AISSMS IOM (MBA)

A
PROJECT REPORT
ON
NON-PERFORMING ASSETS MANAGEMENT
AT
VIJAYA BANK
BY
BHOSALE SAURABH SURESH
UNDER THE GUIDENCE OF
DR. SANJAY PATANKAR
SUBMITTED TO
UNIVERSITY OF PUNE

In the partial fulfillment of the requirement for the award

of the degree of
Master of Business Administration

ACKNOWLEDGEMENT
It is my pleasure in presenting this project on partial fulfillment of master degree in
business administration.

I wish to take this opportunity to express my deep of gratitude to all those

people who directly and indirectly helped me in completing my project
successfully.

I would like to place all my gratefulness to my project guide Mr.Neelkanth Patil

(Chief Manager ) for his contribution and suggestions which has helped me in
bringing this project. He has been a continuous inspiration throughout the project.

I am thankful to the director of my institute and my internal guide Dr. Sanjay

Patankar, who helped and guided me by providing their valuable suggestions at
every stage in bringing about this project.

Last but not the least, I am grateful to all employees of Vijaya Bank and to all
my friends for the help and support they have given to me.

(SAURABH BHOSALE.)

DECLARATION

I, the undersigned honestly declare that, this Project Report entitled

A study of NPA Management is a genuine and bona fide project
prepared by me in partial fulfillment of degree of Master of Business
Administration of University of Pune.

The Project work is original and the conclusions drawn herein are
based on the data collected and analyzed by me.

To best of my knowledge, the matter presented in this project has not

been submitted and award of any degree, diploma or membership
either to this or any other Institute or University.

Place: Pune
Date:
Saurabh Suresh Bhosale
(MBA 2nd YEAR, FINANCE)

EXECUTIVE SUMMARY
Studying books and merely passing exams is not worth, the education, knowledge and
experience is incomplete without being exposed to what is happening in real. In order to make
students competent enough to face real world, there is a requirement of course for undergoing
training for six to eight weeks with some reputed organization. This exposure to real life
situation gives an insight to the students the kind of pressure and problems they can expect to
face during their career. For the requirement of undergoing training I sent my request for training
to Vijaya Bank

and fortunately it was accepted. I was assigned the project a study of Non

Performing Assets Management.

This research topic is a study on the objectives of comparative analysis of nonperforming assets
and its effect on profitability position of the bank and productivity of the bank. An effort has
been made in the instant project to study and find out various reasons leading to none performing
Assets (NPA) and ways of Managing NPA in different types of Banks. Since NPA has been
growing menace in banking, the study may help understanding this concept better and banks may
adopt remedial measures so as to maintain NPA at the minimum level. The selected Banks in
Pune were Bank of Maharashtra and Vijaya Bank from National Bank. The findings of the
study are presented in the form of thesis which comprises various chapters like: introduction,
guidelines of npa, present scenario of npa, effect of npa, reasons of npa, management of npa and
conclusion and suggestions. To conduct a uniform research and arrive at an accurate conclusion,
we restrict our research to only one commercial bank and one cooperative bank. We test
hypothesis that the occurrence of NPA affects the profitability and financial health of a Bank
adversely.

INDEX
Sr. No.

Contents

Page
NO.

Introduction

6-7

Meaning of NPA

8-27

Company Profile

28-34

Objective of The Study

35-36

Research Methodology

37-43

Data Analysis And Interpretation

44-55

Findings

56-57

Conclusions

58-59

Suggestions

60-61

10

Annexure

62-65

11

Bibliography

66-67

CHAPTER: I

INTRODUCTION
TO
NON PERFORMING ASSETS

INTRODUCTION

A strong banking sector is important for flourishing economy. The failure of the banking sector
may have an adverse impact on other sectors. Non-performing assets are one of the major
concerns for banks in India. NPAs reflect the performance of bank. A high level of NPAs
suggests high profitability and net worth of banks and also erodes the value of the assets. The
NPAs growth involves the necessity of provisions, which reduces the overall profits and
shareholders value. The issue of Non-performing assets has been discussed at length for
financial systems all over the world. The problem of NPAs is not only affecting the banks but
also the whole economy. In fact high level of NPAs in Indian banks is nothing but a reflection of
the state of health of the industry and trade. The paper deals with understanding the concept of
NPAs, its magnitude and major cause for an account becoming Non-performing, projections of
NPAs over next three years in public sector banks and concluding remarks.
After nationalization, the initial mandate that banks were given was to expand their
branch network, increase the saving rate and extend credit to the rural and SSI sector. This
mandate has been achieved admirably. Since the early 90s the focus has shifted towards
improving quality of assets and better risk management. The directed lending approach has
given way to more market driven practice.
The Narasimhan committee has recommended prudential norms on in come
recognition, asset classification and provisioning. In a change from the past, in come recognition
is now not on an accrual basis but when it is actually received. Past problems faced by banks
were to a great extent attributable to this. Classification of what an NPAs is has changed with
tightening of prudential norms. Currently an asset is non-performing if interest or installments
of principle due remain unpaid for more than 180 days.

CHAPTER: II

NON PERFORMING ASSETS (NPA)

WHAT IS A NPA (NON PERFORMING ASSETS)?

Action for enforcement of security interest can be initiated only if the secured asset is classified
as Nonperforming asset.
Non-performing asset means an asset or account of borrower ,which has been classified by bank
or financial institution as sub standard , doubtful or loss asset, in accordance with the
direction or guidelines relating to assets classification issued by RBI .
An amount due under any credit facility is treated as past due when it is not been paid within
30 days from the due date. Due to the improvement in the payment and settlement system,
recovery climate, up gradation of technology in the banking system etc. It was decided to
dispense with past due concept, with effect from March 31, 2001. Accordingly as from that
date, a Non performing asset shell be an advance where
i
ii
iii
iv
v

Interest and/or installment of principal remain overdue for a period of more than 180
days in respect of a term loan,
The account remains out of order for a period of more than 180 days ,in respect of an
overdraft/cash credit (OD/CC)
The bill remains overdue for a period of more than 180 days in case of bill purchased or
discounted.
Interest and/or principal remains overdue for two harvest season but for a period not
exceeding two half years in case of an advance granted for agricultural purpose ,and
Any amount to be received remains overdue for a period of more than 180 days in
respect of other accounts
With a view to moving towards international best practices and to ensure greater
transparency, it has been decided to adopt 90 days overdue norms for identification of
NPAs, from the year ending March 31, 2004, a non performing asset shell be a loan or an
advance where;
i

Interest and/or installment of principal remain overdue for a period of more than
90 days in respect of a term loan,
8

ii
iii
iv
v

The account remains out of order for a period of more than 90 days ,in respect
of an overdraft/cash credit (OD/CC)
The bill remains overdue for a period of more than 90 days in case of bill
purchased or discounted.
Interest and/or principal remains overdue for two harvest season but for a period
not exceeding two half years in case of an advance granted for agricultural
purpose ,and
Any amount to be received remains overdue for a period of more than 90 days in
respect of other accounts

Out of order
An account should be treated as out of order if the outstanding balance remains
continuously in excess of sanctioned limit /drawing power. in case where the outstanding balance
in the principal operating account is less than the sanctioned amount /drawing power, but there
are no credits continuously for six months as on the date of balance sheet or credit are not
enough to cover the interest debited during the same period ,these account should be treated
as out of order.

