Professional Documents
Culture Documents
CHAPTER: 1
EXECUTIVE
SUMMARY
Executive Summary
A project has been prepared under the title of ‘Non Performing Assets in
Surat’.
First of all the information regarding the banking industry is given. In that
various facts regarding the bank industry is being provided. Also the various
types of non performing assets.
The brief introduction of non performing assets is given. In this the definition,
various benefits, objective, limitation etc. are mentioned. Then a analysis of
data is made.
Then the objective of doing the project is mentioned.
After that analysis comes. At the last me find Conclusion & Suggestion. Then
comes “facts and finding” part. In this part first of all the details about the non
performing assets by me is given. Then a comparison is made among the three
companies selected by me on various parameters.
CHAPTER: 2
RESEARCH
METHODOLOGY
RESEARCH METHODOLOGY
TITLE OF STUDY
Here it is “NON-PERFORMING ASSETS”
RESEARCH PROBLEM
NPA always affect the profit of bank and also the prestige of bank. So
here the research problem is to identify the causes for the NPA and to identify
the action plan to reduce the NPA.
RESEARCH DESIGN
Here the research design is exploratory which helps me to explore the
NPA problem of bank.
RESEARCH INSTRUMENT
As a research instrument I have taken guidance from the CEO of City
bank and also my faculty of college.
DATA COLLECTION
Primary Data
Secondary Data
Hence it is an exploratory research their is not any dependence on primary
data.
Sources of secondary data
1. Annual report
2. Journals
3. Websites
4. Books
CHAPTER: 3
OBJECTIVE
OF
PROJECT
©. To understand the credit appraisal policy and NPA recovery policy of bank
CHAPTER: 4
LIMITATION
LIMITATION OF PROJECT
Some times bank officer was hesitant to give all data on NPA.
I have selected only one bank for NPA which is very small sample size.
CHAPTER: 5
INTRODUCTION
OF
BANKING INDUSTRY
DEFINITION OF BANK
DEFINITION OF BANKING
For the past three decades India's banking system has several
outstanding achievements to its credit. The most striking is its extensive reach.
It is no longer confined to only metropolitans or cosmopolitans in India. In
fact, Indian banking system has reached even to the remote corners of the
country. This is one of the main reasons of India's growth process.
The government's regular policy for Indian bank since 1969 has paid
rich dividends with the nationalization of 14 major private banks of India.
Not long ago, an account holder had to wait for hours at the bank
counters for getting a draft or for withdrawing his own money. Today, he has
a choice. Gone are days when the most efficient bank transferred money from
one branch to other in two days. Now it is simple as instant messaging or dials
a pizza. Money has become the order of the day.
The General Bank of India was set up in the year 1786. Next were
Bank of Hindustan and Bengal Bank. The East India Company established
Bank of Bengal (1809), Bank of Bombay (1840) and Bank of Madras (1843)
as independent units and called it Presidency Banks. These three banks were
amalgamated in 1920 and Imperial Bank of India was established which
started as private shareholders banks, mostly Europeans shareholders.
During the first phase the growth was very slow and banks also
experienced periodic failures between 1913 and 1948. There were
approximately 1100 banks, mostly small. To streamline the functioning and
activities of commercial banks, the Government of India came up with The
Banking Companies Act, 1949 which was later changed to Banking
Regulation Act 1949 as per amending Act of 1965 (Act No. 23 of 1965).
Reserve Bank of India was vested with extensive powers for the supervision
of banking in India as the Central Banking Authority.
PHASE II
areas. It formed State Bank of India to act as the principal agent of RBI and to
handle banking transactions of the Union and State Governments all over the
country.
PHASE III
This phase has introduced many more products and facilities in the
banking sector in its reforms measure. In 1991, under the chairmanship of M
Narasimham, a committee was set up by his name which worked for the
liberalization of banking practices.
The country is flooded with foreign banks and their ATM stations.
Efforts are being put to give a satisfactory service to customers. Phone
banking and net banking is introduced. The entire system became more
convenient and swift. Time is given more importance than money.
