INDIAN BANKING SYSTEM

History
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 are as 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.

Phase(1)
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.
In 1865 Allahabad Bank was established and first time exclusively by Indians, Punjab
National Bank Ltd. was set up in 1894 with headquarters at Lahore. Between 1906 and
1913, Bank of India, Central Bank of India, Bank of Baroda, Canara Bank, Indian Bank,
and Bank of Mysore were set up. Reserve Bank of India came in 1935.
During the first phase the growth was very slow and banks also experienced periodic
failures between 1913 and 1948. There were approximately 1100 banks, mostly small. To
streamline the functioning and activities of commercial banks, the Government of India
came up with The Banking Companies Act, 1949 which was later changed to Banking
1

Regulation Act 1949 as per amending Act of 1965 (Act No. 23 of 1965). Reserve Bank of
India was vested with extensive powers for the supervision of banking in India as the
Central Banking Authority.
During those days 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(2)
Government took major steps in this Indian Banking Sector Reform after independence.
In 1955, 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
werenationalized.
Second phase of nationalization Indian Banking Sector Reform was carried out in 1980
with seven more banks. This step brought 80% of the banking segment in India under
Government ownership.
The following are the steps taken by the Government of India to Regulate Banking
Institutions in the Country:

1949: Enactment of Banking Regulation Act.

1955:Nationalization of State Bank of India.

1959:Nationalization of SBI subsidiaries.

1969:Nationalization of 14 major banks with deposits over 50 crore.

1971: Creation of credit guarantee corporation.

1975: Creation of regional rural banks.

1980:Nationalization of seven banks with deposits over 200 crore.

After the nationalization of banks, the branches of the public sector bank India rose to
approximately 800% in deposits and advances took a huge jump by 11,000%.
Banking in the sunshine of Government ownership gave the public implicit faith and
immense

confidence

about

the

sustainability

of

these

institutions.

Phase(3)
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.
The financial system of India has shown a great deal of resilience. It is sheltered from any
crisis triggered by any external macroeconomics shock as other East Asian Countries
suffered. This is all due to a flexible exchange rate regime, the foreign reserves are high,
the capital account is not yet fully convertible, and banks and their customers have
limited foreign exchange exposure.

Nationalization of banks
In order to have more control over the banks 14 large commercial banks whose reserves
were more than Rs. 50 crore each was nationalized on July 19, 1969. The banks were:
1. Central bank of India
2. Bank of India
3. Punjab national bank
4. Canara bank
5. United commercial bank
6. Syndicate bank
7. Bank of broad
8. United bank of India
9. Union bank of India
10. Dena bank
11. Allahabad bank
12. Indian bank
13. Indian overseas bank
14. Bank of Maharashtra

On April 15, 1980 those private sector banks whose reserves were more than rs. 200 cr.
Each was nationalized. These banks were:
1.
2.
3.
4.
5.
6.

Andhra bank
Punjab &sindh bank
New bank of India
Vijaya bank
Corporation bank
Oriental bank of commerce

In September 1993 the New bank of India was merged with Punjab National Bank.

These nationalized banks with regional rural banks (RRBs), come under the category of
public sector commercial banks. Other kind of commercial banks are private sector
commercial banks. At present there are 20 nationalized banks beside the RBI.
Indian Banking: A Paradigm shift-A regulatory point of view
The decade gone by witnessed a wide range of financial sector reforms, with many of
them still in the process of implementation. Some of the recently initiated measures by
the RBI for risk management systems, anti money laundering safeguards and corporate
governance in banks, and regulatory framework for non bank financial companies, urban
cooperative banks, government debt market and forex clearing and payment systems are
aimed at streamlining the functioning of these instrumentalities besides cleansing the
aberrations in these areas. Further, one or two all India development financial institutions
have already commenced the process of migration towards universal banking set up. The
banking sector has to respond to these changes, consolidate and realign their business
strategies and reach out for technology support to survive emerging competition. Perhaps
taking note of these changes in domestic as well as international arena All of we will
agree that regulatory framework for banks was one area which has seen a sea-change
after the financial sector reforms and economic liberalization and globalization measures
were introduced in 1992-93. These reforms followed broadly the approaches suggested
by the two Expert Committees both set up under the chairmanship of Shri M.
Narasimham in 1991 and 1998, the recommendations of which are by now well known.
The underlying theme of both the Committees was to enhance the competitive efficiency
and operational flexibility of our banks which would enable them to meet the global
competition as well as respond in a better way to the regulatory and supervisory demand
arising out of such liberalization of the financial sector. Most of the recommendations
made by the two Expert Committees which continued to be subject matter of close
monitoring by the Government of India as well as RBI have been implemented.
Government of India and RBI has taken several steps to:(a) Strengthenthe banking sector,
5

