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Management of Non-Performing Assets

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Management of Non-Performing Assets

PART A: INDUSTRY PROFILE:

Definition of Bank:

Banking means “Accepting deposits for the purpose of lending or investing of deposits of

money from the public, repayable on demand or otherwise and withdraw by cheque, draft

or otherwise”.

1.1 HISTORY OF BANKING IN INDIA

Banking in India has its origin as early as Vedic period. It is believed that the transitions

from many lending to banking must have occurred even before Manu, the great Hindu

furriest, who has devoted a section of his work to deposit and advances and laid down

rules relating to the rate of interest. During the mogul period, the indigenous banker played

a very important role in lending money and financing foreign trade and commerce.

During the days of the East India Company it was the turn of agency house to carry on the

banking business. The General Bank of India was the first joint stock bank to be

established in the year 1786. The other which followed was the Bank of Hindustan and

Bengal Bank. The Bank of Hindustan is reported to have continued till 1906. While other

two failed in the meantime. In the first half of the 19th century the East India Company

established there banks, the bank of Bengal in 1809, the Bank of Bombay in 1840 and the

Bank of Bombay in1843. These three banks also known as the Presidency banks were the

independent units and functioned well. These three banks were amalgamated in 1920 and

new bank, The Imperial Bank of India was established on 27th January, 1921.

With the passing of the State Bank of India Act in 1955 the undertaking of the Imperial

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Bank of India was taken over by the newly constituted SBI. The Reserve Bank of India

(RBI) which is the Central bank was established in April, 1935 by passing Reserve bank of

India act 1935. The Central office of RBI is in Mumbai and it controls all the other banks

in the country.

In the wake of Swedishi Movement, number of banks with the Indian management were

established in the country namely, Punjab National Bank Ltd., Bank of India Ltd., Bank of

Baroda Ltd., Canara Bank. Ltd. on 19th July 1969, 14 major banks of the country were

nationalized and on 15th April 1980, 6 more commercial private sector banks were taken

over by the government.

The first bank in India, though conservative, was established in 1786. From 1786 till

today, the journey of Indian Banking System can be segregated into three distinct phases.

They areas mentioned below:

 Early phase from 1786 to 1969 of Indian Banks.

 Nationalization of Indian Banks and up to 1991 prior to Indian banking sector

Reforms.

 New phase of Indian Banking System with the advent of Indian Financial &

Banking Sector Reforms after 1991.

To make this write-up more explanatory, I prefix the scenario as Phase I, Phase II

and Phase III.

Phase I

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The General Bank of India was set up in the year 1786. Next came Bank of

Hindustan and Bengal Bank. The East India Company established Bank of Bengal

(1809), Bank of Bombay (1840) and Bank of Madras (1843) as independent units

and called it Presidency Banks.

These three banks were amalgamated in 1920 and Imperial Bank of India was

established which started as private shareholders banks, mostly Europeans

shareholders.

During those day’s public has lesser confidence in the banks. As an aftermath

deposit mobilization was slow. Abreast of it the savings bank facility provided by

the Postal department was comparatively safer. Moreover, funds were largely given

to traders

Phase II

Government took major steps in this Indian Banking Sector Reform after

independence. In1955, it nationalized Imperial Bank of India with extensive

banking facilities on a large scale especially in rural and semi-urban areas. It formed

State Bank of India to act as the principal agent of RBI and to handle banking

transactions of the Union and State Governments all over the country.

Seven banks forming subsidiary of State Bank of India was nationalized in 1960 on

19th July,1969, major process of nationalization was carried out. It was the effort of

the then Prime Minister of India, Mrs. Indira Gandhi. 14 major commercial banks in

the country was nationalized.

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Second phase of nationalization Indian Banking Sector Reform was carried out in

1980 with seven more banks.

Phase III

This phase has introduced many more products and facilities in the banking sector

in its reforms measure. In 1991, under the chairmanship of M Narasimham, a

committee was set up by his name which worked for the liberalization of banking

practices.

The country is flooded with foreign banks and their ATM stations. Efforts are being

put to give a satisfactory service to customers. Phone banking and net banking is

introduced. The entire system became more convenient and swift. Time is given

more importance than money.

CHART SHOWING INDIAN BANKING SYSTEM:

APEX BANKING INSTITUTES

EXIM BANK NATIONAL


IDBI NABARD
HOUSING BANK
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CO-OPERATION COMMERCIAL
REGIONAL BANKS
BANK BANKS

CO-OPERATION PRIVATE SECTOR PUBLIC SECTOR


BANKS BANKS BANKS

STATE CO-
NATIONALISED
OPERATIVE FOREIGN BANKS INDIAN BANKS STATE BANKS
BANKS
BANKS

CENTRAL DISTT.
SUBSIDIARY
CO-OPERATIVE SBI
BANKS
BANKS

PRIMARY CREDIT
SOCIETIES

1.2 GROWTH AND PRESENT STATUS OF THE INDUSTRY:

In India the banks are being segregated in different groups. Each group has their

own benefits and limitations in operating in India. Each has their own dedicated

target market. Few of them only work in rural sector while others in both rural as

well as urban. Many even are only catering in cities. Some are of Indian origin and

some are foreign players.

All these details and many more is discussed over here. The banks and its relation

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with the customers, their mode of operation, the names of banks under different

groups and other such useful information’s are talked about.

One more section has been taken note of is the upcoming foreign banks in India.

The RBI has shown certain interest to involve more of foreign banks than the

existing one recently. This step has paved a way for few more foreign banks to start

business in India.

1.3 RECENT DEVELOPMENTS IN BANKING:

Banking arena has changed a lot, compared to simple acceptance and deposit of cash,

thanks to the evolution of technology. Some of the recent developments in the field of

banking are as follows:

a) Core Banking

Through this package the accounts of all the branches of a bank are connected by a

technology called Wide Area Network. This facilitates the customer to get faster

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serviced mainly for collection of outstation cheques to the credit of their account.

Sharing of ATMs is one of the features under this scheme.

b) Electronic Fund Transfer

In this, the funds are transferred from one place to another place; from one account

to another account through electronic media. This is a part of core banking.

c) Tele-Banking

From anywhere at any time, one can access the accounts 24 hours and 365 days a

year. A customer number and pass number will be given to the customer so that

secrecy can be maintained while operating the account.

d) Mobile Banking

It helps the customer to access his account and conduct a host of banking

transactions and inquire through mobile banking services. It gives the real time

transaction capabilities from mobile phones at a true “anywhere, anytime”

convenience.

e) Anywhere Banking

The account holder will be in a position to access his account from anywhere in the

country and get the services without any delay. This brings around transparency,

accessibility and more than all freedom to operate the account 24/7.

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PART B: SUBJECT PROFILE:

1.4 INTRODUCTION TO FINANCE

Finance is that business activity which is concerned with the acquisition and conversation

of capital funds in meeting financial needs and overall objectives of a business enterprise.

