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Chapter: 6 Performing and Non – Performing
Assets Management
6.1. Meaning and Definitions of Performing Assets and Non
- Performing Assets:
The Reserve Bank has issued directives from 31/03/1993 and presented a new
concept of “Income Recognition”. This is done on the recommendations of
Narshimham Committee.
According to these directives the banks haves classify their credit facilities
into two parts:
Performing Assets (Standard Assets)
Non – Performing Assets
Performing Assets (Standard Assets):
Standard Assets is one which does not disclose any problems and which does
not carry more than normal risk attached to the business. Such assets are Performing
Assets (PA) and should not be an NPA.
Non – Performing Assets (NPA):1
With a view to moving towards international debt practices and to ensure greater
transparency, „90 day‟ overdue norms for identification of NPAs have been made
applicable from the year ended March 31, 2004. As such, save and except certain
relaxations mentioned for Tier – I Banks and Tier – II Banks as defined below, with
effect from March 31, 2004, a non – performing asset shall be a loan or an advance
where:
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I. Interest and/or installment of principal remain overdue for a period of more than
90 days in respect of a Term Loan.
II. The account remains Out of order for a period of more than 90 days, in respect of
an Overdraft/ Cash Credit (OD/CC).
III. The bill remains overdue for a period of more than 90 days in the case of bills
purchased and discounted.
IV. In the case of agricultural loans, other than direct finance to farmers for
agricultural purposes, identification of NPAs would be done on the same basis as
non-agricultural advances.
V. Any amount to be received remains overdue for a period of more than 90 days in
respect of other accounts.
Tier I Banks (Unit Banks i.e. Banks having a single branch with deposits upto
Rs. 100 Crores and banks having multiple branches within a single district with
deposits upto Rs. 10 Crores) have been permitted to classify loan accounts including
gold loans and small loan upto Rs 1 lakh as NPAs based on 180 days delinquency
norm instead of the extant 90 days norm. This relaxation was in force upto March 31,
2008. The deposits base of Rs. 100 Crores for the above will be determined on the
basis of average of the fortnightly Net Demand and Time Liabilities in the financial
year concerned. For the above category of banks, an account would be classified as
Non – Performing Asset if the:
VI. Interest and/or installment of principal remain overdue for a period of more than
180 days in respect of a Term Loan.
VII. The account remains Out of order for a period of more than 180 days, in respect
of an Overdraft/ Cash Credit (OD/CC).
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VIII. The bill remains overdue for a period of more than 180 days in the case of bills
purchased and discounted.
IX. Any amount to be received remains overdue for a period of more than 180 days in
respect of other accounts.
Tier II Banks (All UCBs other than Tier – I Banks) shall classify their loan
accounts as NPA as per 90-day norm as hitherto.
6.2. Importance of NPA:
Importance of Non – Performing Assets has become more and more since the
formation of Shri M. Narshimham Committee on banking sector reform in 1991. We
can say that it is a second landmark in banking sector in India after nationalization of
banks. After nationalization of banks it has been given much attention on the lending
policy of nationalized banks but not much attention has been given to the recovery of
advances of nationalized banks by Reserve Bank of India (RBI).
Recovery of non – performing assets has become critical performance area for
all banks in India. As per RBI report, March 1999, the gross NPA of all the scheduled
commercial banks and primary co – operative banks have gone up to Rs. 58,554
crores (14.6%) and to Rs. 4,535 (12.2%) crores respectively. There was a lack of
specific and unanimous guidelines which resulted in miss – allocation of (banks) huge
funds and ruin the sustained economic growth of nation.
So, it was high time to form some specific guidelines on this. Reserve Bank of
India (RBI) introduced a new set of prudential norms in April, 1992 for commercial
banks and subsequently it has been extended, in stages to urban co-operative banks as
well, as per the recommendations of high power committee on urban co-operative
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banks constituted in May 1999 under the chairmanship of K. Madharao as a need for
strengthening the co-operative sector in order to enhance operational efficiency,
productivity and profitability and with the objective of implementing international.
Best practices in Indian banks, it is compulsory for all banking institutions to comply
with prudential norms of RBI.
6.3. History of NPA in Indian Banking Industry:
Reserve Bank of India introduced a critical analysis for a comprehensive and
uniform credit and monitoring by way of the Health Code System, in banks, which
provided information regarding health of individual advances in 1985 – 86. It was
considered that such information would be of immense use to banks‟ management for
control purpose. Advances in the following eight categories with Code assigned to
each borrower account.
1. SATISFACTORY: The account in which all terms and conditions are complying
with and safety of advances are not in doubt.
2. IRREGULAR: The account where safety of advances is not suspected, though
there may be occasional irregularities.
3. SICK – VIABLE: Advances to units which are sick but viable under nursing or
revival programs are under taken.
4. SICK – NON – VIABLE / STICKY: Advances where irregularities continue to
persist and there are no immediate prospects of regularization.
5. ADVANCES – RECALLED: Advances where the recalled repayment is highly
doubtful and nursing is not considered worthwhile, includes accounts where
decision has been taken to recall the advances.
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6. SUIT – FILE – ACCOUNTS: Accounts where legal action or recovery
proceedings have been initiated.
7. DECREED DEBTS: Accounts for which decrees have been obtained.
8. BAD AND DOUBTFUL ACCOUNTS: The accounts in which the recoverability
is in doubtful due to shortfall in the value of the securities and inability /
unwillingness of the borrower to repay the bank‟s dues partly or wholly.
6.4. Technical aspects:
It was very easy for the banks to debit the interest amount to the loan account
and credit the same to income account without considering the fact whether the
interest will be realized and there would be return of principal amount. This practice
of passing the entries in the banks of accounts in respect accrued but not realized as
income results in losing the value of assets. Thus such assets become almost dead by
performing anything. Such non – performing assets were accumulated to the large
extent and became unbearable. On one hand the books of accounts of the banks used
to show huge profit and there was no realization of income because of such
accounting system. This affects the banking system adversely.
Thus major element of the financial sector reform in India was introduced in
the form of prudential norms and regulations. These prudential norms and regulations
are basically aimed at ensuring the safety and soundness of the financial system.
Imparting of greater transparency and accountability in operation and restoring
creditability in Indian Financial System. Prudential norms serve two primary
purposes, which are:
(1) Bringing out the true position of a bank‟s loan profitability
(2) Helping arrest its deterioration
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A proper system for
(1) Income Recognition
(2) Classification of assets and
(3) Provisioning for bad debt on prudential basis is necessary if balance sheet of a
bank is to reflect its original financial health. The committee on financial system
under the chairmanship of shri M. Narshimham had examined this issue,
recommended that a policy of income recognition should be objective, and on
recovery rather than on any subjective consideration. Similarly, the classification
of assets, which would ensure a uniform and consistent application of norms.
The recommendations of shri M. Narshimham committee regarding income
recognition, asset classification and provisioning were sought to be implemented by
Reserve Bank of India in a phased manner over a three – year period from the year
commencing from the year 1992 – 93. In this regard RBI has issued a separate
guideline for different category of commercial banks (in April, 1992), all financial
institutions (in April, 1992 with some modifications considering their functioning),
NBFCs (in June, 1994) RRBs (in March, 1996) at the proper time with the adequate
modification. In 1993 all co – operative banks have been told that they should comply
with prudential norms and regulations with income recognition, asset classification
and provisioning with some modifications.
6.4.1. Income Recognition:
Internationally income from non – performing assets is not an accrual basis
but is taken into account as income only when it is actually received. It has decided to
adopt similar practice in country also. Banks have been advised that they should not
change and take into income account on all non – performing.
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The policy of income recognition has to be objective and based on the record
of recovery. The criteria for treating a credit facility or borrower account as non –
performing is as follows:
1) Term Loan:
The term loan becomes NPA when interest and/or installment remain past due
for four quarters during 1992 – 93 and three quarters during 1993 – 94. From the year
1993 – 94 the term loan is treated as NPA in interest or installment of principal has
remained overdue for any two quarters as on the balance sheet date, although the
default may not be committed continuously for two quarters. This period will be
reduced to one quarter with effect from 31st March, 2004. If the account is regularized
before the balance sheet date by repayment of overdue amounts through genuine
sources (not by sanction of additional facilities or transfer of funds between accounts)
the account need not be treated as NPA. Bank should, however, ensure that the
account remains in order subsequently and a solitary credit entry made in the accounts
on or before the balance sheet date to adjust the overdue interest or installment of
principal is not reckoned as the sole criterion for treating the account as standard
assets (Performing Assets)
2) Cash Credit and Overdraft Facility:
A credit/overdraft account becomes NPA if it remains out of order for any two
quarters in a financial year.
(a) Outstanding balance remains continuously in excess of sanctioned limit or
drawing power whichever is lower.
(b) Where balance outstanding is less than sanctioned limit or drawing power.
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(i) There are no credits in the account continuously for three months or
(ii) Credits are not enough to cover interest and expenses debited during
three months
Flow Chart:
As on 30/09/1996, there are only four possibilities for cash credit accounts as
under: [O = Out of Order, R = Regular]
Quarter
No.
Possibilities
1 2 3 4
I
II
R
R
R
O
O
R
O
O
Category PA PA PA NPA
As on 31/03/1997, there are twelve possibilities for cash credit accounts as
under: [O = Out of Order, R = Regular]
Quarter
No.