The central bank of the country is the Reserve Bank of India (RBI). It
was established in April 1935 with a share capital of Rs. 5 crores on the basis
of the recommendations of the Hilton Young Commission. The share capital
was divided into shares of Rs. 100 each fully paid which was entirely owned
by private shareholders in the beginning. The Government held shares of
nominal value of Rs. 2, 20,000
Reserve Bank of India was nationalized in the year 1949. The general
superintendence and direction of the Bank is entrusted to Central Board of
Directors of 20 members, the Governor and four Deputy Governors, one
Government official from the Ministry of Finance, ten nominated Directors by
the Government to give representation to important elements in the economic
life of the country, and four nominated Directors by the Central Government
to represent the four local Boards with the headquarters at Mumbai, Kolkata,
Chennai and New Delhi. Local Boards consist of five members each Central
Government appointed for a term of four years to represent territorial and
economic interests and the interests of co-operative and indigenous banks.
The RBI has given licenses to new private sector banks as part of the
liberalization process. The RBI has also been granting licenses to industrial
houses. Many banks are successfully running in the retail and consumer
segments but are yet to deliver services to industrial finance, retail trade, small
business and agricultural finance.
The PSBs will play an important role in the industry due to its number
of branches and foreign banks facing the constraint of limited number of
branches. Hence, in order to achieve an efficient banking system, the onus is
on the Government to encourage the PSBs to be run on professional lines.
BANKS
CO-OPERATIVE BANKS
The Co-operative banks have a history of almost 100 years. The Co-
operative banks are an important constituent of the Indian Financial System,
judging by the role assigned to them, the expectations they are supposed to
fulfill, their number, and the number of offices they operate. The co-operative
movement originated in the West, but the importance that such banks have
assumed in India is rarely paralleled anywhere else in the world. Their role in
rural financing continues to be important even today, and their business in the
urban areas also has increased phenomenally in recent years mainly due to the
sharp increase in the number of primary co-operative banks.
Some of the co-operative banks are quite forward looking and have
developed sufficient core competencies to
challenge state and private sector banks.
©. Farming
©. Cattle
©. Milk
©. Hatchery
©. Personal finance
©. Self-employment
©. Industries
©. Home finance
©. Consumer finance
©. Personal finance
CHAPTER: 6
INTRODUCTION
OF
CITY CO-OP. BANK
LTD
CITY
BANK
INTRODUCTION OF BANK
City is a name of the bank where the bank is ready to serve its banking
services to all customers.
The bank have follows continues “A” Grade Audit systems and it is
the Grade “A” bank till now.
The Bank started off with exemplary combination of talented Board &
potential staff team, stuffed with extreme professionalism and well designed
contours of working method. The bank started as a paperless unit employing
Tele-banking, Remote banking, Off-time banking, Sunday banking, Holiday
banking and many more allied methodologies from the very beginning right
from the D-day.
In the line with the same philosophy some of their branches in the
residential area work all the seven days of the week, without a break. They
work on Sundays w/o any alternative drop during the week. Likewise to focus
special attention on the senior citizens the bank offers to credit monthly
interest in their account with any bank before 5th day of every month.
SOCIAL OBLIGATIONS
City bank does not lag behind in offering contribution for the social
activities, particularly in the field of education and medicines. Out of activities
particularly in the field of education and medicines, Out of the substantial
profits earned by the City bank every year after the year, several goodwill
gestures are made such as,
BANK’S SERVICES
LIFE INSURANCE
Bank has tied with Aviva Life Insurance Co ltd. It is joint venture between
Dabur – Indian FMCG Co & AVIVA – UK’s No 1 & world’s No 5 insurance
co. All the branches are offering all the insurance products of AVIVA viz for
child education, daughter’s marriage, retirement solution, term plan etc.
GENERAL INSURANCE
MUTUAL FUND
Bank has tied with Principal PNB Mutual Fund, UTI, Benchmark, ICICI
Prudential, SBI Mutual Fund, Lotus India, Reliance Mutual Fund, Kotak
Mahindra, Birla Sunlight, Sundram BNP Pari Bar Mutual.