Finance in a business is what blood to human body. While in the human system, automatic

regulation of quantity and quality of blood is available no such automation is available for

business..

A well-knit finance system directly contributes to the growth of the economy an efficient

financial system calls for the effective performance of financial institutions, financial

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instruments and financial markets.

DEFNITION:

Finance is that business activity which is concern with the acquisition and conversation of

capital funds in meeting financial needs and overall objective of a business enterprise” –

Wheeler.

Finance may be defined as the provision of money at the time when it is required

MEANING OF BUSINESS FINANCE:

Literally speaking, the term ‘business finance’ connotes finance of business

Activities, therefore It is composed of two words

(i) Business, and

(ii) Finance

Thus, it is essential to understand the meaning of the two words; business and

finance, which is the starting point of develop the whole concept and meaning of the

term business finance.

The word ‘Business’ literally means a ‘state of being busy’. All creative human

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activities relating to e production and distribution of goods and services for satisfying

human wants are known as business. It also includes all those activities which indirectly

help in production and exchange of good, such as, transport, insurance, banking and

warehousing, etc. broadly speaking, the term ‘Business’ includes industry, trade and

commerce.

Finance may be defined as the provision of money at the time when it s required. Finance

refers to the management of flows of money through an organization. It concerns with the

application of skills in the manipulation, use and control of money. Different authorities

have interpreted the term ‘finance’ differently.

1.5 OBJECTIVES OF FINANCE:

The main objective of finance is to arrange as much as funds for the business enterprise, as
required, from time to time. The other objectives of finance are as follows:
1. Acquiring sufficient funds.
2. Increasing profitability.
3. Proper utilization of funds.
4. Maximizing concern’s value.

1.6 INTRODUCTION TO NON-PERFORMING ASSETS:

“A Man without money is like a bird without wings”, the Rumanian proverb insists the

importance of the money. A bank is an establishment, which deals with money. The basic

functions of Commercial banks are the accepting of all kinds of deposits and lending of

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money. In general there are several challenges confronting the commercial banks in its day

to day operations. The main challenge facing the commercial banks is the disbursement of

funds in quality assets (Loans and Advances) or otherwise it leads to Non-performing

assets.

In late 80s, the concept of classification of bank advances in several health codes

categories took place through the terminology non-performing advances did not exist at

that time. This is followed by earlier 90s Anglo-American model of categorization of bank

lending portfolio in several blocks of nomenclature which includes non-performing

advances.

Then the recommendations of the Narasimham committee with the proposition of

creating assets reconstruction fund for cleaning the balance sheets of the banks of non-

performing advances as a one-time measure.

1.7 MEANING AND DEFINITION OF NON-PERFORMING ASSETS:

In simple words, an asset, which cases to yield income, is a non-performing asset. Non-

performing assets are those loans in a Bank or Financial Institution (FI), where borrowers

default interest or principal payments.

Non-performing assets refers to a loan or lease that is not meeting its stated principal and

interest payments.

Banks usually define non-performing asset as an advance where:

1. Term Loans: Interest and/or installment of principal remain overdue for a period of

more than 90 days

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2. Bills: The bill remains overdue for a period of more than 90 days

3. Other Accounts: Any account to be received remains overdue for a period of more

than 90 days

4. Cash Credit / Over draft Account: The account remains out of order for a period

of more than 90 days. Out of Order means an account where the balance is more

than sanctioned limit or drawing power. OR Where as on the date of balance sheet,

there is no credit in the account for a period of 90 days or credit is less than interest

debited or where stock report has not been received for three months or more.

5. Agriculture Account: A loan granted for short duration crops will be treated as an

NPA if the installment of principal or interest thereon remains unpaid for two crop

seasons beyond the due date. For a loan for long duration crops the above period

would be one crop season beyond the due date.

1.8 CLASSIFICATION OF NPA:

There are three category of non-performing assets, which are classified on the basis of

period for which the assets has remain non performing

 Sub-Standard Assets.

 Doubt full Assets.

 Loss Assets.

a) Sub-Standard Assets

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A sub-standard asset was classified as NPA for a period not exceeding two years.

With effect from 31-march-2001, a sub standard assets is one, which has remained NPA

for a period less than or equal to 18 months. In such cases, the current net worth of the

borrower/guarantor or the current market value of the security is charged is not enough to

ensure recovery of the dues to the bank in full. In other words, such as asset will have well

defined credit weaknesses that jeopardize the liquidation of the debts and are characterized

by the distinct possibility that the bank will sustain some loss, if deficiencies are not

corrected.

b) Doubt Full Assets:

A Doubt full Asset is one which remained NPA for a period exceeding18 months.

With effect from 31-march-2001, an asset is to be classified as doubt full, if it has

remained NPA for a period 12 months wef march 31st 2005.

c) LOSS ASSETS:

A loss asset is one where the bank or internal or external auditors or the RBI

inspection has identified loss but the amount has not been written off. In other

words such an asset is considered uncorrectable and of such little value that its

continuance as a bankable asset is not warranted although there may be salvage or

recovery value.

1.10 CAPITAL ADEQUACY:

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NPA doesn’t earn any income, it adversely affects the capital adequacy ratio, and the

adequacy ratio reveals the health condition of the bank. The capital adequacy ratio is

defined as the ratio between a bank’s total capital and its risk-weighted assets

1.11 General Methods of Management of NPAs

Compromise

Legal remedies

Regular Training Program

Recovery Camps

Write offs

1. Persistent phone calls

Spot Visit

2. Media announcements

Rehabilitation of potentially viable


units

Other Methods

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1.12 There are several reasons for an account becoming NPA.

Internal factors

External factors

Internal factors:

1. Funds borrowed for a particular purpose but not use for the said purpose.

2. Project not completed in time.

3. Poor recovery of receivables.

4. Excess capacities created on non-economic costs.

5. In-ability of the corporate to raise capital through the issue of equity or other debt

instrument from capital markets.

6. Business failures.

External factors:

1. Sluggish legal system - Long legal tangles Changes that had taken place in labour laws

Lack of sincere effort.

2. Scarcity of raw material, power and other resources.

3. Industrial recession.

4. Shortage of raw material, raw material\input price escalation, power shortage, industrial

recession, excess capacity, natural calamities like floods, accidents.

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5. Failures, non -payment over dues in other countries, recession in other countries.

1.13 FUNDAMENTAL CAUSES OF HIGH LEVEL OF NPA:

The most important issue missed in the entire processes of events has been to analyze the

reasons as to why such a disproportionate amount of the bank advances has degenerated

into category, the reasons there of can be classify under five broad lories.

1. Failure of business unit either resulting from lack of its own competitive advantage or

generic weakness of the industry.

2. Lack of adequate risk assessment and monitoring system within the bank:

3. Absence of propensity on the part of the management of borrowing units.

4. Lack of prudential regulation.

5. Government or political interference in the working of the banking system.

1.14 RBI GUIDELINES TO CONTAIN THE NPA LEVEL:

By the time, we have come to know that how serious is the issue and where our Indian

banks stand, better late than never, banks have realized that NPA in the hazard for their

growth. Due to this several steps have been taken not only by the affected banks but also

by the government of India, RBI, and several other machineries to control and as far as

possible to eliminate it.