Overdue
Any amount due to the bank under any credit facility is overdue if it is not paid on due
date fixed by the bank.

FACTORS FOR RISE IN NPAs

EXTERNAL FACTORS: Ineffective recovery tribunal
The Govt. has set of numbers of recovery tribunals, which works for recovery of
loans and advances. Due to their negligence and ineffectiveness in their work the bank
suffers the consequence of non-recover, thereby reducing their profitability and liquidity.

 Willful Defaults
There are borrowers who are able to pay back loans but are intentionally
withdrawing it. These groups of people should be identified and proper measures should
be taken in order to get back the money extended to them as advances and loans.
Natural calamities
This is the measure factor, which is creating alarming rise in NPAs of the PSBs.
every now and then India is hit by major natural calamities thus making the borrowers
unable to pay back there loans. Thus the bank has to make large amount of provisions in
order to compensate those loans, hence end up the fiscal with a reduced profit.
Mainly ours farmers depends on rain fall for cropping. Due to irregularities of
rain fall the farmers are not to achieve the production level thus they are not repaying the
loans.
Industrial sickness
Improper project handling , ineffective management , lack of adequate resources ,
lack of advance technology , day to day changing govt. Policies give birth to industrial
sickness. Hence the banks that finance those industries ultimately end up with a low
recovery of their loans reducing their profit and liquidity.
Lack of demand
Entrepreneurs in India could not foresee their product demand and starts production
which ultimately piles up their product thus making them unable to pay back the money
they borrow to operate these activities. The banks recover the amount by selling of their
assets, which covers a minimum label. Thus the banks record the non-recovered part as
NPAs and has to make provision for it.

Change on Govt. policies

With every new govt. banking sector gets new policies for its operation. Thus it
has to cope with the changing principles and policies for the regulation of the rising of
NPAs.
The fallout of handloom sector is continuing as most of the weavers Co-operative
societies have become defunct largely due to withdrawal of state patronage. The
rehabilitation plan worked out by the Central government to revive the handloom sector
10

has not yet been implemented. So the over dues due to the handloom sectors are
becoming NPAs.

INTERNAL FACTORS :A) Defective Lending process

There are three cardinal principles of bank lending that have been followed by the
commercial banks since long.
i
Principles of safety
ii
Principle of liquidity
iii
Principles of profitability
By safety it means that the borrower is in a position to repay the loan both principal
and interest. The repayment of loan depends upon the borrowers:
a

Capacity to pay

Willingness to pay

Capacity to pay depends upon:1. Tangible assets

2. Success in business
Willingness to pay depends on:1. Character
2. Honest
3. Reputation of borrower
The banker should, therefore take utmost care in ensuring that the enterprise or business
for which a loan is sought is a sound one and the borrower is capable of carrying it out
successfully .he should be a person of integrity and good character.

Inappropriate technology
11

Due to inappropriate technology and management information system, market driven

decisions on real time basis cannot be taken. Proper MIS and financial accounting system
is not implemented in the banks, which leads to poor credit collection, thus NPA. All the
branches of the bank should be computerized.
Improper SWOT analysis
The improper strength, weakness, opportunity and threat analysis is another reason for
rise in NPAs. While providing unsecured advances the banks depend more on the
honesty, integrity, and financial soundness and credit worthiness of the borrower.

Banks should consider the borrowers own capital investment.

it should collect credit information of the borrowers from_

a
b
c

From bankers.
Enquiry from market/segment of trade, industry, business.
From external credit rating agencies.

Analyze the balance sheet.

True picture of business will be revealed on analysis of profit/loss a/c and balance
sheet.

Purpose of the loan

When bankers give loan, he should analyze the purpose of the loan. To ensure
safety and liquidity, banks should grant loan for productive purpose only. Bank
should analyze the profitability, viability, long term acceptability of the project
while financing.

Poor credit appraisal system

12

Poor credit appraisal is another factor for the rise in NPAs. Due to poor credit appraisal
the bank gives advances to those who are not able to repay it back. They should use good
credit appraisal to decrease the NPAs.

Managerial deficiencies
The banker should always select the borrower very carefully and should take tangible
assets as security to safe guard its interests. When accepting securities banks should
consider the
1. Marketability
2. Acceptability
3. Safety
4. Transferability.
The banker should follow the principle of diversification of risk based on the
famous maxim do not keep all the eggs in one basket; it means that the banker should
not grant advances to a few big farms only or to concentrate them in few industries or in a
few cities. If a new big customer meets misfortune or certain traders or industries affected
adversely, the overall position of the bank will not be affected.
Like OSCB suffered loss due to the OTM Cuttack, and Orissa hand loom
industries. The biggest defaulters of OSCB are
the OTM (117.77lakhs), and the
handloom sector Orissa hand loom WCS ltd (2439.60lakhs).
Absence of regular industrial visit
The irregularities in spot visit also increases the NPAs. Absence of regularly visit of
bank officials to the customer point decreases the collection of interest and principals on
the loan. The NPAs due to willful defaulters can be collected by regular visits.

Re loaning process
Non remittance of recoveries to higher financing agencies and re loaning of the same
have already affected the smooth operation of the credit cycle.

13

Due to re loaning to the defaulters and CCBs and PACs, the NPAs of OSCB is increasing
day by day.

PROBLEMS DUE TO NPA:-

1
2
3
4

Owners do not receive a market return on their capital .in the worst case, if the banks
fails, owners lose their assets. In modern times this may affect a broad pool of
shareholders.
Depositors do not receive a market return on saving. In the worst case if the bank fails,
depositors lose their assets or uninsured balance.
Banks redistribute losses to other borrowers by charging higher interest rates, lower
deposit rates and higher lending rates repress saving and financial market, which hamper
economic growth.
Non-performing loans epitomize bad investment. They misallocate credit from good
projects, which do not receive funding, to failed projects. Bad investment ends up in
misallocation of capital, and by extension, labor and natural resources.

Non-performing asset may spill over the banking system and contract the money stock, which
may lead to economic contraction. This spillover effect can channelize through liquidity or bank
insolvency:
a) When many borrowers fail to pay interest, banks may experience

liquidity shortage.

This

can jam payment across the country,

b) Illiquidity constraints bank in paying depositors.
c) Undercapitalized banks exceeds the banks capital base.

The three letters Strike terror in banking sector and business circle today. NPA is short form of
Non Performing Asset. The dreaded NPA rule says simply this: when interest or other due to a
bank remains unpaid for more than 90 days, the entire bank loan automatically turns a non
performing asset. The recovery of loan has always been problem for banks and financial
14

institution. To come out of these first we need to think is it possible to avoid NPA, no cannot be
then left is to look after the factor responsible for it and managing those factors.
Interest and/or instalment of principal remains overdue for two harvest seasons but
for a period not exceeding two 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 90 days in
respect of other accounts.
As a facilitating measure for smooth transition to 90 days norm, banks have been advised to
move over to charging of interest at monthly rests, by April 1, 2002. However, the date of
classification of an advance as NPA should not be changed on account of charging of interest at
monthly rests. Banks should, therefore, continue to classify an account as NPA only if the
interest charged during any quarter is not serviced fully within 180 days from the end of the
quarter with effect from April 1, 2002 and 90 days from the end of the quarter with effect from
March 31, 2004.

