Presentation on Grand Project 7412

8/2/2019 Presentation on Grand Project 7412

1/36

Presentation

on

Management of NPA in PNB

Parvinder kumar

MBA IV, 46


2/36

Objectives of study

The basic idea behind undertaking the Grand Project on NPA is :

To know about the concept of NPA

To understand the causes & effects of NPA

To study the past trends of NPA .

To evaluate NPAs (Gross and Net) in PNB and other public sector banks,

Pvt. Sector banks & foreign banks operating in INDIA.

To see whether INDIAN banking industry is following international norms

regarding NPA or not.


3/36

Indian banking history

Started with the establishment ofGeneral bank of India in 1786

Presidency banks (Bank of Bengal, Bank of Bombay, Bank of madras

established in 1809,1840,1843 respectively )

PNB was the first Indian bank established in 1894.

Imperial bank of India now SBI in 1921

1949: Enactment of Banking Regulation Act.

1969: Nationalization of 14 major banks with deposits over 50 crore.

1980: Nationalization of seven banks with deposits over 200 crore.


4/36

PNB

Established in 1894

Total branches 5674 (as on march 2012)

Circle office 65

Employees 60,000(approx)

Revenue 31,206 crore (2011)

Net income 4,574 crore (2011)

Total assets 3,73,786 crore (2011)

fortune India 500 Ranking #26 in 2011 Forbes global ranking #1243 in 2000


5/36

Management (PNB)

Board of Directors

Shri. K.R.Kamath

Chairman & Managing Director

and Dy. Chairman of Indian Banks Association

Shri. Rakesh Sethi

Executive Director

Smt. Usha AnanthasubramanianExecutive Director


6/36


7/36

NPA

Concept of NPA was introduced in 1991

A loan or lease that is not meeting its stated principal and interest

payments. Banks usually classify as non performing assets ,all loans which

are more than 90 days overdue.

More generally an asset which is not producing income after a statedperiod is called NPA


8/36

Classification of assets

Standard Assets

Sub-standard Assets (less than 12 months)

Doubtful Assets (more than 12 months)

Loss Assets (declared loss in auditing)

Provision for NPAs Standard Assets (0.25% )

Sub-standard Assets( 10% )

Doubtful Assets(20 to 100% ) Loss Assets( 100% )


9/36

Causes of NPA

External Ineffective recovery tribunal

Willful Defaults

Natural calamities

Industrial sickness

Lack of demand

Change on Govt. policies

Internal Defective Lending process

Improper SWOT analysis

Inappropriate technology

Poor credit appraisal system

Managerial deficiencies

Absence of regular industrial visit

Re-loaning process


10/36

Effects of NPA

Reduce profitability

Reduce liquidity

Involvement of Management

Credit loss

Impact on economy


11/36

Types of NPA

Gross NPA Gross NPA reflects the quality of

the loans made by banks

(standard, sub-standard, doubtful

& losses)

Gross NPA

Gross NPA ratio == -----------------

Gross advances

Net NPA

Net NPA shows the actualburden of banks and is received

after deducting the provision

gross NPA--provision

Net NPA ratio== -------------------------------

gross advances--provision


12/36

Tools to recover NPA

Recovery

Compromise/negotiable settlement

Establishment of Asset Recovery Branches

Lok adalat & debt recovery tribunal


13/36

Research methodology

Research can simply be defined as search for knowledge; it is an art of

scientific investigation.

In this project report a research has been conducted to know about NPA

of PSB , PNB organization and PNB branch INDORA, reasons of NPA and

branch policies to recover NPAs.

Research design (descriptive study)

DATA

Both primary and secondary data has been used in the project.


14/36

Data analysis

Data analysis part covers the data of

Public sector banks

Pvt. Sector banks &

foreign banks


15/36

(A) NPA of public sector banks (in crore)

s.n

o

PSB GROSS NPA NET NPA

2009 2010 2011 2009 2010 2011

1 SBI & associates18,447 23,533 30,393 10,869 12,830 14,791

2 PNB2,507 3,214 4,379 78 117 238

3 Bank of Baroda

1,843 2,401 3,153 449 602 7914 Bank of India

2,471 4,883 4,812 628 2,207 1,9455 Central bank of

India 2,317 2,458 2,394 1,063 727 8476 Allahabad bank

1,078 1,222 1,648 422 470 736


16/36


17/36

(B) NPA of Pvt. sector banks (in crore)

s.no Pvt. Bank Net NPA to NET Advances (in percentage)

2009 2010 2011

1

Axis Bank Ltd. 0.40 0.40 0.292

HDFC Bank Ltd. 0.63 0.31 0.193

ICICI Bank Ltd. 2.09 2.12 1.114

Indusind Bank Ltd. 1.14 0.50 0.285 Kotak Mahindra Bank

Ltd. 2.39 1.73 0.726

YES Bank 0.33 0.06 0.03


18/36

Net NPA to advances in %

0

0.5

1

1.5

2

2.5

3

1 2 3

Axis Bank Ltd.

HDFC Bank Ltd.

ICICI Bank Ltd.

Indusind Bank Ltd.

Kotak Mahindra Bank Ltd.

YES Bank


19/36

(C ) NPA of foreign banks (in crore)

s.no.