Possibilities
1 2 3 4 5 6 7 8 9 10 11 12
I
II
III
IV
R
R
R
R
O
R
R
R
O
O
R
R
O
O
O
R
O
R
O
R
R
O
O
R
R
R
R
O
O
O
O
O
R
R
O
O
R
O
O
O
R
O
R
O
O
R
R
O
Category Performing Assets Non - Performing Assets
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From the above chart it is clear that if a cash credit account is regular in the
fourth quarter it will be performing assets, even if it is out of order in the earlier three
quarters. Regarding possibility number seven, the account is performing assets even
though it is out of order in the fourth quarter because, it is regular in the earlier three
quarters.
If a cash credit account is out of order in the fourth quarter and out of order for
any one of the previous three quarters, the account will be non – performing assets.
Concept of past due is applicable to the interest debited to cash credit account.
Which means that if a cash credit account is overdrawn only due to application of
interest, then for one year, it will not be treated as over drawn.
3) Bills Purchased and Discounted:
A bill purchased / discounted account becomes non – performing assets if it
remains overdue for two quarters, the position of the oldest account is to be reckoned
for the purpose of income recognition.
4) Housing Loan to Staff:
In the case of housing loan or similar advances granted to staff members where
interest is payable after recovery of principal, interest need not be considered as
overdue from the first quarter onwards. Such loans/ advances should be classified as
NPA only when there is a default in repayment of installment of principal or payment
of interest on the respective due dates.
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5) Other Credit facilities:
Any other credit facility is to be treated as NPA if it remains “Past Due” for a
period of 4, 3 and 2 quarters during the year ended 31st March 1993, 1994 and 1995
onwards respectively.
EXEMPTIONS:
1) Credit facilities Guaranteed by Central /State Government
I. The credit facilities backed by guarantee of the Central Government
though overdue should not be treated as NPA
II. This exemption from classification of government guaranteed advances
as NPA is not for the purpose of recognition of income.
III. From the year ended March 31, 2006, State Government guaranteed
advance and investment in State Government guaranteed securities
would attract asset classification and provisioning norms, if interest
and/or principal or any other amount due to the bank remains overdue
for more than 90 days irrespective of the fact whether the guarantee
have been invoked or not.
2) Advances against term deposits:
Advances against fixed and other term deposits, National Saving Certificates,
LIC Policies, Indira Vikash Patrak, and Kishan Vikash Patrak need not be treated
as NPA although interest there in is not paid. Interest on such advances may also
be taken to income account on due dates provided adequate margin is available in
the accounts.
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3) Fees and Commissions:
Fees and commissions earned by the banks as a result of renegotiations or
rescheduling debts should be recognized on an accrual basis over the period of
time covered by the renegotiations or rescheduled extension of credit.
Appropriation of Recovery in NPAs:
Interest realized on NPAs may be taken to income account provided the
credits in the accounts towards interest are of fresh additional credit facilities
sanctioned to the borrower concerned.
In the absence of a clear agreement between the bank and the borrower for the
purpose of appropriation of recoveries in NPAs [i.e. towards principal or interest due],
bank should adopt an accounting principle and exercise the right or appropriation of
recoveries in a uniform and consistent manner.
6.4.2. Assets Classification:
The primary Gujarat State Financial Corporation bank should classify their assets
into following broad groups, viz.
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(1) Standard Assets
Standard Asset is one which does not disclose any problems and which does
not carry more than normal risk attached to the business. Such an asset should not be
an NPA.2
(2) Sub-standard Assets
(I) With effect from 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. In such cases,
the current net worth of the borrowers/ guarantors 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 assets will have well defined credit
weaknesses that jeopardize the liquidation of the debt and are characterized by
the distinct possibility that the banks will sustain some loss, if deficiencies are
not corrected.
(II) An asset where the terms of the loan agreement regarding interest and
principal have been re-negotiated or rescheduled after commencement of
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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 or rescheduled terms. In other words, the classification of an asset
should not be upgraded merely as a result of rescheduling, unless there is
satisfactory compliance of this condition.
(3) Doubtful Assets
With effect from 31st March, 2005, an asset is required to be classified as
doubtful, if it has remained NPA for more than 12 months. For Tier – I banks, the
twelve month period of classification of a substandard asset in doubtful category is
effective from 1st April, 2009. As in the case of sub-standard assets, rescheduling does
not entitle the bank to upgrade the quality of an advance automatically. A loan
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 currently known facts, conditions and values, highly
questionable and improbable.
(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 Reserve Bank of India
inspection but the amount has not been written off, wholly or partly. In other words,
such an asset is considered un-collectible and of such little value that its continuance
as a bankable asset is not warranted although there may be some salvage or recovery
value.
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6.4.3. Norms for Provisioning on Loan and Advances:
In conformity with the prudential norms, provisions should be made on the non-
performing assets on the basis of classification of assets into prescribed categories as
detailed above.
(1) Standard Assets:
(I) From the year ended March 31, 2000, the banks make a general provision
of a minimum of 0.25 per cent on standard assets.
(II) However, from the year ended March 31, 2007, Tier – II banks will be
subjected to higher provisioning norms on standard Asset as under:
(a) The general provisioning requirement for „standard advances‟ shall be
.040 per cent from the present level of 0.25 per cent. However, direct
advances to agricultural and SME sectors which are standard assets,
would attract a uniform provisioning requirement of 0.25 per cent of the
funded outstanding on a portfolio basis, as hitherto.
(b) For personal loans, loan and advances qualifying as capital market
exposures and commercial real estate loans and advances to
systemically important NBFCs provisioning requirement would be 2.0
per cent.
(III) The provisions towards “standard assets” need not be netted from gross
advances but shown separately as "Contingent Provision against
Standard Assets" under "Other Funds and Reserves" in the Balance
Sheet.
(IV) in case banks are already maintaining excess provision than what is
required/prescribed by Statutory Auditor/RBI Inspection for impaired
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credits under Bad and Doubtful Debt Reserve, additional provision
required for Standard Assets may be segregated from Bad and Doubtful
Debt Reserve and the same may be parked under the head "Contingent
Provisions against Standard Assets" with the approval of their Board of
Directors. Shortfall if any, on this account may be made good in the
normal course.
(V) The above contingent provision will be eligible for inclusion in Tier II
capital.
(2) Sub-standard Assets:
A general provision of 10 per cent on total outstanding should be made
without making any allowance for DICGC/ECGC guarantee cover and securities
available.
(3) Doubtful Assets:
(I) Provision should be for 100 per cent 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 should be made 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 from 20 per cent to 100 per cent of the secured
portion depending upon the period for which the asset has remained doubtful:
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Tier – I Bank
Period for which the advance has
remained in „doubtful‟ category
Provision requirement
Up to one year 20 per cent
One to three years 30 per cent
More than three years (D-III)
(I) outstanding stock of NPAs as on
March 31, 2010
(II) advances classified as „doubtful for
more than three years‟ on or after
April 1, 2010
- 50 per cent
- 60 per cent with effect from March
31, 2011
- 75 per cent with effect from March
31, 2012
- 100 per cent with effect from March
31, 2013
100 percent
Tier – II Bank
Period for which the advance has
remained in „doubtful‟ category
Provision requirement
Up to one year 20 per cent
One to three years 30 per cent
More than three years (D-III)
(III) outstanding stock of NPAs as on
March 31, 2007
(IV) advances classified as „doubtful for
more than three years‟ on or after
April 1, 2007
- 50 per cent as on March 31, 2007
- 60 per cent with effect from March
31, 2008
- 75 per cent with effect from March
31, 2009
- 100 per cent with effect from March
31, 2010
- 100 percent
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Additional provisioning consequent upon the change in the definition of doubtful
assets effective from March 31, 2002 has to be made in phases as under:
As on 31/03/2002, 50 percent of the additional provisioning requirement on
the assets, which become doubtful on account of new norm of 18 months for
transition from sub – standard asset to doubtful category.
As on 31/03/2003, balance of the provisions not made during the previous
year, in addition to the provisions needed as on 31/03/2003.
The provisions on standard assets must not be reckoned for arriving at net NPA.
The provisions towards “standard assets” need not be netted from gross advances
but shown separately as "Contingent Provision against Standard Assets" under
"Other Funds and Reserves" {item.2 (viii) of Capital and Liabilities} in the
Balance Sheet.
In respect of the advances covered by ECGC/DICGC guarantee banks were
advised that in the case of advances guaranteed by ECGC/DICGC, provision
should be made only for the balance in excess of the amount guaranteed by these
corporations. From the year 1995 – 96 and onwards, bank should deduct realizable
value of security from outstanding balance before the ECGC/DICGC guarantee is
offset example, the following method should be adopted to find out the
provisioning requirement in respect of doubtful assets:
Outstanding balance Rs. 10 Lacs
ECGC/DICGC cover 60 %
Period for which the advanced has remained doubtful More than 3years
Value of security Rs. 3 Lacs
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Calculation of Provision:
Outstanding balance Rs. 10 Lacs
Less: value of security held Rs. 03 Lacs
Balance Rs. 07 Lacs
Less: ECGC/DICGC cover (60% of Balance) Rs. 4.2 Lacs
Balance of amount required provisioning Rs. 2.8 Lacs
Provision for unsecured portion – 100 % after adjusting the
Guarantee covers (a) Rs.2.8 Lacs
Provision for secured portion (50 % of 03 Lacs) (b) Rs. 1.5 Lacs
Total provision required to be made (a + b) Rs. 4.3 Lacs
Advances against gold ornaments, government securities and all other kinds of
securities are not exempted from provisioning requirements.
the RBI in its circular dated on 2nd
July, 1996 has advised the banks to classify
non- performing assets into sub – standard, doubtful and loss assets before
finalizing the accounts as at 31st March and submit the copy of a statement to the
RBI, duly certified by the statutory auditor of the bank who have been appointed
to audit the annual accounts of the banks.