NPAs do not just reflect badly in a banks account books, they adversely impact the national
economy. Following are some of the repercussions of NPAs:
Depositors do not get rightful returns and many times may lose uninsured deposits. Banks may
begin charging higher interest rates on some products to compensate Non-performing loan losses
Bank shareholders are adversely affected
Bad loans imply redirecting of funds from good projects to bad ones. Hence, the economy suffers
due to loss of good projects and failure of bad investments
When bank do not get loan repayment or interest payments, liquidity problems may ensue

15

Reasons for Occurrence of NPAs

NPAs result from what are termed Bad Loans or defaults. Default, in the financial parlance, is
the failure to meet financial obligations, say non-payment of a loan instalment. These loans can
occur due to the following reasons:
Usual banking operations /Bad lending practices
A banking crisis (as happened in South Asia and Japan)
Overhang component (due to environmental reasons, business cycle, etc.)
Incremental component (due to internal bank management, like credit policy, terms of credit, etc.

Result of NPAs on an organization

1. They decrease profitability.
2. They reduce capital assets and lending limits.
3. They increase loan loss reserves.
4. They bring unwanted attention from government regulators

'Out of Order' status:

An account should be treated as OUT OF ORDER if the outstanding balance
remains continuously in excess of the sanctioned limit/drawing power. In cases where the
outstanding balance in the principal operating account is less than the sanctioned limit/drawing
power, but there are no credits continuously for six months as on the date of Balance Sheet or
credits are not enough to cover the interest debited during the same period, these accounts should
be treated as 'out of order'.

Overdue:
Any amount due to the bank under any credit facility is overdue if it is not paid on
the due date fixed by the bank.

16

Impact of NPA
Profitability:NPA means booking of money in terms of bad asset, which occurred due to wrong
choice of client. Because of the money getting blocked the prodigality of bank decreases
not only by the amount of NPA but NPA lead to opportunity cost also as that much of
profit invested in some return earning project/asset. So NPA doesnt affect current profit
but also future stream of profit, which may lead to loss of some long-term beneficial
opportunity. Another impact of reduction in profitability is low ROI (return on
investment), which adversely affect current earning of bank.

Liquidity:Money is getting blocked, decreased profit lead to lack of enough cash at hand which lead to
borrowing money for shot\ rtes. period of time which lead to additional cost to the company.
Difficulty in operating the functions of bank is another cause of NPA due to lack of money.
Routine payments and dues.
Involvement of management:Time and efforts of management is another indirect cost which bank has to bear due to NPA.
Time and efforts of management in handling and managing NPA would have diverted to some
fruitful activities, which would have given good returns. Now days banks have special
employees to deal and handle NPAs, which is additional cost to the bank.

Credit loss:Bank is facing problem of NPA then it adversely affect the value of bank in terms of market
credit. It will lose its goodwill and brand image and credit which have negative impact to the
people who are putting their money in the banks.

17

REASONS FOR NPA:

Reasons can be divided in to two broad categories:A] Internal Factor
B] External Factor

A] INTERNAL FACTOR:Internal Factors are those, which are internal to the bank and are controllable by banks.

Poor lending decision:

Non-Compliance to lending norms:

Lack of post credit supervision:

Failure to appreciate good payers:

Excessive overdraft lending:

Non Transparent accounting policy:

Change on govt. policies:

B] EXTERNL FACTOR:External factors are those, which are external to banks they are not controllable by banks.

Socio political pressure:

18

Chang in industry environment:

Endangers macroeconomic disturbances:

Natural calamities

Industrial sickness

Diversion of funds and willful defaults

Time/ cost overrun in project implementation

Labor problems of borrowed firm

Business failure

Inefficient management

Obsolete technology

Product obsolete

Types of NPA
A] Gross NPA

19

B] Net NPA

A] Gross NPA:
Gross NPAs are the sum total of all loan assets that are classified as NPAs as per RBI guidelines
as on Balance Sheet date. Gross NPA reflects the quality of the loans made by banks. It consists
of all the non- standard assets like as sub-standard, doubtful, and loss assets. It can be calculated
with the help of following ratio:

Gross NPAs Ratio =

Gross NPA

*100

Gross Advances

B] Net NPAs:
Net NPAs are those type of NPAs in which the bank has deducted the provision regarding NPAs.
Net NPA show the actual burden of banks. Since in India, bank balance sheets contain a huge
amount of NPAs and the process of recovery and write off of loans is very time consuming, the
provisions the banks have to make against the NPAs according to the central bank guidelines, are
quite significant. That is why the difference between gross and net NPA is quite high.
It can be calculated by following_
Net NPAs Ratio =

Gross NPAs Provisions

Gross Advances - Provisions

20

PREVENTIVE MEASUREMENT FOR NPA

Early Recognition of the Problem:

Invariably, by the time banks start their efforts to get involved in a revival process, its too late to
retrieve the situation- both in terms of rehabilitation of the project and recovery of banks dues.
Identification of weakness in the very beginning that is: When the account starts showing first
signs of weakness regardless of the fact that it may not have become NPA, is imperative.
Assessment of the potential of revival may be done on the basis of a techno-economic viability
study. Restructuring should be attempted where, after an objective assessment of the promoters
intention, banks are convinced of a turnaround within a scheduled timeframe. In respect of
totally unviable units as decided by the bank, it is better to facilitate winding up/ selling of the
unit earlier, so as to recover whatever is possible through legal means before the security position
becomes worse.

Identifying Borrowers with Genuine Intent:

Identifying borrowers with
genuine intent from those who are non- serious with no commitment or stake in revival is a
challenge confronting bankers. Here the role of frontline officials at the branch level is
paramount as they are the ones who have intelligent inputs with regard to promoters sincerity,
and capability to achieve turnaround. Based on this objective assessment, banks should decide as
quickly as possible whether it would be worthwhile to commit additional finance.

In this regard banks may consider having Special Investigation of all financial transaction or
business transaction, books of account in order to ascertain real factors that contributed to
21

sickness of the borrower. Banks may have penal of technical experts with proven expertise and
track record of preparing techno-economic study of the project of the borrowers.

Borrowers having genuine problems due to temporary mismatch in fund flow or sudden
requirement of additional fund may be entertained at branch level, and for this purpose a special
limit to such type of cases should be decided. This will obviate the need to route the additional
funding through the controlling offices in deserving cases, and help avert many accounts slipping
into NPA category.

Timelines and Adequacy of Response:

Longer the delay in response, grater the injury to the account and the asset. Time is a crucial
element in any restructuring or rehabilitation activity. The response decided on the basis of
techno-economic study and promoters commitment, has to be adequate in terms of extend of
additional funding and relaxations etc. under the restructuring exercise. The package of
assistance may be flexible and bank may look at the exit option.