Foreign bank Net NPA

2009 2010 2011

1 HSBC Bank Ltd. 391 543 2492 The Royal Bank of

Scotland NV366 261 174

3 Standard Chartered

Bank514 580 132

4 Citibank1,051 784 493

5 American Express

Banking Corporation 30 14 16


20/36

Net NPA of foreign banks

0

200

400

600

800

1000

1200

1 2 3

HSBC Bank Ltd.

The Royal Bank of Scotland NV

Standard Chartered Bank

Citibank

American Express Banking Corporation


21/36

PNB


22/36

AdvancesV deposits of PNB (figures in crore)

Year 2007 2008 2009 2010 2011deposit 1,39,860 1,66,457 2,09,760 2,49,330 3,12,,899advances 96,597 1,19,502 1,54,703 1,86,601 2,42,107

0

50000

100000

150000

200000

250000

300000

350000

1 2 3 4 5

deposit

advances


23/36

CD ratio

year 2007 2008 2009 2010 2011deposit 139860 166457 209760 249330 312899credit 96597 119502 154703 186601 242107ratio 69.06 71.79 73.75 74.84 77.37

64

66

68

70

72

74

76

78

1 2 3 4 5

CD ratio

ratio


24/36


25/36

Net NPA ratioyear 2007 2008 2009 2010 2011ratio 0.76 0.64 0.17 0.53 0.85

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1 2 3 4 5

Net NPA ratio

NetNPA

ratio


26/36

Sectoral segmentationSector amountPriority sector 2742Of which agriculture 1171Of which MSME 1349Other 222Non priority sector 1637

Priority sector

Non priority

sector


27/36

PNBBranch indora

Established in 1971


28/36

Deposit V advances

Year March 2010 March 2011 Feb 2012Deposit 34.18 41.72 49.20Advances 10.23 12.43 15.03

0

5

10

15

20

25

30

35

40

45

50

1 2 3

Deposit

Advances


29/36

CD ratio of PNB indorayear March 2010 March 2011 Feb 2012deposit 34.18 41.72 49.20credit 10.23

12.43

15.03

ratio 29.92 29.79 30.54

29.4

29.6

29.8

30

30.2

30.4

30.6

1 2 3

CD ratio

CDratio


30/36

% of gross NPA to advancesyear March 2010 March 2011 Feb 2012advances 10.23 12.43 15.03Gross NPA 53.12 lac 25.60 lac 65.28 lacpercentage 5.19 2.05 4.34

0

1

2

3

4

5

6

1 2 3

% of NPA to advances

% of NPA toadvances


31/36

% of indora branch to NPA of PNB

year 2010 2011 2012Gross NPA of PNB

2767 3645 4379Gross NPA of indora

branch (in lac)

53.12 25.60 65.28percentage .019 .0071 .014

0

0.002

0.004

0.006

0.008

0.01

0.012

0.014

0.016

0.018

0.02

1 2 3

Percentage

Percentage


32/36

findings

I found that the advances of the bank are increasing continuously

which leads to increase in the profits also.

The CD ratio of the bank is good which makes it position strong.

The recovery system of the bank needs to be stronger which can help

the bank to make its position better.

The fluctuations in the amount of NPA were due to various reasons

(internal & external). Various bank loans are not utilized for the same purpose for which

they are granted specially in agricultural sector.

NPA of PNB has been reduced to 2 % which is very good and showing

the strong position of the bank.

Since PNB is the second largest Indian public sector bank and has agreat opportunity of growth but various times due to some factors

bank uses conservative measures which hindrance for the bank to

grab the opportunity.


33/36

recommendations Each bank should have its own independence credit rating agency which

should evaluate the financial capacity and credit history of the borrower.

There should be proper monitoring of the restructuring accounts because

there is every possibility of the loan slipping into NPAs

Willful default of bank loans should be made a criminal offence.

Settlement procedure should be more strict and faster.

Strong laws need to be enacted to deal with the problem of NPA.

Proper training is important to the staff of the banks at the appropriate

level so that they should deal with the problem of NPAs

No loan is to be given to a group whose one or the other undertaking

became a defaulter.

The overall banking environment should be improved through reduction

of govt. intervention in credit mgmt.


34/36

Limitations

It was critical for me to gather the financial data of the bank so the better

evaluation of the performance of the bank is not possible.

Since my study is based more on the secondary data, the practical

operations as related to the NPAs are adopted by the bank are not

learned.

Since the Indian banking sector is so wide, so it was not possible for me to

cover all the banks of the Indian banking sector.

There is also variation in figures available at different sources which

creates confusion.

The RBI norms for the classification of assets / NPAs are available on a paysite & not publicly available through any source.


35/36

conclusion As NPA is big threat to profitability of all banks and need to be managed

effectively

NPA of PSB is much more than Pvt. Sector banks and foreign banks.

As for as PNB is concerned have less amount of NPA as compare to other

PSB.

However with the introduction ofSARFAECI ACT (The Securitisation and

Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002) banks

can issue notices to defaulters to repay their loans. Also, the Supreme

Court has given the banks the freedom to sell mortgage assets of the

borrowers, if they do not respond to the legal proceedings initiated by

lender. This enables banks to get rid of sticky loans thereby improving

their bottom lines.

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.


36/36

Documents

Presentation on Grand Project 7412