LOCKERS
Rent free locker facilities are available in Baroda at Kareli Baug, at Bharuch,
Navsari & at following branches of Surat
BOARD OF DIRECTORS
Shri. Amaratbhai
6 Director
Brachmabhatt
Shri. Dineshbhai
7 Director
Tamakuwala
Shri. Gaurang Rushi
8 Director
ORGANISATION STRUCTURE
(CHAIRMAN)
(DIRECTORS)
(CEO)
(CHIEF MANAGER)
(DIVISIONAL MANAGER)
(AREA MANAGER)
(BRANCH MANAGER)
(OFFICER/CLERK)
BALANCE SHEET
(Rs. in lacs)
Liabilities 2006 2007 Assets 2006 2007
BRANCHES
1 Main Branch
2. Rander Branch
11, Patel Park, Tadwadi,Rander Road, Surat-9.
3. Adajan Branch
2, River Park Row House, Adajan Surat-9.
5. Abhishak Branch
1,Balaji Market , Ring Road, Surat – 2.
CHAPTER: 7
INTRODUCTION
OF
NON-PERFORMING
ASSETS
NON-PERFORMING ASSETS
©. MEANING
©. DEFINITION
A NPA was defined as credit in respect of which interest and/or
installment of principal has remained “past due” for a specific period
of time. The specific period of time was reduced in a phased manner as
under:
©. Industrial problem
NARSIMHAN COMMITTEE
©. FIRST COMMITTEE
A. If banks want to know the true and fair financial health of bank then
they should observed the prudential accounting norms while making
balance sheet and profit & loss account.
B. Classification of assets has to be done on the basis of objective criteria.
C. Provisioning should be made on the basis of classification into four
different categories.
@. These norms are applicable to all UCB’s from 1st April, 1992.
©. SECOND COMMITTEE
5. Banks have been asked to reduce the level of NPA to 5% of their total
advances till 31st March, 2000. The percentage has to be brought down
to less than 3% with effect from 31st March, 2002.
ASSETS CLASSIFICATION
ASSETS
1. STANDARD ASSETS:
Standard assets are one which does not carry any problems and which
does not carry more than normal risk attached to the business.Such assets
should not be an NPA.
2. SUB-STANDARD ASSETS:
These assets involved the two types of view as follows…
In respect to the norms of March 31, 2005 an asset would be classified as
Sub standard if it remained NPA for a period less than or equal to 12 months.
An assets where the terms of the loan agreement regarding interest &
principal have been regenerated or rescheduled after commencement of
production, should be classified as sub-standard and should remain in such
category for at least 12 months of satisfactory performance under the re-
negotiated terms.
3. DOUBTFUL ASSETS:
In respect to the norms of March 31, 2005 an asset is required to be
classified as doubtful, if it has remained NPA for more than 12 months.
A loan which is classified as doubtful has all the weaknesses inherent as that
classified as Sub-standard with the added characteristic that the weaknesses
make collection or liquidation in full, on the basis of the currently known
facts, conditions and values, highly questionable and improbable.
Some types of these assets are…
4. LOSS ASSETS
A loss asset is one where loss has been identified by the bank or internal
or external auditors or by the Co-operation department or by the RBI
inspection but the amount has not been written of, wholly or partly.
1. BASIC CONSIDERATION:
B.M. Collage of Business Administration Page 39
Non Performing Assets
what would constitute a high value account depending upon their respective
business levels. The cut-off point should be valid for the entire accounting
year.
The system should ensure that doubts in asset classification due to any
reason are settled through specified internal channels with in one month from
the date on which the account would have been classified as NPA as per
extant guidelines.
According to the act of 1st April, 1992 the income recognition policy is
as follows…
The policy of income recognition has to be objective and based on the
record of recovery. Income from non-performing assets is not recognized on
accrual basis but is booked as income only when it is actually received.
Therefore, banks should not take to income account interest on non-
performing assets on accrual basis.
However, interest on advances against term deposits, NSCs, IVPs, KVPs,
and Life policies may be taken to income account on the due date, provided
adequate margin is available in the accounts.
PROVISIONING NORMS
( | ). LOSS ASSETS
The entire assets should be written off after obtaining necessary approval
from the competent authority and as per the provisions act of C0-operative
society Act. If the assets are permitted to remain in the books for any reason,
100% of the outstanding should be provided for.
( || ). SUB-STANDARD ASSETS
( |V ). STANDARD ASSETS
From the year ended March 31, 2000, the banks should make a general
provision of a minimum of 0.25% on the standard assets.
( V| ). HIGHER PROVISIONS
There is no objection if the banks create bad and doubtful debts reserve
beyond the specified limits on their own or if provided in the respective State
Co-operative Societies Acts.
