A PROJECT REPORT ON

NON-PERFORMING ASSETS
IN BANKING SECTOR WITH SPECIAL REFERENCE TO J&K BANK LTD.

Under the Guidance of:

SUBMITTED BY
Rameez Tassaduq

MR. TAFHEEM BASHIR MIR

MBA (THIRD SEMESTER) (DEPARTMENT OF FMIT)
JAMIA HAMDARD UNIVERSITY, NEW DELHI

COMPANY INTRODUCTION

Jammu and Kashmir bank limited was incorporated on 1 st October 1938 and
commenced its business from 4th July 1939 at Kashmir (India).

It is a private bank in which 53% owned by Jammu and Kashmir government.

Regulated by the RBI and SEBI.

Listed in NSE and BSE.

Headquarter of J&K bank is in SRINAGAR.

J&K has 777 branches operating in India

Scope of the study

The main aim behind making this report is to know how J&K
Bank is operating its business and how NPAs play its role to the
operations. Thats why the study of NPAs become necessary duo
to the above mentioned reasons:

They erode current profits through provisioning requirements.

They result in reduced interest income.

They require higher provisioning requirements, affecting profits

and accretion to capital funds and capacity to increase good
quality risk assets in future, and

They limit recycling of funds, set in asset-liability mismatches,

etc.

What is NPA

A non-performing asset (NPA) was defined as a credit facility in

respect of which the interest and/ or instalment of principal has
remained past due for a specified period of time.

With a view to moving towards international best practices and to

ensure greater transparency, it has been decided to adopt the
90 days overdue norm for identification of NPAs, from the year
ending March 31, 2004.Accordingly, with effect from March 31,
2004, a non-performing asset

Research Methodology

Objectives of the study

To analyze the volume of NPA of the Jammu & Kashmir Bank

Ltd.

To know the recent credit performance of the bank

To study the repayment capacity of the customer.

To know the policies that the J&K Bank follows to cover its
NPAs.

To know the ill effects of NPAs on the performance of the

banks.

To get aware of the confidence among the customers of the

J&K Bank regarding the performance of the bank in recovery of
NPA

Research design

Research design is the conceptual structure within which

research is conducted;

It constitutes the blueprint for the collection, measurement and

analysis of data.

Descriptive research is carried out which is preferred for

assessment purposes.

Descriptive research includes survey and fact finding enquiries of

different kinds.

The major purpose of descriptive research is description of the

state of affairs, as it exists at present.

DATA COLLECTION

Data collection is very important for conducting any research. Success or failure of a research
primarily depends on data collection. Data may be collected by any of the following methods:

Primary sources

Secondary sources

The primary sources of collecting data in this project include:

Personal interviews

Questionnaire

Telephonic interviews

The secondary sources through which data have been collected for this project include the
following:

Internet

Newspapers

Information brochures of the bank

Books and magazines

SAMPLING PLAN

The sampling plan in this project is as follows:

Population:

Sampling unit: Any individual residing in district Srinagar of J&K

state.

Sample size:

Sampling procedure: convenience sampling

The customers of the bank.

100

Data Collection and Analysis

Q.1) Are you satisfied with the ways J&K Bank grants loans?

a) Yes

b) NO

With the help of this question an attempt was made to know whether
J&K bank grants loans with ease or apply strictness to cover their
NPAs.

No. of respondents

Yes 80

No 20

The data in the table is shown with a chart for more clarification:

100

Analysis -:
The above chart shows that majority of the population is satisfied with the
ways J&K Bank offers loans to the public. About 80% of the respondents
favoured that J&K Bank offers them loans with ease and with the banks
effective policies it covers the risk.

Q.2) Is the NPA level of JKB controllable?

YES

NO

CAN'T SAY

With the help of this question, the purpose was to get aware whether the
people know that

J&K Banks NPA level is at a point where they will feel satisfactory.
No. of respondents

100

YES

50

NO

25

CAN'T SAY

25

Chart 2
50

50

45
40
35
30
25

25

25

20
15
10
5
0

YES

NO

CAN'T SAY

Analysis

After critical interpretation of the data it is clear that though most of the
respondents say that the NPA level of J&K Bank is controllable, still there are a
good portion of people who either say that NPA level of J&K Bank is not
controllable or dont have any knowledge. About 25% of respondents were
having no knowledge about the subject and the same amount of respondents
say that the NPA level of J&K Bank is not controllable.

