NPA Management

Management of non performing assets (NPAs) and other stressed assets continues to be one of
the biggest challenges facing the Indian banking industry impacting the profitability of the banks.
To tackle the mounting stressed assets, RBI has undertaken several initiatives. These include
creating an empowered Joint Lenders’ Forum (JLF) for identification of incipient stress,
introducing restructuring mechanism under the Strategic Debt Restructuring (SDR) scheme,
enabling flexible refinancing under 5:25 scheme, easing norms around sustainable structuring of
stressed assets (S4A), and revising guidelines for their sale.

FY 2017 had been a challenging year for our Bank also in terms of stress in asset quality. The
movement in stressed book of the Bank during the year was as under:

(Rs crore)

Title FY 2016 FY 2017(16-17

Gross NPA 40,521 42,719

Gross NPA Ratio 9.99% 10.46%

Net NPA 19,407 18,080

Net NPA Ratio 5.06% 4.72%

Additions to NPAs 27,828 13,312

Recovery / Upgradations 2,015 6,766

Write offs including TWOs 1,554 4,348

Recoveries in Written off Accounts 221 327

Provision Coverage Ratio (Including TWO) 60.09% 66.83%

Provision Coverage Ratio (Excluding TWO) 52.11% 57.68%

The breakup of advances portfolio of our Bank as per asset classification as of March 31, 2017
was as under-

(Rs crore)

Asset Category (Gross) March 31, 2016 March 31, 2017

 Standard 3,64,996 3,65,792

Gross NPA 40,521 42,719

Total 4,05,517 4,08,511

Gross NPA comprising of:

Sub-Standard 11,569 8,804

Doubtful 25,766 29,186

Loss 3,186 4,729

Total Gross NPA 40,521 42,719

Our Bank has developed a comprehensive organizational structure for recovery and credit
monitoring across different levels and taken a number of measures to strengthen systems and
processes to manage stressed assets which include:

 Set up of legal war-room for real-time tracking of recovery proceedings and to aid accelerated
decision making (~140 high value suit-filed accounts being monitored)
 Strengthening Bank’s legal/ fraud investigation capabilities and ability to handle recovery cases
enhanced through onboarding of external experts
 39 accounts identified for action under Indian Bankruptcy Code (IBC), of which, 13 cases have
been filed in NCLT and tracked through war-room
 ‘Solution provider’ cell setup to provide resolution strategies for stressed accounts, with
currently 65 large NPA accounts with exposure above Rs. 100 crore under process of being
resolved
 Collections call center setup (~200 agents) for retail loans with multi-lingual support and
augmented with feet-on-street staff to drive on-ground collections
 900-member strong Bank taskforce deployed for NPA and potential NPA recovery in small
accounts
 Business Correspondents incentivized for crop loan collections
In addition Bank has in place the following measures on ongoing basis towards recovery of non
performing assets:

 Assigning Nodal Officer at each of DRT for follow-up of legal cases on daily basis so as to
minimize the delay in obtaining decrees and execution and maximize recoveries.
 For recoveries in all DRT Suit filed NPA accounts, the assets charged to the Bank are sold
through e-auction to get fair market value.
 Recovery Agents for assisting in taking possession of assets & other pre/post sale activities
 Consultants to liaise with Official Liquidators (OL) to get the recoveries realized by OLs.
 Maximum participation in National Lok Adalats is ensured to expedite recovery in suit filed &
non suit filed NPA accounts.
 Recovery Camps were regularly conducted by our Bank’s branches to recover & reduce long
pending cases and expedite recoveries in small accounts.
 Special incentive scheme named “Sankalp-X” Scheme was launched during the year to intensify
recovery efforts of smaller value accounts with an outstanding up to Rs. 25 laks. Cash recovery
made during FY 2017 under the scheme was at Rs. 116.88 crore.
 Monitoring of large value of NPA accounts of Rs. 1 crore and above directly from Corporate
Office.
While our Bank has taken steps to strengthen systems and processes to manage stressed assets, it
has been proactive in providing against non performing assets. Provision Coverage Ratio (PCR)
of the Bank including provision held for technically written off (TWO) accounts was 66.83%
while PCR excluding provision for TWO accounts was 57.68%. With better provision coverage
ratios, our Bank is better positioned to take decisive actions for resolution of stressed assets
issue.

The Insolvency and Bankruptcy Code, 2016 and amendment of Banking Regulation Act, 1949
Enactment of the Insolvency and Bankruptcy Code, 2016 by the Parliament and promulgation of
the NPA ordinance amending Section 35 A of Banking Regulation Act and empowering the RBI
to direct banks to tackle the NPA problem by either intervening directly or by appointing
oversight committees are latest important steps taken by the Government to address the issue of
NPAs in the banks. The Insolvency and Bankruptcy Code aims to consolidate and amend the
laws relating to reorganization and insolvency resolution of corporate persons, partnership firms
and individuals. It provides for a time bound Corporate Insolvency Resolution (CIR) Process for
all corporates prior to liquidation, during which creditors have the ability to consider measures to
resolve the financial distress of the corporates and to maintain and preserve its continued
business operations by framing a plan referred to as a resolution plan. A period of 180 days has
been prescribed for the purpose of completion of the entire CIR process with a further extension
of 90 days in exceptional cases.

