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Management of nonperforming assets in IOB

A PROJECT REPORT ON NON PERFORMING ASSETS OF


COMMERCIAL BANKS: A CASE STUDY OF INDIAN OVERSEAS
BANK BANK
Submitted to Gulbarga University.
In partiall fulfillment of the requirement of the award of
Bachelor of Business Management,
Gulbarga University, Gulbarga.
Submitted by
Miss. R.AMALA
Reg No:!"#$"%&
Under the able Guidance of
M'. G.S As()*+( N*'*,*-*
M.Co./ M.B.A/ M.0(i1/
Assis+*-+ 0'o2esso'
epartment of commerce and Management
S.S.!. Govt. "irst Grade #ollege
B$%%!&' ()*+,+
-,+,.-,++
Declaration
1
Management of nonperforming assets in IOB
I hereby, declare that this pro/ect entitled 0121 3$&"2&MI1G
!SS$4S 2" #2MM$&#I!% B!15S6! #!S$ S4U' 2" I1I!1
27$&S$!S B!15 B!15 8 Bellary has been prepared by me under the
able guidance of Mr. !shwath 1arayana faculty member in epartment
of #ommerce 9 Management, S.S.!.Government first Grade #ollege,
Bellary.
I also declare that this pro/ect is my own wor: and has not been
submitted to any other university for the award of any degree or other
similar degree.
3lace6 Bellary
ate6
Signature of student
&. !M!%!
2
Management of nonperforming assets in IOB
CERTIFICATE
I here by certify that this pro/ect entitled8 non performing assets of
commercial ban:s 6 ! case study of indian overseas ban: ban:,
Bellary is submitted by Miss. &. !mala, in partial fulfillment of B.B.M
2" GU%B!&G! U1I7$&SI4', GU%B!&G!. Based on independent
study carried out by under the Guidance of Mr. G.S. !shwath
1arayana faculty member in department of #ommerce and
Management.
It represents original fieldwor: and it has not been previously
submitted to any other University for the award of any egree;
diploma
3lace6 Bellary
ate6
Signature of guide
Mr. G.S. !shwath 1arayana
M.#om, M.B.!,M.phil
epartment of #ommerce and Management
S.S.!. Government first Grade #ollege
Bellary
CERTIFICATE
3
Management of nonperforming assets in IOB
I here by certify that this pro/ect entitled , 8 non performing assets
of commercial ban:s 6 ! case study of indian overseas ban: ban:,
Bellary is submitted by Miss. &. !mala, in partial fulfillment of B.B.M
2" GU%B!&G! U1I7$&SI4', GU%B!&G!. Based on independent
study carried out by under the Guidance of Mr.G.S. !shwath
1arayana faculty member in department of #ommerce and
Management.
It represents original fieldwor: and it has not been previously
submitted to any other University for the award of any
egree;diploma
3lace6 Bellary
ate6
Signature of co.ordinator
r. S. Sadyo/athappa
M.#om, M.3hil, 3h.d
epartment of #ommerce and Management
S.S.!. Government first Grade #ollege
Bellary

CERTIFICATE
4
Management of nonperforming assets in IOB
I here by certify that this pro/ect entitled8 non performing assets of
commercial ban:s 6 ! case study of indian overseas ban: ban:,
Bellary is submitted by Miss. &. !mala, in partial fulfillment of B.B.M
2" GU%B!&G! U1I7$&SI4', GU%B!&G!. Based on independent
study carried out by under the Guidance of Mr.G.S. !shwath
1arayana faculty member in department of #ommerce and
Management.
It represents original fieldwor: and it has not been previously
submitted to any other University for the award of any
egree;diploma.
3lace6 Bellary
ate6
Signature of <.2.
M. Gopal, M.com
epartment of #ommerce and Management
S.S.!. Government first Grade #ollege,
Bellary.


CERTIFICATE
5
Management of nonperforming assets in IOB
I here by certify that this pro/ect entitled8 non performing assets of
commercial ban:s 6 ! case study of indian overseas ban:
ban:,Bellary is submitted by Miss. 5. 3arimala, in partial fulfillment of
B.B.M 2" GU%B!&G! U1I7$&SI4', GU%B!&G!. Based on
independent study carried out by under the Guidance of Mr.G.S.
!shwath 1arayana faculty member in department of #ommerce and
Management.
It represents original fieldwor: and it has not been previously
submitted to any other University for the award of any
egree;diploma.
3lace6 Bellary
ate6
Signature of principal
. Ganganna, M.com
S.S.!. Government first Grade
#ollege
Bellary
ACKNOWLEDGEMENT
6
Management of nonperforming assets in IOB
I wish to e=press my heartiest gratitude with great pleasure to S.S.!.
Govt "irst Grade #ollege which provided an opportunity in fulfilling my
cherished.
I wish to e=press my gratitude to our respected principal Mr. .
Ganganna, <ead of the epartment, Mr. M. Gopal and Mr. r. S.
Sadyo/athappa, #o.2rdinator also has <elped and encourages me.
I am greatly indebted to Sir. G.S. !shwath 1arayana for his inspiring
guidance. It has been a pleasure and privilege to wor: under his able
guidance, in spite of his preoccupation with several busy assignments>
he has been :ind enough to spare his valuable time in giving me
necessary guidance.
!s the out set, I would li:e to convey my sincere than:s to indian
overseas ban: ban:. !nd also to Mr. 1.&. Badimi, senior Manager for
permitting me to conduct the study, completing the in.plant training and
to write this pro/ect.
I finally e=tend my whole hearted than:s to my parents and friends
for their constant inspiritation, moral support and encouragement.
3lace6 Bellary
ate6
R.Amala
Final Year BBM



CONTENTS
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Management of nonperforming assets in IOB
CHAPTER: 1 THEORITICAL BAC!RO"#$ OF THE %T"$Y
CHAPTER: 2 RE%EARCH $E%I!#
I#TRO$"CTIO# OF THE %T"$Y
%TATEME#T OF THE PROBLEM
OB&ECTI'E OF THE %T"$Y
%COPE OF THE %T"$Y
COLLECTIO# METHO$ OF THE %T"$Y
OPERATIO#AL $EFI#ITIO#%
LIMITATIO# OF THE %T"$Y
CHAPTER: 3 COMPA#Y PROFILE
CHAPTER: 4 $ATA A#ALY%I% A#$ I#TERPRETATIO#
CHAPTER: 5 FI#$I#!( %"!!E%TIO# )CO#CL"%IO#
BIBLIO!RAPHY
LIST OF TABLES
*
Management of nonperforming assets in IOB
+
T*31e -o Lis+ o2 +*31es P*ge -o
&.& T*31e s(o)i-g 0'o4isio- 'e56i'e7 2o' 7o63+261 *sse+s&$
&.8 T*31e s(o)i-g RBI -o'.s 2o' +'e*+i-g 7i22e'e-+
*74*-9es.
As NPA *-7 0'o4isio-i-g -o'.s
:8
&.: T*31e s(o)i-g 0'o9e76'e 2o' T*;eo4e' o2 se96'e7
*sse+s 3,
T(e B*-;
:%
&.< T*31e s(o)i-g 0'o9e76'e 2o' s*1e o2 se96'e7 *sse+s :$
&.# T*31e s(o)i-g .*-*ge.e-+ o2 i-7i*- o4e'se*s 3*-;
B*-;
##
:.& T*31e s(o)i-g i-7i*- o4e'se*s 3*-; ROBECO .6+6*1
26-7 0'o769+s
%!
:.8 T*31e s(o)i-g =DFC .6+6*1 26-7 0'o769+s %&
:.: T*31e s(o)i-g i-+e'es+ '*+es o2 7o.es+i9 +e'. 7e0osi+s >&
:.< T*31e s(o)i-g 1e-7i-g '*+es >8
:.# T*31e s(o)i-g 2i-*-9i*1 0osi+io- o2 i-7i*- o4e'se*s
3*-; 3*-;
>"
:.% T*31e s(o)i-g 0'o2i+ *-7 1oss *?9 o2 i-7i*- o4e'se*s
3*-;
$!
:.> T*31e s(o)i-g B?S o2 i-7i*- o4e'se*s 3*-; 3*-; $&
<.& T*31e s(o)i-g +(e 1e4e1 o2 NPA o2 i-7i*- o4e'se*s 3*-;
3*-;
$:
<.8 T*31e s(o)i-g '*+io o2 NPA +o *74*-9es $#
<.: T*31e s(o)i-g '*+io o2 NPA +o +o+*1 *sse+s $%
<.< T*31e s(o)i-g *sse+s 91*ssi2i9*+io- o2 i-7i*- o4e'se*s
3*-; 3*-;
$>
<.# T*31e s(o)i-g 9*0i+*1 *7e56*9, '*+io o2 i-7i*-
o4e'se*s 3*-; 3*-;
$"
<.% T*31e s(o)i-g se9+o' )ise g'oss NPA "!
<.> T*31e s(o)i-g .o4e.e-+ o2 NPA "&
<.$ T*31e s(o)i-g .o4e.e-+ o2 0'o4isio-s 2o' NPA S "8
Management of nonperforming assets in IOB
LIST OF C=ARTS
1,
Management of nonperforming assets in IOB


11
C(*'+ -o Lis+ o2 9(*'+s P*ge -o
<.&@*A G'*0( s(o)i-g -e+ NPA i- 0e'9e-+*ge $#
<.&@3A G'*0( s(o)i-g -e+ NPA i- *.o6-+ $%
<.8 G'*0( s(o)i-g '*+io o2 NPA +o *74*-9es $>
<.: G'*0( s(o)i-g '*+io o2 NPA +o +o+*1 *sse+s $$
<.<@*A G'*0( s(o)i-g 91*ssi2i9*+io- o2 *74*-9es $"
<.<@3A G'*0( s(o)i-g 91*ssi2i9*+io- o2 NPAs "!
<.# G'*0( s(o)i-g 9*0i+*1 *7e56*9, '*+io o2 i-7i*-
o4e'se*s 3*-; 3*-;
"&
<.% G'*0( s(o)i-g se9+o' )ise g'oss NPA "8
<.> G'*0( s(o)i-g .o4e.e-+ o2 NPA ":
<.$ G'*0( s(o)i-g .o4e.e-+ o2 0'o4isio-s 2o' NPAs "<
<." G'*0( s(o)i-g 9o.0*'iso- o2 i-7i*- o4e'se*s 3*-;
3*-; )i+( o+(e'
N*+io-*1iBe7 3*-;s.
"#
Management of nonperforming assets in IOB

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CHAPTER-1
INTRODUCTION
Management of nonperforming assets in IOB
CHAPTER I
INTRODUCTION
Finance is referred as the provision of money at a time when it is
required. Every enterprise needs finance to carry on its operation and
achieve its targets. Finance is so indispensable; therefore it is defined
as Life blood of an enterprise. Without adequate finance no enterprise
thin!s of its e"istence.
#n late $%s the concept of classification of ban! advances in
several health code categories too! place though the terminology non&
performing advances did not e"ist at that time. 'his is followed by early
(%s )nglo&)merican model of categori*ation of ban! lending portfolio in
several bloc!s of nomenclature in that included the non&performing
advances. 'he rapid popularity of the phenomenon can be ascribed to
the opening up of the #ndian economy and consequent pressure from
western powers to influence our ban!ing system in the name of
international standards of accounting congruence of ban!ing
supervision by +asle ,ommittee and so on.
'he sudden shoc! of guidelines relating to non&performing
advances and simultaneous of income recognition made the #ndian
ban!ing system totter and a number of public sector ban!s started
incurring losses from the mid&nineties. 'hen the recommendations of
the -arasimhan ,ommittee came into e"istence with the proposition of
creating asset&reconstruction fund for cleaning the balance sheets of the
ban!s of non&performing advances as a one&time measure.
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Management of nonperforming assets in IOB
NON-PERFORMING ASSETS
)n asset is classified as non&performing asset if dues in the form
of principal and interest are not paid by the borrower for a period of (%
days. -.)s are the advances loans and interest on loans which are
not returned in time. 'hus creates pending recovery it is nothing but an
e"plicit model of assessing the credit ris! of ban!s or financial
institutions carry in the balance sheet. #t/s a !nown fact that the ban!s
and financial institutions in #ndia face the problem of swelling non&
performing assets 0-.)s1 and the issue is becoming more and more
unmanageable. #n order to bring the situation under control some steps
have been ta!en recently. 'he 2ecuriti*ation and 3econstruction of
Financial )ssets and Enforcement of 2ecurity #nterest )ct 4%%4 was
passed by .arliament which is an important step towards elimination or
reduction of -.).
NPA DEFINITON GIVEN BY THE NARASIMHAN
COMMITTEE
'he committee has defined non&performing assets as advances
here as on the date of balance sheet in respect of term loans interest
remains past due for a period of more than 5$% days. 6verdrafts and
cash credits accounts remain out of order for more than 5$% days. +ills
purchased and discounted remain over due and unpaid for a period of
more than 5$% days. )n amount is considered past due when it remains
outstanding for 7% days beyond the due date. #nterest and8or installment
of the principal remain0s1 overdue for two harvest seasons but not
e"ceeding two and half years in the case of an advance granted for
agricultural purposes; and any amount to be received remains overdue
for a period of more than 5$% days in respect of other accounts.
NORMS RELATED TO NPA IN INDIA
'here are two concept related to -.)s& gross and net. 9ross
-.) refers to all -.)s on a ban!s balance sheet irrespective of the
provisions made. #t consists of all the non&standard assets viz 2ub&
standard doubtful and loss assets. ) loan asset is classified as :sub&
standard; if it remains -.) up to a period of 5$ months; :doubtful; if it
remains -.) for more than 5$ months; and :loss; without any waiting
period where the dues are considered not collectible or marginally
collectible.
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Management of nonperforming assets in IOB
-et -.) is a gross -.) less provisions. 2ince in #ndia ban!
balance sheet contains huge amount of -.)s and the process of
recovery and write&off of loans is very time consuming the provisions
the ban!s have to ma!e against the -.)s according to the central ban!
guidelines are quite significant. 'hat is why the difference between
gross and net -.) is quite high. While gross -.) reflect the quality of
the loans made by ban!s net -.) shows the actual burden of the
ban!s. 'he requirements for provisions are< 5%%= for loss assets; 5%%=
of the unsecured portion plus 4%&>%= of the secured portion depending
on the period for which the account has remained in the doubtful
category; and 5%= general provision on the outstanding balance under
the sub&standard category.
-et -.) ? 6pening balance @ )ddition during the year &
3ecovery