The kinds of scientific norms adopted in the banking industry, the world over in

general and India in particular, have not evolved over night, but over several decades, with

serious thinking. Earlier an asset, which could be recovered, was off in one straight

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method. But now, the issues under consideration are:

a) What amount of risk is involved in that lending?

b) What amount of direct and indirect security is available?

c) Whether the bank has got adequate capital to handle the business.

d) Assuming the asset deteriorates, that safeguard is in place-adequate capital,

periodical provisioning, periodical review of advances and the capacity to write off

the loss assets.

The above considerations gave birth to 11 concepts like:

1. Health Code Classification.

2. Capital Adequate Ratio.

3. Risk Weight age Of Assets.

4. Income Recognition Norms.

5. Periodical Provisioning.

6. Insurance Agent Like ECGCI, DICGC, NABARD Etc…

7. BIFR.

8. DRT(Debt Recovery Tribunal)

9. OTS-One Time Settlement Scheme.

10.Securities of Debt.

11.Criminal Proceedings Taken Against the Defaulters.

1. CAPITAL ADEQUACY RATIO (CAR):

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It is the minimum capital, which the bank should have to handle the particular level of

advances. Higher the capital, greater is the lending capacity of the bank.

Reserve Bank of India (RBI) has issued capital adequacy norms for the Indian banks. The

minimum CAR, which the Indian banks are required to meet all the times, is set at 9%. It

should be taken into consideration that the bank’s capital refers to the ability of banks to

which stand losses due to risk exposure.

To be more precise, capital charge is a sort of regulatory cost of keeping loans (perceived

as risky) on the balance sheet of the banks. The quality of the assets of the bank and its

capital are often closely related. Quality of assets is reflected in the quantum of NPA` s.

By this, implies that if the asset qualities were poor, and then higher would be the quantum

of non-performing assets and vice-versa.

Market risk is the arising due to the fluctuations in value of a portfolio due to the volatile

of market prices.

2. RISK WEIGHTAGE OF ASSETS:

Assets for the banks are the advantages given to different borrowers. Each advance is

differentiating by the element of risk involved in it. So, have to weigh the risk while

lending to the borrowers. Because risk is based on the purpose for which the borrower has

taken to fulfill his needs.

E.g.: a loan given for buying a consumer durable item has got the possibility of the item

being retrieved and sold to recover the loan, in case of default. On the other hand, a loan

given for, say consumption purpose has nothing to fall back upon. In the latter case, the

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element of risk is more than that of the first case

3. INCOME RECOGNITION:

Before income recognition was introduced. Whatever the interest was due from the

borrower the banks used to treat it as income and banks were recording in the profit and

loss account on the accrual basis even if the bank get it or not. As a result the bank` s

profits were showing huge amount due to this share holders were benefited and were

getting good amount of dividends. Due to this income recognition norms came into

existence.

4. PERIODICAL PROVISIONING:

It is a known fact that all the borrowers are not 100% true in repaying loan,

which they have taken from the banks. So, there is always a chance that the banks can

face the eventuality of write off of the debts. Before the banks adopted provisioning, banks

used to write off the entire amount when the borrower failed to repay.

5. INSURANCE AGENT:

ECGCI- (Export Credit Guarantee Corporation Of India Ltd):

Lending operations are no more restricted only to the banks; there are other entities which

support the lending activities of the banks by taking care of the risk involved in lending.

Essentially, these organs are like insurance companies and they indemnify a bank on

behalf of the customers who have suffered a loss for no fault of theirs. If an exporter

suffers a loss, caused by a development in importer’s country, then passing on that loss to

the exporter is unfair because, he has no say in that. Such eventualities are taken care of by

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indemnifying agents like ECGC.

In order to protect the exporters as well as banks and credit institutions from

commercial and political risks and resultant loss and in the interest of expansion and

growth of export, the export credit guarantee corporation of India ltd. (ECGCI) was set

up by the Government of India in July 1957.

6. BIFR –BOARD OF INTITUTION OF FINANCIAL RECONSTRUCTION:

Banks had a tendency to arbitrarily decide whether to extend credit support or not.

Therefore, government of India thought it fit to establish an arbitrator who could decide

about the desirability of extending further credit or to deny further lending. This institution

is called BIFR.

8. DRT-DEBT RECOVERY TRIBUNAL:

The slow movement of legal machinery in India is no secret. Banks, which were seeking

legal remedy, were getting involved in protracted legal proceedings. Dart` s were

established as a way out from this. DRT` s are meant exclusively for the banks to ensure

speedy recovery of large advances loans in excess of Rs 1000000.

If the other of the DRT aggrieves a person, he can file an appeal to the appellate tribunal

within 30days from the date of receipts of the DRT order.

If the DRT or appellate tribunal holds that possession of assets by the secured creditor was

wrongful and directs the secured creditor to return assets to concerned borrowers, the

borrowers shall be entitled to compensation and cost as may be determined by DRT or

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appellate tribunal.

The tribunal can also direct return of assets, if the secured creditor had already sold

or transfer the asset to a third party.

OTHER MODES OF RECOVERYINSOLVENCY PROCEEDINGS:

In cases where the Bank is not having any security to fall back upon and or not in a

position to ascertain the details of personnel assets of borrower, insolvency proceedings

can be initiated against the borrowers /judgment debtors.

WINDING UP OF COMPANY:

Resorting to winding up is another important tool for the recovery of advances granted to

limited companies when the company is unable to pay its debts or has neglected to pay its

debts. Section 433 of the companies Act, 1956 provide for various circumstances under

which a company may be wind up by the court.

1.14 NON-PERFORMING ASSETS IN INDIAN BANKS:

The Non-Performing Assets (NPAs) of the Indian banking sector have been incessantly

rising in the past six months. Historically, in 1997, NPAs were 15.8% of loans for the

banking sector, which nose-dived to 2.4% in 2008. This figure stands at 2.94% of loans in

2012. In absolute figures, NPAs have doubled from 2009 to 2012 and assets under

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reconstruction had trebled during the same period. India’s biggest lender, State Bank of

India, is experiencing an NPA level of 4.99% of total loans. According to a recently

published Credit Suisse Group AG report, 10 large industrial houses account for 13% of

total assets financed by the Banking system, which means that bank lending is getting

increasingly skewed. Further, of the total reconstructed assets, 8.24% belong to the large

manufacturing sector, 3.99% are from the services sector while 1.45% are from the

agricultural sector.

1.15 REASONS FOR GROWING NPAS:

1. Economic Slowdown

The global economy is still in the throes of an economic crisis that is looming large

both in the US and Europe. There is a general slackening of domestic economic

activity in India both in manufacturing and the services sectors. A sluggish economy

will have a direct impact on the balance sheets and profitability of many firms who

have availed of loans from the banking industry. Over a period of time, some of the

hard hit firms will be compelled to default on their loans. There is a groundswell of

expert opinion in India that NPAs are more an outcome of economic factors rather

than any internal systemic failures.