(4) Loss Assets:
(I) The entire assets should be written off obtaining necessary approval from the
competent authority and as per the provisions of the co – operative society‟s
act/rules. If the assets are permitted to remain in the books for any reason,
100 per cent of the outstanding should be provided for.
(II) In respect of an asset identified as a loss asset, full provision at 100 per cent
should be made if the expected salvage value of the security is negligible.
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6.4.4. Other Provisional Norms:
(1) Treatment of NPAs of Agricultural Advances:
Where natural calamities impair the repaying capacity of agricultural borrowers,
as a relief measure, banks may decide on their own to:
(a) convert the short-term production loan into a term loan or re-schedule the
repayment period, and
(b) sanction fresh short-term loans
In such cases of conversion or re-schedulement, the term loan as well as fresh
short-term loan may be treated as current dues and need not be classified as non -
performing asset (NPA). The asset classification of these loans would, therefore, be
governed by the revised terms and conditions and these would be treated as NPA
under the extant norms applicable for classifying agricultural advances as NPAs.
(2) Net Worth Of Borrower/Guarantor or Value of Security:
It is clarified that availability of security or net worth of borrower/guarantor
should not be taken into account for the purpose of treating advances as NPA or
otherwise, as income recognition is based on record of recovery.
(3) Credit facilities Guaranteed by Central /State Government:
(I) The credit facilities backed by guarantee of the Central Government
though overdue should not be treated as NPA
(II) This exemption from classification of government guaranteed advances
as NPA is not for the purpose of recognition of income.
(III) From the year ended March 31, 2006, State Government guaranteed
advance and investment in State Government guaranteed securities
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would attract asset classification and provisioning norms, if interest
and/or principal or any other amount due to the bank remains overdue
for more than 90 days irrespective of the fact whether the guarantee have
been invoked or not.
(4) Treatment of NPAs – Borrower-wise and not Facility-wise:
In respect of a borrower having more than one facility with a bank, all the
facilities granted by the bank will have to be treated as NPA and not the particular
facility or part thereof which has become irregular.
However, in respect of consortium advances or financing under multiple banking
arrangements, each bank may classify the borrower accounts according to its own
record of recovery and other aspects having a bearing on the recoverability of the
advances.
(5) Consortium Advances:
As per the revised guidelines by the RBI in January, 1997 stating that in
respect of consortium advances each bank may classify the borrower accounts
according to its own record of recovery and other aspect having a bearing on the
recoverability of advances.
(6) Regularization of Credit Facility before a Balance Sheet date:
The RBI issued a circular in January, 1997 stating that if the accounts of the
borrower have been regularized before the balance sheet date by repayment of
overdue amounts though genuine source (not by sanction of additional facilities or
transfer of funds between accounts), the accounts need not be treated as NPA. Bank
should , however ensure that the account remains in order subsequently and a solitary
credit entry made in the account or before the balance sheet date, which extinguishes
the overdue amount of interest or installment of principal, in not reckoned as the sole
criterion for treating the accounts as standard assets (performing assets)
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(7) Advances Granted under Rehabilitation Packages Approved
by BIFR/Term Lending Institutions:
Banks are not permitted to upgrade the classification of any advances in respect of
which the terms have been re-negotiated unless the package of re-negotiated terms has
worked satisfactorily for a period of two years. thus, bank should continue to make
provision in respect of existing credit facilities sanctioned to a unit under
rehabilitation as per their classification as sub – standard or doubtful. As regard the
additional facilities sanctioned as per package finalized by BIFR/term landing
institution, bank need not make provision for a period of one ear from the date of
disbursement of additional facilities. Similar relaxation also extended so SSI units
which are identified as sick by banks themselves (as per RBI circular dated 20th
November, 2000). In other words, RBI guidelines on income recognition, asset
classification and provisioning will apply to additional facilities after a period of one
year from the date of disbursement.
(8) Accrued Interest on Non – Performing Assets:
Interest accrued on non-performing assets not be debited to borrowal accounts but
to 'Interest Receivable Account' and credited to 'Overdue Interest Reserve Account'
and shown on the assets and liabilities side of the balance sheet respectively. In this
context, it may be clarified that the amount held in the 'Overdue Interest Reserve
Account' cannot be regarded as a „reserve‟ or as part of the owned funds of the bank.
(9) Accrued Interest on Performing Assets:
In the case of performing assets, interest accrued may be debited to borrowal
account and credited to Interest account. If the accrued interest for the quarter ended
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March, if not realized becomes “past due” only on 30th
April of the following
accounting year. If the relevant credit facility becomes NPA at a later date, the bank
should reserve the entry of the unrealized interest‟s amount by debiting “profit and
loss account” and crediting to the 'Overdue Interest Reserve Account' should not be
deducted from the advances outstanding.
(10) Reversal of Unrealized Interest:
If any advance including bills purchased and discounted which have been
classified as non –performing assets for the first time during the current year, the
interest accrued and credited to income account in the previous year which has not
been realized, should be reversed or provided for during the current year. This will be
applicable to unrealized interest on Government guaranteed accounts also.
(11) Partial Recoveries of Non – Performing Assets:
In respect of the interest partially recovered in non – performing assets, it has
been clarified that banks may rake to income account interest realized in non –
performing assets provided it is ensured that the credits in the accounts towards
interest are not out of fresh/additional facilities sanctioned to the borrower concerned.
(12) Interest Suspense Account:
The amount held in the interest suspense account should not be reckoned as
part of provisions. However, amounts lying in the interest suspense account should be
deducted from the relative advances and provisioning should be made on the balance
sheet after such deduction.
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(13) Valuation of Interest:
If there is any appreciation in the value of securities on account of the method
of valuation as indicated by RBI, it should not be booked as income. Further banks
which have adopted a more prudent method of valuation of securities than the one
suggested by RBI, these banks may continue the practice either to be followed by
them.
(14) Removal of “past due” Concept:
With circular of RBI dated 8th
December, 2000 stating that due to the
improvement in the financial sector during the past few years, it has been decided to
dispense with “past due” concept with effect from March 31st, 2001. Accordingly as
from the date, a non – performing asset shall be an advance where interest and/or
installment of principal of term loan, overdraft, demand draft of bills purchased and
discounted, any amount to be received remains overdue more than 180 days.
(15) Advances covered by ECGC/DICGC guarantee:
In the case of advances guaranteed by DICGC/ECGC, provision should be made
only for the balance in excess of the amount guaranteed by these
Corporations. Further, while arriving at the provision required to be made for
Doubtful assets, realizable value of the securities should first be deducted from the
outstanding balance in respect of the amount guaranteed by these Corporations and
then provision made as illustrated hereunder:
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For Example:
Outstanding balance Rs. 4.00 Lacs
Less: Value of security held Rs. 1.50 Lacs
Unrealized balance Rs. 2.50 Lacs
Less: DICGC Cover (50% of unrealizable balance) Rs. 1.25 Lacs.
Net unsecured balance Rs. 1.25 Lacs
Provision for unsecured portion of advance Rs.1.25 Lacs
(@ 100 per cent of unsecured portion)
Provision for secured portion of advance Rs.0.90 Lacs
(As on March 31 2005) (@ 60 % of secured portion)
Total provision required to be made Rs. 2.15 Lacs
In case the banks are following more stringent method of provisioning in respect
of advances covered by the guarantees of DICGC/ ECGC, as compared to the method
given above, they may have the option to continue to follow the same procedure.
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6.4.5. Recent Development: [ From 23rd
April, 1999 by RBI]
1) Reduction in the time frame for classification of assets as
doubtful assets:
With a view to moving closer to international practices in regard decided that as
asset should be classified as doubtful if it has remained in sub – standard category for
18 month instead of 24 months as at present, by 31st March, 2001. The banks are
permitted to achieve these norms for additional provisioning, in phases, as under:
As on 31st March, 2002 Balance of the provisioning not made during the
previous year, in provisions needs as on 31st March, 2002.
2) Norms in respect of Government Guaranteed Advances:
It has been decided, as a prudent measure, to introduce provisioning norms in
respect of advances guaranteed by state government where guarantee has been
invoked and has remained in default for than two quarters. This measure would be
effective from 1st April, 2000 as regards provisioning requirements, which stood
invoked as on 31st March 2000, necessary provision should be made during the
financial year ending 31st March 2000 to 31
st March 2003 with a minimum of 25 %
each year.
3) Provision on Standard Assets: (Performing Assets)
0.25% of the outstanding performing advances under direct agriculture and
advance qualifying as capital market exposure, commercial and real estate loan &
loans and advances to systemically important NBFCs-Non-Deposit Taking
Companies, 1% for residential housing loans beyond Rs. 20 Lakh and 0.40% on the
residual outstanding performance advances.3
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4) Other Matters:
It has been decided, in consultation with Government of India, to implement
some of the recommendations made by the commits on banking sector reforms. These
are given in the following table:
No. Recommendations Decision Taken
(1) Banks and financial institutions should
avoid the practice of ever greening
The Reserve Bank reiterates that
Banks and Financial Institutions
should adhere to the prudential
norms on assets classification,
provisioning etc. and avoid the
practice of ever greening of loan
accounts.
