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IN BANKING SECTOR
Objectives of study
To study and understand the concept of NPAs To find out various reasons behind the occurrence of NPAs
RESEARCH METHODOLOGY
Exploratory Research has been used in this project. The data has been collected from secondary sources Sample size includes public , private and foreign banks
INTRODUCTION
NPA rule says simply this: when interest or other due to a bank remains unpaid for more than 90 days, the entire bank loan automatically turns a non performing asset. The depth of the problem of bad debts was first realized only in early 1990s. The magnitude of NPAs in banks and financial institutions is over Rs.1,50,000cr.
TYPES OF NPA
Gross NPA
Net NPA
Gross NPA Gross NPA reflects the quality of the loans made by banks. It consists of all the non standard assets like as sub-standard, doubtful, and loss assets.
Net NPA
Those type of NPAs in which the bank has deducted the provision regarding NPAs. Net NPA shows the actual burden of banks
Net NPAs =
Reporting of NPAs
Banks are required to furnish a Report on NPAs as on 31st March each year after completion of audit. The NPAs would relate to the banks global portfolio, including the advances at the foreign branches. The Report should be furnished as per the prescribed format given in the Annexure I.
Asset Classification
Standard Assets
Non-performing Assets a) Sub-standard Assets (NPA for 18months) b) Doubtful Assets c) Loss Assets
INTERNAL FACTORS
Absence of regular industrial visit Managerial deficiencies Poor credit appraisal system
IMPACT OF NPA
Profitability Liquidity Involvement of management(time&effort) Credit loss(goodwill and image of bank)
10000
5000 0
20000
15000 10000 5000 0 priority non priority public
FINDINGS
Indian banks begin the year 2009 with a lurking fear that their Non Performing Assets would go up. Visible strain on consumer, credit card and vehicle loan portfolios , banks have decided to scale down their advances. Despite pressures from global financial markets, Indian banks witnessed a healthy 25 to 29 per cent average growth in credit disbursals, primarily in housing, auto and infrastructure loans Government-owned banks were quick to respond by reducing interest rates periodically, many private banks were yet to follow suit
CONCLUSION
Even though the banks have managed to reduce their levels of NPAs by a great deal but it is not possible to eliminate them totally.
Steps can be taken to minimize the NPAs and it is always wise to follow a proper policy appraisal, supervision and follow up of advances to avoid NPAs.
The banks should not only take steps to reduce the existing NPAs but it is also necessary to take precautionary measures to avoid NPAs in future. Thus, instead of dealing with the problem after it has occurred, the focus should be avoidance of NPAs before their occurrence.
RECOMMENDATIONS
Effective inspection system should be implemented Operating staff should scrutinize the level of inventories/receivables regularly