Focus on Cash Flows:

While financing, at the time of restructuring the banks may not be guided by the conventional
fund flow analysis only, which could yield a potentially misleading picture. Appraisal for fresh
credit requirements may be done by analyzing funds flow in conjunction with the Cash Flow
rather than only on the basis of Funds Flow.

Management Effectiveness:
22

The general perception among borrower is that it is lack of finance that leads to sickness and
NPAs. But this may not be the case all the time. Management effectiveness in tackling adverse
business conditions is a very important aspect that affects a borrowing units fortunes. A bank
may commit additional finance to an align unit only after basic viability of the enterprise also in
the context of quality of management is examined and confirmed. Where the default is due to
deeper malady, viability study or investigative audit should be done it will be useful to have
consultant appointed as early as possible to examine this aspect. A proper techno- economic
viability study must thus become the basis on which any future action can be considered.

Multiple Financing:
A During the exercise for assessment of viability and restructuring, a Pragmatic and
unified approach by all the lending banks/ FIs as also sharing of all relevant information
on the borrower would go a long way toward overall success of rehabilitation exercise,
given the probability of success/failure.

B In some default cases, where the unit is still working, the bank should make sure that it
captures the cash flows (there is a tendency on part of the borrowers to switch bankers
once they default, for fear of getting their cash flows forfeited), and ensure that such cash
flows are used for working capital purposes. Toward this end, there should be regular
flow of information among consortium members. A bank, which is not part of the
consortium, may not be allowed to offer credit facilities to such defaulting clients.
Current account facilities may also be denied at non-consortium banks to such clients and
violation may attract penal action. The Credit Information Bureau of India Ltd.
(CIBIL) may be very useful for meaningful information exchange on defaulting
borrowers once the setup becomes fully operational.

23

C In a forum of lenders, the priority of each lender will be different. While one set of
lenders may be willing to wait for a longer time to recover its dues, another lender may
have a much shorter timeframe in mind. So it is possible that the letter categories of
lenders may be willing to exit, even a t a cost by a discounted settlement of the
exposure. Therefore, any plan for restructuring/rehabilitation may take this aspect into
account.

D Corporate Debt Restructuring mechanism has been institutionalized in 2001 to provide

a timely and transparent system for restructuring of the corporate debt of Rs. 20 crore and
above with the banks and FIs on a voluntary basis and outside the legal framework.
Under this system, banks may greatly benefit in terms of restructuring of large standard
accounts (potential NPAs) and viable sub-standard accounts with consortium/multiple
banking arrangements.

Recovery Process of NPAs Management

24

Credit Default

Inability to Pay

Unviable
Compromise

Willful default

Viable
Rehabilitation

LokAdalat
Debt Recovery

Securitization
Act

Asset
Reconstruction

Consortium Finance

Sole Banker

Corporate Debt Restructuring

Fresh Issue of
Term Loan

Conversion
into WCTL

Fresh WC
Limit

Rephasement of
Repayment Period

Once NPA occurred, one must come out of it or it should be managed in most efficient manner.
Legal ways and means are there to overcome and manage NPAs. We will look into each one of it.

Willful default:
25

A] LokAdalat and Debt Recovery Tribunal

B] Securitization Act
C] Asset Reconstruction

Lok Adalat:
Lok Adalat institutions help banks to settle disputes involving account in doubtful and loss
category, with outstanding balance of Rs. 5 lakh for compromise settlement under LokAdalat.
Debt recovery tribunals have been empowered to organize LokAdalat to decide on cases of NPAs
of Rs. 10 lakh and above. This mechanism has proved to be quite effective for speedy justice and
recovery of small loans. The progress through this channel is expected to pick up in the coming
years.

Debt recovery tribunals (DRT):

The recovery of debts due to banks and financial institution passed in March 2000 has helped in
strengthening the function of DRTs. Provision for placement of more than one recovery officer,
power to attach defendants property/assets before judgment, penal provision for disobedience of
tribunals order or for breach of any terms of order and appointment of receiver with power of
realization, management, protection and preservation of property are expected to provide
necessary teeth to the DRTs and speed up the recovery of NPAs in the times to come.

DRTs which have been set up by the Government to facilitate speedy recovery by banks/DFIs,
have not been able make much impact on loan recovery due to variety of reasons like inadequate
number, lack of infrastructure, under staffing and frequent adjournment of cases. It is essential
that DRT mechanism is strengthened and vested with a proper enforcement mechanism to
enforce their orders. Non observation of any order passed by the tribunal should amount to
contempt of court, the DRT should have right to initiate contempt proceedings. The DRT should
26

empowered to sell asset of the debtor companies and forward the proceed to the winding up
court for distribution among the lenders.

Inability to Pay
Consortium arrangements:
Asset classification of accounts under consortium
should be based on the record of recovery of the individual member banks and other aspects
having a bearing on the recoverability of the advances. Where the remittances by the borrower
under consortium lending arrangements are pooled with one bank and/or where the bank
receiving remittances is not parting with the share of other member banks, the account will be
treated as not serviced in the books of the other member banks and therefore, be treated as NPA.
The banks participating in the consortium should, therefore, arrange to get their share of recovery
transferred from the lead bank or get an express consent from the lead bank for the transfer of
their share of recovery, to ensure proper asset classification in their respective books.

27

CHAPTER: III

COMPANY PROFILE

28

Vijaya Bank, was founded on 23rd October 1931 by late Shri A.B.Shetty and other enterprising farmers
in Mangalore, Karnataka. The objective of the founders was essentially to promote banking habit, thrift
and entrepreneurship among the farming community of Dakshina Kannada district in Karnataka State.
The bank became a scheduled bank in 1958
The bank has made steady progress in past 30+ years and under the present Board of Directors has
taken leap towards progress through technology. The Banks financial status is as follows :
Deposits

12496.15 Cr

Advances

81504.03 Cr

Share Capital 85911.94

Vijaya Bank, was founded on 23rd October 1931 by late Shri A.B.Shetty and other enterprising farmers
in Mangalore, Karnataka. The objective of the founders was essentially to promote banking habit, thrift
and entrepreneurship among the farming community of Dakshina Kannada district in Karnataka State.
The bank became a scheduled bank in 1958
Vijaya Bank steadily grew into a large All India bank, with nine smaller banks merging with it during the
1963-68. The credit for this merger as well as growth goes to late Shri M.Sunder Ram Shetty, who was
then the Chief Executive of the bank. The bank was nationalised on 15th April 1980. The bank has built
a network of 1512 branches, 48 Extension Counters and 1528 ATMs, that span all 28 states and 4 union
territories in the country.
Each branch provides effective and efficient services and significantly contributes to the growth of the
individual, and the nation.
Vijaya Bank today is a PAN India Institution, serving diverse sectors of the society. The bank has built a
network of 1512 branches, 48 Extension Counters and 1528 ATMs, that span all 28 states and 4 union
territories in the country. The Bank has the highest number of branches in its home state Karnataka.
Vijaya Bank offers a bouquet of innovative and attractive products and services to the customers.
Vijaya Bank also incorporated the latest technology to provide the best services to our customers.
The Bank offers several technology products, such as, ATMs, cash deposit machines, Debit and Credit
cards, internet banking, Mobile Banking, Phone Banking, Funds transfer through RTGS and NEFT etc.
All Branches / offices are under RTGS / NEFT.29
The Bank also offers RuPay cards to its customers.
The driving force behind Vijaya Bank's every initiative has been its 12000 strong dedicated workforce.