1.4 CONCEPT OF NPA
'he crucial factor that decides the performance of the ban!s and
financial institutions nowadays is the spotting of non&performing assets
0-.)1. +an!s and other financial institutions are now required to
recogni*e such loans periodically and then classify the assets.
+an!s are not allowed to boo! any income from non&performing
assets. )lso they have to ma!e provision for the -.)s which impacts
profitability adversely. 'he concept of classification of ban! advances in
several categories started in the late $%s scheme but at that time the
terminology of -.) did not e"ist. #t was early (% schemes when )nglo&
)merican model had several bloc! of categori*ation of ban! assets.
.rior to introduction of assets classification ban!s in #ndia had system
of their own. Aowever this accounting is not in conformity with
international standards.
-on&performing assets are a part of the ban!ing through the
world. #t is not peculiar to public sector ban!s and financial institutions in
#ndia. #ncidence of -.) is higher in public sector in comparison to
private sector ban!s and foreign ban!s in #ndia.
MODERN CONCEPT
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Management of nonperforming assets in IOB
-.)s came into #ndian financial system consequent to the
introduction of prudential accounting norms. )n era of ta!ing profits
0even unreali*ed1 was changed to providing for e"pected loss days of
:counting the chic!ens before eggs hatch; are over.
From the financial year 5((5&(4 the new system accounting came
into e"istence. -ew accounting system classification of loans and
interest were come into effect. 'he financial institutions and ban!s
adopted income recognition rule. 3+# also too! !een interest with regard
to these -.)s and laid several guidelines.
)s a result the method of :)ssets ,lassification; came into force.
While introducing these guidelines internationally accepted standards
of +asle ,ommittee recommendations were also ta!en into
consideration. )s per the norms of these standards income was
recogni*ed.
2teps were ta!en to debit the borrower8capital only when the borrower
pays the outstanding interest and the installment.
)ctions and initiative were ta!en to recover as and when the interest
and installment becomes due. 'his becomes mandatory for ban!s and
financial institutions. Bue to all these efforts the assets were classified
as follows<
.erforming assets8 standard assets.
-on&performing loans<
2o it is very clear that many steps were ta!en towards the
effective and efficient of functioning of the financial institution for
reducing the level of -.) to the ma"imum possible e"tent.
'he decade of nineties heralded an era of economic and monetary
policy change brought about by the government of #ndia and the 3+# to
globali*e the #ndian economy. 'he wave of L.9 that swept across the
e"ternal trade sector of the world over was not without its impact on the
domestic sector the investment polices and indeed the financial sector.
'he implementation of the -arasimhan ,ommittee ushered in the
reformation of #ndian ban!ing and financial industry. #ndian ban!s have
adopted international standards of accounting since last si" years.
.rudential norms were adopted with regards to
#ncome 3ecognition.
)ssets classification.
.rovision for bad and doubtful assets.
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Management of nonperforming assets in IOB
,apital adequacy.
'he origin of the problem of burgeoning -.)s lies in the quality
of managing credit ris! by the ban!s concerned what is needed is
having adequate preventive measures in place namely. Fi"ing pre
sanctioning appraisal responsibility and having an effective post&
disbursement supervision are essential. +an!s concerned should
continuously monitor loans to identify accounts that have potential to
become non&performing.
1.5 RBI REGULATIONS REGARDING INCOME
RECOGNITION, ASSETS CLASSIFICATION AND
PROVISIONING
3+# has notified regulations concerning the income recognition of
ban!s while accepting the recommendations of the -arasimhan
committee report. 'he following is the regulations regarding income
recognition of ban!s<
#nterest income should not be recogni*ed until it is reali*ed. )
non&performing asset is one when it is overdue for two quarters or more.
#n respect of non&performing assets interest is not to be recogni*ed on
accrual basis but it is to be treated as income only when it is actually
received. -.)s ban!s should not charge or ta!e into account the
interest. #n overdue bill interest should not be charged or ta!en as
income unless reali*ed. #nterest accrued and credited to prior
accounting period in respect of non&performing assets should be
reversed or provided for in the current account if such interest still
remains uncollected.
#ncome from non&performing asset is not recogni*ed on accrual
basis but is boo!ed as income only when it is actually received.
'herefore interest on -.)s shall be charged to the account only when it
is actually received. )s and when recovery is made in -.)s e"penses
incurred but not charged to the accounted shall be debited to the
account C credited to the mice income first balance of recovery made or
interest up to the end of the provisions month not charged to the
account whichever is less shall be debited to the account and credited
to the interest on -.). )fter debiting the e"penses C interest to the
-.) 0real a8c1 balance in real account shall not be e"ceeds the balance
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Management of nonperforming assets in IOB
in shadow a8c since balance in shadow a8c are the total dues of the
borrower.
CLASSIFICATION OF ASSETS FOR MAKING PROVISION
For the purpose of ma!ing provisions for bad and doubtful loans
and advances ban!s need to classify them into the following broad
categories<
.erforming assets
-on&performing assets
PERFORMING ASSETS
.erforming assets is also !nown as standard assets8loans where
the interest or principal are not overdue beyond (% days at the
end of the financial year. 2uch loans dont carry more than the
normal business ris!.
'he above categories are done ta!ing into account the degree of well&
defined credit wea!ness and e"tent of dependence on collateral security
for reali*ation of dues.
NON-PERFORMING ASSETS
)ny loan the repayment of which is overdue beyond (% days or two
quarters is considered as -.). #t is also further classified into<
2ub standard assets
Boubtful assets
Loss assets
SUB-STANDARD ASSETS
) sub&standard assets is one which has remained -.) for a
period less than or equal to 54 months. Further sub&standard assets
shall be segregated in to secured e"posure C unsecured e"posure for
the purpose of determining the rate of provision. Dn secured& e"posure
is defined as an e"posure where the reali*able value of the security as
assessed by the ban!8approved valuers8 reserve ban!s inspecting
officers is not more than 5%= ab&initio of the o8s e"posure e"posure
shall include all funded and non&funded e"posures 0including
underwriting C similar commitments1 security means tangible security
properly charged to ban! and will not including in intangible securities
li!e guarantees comfort letters etc. 'herefore all clean loans and loans
1*
Management of nonperforming assets in IOB
with security less than 5%= under sub&standard category may be
treated as un secured e"posure #t may be noted that each sub&
standard asset shall be classified as either secured e"posure or
unsecured e"posure C provision shall be made on o8s balance.
Loans which are non&performing for a period not e"ceeding 54
months where the current net worth of the borrower or the current
mar!et value of the security against which the loan is ta!en is not
enough to ensure full recovery of the debt. #n other words such an asset
will have well defined credit wea!nesses that Eeopardi*e the liquidation
of the debt and are characteri*ed by the distinct possibility that the ban!
will sustain some loss if deficiencies are not corrected.
DOUBTFUL ASSETS
) doubtful asset is one which has remained -.) for period
e"ceeding 54 months. Boubtful assets shall be bifurcated in to doubtful
assets less than one year b8w 5 and 7 years above 7 years doubtful
assets and above 7 years shall be further bifurcated in to :e"isting
stoc!;. Further each doubtful asset shall be bifurcated in to secured
portion and unsecured portion for provisioning purpose.
Loans which have remained -on&performing for a period
e"ceeding 54 months will be treated as doubtful assets. #n the case of
loans where instalments of principal have remained overdue for a
period e"ceeding two years should be treated as doubtful assets. ) loan
classified as doubtful has all the added characteristics that the
wea!ness ma!e the collection or liquidation in full on the basis of
currently !now facts conditions and values&highly questionable and
improbable.
LOSS ASSETS
) loss asset is one where loss has been identified by the ban! or
internal or e"ternal auditors or 3+# inspection. #n other words such an
asset is considered uncollectable C of such little value that its
continuance as a ban!able asset is not warranted although there may
be some salvage or recovery value. -.) shall be treated as loss asset
irrespective of age of -.) if it is uncollectible due to serious credit
impairment li!e fraud etc.
3eali*able value of securing has become nil or negligible due to
erosion in the value of security. 0Falue may be treated as negligible if it
is less than 5%= of the o8s in the borrower account1
1+
Management of nonperforming assets in IOB
Loss assets in one where the ban! or internal8e"ternal auditors
the 3+# have identified loss but the amount has not been written off
fully. 'hese assets are considered unrecoverable and are of little value
to the lending institution.
Guid!i"# $%& '!(##i$i'()i%" %$ (##)#
5. +roadly spea!ing classification of assets into above categories
should be done ta!ing into account the degree of well&defined credit
wea!nesses and the e"tent of dependence on collateral security for
reali*ations of dues.
4. +an!s should establish appropriate internal systems to eliminate the
tendency to delay or postpone the identification of -.)s especially in
respect of high value accounts. 'he ban!s may fi" a minimum cut off
point to decide what would constitute a high value account depending
upon their respective business levels. 'he cutoff point should be valid
for the entire accounting year. 3esponsibility and validation levels for
ensuring proper asset classification may be fi"ed by the ban!s. 'he
system should ensure that doubts in asset classification due to the
reasons are settled through specified internal channels within one
month from the date on which the account would have been classified
as -.) as per e"tant guidelines.
PROVISIONING FOR LOANS AND ADVANCES
+an!s and other financial institutions have to ma!e the following
provisions in their boo!s for advances which are considered as non&
performing assets. 'a!ing into account the time lag between an account
becoming doubtful of recovery its recognition as such the reali*ation of
the security and the erosion over time in the value of security charged to
the ban! the ban!s should ma!e provision against sub&standard
assets doubtful assets and loss assets as below<
LOSS ASSETS
'he entire asset should be written off. #f the assets are permitted
to remain in the boo!s for any reason 5%% percent of the outstanding
should be provided for.
DOUBTFUL ASSETS
51 5%% percent of the e"tent to which the advance is not covered by the
reali*able value of the security to which the ban! has a valid recourse
and the reali*able value is estimated on a realistic basis.
2,
Management of nonperforming assets in IOB
41 #n regard to the secured portion provision may be made on the
following basis at the rates ranging from 4% percent to >% percent of the
secured portion depending upon the period for which the asset has
remained doubtful<
TABLE NO. 1.1
PROVISION RE*UIRED FOR DOUBTFUL ASSETS
.eriod for which the advance has
been considered as doubtful
.rovision requirement
0=1
Dp to one year 4%
6ne to three years 7%
Gore than three years >%
SUB-STANDARD ASSETS
) general provision of 5% percent on total outstanding should be
made without ma!ing any allowance for Beposit #nsurance ,redit
9uarantee ,orporation 0B#,9,1 8 E,9, guarantee cover and
securities available. 'he unsecured e"posures which are identified as
sub standard would attract additional provision of 5%= i.e. a total of
4%= on the outstanding balance. Dnsecured e"posure is defined as an
e"posure where the reali*able value of the security as assessed by the
ban!8approved values8reserve ban!s inspecting officers is not more
than 5%= )b&#nitio of the outstanding e"posure.

STANDARD ASSETS
0i1 From the year ending 75.%7.4%%% the ban!s should ma!e a general
provision of a minimum of %.4> percent on standard assets on global
loan portfolio basis.
0ii1 'he provisions on standard assets should not be rec!oned for
arriving at net -.)s.
21
Management of nonperforming assets in IOB
0iii1 'he provisions towards 2tandard )ssets need not be netted from
gross advances but shown separately as /,ontingent .rovisions against
2tandard )ssets/ under /6ther Liabilities and .rovisions & 6thers/ in
2chedule > of the balance sheet.
O)+& (d,("'#
)dvance against term deposit -2,s HF.8#F. etc.
)dvance against term deposits inclusive of accrued interest if any.
S-'i(! '(##
Equated monthly installment
#n the case of loans repayable in equated in monthly installments where
a part of the interest is included in the installment -.) status shall be
determined on the basis of equated monthly installment and not with
reference to the date of debit of monthly interest.
Loans with moratorium for payment of interest
in the case of loans given for industrial proEects or for agricultural
plantation etc. where moratorium is available for payment of interest
becomes due only after the moratorium or gestation period is over
therefore such amounts of interest do not become overdue with
reference to date of debit of interest. 'hey become overdue after due
date for payment of interest if uncollected.
2taff housing Cvehicle loans
#n the case of housing loan vehicle loan or similar advances granted
to staff members where interest is payable after recovery of principal
interest need not be considered as overdue from the first month
onwards.
2uch loans8advances should be classified as -.) only when there is
a default in repayment of installment of principal or payment of interest
on the respective due dates.
)dvance payments
Where the borrower has made advance payment of installments
fi"ed towards the loan C as on 758%78%I the loan account is regular
such loan account need not be treated as -.) even if technically
interest is due for more than (% days.
22
Management of nonperforming assets in IOB
1.. ACCOUNTING PROCEDURE FOR NPA#
R,&#(! %$ U"&(!i/d I")&#)
'he un recovered portion of interest debited during the current
year 04%%(&5%1 C corresponding previous year 04%%$&%(1 in a8c that
have slipped to -.) during the current year i.e. 4%%(&5% shall be
recovered as at the close of the year. 'his will apply to ,entral
9overnment guaranteed account with overdue more than (% days also
though they are treated as standard asset.
#n respect of the accounts which have become -.) first time
during the year the unreali*ed portion of interest which was ta!en to
.CL account on the accrual basis pertaining to the preceding year if
any shall also be reversed. 6nce the advance was identified as -.)
interest should not be charged to such accounts and interest if any
charged for the previous quarters has to be reversed.
S+(d%0 (''%u")#
)s per accounting norms the ban!s have to maintain shadow
accounts in respect of all -.)s as interest was not charged to the real
-.) account. #nterest will be calculated for -.)s each month and the
ban! will not pass any entries for them as they are restrained to do so.
#n order to !now the amount due from the borrower and the
unrecovered interest in the account shadow accounts are maintained.
)t any point of time the difference between the real account and the
shadow account indicates the unrealistic interest in the account.