The code provides resolution with minimum involvement of NCLT and other authorities. The
entire resolution will be carried out by the professionals (Insolvency Professionals) and the
committee of creditors will have pivotal role who will decide the direction of resolution process.
Further, the secured creditors will have priority over Crown Debts (Government Dues). The
Code will help the banks to reduce time frame for resolution of NPAs and getting fair value for
assets.

Our Bank has identified 39 accounts where Insolvency Resolution Process can be initiated under
the Code of which, 13 cases have been filed in NCLT.
Credit Monitoring
Our Bank has the system of monitoring of advance accounts at various levels
(Branch/Region/Zone and Corporate) to prevent slippages and to take timely corrective actions
to improve asset quality. Credit Monitoring vertical at the Corporate Office enables early
identification of weakness/ potential default/incipient sickness in the advance accounts for
initiating suitable and timely corrective actions for preventing impairment in advance accounts /
deterioration in credit quality. Accounts with incipient stress are identified under Special
Mention Accounts (SMA) categories of SMA0, SMA1 and SMA2.

All SMA2 accounts are followed up for the formation of the Joint Lenders Forum (JLF) and
options to resolve stress under Corrective Action Plan are explored by way of rectification,
restructuring and recovery. The vertical also undertakes identification of suitable cases under
restructuring/ Strategic Debt Restructuring (SDR)/ 5:25 refinancing/ Scheme for Sustainable
Structuring of Stressed Assets (S4A).

The Position of Restructured Assets and SDR and S4A Scheme are as under:

(Rs crore)

Total
Restructured Of the total
advances restructured advances

Accounts Accounts
under SDR under S4A

Sr Asset March 31, March 31, March 31,

No. Categorization 2017 2017 2017

No.of
Borrowers 11,820 12 9
Restructured
Standard Amount
1 Advances Outstanding 10,784.53 2,754.18 2,160.15

No.of
Borrowers 26,129 24 1

Restructured Amount
2 NPAs Outstanding 14,914.98 3,977.68 118.44

No.of
3 Borrowers 37,949 36 10
 Total
Restructured Amount
Advances Outstanding 25,699.51 6,731.86 2,278.59
The position of Assets under Flexible restructing (5/25 scheme) are as under:

(Rs crore)

Particulars Year ended March 31, 2017

Number of borrowers under flexible structuring 11

Amount of loans taken up for flexible struturing 5,932.59

-Standard 2,275.00

-NPA 3,657.59
Follow up of accounts of Rs. 1 crore and above is done by way of Monthly Monitoring Reports
for taking timely corrective actions. The monitoring is carried on line web based platform. Based
on the MMRs, various parameters like information on short reviews, overdues, credit turnovers,
credit ratings, pending stock statements, observations in stock audits and credit audits, pending
legal audits, insurance coverage and LC’s devolved and Bank guarantees invoked are monitored.
Follow up actions are taken for ensuring expeditious review of accounts, rectification of
irregularities, compliance of terms and conditions in high value advance accounts for
maintaining the health of credit portfolio.

Bank is in the process of implementing Early Warning Signals System solution which would
receive data from Bank’s internal systems viz. core banking system, risk rating system as well as
external sources like internet, social Media, credit bureaus, rating agencies and other external
sources to provide early warning signals for monitoring of credit and taking timey remedial
actions.

Information Technology (IT)

Our Bank has best of technology infrastructure and a stateof- the-art Data Centre conforming to
Uptime Institute Tier-3 standard and a Disaster Recovery Site in different seismic zone with
redundancy built in every single point of failure to ensure uninterrupted banking service delivery
to customers. In addition to the Disaster Recovery Centre, Bank has also implemented the Near
Disaster Recovery Centre to ensure Near Zero Data Loss as part of its Business Continuity
Planning and Disaster Recovery strategy.

Bank has been undertaking regular capacity planning and upgrades to support growing demand
of business at various service delivery channels. Bank has implemented Enterprise Management
System and modules have been deployed to effectively manage and monitor Bank’s growing IT
infrastructure.
 Bank has deployed a centralized IT architecture to provide the Core Banking Solution (CBS) and
other application platform to all its domestic branches and 23 overseas territories, providing ease
of management & monitoring and optimization of resources. Bank’s Regional Rural Banks
(RRBs) are also on the CBS Platform with delivery channels. Bank has initiated the upgradation
of Core Banking Solution (CBS) to Finacle 10.x and e-banking upgradation to 11.x.