Today, living up to the ideals of the visionaries of the bank, the management includes dedicated
professionals, who bring with them a considerable amount of expertise and experience in the
banking industry.

The Bank has a three tier Organisation structure.

Head Office
Regional Office
Branches.
The Head office hosts various functional departments that are instrumental in policy
formulations and monitoring of performances, of the regions and branches
The bank's 24 Regional Offices exercise immediate supervision and control over the branches
under their jurisdiction.

FINANCIAL INCLUSION PLAN

Bank has
villages with above 2000 population under Financial Inclusion.

These villages are spread over in 12 States, 47 districts.

Bank has covered these 378 villages with 89 Brick and mortar branches and 332 BCAs.

covered 378

Bank has also covered 2240 villages with below 2000 population under FI with 32
branches, 457 BCAs and 20 offsite ATM
Bank has introduces kiosk Banking Solution and it is Live in 35 centers.

Bank is implementing Electronic Benefit transfer program of the Govt. of Karnataka

under One District One Bank Model in Mandya district of Karnataka to disburse Social
Security pensions to more than 95000 beneficiaries every month through business
Correspondents Agents.

Bank has established 11 Financial Literacy Centers through a joint trust viz. JnanJyothi
Financial literacy and credit counseling trust.9 of these FLCs are in Karnataka,3 districts level
and 6 taluk level. Two more taluk level FLCs are opened in Kerala State
30

Three Financial Inclusion Resource Centers have been set up in the lead Districts of
Mandya, Haveri and Dharwad in Karnataka.

Bank has provided five mobile vans at centers having more number of villages under
Financial Inclusion for financial literacy activities.

Swabhimaan logo is used on the Smart cards issued by our Bank.

T -Shirts and Caps bearing Swabhimaan logo and Banks logo have been provided to
CSPs.

Bank has converted 43 USBs into regular Brick and Mortar branches during the year 201314.

Bank has planned to cover 293 villages of below 2000 population during the current year
2014-15 as per the FIP 2013-16.

Services for personal banking: Sr. No.

1
2
3
4
5
6
7
8
9
10

Services
ATM services
RTGS/NEFT
Broking Services
Safe Deposit Locker
RBIEFT
Foreign Inward Remittance
E-rail
SBI VishwaYatra Foreign Travel
Card
Internet Banking
E-pay

Sr. No.
1
2
3
4
5
6
7

NRI Services:-

31

Other Services
Gift Cheques
International Banking
Mobile Banking
Corporate Banking
Demat Services
NRI Services
Agriculture/Rural Banking

Sr. No.
1
2
3

Name of NRI services

Deposit Accounts
Opening of NRI Accounts
NRI Home Loan

Sr. No.
4
5
5

Name of NRI services

Remittances to India
NRI car Loan Scheme
Miscellaneous

International Banking And Corporate Banking

Sr. No.
1
2
3
4
5
6
7
8

International Banking
Correspondent Banking
Trade Finance
Project Export Finance
Merchant Banking
Treasury
Exporter Gold Card
USA Patriot Act Certification
Offshore Banking

Sr. No.
1
2
3
4
5

Corporate Banking
Mid-Corporate Group
Corporate Accounts Group
Products And Services
Project Finance
Gold Banking

SME

Sr. No
1
2

Sr. No
11
12

Name of SME
Transport Operators
SME Petro Credit

3
4
5

Name of SME
Surabhi Deposit Scheme
Commodity Backed Warehouse
Receipt
Business Current Accounts
Traders Easy Loan Scheme
Open Term Loan

13
14
15

V- Vyapar

16

7
8
9
10

V- Health Care
Retail Trade
V-Shoppe
VIJAYA ADALAT

17
18
19
20

Small Business Credit Card

Auto Loan
V-Samman Term Deposit for
Senior Citizens
V-GenUTH
Unnati
Plus
Recurring Deposit
V- Restaurant
V Dhaanya Rice Mill
V- Dhaanya Flour Mill
V- Dhaanya Dal Mill

The Reserve Bank of India (RBI) has offered some leeway to banks for early detection
and resolution of bad loans. Under the new regime kicking off from April 1, lenders can
32

finance 50 per cent of the outstanding loan value, RBI said in Framework for Revitalising
Distressed Assets in the Economy, released on Thursday. Earlier, RBI had proposed to
allow takeover of existing loans by new financiers at 60 per cent or more of the loan
value.

The central bank also diluted rules for accelerated provisioning it had proposed for nonperforming accounts. Now lenders will make 25 per cent provision for unsecured loans
that remain unpaid for six months. Initially, RBI had proposed 30 per cent provisions.

Plus, for loans that have remained unpaid for two years, banks have to set aside 40 per
cent, instead of 50 per cent.

The new framework calls for early formation of a lenders' committee with the timeline to
agree to a plan for resolution. It also offers incentives for lenders to agree collectively and
quickly to a restructuring plan. It will give better regulatory treatment of stressed assets if
a resolution plan is underway. However, it will attract accelerated provisioning if no
agreement can be reached. Seeking improvements in the current debt restructuring
process, the framework allows independent evaluation of large value restructuring. This
is for purpose of framing viable plans and a fair sharing of losses (and future possible
upsides) between promoters and creditors. It also mooted steps to enable better
functioning of asset reconstruction companies. This is apart from encouraging sectorspecific companies and private equity firms to play active role in stressed assets market.
It has offered liberal regulatory treatment provided for asset sales. Lenders can spread
loss on sale over two years, provided the loss is fully disclosed. Leveraged buyouts will
be allowed for specialised entities for acquisition of 'stressed companies'.
Steps to enable better functioning of asset reconstruction companies mooted.
The sector-specific companies / private equity firms will be encouraged to play an active
role in stressed assets market, RBI said.
The continuing slowdown in the economy has led to a historic pile of bad loans in the
system.
RBI in its Financial Stability Report on December 30 had warned the strain on asset
quality continues to be a major concern. "In a base case scenario, with the present
33

conditions continuing, the gross NPAs (non-performing assets) in the system will rise to
4.6 per cent by September 2014 from 4.2 per cent in September 2013 or to about Rs 2.29
trillion from Rs 1.67 trillion a year earlier," it had noted.

