Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
Methodology
1. Primary data
-Interaction with the branch manager
-observation
2. Secondary data
- Cream software
- Financial reports
- Internet
- Bank magazines
Part B 12-17
➢ Types of loans
➢ Credit facilities
Part C 18-47
➢Introduction to non performing assets
➢Meaning of non performing assets
➢Classification of assets
➢Reasons for an account becoming NPA
➢Techniques used in reduction of NPAs
➢Provisions
➢Impact of NPA
➢Preventative measures
➢Guidelines for preventing slippage of NPA accounts
➢Asset classification as tool kit to bring down the branch
NPAs to the minimum.
➢ Income recognition
➢ Global developments and NPA
➢ Factors for rise in NPAs
Part E 67-72
➢ Findings
➢ Recommendations
➢ conclusions
Bibliography
In July 1969, Bank of Maharashtra was nationalized along with 13 other banks.
After nationalization, the Bank expanded rapidly and today its branch network comprises
of 1444 branches and 30 extension counters spread over 22 states and 2 union territories
Bank of Maharashtra has the largest network of branches by any Public sector bank in the
state of Maharashtra
In the year 2004 the bank came up with initial public offering. Bank of
Maharashtra has altogether 1444 branches all over India. The total turnover is 90,000
crores. Now it has 345 ATMs and 902 CBS branches. The bank has achieved 100% CBS
coverage.
Mission
To ensure quick and efficient response to customer expectations.
The Pillar
The Diyas
Our Branches- Symbolising service.
Our Aims
The bank wishes to cater to all types of needs of the entire family, in the whole country.
Its dream is "One Family, One Bank, Bank of Maharashtra ".
The Autonomy
The Bank attained autonomous status in 1998. It helps in giving more and more services
with simplified procedures without intervention of Government.
▪ S M E branches - 14
▪ Agro High-Tech branches - 4
▪ Industrial Finance branches - 2
▪ Overseas branches - 2
▪ Treasury & international Banking - 1
▪ Pension Branch -1
▪ Govt Business Branch - 1
▪ Bank has 28 FEX centers to handle FEX business.
▪ Toll Free telephones at 11 major Metro centers.
▪ The bank is shouldering the responsibility of lead bank in six districts viz. Satara,
Pune, Thane, Nasik, Aurangabad and Jalna. Our bank is also convening State
Level Bankers’ Committee and various development issues are taken up to
implement the state credit plan and achieving the targets under various
Government sponsored schemes.
▪ The Bank has set up a Trust viz. Mahabank Agricultural Research and Rural
Development Foundation (MARDEF), which is engaged in providing Credit Plus
services to the farmers in specific specialised fields like commercial dairy, Emu
farming, sericulture, organic farming, etc.
▪ The Rural Development Centers at Bhigwan and Hadapsar in Pune District
undertake various labs to land programs on improved technologies. A fully
fledged soil-testing lab is being set up for the benefit of the farmers to go in for
high-tech agriculture.
▪ To provide activity specific training to educated unemployed youth, Bank has set
up five Mahabank Self Employment Training Institutes (MSETI) at Pune,
Organizational Structure
The bank has 3 tier organization structures.
Head office of the bank is located in Pune and regional office will be there exercised
immediate supervision and control over the branches under their jurisdiction or regional
officers are headed by experience executives in the senior/ top management grade. There
are 44 regional offices.
1. Education loan
It is given to students to wish to study in India or abroad. The student should be an Indian
citizen. He should have secured a seat through an entrance test or merit basis selection.
The rate of interest for this loan is 10.25%.
2. Housing loan
The purpose of this loan is to build a house, purchase a house/flat or make repairs to the
existing house. It is given to salaried persons, professionals, businessmen, farmers and
resident Indians. There is no maximum limit for urban areas. But for rural areas it is 15
lakhs. The rate of interest is 9.25%.
4. Consumer loan
The purpose of this facility is to cultivate the crops, meeting the short term credit
needs of farmers for crop production and maintenance of farm equipments. The
agriculturists should own an agriculture land to get this facility. The amount lend is
decided by district technical committee. The security taken is hypothecation of
crops/assets or mortgage of land. Under this scheme insurance is given to crops.