2. High Interest Rates

It is a known fact that interest rates have been revised upwards, 10 times in the past

two years with a view to curb inflation. High interest rate increases the cost of funds

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to the credit users and has a debilitating effect especially on the repayment capacity

of small and medium enterprises. Banks need to maintain their Net Interest Margin

and hence pass on any interest rate hike to the borrowers. A high rate of inflation

dilutes the quality of assets of the banking sector. Weak supply demand scenario,

high borrowing or leveraging and intense competition contribute to loan defaults.

3. New Reporting System

Indian banks are to report NPAs from April 2012 in a computer recognized /

identified format. It is stated that almost 90% of all banks' loan portfolio is under the

computerized system of NPA reporting or system based reporting.

The discretion of bank managers in classifying assets according to their local

judgment is eliminated. This change in reporting pattern makes identification of

NPAs a machine driven objective activity. However, credit risk analysis does have a

subjective and judgmental element to it.

4. Aviation Sector

The Indian banking system has a total exposure of around Rs. 40,000 crores to the

ailing aviation sector. SBI alone has an exposure of 5,000 crores to the aviation

industry. It is common knowledge that many airlines are either in the red or

marginally profitable. According to an RBI report, nearly three-fourths of the top

Banks’ loans to the aviation sector are either impaired or restructured. Kingfisher

airlines and Air India have been the significant aviation borrowers whose

performance is below par.

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Current NPA Position of J& K Bank:

The net NPA of the J&K Bank as on 31.03.2012 stood at Rs. 49.34 Crores constituting

0.15% of advance. The net NPAs of the Bank, as on 31st March, 2013, stood at Rs. 55.27

Crores, accounting for 0.14% of net advances.

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2.1 TITLE OF THE STUDY

The title of the project is “Management Of Non-Performing - A CASE STUDY OF THE To

Jammu & Kashmir Bank ”.

2.2 STATEMENT OF PROBLEM:

. The main functions of banks are mobilization of funds and lending of funds. The

difference between both the interest rates is the profit for the bank. Bank will be playing

safe till all the borrowers pay their dues within the stipulated time. But we all know that no

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man is perfect, like wise if the borrowers fail to repay the loans and advances then the

banks will face unstable position. So, the main problem that banks are facing is whatever

the loan and advances that have been lend to the individuals, industries and business world

are not recovered with in a stipulated time. Due to this their NPA level is raising

enormously which is showing an adverse effect on banks profitability. Banking is an

ongoing process where refunds continuously recycled for the benefit of all the segments of

the society. The redeployment of funds gets stagnated indirect proportion to the quantum

of NPA`s.

2.3 OBJECTIVES OF THE STUDY:

1. To study the problem and cause of non-performing assets.

2. To study the general reasons for assets become NPAs

3. To understand how it affects the performance of a bank.

4. To study the assets and liabilities structure of J&K BANK.

5. To understand the extent to which J&K BANK has been successful in cutting down

its NPA level.

6. To give suggestion and recommendations this would help J&K Bank in controlling

their level of non-performing asset.

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SCOPE OF THE STUDY:

This study confines to J&K bank, the reference period of the study covers the year 2009-

2013. The study is based on the regulation of reserve bank of India and recommendations

on the committees appointed by it.

METHODOLOGY OF THE STUDY:

This study is based on the various data provided by bank officials, the RBI circulars,

journals, magazines and data from internet were thoroughly studied and interpretation

made thereof.

SOURCES OF THE DATA:

 Primary Sources:

 Primary source data is collected from officials and staff members through

discussions.

 Detailed discussions with the loan manager regarding the study.

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 Secondary Source:

The secondary data was collected through the following:

 Annual reports

 Management reports

 Magazines

 Standard textbooks (especially related to banks)

 Sources from INTERNET were studied.

2.4 LIMITATIONS OF THE STUDY

1. NPA is very vast field having a wide coverage in measuring and managing it.

2. It involves sensitive issues, which makes research very difficult.

3. In India banks are legally not bound to declare their NPA`s. hence banks have tendency

to camouflage the real scenario.

4. Scientific assessment of risk itself is a recent phenomenon. This aspect is yet to sink

into India banking system.

5. Access to the information is limited.

6. The data taken for interpretation is for a limited period. The time period was limited and

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study had to be carried out within 8 weeks.

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3.1 INCEPTION OF THE ORGANISATION:

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CORPORATE HEADQUATER OF J&K BANK

The origin of Jammu and Kashmir Bank Limited, more commonly referred to as J&K

Bank, can be traced back to the year 1938, when it was established as the first state-owned

bank in India. The bank was incorporated on 1st October 1938 and it was in the following

year (more precisely on 4th July 1939) that it commenced its business, in Kashmir. It was

initially set up as a semi-State Bank, with its capital being contributed by State as well as

the public under the control of the State Government.

Jammu and Kashmir Bank had to face serious problems in 1947 i.e. at the time of

independence. With the partition of Pakistan, two out of the total ten branches of the bank,

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namely the ones in Muzaffarabad and Mirpur, fell to the other side of the line of control

(now Pak Occupied Kashmir), along with cash and other assets. At that point of time, in

keeping with the extended Central laws of the state, J&K Bank was categorized as a

Government Company, as per the provisions of Indian Companies Act 1956.

It was in the year 1971 that Jammu and Kashmir Bank was granted the status of a

'Scheduled Bank'. Five years later, it was declared as "A" Class Bank, by the Reserve

Bank of India (RBI). As the years passed on, the bank started achieving more and more

success. Today, it boasts of more than 685 branches across the country. It was only

recently that Jammu and Kashmir Bank became a billion dollar company. Governed by the

Companies Act and Banking Regulation Act of India, it is regulated by RBI and SEBI. It

finds a listing on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE)

as well.

3.2 BRAND IDENTITY

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NIMS INSTITUTE OF MANAGEMENT & COMPUTER SCIENCE
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The new identity for J&K Bank is a visual representation of the Bank philosophy and

business strategy. The three coloured squares represent the regions of Jammu, Kashmir

and Ladakh. The counter- form created by the interaction of the squares is a falcon with

outstretched wings a symbol of power and empowerment. The synergy between the three

regions propels the bank towards new horizons. Green signifies growth and renewal, blue

signifies stability and unity and red signifies energy and power. All these attributes are

integrated and assimilated in the white counter-form.

3.3 MISSION OF THE BANK:

The company’s mission is two-fold: To provide the people of J&K international quality

Financial Service and solutions and to be a super-specialist bank in the rest of the country.

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The two together will make it the most profitable bank in the country.

