Abstract

The project contains a brief history of Banking in India with main focus on growth and

challenges in the Public and Private sector Banking in particular dimension to rising trend of

Non-performing loans. Analysis has been shown about how NPA in Public sector banks have

shot up during the last five years from 2014 onwards. The Indian banking scenario in terms of

Non-performing loans has also been compared to some extent with the Global banking

scenario. The project broadly discusses the various measures to tackle NPA during earlier times

as well as in recent times.

While preparing my project papers on NPA management I have attempted to place on record

the historical background of banking in our country, defining NPA in true perspective as per

terms of prudential norms prescribed by RBI from time to time as to how NPA creates an

impact on the economy as whole, the basic reasons for accounts becoming NPA and the

remedial measures thereof. Various lapses and lacunae in the systems which needs early

corrections to bring down the ill effect of growing NPA.

After the opening up of the Indian economy during 1991-92, the entire economy including that

of banking sector were left to the severe global challenges. Prior to globalization, bankers were

almost going by traditional thought process of mobilizing fund from the market and lending

fund to a section of the people for industrial , commercial and other business or personal

purposes. There were, as such, neither any scientific method based on principles for grant of

funds or basis of ascertaining the credit need of the borrower. Follow up methodology for

recovery of loans was poor and Bankers were to used to book their profit arising out of interest

or commissions earned on accrual basis without ascertaining the realisability of the income.

Thus there were huge window dressing on the part of bankers so far as profitability and bad

loans were concerned and major areas of bad loans were kept under the carpet .
when the concept of prudential norms came into picture and was vehemently implemented in

all the commercial banks, the profitability of banks started shrinking and non-performing loans

gradually started coming in lime light putting the banks into dismal conditions.

Here lies the significance of studying NPA management . No one can really come out with

ready made solutions to this growing NPA so as to contain its rising trend or to reduce it

through the process of various recovery measures . For the purpose we need to know what

exactly NPA means, when and how they occurs and how is the voracity of NPA showing

symptoms of sickness of the banks , causing damage to the society and/or the country as a

whole. We also need to know the comparative study all the relevant data on the credit port

folio of all the banks to clearly understand the volume of their NPA as percentage of their total

advance portfolio and how their move to reduce NPA has been proved to be effective in the

short and long term operations .

While abundant precautions are of immense need before grant of loan to corporate or non

corporate credit , small or big , we are in need to know the details of process in timely move

towards recovery of dues, including that of legal recourse for recovery . I have therefore

discussed in details the existing legal frame work by which a banker may file a civil suit or

take them to a Debt tribunal to get an early decree for realization of dues or can take possession

of the mortgage property without intervention of the court or may go for filing application

under the IBC ( insolvency and bankruptcy code ) to start criminal proceedings against a willful

defaulter. We also need to know whether the bank should think of rehabilitation of the

Project under default and should consider restructuring programme within the purview of

norms adhering to the prescribed norms , rules and regulations .

In any case my sole objectives in taking up the project is to highlight the serious concern over

rising NPA in banking sector which were once nationalized with a view to benefit crores of

people in india in lieu of a few a vested group of business people . where as there is no doubt
that banking in India has large expansion in terms of branches , volume of business, employees

strength have contributed widely in expansion of industries , trade and commerce , agriculture

, housing etc but at the same time contributed heavily towards growth of Bad loans which

needs to be resolved with sincere move, appropriate knowledge and timely action plan .

whereas fraudulent activities on the part of some dishonest borrowers and/or mala fide act on

the part of employees and/or other top executives, board members , policy decision makers are

matters of major concern , adequate understanding and knowledge about the portfolio may be

helpful for all the stake holder to take suitable measures leading to effective management of

credit portfolio vis a vis NPA management.