The purpose of this facility is for digging new wells, revitalization of existing wells,
purchase of oil engine, electric motor, etc. the agriculturists should own a agriculture
land. The amount given is as per NABARD unit costs. Hypothecation of movable
assets or mortgage of land is taken as security. The repayment period is 7 to 11 years.
iv.Animal husbandry
v.Horticulture
The purpose is cultivation of fruit crops like mango, pomegranate, grapes, etc. the
amount given is as per NABARD unit costs. The repayment period is 15 years. The
security needed is mortgage of land or hypothecation of crops.
The eligibility for this scheme is small, marginal or tenant farmers. The maximum
amount given is 15 lakhs. The repaying period is as per the capacity of the borrower
or incremental income. The security taken is hypothecation of crops or mortgage of
land.
The purpose is to purchase a two wheeler. The eligibility is that the agricultural
income should be above Rs 50000. The maximum amount given is Rs 50000. The
repayment period is 3 to 5 years.
Collateral free loan up to 10 lakhs is given. The loan is offered to Micro, Small and
Medium enterprises.
7. Solar loans
The purpose of this loan is to install solar home systems for domestic and commercial
use. The maximum amount given for domestic users is Rs 25000 and for entrepreneurs is
Rs 200000. The rate of interest is 12.5%. The repayment period 5 years.
8. Personal loans
The purpose is to meet the personal expenses. The maximum amount is 1.50 lakhs. The
rate of interest is 14%. The processing fee charged is 1% of loan amount. The eligibility
is salaried or professionals.
1. Cash credit
It is a short term cash loan to a company. The bank provides this type of credit facility
only after required security is given to secure the loan. Once the security for repayment
has been given the company that receives the loan can continuously draw from the bank
up to a specified amount.
2. Overdraft
It is given when then the withdrawals from a bank account exceed the available balance.
3. Term loans
These are commercial loans. They carry fixed interest rates. The repayment schedule is
monthly or quarterly.
4. Bill discounting
The bank buys a bill i.e. a bill of exchange or a promissory note before its due and credits
the value of the bill after a discounts charge to a customers account. The transaction is
practically an advance against the security of the bill and discount represents the interest
on the advance from the date from the purchase of the bill until it’s due for payment.
The world is going faster in terms of services and physical products. However it
has been researched that physical products are available because of the service industries.
In the nation economy also service industry plays vital role in the boosting up of the
economy. The nations like U.S, U.K, and Japan have service industries more than 55%.
The banking sector is one of appreciated service industries. The banking sector plays
larger role in channelising money from one end to other end. It helps almost every person
in utilizing the money at their best. The banking sector accepts the deposits of the people
and provides fruitful return to people on the invested money. But for providing the better
returns plus principal amounts to the clients; it becomes important for the banks to earn.
The main sources of income for banks are the interest that they earn on the loans that
have been disbursed to general person, businessman, or any industry for its development.
Thus, we may find the input-output system in the banking sector. Banks first, accepts the
deposits from the people and secondly they lend this money to people who are in the need
of it. By the way of channelising money from one end to another end, Banks earn their
profits.
However, Indian banking sector has recently faced the serious problem of Non
Performing Assets. This problem has been emerged largely in Indian banking sector since
three decade. Due to this problem many Public Sector Banks have been adversely
affected to their performance and operations. In simple words Non Performing Assets
problem is one where banks are not able to recollect their landed money from the clients
or clients have been in such a condition that they are not in the position to provide the
borrowed money to the banks.
The problem of NPAs is danger to the banks because it destroys the healthy
financial conditions of the them. The trust of the people would not be anymore if the
banks have higher NPAs. So. The problem of NPAs must be tackled out in such a way
that would not destroy the operational, financial conditions and would not affect the
image of the banks. Recently, RBI has taken number steps to reduce NPAs of the Indian
KLS’s, Institute of Management Education & Research, Belgaum Page 22
banks. And it is also found that the many banks have shown positive figures in reducing
NPAs as compared to the past years.
1. Performing assets
It means an asset which continues to generate income to the bank
An asset becomes a non performing asset when it does not generate income. Non
Performing Asset means an asset or account of borrower, which has been classified by a
bank or financial institution as sub-standard, doubtful or loss asset, in accordance with the
directions or guidelines relating to asset classification issued by The Reserve Bank of
India.
RBI has given some guidelines to decide as to when an asset becomes non performing.