Bank has initiated implementation of following solutions to provide new products to the
customers and digitizing the core operating processes:

 Supply chain finance solution to provide integrated commercial and financial solutions to the
supply and distribution channels of corporates. Supply chain financing would support to the
commercial relationship between the clients and their suppliers and customers.
 A new and comprehensive retail Internet Banking Solution across account services and delivery
channels which will help in driving the Digital India initiative. The solution would provide the
customers with access to the new state-of-the-art payment and communication infrastructure.
 Loan Management System to streamline loan origination and tracking process. The solution will
enable end to end processing of loan proposals using image based workflow and Business
Process Management (BPM) to digitize the processes and improve TAT.
 Fraud Risk Management System (FRMS) solution which will provide enterprise wide fraud
detection and prevention covering the risks associated with indicative list of channels and
applications under online and/ or offline mode. The solution covers prevention and detection of
frauds at different process stages of the below mentioned applications and channels for all types
of transactions.
 Early Warning Signals System (EWS) solution which would receive data from Bank’s internal
systems viz. core banking system, risk rating system as well as external sources like internet,
social Media, Information from credit bureaus, rating agencies and other external sources to
provide early warning signals for monitoring of credit and taking timey remedial actions.
 Bank is also creating analytics center of excellence to reap benefits of analytics capabilities
across various line of businesses such as marketing, planning, retail business, risk, fraud, security
and compliance.
 Bank has embarked upon the journey of cloud adoption. In this direction Bank has implemented
public and hybrid cloud services for many communication and collaboration technology
solutions. Bank has also implemented archival solution for email communication to strengthen
the compliance.
 Bank has continuous endeavor to bring more value to its customers by way of implementing
technology innovations. In this direction, Bank is working with technology innovations such as
Robotics Process Automation, Block Chain Technology and Artificial Intelligence to bring more
efficiency and transparency in the business process.
In addtion to the above, Bank implemented Unified Payments Interface (UPI) which offers
architecture and a set of standard Application Programming Interface (API) specifications to
facilitate online payments. It aims to simplify and provide a single interface across all NPCI
systems besides creating interoperability and superior customer experience.
Bank has also implemented Internet Payment Gateway (IPG) which is a payment and settlement
system for a merchant to collect payment from their customer for online sale of products or
services.

For liabilities account opening, our Bank has implemented scan based account opening which
scan forms and exports through Omniscan 3.1 instead of sending the physical copy of the same.
The purpose of this migration project is to bring down the TAT of account opening process.

Cyber Security

Over the years, Bank has built a strong foundation of cyber security comprising a comprehensive
set of information security measures to counter against cyber-attacks. To further strengthen
security posture, Bank is in process of implementing advanced technology solutions in the area
of Network Security, Server Security, Application Security and Security Analytics. Bank’s Data
Centre and DR operations are certified to ISO27001 standard which is a set of international best
practices in the field of information security and provides assurance to all the stakeholders.

Bank has captive Security Operations Centre, which is equipped with advanced tools to monitor
Cyber security events. Security operations centre operates on 24X7 basis and continuously
monitors activities on Servers, Network devices, Security devices, Critical databases etc. for
security violations. Periodic security assessments are conducting through in-house qualified
professionals as well as outside auditors. Identified vulnerabilities are quickly closed.

Bank monitors phishing websites and fraudulent mobile apps. In case of observance of any
phishing site or fraudulent mobile app, the same is taken down. This protects our customers from
sharing their sensitive information and credentials on fake websites and on rogue mobile
applications.

Bank is in touch with Governmental agencies and industrial bodies such as Cert-In, NCIIPC,
RBI-CSITE, IDRBT etc. and receiving threat/vulnerability advisories from such bodies and
quickly acting upon it. To ensure preparedness against probable cyber threats, Bank is actively
participating in the cyber security drills conducted by Cert-In, IDRBT, RBI-CSITE.

Digital Transformation
Our Bank’s Digital Banking team has been making significant progress as part of our efforts to
take forward the Bank’s Digital Transformation which is taking place against the backdrop of
several growth stimuli being driven by the Government such as Start up India, Digital India and
Make in India. Our favourable demographic dividend along with deepening of mobile
penetration has created the enabling factors to usher in the Digital Revolution in our country,
which has disrupted the banking and financial services landscape. As more and more of our
customers look to transition to cashless modes of payment, Bank seeks to handhold and guide the
customers through this journey.

Bank has been at the forefront of innovation through the following:

Digital Portable Branch

Our Bank has evolved an innovative concept of pre-fabricated banking outlet equipped with Self
Service machines to meet routine customer requirements and space for 2-3 officials/ BCs for a
face to face interaction/ handholding. These outlets are highly secure, conducive to varying
weather conditions and are conceptualized to offer 24x7 convenient banking facilities. Self
Service machines are designed to offer Instant Account opening, Debit Card dispensation, Cash
withdrawal, Passbook updation, Funds transfer, Utility Bill payment, Account based enquiry
services etc.

Bank opened the First Digital Portable Branch in September 2016 at Bhagesara Village in
Pratapgarh District, located in the Sultanpur Region in the state of Uttar Pradesh. This Digital
Branch has the state-of-the art digital technology available for usage of the residents in the
hinterland - an Automatic Account Opening Machine, a Pass Book Printer and an ATM. This
innovative initiative of our Bank has been lauded by the local people and is being expanded
further in this financial year. This was achieved on the back of well co-ordinated team work
given the leadership of our Zonal, Region and Branch office in Eastern UP, supported by the
Corporate Office departments including Digital Banking, Facilities Management and
Technology.