(b) Provide more operational flexibility to banks,

(c) Enhance the competitive efficiency of banks, and
(d) Strengthen the legal framework governing operations of banks.
Regulatory measures taken to strengthen the Indian Banking sectors
The important measures taken to strengthen the banking sector are briefly, the
Following:
Introduction of capital adequacy standards on the lines of the Basel norms,
Prudential norms on asset classification, income recognition and provisioning,
Introduction of valuation norms and capital for market risk for investments
Enhancing transparency and disclosure requirements for published accounts,
Aligning exposure norms single borrower and group-borrower ceiling with
Inter-national best practices
Introduction of off-site monitoring system and strengthening of the supervisory
Framework for banks.
(A) Some of the important measures introduced to provide more operational flexibility to
banks are:
Besides deregulation of interest rate, the boards of banks have been given the authority
to fix their prime lending rates. Banks also have the freedom to offer variable rates of
interest on deposits, keeping in view their overall cost of funds.
Statutory reserve requirements have significantly been brought down.
The quantitative firm-specific and industry-specific credit controls were abolished and
banks were given the freedom to deploy credit, based on their commercial judgment, as
per the policy approved by their Boards.
The banks were given the freedom to recruit specialist staff as per their requirements,
The degree of autonomy to the Board of Directors of banks was substantially enhanced.

 Banks were given autonomy in the areas of business strategy such as, opening of
branches / administrative offices, introduction of new products and certain other
operational areas.
(B) Some of the important measures taken to increase the competitive efficiency of banks
are the following:
Opening up the banking sector for the private sector participation.
Scaling down the shareholding of the Government of India in nationalized banks and of
the Reserve Bank of India in State Bank of India.
(C) Measures taken by the Government of India to provide a more conducive legal
Environment for recovery of dues of banks and financial institutions are:
Setting up of Debt Recovery Tribunals providing a mechanism for expeditious loan
recoveries.
Constitution of a High Power Committee under former Justice Shri Eradi to suggest
appropriate foreclosure laws.
An appropriate legal framework for securitization of assets is engaging the attention of
the Government.
Due to this paradigm shift in the regulatory framework for banks had achieved the
desired results. The banking sector has shown considerable degree of resilience.
(a) The level of capital adequacy of the Indian banks has improved: the CRAR of public
sector banks increased from an average of 9.46% as on March 31, 1995 to11.18% as on
March 31, 2001.
(b) The public sector banks have also made significant progress in enhancing their asset
quality, enhancing their provisioning levels and improving their profits.

 The gross and net NPAs of public sector banks declined sharply from 23.2% and14.5%
in 1992-93 to 12.40% and 6.7% respectively, in 2000-01.
Similarly, in regard to profitability, while 8 banks in the public sector recorded
operating and net losses in 1992-93, all the 27 banks in the public sector showed
operating profits and only two banks posted net losses for the year ended March31, 2001.
The operating profit of the public sector banks increased from Rs.5628 crore as on
March 31, 1995 to Rs.13,793 crore as on March 31, 2001.
The net profit of public sector banks increased from Rs.1116 crore to Rs.4317crore
during the same period, despite tightening of prudential norms on provisioning against
loan losses and investment valuation. The accounting treatment for impaired assets is
now closer to the international best practices and the final accounts of banks are
transparent and more amenable to meaningful interpretation of their performance.

