the major problem.

Objective of Study

: The present situation of heavy accumulation of NPAs is alarming. It invites attention of banks to take effective action to recover more than Rs.1,20,000 crore from borrowers, which otherwise could have been utilized for other developmental schemes of the nation .The situation also resulted in litigation with borrowers and taking harsh steps to recover the money. It is therefore felt , that the problem needs thorough examination both extensively and intensively to arrive at some conclusions which may help in resolving the problem.

This necessitates a detailed and meaningful study of the data to be collected from the lenders and find out the weak spots where NPAs position is alarming and needs immediate attention of banks to recover the money at the shortest period of time. To understand the position of NPAs in deeper perspective and find out the best possible measures to be taken to manage them effectively. The data is to be collected from the lenders will be analyzed on the basis of size, sectoral, geographical, industry-wise and region-wise segmentations and also operating status. The data to be analyzed on above basis will be exhibited on the graphic / chart form with a view to make the position of NPAs more understandable. This exercise will give us an idea of difficult zones where more attention is required to be focused for effective management. Besides above exercise the causes responsible for delay/non-recovery of Loans also need to be pin-pointed .For this, the study will cover RBIS findings on External and internal factors, rate of interest on borrowed money, willful defaulting, diversion of funds from short term to long term by borrowers and inadequacy of early warning systems, if any with the financial institutions. Classification procedure for NPAs with reference to RBIs instructions and legal provisions will also need to be examined.

The main objective of the above study will be to find out the causes of NPAs accumulation to such a huge extent. To find out the weaknesses with NPAs management systems viz. skills , resources, procedures and legal & regulatory regime under which the lenders are operating. Based on the above study and exercise, certain recommendations will be developed for effective and result oriented management of NPAs. For such a study and analysation, I have chosen the position of NPAs as at the end of the year ended 31 March 2007. The data for such analysis will be collected from various lenders and other necessary information from various publications. Methodology : For studying the characteristics of Non-Performing assets Management strategies being followed in the Indian Banking system, I will adopt the following approach: Study of incidence of NPAs on the basis of their characteristics in sizes, sectoral , geographical , industry-wise and region-wise segmentation as well as operating status. This will be done on sample basis using data to be collected from the lenders viz. public / private sector banks and data available with other sources viz. Economic Survey of India , IBA bulletins, magazines and newspapers. The study will cover financial positions of gross NPAs at the end of financial year ended 31 March 2007. About 40% of the gross NPAs will be covered in the data of about 6 to 7 participant lenders.

Sources of Information : In carrying out the study , I will have to obtain the information from the lenders and rely on the information to be supplied by them. It will not be possible for me to verify the data to be provided by the leaders. No representations are also possible regarding the accuracy of the information. Following sources of information will also be utilized for carrying the study:(i) (ii) (iii) NPA data of IBA. Publications of RBI. Other published information / repots. CRISIL, Fitch rating, journal and magazines etc. Expected Contribution From Study : By studying the above mentioned lines, I am confident that some new ideas would develop in my mind and I would be able to pin point the spots, where there are weaknesses in managing the NPAs and develop some credible remedies to have some more control over the alarming situation of NPAs which our banking industry is facing at the moment. Limitations : Sometimes, due to government policies and political pressure the banks management fail to exercise due control on loans/ advances, and feel helplessness. As regards this study is concerned, I would have been much benefited in my scrutiny if I would have provided some bank records for study. However, that will not be possible.

Recommendations And Suggestions : These will find place in the main Project Report, when submitted after approval of this synopsis.

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