P(&)i(! &'%,&i#
#n respect of part payments received in -.) accounts first credit
must be posted in real account and then in the shadow account. 'he
real account must be debited to the e"tent of recovery or uncovered
interest as indicated in shadow account whichever is lower and the
contra credit will go to the ban!s .CL account. 'hus to the e"tent of
recovery interest can be debited 0to the e"tent it is already charged1 to
-on .erforming advances and credit to the ban!s .CL.
)s per the guidelines once the required installments and interest
is recovered in a -.) account the status of the account can be
changed from -on .erforming )sset to .erforming )sset.
C+("1 i" )+ #)()u# %$ )+ (''%u") $&%2 "%"--&$%&2i"1
(##) )% -&$%&2i"1 (##)3
23
Management of nonperforming assets in IOB
)s per the guidelines once the required installments and interest
is recovered in a -.) account the status of the account can be
changed from -on .erforming )sset to .erforming )sset.
C!(##i$i'()i%" %$ !%("# u"d& -&i%&i)4 #')%& (d,("'#
5. ,redit for financing distribution of fertili*ers pesticides seeds
etc.
Loans up to 3s J% La!h granted for financing distribution of inputs for
the allied activities such as cattle feed poultry feed etc.
4. Loans for contribution and running storage facilities
0warehouse mar!et yard and godown1 including cold storage units.
7. Finance e"tended to dealers in drip irrigation8 sprin!ler irrigation
system8agricultural machinery irrespective of their location subEect to
ceiling of 3s 7% La!h.
J. Loans to )rthias 0commission agents in rural and semi urban
areas functioning in mar!ets 8 mandis1 for meeting their wor!ing capital
requirements on account of credit e"tended to formers for supply of
inputs.
U- 1&(d()i%" %$ !%(" (''%u")# '!(##i$id (# NPA
#f arrears of interest and principal are paid by the borrower in the
case of loan accounts classified as -.)s the account should no longer
be treated as non&performing and may be classified as standard in
other words an account which become -.) due to non&payment of
interest and 8 or installment of principal up on payment of arrears of
principal in fall stands upgraded as standard asset on the day of
clearing the arrears full.
)ccounts classified as -.) may get up graded any day during the
year to performing asset under following circumstances. #n case of
loans the a8c is fully regulari*ed by payment of arrears of interest C
installments.
#n case of 6B8,, a8c the overdrawals allowed have been
regulari*ed 8 reimbursed or the party has started operating the account
with in limit8 drawing power or the credits are enough to cover the
interest debited. #n the case of bills limit all overdue bills have been
reali*ed 8 recovered.
) performing account classified as -.) on a8c of irregularity in
other account and such other accounts is regulari*ed8 recovered8closed.
) -.) account so classified for non&submission of stoc! statement
24
Management of nonperforming assets in IOB
non&renewal of limits etc. stands up graded as standard asset on the
day of regulari*ing the account by submission of stoc! statement
renewal of limit etc.
#n case of a borrower having multiple accounts the accounts can
be upgraded as standard asset only if all accounts of the borrower or
regular on the day of up gradation.
1.5 IMPACT OF NPA ON PROFITABILITY AND BALANCE
SHEET OF THE BANKS
'he crucial factor that decides the performance of ban!s
nowadays is the spotting -.)s. For every 3s.5%%8& in -.) the ban! is
losing 3s.7%8& p.a. i.e. 3s.$ towards the average interest paid on
deposits 0which is the source of lending1 @ 3s. 5%8& towards the
provision@ 3s.548& towards non&recognition of income and .L3. #n this
way within 7 years the loss is as much as the principal.
'he impact of -.)s on the profitability of the ban!s is summari*ed in
the following points
Rdu'# (&"i"1 '(-('i)4 %$ )+ (##)#< -.)s reduce the
earning capacity of the assets and as a result of this return on
assets get affected.
B!%'6# '(-i)(!< -.)s carry ris! weight of 5%%= 0to the e"tent it is
uncovered1. 'herefore they bloc! capital for maintaining ,apital
adequacy. )s -.)s do not earn any income they are adversely
affecting :,apital )dequacy 3atio; of the ban!.
I"'u&&"' %$ (ddi)i%"(! '%#)< ,arrying of -.)s require
incurrence of ,ost of ,apital )dequacy ,ost of funds in -.)s
and 6perating cost for monitoring and recovering -.)s.
Rdu'# EVA< While calculating Economic Falue )dded 0EF)
?-et operating profit after ta" minus cost of capital1 for measuring
performance towards shareholders value creation cumulative
loan loss provisions on -.)s s considered as capital. Aence it
increases cost of capital and reduces EF).
L%0 4i!d %" (d,("'#< Bue to -.)s yield on advances shows
a lower figure than actual yield on :standard )dvances;. 'he
reasons that yield are calculated on wee!ly average total
advances including -.)s.
25
Management of nonperforming assets in IOB
A$$') %" R)u&" %" A##)#< -.)s reduce earning capacity of
the assets and as a result of this 36) gets affected.
1.7 RBI GUIDELINES
GUIDELINES FOR RECOVERY AGENTS
From Garch 4> 4%%$ onwards ban!s may have to ma!e a
provision for recording the calls made by recovery agents to customers
and vice versa according to the second draft guidelines on recovery
agents issued by the 3+#.
+an!s may also have to place an updated list of recovery agents
on their Web site and conduct periodical verification of the antecedents
of employees of recovery agents which may include verification through
police.
While the revised guidelines may allow ban!s to continue recovery
proceedings if the borrower continuously ma!es frivolous or ve"atious
complaints they can also utili*e the services of a credit counselor if the
case of a particular borrower deserves sympathetic consideration said
the draft guidelines.
+an!s may be permitted to tie up with the #ndian #nstitute of
+an!ing and Finance 0##+F1 and other training colleges so that every
recovery agent passes the e"amination conducted by ##+F in a year.
RBI DIRECTIVE ON NPA SELLING
6n 6ctober > 4%%K 'he 3eserve +an! of #ndia as!ed ban!s that
the sale price should generally not be lower than the net present value
arrived at while selling non&performing assets 0-.)s1.:+an! should
while selling -.)s wor! out the net present value of the estimated cash
flows associated with the reali*able value of the available securities net
of the cost of reali*ation.;
:'he sale price should generally not be lower than the net present
value arrived at in that manner; the 3+# stated in a notification to all
ban!s and term lending institutions.
26
Management of nonperforming assets in IOB
+an!s boards are required to lay down policies and guidelines
covering among other things valuation procedure to be followed to
ensure that the economic value of financial assets is reasonably
estimated based on the assessed cash flows arising out of repayments
and recovery prospects.
RBI GUIDELINES FOR RECOVERY OF NON-PERFORMING
ASSETS UPTO RS. 5 CRORE COVERAGE
5. 'he revised guidelines will cover all. -.)s in all sectors
irrespective of the nature of business which have doubtful or loss
as on 75st Garch 5((K with outstanding balance of 3s. > ,rore
and below on the cutoff date.
4. 'he guidelines will also cover -.)s classified as sub&standard as
on 75st Garch 5((K which have subsequently become doubtful or
loss category.
7. 'hese guidelines will also cover cases pending before
,ourts8Bebt 3ecovery 'ribunals8+oard for #ndustrial Finance and
3econstruction subEect to consent decree being obtained from the
,ourts8B3's8+#F3.
J. ,ases of willful default fraud and malfeasance will not be
covered.
GUIDELINES FOR RECOVERY OF NON-PERFORMING
ASSETS OVER RS. 5 CRORE
5. ,GBs should personally supervise the -.)s of 3s. > ,rore and
above on case&to&case basis. ) list of such -.)s should be
prepared and all cases reviewed by ,GB personally and the
course of action decided in terms of rehabilitation8restructuring
one time settlement of filing of suits by 75st )ugust 4%%%. 'he
matter should be placed before the +oard of Birectors finali*ing
the course of action by 7%th 2eptember 4%%% in each such case.
4. 'he +oard of Birectors may evolve policy guidelines regarding
one time settlement of -.)s over 3s. > ,rore covering the
computation formula reali*able amount cutoff date and payment
conditions with reference to factors of security and disposability
etc. as part of its loan recovery policy including setting up of
2ettlement )dvisory ,ommittee staff accountability and other
27
Management of nonperforming assets in IOB
relevant aspects and decide individual cases in accordance with
such policy.
7. Wherever a suit is required to be filed against the defaulters who
have not come up for one time settlement or where restructuring
is not feasible suits must be filed in all such cases by 75st
6ctober 4%%%.
J. +an!s should follow up suit filed cases vigorously and effectively
in the ,ourts to enable B3's to decide the cases within I months
as laid down in the B3' )ct and reali*ation of dues completed at
the earliest. ) quarterly report in regard to outstanding of above
3s. > ,rore should also be prepared and held on the file.
>. )ny deviation from the above settlement guidelines for any
borrower should be made only by the +oard of Birectors.
'o start with performance in terms of profitability is a benchmar!
for any business enterprise including the ban!ing industry. Aowever
increasing -.)s have a direct impact on ban!s profitability as legally
ban!s are not allowed to boo! income on such accounts and at the
same time ban!s are forced to ma!e provision on such assets as per
the reserve ban! of #ndia 03+#1 guidelines.
)lso with increasing deposits made by the public in the ban!ing
system the ban!ing industry cannot afford defaults by borrowers since
-.)s affects the repayment capacity of ban!s. Further reserve ban! of
#ndia 03+#1 successfully creates e"cess liquidity in the system through
various rates cuts and ban!s fail to utili*e this benefit to its advantage
due to the fear of burgeoning non&performing assets.
RBI NORMS FOR TREATING DIFFERENT ADVANCES AS
NON-PERFORMING ASSETS AND PROVISIONING NORMS
2*
Management of nonperforming assets in IOB
TABLE 1.8
1.19 CHECK LIST FOR REDUCTION OF NPA
E(&!4 id")i$i'()i%"3
#dentification accounts showing early warning signals.
Aigh values -.)s should be given focused attention.
) systematic review of .roblem Loans should be done. 'he
time norms for the problem loan review should be adhered to.
)ction plan to be drawn up for each account and follow up.
R'%,&43
)ctual recovery occurs in the accounting in which the total
recovery of the dues is warranted. 'hrough regular pre and post
sanction monitoring follow&ups the -.)s can be eliminated.
U- 1&(d()i%"3
'he -.) accounts in which part recovery of the total dues will
upgrade the account from -.) to performing asset. 9enerally the -.)
accounts with less than 4 years of the age under -.) are covered. 'he
main characteristic of these accounts is after elimination from -.) also
2+
S!.
N%.
T4- %$ L%(" C%"di)i%" P&i%d
5. 'erm loans
#nstallment or
interest
remains past
due
For one quarter or
three months.
4. ,)2A ,3EB#' 63
68B
)ccount
remains out of
order
6ne quarter or
three months.
7. )griculture loans
#nstallment or
interest
remains past
due
'wo harvest
seasons not
e"ceeding two
and half years.
J. +ills purchased and
Biscounted
+ills remains
overdue and
unpaid
For one quarter or
three months.
Management of nonperforming assets in IOB
these accounts continued to be part of advances. 2ince lending is a
main business of the ban!s up gradation of accounts is preferred.
2ubstandard accounts to be specially targeted for up gradation.
Dp gradation strategies would include adEustment of irregularity
repayment of overdue interest8 installment and up gradation
following restructuring8 rehabilitation.
3eplacement 8 re&schedulement of loans should be done in
deserving cases promptly. )fter 5 year of successful
implementation account to be reviewed for up gradation.
R+(:i!i)()i%"3
3ehabilitation of units should be ta!en up in deserving cases.
R-(42")3
Fi"ing repayment program for accounts while continued viability is in
doubt.
Fi"ing installments for irregular amount were limits to be continued
with reduced e"posure.
C%2-&%2i#3
'hrough compromise the accounts are closed by negotiated
settlement with the borrowers as per the compromise policy of the ban!.
9enerally compromises are encouraged in cases of chronic -.)
accounts. ,ompromise proposals need to be considered where
necessary and in time.
6ption of 6'2 through Lo! )dalat should be e"amined.
1.11 THE SECURITI;ATION AND RECONSTRUCTION OF
FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY
INTEREST ACT <SARFAESI ACT=, 8998
'here was an acute need being felt for assistance to the ban!s
and other financial institutions in the recovery of loans for there were
heavy losses being incurred on account of unpaid debts. 'o regulate
3,
Management of nonperforming assets in IOB
securiti*ation and reconstruction of financial assets and enforcement of
security interest the .resident on 45
st
day of Lune 4%%4 promulgated
the 2ecuriti*ation and 3econstruction of Financial )ssets and
Enforcement of 2ecurity #nterest )ct.
D$i"i)i%" %$ S'u&i)i/()i%"
2ecuriti*ation means acquisition of financial assets by any
securiti*ation company or reconstruction company from any originator
by raising of funds by such 2ecuriti*ation ,ompany or 3econstruction
,ompany from qualified institutional buyers by issue of security receipts
representing undivided interest in such financial assets.
M(#u&# $%& (##)# &'%"#)&u')i%"
When the borrower fails to repay the loan amount then according to
3+# guidelines the reconstruction company can ta!e following
measures<
5. 'he proper management of business of the borrower by change in
or ta!eover of the management of the business of the borrower.
4. 'he sale or lease of a part or whole of the business of the borrower.
7. 3escheduling of payment of debts payable by the borrower.
J. Enforcement of security interest in accordance with the provisions of
this )ct. 2ettlement of dues payable by the borrower.
>. 'a!ing possession of secured assets in accordance with the
provisions of the act.
1.18 PROCEDURE TO TAKE OVER THE SECURED ASSETS
BY THE BANK THROUGH THE CHIEF METROPOLITAN
MAGISTRATE OR THE DISTRICT MAGISTRATE
When the possession of any secured assets is required to be
ta!en by the )uthori*ed 6fficer of if any of the secured assets is
required to be sold or transferred by the +an! under the provisions of
this 6rdinance the +an! may for the purpose of ta!ing possession or
control of any such secured assets request in writing the ,hief
Getropolitan Gagistrate 0,GG1 or the Bistrict Gagistrate 0BG1 or as the
case may be the ,hief Getropolitan Gagistrate 8 Bistrict Gagistrate
0,GG8BG1 shall on such request being made to
31
Management of nonperforming assets in IOB
5. 'a!e possession of such assets and documents relating thereto.
4. Forward such assets and documents to the ban!.
Without the )ssistance of ,hief Getropolitan Gagistrate or Bistrict
Gagistrate the branch may ta!e possession of the 2ecured )ssets
without approaching the ,hief Getropolitan Gagistrate 8 Bistrict
Gagistrate by adopting the following procedure.
TABLE NO.1.>
PROCEDURE FOR TAKEOVER OF SECURED ASSETS BY
THE BANK
Goveable .roperty #mmoveable .roperty
2tep 5 #n the presence of two
witnesses a .anchanama
should be drawn as pre
)ppendi" M #F 03ule J051
and should be signed by
two witnesses of
respectable capacity
'he authori*ed officer should
ta!e possession by delivering a
possession notice as in
)ppendi"&F# 03ule $051 to the
borrower and by affi"ing the
possession notice on the outer
door or at conspicuous place of
the property.
2tep 4 )n inventory as per
)ppendi" F 03ule J041 has
to be made and should be
delivered or cause to be
delivered to the +orrower 8
9uarantor or his agent to
receive on behalf of the
+orrower 8 9uarantor
'he possession notice should
be publici*ed in two leading
newspapers. 6ne in vernacular
language having sufficient
circulation in that locality by the
authori*ed officer.
2tep 7 'he authori*ed officer
should !eep the property
in his own custody or in
the custody of the persons
authori*ed or appointed by
him and as an owner of
the property of ordinary
prudence care has to be
e"ercised.
'he authori*ed officer should
!eep the property in his own
custody or in the custody of
persons authori*ed or appointed
by him and as an owner of the
property of ordinary prudence
care has to be e"ercised.
32
Management of nonperforming assets in IOB
2tep J #f the property is subEect to
natural or speedy decay or
e"pense of !eeping such
property e"ceeds the
value of the property the
)uthori*ed officer may sell
the same.
'he authori*ed officer should
ta!e steps for preservation and
protection of secured assets and
should be insured.
2tep > 'he authori*ed officer
should ta!e steps for
preservation and
protection of secured
assets and should be
insured.
'he authori*ed officer should
obtain estimated value of the
secured assets through the
approved valuer and in
consultation with the borrower
the reserve price has to be fi"ed.
2tep I 'he authori*ed officer
should obtain estimated
value of the secured
assets through the
approved valuer and in
consultation with the
borrower the reserve price
has to be fi"ed.