(2) Any effort at financial restructuring
must go hand in hand with operational
restructuring with the cleaning up of
the balance sheet, simultaneously
steps, to be taken to prevent / limit re-
emergence of new NPAs.
The banks are advised to take
effective steps for reduction of NPAs
and also put to place risk
management system and practices to
prevent re-emergence of fresh NPAs.
(3) Bank to pay special attention to
reporting and checking by the bank
office of the trading transactions.
While the system is already in place,
banks are required to monitor this
vigorously to strengthen their
internal control system.
(4) There is need to institute as
independent loan review mechanism
especially for large borrowal accounts
and to identify potential NPAs.
Banks should ensure a loan review
mechanism for larger advances soon
after its sanction and continuously
monitor the weakness developing
corrective measures in time.
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6.5. Managing Non – Performing Assets:
Reasons for managing Non- Performing Assets. (Why should manage Non-
Performing Assets?)
NPAs have multifold effects on the banks. It shows the weakness of
management of bank. It is necessary to manage non – performing assets for following
reasons:
1. To protect the interest of shareholders:
Members of the banks are true owners of bank. They contribute or invest their
amount in banks to earn dividend. Being amount of NPA with their amount to banks
to earn dividend because high amount of NPAs means earning assets are on
deterioration consequently, means lower income of banks that will make unable to
satisfy the members by paying high rate of dividend.
2. To protect the interest of depositors:
Depositors are the key person of the banks because of their deposits the banks
are able to lend to borrowers. Depositors want consistence interest income on their
deposit. When their deposits, advanced to borrowers, which would, later on, if
become a NPA, banks would be unable to pay timely interest to depositors will switch
of their deposits from one bank to another bank which is not commendable for
particular bank. Thus it is very important for banks to manage efficiently their
advances, which are likely to turn into NPAs.
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3. For Profitability:
Non-performing Assets means an asset, which cease to generate any income.
Thus more and more NPA will reduce the income of banks as interest which is main
component of bank‟s income thus it will jeopardize the profitability or return on
assets consequently it will be constraint for bank‟s growth.
4. High Provision:
Higher NPA leads banks to compel higher provision for “Bad Debts Reserve” as
per the norms of RBI Provision will be cone by realized and NPA will block the
actual profit of banks for current year thus NPA has a dual effect i.e. not realization
of interest income and separate provision for NPA from Profit & Loss Account.
5. Creditworthiness of the Banks:
NPA works as a tool for worthiness of particular bank. If banks are having
high NPA level then it will be very difficult to raise additional funds from market. It
will make bad impression of banks on people.
6. Expansion Plan:
For instance banks want to start as its expansions plan and its NPA level is
higher. Then prescribed by RBI that is 15% of advances, banks will not be able to get
permission from the RBI for starting a new branch. Thus it is necessary to control
NPA level within prescribed limit for future growth of banks.
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7. Welfare of Employees:
If banks are having high NPA it will ruin the whole capital and past reserves,
which raises question for existence of banks. Thus, many personnel will loss
employment, but also banks cannot make any provision for welfare activities of the
employee‟s future benefits due to lack of availability of free reserves.
8. In the interest of sustained economic growth:
For the internet of sustained economic growth it is necessary to control and
minimize NPAs of nations banking sectors. High NPA leads to inflation in economy.
Further, NPASs will reduce the opportunities for productive investment, ruin the
effort of directed allocation of funds, preferred investment areas, subsequently
economy of country will not be able to achieve expected growth, which is decided on
formation of budget.
6.6. Reducing The NPAs:
Guidelines issued by Reserve Bank of India regarding recognition, asset
classification and provisioning norms have completed banks in India not to show true
financial picture in the balance sheet but also to take corrective steps for improving
their loan portfolio. With the adoption of these guidelines, banks are now fully
vigilant about quality of their loan assets and various steps are being taken by them to
reduce the NPAs. It is always better to follow the proper policy for appraisal,
supervision and follow-up of advances to avoid NPAs. However, risks attached to
lending cannot be completely eliminated. If certain advances are converted into
NPAs, it is necessary to take corrective steps to reduce them. Reduction in NPAs is
necessary to improve profitability.
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Researcher would like to suggest following strategies (techniques) to Bans for
reducing their NPAs.
1. Replacement of loans
2. Rehabilitation of potentially viable units
3. Acquisition of sick units by health units
4. Compromised with borrowers
5. Calling up of advances and filling of civil suits
6. Approaching debt recovery tribunal
7. Recovery of advances given under Government sponsored programs
8. Settlement of claims with DICGC / ECGC
9. Establishment of assets recovery branches
10. Write off the outstanding
1. Replacement of loans:
Repayment of a term loan depends on income generating capacity of the
borrowing concern. It may be difficult to get repayment of the term loans if the
borrowing unit does not generate profit. A unit, which does not earn profit, may repay
a few installments by borrowing from other sources of diverting short term fund for
repayment. But ultimately a unit not earning profit will not be able to repay the term
loan. Therefore, it is necessary to fix repayment schedule for a term loan according to
income generating capacity of the unit. If repayment schedule is not fixed properly or
a unit is not able to generate expected profit, possibility may be explored in
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consultation with the borrowers, fore replacement of loan installments. Banks are not
permitted to upgrade the classification of any advances in respect of which terms have
been renegotiated unless the package of renegotiated term has worked satisfactorily
for a period of two years. The classification of assets may improve, if performance of
the loan account remains satisfactory for two years after replacement. It may be
mentioned that replacement of the loan installment should be done only when it is
expected to get repayment after the replacement.
2. Rehabilitation of the potentially viable units:
If a sick unit is potentially viable, necessary efforts should be made to finalize
the rehabilitation package without the loss of time. Provision need not be made for a
period of additional facilities sanctioned under rehabilitation package approved by
BIFRJ term lending institution. If the rehabilitation program runs smoothly, it may be
necessary to make provision even after one year for additional facilities provided
statutory auditors are also satisfied about the progress of rehabilitation program. If the
unit becomes viable, the entire outstanding (including existing facilities) will become
standard assets. Although rehabilitation of sick unit is a long drawn procedure, it may
be encouraged where units are potentially viable and the management is reliable.
However, non-viable sick units should be liquidated to get funds for recycling without
avoidable loss of time in decision making.
3. Acquisitions of sick units by health units:
If healthy unit acquires a sick units, the outstanding loan amount of sick unit
may be transferred to the healthy unit the entire NPA may be even wiped off.
Therefore, banks should encourage merger/acquisition of sick units wherever they
feel it may reduce the NPAs. Banks may even help the sick units to get stable buyers,
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if a part of the consideration is to be received by the sick unit is likely to be used for
liquidating the NPA. Banks should make a comparative study of grains of
merger/acquisition and sacrifice to be made by them to clinch the deal.
4. Compromise the borrowers:
A compromise may be called a negotiated settlement in which the borrowers
agree to pay a certain amount to the banker after getting certain concession. A large
number of compromise proposal are being approved by banks with a view to reducing
the NPAs and recycling the funds instead of resorting to expensive recovery
proceedings spread over a long period. However a compromise proposal should not
be approved without proper scrutiny. Banks should try to recover their dues to the
maximum extent possible at minimum expenses. While entering into the compromise
proposals, following points should be taken into consideration.
(a) A bank keeping in view the guidelines given in its Loan Recovery Policy should
accept compromise proposal.
(b) A proper distinction should be made between willful defaulters and the
borrowers defaulting the repayment due to circumstances beyond their control.
Normally, compromise proposal should be accepted from non-willful defaulter,
compelling reasons for resorting to the some should be spelt out in the
note/memorandum prepared for is approval.
(c) Where security is available, its realizable value should be assessed taking into
consideration its location, present condition, marketable title and possession.
(d) Worth of the guarantor, if any, should be assured. Many a time‟s banks may be
able to recover the amount with the help of guarantee available.
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(e) Borrower‟s creditability and his paying ability should be assured if recovery is
to be made in installments as per the compromise proposal.
(f) Staff accountability should be examined expeditiously and complete within a
time frame.
(g) All compromise proposal approved by any functionary should be promptly
reported to the next higher authority for post-facto security.
(h) The proposal for write – off / compromise falling within the authority of
Executive Director / Chairman and Managing Director / Management
Committee / Board of Bank should be first processed by a committee of senior
executive of the bank (i.e. Chief General Manager, General Manager).
(i) Internal inspector of the banks and statutory auditors should also examine the
compromise proposal to ascertain that they have been done in the interest of the
bank.
(j) While conducting inspection of banks, official of the Reserve Bank should also
examine all the compromise proposals involving higher sacrifice. They may
also scrutinize such proposals where the amount of loss suffered by banks as
percentage to the total outstanding is very high. It may be observed from above
that compromise has to be done with great care after taking in to consideration
the various factors. Points to be seen while entering in to a compromise
proposal can be summarized in the below chart.
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Compromise Proposal
Advantages Disadvantages
I. Reduction in NPAs
II. Recycling of funds
III. Saving in time and expenses involving
the legal proceedings.
IV. Tax relief due to writing off the
unrealized portion of the outstanding.
I. Loss suffered by the Bank and
result of difference between loan
outstanding and the amount
actually received.
II. While calculating the loss,
unapplied interest for the period
up to which payment is likely to
be received after compromise
and other national waivers, if
any, should be added in the
outstanding balance.
Following points are to be considered while taking decisions on the
compromise proposals:
1. Realized value of security, if any
2. Worth of the guarantor, if any
3. Financial position of the borrower
4. Amount of loss to be suffered as percentage to the total loan outstanding.
5. Time and expenses likely to be incurred in legal proceedings
As no formula can be prescribed for entering into a compromise proposals,
banks should consider the above points while taking a decision on a compromise
proposal.