MANAGEMENT OF NPA
t is very necessary for bank to keep the level of NPA as low as
possible. Because NPA is one kind of obstacle in the success of bank so, for
that the management of NPA in bank is necessary. And this management can
be done by following way:
RECOVERY OF NPA
©. IMPORTANCE OF RECOVERY:
1. SECURITIZATION ACT
2. Gujarat state has also by amending under co-op soc, act empower co-op
bank to appoint their staff as recovery officer on getting order from the board
of nominees.
Above both act are benefited to bank for the recovery of NPA.
CHAPTER: 8
B.M. Collage of Business Administration Page 46
Non Performing Assets
NON-PERFORMING
ASSETS
©. INTRODUCTION
©. POLICY ON PRE-SANCTION
©. APPRAISAL
2. Working capital facilities beyond Rs. 5 lacs should not be considered in the
form of overdraft.
B. TERM FINANCE
1. term loan limit to be arrived @ 25% margin in respect of
Machinery/Equipment and Vehicles while 50% against land & building,
electrification, furniture fixtures.
C. GENERAL
1. Credit facilities should not exceed segment wise, individual as also
group exposures.
©. EXPOSURE
©. SANCTIONING AUTHORITY
1. AGM
Rs.1.00 lac for all types of fresh loan except staff loan and Rs.2.00
lacs for renewal
2. CEO
Rs.2.00 lacs for all types of fresh loan except staff housing loan and
Rs.4.00 lacs for renewal
3. COE
Committee of executives comprising of all the executives shall have
authority to grant all type of fresh loan up to Rs.15.00 lacs except loan
against FDR/LIC/GOVT. security and staff housing loan as also
renewal of all working capital facilities irrespective of limit.
5. LOAN COMMITTEE
All types of loans to single borrower up to Rs.77.50 lacs and Rs.1.75
crores for group borrower.
6. BOARD
All types of loan within exposure ceiling for individual and group
borrower.
©. DISBURSAL FORMALITIES
2. In case of new unit, working capital facility to be released, only after the
unit starts commercial production.
B. TERM FINANCE
1. So far as possible, disbursement to be made by direct payment to seller.
C. GENERAL
1. Disbursement to be made only after complying with all the terms and
conditions of sanction, complete documentation and obtaining disbursal
authority.
2. In case of Private Ltd. Company, charge with ROC to be registered
immediately on disbursal of credit facility.
3. Before disbursal branch to ensure that borrowers/guarantors become
member of the bank.
©. POST SANCTION
A. TERM FINANCE
2. At least twice a year, branch to inspect the unit to ensure that machineries
financed by the bank are in running condition.
B. WORKING CAPITAL
1. No finance to be considered against inter-firm receivable and for the
receivables of more than 90 days.
2. Branch to submit the renewal papers along with memorandum for renewal
to higher authority for renewal, with its comments on performance with the
bank, financial performance viz. sales, profit etc…
3. If financial performance does not justify the limit at current level, branch to
persuade the party to reduce the limit.
©. CLASSIFICATION:
2. DOUBTFUL ASSETS
NPA for more than 12 months is doubtful assets.
©. PROVISION:
1. STANDARD ASSETS
0.25% of standard assets in SME and direct agriculture advances.
0.40% in case of all other standard loans
1.00% for personal loan, Commercial Real Estate Loan, Loan against
shares
And for housing loan up to Rs.20.00 lacs the provision is 2.00%.
3. DOUBTFUL ASSETS
©. BANK’S POLICY:
At present they are making recovery but procedure for the same is not
documented in the form of policy. Although the bank is committed to
collection/recovery of its dues but the dignity of and respect for the customer
is central to their recovery policy. The policy is framed on the principal of
courtesy, fair treatment and persuasion.
3. If the branch does not get response from the borrower for paying
the amount, they have to visit the unit and meet with the borrower.
During visit to customer’s place for collection of dues, decency
4. If the branch does not get any favorable response, during personal
visit, they should write a notice letter to borrower.
10. The aim of possession under Securitization or State co-op. Act will
be to recover the dues and will not be aimed at whimsical
deprivation of the property. The bank shall resort to repossession
of the security only when the collection/recovery of dues is not
forthcoming in spite of request made and the policy for
repossession shall be in accordance with the terms and conditions
of the loan documents and with in the legal framework. The policy
fairness and transparency in repossession, valuation and realization
of security.