1.1> PROCEDURE FOR SALE OF SECURED ASSETS
)fter ta!ing possession before sale the )uthori*ed 6fficer shall
obtain the estimate value of the property from an approved valuer and
fi" the reserve price and may sell the whole or any such part of the
property by any of the following methods.
5. 6btaining quotations from parties dealing with similar secured assets
or otherwise interested in buying such assets or
4. #nviting tenders from the public or
7. Aolding public auction
J. +y private treaty
>. +y public auction by publishing notice in two leading newspapers one
in vernacular language.
33
Management of nonperforming assets in IOB
I. 2ale by any methods other than public action or public tender shall
be on such terms as may be settled between the parties in writing.
?RITING OFF OF DUES
Write off may be e"ercised in respect of accounts classified as
Boubtful or Loss )ssets and considered as irrecoverable either in the
normal course or through court. 'he account should have remained in
the Boubtful or Loss category for a minimum period of two years before
considering for write off and write off should be considered only as a last
resort after e"hausting all avenues of recovery.
+efore writing off of the Ledger +oo! +alance all liquid securities
and subsidy if any not appropriated should be appropriated. )mount
received from any guarantee corporations should also be appropriated
and only net balance should be considered for write off.
COMPROMISE SETTLEMENT OF HC-98 ACCOUNTS
#n case of 2tandard )ssets )ccounts which have been classified
as Aealth ,ode&%4 if such accounts pose threat of migrating to -.) in
the current Financial Near and if there is any possibility of substantial
recovery by providing certain concession in rate of interest the
compromise proposal may be considered. Aowever such requests can
be considered only at 3egional 6ffice and Aead 6ffice on the following
terms<&
a. ,oncession in rates of interest up to a ma"imum 4= p.a. on the
documented rate besides penal interest may be permitted. 'he
concerned 3egional Aead may consider requests for reduction in
rate of interest in respect of the loans sanctioned by the +ranch
functionaries coming under his administrative control. #n respect of
loans sanctioned by the e"ecutives in 3egional 6ffices 9eneral
Ganager ,redit 06perations1 may consider such requests. #n respect
of loans sanctioned at Aead 6ffice e"ecutives at one grade higher
than the sanctioning authority may consider such requests.
,oncessional rate of rate of interest may be charged from the date of
last renewal in case of operative account and date of last disbursal in
case of 'erm Loan till closure of the account as per the procedure in
vague.
b. ,hairman and Ganaging Birector may approve further concession in
the rate of interest than 4= in respect of loans sanctioned by various
authorities up to E"ecutive Birector and in case of loans sanctioned
34
Management of nonperforming assets in IOB
by the ,hairman and Ganaging Birector; the G,+ may approve
further concession in the rate of interest.
c. 'he entire amount should be paid within a period of one month from
the date of receipt of the approval of the compromise proposal...
Aowever if the borrower is unable to pay the amount within one
month and remaining K>= should be paid within a ma"imum period
of si" months. ,hairman and Ganaging Birector depending upon
merits of the case may however permit further period of 7 months for
payment of entire amount. #f the amount is not closed within si"
months or within the e"tended period of further 7 months as the case
may be the entire concessions provided shall stand withdrawn and
the entire amount along with interest as per the documented rate
should be recovered as per the guidelines in vogue.
d. )fter receipt of the proposal for compromise no operations debits
should be permitted in the account. -ecessary consent letter should
be obtained at the time of entertaining application for compromise.
?&i) O$$#3
)s a prudent practice and also as a measure of cleaning the
balance sheet with an ultimate obEective of reflecting the true and
transparent picture of the ban! the non&collectible and unrecoverable
loans are off 03+# guidelines& up to 3s. 5%%%% crores1 which result in
reduction of -.). Elimination of -.) by this means result in elimination
of the loan from advances.
3ecovery through write off should be e"ercised where recovery
prospects are blea! and adequate provisions have been made
therefore.
'he ,ore -.)s which have been fully provided for are
considered for the technical write offs and holding the same in
)D,) for the purpose of recovery.
O)+& &du')i%" #)&()1i#3
.roper follow&up of B3' cases.
)ttachment before Eudgment and declaration of assets by
borrower8 guarantors to be pursued.
Legal action be initiated promptly. )ll suits filed cases pending for
more than 7 years and decreed debts pending for more than one
35
Management of nonperforming assets in IOB
year to be reviewed quarterly and specific action plan for such
cases firmed up.
Where cases have been decreed e"ecution proceedings should
be drawn up immediately.
S))!2") %$ C!(i2#
'he E"port ,redit 9uarantee ,orporation of #ndia 0E,9,#1 Ltd.
has prescribed an underta!ing to be given by the +an! 8 +ranch prior to
or after settlement of the claim to the effect that the right of the +an!
and E,9,# Ltd. will be adequately safeguarded by the +an! 8 +ranch
notwithstanding the settlement of the claim by E,9,# Ltd. 'he claim
received from E,9,# Ltd. is to be credited to :,laims received from
E,9,# Ltd. )8c;. )s and when recoveries are made from the e"porter
towards liquidation of the overdue post shipment advances in full 8 part
after deducting the e"penses incurred for reali*ing the same the
balance available should be shared between the ban! and the E,9,#
Ltd. #n other words the amount remitted by the e"porter should be
credited to the overdue post&shipment advance a8c and the
proportionate amount due to E,9,# Ltd. should be remitted to them by
debiting the same :,laims received from E,9,# Ltd. )ccount;.
1.1. RECOVERY TOOLS AND THEIR EFFECTIVENESS
1. D:) R'%,&4 T&i:u"(!#3
Lac! of e"peditious court remedies has been one of the maEor
impediments e"perienced by ban!s and financial institutions in the
recovery of -.). 6n the basis of the recommendation of 'iwari
,ommittee 05($51 and -arasimhan ,ommittee on Financial systems
05((51 which emphasi*ed the need for the establishment of special
tribunals for ban!s and financial institutions the recovery of debts due
to ban!s and financial institutions act was enacted in 5((7.
'he act applies only to cases where the amount of debt due to
ban!s8 financial institution is 3s.5% la!h or above. Filing of cases at the
B3' has been a cause of concern for almost every ban! in the country
today. 6ne reason for the slow pace is the requisite infrastructure at the
respective B3' was inadequate to handle the huge number of cases
pending with it. 'here has been a decision to add about K more B3' to
the e"isting 44 B3' and > appellate authorities. 'his enables the ban!s
to settle some of the pending -.)s.
8. L%6 Ad(!()#3
36
Management of nonperforming assets in IOB
For recovery of smaller loans the Lo! )dalat has proved a very
good agency for quic! Eustice and settlement of dues. 'he 9uEarat 2tate
Legal 2ervice )uthority and the B3' )hmedabad have nominated and
appointed ,onciliators to deal with the cases before the
Lo! )dalat comprising of retired Aigh ,ourt Ludge and two members
from 2enior )dvocates8 #ndustrialists8 E"ecutives of the ban!s. 'hese
)dalats in the state of 9uEarat have been found to be useful as
supplement to the efforts of the recovery by the B3's. 2uch agencies
should be established in all the estates.
>. A##) R'%"#)&u')i%" C%2-("43
'he setting of asset 3econstruction ,ompany may be another
channel to discount the -.)s of the ban! to suc! an agency and to
developing the process of securiti*ation of +an!s loan assets for
providing liquidity. .erhaps secondary mar!et of derivatives based on
securiti*ed assets could also be developed as in individual countries.
4. R,"u R'%,&4 A')3
#n some state revenue recovery act has been made applicable to
ban!s. 2ince this is also e"peditious process of adEudicating claims
ban!s may be notified to cover under the )ct by 2tate.
1.15 INDIAN BANKING SYSTEM
#ndia is one of the fastest growing economies in the world.
)ccording to revised estimates released by the ,entral 2tatistical
6rgani*ation 0,261 real 9B. accelerated from K.> per cent in 4%%J&%>
to (.J per cent during 4%%I&%K.'he #ndian economy has thus recorded
an average growth of over $ per cent in the latest three years 04%%7&%J
to 4%%>&%I1. #n general the #ndian Financial system consists of
,ommercial +an!s Bevelopment +an!s ,o&operative +an!s and
speciali*ed financial institutions. 'he 3eserve +an! of #ndia 03+#1 as
the central +an! of the country is at the head of this group.
)ccording to the #+)0#ndian +an!ing )ssociation1 +ulletin the
ban!s in #ndia are classified in to si" maEor groups are .ublic sector
+an!s .rivate sector +an!s Foreign +an!s state ,o&operative +an!s
Bistrict ,o&operative +an!s and .rimary ,o&operative +an!s. Fasanth
Besai 04%%I1 from his boo! titled as +an!s and #nstitutional
Ganagement classified the structure of financial institutions in #ndia in
37
Management of nonperforming assets in IOB
to three maEor sectors vi*. commercial +an!s co&operative 2ocieties
and other #nstitutions.



3*
CHAPTER-2

RESERCH
DESIGN

Management of nonperforming assets in IOB
CHAPTER II
RESEARCH DESIGN
INTRODUCTION
-.) means any asset which is not yielding income to the
ban!.
'hat means any credit facility is respect of which interest
or repayment of instalment principal as both remain unpaid for as
period of two quarter or more respect of non agriculture loans and one
year in the case of agriculture.
8.1 STATEMENT OF THE PROBLEM
#n the recent times the phenomenon of -on .erforming )sset has
become widely !nown and discussed. 'he private and public sector
commercial ban!s co&operative ban!s national and state level financial
organisations have come to suffer from high level of -.)s. 'he level of
-.)s differs from institution to institution. 'hey have wea!ened the
credit allocation delivery and recovery systems.
-.)s are inevitable burden on the ban!ing industry. Aence the success
depends upon methods of managing -.)s and !eeping them within
tolerance level. 2everal institutional mechanisms have developed in
#ndia to deal with -.)s and there also been tightening of legal
provision. .erhaps more importantly effective management of -.)s
requires an appropriate internal chec! and balances systems in a ban!.
8.8 OB@ECTIVES OF THE STUDY
3+
Management of nonperforming assets in IOB
5. 'o find out the -.) position in #ndian overseas ban! +an!.
4. 'o study the 3+# norms regarding -.).
7. 'o analy*e the recovery strategies for reducing -.)s in #ndian
overseas ban! +an!
J. 'o ma!e suggestions on the basis of the analysis.
8.> SCOPE OF THE STUDY
'he study throws light on the factors influencing -on&performing
assets of the ban! and the steps ta!en by the ban! to minimi*e the -.)
and guidelines issued by the 3eserve +an! of #ndia. 'his study is
confined to #ndian overseas ban! +an! and the research covers the
period of two years that is 4%%>&%I and 4%%I&%K.
'he information collected will be very useful to the ban! students
and to the customer. 'he proEect will help the ban! to ta!e steps based
on the suggestions and recommendations given at the end of the
proEect.
4his training program is basically aimed at giving a good
:nowledge required to clear degree e=ams held by the university.
8.4 COLLECTION METHODS
T+ d()( i# '%!!')d :%)+ -&i2(&4 (# 0!! (# #'%"d(&4
#%u&'#.
PRIMARY DATA3 'he primary data is collected through direct
communication with the staff members.
SECONDARY DATA3 #n this study secondary data is collected
from various sources li!e company records Eournals maga*ines
and internet.
8.5 OPERATIONAL DEFINITIONS
4,
Management of nonperforming assets in IOB
N%" -&$%&2i"1 (##)#3
A AN%" P&$%&2i"1 A##)#B 0(# d$i"d
(# '&di) $('i!i)4 i" &#-') %$ 0+i'+ )+ i")&#) %& i"#)(!2")
%$ -&i"'i-(! +(# &2(i"d u"-(id <AP(#) duB= $%& ( #-'i$id
-&i%d 0(# &du'd i" -+(#d 2(""&.
P&$%&2i"1 (##)#3
P&$%&2i"1 (##)# i# (!#% 6"%0" (# #)("d(&d
(##)#C!%("#, 0+& )+ i")&#) %& -&i"'i-(! (& "%) %,&du
:4%"d D9 d(4# () )+ "d %$ )+ $i"("'i(! 4(&.
Su:-#)("d(&d (##)#3
A #u: #)("d(&d (##)# i# %", 0+i'+ +(#
&2(i"d NPA $%& ( -&i%d !## )+(" %& Eu(! )% 18 2%")+#.
L%## (##)#3
L%## (##)# i" %", 0+& )+ :("6 %&
i")&"(!CF)&"(! (udi)%&# )+ RBI +(, id")i$id !%##, :u) )+
(2%u") +(# "%) :" 0&i))" %$$ $u!!4. T+# (##)# (&
'%"#id&d u"&'%,&(:! ("d (& %$ !i))! ,(!u )% )+
!"di"1 i"#)i)u)i%".
L%("3
M%"4 :%&&%0d $&%2 ( !"di"1 i"#)i)u)i%" %& (
1%,&"2") (1"'4, u#u(!!4 &-(id 0i)+ i")&#).
B("63
A '%&-%&()i%" 2-%0&d )% d(! 0i)+ '(#+, d%2#)i'
("d $%&i1" ("d )% &'i, )+ d-%#i)# %$ 2%"4 ("d )% !%("
)+%# 2%"i# )% )+i&d -(&)i#.

8.. LIMITATIONS OF THE STUDY
'he study is limited to the e"tent of available data.
)n in depth study cannot be done because of time constraint.
6wing the confidentially enforced by the ban! all the data could
not be obtained.
2ince the area wise -.) data are not available for study overall
concept is ta!en for the study
41
Management of nonperforming assets in IOB