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5. Calling up the advances and filing of civil suits:
It is not possible to receive a unit or enter into a reasonable settlement with the
borrower, it is better to recall the advances at any early state instead of waiting for a
long time which may result in deterioration of the security available. Further, if it is
not possible to sell the security without obtaining courts order, civil suits may be fled
against such borrows who are not likely to come to reasonable settlements. Banks
should not feel that their job over by filing the court case. Banks should revise the list
of approval advocate from time to time keeping in view their performance. Advocates
who do not perform well should not be given new cases.
6. Approaching debt recovery tribunal:
An act has been passed by parliament for setting up Debt Recovery Tribunal
for expeditious adjudication and recovery of debts due to banks and financial
institutions. The provisions of this act title as “the recovery of debts due to banks and
financial institutions act, 1993”, are applicable where the amount of debt to any bank
of financial intuitions of to a consortium of banks or financial institutions is not less
than Rs. 10 Lakhs. The Central Government have, however, been empowered to
reduce the lower limit of Rs. 10 Lakhs but not below Rs. 1 Lakhs by issuing
notification.
The “Debt Recovery Tribunals” are being setup in various states and an
Appellate Tribunal has also been set up at Bombay to hear the appeals against the
decision of the Debt Recovery Tribunals. However, a provision has been made in this
act to deposit 75% of the decrial amount before going for appeal, which may
discourage unnecessary delay in settlement of case. It is hoped that establishment of
debt recovery may not only failure quick decisions but also induce borrowers to enter
settlements with the banks.
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7. Recovery of advances given under Government sponsored
programs:
Banks should take advantage of the legislation enacted of State Government
for specially recovery of banks overdue. They should promptly file cases against
willful defaulters with the concerned authorities of the State Government. While filing
the cases, they may ensure that necessary details and settlements are submitted.
Representative of the banks should also attend the courts on fixed dates. The matters
relating to recovery of advances should be discussed into State Level Bankers meeting
and necessary help for recovery should be obtained from the State Government
authorities. Sometimes, it may be useful to organize Recovery Camp for effecting
speedy recovery of the bank‟s dues. A list of defaulters may be for each village before
organizing the Recovery Camp with which Recovery Officers, Blocks Department
officers, Patwaries, Gram Sevaks, etc. may be closely associated. Banks in rural areas
should take full advantage of non-public business working days for recovery of
advances. If necessary, branch wise analysis of overdue in a particular branch, proper
monitoring of overdue from rural branches is also essential to reduce the outstanding
advances.
8. Settlement of claims with DICGC / ECGC:
If DICGC / ECGC claims are available should submit their proposal for the
same with necessary details. Proper follow – up with DICGC / ECGC is necessary for
settlement of claims and reducing the NPAs to certain extent.
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9. Establishment of Asset Recovery Branches:
Some banks have opened Asset Recovery Branches at critical centers for
undertakings recovery. Bad and doubtful debts of various branches have been
transferred to the recovery branch, which may have expert trained staff with necessary
background for recovery. The specialized recovery branches may give undivided
attentions to recovery of dues. Establishment of such specialized branches may help
in reducing NPAs.
10. Write-off the outstanding:
If all the efforts for recovery fail, banks may have to writ off the advances.
Such write-off should be done after exhausting all other remedies. When chances of
recovery are negligible, some banks prefer to write-off an advance to reduce its
income and save tax. In such cases, banks should continue to make efforts for
recovery even after writing-off the advance.
It may be observed from the above that various techniques can be used for
reducing NPAs. If one technique dealing with a particular NPA, the bank may have to
try with other techniques for that case.
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6.7. Ratio Analysis of NPAs:
6.7.1. Net NPA Ratio:
Table: 6.7.1. Net NPA Ratio of GSFC
(Base Year: 2002 – 03) (Rs. In lacs)
Sr. No. Year Net NPA Net Loan and
Advances
Ratio
1 2002 – 03 63669 88430 71.99
2 2003 – 04 65167 73733 88.38
3 2004 – 05 57184 61180 93.47
4 2005 – 06 35351 37461 94.37
5 2006 – 07 13519 13744 98.36
6 2007 – 08 04923 04964 99.17
7 2008 – 09 56722 56747 99.94
8 2009 – 10 40699 40719 99.95
9 2010 – 11 37393 37413 99.95
10 2011 – 12 34663 34695 99.91
Average 40929 44909 94.55
Source: Computed from the annual reports and accounts of the GSFC, Gandhinagar.
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The above Table and Chart presents the Net NPA Ratio of the GSFC.
It shown an increasing trend during the whole study period, expected in the year 2011
– 12. And it was a very high during whole study period. It is not good sign for the
unit. It was ranged between 71.99 percent in the year 2002 – 03 and 99.95 percent in
the 2010 – 11 with an average of 94.55 percent. This led to the acceptances the null
hypothesis and rejects the alternative hypothesis. The researcher concludes that the
net NPA ratio of the GSFC has been not an effective and efficient manner. The
management of GSFC has not taken enough care and not followed ideal norms in
granting loan and advances, so that the recovery position of GSFC is not satisfactory
leading to lower Net NPA.
71.99
88.38 93.47 94.37
98.36 99.17 99.94 99.95 99.95 99.91
0
20
40
60
80
100
120
2002 –
03
2003 –
04
2004 –
05
2005 –
06
2006 –
07
2007 –
08
2008 –
09
2009 –
10
2010 –
11
2011 –
12
Chart: 6.7.1. Net NPA Ratio of GSFC
Ratio Average Ratio
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6.7.2. Problems Assets Ratio:
Table: 6.7.2.
Problems – Assets Ratio of GSFC
(Base Year: 2002 – 03) (Rs. In Lacs)
Sr. No. Year Net NPAs Net Assets Ratio
1 2002 – 03 63669 101380.48 62.80
2 2003 – 04 65167 79894.08 81.57
3 2004 – 05 57184 66688.93 85.75
4 2005 – 06 35351 46350.35 76.27
5 2006 – 07 13519 17305.80 78.12
6 2007 – 08 04923 10450.82 47.11
7 2008 – 09 56722 2940.73 1928.84
8 2009 – 10 40699 2976.46 1367.36
9 2010 – 11 37393 4077.95 916.96
10 2011 – 12 34663 5265.04 658.36
Average 40929 33733.06 530.31
Source: Computed from the annual reports and accounts of the GSFC, Gandhinagar.
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The Problem Assets Ratio shows the proportion of Net NPA to Total Assets
and the table and chart given above shows that the percentage of GSFC is 530.31
percent on an average for the study period. The percentage shown is, however not
stable. It was ranged between 47.11 percent in 2007 – 08 and 1928.84 percent in the
year2008 – 09. It was reducing from 2009 – 10 to end of the study, it is good for the
unit. It seems that the attention has been not given by the management to the
proportion of Net NPA and Total Assets of the banks. This led to the acceptances of
the null hypothesis and rejects the alternative hypothesis.
62.8 81.57 85.75 76.27 78.12 47.11
1928.84
1367.36
916.96
658.36
0
500
1000
1500
2000
2500
2002 –
03
2003 –
04
2004 –
05
2005 –
06
2006 –
07
2007 –
08
2008 –
09
2009 –
10
2010 –
11
2011 –
12
Chart: 6.7.2. Problems – Assets Ratio of GSFC
Problems Assets Ratio Average Ratio
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6.7.3. Shareholders‟ Risk Ratio:
Table: 6.7.3.
Shareholders‟ Risk Ratio of GSFC
(Base Year: 2002 – 03) (Rs. In lacs)
Sr. No. Year Net NPAs Total Capital and
Free Reserves
Ratio
1 2002 – 03 63669 16516.40 385.49
2 2003 – 04 65167 16516.40 394.56
3 2004 – 05 57184 16516.40 346.23
4 2005 – 06 35351 31291.40 112.97
5 2006 – 07 13519 31291.40 43.20
6 2007 – 08 04923 33550.40 14.67
7 2008 – 09 56722 34358.40 165.09
8 2009 – 10 40699 34358.40 118.45
9 2010 – 11 37393 34818.88 107.39
10 2011 – 12 34663 34818.88 099.55
Average 40929 28403.70 178.76
Source: Computed from the annual reports and accounts of the GSFC, Gandhinagar.
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The shareholders are exposed to great risk if the Net NPA is positive or more
than zero. Hence it is necessary to see that the shareholders‟ funds are safe in view of
the NPAs. So, this ratio becomes important from view point of the shareholders. From
the table and chart given above, we can see the position of the GSFC. A risk ratio is
resulted very high during the whole study period. It ranged between 14.67 percent in
the year 2007 – 08 and 385.49 percent in the year 2002 – 03 with an average of
178.76 percent. However, it is a happy sign that the risk ratio shown a decreasing
trend during the whole study period, expected in the year 2008 – 09. This signifies
that the shareholders‟ funds in the GSFC bank are not safe. This led to the
acceptances of the null hypothesis and rejects the alternative hypothesis.
385.49 394.56
346.23
112.97
43.2 14.67
165.09
118.45 107.39 99.55
0
50
100
150
200
250
300
350
400
450
2002 –
03
2003 –
04
2004 –
05
2005 –
06
2006 –
07
2007 –
08
2008 –
09
2009 –
10
2010 –
11
2011 –
12
Chart : 6.7.3. Shareholder‟s Risk Ratio of
GSFC
Shareholder's Risk Ratio Average Ratio
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References:
1. Yardi, Prabhu and Prasad: Banker‟s Guide to Non – Performing Assets, 2008, 3rd
Edition, page 97 – 98.