CHAPTER: 9
ANALYSIS
OF
DATA
©. YEAR 2003
(RS. IN LACS)
Details Amount %of Total
N P A OF 2003
LO S S A S S E TS0.22755
D O U B TF U L A S S E TS4.922324
ASSETS-->
% of Total
S UB -S TA N D A RD A S S E TS
2.949291
S TA ND A RD A S S E TS 91.90084
0 20 40 60 80 100
V A L U ES -->
©. YEAR 2004
(RS. IN LACS)
N P A O F YE AR 20 04
L O S S A S S E TS
0 .1 5
D O U B TF U L A S S E TS
3 .9 5
ASSETS-->
% o f To ta l
S U B -S TA N D A R D A S S E1 TS
.9 5
S TA N D A R D A S S E TS 9 3 .9 5
0 20 40 60 80 100
V A L U E S -->
©. YEAR 2005
(RS. IN LACS)
Details Amount %of Total
N P A O F YE AR 2 0 0 5
LO S S A S S E TS0.01
DO U B TF U L A S S E TS3.61
ASSETS-->
% of Total
S U B -S TA N D A R D A S S E TS
2.03
S TA N D A R D A S S E TS 94.28
0 20 40 60 80 100
V A L U ES -->
©. YEAR 2006
(RS. IN LACS)
Details Amount %of Total
N P A O F YE AR 2006
L O S S A S S E TS
0
D O U B TF U L A S S E 3TS
.01
ASSETS-->
% o f To ta l
S U B -S TA N D A R D A S S0E. 1TS
7
S TA N D A R D A S S E TS 96.82
0 20 40 60 80 100 120
V A L U E S -->
©. YEAR 2007
(RS. IN LACS)
N P A O F YE A R 2 0 0 7
LO S S A S S E TS1.54
DO U B TF U L A S S E TS
2.5
ASSETS-->
% of Total
S UB -S TA N DA RD A S S E 1.16
TS
S TA N DA RD A S S E TS 94.78
0 20 40 60 80 100
V AL U ES -->
SEGMENT
NO AMOUNT NO AMOUNT NO AMOUNT
OF OF OF
TOTAL TOTAL TOTAL
A/C NPA A/C NPA A/C NPA
ADVANCES ADVANCES ADVANCES
RETAIL TRADE 267 752.63 17.69 248 641.90 20.21 343 802.03 76.81
SMALL SCALE IND 582 4021.55 210.74 642 3832.29 44.88 975 6323.86 180.86
CONSTRUCTION &
246 323.43 21.02 231 343.86 2.70 345 459.76 22.43
REPAIRS
OTHER PRIORITY
SECTOR 0 0.00 0.00 55 41.82 3.47 326 68.05 16.42
OTHE NON
375 2454.16 177.26 285 2178.85 134.41 310 2394.94 186.20
PRIORITY SECTOR
TOTAL 1599 7707.72 436.09 1496 7093.63 225.82 3055 10340.26 538.77
RATIO ANALYSIS
To analyzed the NPA situation in bank and from that to know about the
banks credit appraisal system and level of risk in bank I have done the ratio analysis.
Ratio analysis is the tool which will help us to do financial analysis of bank.
Some names of ratio are as follows:
5. PROVISION RATIO.
Gross NPA is the sum of the total assets which are classified as the NPA by bank
at the end of every year. Gross NPA is the ratio of Gross NPA to Gross Advances. It is
expressed in percentage form.
G R O SS NPA R AT IO
9.0 0 % 8 .10 %
8.0 0 %
7.0 0 % 6.0 4% 5.6 8 %
PERCENTAGES-->
6.0 0 % 5.2 1 %
5.0 0 %
R AT IO
4.0 0 % 3 .1 8 %
3.0 0 %
2.0 0 %
1.0 0 %
0.0 0 %
2003 2004 2 00 5 2006 2007
Y EAR -->
©. ANALYSIS
Gross NPA ratio shows the bank’s credit appraisal policy. High Gross NPA ratio
means bank have liberal appraisal policy and vice-versa.
