PREFACELoans have to be paid back one day. Had this been realized by all, how nice life would have been on this Planet. It would not have prompted the poet to say Neither be a Lender, nor a Borrower Be. Alas! Given the realities in life, this could remain at best a wishful thinking. So their business is to lend and lend more. Their proficiency; skill; competency are all tested in how much they lend and how much they RECOVER and how quickly. Suffice it would be to state that this can be likened to the vigour and strength with which one goes about after fully recovering from any ailment. It is agreed by al beyond doubt Recovery is essential and get recovery is very essential. We know right form the appraisal stage up to the actual repayment stage the banks need to be careful. We also know that once the money is in the hands of a borrower, attitudinal changes take place. The borrower, with some few exceptions may be, feels a bit more complacent as after all it is not this own money which is at stake. Therefore an attempt is made here to put all that we know already proper perspective.
ACKNOWLEDGEMENTTNRCMS MAYANK SHAH 1
At outset, we would like to thank the institutions for having provided us with an opportunity to carry out a project of this magnitude that helped me satisfy my curiosity as far as my area of interest was concerned. The essence of this project, i.e. its contents have been compiled with help of varied sources of secondary database, but we would specially like to acknowledge the support, suggestions and feedback received from my Project Guide1) Mr.K.P.S.Arya AGM, Of RASMECCC State Bank Of India, Rajkot 2) Mr.M.D. Raval Manager of RASMECCC, State Bank of India, Rajkot. 3) Mrs.Jyoti & Mr.Avinash Singh Officer, RASMECCC, State Bank Of India, Rajkot. Also my faculty member Mr. Abhay Raja guide and suggest me about the project. A lot of other people have also contributed directly and indirectly to completion of this project would not have seen light of the day. Our hearts felt gratitude to all of them.
DECLARATIONTNRCMS MAYANK SHAH 2
I the undersigned Mr.Mayank S. Shah, a student of MBA (Finance) Semester-III, hereby declare that the project work presented in this report is my original work.
This work has not been previously submitted to any other university for any other examination.
Date: 15 t h July,2008 Place: Rajkot ---------------------(Mayank S. Shah)
The most important problem that the Indian banks are facing is the problem of their NPAs. It is only since a couple of years that this particular aspect has been given so much importance. The banks have to overcome these difficulties properly in order to effectively counter the competition faced by the foreign banks. With the framing of laws as per international standards and setting up of Debt recovery tribunal we can say that steps have been taken in this direction. Banks in India have traditionally been saddled with very high Non-Performing Assets. The banking sector was heading for a crisis in 2001 with NPAs crossing a mammoth 64000 crores. Banks burdened with huge NPAs faced uphill tasks in recovering then due to archaic laws and procedures. Realizing the gravity of the situation the government was quick to implement the recommendations of the Narsimham Committee and Andhuarjuna Committee leading to the enactment of the SRESI ACT 2002.( Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act). This Act gave the banks the much needed teeth to curb the menace of NPAs. The non performing assets (NPAs) of banks have at last begun shrinking. As reported from surveys, it is understood that there has been substantial improvements in non performing assets and this has been because of several measures such as formation of asset reconstruction companies, debt restructuring norms, securitization, provisioning norms and prudential norms for income recognition. The gross NPAs of the banking system are about 16 per cent of the total assets of the nationalized banks as of 2000-01. This is against a global norm of about 5%. Hence there is a long way to go before we can say that the NPAs of our banks are under control. The improvements in NPAs of individual nationalized banks have been in the order of 10% to 20%, thanks to the various schemes and measures introduced. This paper addresses the results we have achieved so far since the measures have been implemented and the thrust on
measures that need to be taken to expedite recovery of NPAs. We also give our suggestions as to how NPA retrieval can be made easy and in what way the NPA scenario is headed. The problem is no doubt about recovery management where the objective is to find out about the reasons behind NPAs and to create networks for recovery. Banks of Rajkot have been considered where 21 executive have been approached with a structured question to elicit information. The crucial factor that decides the performance of banks now days is the spotting of nonperforming assets (NPA). NPAs are those loans given by a bank or financial institution where the borrower defaults or delays interest or principal payments banks are now required to recognize such loans faster and then classify them as problem assts. As far as the study is concerned the following may be summarized. Nearly 10% of the banks in Gujarat responded within a month for loan applications received by them from their corporate clients. If was also found that 67 % of the banks used to appraise loan proposals from their corporate clients with the viewpoint of recovery. In Gujarat region it was found that about 62 % of the banker opined that there was a need to evaluate the loan applications critically. The respondents assigned highest weight to companys current performance and the second highest was assigned to companys past performance. Around 10 % of the banks in Gujarat recovered their dues on time from their corporate clients after maturity in Gujarat. The most preferred measures were pervasion and legal action. The most common suggestion received for improving the recovery system in Gujarat was regarding improving the judicial system and delegating more power and autonomy to the banks.
INDEXSr.Preface Acknowledgment Declaration 1. Executive Summery Introduction Early History of Bank Type of Bank Status wise bifurcation of Banks
Page No.1 2 3 4 8-1510 12 14
About SBIHistory Awards & Recognition Mission Organization Structure
Survey & Research on NPAsResearch Plan Introduction Debt Recovery Problem NPAs and Their Effects Steps to solve NPAs Tools for Managing NPAs
Strategy for Prevention of NPAs Non Legal Measure
4. 5. 6. 7. 8.
SWOT Analysis FUTURE PLAN CONCLUSION BIBLIOGRAPHY ANNEXURE
INTRODUCTIONThe word bank it derived from the word bancus or banque that is French.
There was other of the opinion that the word bank is originally derived from the German word back meaning joint for which was Italianized into banco. But whatever be the origin of the word bank as Prof. Rramchandra Rao says. It would trace the history of banking in Europe from middle ages. Generally, banks do the business of money they take deposits of moneys from client and give loan to the person who has need of money. But in this age, for the convenience of customer, banks provides some other services to their customer such as bankers cheque, overdraft, internet banking, ATM facility, paying of bills, credit card, telegraphic transfer, insurance, demat etc. For a people, it is difficult to keep a very big amount of money in his house safely. So, people save their money to bank. Bank gives loan to the person who has need of money and gets higher interest on it than the interest of deposit. The margin between the interest of loan and interest of deposit is the income of bank.
EARLY HISTORY OF BANKINGAs early as 2000 B.C. the Babylonians had developed a banking system. There is evidence to show the temples of Babylon were used as banks. After a period of time, there was a spread of irreligion, which soon destroyed the public sense of security in depositing money and valuable in temples. The priests were longer acting as financial agents. The Romans did minute regulations, as to conduct private banking and to create confidence in it. Loan banks were also common in Rome. From these the poor citizens received loans without paying interest, against security of land for 3 or 4 years. During the early periods, although private individual mostly did the banking business, many countries established public banks either for the purpose of facilitating commerce or to serve the government. However, upon the revival of civilization, growing necessity forced the issued in the middle of the 12 t h century and banks were established at Venice and Genoa. The Bank of Venice established in 1157 is supposed to be the most ancient bank. Originally, it was not a bank in the modern sense, during simply an office for the transfer of the public debt. In India, as early as the Vedic Period, banking, in most crude from existed. The books of Manu contain references regarding deposits, pledges, policy of loans, and rate of interest. True, the banking in those days largely mint money lending and they did not know the complicated mechanism of modern banking. This is true not only in the case of India but also of other countries. Although, the business of banking is as old as authentic history, banking institutions have since TNRCMS MAYANK SHAH