COMPARATIVE ANALYSIS ON NON PERFORMING ASSETS

Name:

Mohit Kakkar (2008 -2010)

Title:

COMPARATIVE ANALYSIS ON NON PERFORMING ASSETS OF CANARA BANK AND

PUBLIC SECTOR BANKS

Executive Summary

The accumulation of huge non-performing assets in banks has assumed great

importance. 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.1,50,000 crores. While gross NPA reflects the quality of the loans made by banks,
net NPA shows the actual burden of banks. Now it is increasingly evident that the
major defaulters are the big borrowers coming from the non-priority sector. The
banks and financial institutions have to take the initiative to reduce NPAs in a time
bound strategic approach. Public sector banks figure prominently in the debate not
only because they dominate the banking industries, but also since they have much
larger NPAs compared with the private sector banks. This raises a concern in the
industry and academia because it is generally felt that NPAs reduce the profitability
of banks, weaken its financial health and erode its solvency. For the recovery of
NPAs a broad framework has evolved for the management of NPAs under which
several options are provided for debt recovery and restructuring. Banks and FIs
have the freedom to design and implement their own policies for recovery and
write-off incorporating compromise and negotiated settlements.

Objectives:

The basic idea behind undertaking the Grand Project on NPA was to:


To evaluate NPAs (Gross and Net) in different banks.

To study the past trends of NPA

To calculate the weighted of NPA in risk management in Banking

To analyze financial performance of banks at different level of NPA

To evaluate profitability positions of banks

To evaluate NPA level in different economic situation.

To Know the Concept of Non Performing Asset

To Know the Impact of NPAs

To Know the Reasons for NPAs


To learn Preventive Measures

Recommendations :

Bank should check the credibility of farmer like the proper identification and also
his/her reputation in the village.

Banks have to find out the original reasons for the loan.

Proper identification of the guarantor should be check by the bank and his/her
wealth also, so

that he/she can’t mi

slead the bank.

Sarpanch of the village should also inquire before the disbursement of the loan
amount.

Agriculture loan comes in priority sector, so banks are bound to achieve the targets
set by government. In this situation government has to relax some norms about the

priority sector.

The stocks and receivables are to check randomly by the bank, so that the bank are
aware of position of the firms. 

Banks have to be assure that the collateral security should not be disputed asset
and neither any other loan is taken on that security.


Banks have to make a separate department, whose duty is only inquire the
personnel goodwill in the city apart from the financial asset.

In the export related loan, banks have to check the authenticity of the firm with the
export house.

Banks should have to consider the market condition of economy before

disbursement of loan in case of import, export.

Banks also have to consider the market condition of that product, which is going to
export or import.

The recovery process is very slow, so the governments have to update the process
which is fast and effective.

And last not the least, the bank officers shouldn’t forget the ethics of doing job.

Limitations

The first limitation is authenticity of data, the data which I get from the bank is
molded,

because bank doesn’t want to reveal the original facts.



The other limitation is the traveling factor, because for the primary study I have to
go Chandigarh, circle office and that is very hectic from Gurgaon.

Time factor is other limitation

in this study, because the bank officials didn’t have proper time

to meet and solve mine queries.

Some of my recommendations are not for all banks because they are basis on high
cost. .............................................................................................................................
.......................................

The above article was extracted from dissertations in Marketing, Finance, Human
Resources, Strategy, Information Systems by the students from Skyline College.
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and BBA

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