CHAPTER III
42
CHAPTER-3
COMPANY
PROFILE
Management of nonperforming assets in IOB
PROFILE OF INDIAN OVERSEAS BANK BANK
Widely !nown for its customer centricity #ndian overseas ban!
+an! was founded by 2hri )mmembal 2ubba 3ao .ai a great visionary
and philanthropist in Luly 5(%I at a small port in Gangalore
Harnata!a. 'he +an! has undergone various phases in its growth path
over hundred years of its e"istence. 'he growth of #ndian overseas ban!
+an! was phenomenal especially after nationali*ation in the year 5(I(
attaining the status of a national level player in terms of geographical
reach and clientele segments. Eighties was characteri*ed by business
diversification for the +an!. #n Lune 4%%I the +an! completed a century
of operation in the #ndian ban!ing industry. 'he eventful Eourney of the
+an! was strewn with many memorable milestones. 'oday #ndian
overseas ban! +an! occupies a premier position in the comity of #ndian
ban!s emerging as the largest nationali*ed ban! in #ndia in terms of
aggregate business volume for 4%%I&%K. With an unbro!en record of
profits since its inception #ndian overseas ban! +an! has several firsts
to its credit. 'hese include<
Launching of #nter&,ity )'G -etwor!
6btaining #26 ,ertification for a +ranch
)rticulation of 9ood +an!ing M +an!s ,iti*en ,harter
,ommissioning of E"clusive Gahila +an!ing +ranch
Launching of E"clusive 2ubsidiary for #' ,onsultancy
First +an! in #ndia to issue credit card for farmers.
First +an! in #ndia to provide )gricultural ,onsultancy 2ervice
>.1 SUBSIDIARY BANKS OF INDIAN OVERSEAS BANK
BANK
,anfin Aomes Limited
,anban! Factors Limited
,anban! Fenture ,apital Fund Limited
,anban! ,omputer 2ervices Limited
9ilt 2ecurities 'rading Limited
43
Management of nonperforming assets in IOB
,anban! #nvestment Ganagement 2ervices Limited
,anban! Financial 2ervices Limited
>.8 REGIONAL RURAL BANKS
2hreyas 9ramin +an!
2outh Galabar 9ramin +an!
.ragathi 9ramin +an!
>.> HISTORY OF INDIAN OVERSEAS BANK BANK
Founded as /#ndian overseas ban! +an! Aindu .ermanent Fund/ in
5(%I by late 2ri. )mmembal 2ubba 3ao .ai this small seed blossomed
into a limited company as /#ndian overseas ban! +an! Ltd./ in 5(5% and
became #ndian overseas ban! +an! in 5(I( after nationali*ation.
SIGNIFICANT MILESTONES
Near
5st Luly
5(%I
#ndian overseas ban! Aindu .ermanent Fund Ltd. formally
registered with a capital of 4%%% shares of 3s.>%8& each with J
employees.
5(5%
#ndian overseas ban! Aindu .ermanent Fund renamed as
#ndian overseas ban! +an! Limited
5(I(
5J maEor ban!s in the country including #ndian overseas ban!
+an! nationali*ed on Luly 5(
5(KI 5%%%th branch inaugurated
5($7
6verseas branch at London inaugurated
,ancard 0the +an!s credit card1 launched
5($J Gerger with the La!smi ,ommercial +an! Limited
44
Management of nonperforming assets in IOB
5($>
,ommissioning of #ndo Aong Hong #nternational Finance
Limited
5($K ,anban! Gutual Fund C ,anfin Aomes launched
5($( ,anban! Fenture ,apital Fund started
5($(&(% ,anban! Factors Limited the factoring subsidiary launched
5((4&(7
+ecame the first +an! to articulate and adopt the directive
principles of :9ood +an!ing;.
5((>&(I
+ecame the first +an! to be conferred with #26 (%%4
certification for one of its branches in +angalore
4%%5&%4
6pened a /Gahila +an!ing +ranch/ first of its !ind at
+angalore for catering e"clusively to the financial
requirements of women clientele.
4%%4&%7 Gaiden #.6 of the +an!
4%%7&%J Launched #nternet C Gobile +an!ing 2ervices
4%%J&%> 5%%= +ranch computeri*ation
4%%>&%I Entered 5%%th Near in +an!ing 2ervice
Launched ,ore +an!ing 2olution in select branches
-umber One .osition in )ggregate +usiness among -ationali*ed
ban!s
4%%I&%K -otched up the highest ever net profit since its inception
3etained -umber 6ne .osition in )ggregate +usiness
among -ationali*ed +an!s
2inged GoDs for ,ommissioning 'wo LFs in #nsurance and
)sset Ganagement with international maEors.
4%%K&%$ Launching of -ew +rand #dentity;
Launching of 6nline 'rading .ortal
#ncorporation of #nsurance and )sset Ganagement LFs
45
Management of nonperforming assets in IOB
Launching of a ,all ,entre
2witchover to +asel 4 -ew ,apital )dequacy Framewor!
4%%$&%( 'he ban! crossed the coveted 3s. 7 la!h crore in aggregate
business
'he +an!s 7
rd
foreign branch at 2hanghai commissioned
4%%(&5% 'he +an!s aggregate business crossed 3s. J la!h crore
mar!.
-et profit of the +an! crossed 3s. 7%%% crore
>.4 BRANCH NET?ORK
)s at Becember 4%%K the +an! has further e"panded its domestic
presence with 4IJ5 branches spread across all geographical
segments. #n view of the centrality of customer convenience the +an!
provides a wide array of alternative delivery channels that include over
5(%% )'Gs& covering I$% centers 55>K branches providing #nternet
and Gobile +an!ing 0#G+1 services and 5$77 branches offering
/)nywhere +an!ing/ services. Dnder advanced payment and settlement
system 5I(7 branches of the +an! offer 3eal 'ime 9ross 2ettlement
03'921 and -ational Electronic Funds 'ransfer 0-EF'1.
'he number of employees wor!ing at #ndian overseas ban! +an!
is JI7>( business per employee is 3s. >J$KI%%% and profit per
employee is 3s. 74J%%%.
'he cantonment branch of indian overseas ban! ban! total are
5K members. 5 senior manager -.3.+adimi 5 manager A.Aonurappa 7
officiers 5 special assistant K clear!s 7 sub&staffs 5 par&time
employee. 6ut of that I ladies staff and 55 gents staff.

46
Management of nonperforming assets in IOB
TABLE NO. 1.5
MANAGEMENT OF INDIAN OVERSEAS BANK BANK

>.5 VISION AND MISSION
Vi#i%"
'o emerge as a +est .ractices +an! by pursuing global benchmar!s in
profitability operational efficiency asset quality ris! management and
e"panding the global reach.
Mi##i%"
'o provide quality ban!ing services with enhanced customer orientation
higher value creation for sta!eholders and to continue as a responsive
corporate social citi*en by effectively blending commercial pursuits with
social ban!ing.
A?ARDS AND ACHIEVEMENTS
47
23#. ). ,. G)A)L)- ,hairman C Ganaging Birector
23#. L)9)B#2A .)#. H. L E"ecutive Birector
23#. A. 2. D. H)G)'A E"ecutive Birector
Management of nonperforming assets in IOB
)dEudged the GB#) Pu:!i' S')%& B("6G in #ndia under the /+est
+an!s 2urvey/ conducted by /Financial E"press&Ernst and Noung/
for 4%%>&%I.
)warded the HFi&#) N()i%"(! A0(&dH instituted by the Ginistry of
Gicro 2mall C Gedium Enterprises 9overnment of #ndia for
e"cellence in /Gicro C 2mall Enterprises 0G2E1 Lending/ for 4%%I&
%K.
,onferred with GE2-!%4& B&("di"1 A0(&d# 8995G by #ndia times
Gindscape and #'G +usiness 2chool for e"cellence in human
resources. #ndian overseas ban! +an! was the first .ublic sector
+an! to bag this award.
Won the maiden award of GB#) P&$%&2i"1 B("6G under solar
water heater finance for the year 4%%>&%I instituted by the
Ginistry of -ew and 3enewable Energy 9overnment of #ndia.
3eceived Ni&4() B("d+u G%!d T&%-+4 for outstanding
performance under e"port finance.
+agged the prestigious IG%!d" P('%'6 N()i%"(! T&(i"i"1
A0(&d-8995J for e"cellence in 'raining.
B#) B("6 i" S%u)+ ;%" A0(&d 8997-9D3 For lending under
H#F, and .GE9. 2chemes.
>.. PRODUCTS AND SERVICES
DEPOSIT SCHEMES
2avings +an! )ccount
Hamadhenu Beposit 03e&#nvestment .lan1
2+ 9old 2cheme 0,+2 +ranches 6nly1
,an&'a" 2aver 2cheme
2+ ,an ,hamp Beposit 2cheme
3ecurring Beposits
,ansaral 2avings )ccount
4*
Management of nonperforming assets in IOB
2pecial 3ecurring Beposit 2cheme
,urrent )ccount
)shraya Beposit 2cheme 0For 2enior ,iti*ens1
,an .remium ,urrent )ccount 0,+2 +ranches 6nly1
,anban! )uto 3enewal Beposit 0,ard1
Fi"ed Beposit
,anrela" 2cheme
Floating 3ate Beposit 2cheme 0F3B21
LOANS PROVIDED BY BANK
,)-G)A#L)
Boctors ,hoice
Aousing
4+
Management of nonperforming assets in IOB
Aouse #mprovement
,an,)2A 02hares1
,)-G6+#LE 0Fehicle1
'wo Wheeler Loans
,an+DB9E' 0For Employed1
,an.E-2#6-
'eachers Loan
2warna Loan 09old Loan1
,an3E-'
,anG63'9)9E
,an'3)FEL
,an'E,A
,anLEWEL
,an2ite Loan
#ndian overseas ban! Leevan
TECHNOLOGY PRODUCTS
ATM-'u2-D:i) C(&d
'he )'G cum Bebit card can be used for the following purposes
5. 'ransactions through #ndian overseas ban! +an! )'Gs and 6ther
+an! )'Gs
4. .urchase of 9oods and 2ervices at .62 Gerchant Establishments
7. Gobile 'op&up and E&tic!eting
J. F#2) Goney 'ransfer
3'92 8 -EF' & an #nter&ban! funds transfer facility for customers