3.4 VISION OF THE BANK:

The Bank's vision is “To catalyse economic transformation and capitalize on growth”. The

bank aspires to make Jammu and Kashmir the most prosperous state in the country, by

helping create a new financial architecture for the J&K economy, at the centre of which

will be the J&K Bank. The Bank is committed to achieve healthy growth in profitability

and simultaneously to remain consistent with the Bank's risk appetite and at the same time

ensuring the highest levels of ethical standards, professional integrity and regulatory

compliance.

3.5 SWOT ANALYSIS:

The term SWOT is the acronym made up of four words viz, Strengths, Weaknesses,

opportunities and Threats. The first two variables are internal to an organization whereas

the last two are external. The value of SWOT analysis cannot be over emphasized. It is

rightly said “winners recognize their limitations but focus on their strengths; losers

recognize their strength but focus on their limitation”.

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a) Internal factors

Strength:

Strength is defined as something which is positive, good or such other characteristics that

give to the company an edge in the competitive market. The Bank has one unique source

of strength which if cultivated carefully, can be virtually impregnable – its roots are in the

state, and as such it shares with the people of Jammu and Kashmir a kinship and empathy

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for the cause of the state’s progress, which no outside bank ever can. The J&K Bank also

performs the leader’s role in the J&K. As a leader the Bank continued to discharge its

Lead Bank responsibility in 8 out of 14 districts of J&K State satisfactorily.

 A listed company of the state on BSE and NSE.

 Company owned property.

 Tele banking, anywhere banking, SMS, and mobile banking etc.

 99% of the total business is computerized.

Weaknesses:

A weakness refers to something which one lacks. It is something which restricts us to

move forward. While doing my summer training in the J&K Bank I found the following

weaknesses are:

(i) There is less competent staff at lower level.

(ii) Weak competitive capability because of lack of lesser advertisement budget.

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(iii) Labour problems because of militancy in the state which results in strikes

and tense conditions.

(iv) The activities of Branch managers are not effectively monitored.

(v) Less coverage in east and south India.

b) External factors

Opportunities:

Opportunities are entirely external concerning the business environment. Opportunities do

not come very frequently and therefore, the management must exploit them to the

maximum extent without any delay. Each opportunity should be analyzed in terms of its

profitability. The opportunities analysed for the J&K Bank are;

1) There is agriculture market which is still fully not trapped by the J& K Bank

.There is lots of schemes regarding agriculture such as post Harvest Preservation

scheme and many other schemes.

2) The historical activities of the state such as carpet industry, dastakar

finance, khatamband schemes and many other activities of historical importance

are not still fully covered by J&K Bank.

3) Increase business activities particularly in south and east India.

4) Making banking activity more simple and fast.

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5) Taking up newly and big venture projects.

6) Continued emphasis on infrastructure facilities.

Threats:

With every opportunity, there also goes alongside certain threats which may adversely

affect the profitability and competitive capability of an enterprise. The threats analysed

are;

(i) Competitors like HDFC Bank, Central Co-operative Bank, ICICI Bank etc. may

enter in the field to provide finance facility.

(ii) There may be change in the policies of the state government.

(iii) Better facilities in terms of technology, people and funds.

(iv) Economic liberalization allowed private banks to operate completely, thus

forcing treat.

3.7 PRODUCT AND SERVICES OF J&K BANK

 Savings Bank Account.

 Anywhere Banking Facilities

 Internet Banking

 Corporate/Retail Internet Banking

 E-Commerce Facility for J&K Bank E-Banking Customers

 E-Payment Of Tax For J k Bank E-Banking Customers

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Board of Directors:

The Board of Directors of the Bank consists of 12 members. The Board sits more than a

dozen times in a year to review the business activities of the Bank. It also plans and

regulates the future activities of the Bank through policy decisions and administrative

guidelines. All the important decisions of the Bank have to be endorsed by the Board of

Directors before their implementation.

BOARD OF DIRECTORS

Mr. Mushtaq Ahmad


Chairman & CEO

Mr. Sudhanshu Pandey, Mr. Arnab Roy Mr. Ashok Kumar


40
IAS Director Director
NIMS INSTITUTE OF MehtaSCIENCE
MANAGEMENT & COMPUTER Executive
Director
Management of Non-Performing Assets

Mr. Abdul Majid Mir Mr. B. L. Dogra Mr. M. I. Shahdad


Executive Director Director Director

Mr. Vikrant Kuthiala Prof. Nisar Ali Director Mr. A. M. Matto


Director Director
s

Mr. Nihal C. Garware


Mr. R. K. Gupta
Director
Director

3.6 ORGANIZATIONAL STRUCTURE:

The J&K Bank has a four tier organizational structure, namely:

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NIMS INSTITUTE OF MANAGEMENT & COMPUTER SCIENCE
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Coporate
Head Quaters

Area/District
Zonal Office
offices

Branch Office

 CORPORATE HEADQUARTER:

The corporate Headquarter of the Bank is located at Srinagar and is headed by Chairman

cum Chief Executive officer (CEO), who is appointed by the J&K Government for a

period of 3 to 5 years. Generally, the chairman is selected form reputed Economists,

Bankers or the Administrators of the state. The Chairman is guided by the Board of

Directors of the Bank.

 ZONAL OFFICE:

Under Corporate Headquarters there are 4 Zonal Offices spread all over India. A

zonal Manager, who is of the rank of Joint General Manager/Deputy General

Manager of senior Management cadre, heads Zonal Offices and is assisted by the

Assistant General Managers/Chief Managers heading respective Departments.

 AREA/ DISTRICT OFFICES:

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NIMS INSTITUTE OF MANAGEMENT & COMPUTER SCIENCE
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Under Zonal Offices, there are Area/District Offices. The District Office is headed by the

concerned District Manager. The Branch Managers report to their respective District

Manager. Presently the Bank has 11 District Offices and 3 Area Offices.

 BRANCH OFFICE:

The various branches of the Bank in Jammu and Kashmir State are divided into 5

different categories whereas in Delhi Zone they are divided into 2 categories,

depending on the quantum of business.

2.8 FUNCTIONAL DEPARTMENTS OF THE ORGANIZATION:

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NIMS INSTITUTE OF MANAGEMENT & COMPUTER SCIENCE
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Banking Operations

Commun Corporate Executive Monetary


Debt Financial Financial
Audit: & Legal & Financial Research
ications Services: Administration Services Maarkets Services
Analysis

a) Audit:

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NIMS INSTITUTE OF MANAGEMENT & COMPUTER SCIENCE
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Audit is responsible for conducting the independent and objective appraisals that will

examine and evaluate Bank operations.

b) Banking Operations:

Key players in three of the Bank’s core functions: currency, financial system, and funds

management.

c) Communications:

Helps the Bank to meet its commitment, openness, transparency and build public relations.

d) Corporate Services:

The Corporate Services helps to comprise the following service areas: Human Resources,

Information Technology, Knowledge and Information, Facilities and Protective Services.

e) Debt Administration:

Ensures the delivery of cost-effective back-office operations and provides policy advice.

f) Executive and Legal Services:

It supports the Bank's management by providing decision-support functions to the

executive and to the Board of Directors.

g) Financial Markets:

Functions include implementing monetary policy, managing the federal government's cash

balances and foreign exchange reserves.

h) Financial Services:

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NIMS INSTITUTE OF MANAGEMENT & COMPUTER SCIENCE
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It is responsible for the accounting and financial reporting of the Bank.

i) Monetary and Financial Analysis:

Monitors and carries out researches on the financial sector.

j) Research:

Research provides the Bank to manage with high-quality analysis of the economy and

related policy issues and new trends in the market.