These guidelines are as follows.
a) Term loans
When the interest or installment of principal remains unpaid for a period of more
than 90 days. The term loan becomes non performing
E.g.: suppose of the total term loans of Rs 20,00,000 as at 31-3-2007 the interest
remains unpaid on a loan amount of Rs 1,00,000 for a period of more than 90
days. In this case 1,00,000 becomes non performing asset and the balance i.e.
19,00,000 is performing asset.
ii. Though the outstanding balance is less than the sanctioned limit there are no
credits continuously for more than 90 days as on the date of balance sheet or
the credits during the aforesaid period is not enough to cover the interest
during the current period.
d) Agricultural advances
In the case of agricultural advances if the interest or installment or principal
remains overdue for two harvest seasons but for a period not exceeding two half
years such agricultural advances become non performing asset.
e) Other accounts
In case of other accounts if the amount remains overdue for a period of more than
90 days such other accounts are treated as non performing assets.
It should be noted that the non performing assets are determined borrower wise and not
facility wise. Therefore if the facilities granted to a borrower becomes non performing all
the facilities become non performing irrespective of the performing status of other
facilities. The identification of non performing asset is to be made on the basis of the
above position as on the date of the balance sheet.
The object of the above classification is that the international practice is now to
classify the assets into performing assets and non performing assets. Income is recognized
1. Standard assets
It is not a non performing asset. It carries normal risk.
2. Sub-standard asset
It is an account which remained non performing asset for a period less than or equal to 12
months. This account has credit weakness. If it is not rectified it may affect the recovery
of the debt in the long term.
3. Doubtful assets
It is an asset which remained non performing for a period of more than 12 months.
However if the account has any threat to recovery due to erosion in the value of the
security or frauds committed by the borrowers then it will be classified as doubtful asset
without waiting for the above said period of 12 months. It carries high risk.
4. Loss asset
A loss asset is one where the loss has been identified by the bank or by the auditors or by
RBI after inspection. This asset is considered as uncollectible.
* Internal factors
* External factors
Internal factors:
1. Funds borrowed for a particular purpose but not use for the said purpose.
5. In-ability of the corporate to raise capital through the issue of equity or other debt
instrument from capital markets.
6. Business failures.
9. Deficiencies on the part of the banks viz. in credit appraisal, monitoring and
follow-ups, delay in settlement of payments\ subsidiaries by government bodies
etc.,
3. Industrial recession.
5. Failures, non payment\ over dues in other countries, recession in other countries,
adverse exchange rates etc.
6. Government policies like excise duty changes, Import duty changes etc.
➢ Sending notices on due dates. i.e. through ordinary, registered and legal. The bank
sends notices to borrowers. The notices contain the due dates. The various forms
of sending these notices are ordinary, registered and legal. The borrowers have to
reply to such notices. And further they have started making the repayments.
➢ Compromises
It includes waiver, interest reduction. The bank talks with the defaulter and does
some compromises like interest reduction, waiver, etc. by this way the amount is
recovered.
➢ The assessment made by the inspecting officer of the RBI is furnished to the bank
to assist the bank management or the statutory auditors in taking a decision in
regard to making adequate provision in terms of the prudential guidelines.
➢ The bank raises the provision on standard assets from 0.25% to 0.40% to
agriculture and MSMEs.
➢ The ‘unsecured exposures’ which are identified as sub standard would attract an
additional provision of 10%.
➢ For these assets 100% provision is made. They are generally written off.
NOTE:
1. The total provisions are Rs 24,22,323.
Liquidity:-
Money is getting blocked, decreased profit lead to lack of enough cash at hand which lead
to borrowing money for shot\rtes period of time which lead to additional cost to the
company. Difficulty in operating the functions of bank is another cause of NPA due to
lack of money. Routine payments and dues.
Involvement of management:-
Time and efforts of management is another indirect cost which bank has to bear due to
NPA. Time and efforts of management in handling and managing NPA would have
diverted to some fruitful activities, which would have given good returns. Now day’s
banks have special employees to deal and handle NPAs, which is additional cost to the
bank
Credit loss:-
Bank is facing problem of NPA then it adversely affect the value of bank in terms of
market credit. It will lose its goodwill and brand image and credit which have negative
impact to the people who are putting their money in the banks.