5,
Management of nonperforming assets in IOB
3eal 'ime 9ross 2ettlement 03'921 and -ational Electronic Fund
'ransfer 2ystem 0-EF'1 are two efficient secure economical reliable
system of funds transfer from +an! to +an!. -ow fund transfer can be
made to more than 7I%%% +an! branches across #ndia. 'hese facilities
are available in more than 5I>% branches of #ndian overseas ban! +an!
0addresses and #F2, codes are available in our website under /locator/1
as of now and +an! has planned to enable all its branches for 3'92
8-EF' by 75.7.%$
MUTUAL FUNDS
#ndian overseas ban! ban! has tie up with 3obeco and ABF, )G, for
cross selling of the mutual fund products through its branches the
details of products are as follows
TABLE NO. >.1
INDIAN OVERSEAS BANK ROBECO MUTUAL FUND
PRODUCTS
51
Management of nonperforming assets in IOB
52
2cheme 'ype 2cheme -ame
6pen Ended +alance 2cheme
0Equity oriented 1
#ndian overseas ban! 3obeco
+alance ##
6pen Ended +alance 2cheme
0Bebt oriented 1
#ndian overseas ban! 3obeco
+alance
Garginal Equity 2cheme #ndian overseas ban! 3obeco
,#96
Equity 2cheme 0 'a" 2aving
2cheme 1
#ndian overseas ban! 3obeco
Equity 'a" 2aver
Equity 2cheme 0 6pen Ended 1
#ndian overseas ban! 3obeco
Equity Biversified
#ndian overseas ban! 3obeco
E"po
#ndian overseas ban! 3obeco
-ifty #nde"
#ndian overseas ban! 3obeco
Emerging Equities
#ndian overseas ban! 3obeco
#nfrastructure
#ndian overseas ban! 3obeco
Fortune (J
Equity 2cheme 0 ,lose Ended 1 #ndian overseas ban! 3obeco
Gulticap
Bebt 2cheme 0 ,lose Ended 1 #ndian overseas ban! 3obeco
Fi"ed Gaturity .lan 57G 23#
Bebt 2cheme 0 6pen Ended 1 #ndian overseas ban! 3obeco
#ncome
#ndian overseas ban! 3obeco
Liquid .lus
Bebt 2cheme 0 Bedicated 9ilt
2cheme 1
#ndian overseas ban! 3obeco
9ilt .92
Bebt 2cheme 0 ,ash
Ganagement 2cheme 1
#ndian overseas ban! 3obeco
Liquid
#ndian overseas ban! 3obeco
Floating 3ate
Management of nonperforming assets in IOB
TABLE NO. >.8
HDFC MUTUAL FUND PRODUCTS
2cheme 'ype 2cheme -ame
6pen ended growth scheme
ABF, growth fund
ABF, equity fund
ABF, top 4%% fund
ABF, capital builder fund
ABF, core C satellite fund
ABF, premier multi&cap
fund
6pen ended balanced scheme ABF, balanced fund
ABF, prudence fund
6pen ended equity lin!ed savings
schemes
ABF, long term advantage
fund
ABF, ta" saver
6pen ended inde" lin!ed scheme ABF, inde" fund
6pen ended monthly income
scheme
ABF, GF monthly income
plan
LIFE INSURANCE
'he ban! provides insurance facility to its customers on a condition and
is the contract of insurance is between the insurer and the insured and
not between the +an! and the insured.
AVIVA LIFE INSURANCE PRODUCTS
2ome of )viva life insurance products are as follows
Life +ond .lus
Easy Life .lus
.ension .lus
53
Management of nonperforming assets in IOB
Life +ond
Life Long
Noung )chiever
Life +ond & >
2aveguard
Life 2hie
GENERAL INSURANCE
B("'(##u&("' <N%"-Li$=
+an! has tied up with Dnited #ndia #nsurance ,ompany Limited as a
,orporate )gent for distribution of 9eneral insurance .roducts without
any ris! participation.
CANMEDICLAIM
.ersonal )ccident .olicy by Dnited #ndia #nsurance ,ompany Ltd.
specially designed for #ndian overseas ban! +an! customers. Betails
are as follows
Aospitali*ation e"penses for medical8surgical treatment.
.re&hospitali*ation e"penses up to 7% days prior to hospitali*ation.
.ost&hospitali*ation e"penses up to I% days after hospitali*ation.
)ll account holders of the +an! i.e. depositor as well as
borrowers including employees e"&employees and ,ancard
holders can avail of the benefits of the scheme.
> Nears to I> years. ,hildren between 7 months and > years can
be covered provided one or both parents are covered
concurrently. Dpper age limit can be rela"ed up to $% years only
on renewals.
'wo .lans< .lan ) < )ccount holder 2pouse C 4 dependent
children 05 @ 71. .lan +< )ccount holder 2pouse 4 dependent
children C parents 05 @>1
Flat premium irrespective of age no medical e"amination is
required; 2um #nsured is on floater basis.
54
Management of nonperforming assets in IOB
2um #nsured &Ginimum< 3s.>%%%%8& Ga"imum < 3s. >%%%%%8&
can be selected in multiples of 3s. >%%%%8&.
.olicy .eriod is 54 Gonths.
,ash less facility through 'hird .arty )dministrator 0'.)1. #n case
services of '.) networ! hospital are not utili*ed claims to be
submitted to selected '.) for reimbursement.
#ncome ta" benefit under 2ection $6 B of #ncome 'a" )ct is
available.
FOREIGN EKCHANGE AND INTERNATIONAL BANKING
SERVICES
#ndian overseas ban! +an! entered Fore" arena in 5(>7 with the
opening of its first Foreign E"change Bepartment in Gumbai.
+an! finances e"ports at pre&shipment stage as well as post
shipment stage which can be availed either in foreign currency or
#ndian3upees.
#n addition ban! facilitates forfaiting. 'hat is discounting of
deferred e"port receivables on /without recourse basis/ from an
overseasforfaitingagency.
#ndian overseas ban! +an! is pioneer in financing of L, based
#nternational 'radetransactionsin#ndia.
'he +an! not only finances at customers option in foreign currency
at pre&shipment and post&shipment stages at L#+63 related rates but
also finance the import leg in foreign currency where imported inputs
are required for e"ports.
'he +an! has the e"pertise in handling proEect e"ports of
goodsandservices.
'he +an! has an e"cellent worldwide correspondent relationship
and has the capability to handle any e"port import remittance and
55
Management of nonperforming assets in IOB
related transactions anywhere in the world and in anycurrency.
-on fund based transactions li!e adding confirmations to L,
issuing inward and outward +id bonds C guarantees establishing L,s
for import into #ndia arranging buyer/s credit at attractive
termsetc.areourforte.
#ndian overseas ban! +an! has a branch in London and Aong
Hong. )nd have a Eoint venture with 2+# at Goscow under the name
,ommercial +an! of #ndia LL,.
)nd have recently opened a 3epresentative 6ffice at 2hanghai
.eople 3epublic of ,hina. 'hey are engaged in 'rade finance and have
e"pertise on the #ndian mar!et scenario. 'he +an! also manages 4
E"change houses in the 9ulf and arrangement with 5( E"change
Aouses and 5( +an!s for drawing BBs from 9ulf ,ountries on our
select branches throughout #ndia.
'he +an! has > fore" dealing rooms located in Gumbai -ew
Belhi Hol!ata ,hennai and +angalore in #ndia. 6ur London branch has
a dealing room of its own. We are active in the #ndian fore" mar!et as
well as in overseas fore" mar!et. We provide a whole range of services
and products li!e purchase and sale of K world currencies forward
boo!ings and other fore" hedging instruments li!e currency swaps.
'he above services are offered at attractive cost to the customers
of the +an! subEect to the +an!/s policies and e"change control 8 FEG)
provisions laid down by the 3egulatory )uthorities from time to time.
+an!s 5I Foreign Bepartments located in maEor cities in #ndia
have the requisite e"pertise to guide you and inform you in any matter
connected with our products and services as well as the current fore"
regulations.
CREDIT CARD SERVICES - CANCARD
,)-,)3B is a ,3EB#' ,)3B from the house of #ndian
overseas ban! +an! one of the leading +an! of #ndia with around 4I%%
branches and 4$ million loyal customer bases.
,)-,)3B committed to create convenience and quality
services to cardholders offer unmatched products to suit all the needs.
#t enEoys privilege of wide acceptance and free insurance coverage.
Wide networ! of #-B#)- 6FE32E)2 +)-H +)-H branches and 4J
,ancard 2ervice centers located at many important cities spread across
the country bac! all ,)-,)3B products. ,)-,)3B is the principal
56
Management of nonperforming assets in IOB
member of F#2) #-'E3-)'#6-)L and G)2'E3,)3B
#-'E3-)'#6-)L.
CANCARD PRIVILEGES
Ginimum 9ross income to get ,)-,)3B is 3s.I%%%% only per
annum.
Liberal ,ard limit
9et 7%= of your gross annual income with a ma"imum of 3s.7.%%
la!h. Fi"ing up of the limit is at the sole discretion of #ndian
overseas ban! +an!.
,ash withdrawal limit up to >%= of your card limit with a ma"imum
of 3s.>%%%%.
,ash withdrawal charges only 3s.7% per thousand. Ginimum
3s.7% only.
3eal Free ,redit period for 4%&>% days
,ash withdrawal facility at designated J>% branches all over
#ndia .
,ash withdrawal at #ndian overseas ban! +an! )'Gs.
-o #nterest on cash withdrawal if paid by the due date. #f not paid
by the BDE B)'E interest is charged from BDE B)'E only and
not from the B)'E 6F ,)2A W#'AB3)W)L.
6pt for 3evolving .ayment system and pay only >= of the billed
amount and defer the payment. ,arried over balance attracts
interest at 4.>= p.m.
-o financial charges i.e. interest on other transactions
subsequent to cash withdrawal till the cash withdrawal is repaid.
Lost ,ard protection Liability restricted to 3s.5%%% only from the
time of reporting.
Free card replacement in case of mutilation 8 loss of card.
T+& (& $%u& )4-# %$ '&di) '(&d# (& i##ud :(#d %" 'u#)%2&
"d# )+4 (&,
,)-,)3B F#2) ,L)22#,
57
Management of nonperforming assets in IOB
,)-,)3B F#2) ,63.63)'E
,)-,)3B G)2'E3,)3B
,)-,)3B F#2) #-'E3-)'#6-)L 96LB
CONSULTANCY SERVICES
2ome of the consultancy services provided by ban! are as follows
.ersonal ta" )ssistance C #nvestment ,ounseling
Estate C Wills 2ervices
'rustee 2ervices M .rivate and ,haritable
Bebenture 'rusteeship
2ecurity 'rusteeshi
DEPOSITORY SERVICES
'he #ndian overseas ban! +an! is providing depository services
through its subsidiary called 9ilt 2ecurities 'rading ,orporation Limited.
#t helps its customers for investing money in the stoc! mar!et.
Ad,(")(1# %$ %-"i"1 d2() (''%u") 0i)+ I"di(" %,&#(# :("6
B("6 (&,
Gulti location services across the country
,ompetitive charges
,ustomer friendly service
#Be)2 0#nternet based Bemat )ccount 2tatement1 facility
available for viewing and downloading transaction statements
from internet.
T+ #&,i'# (,(i!(:! )% )+ d2() (''%u") +%!d&# (&,
)ccount opening
Bemateriali*ation
'ransfer of securities
.ledge services
5*
Management of nonperforming assets in IOB
Free*ing and un&free*ing the depository account
-omination facility
)-,#LL)3N 2E3F#,E2
SAFE DEPOSIT LOCKERS
Loc!ers available at select branches where 2afe Beposit Faults are
installed. +an! lets on hire safe deposit loc!ers to individuals 02ingly or
Eointly1 Firms ,ompanies )ssociation or ,lubs 'rustees on nominal
rent.
SAFE CUSTODY SERVICES
'his subsidiary service is rendered by the +an! to most valued
customers. +an! underta!es the responsibility of safe custody of articles
entrusted by the customer under a contract and returns the same
according to terms agreed upon.
NOMINATIONS
'his facility has been devised with an aim of minimi*ing the
hardships caused to the family members on the death of the
depositor8s. -ominations can be made in respect of all types of deposit
accounts by the individual account holders in their own capacity singly
or Eointly.
5 DAY BANKING & Facility is available at select branches.
EKTENDED BANKING HOURS
'he ban! has e"tended business hours by one hour more for
customers convenience. 0)t select computeri*ed branches1.
DD SHOPPE
5+
Management of nonperforming assets in IOB
9et your demand drafts through our e"clusive BB outlets. 6ur BB
2hoppe issues demand drafts up to one hour before close of office
hours. Facility is available at select branches.
NRI BANKING SERVICES
'he following services are a few e"amples of our attorney ship services
5. Ga!ing investments in shares8debentures in #ndian ,ompanies by
direct subscription8 through mar!et operation.
4. 2ale of shares8debentures of #ndian companies through mar!et
operation.
7. Ga!ing other investments li!e fi"ed deposits8-2,8Dnits of
D'#89ovt. securities8 bonds of .ublic sector underta!ings etc.
0'he above services are offered on -on discretionary basis and
specific instructions are to be given for each transaction1.
J. 6pening of demat account with the depository participant and
handling their demat accounts.
>. Ga!ing payment of #nsurance premiums8subscription to
)ssociations etc.
I. ,ollection of income on investments8 reali*ation of investments8
safe custody of securities.
K. 6btaining 3+# permission for purchase8sale of shares. Follow&up
for purchase8sale of shares.
$. ,ollection of income li!e rents and other receipts8effecting
remittances as per instructions 8 ,omputation of income and filing
of #ncome ta" returns.
(. .ayment of L#, premium telephone bills etc.
>.5 PRIORITY SECTOR CREDIT
AGRICULTURE AND RURAL CREDIT SCHEMES
'he ban! provides different types of loans based on the needs of
the agriculturists and rural people
Loans for )gri clinics 8 )gri business ,enters
Hisan ,redit ,ard
Ginor #rrigation 8 .ump set Loans
6,
Management of nonperforming assets in IOB
Farm Gachinery Loans
Farm Bevelopment Loans
Fehicle Loan for )griculturists
Loan for .lantation ,rops
Loan for Garine Fisheries
Loan for 2ericulture
Loans for .oultry and Buc! rearing
Loan for ,old 2torage and 3ural 9odown
OTHER PRIORITY SECTOR LOANS
Education loan
Laghu Ddyami ,redit ,ard 2cheme0LD,,1
Loan for 3etail 'raders
Loan for 2olar Water Aeating 2ystems
Birect Financing to 2elf Aelp 9roups
Finance to -96s
GOVERNMENT SPONSORED SCHEMES
#ndian overseas ban! +an! is the front&runner in implementing
various 9overnment 2ponsored 2chemes aimed to uplift poor
educated un&employed 8 under&employed people in rural 8 semi&urban 8
urban areas by providing financial assistance to set up self&employment
ventures with the help of various government authorities 8 agencies.
'he following are the prominent schemes<
.rime Ginister/s 3o*gar NoEana
2warna Layanthi 2hahri 3o*gar NoEana
2warnaEayanthi 9ram 2waro*gar NoEana
2cheme for Liberation C 3ehabilitation of 2cavengers
61
Management of nonperforming assets in IOB
>.7 INTEREST RATES FOR DOMESTIC DEPOSITS
I")&#) &() $%& S(,i"1# B("6 A''%u") d-%#i)# i# >.5L.
TABLE NO. >.>
INTEREST RATES OF DOMESTIC TERM DEPOSITS
.eriod of
deposit
3)'E 6F #-'E3E2' 0=1 ..). M W.E.F. 5%.%$.4%%(
Less than 3s.5> la!h
9eneral
.ublic
2enior
,iti*ens
Employees8
E"&employees8
2enior ,iti*ens
C other
categories
eligible for
preferential
interest rates
2ingle bul!
domestic
term deposit
of 3s.5 crore
C above to
less than 3s.
5% crore
K days to 5J
days
5.>% 4.%% 4.%% 5.%%
5> days to J>
days
4.K> 7.4> 7.4> 7.%%
JI days to (%
days
J.%% J.>% J.>% 7.>%
(5 days to 5K(
days
>.%% >.>% >.>% J.%%
4K% days to
less than 5
year
>.K> I.4> I.4> >.4>
5 year C above
to less than 4
years
I.K> K.4> K.4> I.4>
4 years C
above to less
than > years
K.%% K.>% K.>% I.>%
> years C
above to less
than $ years
K.4> $.4> $.4> I.>%
$ years C K.>% $.>% $.>% I.>%
62
Management of nonperforming assets in IOB
above to 5%
years
>.D LENDING RATES
T+ :("6J# AP&i2 L"di"1 R() <PLR=B i# 1>.85L 0..$. 15.94.8919
TABLE NO. >.4
LENDING RATES
3ate of #nterest on housing loans is as follows
3epayment
period of
the loan
3EF#2EB 36# 0=1 w.e.f. 45.%4.4%5%
Loans up to 3s. 7%
La!h
Loans above 3s. 7% La!h to 5
crore
FL FO FL FO
Dpto > yrs $.K> 55.%% (.4> 55.4>
)bove > yrs
C upto 5%
yrs
(.%% 55.4> (.>% 55.>%
63
Management of nonperforming assets in IOB
)bove 5%
yrs C upto
4> yrs
(.4> 55.>% 5%.%% 55.K>
I")&#) &()# %" di$$&") )4-# %$ !%("# (&,
,an2ite 5J.>%=
#ndian overseas ban! Leevan 5%.>%=
#ndian overseas ban! +udget 5J.>%=
#ndian overseas ban! 9uide 54.4>=
,anvalue 57.4>=
,an,ash 5J.>%=
,anGobile 0,ar 8 two wheeler loan1 55.%%=.
,an+udget Loan 2cheme 02imple .ersonal Loan1 5>.>%=
,an.ension 54.%%=
'eachers loan scheme 5J.>%=
,anmahila loan scheme 5J.%%=
#.6 financing 57.%%=
Loans to individuals against other
approved securities
5>.%%=
,orporate Loan scheme
55.%%=
Loans for 'raders C +usinessmen <&
Dp to 3s.4 la!h
)bove 3s.4 la!h including loans
under priority sector
54.>%=
57.K>=
Vid4(#(1(& L%(" $%& S)ud")#
64
Management of nonperforming assets in IOB
2tudent satisfying B3# norms
0irrespective of quantum of loan1
0B3#< annual income less than 3s K4%% p.a.1
J.%%=
6thers
Dp to 3s.J la!h
)bove 3s.J la!h up to 3s. K.>% la!h
)bove 3s. K.>% la!h up to 3s. 4% la!h
)bove 3s.5>.%% la!h up to 3s.4%.%% la!h
PFor students secured admission in ##'8 ##G8#2+
55.%%=
54.%%=
(.K>=
(.K>=
5%.%%=
>.19 BUSINESS PERFORMANCE OF THE BANK FOR THE
YEAR 8919
N) P&%$i) of the +an! reached an impressive 3s.7%45 crore by
recording a robust J>.$= growth over FN%( net profit of 3s.4%K4 crore.
O-&()i"1 P&%$i) of the +an! rose to 3s.>%I5 crore compared to
3s.7(IJ crore for FN%( with a growth of 4K.K=.
) )%)(! -&%,i#i%" of 3s.4%7(
crore has been made during
FN5% which includes a provision
of 3s.5J%$ towards -.). 'he
P&%,i#i%" C%,&(1 R()i% $%&
)+ B("6 was comfortable at
55.51L which is well above the
3+# stipulated level of K%= 0to be
achieved by 2eptember 4%5%1.
) di,id"d %$ 199L amounting to 3s.J5% crore is declared by the
+oard of Birectors of the +an! compared to a dividend of $%= last year.
R)u&" %" A,&(1 A##)# for FN5% improved to 1.>9L compared to
5.%I= a year ago. While E(&"i"1# P& S+(& 0E.21 improved to
3s.K7.I( from 3s.>%.>> a year ago B%%6 V(!u rose to 3s.7%>.$7
compared to 3s.4JJ.$K as at Garch 4%%(.
I"'%2 ("d EF-"##
'he +an!s )%)(! i"'%2 grew by 55.4= to reach 3s.45I5% crore
including 3s.57(JI crore contributed by i")&#) i"'%2 $&%2
65
FY09 FY10
3021
2072
0
500
1000
1500
2000
2500
3000
3500
Net Pro!t
"R#$ !% Crore&
I
%
'
r
e
(
#
e

o


)
5
$
7
9
*

Management of nonperforming assets in IOB
!%("#C(d,("'#. N%"-i")&#) i"'%2 of the +an! grew by 47.K= to
3s.4$>$ crore. Fee&based income increased to 3s.5J%7 crore
supported by income from bancassurance at 3s.I$ crore.
While the growth in )%)(! F-"## of the +an! was contained at K.%=
%-&()i"1 F-"## of the +an! grew by a moderate 57.>= during
FN5% on account of provision for wage revision.
N) i")&#) i"'%2 improved to 3s.>I$5 crore with a growth of
4%.J= compared to 3s.JK5$ crore as at Garch 4%%(. 'he +an! could
maintain the spread by increasingly focusing on core business growth
and containing cost. N) I")&#) M(&1i" <NIM= improved from 4.K$=
as at Garch 4%%( to 4.$%= as at Garch 4%5%.
*4 FY19 P&$%&2("'
O-&()i"1 -&%$i) for the quarter grew by 54.J= to 3s.5J7% crore
compared to 3s.54K7 crore last year.
) total -&%,i#i%" of 3s.(4K crore was made for the quarter
higher than the 3s.>>J crore for the same quarter a year ago.
#ncome from #(! %$ i",#)2")# during the quarter was to the
e"tent of 3s.55J crore as against 3s.7J( crore during the same
quarter a year ago.
6n account of the above ") -&%$i) for QJ FN5% wor!ed out to
3s.>%7 crore compared to 3s.K5( crore during the corresponding
quarter of last year.
Buring QJ FN5% the +an!s )%)(! i"'%2 increased to 3s.>>%K
crore contributed by 3s.7>J> crore from i")&#) i"'%2 $&%2
!%("#C(d,("'#.
O-&()i"1 F-"## during the quarter was maintained at
3s.$KK crore.
N) i")&#) i"'%2 for the quarter rose to 3s.5>($ crore from
3s.57%> crore a year ago recording good growth of 44.J=.
Bu#i"## G&%0)+ ("d P&%du')i,i)4
)gainst the challenging economic environment, )%)(! :u#i"## reached
3s.J%7($I crore as at
Garch 4%5% recording a
robust y&o&y growth of
4J.7= over 3s.74>554
crore last year.
66
FY+0, FY+09 FY+10
2-1310
325112
)039,-
0
100000
200000
300000
)00000
R
#
$