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1. TABLE SHOWING MOVEMENT IN GROSS NPA:

S.No Particulars FY FY FY FY FY
. 2008-09 2009-10 2010-11 2011-12 2012-13
1. Gross NPAs (Opening 485.23 559.27 462.31 518.83 516.60
Balance)
2. Additions (Fresh NPAs) 401.89 188.78 289.14 314.68 455.00
during the Year
3. Sub Total (1&2) 887.12 748.05 751.45 833.51 971.6

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NIMS INSTITUTE OF MANAGEMENT & COMPUTER SCIENCE
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Less:
4. Up gradation 103.67 127.78 44.61 57.57 104.70
5. Recoveries(excludin
g recoveries made 151.94 126.58 113.57 145.07 136.10
from up graded
accounts)
6. Write-offs 72.24 31.38 74.45 114.27 87.03
7. Sub Total(4,5&6) 327.85 285.74 232.63 316.91 327.83
8. Gross NPA (3-7) 559.27 462.31 518.83 516.60 643.77
(Source: Financial Statements)

Analysis of table 1:

The above table shows movement in Gross NPA. The amount of gross NPA of the bank in

the year 2008-09 amounts to Rs.559.27 Crores which is due to the fact that during this FY

political instability on account of Amarnath imbroglio erupted in whole J&K state that

disrupted by and large , small, medium and large business enterprises , valley was under

siege months together, banks witnessed least number of clients, sociopolitical system

collapsed which severely hindered follow-ups and recovery process and resulted in greater

slippage (approx 401.81 lacks) . However, in 2009-10 situations showed little

improvement politically, which helps in registering good amount of recoveries and less

slippages. Since FY 2009-10 onwards Gross NPA shows an increasing trend which can be

attributed to the unfavorable business environment because of sociopolitical instability.

(See graph below)

1. GRAPH SHOWING MOVEMENT IN GROSS NPA

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NIMS INSTITUTE OF MANAGEMENT & COMPUTER SCIENCE
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700
643.77

600 559.27
518.83 516.6
500
426.31
Gross NPA

400

300
Gross NPA

200

100

0
2008-09 2009-10 2010-11 2011-12 2012-13

YEARS
(Source: table 1)

2. TABLE SHOWING MOVEMENT IN NET NPA:

FY FY FY FY FY
S.No. Particulars 2008-09 2009-10 2010-11 2011-12 2012-13
1 Net NPAs
(Opening Balance) 203.55 287.51 64.33 53.24 49.34

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2. Additions during the 346.09 64.93 222.79 325.26 342.48


Year
3. Sub Total (1& 2) 549.64 352.44 287.12 378.50 391.82

Less

4. Up gradation 103.67 127.78 44.61 57.57 104.70


5. Recoveries (excluding
recoveries made from 151.94 126.58 113.57 156.71 136.10
upgraded accounts)

6. Write-off s 6.21 31.38 74.45 144.27 87.03

7. Sub Total (4,5&6) 261.82 285.74 232.63 328.55 327.83

8. Net NPAs (3-7) 287.51 64.33 53.24 49.34 55.27


(Source: Financial Statements)

Analysis of Table 2:

The above table shows movement in net NPA. The amount of net NPA of the bank shows

a decreasing trend, in contrast to the gross NPA. During FY

2008-09 net NPA shows exorbitant amount of 287.51 Crores (Reasons mentioned in

previous graph analysis) which shows a decreasing trend 78% (approx.) decrease during

FY 2009-10, which can be attributed to the aggressive policy of bank for write-offs /OTS

(one time settlement) on one hand and increasing follow-ups and recoveries on the other

hand ,shown in the graph below:

2. GRAPH SHOWING MOVEMENT IN NET NPA:

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350

300
287.51

250

200

150

100 62.33
53.24 55.27
49.34
50

0
2008-09 2009-10 2010-11 2011-12 2012-13

(Source: table 2)

3. TABLE SHOWING LOANS AND ADVANCES:

Year Total Advances


(Rs. Cr.)

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FY 2008-09 20,930.4113

FY 2009-10 23,057.2250

FY 2010-11 26,193.6350

FY 2011-12 33,077.4215

FY 2012-13 39,199.8104

(Source: Financial Statements)

Analysis of Table 3:

The above table shows the advances of the bank. In the year 2008-09 the total advances of

the bank were Rs.20, 930.4113 crores and shows an increasing trend from 2008-09 .

During FY 2012-13 the advances stood at

Rs. 39, 199.8104 crores, thereby registering a growth rate of 87% approx. in loans and

advances since FY 2008-09, by penetrating into every house hold and aggressive loaning

to priority sector, refer graph 3.

3. GRAPH SHOWING LOANS AND ADVANCES:


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Total Advanses
45,000.00
40,000.00 39,199.81
35,000.00
33,077.42
30,000.00
23,057.23
25,000.00 26,193.63

20,000.00 Total Advanses


20,930.41
15,000.00
10,000.00
5,000.00
0.00
2008-09 2009-10 2010-11 2011-12 2012-13

(Source: table 3)

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4. TABLE SHOWINGGROSS PROFIT:

Year Gross profit (Rs. Cr.)

FY 2008-09 774.45

FY 2009-10 958.21

FY 2010-11 1,149.49

FY 2011-12 1,370.33

FY 2012-13 1,810.76
(Source: Financial Statements)

Analysis of Table 4:

The above table indicates the Gross profit of the bank. In the year 2008 the Gross profit

amounts to Rs.774.45 Cr. The above table shows an increasing trend of Gross profit and in

the FY 2012-13 it stood at Rs.1, 810.76 crores which is 32.14% more than the previous FY

2011-12.

Also refer to graph 4.

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4. GRAPH SHOWING GROSS PROFIT:

Gross profit (Rs. Cr.)

2000
1,810.76
1500
1,149.49 1,370.33
774.45 958.21
1000

500

0
2008-09
2009-10
2010-11
2011-12
2012-13

Gross profit (Rs. Cr.)

(Source: table 4)

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NIMS INSTITUTE OF MANAGEMENT & COMPUTER SCIENCE
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5. TABLE SHOWING NET PROFIT:

Years NET PROFIT


(Rs. Cr.)
FY 2008-09 409.84

FY 2009-10 512.38

FY 2010-11 615.20

FY 2011-12 803.25

FY 2012-13 1055.10

(Source: Financial Statements)

Analysis of Table 5:

The above table indicates the net profit of the bank. In the year 2008 the net profit amounts

to Rs.409.84 Cr. The above table also shows that bank registered highest ever Net Profit of

Rs.1055.10 Crores for FY 2012-13, as compared to Rs. 803.25 Crores for FY 2011-12

with an average increase of 20%-30% since FY 2008-09.See graph below.