Longer the delay in response, grater the injury to the account and the asset. Time is a
crucial element in any restructuring or rehabilitation activity. The response decided on the
basis of techno-economic study and promoter’s commitment, has to be adequate in terms
of extend of additional funding and relaxations etc. under the restructuring exercise. The
package of assistance may be flexible and bank may look at the exit option.
While financing, at the time of restructuring the banks may not be guided by the
conventional fund flow analysis only, which could yield a potentially misleading picture.
Appraisal for fresh credit requirements may be done by analysing funds flow in
conjunction with the Cash Flow rather than only on the basis of Funds Flow.
Management Effectiveness:-
The general perception among borrower is that it is lack of finance that leads to sickness
and NPAs. But this may not be the case all the time. Management effectiveness in
tackling adverse business conditions is a very important aspect that affects a borrowing
unit’s fortunes. A bank may commit additional finance to an ailing unit only after basic
viability of the enterprise also in the context of quality of management is examined and
confirmed. Where the default is due to deeper malady, viability study or investigative
audit should be done – it will be useful to have consultant appointed as early as possible
to examine this aspect. A proper techno economic viability study must thus become the
basis on which any future action can be considered
Longer the delay in response, grater the injury to the account and the asset. Time is a
crucial element in any restructuring or rehabilitation activity. The response decided on the
basis of techno-economic study and promoter’s commitment, has to be adequate in terms
of extend of additional funding and relaxations etc. under the restructuring exercise. The
KLS’s, Institute of Management Education & Research, Belgaum Page 36
package
of assistance may be flexible and bank may look at the exit option.
While financing, at the time of restructuring the banks may not be guided by the
conventional fund flow analysis only, which could yield a potentially misleading picture.
Appraisal for fresh credit requirements may be done by analysing funds flow in
conjunction with the Cash Flow rather than only on the basis of Funds Flow.
Management Effectiveness:-
The general perception among borrower is that it is lack of finance that leads to sickness
and NPAs. But this may not be the case all the time. Management effectiveness in
tackling adverse business conditions is a very important aspect that affects a borrowing
unit’s fortunes. A bank may commit additional finance to an ailing unit only after basic
viability of the enterprise also in the context of quality of management is examined and
confirmed. Where the default is due to deeper malady, viability study or investigative
audit should be done – it will be useful to have consultant appointed as early as possible
to examine this aspect. A proper techno economic viability study must thus become the
basis on which any future action can be considered
At the behest of the BFS, a study was conducted on slippage of non-performing accounts
from sub-standard to doubtful/loss categories. A suggested framework of
recommendations, prepared on the basis of the study, was circulated among banks for
feedback and comments. Based on the response to these draft recommendations, the final
recommendations for preventing slippage of NPA accounts were forwarded to banks in
September 2002. A system of early recognition with timely and adequate intervention
was suggested.
In this context, it was also suggested that banks may introduce a new asset category called
'Special Mention Accounts' between 'Standard' and 'Sub-standard' for their own internal
monitoring and follow-up, in line with international best practices but keeping in view the
local requirements. An asset may be transferred to this category once the earliest signs of
sickness/ irregularities are noticed. This would help banks to look at accounts with
potential problems in a focused manner right from the onset of the problem, so that
monitoring and remedial actions can be more effective. Banks which already have a
designated asset category on the lines of 'special mention assets' may continue the same
on the basis of their internal norms.
Special mention assets would not require provisioning, as they are not classified as NPAs.
Their main purpose is to alert management to the possibility of such an account turning
bad, thus triggering preventive action well in time. These guidelines are aimed at
providing a common minimum framework to tackle the problem of slippage of NPAs and
it is expected that banks will work out their strategic responses in keeping with the broad
thrust of the guidelines.
ix) Seasonal activities-monitor the recovery in the account and ensure recovery
effort coincides with the time of revenue inflow.
x) Be aware of the danger signals received from the borrowers about the problem
loans. Preventive and curative action should be taken immediately.
xi) Do not be just satisfied and let lose the good borrowers. Complacency towards
existing good borrowers may lead to account turning NPAs later.
ii) Issues raised by advocates should be tackled to get the suits disposed of and
executive the decreased so obtained to reduced the NPAs.
iii) Where branches have got backlog in settlement to DICGC claims such claims
should followed up rigorously. For this purpose dealing official at the branch
should explore the possibilities of getting the claim settled at an earliest in
consideration with the DICGC Chennai / Mumbai.