C
r
o
r
e
Tot(. /0#!%e##
Management of nonperforming assets in IOB
While aggregate deposits of the +an! grew by 4>.I= y&o&y to touch
3s.47JI>5 crore ") (d,("'# increased to 3s.5I(77> crore
registering a y&o&y growth of 44.>=. C&di) )% d-%#i) &()i% stood at
K4.5I=.
'he +an!/s '%& d-%#i)# grew by 74.7=. 'he share of CASA
d-%#i)# in domestic deposits was 4(.$>=. 2avings deposits recorded
a growth of over 5(=.
Buring FN5% the +an! had launched a nationwide S(,i"1# U)#(,
campaign to mobili*e higher savings deposits. 'he +an! could add a
significant 5I la!h plus new savings ban! accounts during the campaign
period.
'he +an!s d%2#)i' :u#i"## constituted (I.K= of the aggregate
business with 3s.44$JJ> crore 0(K.J=1 under deposits and 3s.5I44$K
crore 0(>.(=1 under advances.
.roductivity measured as Bu#i"## -& E2-!%4 rose to R#.D.7>
crore as at Garch 4%5% compared to 3s.K.$% crore a year before.
Bu#i"## -& B&("'+ rose to R#.1>8..> crore as against 3s.55$.(I
crore at Garch 4%%(. 'he +an! has added 8.54 2i!!i%" clientele during
the year ta!ing the total '!i")! :(# to 7K.7J million as at Garch
4%5%.
C&di) S12")#
)dvances to -&i%&i)4 #')%& reached 3s.>(75% crore recording a
significant y&o&y growth of 45.I= and accounted for J7.(4= of the
adEusted net ban! credit. ,redit to agriculture touched R#.85958 '&%&
signifying a strong 4J.J= growth covering 8D.>D !(6+ farmers. 'he
+an!/s credit to Mi'&%, S2(!! ("d Mdiu2 E")&-&i## 0G2GEs1 grew
by a robust 7%.J= to reach R#.>1954 '&%& compared to a level of
3s.47$47 crore a year ago.
'he +an! opened "i" F'!u#i, 2i'&%$i"("' :&("'+# in urban
centres to cater to the requirements of the urban poor.
2ustaining its premier position among nationali*ed ban!s the +an!s
du'()i%" !%(" -%&)$%!i% increased to R#.87D. '&%& as at Garch
4%5% registering a y&o&y growth of 85.DL and covering more than 1.51
!(6+ students.
67
Management of nonperforming assets in IOB
With a disbursal of R#.7.5> '&%& during the year credit under &)(i!
!"di"1 %-&()i%"# touched R#.8>D98 '&%& as at Garch 4%5% with a
y&o&y growth of 89.5>L. 'he +an!s retail portfolio as a proportion of net
credit stood at 14.5DL. )dvances under housing 0direct1 increased by
87.1L growth to reach R#.1911. '&%&. Aousing portfolio with a
significant portion in priority ambit constituted 48.>L of the retail
portfolio.
,ontinuing with its commitment to greater financial inclusion in the
country the +an! has achieved )%)(! $i"("'i(! i"'!u#i%" in all the 8.
!(d di#)&i')# spread across five 2tates. With a mobili*ation of 4.59
!(6+ "%-$&i!! (''%u")# during the year the total tally under such
accounts rose to 81.79 !(6+ since inception. )mount under such
accounts increased to 3s.7$4.> crore. 'he +an! has so far formed 7.4
la!h S!$ H!- G&%u-# 02A9s1 with credit
lin!ing of 4.K> la!h 2A9s with an outstanding amount of 3s.(4I crore.
E"tending credit under financial inclusion the +an! has issued 5$$KI4
9eneral ,redit ,ards amounting to 3s.4I(.IJ crore.
Further ( "0 '(2-u# for #ndian overseas ban! +an! #nstitute for
)rtisans was inaugurated at Harai!udi 'amil -adu by 2hri .
,hidambaram Aonble Dnion Aome Ginister of #ndia during Becember
4%%(.
T%)(! :u#i"## of all 7 33+s sponsored by the +an! reached
3s.5K>%( crore with a growth of 47.J=. For the year ended Garch
4%5% all 33+s posted a profit after ta" of 3s.5%K.$ crore recording a
good growth of 4(.J=.
)ll subsidiaries and sponsored entities of the +an! posted better
performance in FN5%.
D!i,&4 C+(""!# ("d T'+"%!%14 Ad,("'2")
Buring FN5% the +an! undertoo! ( 2(M%& :&("'+ F-("#i%" d&i,
across the country. +efitting its 5%J
th
year of e"istence the +an! on its
Founders Bay i.e. 5(
th
-ovember 4%%( opened 5%J branches across
the country inaugurated by Aonble Finance Ginister 2hri .ranab
Gu!herEee. 'he +an! opened 75J branches during the year ta!ing the
total tally under the branch networ! to 7%JI branches including 7
overseas branches at London Aong Hong and 2hanghai. 3ecently in
)pril 4%5% the +an! opened its 4
)+
%,&#(# :&("'+ () Li'#)& DH.
Dnder C%& B("6i"1 S%!u)i%" the +an! has covered 5$%( branches
accounting for a substantial (%= of the +an!s business as at Garch
6*
Management of nonperforming assets in IOB
4%5%. With over 4%%% )'Gs the +an! has a debit card base of J(.(I
la!h as at Garch 4%5%. 'he number of branches offering A"40+&
B("6i"1 0)W+1 and I")&") ("d M%:i! B("6i"1 0#G+1 services
e"panded to 4%(5 and 5(>( branches respectively.
>.11 FUTURE GOALS
'he +an! aims to reach an (11&1() :u#i"## figure of R#.5 !(6+
'&%&, comprising total deposits of 3s.4$>%%% crore and advances of
3s.45>%%% crore.
'he +an! will continue to focus on '%& :u#i"## with the obEective
of augmenting profits and profitability.
E"panding global footprints the +an! is li!ely to open a
3epresentative 6ffice at S+(&M(+ shortly in addition to 3+# approval
already obtained in ( international centres.
'argets to achieve 199L CBS '%,&(1 by Lune 4%5%
'he +an! has plans to open %,& 899 "0 :&("'+# during
FN4%55.
6+
Management of nonperforming assets in IOB
>.18 FINANCIAL DETAILS
TABLE NO. >.5
TABLE SHO?ING FINANCIAL POSITION OF INDIAN OVERSEAS
BANK BANK
0)mount in
,rore 3s1
P(&)i'u!(&# 8995-97 8997-9D 899D-19
)dvances 54K4.I4 45IK.(K 4>(%75
Beposits (I(%$.J4
55I$%7.4
7
5J47$5.J
>
-et .rofit 5J4%.$5 5KJK7.K75$K75.7>
-on&.erforming )ssets $((.%7 5>%K.4> 5K((.K%
-on&.erforming )ssets 0= -et
-.)1 %.$J 5.%( 5.%I
#n the )nnual 3eport of #ndian overseas ban! +an! we can observe that
their level of -on&.erforming )ssets is fluctuating year on year from
%.$J= to 5.%I=.


7,
Management of nonperforming assets in IOB
S.W.O.T ANALYSIS
A -.ar./01 -mall 23n-0l.an24 50-ine-- mi67. 2arr4 30. .7e 83ll39in6
%:OT anal4-i-:
STRENGTHS:
Ban; i- a5le .3 re-13n< =er4 >0i2;l4 a- 9e 7a=e n3 re< .a1e( n3 nee< 83r
7i67er mana6emen. a11r3=al( e.2.
Ban; i- a5le .3 6i=e reall4 633< 20-.3mer 2are( a- .7e 20rren. -mall
am30n. 38 93r; mean- 9e 7a=e 1len.4 38 .ime .3 <e=3.e .3 20-.3mer-
Ban;?- lea< 23n-0l.an. 7a- -.r3n6 re10.a.i3n 9i.7in .7e mar;e.
Ban; 2an 27an6e <ire2.i3n >0i2;l4 i8 9e 8in< .7a. 30r mar;e.in6 i- n3.
93r;in6
Ban; 7a- li..le 3=er7ea<( -3 2an 388er 633< =al0e .3 20-.3mer-.
WEAKNESSES:
Ban; 7a- n3 mar;e. 1re-en2e 3r re10.a.i3n
Ban; 7a- a -mall -.a88 9i.7 a -7all39 -;ill- 5a-e in man4 area-
Ban; i- =0lnera5le .3 =i.al -.a88 5ein6 -i2;( lea=in6( e.2.
71
Management of nonperforming assets in IOB
Ban;?- 2a-7 8l39 9ill 5e 0nrelia5le in .7e earl4 -.a6e-.
OPPORTUNITIES:
Ban;in6 50-ine-- -e2.3r i- e@1an<in6( 9i.7 man4 80.0re 3113r.0ni.ie- 83r
-022e--
Ban;?- l32al 230n2il 9an.- .3 en230ra6e l32al 50-ine--e- 9i.7 93r;
97ere 13--i5le
Ban;in6 23m1e.i.3r- ma4 5e -l39 .3 a<31. ne9 .e27n3l36ie-
THREATS:
:ill <e=el31men.- in .e27n3l364 27an6e .7i- mar;e. 5e43n< 30r a5ili.4
.3 a<a1.A
A -mall 27an6e in 8320- 38 a lar6e 23m1e.i.3r mi67. 9i1e 30. an4 mar;e.
13-i.i3n 9e a27ie=e
T7e 23n-0l.an24 mi67. .7ere83re <e2i<e .3 -1e2ialiBe in ra1i< re-13n-e(
633< =al0e -er=i2e- .3 l32al 50-ine--e-. Mar;e.in6 930l< 5e in -ele2.e<
l32al 105li2a.i3n-( .3 6e. .7e 6rea.e-. 13--i5le mar;e. 1re-en2e 83r a -e.
a<=er.i-in6 50<6e.. T7e 23n-0l.an24 -730l< ;ee1 01/.3/<a.e 9i.7 27an6e-
in .e27n3l364 97ere 13--i5le.
72
Management of nonperforming assets in IOB
CHAPTER IV
ANALYSIS AND INTERPRETATION OF THE DATA
#n recent years a parado" has been observed in -.)
management of #ndian ban!s while the gross and net -.) levels of
most ban!s have come down in percentage terms. 'herefore the
criteria of gross -.) as well as -.) percentages cannot be the only
yardstic! for measurement rating of a ban!s performance with respect
to -.) management. Goreover the techniques adopted by ban! for
-.) reduction must vary widely and play a significant role in quality of
-.) management of ban!.
'his chapter deals with the analysis and interpretation of data
collected from the ban!. 'he balance sheet and other relevant data
which was published in the 4%%K&%$ 4%%$&%( and 4%%(&5% annual
reports were collected and studied. )s the -.) data is sensitive an
attempt has been made to analy*e the data of #ndian overseas ban!
+an! !eeping in view of the limitation. 9uidance was ta!en from the
officials of the ban!s to understand the concept and analy*e how the
level of -on&.erforming )ssets affects the performance of the ban!.
73
CHAPTER-)
DATA ANALYSIS
AND
INTERPRETATION
Management of nonperforming assets in IOB
TABLE NO. 4.1
TABLE SHO?ING THE LEVEL OF NON-PERFORMING ASSETS OF
INDIAN OVERSEAS BANK BANK
Y(& L,! %$ NPA
i" L
A2%u") %$
NPA <R#. i"
'&%&=
T%)(! R)u&"
%" A##)# i"
L
4%%K&%$ %.$J= $((.%7 5.%I=
4%%$&%( 5.%(= 5>%K.4> 5.JK=
4%%(&5% 5.%I= 5K((.K% %.$K=
G'*0( No. <.&@*A C G'*0( s(o)i-g -e+ NPA i- 0e'9e-+*ge
S9*1e
O, *Dis &9. E
!.8F
OD *Dis &9. E
&,e*'
,.)?
+.,@
+.,A
-,,B.,) -,,).,@ -,,@.+,
Le4e1 o2 NPA i- F
%evel of 13! in C
G'*0( No. <.&@3A C G'*0( s(o)i-g -e+ NPA i- *.o6-+
S9*1e
O, *Dis &9. E 8!!
9'o'e
74
Management of nonperforming assets in IOB
OD *Dis &9. E &,e*'
)@@.,*
+(,B.-(
+B@@.B
+.,A +.?B ,.)B
-,,B.,) -,,).,@ -,,@.+,
C(*'+ Ti+1e
!mount of 13! in crore &s 4otal returns in C
I-2e'e-9e
)ccording to the above table the level of -.) is fluctuating every
year from %.$J= in 4%%$ to 5.%(= in 4%%( and 5.%I= in the year 4%5%.
'otal return on )ssets of ban! are fluctuating at the rate of 5.%I=
5.JK= and %.$J= for this year.
TABLE NO. 4.8
TABLE SHO?ING RATIO OF NPA TO ADVANCES
<I"L=
Y(& G&%## NPA C G&%##
(d,("'#
N) NPA C N) (d,("'#
4%%K&%$ 5.5$ .%.$J
4%%$&%( 5.>I 5.%(
4%%(&5% 5.>4 5.%I
75
Management of nonperforming assets in IOB
G'*0( No. <.8 C G'*0( s(o)i-g '*+io o2 NPA +o *74*-9es

S9*1e
O,
*Di&9.E!.8F
OD *Dis
&9.E,e*'
-,,B.,) -,,).,@ -,,@.+,
+.+)
+.(A
+.(-
,.)?
+.,@
+.,A
C(*'+ Ti+1e
Gross 13! ; Gross advances 1et 13! ; 1et advances

I-2e'e-9e
'he above table shows the ratio between -.)s to advances. 9ross
-.) ratio for three years was 5.5$= 5.>I= and 5.>4= respectively.
)nd -et -.) ratio was %.$J= 5.%(= and 5.%I= respectively for the
years 4%%$ 4%%( and 4%5%; it shows that both gross and net -.) ratio
ratios are fluctuating continuously.
TABLE NO. <.:
TABLE S=OGING RATIO OF NPA TO TOTAL ASSETS DIn CE
76
Management of nonperforming assets in IOB

