Management of Non Performing Assets in Public Sector Banks

Presented by :- Amit Kumar Yadav

Roll no - 06

OBJECTIVES OF THE STUDY 

• To evaluate NPAs (Gross and Net) in different banks

• To evaluate profitability positions of banks

• To Know the Concept of Non Performing Asset

• To Know the Impact of NPAs

• To Know the Reasons for NPAs

• To learn Preventive Measures

INDIAN OVERSEAS BANK (IOB)INTRODUCTION

• Indian Overseas Bank (IOB; established in 1937) is a major

bank based in Chennai (Madras), with 1950 domestic branches

and six branches overseas. Indian Overseas Bank has an ISO

certified in house Information Technology department,

which has developed the software that 900 branches use to

provide online banking to customers.

Contd…

• Type : Public (BSE, NSE)

• Industry : Banking Capital Markets and allied industries

• Founded : Madras, February 10, 1937

• Headquarters : Chennai, India

• Key people : Chairman & MD , S A Bhat

• Product : Loans, Credit Cards, Savings, Investment vehicles etc.

Contd…

• Indian Overseas Bank (IOB) is the thirteenth-largest bank in

India in terms of assets with an asset base of Rs. 1,210.73

billion as on 31st march 2009

• Indian Overseas Bank was nationalized in 1969.

• After nationalization ,In 1979 IOB opened a Foreign Currency

Banking Unit in the free trade zone in Colombo.

COMPITITORS OF (IOB)

State Bank of India (SBI)  : Is the largest bank in India , the bank

had 21 subsidiaries and 10,186 branches.

Punjab National Bank : Punjab National Bank with 4497 offices

is the largest nationalized bank currently serving 3.5 Crores

customers .

What is NPA (Non Performing Asset)

Interest and/ or installment of principal remain overdue for

a period of more than 90 days in respect of a term loan.

The account remains “out of order” in respect of an

overdraft/ cash credit.

Contd….

The bill remains overdue for a period of more than 90 days

in the case of bills purchased and discounted

The installment or interest remains overdue for two crop

seasons in case of short duration crops and for one crop

season in case of long duration crops

Definition of NPA –(Non Performing Asset)

A ‘non-performing asset’ (NPA) was defined as a

credit facility in respect of which the interest and/

or instalment of principal has remained ‘past due’

for a specified period of time.

Classification of Assets

 

 

 

Performing Asset (PA) Non Performing Assets (NPA)

Loan Asset

Standard Assets Substandard Doubtful Loss

RBI has specified norms for various classes of NPL as follows:Standard Assets: 10%Doubtful Assets: 100% of unsecured portion,20-50% on secured portionLoss Assets: 100%

Cont….

Standard Assets : These are loans which do not have any problem are less risk.

Substandard : Non-performing loans or advances past due 90 days or more but less than 180 days is classified sub standard.

Doubtful : Non-performing loans or advances past due 180 days or more, but less than 360 days shall be classified as doubtful.

Loss : Non-performing loans or advances past due 360 days or more shall be classified as Loss.

Impact of NPA

• Profitability

• Liquidity

• Involvement of management

• Credit loss etc.

GENERAL REASONS FOR ASSETS BECOMING NPAs

• Poor credit appraisal system

• Lack of proper monitoring

• Change in economic policies/ environment

• Lack of coordination between banks.• Failure on the part of the promoters to bring their portion of

equity from their own source• Willful Defaults • Natural calamities

NPA MANAGEMENT - RESOLUTION

• Debt Recovery Tribunals

• Lok Adalats

• Compromise Settlement Schemes

• Enactment of SARFAESI Act

• Corporate Debt Restructuring Cell

NPA Case study (IOB Delhi Cant Branch) • Name of the company: Water Management India pvt ltd. Or

Water Resource Development Center

• Date of Loan: 31 April 2008

• Amount of Loan: 20, 55,000

• Asset Classification: Standard

• Line of Activity: Drilling of deep Water Tube well and Hand pumps and Undertaking Water Managements Projects.

• EMIs: 60s EMIs of Rs 48725 from June 2oo9

• Rate of Interest: 14 %

STEP TAKEN BY BANK AGAINST WATER MANAGEMENT INDIA Pvt Ltd

 •  (ACCORDING TO BANK TOTAL NPA OF WATER MANAG MENT INDIA PVT LTD IS = 2188344) 

• First step : Bank trying do the Personal Settlement

• Second step: Revival

• Third step : Bank takes legal action• Notice• After Notice bank use SARFASI Act of 60 days u/s 13(2)

• Fourth step : Symbolic possession

• Fifth step : Issue tender notice for auction of property, the auction may be sealed or open.

 

CONCLUSION

• The only problem that the Public Sector Banks are facing

today is the problem of nonperforming assets. If the proper

management of the NPAs is not undertaken it would hamper

the business of the banks. The NPAs would destroy the current

profit, interest income due to large provisions of the NPAs,

and would affect the smooth functioning

SUGGESTION

• Special accounts should be made of the clients where monthly

loan concentration reports should be made.• The credit rating agency should regularly evaluate the

financial condition of the clients.

• There should be proper monitoring of the restructured

accounts because there is every possibility of the loans

slipping into NPAs category again.

Contd…

• Willful Default of Bank loans should be made a Criminal

Offence.

• No loan is to be given to a Group whose one or the other

undertaking has become a Defaulter.

• There should be proper monitoring of the restructured

accounts because there is every possibility of the loans

slipping into NPAs category again.

 

LEARNING

• About NPA

• About Indian Overseas Bank

• Functioning of bank

• What are the steps taken by bank to reduce the NPA

THANK YOU