iv) Compromise as a strategy for reducing NPAs is receiving attention of branch
functionaries. Encourage compromise proposal selectively without giving wrong
signals to the other good borrowers. Branches should view such compromise
proposals based on the net present value, nature and value of value of assets
presently available to us.
i) Write off Doubtful and loss assets was initiated by branches from the first quarter
of the year itself.
ii) High value doubtful and loss assets where DICGC has settled the claims and / or
rejected the case should be first dealt with write-off proposals with additional
information should be submitted immediately where ever assets are not available.
iii) Identify all loss assets where full provision is available to write off. Where ever
suits are pending and prospect of recovery exists such account can be parked in
advance under collections accounts.
iv) Recommendation to write up file value loss asset should be sent on priority basis.
v) Write off out standings where provision is short up to Rs 25000 may be sent
immediately without further loss of time
vi) Where ever compromises are / where entertained earlier and write-off the balance
still exist arrange to sent such write-off proposals and ensure that the account does
not appear in balance sheet of the bank.
➢ However, interest on advances against term deposits, NSCs, IVPs, KVPs and Life
policies may be taken to income account on the due date, provided adequate margin is
available in the accounts.
➢If Government guaranteed advances become NPA, the interest on such advances
should not be taken to income account unless the interest has been realised.
2. Reversal of income:
If any advance, including bills purchased and discounted, becomes NPA as at the
close of any year, interest accrued and credited to income account in the corresponding
previous year, should be reversed or provided for if the same is not realised. This will
apply to Government guaranteed accounts also.
In respect of NPAs, fees, commission and similar income that have accrued
should cease to accrue in the current period and should be reversed or provided for with
respect to past periods, if uncollected.
➢In the absence of a clear agreement between the bank and the borrower for the purpose
of appropriation of recoveries in NPAs (i.e. towards principal or interest due), banks
should adopt an accounting principle and exercise the right of appropriation of recoveries
in a uniform and consistent manner.
4 Interest Application:
There is no objection to the banks using their own discretion in debiting interest to an
NPA account taking the same to Interest Suspense Account or maintaining only a record
of such interest in proforma accounts.
5 Reporting of NPAs
➢ While reporting NPA figures to RBI, the amount held in interest suspense account,
should be shown as a deduction from gross NPAs as well as gross advances while
arriving at the net NPAs. Banks which do not maintain Interest Suspense account for
parking interest due on non-performing advance accounts, may furnish the amount of
interest receivable on NPAs as a foot note to the Report. ➢ Whenever NPAs are reported
to RBI, the amount of technical write off, if any, should be reduced from the outstanding
gross advances and gross NPAs to eliminate any distortion in the quantum of NPAs being
reported.
The core banking business is of mobilizing the deposits and utilizing it for lending to
industry. Lending business is generally encouraged because it has the effect of funds
being transferred from the system to productive purposes, which results into economic
growth. However lending also carries credit risk, which arises from the failure of
borrower to fulfill its contractual obligations either during the course of a transaction or
on a future obligation. A question that arises is how much risk can a bank afford to take?
Recent happenings in the business world -Enron, WorldCom, Xerox, Global Crossing do
not give much confidence to banks. In case after case, these giant corporate becan1e
bankrupt and failed to provide investors with clearer and more complete information
thereby introducing a degree of risk that many investors could neither anticipate nor
welcome. The history of financial institutions also reveals the fact that the biggest
banking failures were due to credit risk. Due to this, banks are restricting their lending
operations to secured avenues only with adequate collateral on which to fall back upon in
a situation of default.
The banking sector has been facing the serious problems of the rising NPAs. But the
problem of NPAs is more in public sector banks when compared to private sector banks
and foreign banks. The NPAs in PSB are growing due to external as well as internal
factors.
EXTERNAL FACTORS:-
The Govt. has set of numbers of recovery tribunals, which works for recovery of loans
and advances. Due to their negligence and ineffectiveness in their work the bank suffers
the consequence of non- recover, their by reducing their profitability and liquidity.
Willful Defaults
There are borrowers who are able to pay back loans but are intentionally withdrawing it.
These groups of people should be identified and proper measures should be taken in order
to get back the money extended to them as advances and loans.