In city bank this ratio was 8.10% in March-2003 and it has been decreased from
year 2003 to 2006 from 8.10% to 3.18%. But again in March-2007 this ratio reach at
5.21%. This variation was come because City bank has merged with Baroda dist. Co-op.
bank in the financial year 2006-2007.
However it is revels from the chart that bank’s Gross NPA ratio is continuously
decreasing which is positive trend for bank and we can say that bank have good appraisal
system.
The Net NPA Ratio is the ratio of net NPA to Net Advances. This ratio shows the
degree of risk in bank’s portfolio. Net NPA ratio can be obtain by Gross NPA minus the
NPA provisions divided by Net advances.
6.00%
4.82%
5.00%
PERECNTAGE-->
4.00%
2.00%
1.00%
0.00% 0.00% 0.00% 0.00%
0.00%
2003 2004 2005 2006 2007
YEAR-->
©. ANALYSIS
Net NPA ratio shows the degree of risk in portfolio of bank. High net NPA ratio
means banks don’t have enough fund to do provision against the Gross NPA.
In City Bank Net NPA ratio was 4.82% in year March-2003 which shows that in
that year bank had not enough fund for provisions. But after that from March-2004 to
March-2007 Net NPA ratio is 0.00% which shows that bank has now enough provision
capacity. So, here the degree of risk is less.
City bank has done more provision every year which is good at one side but at other
side it also reduces the profit of bank. And shareholder will get fewer dividends.
When all bank will do provision then Net NPA will become zero but if we want to
know the true and fair situation of bank we must consider the Gross NPA of bank.
This ratio is also known as the Gross NPA to Total Assets ratio. This ratio shows
the percentage of risk on the total assets of the bank. High ratio means high risk for bank.
4.50%
3.89%
4.00%
3.50%
PERCENTAGE-->
©. ANALYSIS
This ratio shows the percentage of risk on the assets of bank. It shows the level of
risk on bank’s assets. High ratio shows the high risk on liquidity.
In City Bank this ratio was 3.89% in March-2003 and after that it has been
decreased from 3.89% to 1.21% in March-2006. But again it increase to 2.23% in March-
2007 because in that year City Bank was merged with Baroda dist. Co-op. bank in the
financial year 2006-2007.
This ratio is continuously decreasing in bank except in March-2007. But overall this
ratio is good for bank which indicates the level of risk is low in bank.
(RS. IN LACS)
TOTAL SHAREHOLDER’S
YEAR NET NPA CAPITAL & RISK RATIO
RESERVE (%)
2003 299.13 1793.76 16.68%
18.00% 16.68%
16.00%
14.00%
PERCENTAGE-->
12.00%
10.00% SHAREHOLDER’S RISK
8.00% RATIO
6.00%
4.00%
2.00% 0.00% 0.00% 0.00% 0.00%
0.00%
2003 2004 2005 2006 2007
YEAR-->
©. ANALYSIS
This ratio shows the degree of risk with share holder’s investment. High ratio
means high ratio with the investment.
In City Bank this ratio was 16.68% in year March-2003 which shows that in that
year risk on share holder’s investment was quite high but after that this ratio is 0.00% up
to year March-2007, which shows that Bank have enough capacity for provision and the
risk on investment is nil.
As we know that this ratio is 0.00% show the risk is nil but on the other side
because of more provision the profit will decrease and the shareholder will get less
dividends.
5. PROVISION RATIO
Provisions are to be made against the Gross NPA of bank. As bank make
provision for NPA it directly affects the profit of bank. This ratio shows the relation of
total provision to Gross NPA.
PROVISION RATIO
250.00%
208.59%
PERCENTAGE-->
200.00%
150.00%
107.83%108.00% 112.60% PROVISION RATIO
100.00%
42.59%
50.00%
0.00%
2003 2004 2005 2006 2007
YEAR-->
©. ANALYSIS
Provision ratio shows the degree of provision that is made against the Gross NPA
of bank. As bank made the provision it directly affect the profit of bank and also the
dividend payout ratio of bank too.
If Provision ratio is less then it means that bank has make under provision and if
provision is more then it means that it is over provision.