Key drivers under new regime

* Early formation of Joint Lender's Forum for action plan
* Carrot for lenders to agree collectively and quickly to a plan
* Penalty of higher provisioning for delayed actions
* Independent evaluation for large recast deals
* Take-out and refinancing will not be treated as restructuring
* Losses from selling of NPAs can be spread over two years

CHAPTER: IV
34

OBJECTIVES OF
THE STUDY

OBJECTIVES OF THE STUDY:1 To study the Non-Performing Assets of Vijaya

Bank

35

2 To study the appraisal process for granting of

loan by bank.
3 To recognize the income, assets classification
and the provisioning norms related to NPAs
4 To study the recovery process followed by the
bank.
.
5 To study NPA reduction measures

36

CHAPTER: V
RESEARCH
METHODOLOGY

RESEARCH METHODOLOGY
Research Methodology is a way to systematically solve the problems. It may be understood to
study how research is done scientifically. In this, we study various steps that are generally
adopted by the researcher in studding research problems along with the logic behind them, to
understand why we are using particular method of technique so that the research results are
capable of being evaluated. During my project work, I have used a lot of data to understand the

37

concept of NPA and to study the Recovery process. The data collected was interpreted and then
used as information in project.

In order to examine the magnitude and dimensions of NPAs of banks, the relevant literature
such as articles, published books and reports including RBI sources will be consulted. The
analysis of NPAs as also its dimensions, obviously, will be at-the aggregate industry level.
However in order to get insights into the various dimensions of NPAs, a comparative analysis
of NPAs of commercial bank and co-operative bank will be attempted.
The study is an empirical research based on collection of both primary and secondary data.
The information relating to details of various aspects of NPA and management of it, it will be
collected from different branches of a selected commercial banks and co-operative bank.

DATA COLLECTION:PRIMARY DATA: Primary research (also called field research) involves the collection of data that does not
already exist, which is research to collect original data. Primary Research is often undertaken
after the researcher has gained some insight into the issue by collecting secondary data. This can
be through numerous forms, including questionnaires, direct observation and telephone
interviews amongst others. This information may be collected in things like questionnaires and
interviews.

TYPES OF DATA

PRIMARY DATA

SECONDRY DATA
38

METHODS OF PRIMARY DATA:1. OBSERVATION METHOD:Observation is either an activity of a living being, such as a human, consisting of receiving
knowledge of the outside world through the senses, or the recording of data using scientific
instruments. The term may also refer to any data collected during this activity. An observation
can also be the way you look at things or when you look at something.
2. QUETIONAIRE METHOD:-A questionnaire is set of questions for gathering information
from individuals. The questionnaires by mail, telephone, using face to face interviews, as
handouts, or electronically (i.e., by e-mail or through web-based questionnaires)

3. INTERVIEW METHIOD:Interviews are particularly useful for getting the story behind a participants experiences.
The interviewer can pursue in-depth information around the topic. Interviews may be
useful as follow-up to certain respondents to questionnaires, e.g., to further investigate
their responses.
5

SCHEDULE METHOD: Informal, conversational interview: - No predetermined questions are asked, in

order to remain as open and adaptable as possible to the interviewees nature and
priorities; during the interview the interviewer goes with the flow.

General interview guide approach -the guide approach is intended to ensure that the
same general areas of information are collected from each interviewee; this provides
more focus than the conversational

SECONDARY DATA: The secondary data on the other hand, are those which have already been collected by
someone else and which have already been passed through the statistical processes.
39

When the researcher utilizes secondary data then he has to look into various sources
from where he can obtain them.
For e.g. Books, newspaper Internet, publications and reports. In the present study use of
secondary data collected from website, i.e. www.rbi.co.in.

NORMS FOR ASSETS CLASSIFICATION AND PROVISION FOR LOAN

ASSETS

The loan accounts in banks are classified into four categories. Out of these four categories, the
following three categories are considered as NPAs:A) Sub-standard assets
B) Doubtful Assets
C) Loss Assets
The forth category of loan accounts, which is not included in NPA category, is
standard Assets. Standard asset is one which does not disclose any problems and which does not
carry only normal risk attached to the business.

Sub-standard Assets:-

Earlier a sub-standard asset was one, which was classified as NPA for a period
not exceeding two years. With effect from 31 March 2001, a sub-standard asset was one, which
has remained NPA for a period less than or equal to 18 months. With effect from 31 March 2005
the norms have been further tightened and a sub-standard asset would be one, which has
remained NPA for a period less than or equal to 12 months.

In such cases, the current net worth of the borrower/guarantor or the current market value of the
security charged is not enough to ensure recovery of the dues to the banks in full. In other words,
such an asset will have well defined credit weaknesses that jeopardizes the liquidation of the
debt and are characterized by the distinct possibility that the banks will sustain some loss, if
deficiencies are not corrected
40

Doubtful Assets:-

Earlier a doubtful asset was one, which remained NPA for a period exceeding two years. With
effect form 31 March 2001, an asset is to be classified as doubtful, if it had remained NPA for a
period exceeding 18 months. With effect from march31, 2005, the norms have been further
tightened, and an asset would be classified as doubtful if it remained in the sub-standard category
for 12 months.

A loan classified as doubtful has all the weaknesses inherent in asset that were classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full,
on the basis of currently known facts, condition and values-highly questionable and improbable.
Loss assets:A loss asset is one where loss has been identified by the bank or internal or external auditors or
the RBI inspection but the amount has not been written off wholly. In other words, such an asset
is considered uncollectible and of such little value that its continuance as a bankable asset is not
warranted although there may be some salvage or recovery value.

However, only those advances are classified as loss assets where no security is available. In
accounts where some security / ECGC / DICGD cover is available, these accounts are not
reported under loss assets.

PROVISIONING NORMS:Bank should make provisions against sub-standard assets,

doubtful assets and loss assets as below:

Loss Assets:-

41

Loss should be written off. If loss assets are permitted to remain in the books for any
reason, 100 per cent of the outstanding should be provided for.

Doubtful Assets:-

i) 100% of the extent to which the advance is not covered by the realizable value of the
security to which the bank has a valid recourse and the realizable value is estimated on a realistic
basis.
ii) in regard to the secured portion, provision may be made on the following basis, at the
rates ranging form 20 % to 100% of the secured portion depending upon the period for which the
asset has remained doubtful.

PROVISIONING NORMS FOR ASSETS:-

Period for which the advance has remained in Provision Requirement (in%)
Doubtful category
Up to one year
One to three year
More than three year
i) outstanding stock of NPAs as on
March 31, 2004.
ii) advances classified as doubtful more
than 3 years on or after April 1, 2004

20%
30%
- 60 % with effect from march 31, 2005
- 75 % with effect from march 31, 2006
- 100 % with effect from march 31, 2007
- 100 % with effect from march 31, 2005

Sub-standard Assets:A general provision of 10% on total outstanding should be made without
making any allowance for ECGC guarantee cover and securities available. The unsecured
exposures, which are identified as sub-standard would attract additional provision of 10%, i.e. a
total 20% on the outstanding balance. The provisioning requirement for unsecured doubtful
assets is 100%

42

Standard Assets:i) Bank should make general provision for standard assets at the following rates for the
funded outstanding on global loan portfolio basis:
a)

Direct advances to agricultural and SME sector at 0.25%

b)

Advances to specific sectors, i.e. personal loans, loans and advances qualifying as capital
market exposures, residential housing loans beyond Rs. 20 lakhs and commercial real

estate
loans at 1%.
c)

ii)

All other advances not included in (a) and (b) at 0.40%.