Natural calamities
This is the measure factor, which is creating alarming rise in NPAs of the PSBs. every
now and then India is hit by major natural calamities thus making the borrowers unable to
pay back there loans. Thus the bank has to make large amount of provisions in order to
compensate those loans, hence end up the fiscal with a reduced profit. Mainly ours
farmers depends on rain fall for cropping. Due to irregularities of rain fall the farmers are
not to achieve the production level thus they are not repaying the loans.
Lack of demand
Entrepreneurs in India could not foresee their product demand and starts production
which ultimately piles up their product thus making them unable to pay back the money
they borrow to operate these activities.
Change on Govt. policies
INTERNAL FACTORS:-
Defective Lending process
There are three cardinal principles of bank lending that have been
i. Principles of safety
Principles of safety:-
By safety it means that the borrower is in a position to repay the loan both principal and
interest. The repayment of loan depends upon the borrowers:
Capacity to pay depends upon:
• Tangible assets
• Success in business
• Honest
• Reputation of borrower
The banker should, therefore take utmost care in ensuring that the enterprise or business
for which a loan is sought is a sound one and the borrower is capable of carrying it out
successfully .he should be a person of integrity and good character.
Inappropriate technology
The improper strength, weakness, opportunity and threat analysis is another reason for
rise in NPAs. While providing unsecured advances the banks depend more on the
honesty, integrity, and financial soundness and credit worthiness of the borrower.
• Banks should consider the borrowers own capital investment.
• It should collect credit information of the borrowers from: -
a. From bankers.
b. Enquiry from market/segment of trade, industry,
business.
c. From external credit rating agencies.
• Analyze the balance sheet. True picture of business will be
revealed on analysis of profit/loss a/c and balance sheet.
When bankers give loan, he should analyze the purpose of the loan. To ensure safety and
liquidity, banks should grant loan for productive purpose only. Bank should analyze the
profitability, viability, long term acceptability of the project while financing. Poor credit
appraisal system Poor credit appraisal is another factor for the rise in NPAs. Due to poor
credit appraisal the bank gives advances to those who are not able to repay it back. They
should use good credit appraisal to decrease the NPAs. Managerial deficiencies The
banker should always select the borrower very carefully and should take tangible assets as
security to safe guard its interests.
1. Marketability
2. Acceptability
3. Safety
4. Transferability.
Non remittance of recoveries to higher financing agencies and re loaning of the same
have already affected the smooth operation of the credit cycle.
(Figures in lakhs)
(Figures in lakhs)
INTERPRETATION
The above diagram shows the percentage of gross NPAs to gross Advance during 2005 to
2009. In the year 2009 the NPA has increased sharply because most of the enterprises
were closed down and they failed to pay the installments. During the years 2005 to 2008
the gross NPAs were moderate i.e. they ranged from 3% to 8%.
(Figures in lakhs)
INTERPRETATION
The above chart shows the percentage of net NPAs to net Advances. The banker prefers
this ratio over gross NPA. There were moderate NPAs during 2005 to 2008. But in the
year 2009 the percentage is high. It is above the standard norm of 10%. The banks should
use various techniques like SARFAESI, legal procedure, one time settlement to recover
the NPAs.
(Figures in lakhs)
Advances = Rs 4,68,21,644
= 97,45,045 * 100
4,68,21,644
= 20.81%
Advances = Rs 4,43,99,000
= 73,22,724 * 100
4,43,99,000
= 16.42%
Note:
1. Gross NPAs refers to total NPAs
2 Net NPA = Gross NPA – ( total provisions held + balance in interest suspense account
+ DICGC/ECGC claims received and pending adjustment + part payment received
and kept in suspense account
SL.NO
PARTICULARS AMOUNT
1
Opening NPA level as on 01-04-2009 1968005
2
Less : recovery as on 01-04-2009 452392
INTERPRETATION:
The table shows movement of gross NPAs. The opening level of NPA as on 01-04-2009
is taken. Certain items like recovery of NPAs and balances written off are deducted from
the opening level of NPA. New NPA accounts are added to the sub total. Net variation
includes expenses like issue of notice charges, advocate charges, etc.The balance obtained
is closing level of NPA.
ASSET
NAMES CLASSIFICATION NPA
E doubtful 917238
TOTAL 5163151
INTERPRETATION:
The above table shows the top five borrowers having NPA accounts. It accounts for 52%
of the total NPAs. Most of the assets are in the sub standard category. Proper steps should
be taken to avoid slippages into other category of assets.