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5. GRAPH SHOWING NET PROFIT:

Net Profit

1200
1055.1

1000

803.25
800
615.2
600 512.38 Net Profit

409.84
400

200

0
2008-09 2009-10 2010-11 2011-12 2012-13

(Source: table 5)

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6. TABLE SHOWING THE LEVEL OF NON-PERFORMING


ASSETS:

Years Amount of Total Level of


NPA(Cr) Advances NPA (%)
(Cr)

FY 2008-09 287.51 1.37


20,930.4113

FY 2009-10 64.33 23,057.2250 0.28

FY 2010-11 53.24 26,193.6350 0.20

FY 2011-12 49.34 0.15


33,077.4,215

FY 2012-13 55.27 0.14


39,199.8104

(Source: Financial Statements)

ANALYSIS OF TABLE 6:

The net NPA/advances i.e. level of NPA shows a decreasing trend since FY 2008-09

which is due to aggressive loaning to various sectors particularly to priority sector i.e.

horticulture, agriculture, manufacturing, SMEs etc on one hand and emphasize on write-

offs, OTS, interest remission on other hand in addition to regular follow-ups and vigorous

recoveries. Refer to graph 6.

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6. GRAPH SHOWING THE LEVEL OF NON-PERFORMING


ASSETS:

(Source: table
LEVEL OF NPA (%) 6)
1.6

1.4 1.37
1.2

0.8
LEVEL OF NPA (%)
0.6

0.4 0.28
0.2 0.15
0.2
0.14
0
2008-09 2009-10 2010-11 2011-12 2012-13

7. TABLE SHOWING THE PROPORTION OF NON-PERFORMING ASSETS TO


TOTAL ASSETS:
This expression relates to non-performing assets to the total assets of the Bank. It
indicates how much total assets are locked in the Non-Performing Assets, i.e., interest due
for more than 90 days.

FY FY FY FY FY
Particulars 2008-09 2009-10 2010-11 2011-12 2012-13

Non-performing 287.51 64.33 53.24 49.34 55.27


Assets (Rs. Cr.)

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(Sour
Total Assets ce:
37,693.2618 42,546.7948 50,508.1534 60,269.2203 71,743.3151 Fina
(Rs. Cr)
ncial
State
Non-performing ment
Assets to Total 0.0076 0.0015 0.0011 0.0008 0.0007 s)
Assets

Analysis of table 7:

Since J&K bank is a growing organization, it has achieved a good market share in Indian

banking sector. From above table which indicates the proportion of non-performing assets

to total capital. The ratio calculated for J&K bank indicates that in the year 2008-09 the

proportion of NPA to total assets was 0.0076, which reflects a decreasing trend onwards. It

also conveys that the bank has been successful in reducing level of non-performing assets.

The ratio of non-performing assets to total assets is shown graphically below:

7. GRAPH SHOWING THE PROPORTION OF NON-PERFORMING ASSETS TO


TOTAL ASSETS:

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NIMS INSTITUTE OF MANAGEMENT & COMPUTER SCIENCE
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NPA to Total Assets


0.008 0.0076

0.007

0.006

0.005

0.004
NPA to Total Assets
0.003

0.002 0.0015
0.0011
0.0008 0.0007
0.001

0
YEAR YEAR YEAR YEAR YEAR
(Source: table

7)

8. TABLE SHOWING PROPORTION OF NPA TO TOTAL CAPITAL:

Non-performing Assets to Total capital ratio, indicates how much proportion of the total

capital is threatened by the level of non-performing assets.

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(Sour
ce:
Fina
FY FY FY FY FY ncial
Particulars 2008-09 2009-10 2010-11 2011-12 2012-13 State
ment
Non-performing s)
287.51 64.33 53.24 49.34 55.27
Assets( Rs. Cr)

Ana
Total capital. (Rs. 484,922 484,922 484,922 484,922 484,922
Cr.) lysis
Non-performing
assets to of
0.000593 0.000133 0.00011 0.000102 0.000114
Total capital
tabl

e 8:

Since the tier-I capital of J&K bank is Rs.484,922 crores, due to decreasing trend of net

NPA the portion of capital under threat is continuously decreasing which is almost

negligible during the FY 2012-13. The ratio reflects the strong fundamentals of the bank

and cannot be relied upon without a second thought.

This is also shown in the graph below:

8. GRAPH SHOWING PROPORTION OF NPA TO TOTAL CAPITAL:

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NPA to total Capital


0.000593

0.0006

0.0005

0.0004

0.0003
NPA to total Capital
0.0002 0.000133 0.00011
0.000102
0.0001
0.000114
0
YEAR
YEAR
YEAR
YEAR
YEAR
(Source: table

8)

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Following are the findings of our study of NPA of the five financial years viz., 2008-09,

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2009-10, 2010-11, 2011-12 &2012-13.

1. The current non-performing assets ratio is decreasing year by year and it is less

than standard ratio. It shows it is sufficient from working capital point of view.

2. The banks operation for the year 2012-13 revealed significant increase both in

Net Profit and Gross Profit (profit before provision & contingencies) &

sizeable reduction in Gross & net NPA’s

3. The net non performing assets decreased from Rs.287.51 Crores to Rs. 55.27

crores. As every year it goes on decreasing which shows satisfactory position

of the company.

4. Gross NPA’s for the year ended 31.03.2013 is Rs 1,810.76 crore as against Rs.

1,370.33 crore for the previous year.

5. Net Profit for the year ended 31.03.2013 is Rs1055.10 as against Rs. 803.25

for the previous year, recording increase of net profit, by 31.35%.

6. In keeping with its image of a fast Growing Bank, J&K Bank once again

posted excellent business growth during 2012-13 to reach a total business level

of Rs. 1, 03,421.03 Crores recording an annual growth of 19.67%.

7. The Bank continued its prudent approach in expanding quality credit assets in

line with its policy on Credit Risk Management. The net advances of the Bank

increased by Rs.6, 122.99 Crores from Rs.33, 077.42 Crores, as on 31st March,

2012, to Rs.39, 200.41 Crores, as on 31st March, 2013, a growth of 18.51%.

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8. The Bank’s performance in the recovery of NPAs during the year continued to

be good. The Bank effected cumulative cash recovery; up gradation of NPAs

and technical write-off of Rs.327.83 Crores, compared to Rs.316.91 Crores in

the previous year.

9. The gross advances of the Bank, as on 31st March, 2013, stood at Rs.39,

200.41 Crores, as against Rs. 33,077.42 Crores on the corresponding date of

the previous year, recording a growth of 18.51%

10. The priority sector advances of the Bank, as on 31st March, 2013, stood at Rs.

600.50 Crores, as against Rs.460.56 Crores on the corresponding date of the

previous year, recording a growth of 30.38%. Portion of advances to the

priority sector accounts for 69.91% of total advances, much above the

benchmark of 60%.