2. Yardi, Prabhu and Prasad: Banker‟s Guide to Non – Performing Assets, 2008, 3rd
Edition, page 107.
3. Yardi, Prabhu and Prasad: Banker‟s Guide to Non – Performing Assets, 2008, 3rd
Edition, page 223.
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Chapter: 7 Summary, Findings and Suggestions
7.1. Introduction:
In order to provide medium and long term credit to industrial undertaking, a
Central Industrial Finance Corporation was set up under the Industrial Finance
Corporations Act, 1948. The state governments wished that similar corporations
should be set up in their states to supplement the work of industrial financial
corporation. The intention is that the State corporations will confine to financing
medium and small scale industrial and will, as far as possible consider only such
access which are outside the per view of industrial finance corporation.
Gujarat State Financial Corporation premier, regional development bank set
up by Government of Gujarat, to provide finance to new industrial units, for
acquisition of Fixed Assets, Expansion, Modernization, Diversification, Renovation
etc. The Industrial concern must set up in the state of Gujarat and the Union
Territories of Diu, Dadra and Nagar Haveli.
Gujarat State Financial Corporation as pioneer Term lending and grass root
level developmental financial institution in the State of Gujarat. It has made major
contributions in the industrial development and economic growth of the state. During
last four decades has made significant role towards decentralized industrial
development and development of backward area, and in the process generated
massive direct and indirect employment opportunities also. GSFC have placed a
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crucial role in promotion of first generation entrepreneurs. As a result, the state has
witnessed massive growth in industrial sector, through the length and breadth of state.
Since the last few years, Corporation is passing through financially difficult
times. Due to very heavy NPA and as commercial banks are now performing similar
activity has stopped advancing fresh loans since October 2001.
7.2. Summary:
The present study is divided into seven chapters, which are summarized as under:
CHAPTER I
Profile of the GSFC
Gujarat state financial corporation is a premier regional development bank set
up by the state government under a parliamentary Act viz. state financial corporation
act, 1951 on 1st May 1960, the date on which the state of Gujarat came into being.
GSFC was mainly set up by the government to promote industrial development in the
state. It provides financial assistance under various schemes to set up new industrial
units for acquisition of fixed assets like land, factory building, plant and machinery,
technical know – how, preliminary and pre – operative expenses, etc. in GSFC also
provides assistance for expansion, diversification, renovation, modernization or
purchase energy saving devices, etc. in case of existing units. The corporation
provides assistance to industrial concerns set up in Gujarat state and in Union
Territory of Dadra and Nagar Haveli.
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GSFC gives priority to financing a large number of small scale industrial units
having potential for employment generation and thus giving Gujarat a balanced
regional growth. GSFC is always open to tackle the problems faced by the small
industrial units and see to it that the bottlenecks are minimized. It has always been an
Endeavour of the GSFC to make its operations transparent and it has always tried to
become more and more service oriented so that it can provide better service to clients.
GSFC gives various advantages to its clients:
Attractive interest rate
Liberal moratorium period
Government interest subsidy for SSI‟s
Special schemes for existing members where interest rate is lower.
CHAPTER II
Conceptual Framework
Financial performance refers to the act of performing financial activity. In broader
sense, financial performance refers to the degree to which financial objectives being or
has been accomplished. It is the process of measuring the results of a firm's policies and
operations in monetary terms. It is used to measure firm's overall financial health over a
given period of time and can also be used to compare similar firms across the same
industry or to compare industries or sectors in aggregation. In the present study financial
health of GSFC is measured from the analysis of profitability, financial health of GSFC
and NPA management of the unit. Various accounting, statistical and mathematical
techniques are used for the analysis.
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CHAPTER III
Research Methodology
The subject of the present study is ''An Analytical Study of Financial
Performance of State Financial Corporation with Special Reference to Gujarat State
Financial Corporation” which covers the period of seven years from 2002 – 03 to
2011 -12. Research methodology includes the assumptions and values, which are
useful for interpreting data and reaching to conclusions. The study is based on
secondary data, which are derived from the published annual reports of GSFC, which
are collected from the registered office of GSFC at Gandhinagar. In addition to
published reports, other publications by GSFC are also used. The Summery, Findings
and Suggestions information related to the banking industry is derived from various
sources like articles, journals, periodicals, newspapers etc.
The collected data are duly edited, classified and analyzed using all type of
relevant statistical techniques and employing the most appropriate parametric and
non-parametric test. The data are presented through simple classification and with
help of percentage, average, ratio and trend. The hypotheses are tested withheld of
standard ratios related to banking industries.
CHAPTER IV
Profitability of the GSFC
In this chapter analysis of profitability of unit under study has been explained.
Here meaning of profitability, various measurement of profitability has been
discussed. Finally, analysis of profitability with help of various profitability ratios
based on financial statements has been given. Here various statements of hypothesis
have been tested with the help of statistical tools and techniques like mean, index,
ratios and trends.
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CHAPTER V
Financial Analysis of the GSFC
In this chapter financial analysis of bank under study has been explained. Here
meaning and concept of the financial analysis and framework of financial analysis has
been discussed. The financial analysis of the GSFC has been analyzed with help of
various balance sheet ratios based on financial statements. Statistical tools and
techniques like mean, index, ratios and trends.
CHAPTER VI
Performing and Non – Performing Assets Management
In this chapter performing and non – performing assets management of bank
under study has been explained. Here meaning and concept of the performing and non
– performing assets, history of NPAs, classification of NPAs and provisions and
norms for treatment of NPAs has been discussed. The performing and non –
performing assets position of the GSFC has been analyzed with the help of various
NPAs ratios based on financial statement. Statistical tools and techniques like mean,
index, ratios and trends.
7.3. Findings
7.3.1. Profitability of the GSFC
The profitability was analyzed and interpreted with the help of profitability
trends and ratios. The Trends likes, Trends of Incomes, Trends of Interest Earned,
Trends of Non-Interest Income, Trends of Total Expenditure, Trends of Interest
Expended, Trends of Operating Expenses, Trends of Other Expenses, Trends of
Spread, Trends of Burden, Trends of Net Profit, and Trends of Profitability. And the
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ratios likes, Interest Earned to Total Income, Non-Interest Income to Total Income,
Interest Expended to Total Expenditure, Spread to Working Fund and Net Profit to
Working Fund are calculated and analyzed.
1. Trends of Income:
The trends of income registered fluctuating movement in the GSFC during
the study period. It ranged between 74.03 percent in the year 2011 – 12 and
186.78 percent in the year 2005 – 06 with an average ratio of 115.48 percent. The
ratio was above the average expect in the year 2002 – 03, 2006 – 07 and from the
year 2008 – 09 to till the ending year. It was above the average from 2003 – 04 to
2005 – 06 and in the year 2007 – 08. First four year of study period the income of
the unit was increased, it is good sign for the unit but then it was continuously
decreased at the end of the study period excluded the year 2007 – 08, it is not
good for the unit. In short, overall income performance the unit was not improved
during the study period.
2. Trends of Interest Earned:
The trend of Interest earned also showed a fluctuating trend during the study
period. It ranged between 64.90 percent in the year 2010 – 11 and 199.97 percent
in the year 2005 – 06 with an average ratio of 115.43 percent. Initial four year of
study period the interest earned of the unit was increased and then it was
continuously decreased at the end of the study period excluded the year 2007 – 08
and year 2011 – 12. Index on the base year revealed the fact that the interest
earned of the unit was about 72 percent at the end of the study period. It shows
unfavorable position of the unit.
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3. Trends of Non – Interest Income:
Here, non-interest income consists of commission, brokerage, fees, etc. Any
increase in non-interest income indicates decrease in lending and advances,
decrease in rate of interest on lending and advances, decrease in interest earned
etc, and vice-versa. Trends of non-interest income depicted mixed trend in sample
bank. It ranged between 22.23 percent in the year 2006 - 07 and 256.06 percent in
the year 2009 – 10 with an average ratio of 113.06 percent.
4. Trends of Total Expenditure:
Trend of Total Expenditure also showed a fluctuating trend during the study
period. It ranged between 73.39 percent in the year 2007 – 08 and 141.77 percent
in the year 2006 – 07 with an average ratio of 93.11 percent. It remarked
downward movement during from the beginning of the study period to till the year
2007 – 08 and came to 73.36 percent at the end of the year 2007 – 08 expect in the
year 2006 – 07. It is good signal for the bank, and then it was shown upward
movement from 2008 - 09 to till the end of the study period and reached to 110.08
percent at the end of the study period, except in the year 2009 – 10, it is
unfavorable position for the bank.
5. Trends of Interest Expended:
Trends of Interest Expended showed an increasing trend during the study
period. It ranged between 49.89 percent in the year 2005 – 06 and 150.26 percent
in the year 2011 – 12 with an average ratio of 92.63 percent. It remarked
downward movement during the initial three years of the study period, it is good
signal for the bank and then it was shown upward movement from the year 2005 –
06 to till end of the study period, it is unfavorable position for the bank.