As regards the additional facilities sanctioned as per the package finalized by BIFR and /
or term lending institutions, provision on additional facilities sanctioned need not be made
for a period of one year from the date of disbursement.

43

CHAPTER: VI
DATA ANALYSIS
AND
INTERPRITATION

ANALYSIS AND INTERPRETATION OF THE DATA

TABLE NO: - I
i) Capital

44

Sl.
No.
Sl. No.

i) 1.
ii)
iii)
iv) 2.
v)
vi)
vii) 3.

Particulars
31.03.2014
31.03.2013
Particulars
31.03.2014
31.03.2013
CRAREquity
(%) Tier 1 capital ratio (%)
Common

8.12%
Basel
II
10.97
11.32
Tier 1 capital ratio (%)

III ratio (%)

10.56

TierBasel
2 capital
2.44%

10.56%

CRAR
Tier
I
Capital
(%)
Total Capital ratio (CRAR) (%)
8.30
Basel
II
8.54
Percentage of the shareholding of Government of India in public sector banks
74.06%
55.02%
BaselofIIIEquity Capital raised (` In Crores) Refer item 8.12
NIL
Amount
No. 10 363.58
CRAR - Tier II Capital (%)
Amount of Additional Tier 1 capital raised; of which
2.67
Basel II
2.78
PNCPS:
2.44
Basel III

NIL
NIL
PDI:
Amount of Tier 2 capital raised; of which
Debt capital instrument (` In crores):
250.00
NIL
Preference Share Capital Instruments: [Perpetual Cumulative
Preference Shares (PCPS)/ Redeemable Non-Cumulative
Preference Shares (RNCPS)/ Redeemable Cumulative
Preference Shares (RCPS)]
NIL
NIL

Basel III

TABLE NO:-II
i) Investments
Sl. No

1.

2.

Particulars
Value of Investments
Gross value of investments
In India

31.03.2014

31.03.2013

42833.78*
42833.78*

31504.02
31504.02

Outside India
Provisions for depreciation and NPI (Non Performing Investment)
In India
Outside India

NIL
248.39
248.39**
NIL

NIL
219.06
219.06
NIL

Net value of investments

42585.38

In India

42585.38

31284.96
31284.96

Outside India

NIL

NIL

207.79

285.03

0.00

0.00
27.89
105.13

Movement of provisions held towards depreciation on investments

Opening balance
Add:
i) Provision made during the year
ii) Diminution on shifting of investments
Less: Write off

45

77.08
48.94

Closing balance

207.79

235.93

Includes LAF Repo of ` 575 Cr (PY ` 2000 Cr) and MSF of ` 450 Cr (PY ` 800 Cr) outstanding as on
31.03.2014
** Includes provision of ` 12.47 Cr (PY ` 11.27 Cr) made on NPI.
RBI circular DBOD.BP/BC.No. 41/21.04.141/2013-14 dated Aug 23, 2013 on Investment Portfolio of Banks
- Classification, Valuation and Provisioning interalia provides Banks an option to distribute the net
depreciation on the entire Available for Sale (AFS) and Held for Trading (HFT) portfolios on each of the
valuation dates in the current financial year 2013-14, in equal installments. The Bank has fully provided for the
depreciation on the AFS and HFT portfolios as on 31.03.2014.

ii) The particulars of repo transactions (including those from RBI under LAF Repo) are as under
Outstanding during the year

Particulars

Minimum

Maximum

Daily
average

As on
31.03.2
013

1) Govt. Securities

NIL

2800.00

634.08

1025.00

2) Corporate debt securities

NIL

NIL

NIL

NIL

1) Govt. Securities

NIL

14981.99

3224.50

879.43

2) Corporate debt securities

NIL

NIL

NIL

NIL

Securities sold under Repos

Securities purchased under reverse Repos

Repo Transactions 31.03.2013 (Previous Year)

Particulars

Outstanding during the year

Minimum

46

Maximum

Daily
average

As on
31.03.2
014

Securities sold under Repos

1) Govt. Securities

NIL

3100.00

436.82

2800.00#

2) Corporate debt securities

NIL

NIL

NIL

NIL

1) Govt. Securities

NIL

2050.00

27.05

2500.00

2) Corporate debt securities

NIL

NIL

NIL

NIL

Securities purchased under reverse Repos

# ` 800.00 Cr borrowed under Marginal Standing Facility (MSF) from RBI as on 31.03.2013

TABLE NO: - III

Non-SLR Investment Portfolio

Issuer composition of Non-SLR Investments -31.03.2014

(in crore.)

47

Sl.
No
.

Issuer

(1)

(2)

Amount

Extent of
Private
Placeme
nt

(3)

(4)

Extent of
Below
Investme
nt
Grade
Securitie
s
( 5)

Extent
of
Unrate
d
Securiti
es

Extent
of
Unlisted
Securiti
es

(6)

(7)

(i)

PSUs

2749.58

2684.07

2313.72

177.10

(ii)

FIs**

4358.21

675.06

50.50

50.50

(iii)

Banks

1919.17

209.93

25.00

3683.1
4
53.56

(iv)

Private Corporate

355.11

226.60

162.23

112.01

(v)

Subsidiaries/ Joint Ventures

(vi)

Others

15.83

132.10

(vii)

Provision held towards

depreciation and NPI

132.1
0
195.0
2
9319.
15

XXX

XXX

XXX

XXX

3811.49

2551.45

4157.9
1

83.17

Total

32.67

Note:
Amounts reported under columns 4, 5, 6 and 7 above may not be mutually exclusive. ** Includes the
investment under RIDF of ` 3615.57 Cr

Issuer composition of Non-SLR Investments -31.03.2013

(in crore.)

48

Sl.
No
.

Issuer

(1)

(2)

Amount

Extent of
Private
Placeme
nt

(3)

(4)

Extent of
Below
Investme
nt
Grade
Securitie
s
( 5)

Extent
of
Unrate
d
Securiti
es

Extent
of
Unlisted
Securiti
es

(6)

(7)

(i)

PSUs

585.55

549.46

(ii)

FIs**

3,279.39

3,216.72

60.00

(iii)

Banks

754.66

256.03

10.00

(iv)

Private Corporate

428.79

347.16

130.89

13.77

37.79

(v)

Subsidiaries/ Joint Ventures

8.06

8.06

(vi)

Others

382.69

306.05

26.40

4.82

(vii)

Provision held towards

depreciation and NPI

(218.84)

XXX

XXX

XXX

XXX

Total

5,220.3
0

4683.48

227.29

18.59

93.29

Note:
Amounts reported under columns 4, 5, 6 and 7 above may not be mutually exclusive.
** Includes the investment under RIDF of ` 2795.40 Cr

49

TABLE NO: - IV

Non-Performing Non-SLR Investments

(in crore)
Particulars

31.03.201
4

31.03.2013

Opening balance

11.27

17.50

Additions during the year

5.85

0.00

Reductions during the above period

0.00

6.23

Closing balance

17.12

11.27

Total provisions held

12.47

11.27

Movement in provision for Non Performing Investments

(in
Particulars

crore)

31.03.201
4

31.03.2013

Opening balance

11.27

12.36

Add: Provision made during the year

1.20

0.00

Less: Write off / write back of excess provisions

0.00

1.09

Closing balance

12.47

11.27

50

TABLE NO: - V

Asset Quality
a) Non Performing Asset

Particulars

31.03.2014

31.03.2013

1.55

1.33

Opening balance

1532.94

1718.46

Additions during the year

2173.87

1601.42

Reductions during the year

1720.95

1786.94

Closing balance

1985.86

1532.94

(i) Net NPAs to Net Advances (%)

(ii) Movement of NPAs (Gross)

(iii) Movement of Net NPAs

Opening balance

909.69

Additions /( reductions) during the year

352.68

Closing balance

1262.37

998.01
(88.32)
909.69

(iv) Movement of provisions for NPAs*

Opening balance

619.24

Provisions made during the year

400.29

Write-off

309.61

Closing balance

709.92

716.19
437.80
534.75
619.24

(*excluding provisions on standard assets and including floating provision)

b) Sector-wise NPAs
51

Sl.
No.