Q.3) Are the profits of J&K Bank affected by NPA's?

YES

NO

CAN'T SAY

The main purpose by putting this question in the questionnaire was to get
the responses of the people that what they feel about the NPAs. Whether
more NPAs reduce the performance of the bank or not.
No.of respondents

100

YES

30

NO

15

CAN'T SAY

55

Chart 3
55
50
45
40
35
30

percentage

25
20
15
10
5
0

Analysis

YES

NO

C AN' T SAY

Q.4) Are the NPA reduction techniques of JKB standardized?

YES

NO

CAN'T SAY

The purpose by asking this question was to know whether people feel that
the techniques for recovery of NPAs applied by J&K Bank are good or they
need to be changed.
No. of respondents

100

Yes

45

No

20

Cant say

35

Chart 4

45.00%
yes
no
can't say

20.00%
35.00%

Analysis
The analysis of the above data is made in this way that majority of the respondents
favoured that the NPA reduction techniques of J&K Bank are standardized. A little
percentage of about 20% say that the NPA reduction techniques of J&K Bank need to be
changed and about 35% of respondents say that they cant say anything whether the
techniques of JKB are standardized or not.

Q.5 Do you think that NPA percentage in JKB can be reduced to

zero percent?

YES

NO
No. of respondents

100

Yes

50

No

50

Chart 10

YES
NO

Analysis
The analysis of above data shows that there is a balance among respondents whether
NPA percentage of J&K Bank can be minimized to zero percent.

FINDINGS

J&K Banks ratio of Non Performing Assets (NPA) to net advances stood at 0.22% as on 31
march 2014. Compared with 0.22%as on 31 December 2013 and 0.14% as on 31 March 2013.

J&K Banks ratio of Non Performing Assets(NPA)to net gross advances stood at 1.66% as on 31
march 2014. Compared with 1.65%as on 31 December 2013 and 1.62% as on 31 March 2013.

The Jammu & Kashmir Bank has recorded a conspicuous growth in deposits which is the
backbone of any bank. It has increased its Deposits from Rs. 38,337.37cr. to 71,100.86 cr.
from the last five years. The advances are also in increased trend from Rs 37,237.16cr. in
2009-2010 to Rs 69,335.86cr. in 2013-2014.

The Net NPA was maximum in 2013-2014 that is 1.91% and it was minimum in 2012-2013 that
is 0.55%.

The gross NPA ratio was minimum in 2013-2014 that is 1.54% and it was maximum in 20122013 that is 1.95%.

The increase in NPA coverage ratio in 2013-2014 that is 94.01% has decreased the both Net
NPA ratio and Gross NPA ratio.

Bank ltd. is adequate as suggested by 66% of respondents agree that there is an enough
period to pay the money back.

SUGGESTIONS

On the basis of findings following suggestions have been provided to the concern.

The Jammu & Kashmir Bank should utilize the Idle fund to decrease the NPA.

Once a loan becomes non-performing, the earlier bleeding is stopped, the less the losses will be,
which is an internationally accepted principle.

A careful and rigorous appraisal of bank assets quality in relation to financial situation has to be
made regularly.

The overall banking environment should be improved through reduction of government intervention
in credit management.

The Jammu & Kashmir Bank should lend more money as there is huge difference between deposits
and advances.

The Jammu & Kashmir Bank ltd. should increase the NPA coverage ratio and the collection efforts to
decrease the NPA.

The Jammu & Kashmir Bank ltd. should lay strategies to boost doubtful assets as NPA volume of
these assets is increasing year by year.

Most of the customers suggested that the rate of interest charged should be brought down so the
bank should work on the strategies to fix up the competitive interest rates to satisfy the customers.

Conclusion

Risk is part of lending, but it can be minimized by taking precautions.

NPAs can be reduced, if appropriate steps are taken at appropriate time.
Hence banks must take appropriate steps for reducing NPAs.

It is always wise to 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.

For any bank to serve in this competitive world it has to ensure that its
non-performing assets are minimized by improving new strategies on
credit collection from the customers.

THANK YOU