Mr. A is the proprietor of Acer Industries. He had applied for a loan in bank of
Maharashtra in the year 2006. The bank gave credit facilities like.
The bank issues a notice to Mr. A on 17th June 2010. The notice states that the Mr.
A has to pay Rs 10,58,051 along with an interest of 11.50% w.e.f 28.2.2010. If the
amount is not paid within 60 days from the date of the receipt of this notice then the bank
would exercise the powers under section 13(4) of SRAFAESI act.
• To take possession of the secured assets and the right to transfer by way of
lease, assignment or sale for realizing the asset.
• To take over the management of the secured assets including right to transfer
by way of lease, assignment or sale.
• To appoint a person as a manager to manage the secured asset.
• The dealing of secured asset is between the bank and the person who has
acquired the asset. The borrower cannot come in between.
As per section 13 (13) of the above Act Acer Industries is restrained from disposing
off or dealing with the securities without our prior written consent.
Housing - - - - - - - - 32 107.57
Loans
Education - - - - - - - - 10 8.26
Loans
Four - - - - - - - - 6 11.19
Wheeler
loans
( figures in lakhs)
( Khasbag branch, belgaum)
INTERPRETATION:
The above diagram shows the non performing assets in retail sector. Personal loans
has the highest number of NPAs. Personal loans are clean loans. They do not carry
any security. The salaried and professionals take advantage of this. Where as housing,
education and four wheeler does not have any NPAs because the borrowers are
making regular payments.
A/Cs Amt A/Cs Amt A/Cs Amt A/Cs Amt A/Cs Amt A/Cs Amt
(Figures in lakhs)
The diagram shows the composition of various non retail NPAs. Micro and small
enterprises contribute 66% of the total non retail NPAs. The enterprises have failed to pay
the installments because most of enterprises located in Udyambag were closed due to
recession. Agriculture accounts for 34%. Whole sale traders and others do not have any
NPAs.
A/Cs Amt A/Cs Amt A/Cs Amt A/Cs Amt A/Cs Amt A/Cs Amt
( figures in lakhs)
(Khasbag branch)
1. In the year 2009-2010 the gross NPA was Rs 97,45,047 and net NPA was Rs
73,22,724.
2. For the year 2009- 2010 the gross NPA (%) was 20.81% and net NPA was
16.49%.
5. There were moderate NPAs between 2005 and 2008. But the year 2009- 2010 had
a high NPA. The causes for the high NPA was
➢ Closing down of micro, small and medium enterprises.
➢ Effect of recession
6. Among the non retail NPAs the MSME sector contributes the most (i.e. 66% or Rs
61.33 lakhs.Whole sale traders and others do not have any NPAs. Agriculture
accounts for 34%.
7. Among the retail NPAs the personal loans has the highest NPAs i.e. rs1.94 lakhs.
Housing, education and four wheeler loans do not have any NPAs because the
bank has given loan to creditworthy customers.
8. 37% of NPAs fall in the range of five lakhs to ten lakhs. 34% of NPAs fall in the
range of ten lakhs to twenty five lakhs. Together they account for 71%.
10. The opening balance for the year 2009-2010 was Rs 11.54 lakhs (after deducting
the recoveries and written offs). During the same year fresh/new NPAs of Rs
85.83 lakhs were added.
3. There shouldn’t be too much rotation of bank officers of the bank. Generally
the rotation is for 3 years. This creates a gap between the bank officer and
customer of a bank. The bank may find it difficult to monitor the loan if it
keeps on changing the loan officers. There shouldn’t be directed lending.
4. The bank should go for one time settlement instead of legal process because
the legal process will take more time.
8. The bank should increase the provisions and write off the bad loans and
simultaneously follow up of write off loans.
9. Majority of the assets are in the sub standard category. There shouldn’t be in
slippages into other categories of assets. So the bank should monitor the
advances.
10. Bank should appoint special officers for the recovery of the bad loans. His job
will be to go to the houses of defaulters, personal monitoring, etc. SBI has
appoint special officers to recover the bad loans. Even Bank of Maharashtra
should adopt this measure.
1. Websites:
www.bankofmaharashtra.in
www.rbi.org.in
www.google.co.in
2. Books:
➢ Corporate accounting
(By M.B.kadkol)
➢ Bank magazines
3. Cream software
4. Financial statements
5. NPA reports