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6. Trends of Operating Expenses:
Trends of operating expenses showed fluctuating trend during the study
period. It ranged between 12.29 percent in the year 2009 - 10 and 100 percent in
the year 2002 – 03 with an average ratio of 59.62 percent. It remarked downward
movement during the initial eight years of the study period excepted in the 2008 –
09, it is good signal for the bank and then last two year of the study period it
shown upward movement, it is unfavorable position for the bank. An overall trend
of operating expenses of the bank shows a sufficient manner.
7. Trends of Other Expenses:
Trends of other expenses showed fluctuating trend during the study period. It
ranged between 28.69 percent in the year 2009 - 10 which was lowest level and
343.74 percent in the year 2006 - 07 which was the highest for the study period
with an average ratio of 104.82 percent. In the year 2006 – 07 the other expenses
was increased highest because of heavy provisions of NPAs. An overall trend of
other expenses of the bank shows an insufficient manner.
8. Trends of Spread:
Trends of spread showed an overall downward tone. It ranged between 0.49
percent in the year 2005 – 06 which was lowest level and 175.77 percent in the
year 2011 – 12 which was the highest for the study period with an average ratio of
85.05 percent. It is the trend of performance for the banks. It is the reflective of
efficiency in the use of funds. It is the ratio of interest expenditure to interest
income. In favorable case, interest income will be more over interest expenditure
and vice versa condition indicates that interest margins getting squeezed. The
indices of sample bank, at the end of the study period over base year, are the worst
indictor for the study of performance. The minus spread during the whole study
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period and lowest index at the end of the study period on the base year indicates
unfavorable position of the bank.
9. Trends of Burden:
Excess of non-interest expenditure over non-interest income of a bank is
termed as burden. Higher ratio indicates non-interest expenses are not covered by
non-interest income and it is considered unsatisfactory position of the bank. Trend
of burden registered an overall upward tendency during the study period in sample
bank. Index on the base year was recorded the highest in the year 2006 – 07 i.e.
about 278.15 percent and the lowest in the year 2009 – 10 with an average of
83.14 percent. It indicates unfavorable financial position of the bank.
10. Trends of Net Profit:
Net profit is the difference between spread and burden. Trend of net profit
registered fluctuating tendency during the study period in sample bank. Index on
the base year is the best indicator to know the profitability performance of bank.
In the sample bank net profit shows is minus during the whole study period. it
Index on the base year remarked downward movement during initial four year of
the study period and reached at 5.96 percent in the year 2005 – 06 it shown sound
profitability then it indices upward movement till the end of the study period and
reached at 103.51 percent with an average of 76.59 percent in the sample bank it
shown unsound profitability of the bank.
11. Trends of Profitability:
Trend of profitability is the indicator of efficiency of organizational operation.
Profitability is net profit as percent to working fund. Spread and Net Profit as
Percentage to Working Fund are Profitability Ratios. Trends of profitability registered
highly fluctuating trend during the study period. It ranged between 1.61 percent in the
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year 2005 – 06 which was the lowest and 114.62 percent in the year 2006 – 07 which
was the highest during the study period with an average ratio of 54.42 percent. GSFC
proved to be gloomy efficiency during the study period. This led to the acceptances of
the null hypothesis and rejects the alternative hypothesis. The researcher concludes
that the profitability of the GSFC has been not an effective and efficient manner.
12. Interest Earned to Total Income:
Ratio of Interest Earned to Total Income showed a fluctuating trend during
the study period. It ranged between 75.37 percent in the year 2010 – 11which was
the lowest and 97.58 percent in the year 2007 – 08 which was the highest during
the study period with an average ratio of 89.93 percent. This ratio indicates 89.93
percent of the total income was earned out of interest income.
13. Non – Interest Income as percent to total income:
Ratio of Non - Interest Income to Total Income showed a fluctuating trend
during the study period. It ranged between 2.42 percent in the year 2007 – 08
which was the lowest and 24.63 percent in the year 2010 – 11 with an average
ratio of 10.07 percent. This ratio indicates 10.07 percent of the total income was
earned out of interest income.
14. Interest Expended as percent to Total Expenditure:
Ratio of Interest Expended as percent to Total Expenditure showed a
fluctuating trend during the study period. It ranged between 25.66 percent in the
year 2006 – 07 which was the lowest and 87.34 percent in the year 2009 - 10
which was the highest during the study period with an average ratio of 62.15
percent. This ratio indicates that aggregate 62.15 percent of total expenditure
was expended for interest.
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15. Spread as percent to Working fund:
Ratio of Spread as percentage to working fund of GSFC registered upward
movement during the study period. It ranged between (242.83) percent in the
year 2004 – 05 which was the lowest and (726.73) percent in the year 2010 – 11
which was the highest during the study period with an average ratio of (493.04)
percent.
16. Net Profit as percent to working fund:
Net profit as percentage of working fund ratio registered fluctuating trend
during the study period. It ranged between (540.03) percent in the year 2007 –
08 which was the lowest and (1289.04) percent in the year 2006 - 07 which was
the highest during the study period with an average ratio of (762.25) percent.
The ratio indicates overall worse profitability performance of GSFC.
7.3.2. Financial strength of GSFC:
17. Long Term Debt – Equity Ratio:
The long term debt – equity ratio as presented in chart 5.3.2.1 was above
the average long – term debt – equity ratio for the initial three years and it was
below the average long – term debt – equity ratio from the year 2005 – 06 to
2007 – 08. Last four year of the study, it was above the average long – term debt
– equity ratio.
In GSFC, the owners‟ contribution was less than borrowers during the whole
study period.
Increasing trend of ratio indicates that, the GSFC has been depending more
and more on borrowed capital over the time.
The average Long Term Debt – Equity Ratio of 13.12 implies that for every
13.12 rupee of outside liability, the GSFC has 1 rupee of owner‟s capital.
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The margin of safety to the borrowers is not sufficiently. However, it is
observed to have the decrement over the time. This led to the acceptances of
the null hypothesis and rejects the alternative hypothesis. The researcher
concludes that the long term debt – equity ratio of the GSFC has been not an
effective and efficient manner.
18. Total Debt – Equity Ratio:
The long – term debt – equity ratio as presented in chart 5.3.2.2 was
above the average long – term debt – equity ratio for the initial three years and it
was below the average long – term debt – equity ratio from the year 2005 – 06
to 2009 – 10. Last two of the study, it was above the average long – term debt –
equity ratio.
As a whole, from the Total Debt – Equity Ratio, it may be conducted that:
In GSFC, the owners‟ contribution was lesser than borrowers during the whole
study period.
Increasing trend of ratio indicates that, the GSFC has been depending more
and more on borrowed capital over the time.
The average Total Debt – Equity Ratio of 13.80 implies that for every 13.80
rupee of outside liability, the GSFC has 1 rupee of owner‟s capital.
The margin of safety to the borrowers is an average. However, it is observed
to have the decrement over the time. This led to the acceptances of the null
hypothesis and rejects the alternative hypothesis. The researcher concludes
that the total debt – equity ratio of the GSFC has been not an effective and
efficient manner.
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19. Total Debt – Total Assets Ratio:
The ratio shows increasing trend during the study period except in the last
two years of the study period. Total Debt – Total Assets Ratio as presented in
chart 5.3.2.3 was below the average for the whole study period except for the
years from 2008 – 09 to 2011 – 12.
As a whole, from the Total Debt – Total Assets Ratio, it may be concluded that:
The average Debt – Assets Ratio of 15.77, which indicates that in GSFC debt,
exceeds assets and every 15.77 rupee of outside liability, the GSFC has only
1rupee of total assets.
Increasing trend of ratio indicates that, the GSFC has been financing more and
more of its total assets from the outsiders fund over the time.
Thus, the capital structure of the GSFC is not sound and position is
instable in long run. This led to the acceptances of the null hypothesis and
rejects the alternative hypothesis.
20. Equity – Assets Ratio:
The proprietary ratio shows decreasing trend during the study period except in
the last two years of the study period. It ranged between (34.14) percent in the year
2002 – 03 and (3936.93) percent in the year 2009 – 10 with an average ratio of
(1476.76) percent.
As a whole, from the Proprietary Ratio, it may be concluded that:
In GSFC, in spite of high contribution, the owners share in total assets is very
negligible as it largely utilizes for settlement of accumulated loss.
The Proprietary Ratio is negative during the whole study period which
indicates utmost dependence on sources of fund in financing total assets.
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The Proprietary Ratio shows decreasing trend during the study period it
indicates that the proprietorship of the owners of total assets was lower than of
the borrowers.
The average Proprietary Ratio of (1476.76) times implies that for every 1
rupee of total assets, the GSFC has (1476.76) rupee of owner‟s capital.
Thus, the capital structure of the GSFC is neither much sound, nor
having stable position in the long run. This led to the acceptances of the null
hypothesis and rejects the alternative hypothesis.
21. Interest Coverage Ratio:
In GSFC, the Interest Coverage Ratio shows fluctuating trend. It is
range between (10.50) times in the year 2006 – 07 and (0.17) times in the year
2005 – 06 with an average ratio of (4.62) times.
As a whole, from the Interest Coverage Ratio, it may be concluded that:
The average Interest Coverage Ratio of (4.62) times implies that for every 1
rupee of interest to be paid, the GSFC has deficiency of 4.62 rupee of funds
for their payment.
Thus, the overall position of the GSFC is not satisfactory because the
ratio is negative during whole study period. This led to the acceptances of
the null hypothesis and rejects the alternative hypothesis. However, it was
increasing and positive in the year 2005 – 06, which is a good sign.
22. Net Fixed Assets to Net Worth Ratio:
The ratio shows increasing trend during study period except in the
years 2005 – 06 and 2011 – 12. The ratio, presented in chart 5.3.2.6 was less
than average except in the initial four year of the study.