In City Bank they have made 42.59% provision in March-2003 which shows that
it was under provision but after that in March-2004 and March-2005 it is 107.83% and
108% respectively which indicate that provision was nearer to total amount of Gross
NPA but in March-2006 the provision ratio reach at 208.59% which indicate that it is the
very over provision. And again in March-2007 it is 112.60% which is fair ratio.
City bank should make the provision in the range of 100% to 115%. The
provision in March-2006 which is 208.59% is very high and it is not necessary to do that.
(RS. IN LACS)
SUB-STANDARD
SUB-STANDARD
YEAR GROSS NPA ASSETS RATIO
ASSETS
(%)
2003 189.75 521.08 36.41%
S UB -S TA NDA RD A S S E TS RA TIO
25.00% 22.30%
S UB -S TA NDA RD
20.00%
A S S E TS RA TIO
15.00%
10.00% 5.42%
5.00%
0.00%
2003 2004 2005 2006 2007
YEAR-->
©. ANALYSIS
This ratio shows the percentage of Sub-Standard assets in the Gross NPA of bank. High
Sub-Standard ratio means more proportion of Sub-Standard asset in the Gross NPA.
In City bank this ratio was 36.41% in March-2003 which is good for bank and it is 5.42%
in year March-2006 which is not good for bank.
As the level of Sub-Standard assets are more the chances of recovery of NPA are high.
DO UB TF UL A S S E TS RA TIO
100.00% 94.58%
90.00%
80.00%
70.00% 60.78%65.33%63.84%
PERCENTAGE-->
60.00% 48.03% DO UB TF UL A S S E TS
50.00%
RA TIO
40.00%
30.00%
20.00%
10.00%
0.00%
2003 2004 2005 2006 2007
YEAR-->
©. ANALYSIS
This ratio shows the percentage of Doubtful assets in the Gross NPA of bank. High
Doubtful assets ratio means more proportion of Doubtful asset in the Gross NPA.
More Doubtful assets means Bank should take action through recovery policy to reduce
the level of Doubtful assets.
As the Doubtful assets ratio is high which shows that bank should take quick action to
reduce that level.
In City Co. Bank this ratio is in between from 60.00% to 65.00% in year from March-
2003 to March-2005 but in March-2006 this ratio reach at 94.58% which indicate that
bank must take some necessary action to recover it. And again in March-2007 this ratio
decrease to 48.03% which is good for bank.
8. LOSS ASSETS RATIO
(RS. IN LACS)
LOSS ASSETS
TOTAL LOSS
YEAR GROSS NPA RATIO
ASSETS
(%)
2003 14.64 521.08 2.81%
35.00%
29.67%
30.00%
25.00%
PERCENTAGE-->
20.00%
LOSS ASSETS RATIO
15.00%
10.00%
5.00% 2.81% 2.43%
0.24% 0.00%
0.00%
2003 2004 2005 2006 2007
YEAR-->
©. ANALYSIS
This ratio shows the percentage of loss assets in the Gross NPA of bank. High loss assets
ratio means more proportion of loss asset in the Gross NPA.
This should be less in bank. The high ratio indicates that bank has more fraudulent
account and it is bad for bank. The bank must take necessary action to reduce the level of
loss assets.
In City Co. Bank this ratio is 2.81% in March-2003 and from it reach at 0.00% in the year
March-2006. This ratio is decreasing in bank which is good for bank but again in March-
2007 this ratio reaches at 29.67% which is the very high increase and it is very bad for
bank. But the increase in the ratio of March-2007 is because bank was merged with
Baroda dist. Co-op. bank in that year.
Hence, bank should take some action to reduce the level of loss assets from the total
NPA.
As I have already analyze the ratio and from that I can say that bank’s financial
condition is good. Hence, there is correction in the ratio of year 2007. And this correction
is because of City bank was merged with Baroda Industrial co-op bank in year 2007. So,
this effect of merging can be showing from the ratio of year 2007.
1. The Gross NPA ratio of bank is 8.10% in the year 2003 after then it reaches to
5.21% in the year 2007. Hence, the idle gross NPA ratio is 5.00% and bank have
5.21%. So, we can say that bank’s financial condition is good.
2. Bank’s Net NPA ratio is 4.82% in the year 2003 and from 2004 to 2007 it remains
0.00% which is positive for bank.
3. The Problem assets ratio was 3.89% in the year 2003 which was the highest ratio
and from that year it is decrease to 1.21% in the year 2006 which is good for
bank. And this ratio is 2.23% in the year 2007.