Sector

Percentage of NPAs to
Total Advances in that sector

Agriculture & allied activities

4.63

Industry (Micro & small, Medium and Large)

4.71

Services

2.74

Personal Loans

2.52

Movement in NPAs

c)

Particulars

` in crore

Gross NPAs as on 1st April 2013 (Opening Balance)

1532.94

Additions (Fresh NPAs) during the year

2173.87

Sub-total (A)

3706.81

Less:(i) Up gradations

989.15

(ii) Recoveries (excluding recoveries made from upgraded accounts)

435.94

(iii) Write-offs & Others

295.86

Sub-total (B)

1720.95

Gross NPAs as on 31st March 2014 (A-B)

1985.86

TABLE NO:-VI

Comparison of deposits and advances in Vijaya bank for the last four years
YEAR

DEPOSITS

ADVANCES

2010-11

73248

48718

52

2011-12

83056

59703

2012-13

97017

69765

2013-14

124296

81504

TOTAL DEPOSITS AND ADVANCES

140000
120000
100000
80000
DEPOSITS
ADVANCES

60000
40000
20000
0
2010-11

2011-12

2012-13

2013-14

Interpretation:- As per the above table and graph we show that in the year 2010-2011 to 20112012 every year deposits increased as in the advances same thing in that advances also increased
every year as per the deposit increased. In the year 2013-2014 deposits and advances almost two
times increased rate as 2010-11.

TABLE NO: - VII

Level of NPA in the loan granted for the last four years

53

YEAR

LOANS

NPAS

% OF NPAS

2010-11
2011-12
2012-13
2013-14

48718
59703
69765
81504

1259
1718
1533
1986

2.58
2.87
2.19
2.43

PERCENTAGE OF NPA:-

90000
80000
70000
60000
50000
LOANS
NPAS

40000
30000
20000
10000
0
2010-11

2011-12

2012-13

2013-14

Interpretation:- As given above Table and Graph in the year 2010-11 loan -48718 and on that
NPA was 1259 is the 2.58% as same in the year 2013-14 the NPA rate was same at the rate 2.43
% from the year 2010-11 . NPAs of the bank are steady. They are not significantly increasing
over a period of time. Bank must initiate the process to reduce it further

54

55

CHAPTER: VII

FINDINGS

FINDINGS

1) Bank has mentioned NPAs as per different sector to sort it out easily
2) There is a slight decrease in Return of Assets (ROA)

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3) The loans and advances have been increased from2010-11 to 2013-14

4) In case of defaulters no action is taken against guarantor thus legal action should be taken
guarantor in case of default.
5) Income recognition norms are not followed properly.
6) Provisioning for NPA is not in much accordance with RBI guidelines.
7) Credit appraisal and monitoring is not up to mark so that NPA do not occur.

CHAPTER: VIII
57

CONCLUSIONS

CONCLUSIONS

It is not possible to eliminate totally the NPAs in the banking business but can only be
minimized. It is always wise it follow the proper policy appraisal, supervision and
follow-up of advances to avoid NPAs.
The banks should not only take steps for reducing present NPAs, but necessary precaution
should also be taken to avoid future NPAs.
The bank has achieved its target because the net profit is also increased and there is a
decrease in NPAs. So it is in better position compared to last year

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 If the NPAs is less, the economic position of the bank remains sound and solvent.
Vijaya banks NPAs better than average banking industry & thus it depicts the soundness
of Banks financial position.
Bank has to pay proper attention to recover the NPA of the bank.

CHAPTER: IX
59

SUGGESTIONS

SUGGESTIONS
Effective inspection system should be implemented.
Operating staff should scrutinize the level of inventories/receivables regularly.
Large exposure on big corporate or single project should be avoided.
Uneven scale of repayment schedule with higher repayment in the initial years normally is
preferred.
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 Improvement in credit appraisal technique at all levels, so that NPA does not occur.

Improvement in the recovery policy on continuous basis for controlling NPAs.

61

CHAPTER XI

ANNEXURE

ANNEXURE

I am student of Second year MBA of the AISSMS IOM Pune. I am doing project on To study of
non-performing assets in Vijaya Bank as a part of study. I request you to provide the required
information for the completion of my study.
Promise that the information is used exclusively for academic purpose only.

62

personal profile:

A. Name:
B. Address:

C:

Sex:

Male: [

G:

Age:

Female [

1. Do you know the NPAs of bank?

1)

Yes

2)

No

2. It is possible to eliminate totally the NPAs in the banking business?

1)

Yes

2)

No

3. The effective inspection system should be implemented?

1) Yes
2) No
4. Do you think operating staff should scrutinize the level of inventories/receivables regularly?
1)

Yes

2)

No

63

5. Do you think large exposure on big corporate or single project should be avoided?
1)

Yes

2)

No

6. Uneven scale of repayment schedule with higher repayment in the initial years normally is
preferred?
1)

Yes

2)

No

7. Do you think the banks should not only take steps for reducing present NPAs, but necessary
precaution should also be taken to avoid future NPAs?
1)

Yes

2)

No

8. The necessary precaution should also be taken to avoid future NPAs?

1)

Yes

2)

No

9. Do you think there is significant relationship between gross NPA of a bank to its operating
profit?
1)

Yes

2)

No

10. The bank will always face the problem of NPA because of poor recovery of advances granted
by the bank?
1)

Yes

2)

No

11. NPAs are more in

1

Priority sector

64

Non Priority sector

12. What are the methods adopted by the bank to look after NPAs management?

........................................

13. What are the criteria to recovery the advances from the bank?

....

CHAPTER: X
65

BIBLIOGRAPHY

BIBLIOGRAPHY

1. Business Standards, June 2014

2. RBI Bulletin, July 2013 pp-34-36
3. RBI Bulletin, January 2013 pp-17-19
66

4. Alok Majumdar, NPAs: Recovery Blues, Treasury Management (Dec. 2010)

5. Annual Report March, 2013-14

Website:
1. www.business-standard.com/finance
2. www.domainb.com/management
3. www.vijayabank.com
4. www.studymode.com
5. www.rbi.co.in/com
6. www.scribed.com

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