The problem of Non-performing assets has been a headache for the banking industry,

because it causes two fold impacts on the profitability of a bank. On one hand the bank

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ceases to earn interest on the assets and then is deprived of its legitimate income from the

assets. On the other hand, the bank is required to make provisions for these assets

depending on the classification/category of the assets and value of security, if any; this

further erodes the profitability of the bank. The RBI, which is the apex bank to control the

level of Non-performing assets has been giving regular guidelines and getting norms for

the banks, in order to control the incidence of defaults by introducing the system of assets

classification and provisioning in line with International Practices for the first time in

1993, which under event several changes during last two decades.

This study on management of Non-performing Assets with specific reference to J&K Bank

was conducted to find out the reasons for the increase of Non-Performing Assets and how

public sector banks manage it and its effect on the performance of the bank.

The study reveals that J&K bank has almost been successful in controlling its level

of NPA by making timely provision for NPA. The analysis of the studies indicates that the

current non-performing assets ratio is decreasing year by year and it is less than the

standard ratio. Also less capital is locked in NPA which implies that working capital

management of the bank is satisfactory.

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1. The bank branches should be provided with adequate human resources/officers

who should exclusively deal with NPA management. They should be exclusively trained

to deal with such assets with strict supervision from higher authorities.

2. In case of chronic defaulters, if the assets are backed by some security of

immovable property charged to back in the form of equitable or registered mortgaged,

SARFESI Act should be emphasized (executed) with the help of legal discourse through

courts.

3. Branch managers/cluster heads should organize routine meetings with defaulters,

so as to provide counseling with the help of experts, regarding perilous repercussions of

NPA on their individual/business reputation and as a whole on total social setup.

4. In case of doubtful-III and loss assets write-offs and OTS should be emphasized.

5. Banks should be very aggressive in recovering the debts. Bankers should keep an

eye on potential (likely) NPAs; timely follow ups can save banks from bigger slippages.

6. Bank should thoroughly check the credit worthiness of the borrowers before

lending in order to minimize the risk.

7. Bank should lure defaulters by providing, incentives or other type of benefits e.g;

interest remissions etc so that customers come forward for settlements.

8. Bank should Act judiciously in dealing with different customers and not blindly

follow the rules of thumb.

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9. Bank should follow certain principles of lending not only at the pre-sanction stage

but at the post disbursement stage also. These basic principles include the safety of the

advances, purpose for which the loan is granted, liquidity, security and profitability.

10. The staff must be trained to assess the borrower’s efficiency in order to avoid the

wrong selection of borrowers.

11. Bank should monitor NPA accounts on daily basis at branch level which will help

to reduce the level of NPA.

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AS ON AS ON AS ON AS ON AS ON
CAPITAL & 31-03-2009 31-03-2010 31-03-2011 31-03-2012 31-03-2013
(In RS. “000”) (In RS. (In RS. (In RS. (In RS.
LIABILITIES “000”) “000”) “000”) “000”)

Capital 484,922 484,922 484,922 484,922 484,922


Reserves & surplus 25,743,684 29,619,706 34,301,946 40,446,869 48,162,020

Deposits 330,041,036 372,371,604 446,759,350 533,469,016 642,206,195

Borrowings 9,966,265 11,002064 11,046,502 12,409,572 10,750,000

Other Liabilities and 10,696,711 11,989,652 12,488,814 15,881,824 15,830,014


provisions
Total 376,932,618 425,467,948 505,081,534 602,692,203 717,433,151

Assets

Cash and balance with 23,029,505 27,447,263 29,749,638 27,836,539 26,951,472


RBI
Balance with bank 29,718,115 18,695,109 5,738,477 16,702,140 27,091,812

Investments 107,363,347 139,562,473 196,957,679 216,243,188 257,410,654

Advances 209,304,113 230,572,250 261,936,350 330,774,215 392,004,104

Fixed Assets 1,994,143 2,041,332 3,937,702 4,202,704 4,561,791

Other Assets 5,523,395 7,149,521 6,761,688 6,933,417 9,413,318

Total 376,932,68 425,467,948 505,081,534 602,692,203 717,433,151

Contingent liabilities 91,409,177 114,992,485 255,176,641 150,660,768 322,827,985

Bills for collection 9,490,429 5,922,643 14,616,755 9,203,354 8,959,964

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AS ON AS ON AS ON AS ON AS ON
Income 31-03-2009 31-03-2010 31-03-2011 31-03-2012 31-03-2013
(InRS.“000”) (In RS. (In RS. (In RS. (In RS.
“000”) “000”) “000”) “000”)
Interest Earned 29,881,197 30,568,791 37,131,322 48,355,773 61,368,010

Other Income 2,450,539 4,162,357 3,647,562 3,341,232 4,837,264

Total 32,331,736 34,731,148 40,778,884 51,697,005 66,205,274

Expenditure

Interest Expended 19,878,612 19,375,430 21,694,685 29,972,224 38,207,570

Operating Expenses 4,708,607 5,773,672 7,589,318 8,021,519 9,890,151

Provisions And 3,646,162 4,458,258 5,342,862 5,670,757 7,556,571


Contingencies
Total 28,233,381 29,607,360 34,626,865 43,664,500 55,654,292

Net Profit 4,098,355 5,123,788 6,152,019 8,032,505 10,550,982

Total 32,331,736 34,731,148 40,778,884 51,697,005 66,205,274

Apropriations
Transferred To
Statutory Reserve 1,023,389 1,288,947 1,538,005 2,008,126 2,637,746

Capital Reserve _ _ _ – –

Trf. From Revenue _ _ _ – (487,5000)


And Other
Reserves(For Special
Reserve Fy 2011-12)
Revenue And Other 2,115,992 2,587,075 3,144,235 4,136,797 4,283,677
Reserves
Investment Reserve _ _ – 49,629

Special Reserve _ _ – 1,231,600

Proposed Dividend 819,671 1,066,512 1,260,423 1,624,006 2,423,890

Tax On Dividend 139,303 181,254 209,356 263,576 411,940

Total 4,098,355 5,123,788 6,152,019 8,032,505 10,550,982

Earnings Per Share 84.54 105.69 126.90 165.69 217.65

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BOOKS REFERED:

S. No Title of the book Author Publication


1 Financial Management Prasanna Tata Mc Graw Hill
Chandra
2 Financial Management Reddy And Vikas Publishers
Appaniah
3 Financial Management R.K.Sharma Kalyani Publishers
And
Shashi.K.Gupta
4 Hand Book of Banking N.S. Toor Skylark Publication
Information

WEB SITES:

Sl. No Websites
1 www.jkbank.net
2 www.moneycontrol.com
OTHER REFRENCES:

Sl. No Title

1 Annual Report 31st Mar’12

2 Annual Report 31st Mar’13

3 Annual Report 31st Mar’11

4 Annual Report 31st Mar’10

5 Annual Report 31st Mar’09

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