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As a whole, from Net Fixed Assets Net Worth Ratio, it may be concluded
that:
The ratio is negative during the whole study period due to negative net
worth
It implies that the capital structure of GSFC is not sound and there is
deficiency of owners‟ fund. It depends on outside funds for financing its
fixed assets as most of the net worth is used for adjusting heavy losses
suffered by the corporation. This led to the acceptances of the null
hypothesis and rejects the alternative hypothesis.
23. Fixed Assets to Long Term Debt Ratio:
The ratio shows decreasing trend during the whole study period except
in the year 2005 – 06. It was less than one in the whole study period. However,
the ratio as presented in chart 5.3.2.7 was less than average of 0.010 times
except in the initial four years.
As a whole, from Fixed Assets – Long term Ratio, it may be concluded
that:
The Net Fixed Assets not exceeds long term debt during the whole
study period. It indicates that the acceptances the null hypothesis and rejects
the alternative hypothesis. Researcher concludes that the fixed assets not
provided sufficient securities to long term fund and they cannot to be fully
secured by the fixed assets of the GSFC during tenure.
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7.3.3. Performing and Non – Performing Assets Management of
GSFC:
24. Net NPA Ratio:
The Net NPA Ratio of the GSFC shown an increasing trend during the
whole study period, expected in the year 2011 – 12. And it was a very high
during whole study period. It is not good sign for the unit. It was ranged
between and 71.99 percent in the year 2002 – 03 and 99.95 percent in the 2010
– 11 with an average of 94.55 percent. This led to the acceptances the null
hypothesis and rejects the alternative hypothesis. The researcher concludes
that the net NPA ratio of the GSFC has been not an effective and efficient
manner.
25. Problem Assets Ratio
The Problem Assets Ratio shows the proportion of Net NPA to Total
Assets. It shows that the percentage of GSFC is 530.31 percent on an average
for the study period. The percentage shown is, however not stable. It was ranged
between 47.11 percent in 2007 – 08 and 1928.84 percent in the year2008 – 09.
It was reducing from 2009 – 10 to end of the study, it is good for the unit. It
seems that the attention has been not given by the management to proportion of
Net NPA and Total Assets of the banks. This led to the acceptances of the null
hypothesis and rejects the alternative hypothesis.
26. Shareholder‟s Risk Ratio
It ranged between 14.67 percent in the year 2007 – 08 and 385.49
percent in the year 2002 – 03 with an average of 178.76 percent. However, it is
a happy sign that the risk ratio shown a decreasing trend during the whole study
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period, expected in the year 2008 – 09. This signifies that the shareholders‟
funds in the GSFC bank are not safe. This led to the acceptances of the null
hypothesis and rejects the alternative hypothesis.
7.4. Suggestions:
By referring all these findings, there are some suggestions by the researcher for
better performance of the banks. These suggestions are as under:
1. Reorganization of Banking Structure:
There is a need for structural change in the organizational system of banks with a
view to make it more efficient and less wasteful.
There is a need for the splitting up of the State Bank of India into smaller banks
on the principle of geographical contiguity. Each circle of the State Bank may become
an independent bank in itself1
2. Deposit Mobilization:
There should be freedom to banks to decide the interest rates on deposits at
different centers/locations to take liberalization firm roots in the banking system.
3. Recovery of Loans:
A separate cell at each district head quarter may be set up exclusively for
recovery of bank dues. Government vehicles should also be provided for the recovery
and the recovery procedures should be simplified. The defaulters misusing the loans
should be severely dealt with.
The recommendation of the Narsimham Committee regarding setting up of an
Asset Reconstruction Fund to take over from banks the bad and doubtful debts at a
discount deserves to be implemented2
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4. Upgradation of Technology:
Appropriate use of technology for improvement the quality of customer service
and ensuring efficiency in operations is crucial for the effective functioning of banks
in emerging competitive environment. There is a need for improving and upgrading
work technology to cope up with the growing volume of business transactions. The
present program of branch computerization is largely confined to metropolitan and
urban branches only. The feasibility of extending this facility to other growing
banking centers has to be explored3
5. Profit Maximization:
Profitability can be increased to a greater extent by improvement in utilization of
manpower and increase in ancillary earning than due to increase in net interest
earnings from the fund operations.
Banks profitability largely depends on efforts made by management to minimize
establishment / overhead costs, enhance operational efficiency through cost effective
operations and to systematically cost and appropriately price their services, an
exercise which should be done as a continuous and ongoing process.
Banks will have to develop special skills, knowledge and management capabilities
in their staff for under taking non fund business.
There is an urgent need for popularizing concept of profit planning at all levels
especially, in branches creating an awareness that profitability should be the hall mark
of each banking operation at all levels, would go a long way in improving profitability
of banks.
6. Infrastructure:
Nearly 60 percent of the Indian banking infrastructure, particularly in the form of
branch network is located in the rural and semi urban areas. Hence, it is imperative
that for any reform to succeed, it is fundamental that utilization of this infrastructure
is strengthened and so also the man power deployed in it.4
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The developmental role of banking is constrained by the availability of
infrastructure and activities of state agencies in the area. Therefore, merely pumping
in of more credit by commercial banks will not automatically lead to development.
However, if the state and other agencies evolve suitable schemes to enable people to
involve them in productive activities, then the banks can step in and provide the credit
that will be needed.5
In the long run the success of banks‟ role in economic growth is closely linked
with their ability to develop a public image and establish close rapport with the
masses.6
7. Encouraging Competition:
In an increasing competitive environment, public sector banks cannot continue
to operate as monolith. In fact, a breakup of this monolith is not only inevitable but
highly desirable. The public sector banks can no longer use uniform norms for
personnel policies, including recruitment and wages policies, up gradation of
technology, risk management and branch network. To increase competition, foreign
banks and new private sector domestic banks should be actively encouraged.7
There is a need for increasing competition in the Indian banking system given
that the limited entry of small banks allowed so far is unlikely to introduce such
competition on an adequate scale. One option is to allow a large scale entry of private
banks.
Allowing the large scale entry of private banks to provide more meaningful
competition could help to improve the performance of public sector banks, but it has
the risk of forcing closure of weak public sector banks. The more viable option would
therefore be to privatize at least some of the public sector banks.8
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The new bank should be allowed to expand rapidly to increase competition for
existing banks. The government must allow more competition between banks and the
cartel type activities of IBA should be ended.
8. Impart Bank Autonomy:
Bank management should be given autonomy and flexibility, subject only to broad
guidelines regarding all these matters. Nationalized banks should not be under any
informal or formal requirements of prior permission from any one before opening or
closing a branch, even closing a branch in rural areas. Creating a more competitive
environment by greater access to foreign market raises more difficult questions. Even,
internally, less hesitant attitude towards free competition would be welcome. Each
bank should be responsible for its own recruitment including clerical recruitment and
for all its policies, whether credit or personnel or any other. One carefully selected
and found successful bank chairman and senior staff should be continued in their job
in the same bank as long as possible without being worried about silly retirement
rules. Performance bonuses to senior management and indeed to all staff should be
given as decided by individual. Boards of directors, once selected, board members
should also have long tenure with changes mode by the chief executives in
consultation with other directors as and when necessary and not at behest of the
Government.9
As long as banks are owned substantially by the Government, all talk of
autonomy will be an element of wishful thinking. More autonomy should certainly be
given to manager of public sector banks.10
Some other suggestions:
GSFC should make the collaborative efforts with government to promote small-
scale sector.
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GSFC should make a good coordinate with various government agencies.
Need to announce the developmental policies for the small-scale sectors of India.
For the technical competitiveness of small scale GSFC should taken an initiative.
GSFC should create coordination between small scale and medium scale
industries of India.
In the developmental banking the GSFC has been not came up with its aggressive
policy, which is the need of present.
GSFC policy should be developed with proper coordination of all regional office
not at head quarts only.
GSFC should increase its branch with opening of new branches in the various
parts of the state.
GSFC assistance to various regions has shown imbalance, which should minimize.
GSFC assistance to industry wise has also shown a vast deviation, which should
minimize.
GSFC should also provide a various marketing assistance to small-scale sector of
India.
Under the developmental and support assistance GSFC has allocated very less
funds that should be increased.
GSFC should provide a financial assistance to entrepreneur and small scale with
very low interest rates.
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References:
1. Nayar S.D. (1988), “Banking towards 21st Century” In Indian Banking Towards
21st Century (Ed. A.S.Chawala, K.K.Uppal and Keshav Malhotra), Deep and
Deep Publications, New Delhi. p.20.
2. Ahuja Kanta (1996) Op. Cit p.27
3. Thingalaya N.K., “Banking Development in India since Independence” Printwell
Publication, Jaipur 1985. p. 12.
4. Jilani Rasid (1997) in his Statement as chairman IBA Bulletin, Sept. p.15
5. Rangrajan C. (1994) “Innovations in Banking”, RBI Bulletin, New Delhi,
December 1982.
6. Khan Gangadharan (1978), “Nationalized Banking and Economic Development”
p.243.
7. Tarapore S.S. (1997), in his lecture delivered as chief guest IBA Bulletin
September p.20.
8. Sarkar Jayati and Agrawal Pradeep (1991) Op. Cit. p.216.
9. Patel I.G. (1994) “Some Reflections on Financial Liberalization” Punjab National
Bank, New Review, January-March p.46.
10. Ibid p.46.
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