G'*0( No. <.: C G'*0( s(o)i-g '*+io o2 NPA +o +o+*1 *sse+s
S9*1e
O, *Dis &9.
E !.8 F
OD *Dis &9.
E &,e*'
+.+
+.,A
+.B?
+.-+
,.B?
+.-+
-,,B.,) -,,).,@ -,,@.+,
C(*'+ Ti+1e
Gross 13! ; 4otal assets DIn CE 1et 13! ; 4otal assets DIn CE
I-2e'e-9e
'he table J.7 shows ratio between -.) to total assets ratio between
gross -.) to total assets is decreasing from 5.55 to 5.%I and finally to
5.KJ and net -.) to total assets is decreasing from 5.45 to %.KJ and to
increases to 5.45 which is a negative sign of improvement in -.)
position.
TABLE NO. 4.4
77
Y(& G&%## NPA C T%)(!
(##)#
N) NPA C T%)(!
(##)#
4%%K&
%$
5.55 5.45
4%%$&
%(
5.%I %.KJ
4%%(&
5%
5.KJ 5.45
Management of nonperforming assets in IOB
ASSET CLASSIFICATION OF INDIAN OVERSEAS BANK BANK
03s. in crore1
P(&)i'u!(&# 8997-9D 899D-19
-E' -.) 5>%K.4> 5K((.K%
2ub&standard
assets
5>5J.>( 5(>7.>(
Boubtful assets IJI.(K I4K.7(
Loss assets I.J5 (.77
'otal advances 45IK.(K 4>(%.75
G'*0( No. <.< @*A C G'*0( s(o)i-g 91*ssi2i9*+io- o2 *74*-9es
S9*1e
O, *Dis &9. E
#!! 9'o'e
OD *Dis &9. E
&,e*'
!
#!!
&!!!
&#!!
8!!!
8#!!
:!!!
8!!$!" 8!!"&!
NET NPA
S63s+*-7*'7 *sse+s
Do63+261 *sse+s
Loss *sse+s
To+*1 *74*-9es
G'*0( No. <.< @3A C G'*0( s(o)i-g 91*ssi2i9*+io- o2 NPAs
S9*1e
7*
Management of nonperforming assets in IOB
O, *Dis &9.
E #!! 9'o'e
OD *Dis &9.
E &,e*'
!
#!!
&!!!
&#!!
8!!!
8!!" 8!&!
S63s+*-7*'7 *sse+s Do63+261 *sse+s Loss *sse+s
I-2e'e-9e
'he table J.J e"plains division of advances of #ndian overseas
ban! +an! for year 4%%( -et -.) were 3s. 5>%K.4> crore sub
standard assets 3s.5>5J.>( doubtful assets IJI.(K loss assets 3s.
I.J5crore and total advances stood at 3s. 45IK.(K crore. )nd for the
year 4%5% -et -.) 3s. 5K((.K% crore sub standard assets 3s.
5(>7.>( crore doubtful assets I4K.7( crore loss assets 3s. (.77 crore
and total advances were 3s. 4>(%.75 crore.
TABLE 4.5
CAPITAL ADE*UACY RATIO OF INDIAN OVERSEAS BANK BANK
Y(& C(-i)(! AdEu('4 R()i%
<L=
7+
Management of nonperforming assets in IOB
4%%>&%I 55.44
4%%I&%K 57.>
4%%K&%$ 57.7
4%%$&%( 5J.5
4%%(&5% 57.J7
G'*0( No. <.# C G'*0( s(o)i-g 9*0i+*1 *7e56*9, '*+io o2 I-7i*-
o4e'se*s 3*-; B*-;

S9*1e
O, *Dis &9. E
&8.$F
OD *Dis &9. E
&,e*'
13.5
13.3
14.1
13.43
12.*
13
13.2
13.4
13.6
13.*
14
14.2
2,,6/,7 2,,7/,* 2,,*/,+ 2,,+/1,
Ca1i.al A<e>0a24 Ra.i3 CDE
I-2e'e-9e
,apital )dequacy 3atio is also called as ,apital to 3is! Weighted
)ssets 3atio 0,3)31; it is the ratio of ban!s capital to its ris!. ,)3 of
#ndian overseas ban! +an! was 55.44= in 4%%>&%I 57.>= in 4%%I&%K
57.7= in 4%%K&%$ 5J.5= in 4%%$&%( and 57.J7= in the year 4%%(&5%.
TABLE NO. 4..
SECTOR ?ISE GROSS NPA <R#. I" '&%&=
Y(& NPA i"
P&i%&i)4
S')%&
NPA i" N%"-
P&i%&i)4 S')%&
NPA i"
Pu:!i'
S')%&
T%)(!
4%%K&
%$
((%.$( 57I>.7> >.4I 47I5.>%
*,
Management of nonperforming assets in IOB
4%%$&
%(
5%$>.$> I$$.4( (.(K 5K$J.45
4%%(&
5%
(47.K7 >JJ.>% 5$.(I 5J$K.5(
G'*0( No. <.% C G'*0( s(o)i-g se9+o' )ise g'oss NPA
S9*1e
O, *Dis &9. E
#!! 9'o'e
OD *Dis &9. E
&,e*'
++,.*+
1,*5.*5
+23.73
1365.35
6**.2+
544.5
5.26 +.+7 1*.+6
2361.5
17*4.21
14*7.1+
,
5,,
1,,,
15,,
2,,,
25,,
2,,7/,* 2,,*/,+ 2,,+/1,
#PA in Pri3ri.4 %e2.3r #PA in #3n/Pri3ri.4 %e2.3r #PA in P05li2 %e2.3r T3.al
I-2e'e-9e
'he above chart shows that -.) in non priority sector was more
in the year 4%%J&%> than priority sector but it reduced than priority sector
for 4%%>&%I and 4%%I&%K. -.) in public sector shows increase in -.)
for all the years.
TABLE NO. 4.5
MOVEMENT OF NPA
P(&)i'u!(&# 4%%( 4%5%
G&%## NPA G&%## NPA
6pening 54K4.I4 45IK.(K
*1
Management of nonperforming assets in IOB
+alance
)dditions Buring
the Nr.
47KK.KJ 74II.77
3eductions
Buring the Nr.
5J$4.7( 4$J7.((
,losing +alance 45IK.(K 4>(%.75
G'*0( No. <.> C G'*0( s(o)i-g .o4e.e-+ o2 NPA
S9*1e
O, *Dis &9. E #!!
9'o'e
OD *Dis &9. E
&,e*'
,
5,,
1,,,
15,,
2,,,
25,,
3,,,
35,,
!r3-- #PA 2,,+ !r3-- #PA 2,1,
O1enin6 Balan2e A<<i.i3n- $0rin6 .7e Yr.
Re<02.i3n- $0rin6 .7e Yr. Cl3-in6 Balan2e
I-2e'e-9e
'he above table shows movement of gross -.)s the
amount of gross -.)s are fluctuating for both the years 4%%( and 4%5%
where closing balance is more than the opening balance.
TABLE NO. 4.7
MOVEMENT OF PROVISIONS FOR NPA#
03s. #n crore1
P(&)i'u!(&# 899D 8919
6pening balance 7K7.5% I>K.K(
.rovisions made (%%.%% 5J4I.5K
*2
Management of nonperforming assets in IOB
during the year
Write off 8 write bac!
of e"cess provisions
I5>.75 54(K.5I
,losing balance I>K.K( K$I.$%
G'*0( No. <.$ C G'*0( s(o)i-g .o4e.e-+ o2 0'o4isio- 2o' NPAs

S9*1e
O, *Dis &9. E
8!! 9'o'e
OD *Dis &9. E
&,e*'
!
8!!
<!!
%!!
$!!
&!!!
&8!!
&<!!
&%!!
8!!" 8!&!
O0e-i-g 3*1*-9e
P'o4isio-s .*7e 76'i-g +(e ,e*'
G'i+e o22 ? )'i+e 3*9; o2 eD9ess 0'o4isio-s
C1osi-g 3*1*-9e
I-2e'e-9e
'able -o. J.$ e"plains about movement of provisions for -.)
provision for -.) made for the year 4%%( was 3s. (%%.%% crore and for
the year 4%5% was 3s. 5J4I.5K crore.


TABLE NO. 4.D
COMPARISON OF INDIAN OVERSEAS BANK BANK ?ITH OTHER
NATIONALISED BANKS

P(&)i'u!(&# 8997-9D 899D-19
G&%## NPA N) NPA G&%## NPA N) NPA
*3
Management of nonperforming assets in IOB
#ndian
overseas ban!
+an!
5.>I 5.%( 5.>4 5.%I
,entral +an!
of #ndia
5.( %.( 5.I %.K
,orporation
+an!
%.( %.4 %.I %.4
Bena +an! 5.> %.I 5.7 %.I
#ndian +an! %.K %.5 %.> %.55
G'*0( No. <." C G'*0( s(o)i-g 9o.0*'iso- o2 I-7i*- o4e'se*s
3*-; B*-; )i+( o+(e' -*+io-*1ise7 3*-;s.

S9*1e
O, *Dis &9. E !.# F
OD *Dis &9. E &,e*'
*4
Management of nonperforming assets in IOB
!
!.#
&
&.#
8
G'oss NPA
8!!$!"
Ne+ NPA
8!!$!"
G'oss NPA
8!!"&!
Ne+ NPA
8!!"&!
C*-*'* B*-; Ce-+'*1 B*-; o2 I-7i*
Co'0o'*+io- B*-; De-* B*-;
I-7i*- B*-;

I-2e'e-9e
'able -o. J.( compares the -.) position of #ndian overseas ban!
+an! with other ban!s for the last year #ndian overseas ban! +an! had
less -.) ratio than ,entral +an! of India. And had more NPA than
Corporation Bank, Indian Bank and Dena +an!.



*5
Management of nonperforming assets in IOB
CHAPTER V
SUMMARY OF FINDINGS, SUGGESTIONS AND
CONCLUSIONS
5.1 SUMMARY OF FINDINGS
51 T7e In<ian 3=er-ea- 5an; 5an; i- 1r3=i<in6 <i88eren. .41e- 38
-er=i2e- .3 .7e 20-.3mer- -027 a- $e13-i. -27eme- L3an-( $eman< <ra8.(
-a8e <e13-i.- l32;er( $e5i. 2ar< an< 2re<i. 2ar<( ATM 8a2ili.4 e.2.
-E :7ile -ele2.in6 .7e 5an; 20-.3mer- are 23n-i<erin6 =ari30- 8a2.3r-
li;e Ban; ima6e( Pr3<02.- an< -er=i2e-( in.ere-. ra.e- an< -e20ri.4 e.2. in .7a.
m3re .7an 5,D 38 .7e 20-.3mer- are a..ra2.e< 54 Ban; ima6e( -e20ri.4 an<
1r3<02.- an< -er=i2e-.
*6
CHAPTER-5
FINDING1
SUGGESTIONS
AND
CONCLUSION
Management of nonperforming assets in IOB
71 'he #ndian overseas ban! +an! is trying to reduce its level of
-on&.erforming )ssets and thereby trying to improve the quality of the
loans.
J1 customers are attracted by different types of technology
enabled services indian overseas ban! ban!.
>1 'he department is holding e"perts the particular field.
I1 #nterest rates are for domestic deposits are low.
K1 # felt that information about -.) is not easly available.
$1 With careful observation # felt that -.) is increasing day by
day in ban!s.
5.8 SUGGESTIONS
E=en .73067 5an; i- 1r3=i<in6 <i88eren. .41e- 38 -er=i2e- 50. 5an; i- n3.
23n2en.ra.in6 3n 3.7er -er=i2e- li;e M0.0al 80n<-( In-0ran2e( $ema.
a2230n. 8a2ili.4 an< Online 5an;in6 -er=i2e- -3 i8 5an; im1r3=e- .7e-e
-er=i2e- .7en 5an; 2an -a.i-84 .7e e@i-.in6 20-.3mer- an< a..ra2. ne9
20-.3mer-.
. 'he ban! should be cautious while providing loans to the priority
sector since -on&performing )ssets of priority sector are not
decreasing at the required level.
Each branch should daily update the details loans section so that
early detection of the -on&performing )ssets can become possible.
'he securities sei*ed from the defaulters should be sold as soon as
possible so the value of assets should not come down 8 depreciate.
'he ban! should ensure that the assets given as securities are
properly insured by the customers or not.
M3re n0m5er 38 In<ian 3=er-ea- 5an; Ban; ATM 30.le.- i- .7e 23n2ern 38
m3-. 38 .7e re-13n<en.- COnl4 46D 38 .7e 20-.3mer- are -a.i-8ie< 9i.7
a=aila5ili.4 38 ATM 2en.er-E. In =ie9 .3 in2rea-e .7e e@i-.in6 -a.i-8a2.i3n
ra.e( In<ian 3=er-ea- 5an; 5an; -730l< -.0<4 .7e 8ea-i5ili.4 38 -.ar.in6 ATM
30.le.- a. 7i67 0.ili.4 area- in Bellar4 2i.4. In<ian 3=er-ea- 5an; 5an; 2an
*7
Management of nonperforming assets in IOB
-.ill a..ra2. ne9 20-.3mer- 54 1r3=i<in6 e/-er=i2e- li;e ne. 5an;in6( 173ne
5an;in6 e.2.
A6ri20l.0ri-.- an< -mall -2ale in<0-.rie- 9an. .7e l3an a. l39 in.ere-. ra.e-.
In<ian 3=er-ea- 5an; 5an; 7a- .3 im1r3=e .7e 1r3m3.i3nal a2.i=i.4 rela.in6
.3 2an2ar<.
5.> CONCLUSION
Fr3m .7i- -.0<4 I 2an 23n2l0<e .7a. In<ian 3=er-ea- 5an; Ban;
i- 1r3=i<in6 <i88eren. .41e- 38 .7e -er=i2e- .3 i.- 20-.3mer-. A 8e9 -er=i2e-
1r3=i<e< 54 In<ian 3=er-ea- 5an; Ban; are 23mm3n an< al-3 9e 2ame .3 ;n39
.7a. 20-.3mer- -a.i-8a2.i3n .39ar<- In<ian 3=er-ea- 5an; Ban;.
2ince last few years -on&performing )ssets has become one of
the parameters which are used for deciding the efficiency of the ban!s.
#t is crucial for the ban!s to maintain the level of -on&performing )ssets
to the minimum possible level. )nd #ndian overseas ban! +an! has
been successful in maintaining the -on&performing )ssets under
control.
6ne more important event which can increase the -on&performing
)ssets is the political interference Gr. .ranab Gu!erEee Finance
Ginister of central government decided for the waiver of loan amount of
farmers is really going to affect the performance of #ndian overseas
ban! +an!.
BIBLIOGRAPHY
**
Management of nonperforming assets in IOB
@%u&"(!# ("d 2(1(/i"#3
2hreyas M #6+ +an! Gaga*ine
)nnual 3eport of #6+ +an! 4%5%&55
B%%6#3
Fasant Besai :+an!s and #nstitutional Ganagement; first edition
Aimalaya .ublishing Aouse 4%5%
?: #i)#3
www.iob.in
www.moneycontrol.com
*+
Management of nonperforming assets in IOB
+,
Management of nonperforming assets in IOB
+1
Management of nonperforming assets in IOB
+2
Management of nonperforming assets in IOB
+3
Management of nonperforming assets in IOB
+4
Management of nonperforming assets in IOB
+5
Management of nonperforming assets in IOB
+6

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