4. Provision ratio for the year 2003 is 42.59% which show that their was under
provision in that year but in year 2007 this ratio is 112.60% which shows that
bank have enough profit for the provision.
5. It will be considered good if the Sub-standard assets ratio is high. For City bank
this ratio is 36.41% in the year 2003 which is good but it reaches to 5.42% in the
year 2006 which is very bad for bank’s health.
6. Doubtful assets ratio should be low for the good health of bank and in City bank
this ratio is 94.58% in the year 2006 which is very bad but in year 2007 this ratio
decrease to 48.03% which is positive for bank.
7. Loss assets ratio should be zero and bank have 0.00% in the year 2006 which is
good but in year 2007 this ratio reaches to 29.67% which is very rapid change
with in a one year. And it is also bad for bank.
LOSS
1.04 0.00 159.85
ASSETS
TOTAL
436.09 225.82 538.77
NPA
CLASSIFICATION OF NPA
600
500 PERCENTAGE-->
100
0
2003 2004 2005 2006 2007
YEAR-->
(RS. IN LACS)
YEAR 2003 2004 2005 2006 2007
TOTAL
521.08 445.44 436.09 225.82 538.77
NPA
STANDARD
5912.67 6923.74 7266.63 6867.81 9801.49
ASSETS
TOTAL
6433.75 7369.18 7707.72 7093.63 10340.26
ADVANCES
C L A S S IF IC A T IO N O F T O T A L A D V A N C E S
1 2000
1 0000
8 00 0 TO TA L N P A
RS IN LACS-->
6 00 0 S TA N D A R D A S S E TS
4 00 0 TO TA L A D V A N C E S
2 00 0
0
200 3 200 4 200 5 2006 2007
YEA R -->
CHAPTER: 10
B.M. Collage of Business Administration Page 84
Non Performing Assets
CONCLUSION
&
SUGGESTION
CONCLUSION
City Co. bank’s NPA level is decreasing year by year which good for bank.
In year 2007 City bank’s own NPA is very low but because of merger with Baroda
industrial co-op bank the level of NPA was increase.
The Gross NPA ratio of bank is 8.10% in the year 2003 after then it reaches to 5.21%
in the year 2007. Hence, the idle gross NPA ratio is 5.00% and bank have 5.21%. So, we
can say that bank’s financial condition is good.
Bank’s Net NPA ratio is 4.82% in the year 2003 and from 2004 to 2007 it remains
0.00% which is positive for bank.
Loss assets ratio should be zero and bank have 0.00% in the year 2006 which is good
but in year 2007 this ratio reaches to 29.67% which is very rapid change with in a one
year. And it is also bad for bank.
City Co. Bank has sound credit appraisal system and also sound recovery policy.
City Co. Bank’s NPA level is decreasing year by year and because of that City Co.
Bank is being considered very good bank by citizens of Surat.
Hence in present time the position of NPA in bank is much better then the past
position. In year 1997 in India the Gross NPA was 15.7% but now it is 3.00% in the year
2007. This is very favorable to Indian economy and also banking sector of India.
Government’s act and also the Narsimhan committee on NPA are very useful to
reduce the level of NPA.
So, I can conclude that level NPA in any bank is important parameter to analyze the
health of bank.
SUGGSTIONS
1. City Co. bank’s NPA level is decreasing year by year which good for bank but
bank should follow the recovery policy strictly.
2. In year 2007 City Co. bank’s own NPA is very low but because of merger with
Baroda industrial co-op bank the level of NPA increase so City Co. bank should
have consider the NPA situation of that bank before merger.
3. In City Co. bank there is no any special recovery department so bank should
develop the department for the fastest recovery of NPA.
5. Bank have more NPA in Small Scale Industry so, they should try to reduce that
level of NPA.
CHAPTER: 11
BIBILIOGRAPHY
JOURNALS
• Periodical circular and statement of RBI regarding to NPA managing and UCB’s
WEBSITES
• http://finance.indiamart.com/investment_in_india/banking_in_india.html
• http://www.rbi.org.in/Home.aspx
• http://www.banknetindia.com/banking/cintro.htm
• http://www.investorwords.com/
• http://www.indiabankassociation.com/