COMPANY PROFILE
PNB

Punjab National Bank (PNB) is an Indian financial services company based in New
Delhi, India.PNB is the third largest bank in India by assets. It was founded in 1894 and
is currently the second largest state-owned commercial bank in India ahead of Bank of
Baroda with about 5800 branches across 764 cities. It serves over 37 million customers.
The bank has been ranked 248th biggest bank in the world by the Bankers Almanac,
London. The bank's total assets for financial year 2007 were about US$60 billion. PNB
has a banking subsidiary in the UK, as well as branches in Hong Kong, Dubai and Kabul,
and representative offices in Almaty, Dubai, Oslo, and Shanghai.

HISTORY
Punjab National Bank was registered on 19 May 1894 under the Indian Companies Act
with its office in Anarkali Bazaar Lahore. The founding board was drawn from different
parts of India professing different faiths and a varied back-ground with, however, the
common objective of providing country with a truly national bank which would further
the economic interest of the country. PNB's founders included several leaders of
the Swadeshi movement such as Dyal

Singh

Majithia and LalaHar KishenLal,LalaLalchand, Shri Kali Prosanna Roy, Shri E.C.
Jessawala, Shri PrabhuDayal, BakshiJaishi Ram, and LalaDholan Dass. LalaLajpat
Rai was actively associated with the management of the Bank in its early years.

VISION
"To be a Leading Global Bank with Pan India footprints and become a household brand
in the Indo-Gangetic Plains providing entire range of financial products and services
under one roof"
MISSION
"Banking

for the unbanked"

10

MANAGEMENT
Board of Directors
o Shri. K.R.Kamath
Chairman & Managing Director
and Dy. Chairman of Indian Banks Association
o Shri. Rakesh Sethi
Executive Director
o Smt. UshaAnanthasubramanian
Executive Director
Directors
o Shri. Anurag Jain
Govt. of India Nominee Director
o Shri. Jasbir Singh
Reserve Bank of India Nominee Director
o Shri. M P Singh
Workmen Employees Director
o Shri. Pradeep Kumar
Officer Director

11

o Shri. M A Antulay
Part-time non-official Director
o Shri. B B Chaudhry
Part-time non-official Director
PROFILE
With over 60 million satisfied customers and more than 6081 branches, including 5
overseas branches, PNB has continued to retain its leadership position amongst the
nationalized banks. The bank enjoys strong fundamentals, large franchise value and good
brand image. Besides being ranked as one of India's top service brands, PNB has
remained fully committed to its guiding principles of sound and prudent banking. Apart
from offering banking products, the bank has also entered the credit card, debit card;
bullion business; life and non-life insurance; Gold coins & asset management business,
etc. PNB has earned many awards and accolades during the year in appreciation of
excellence in services, Corporate Social Responsibility (CSR) practices, transparent
governance structure, best use of technology and good human resource management.
Since its humble beginning in 1895 with the distinction of being the first Swadeshi Bank
to have been started with Indian capital, PNB has achieved significant growth in business
which at the end of March 2014 amounted to Rs 8,00,666 crore. PNB is ranked as the 2nd
largest bank in the country after SBI in terms of branch network, business and many other
parameters. During the FY 2013-14, with 38.30% share of CASA to domestic deposits,
the Bank achieved a net profit of Rs 3343 crore. Bank has a strong capital base with
capital adequacy ratio of 12.29% as on Mar14 as per Basel II with Tier I and Tier II
capital ratio at 8.44% and 3.98% respectively. As on March14, the Bank has the Gross
and Net NPA ratio of 1.79% and 0.85% respectively. During the FY 2013-14, its ratio of
Priority Sector Credit to Adjusted Net Bank Credit at 40.67% & Agriculture Credit to
Adjusted Net Bank Credit at 19.30% was also higher than the stipulated requirement of
40% & 18% respectively.
12

The Bank has been able to maintain its stakeholders interest by posting an improved
NIM of 3.44% in Mar14 (3.57% Mar10). The Earning per Share improved to Rs 140.60
(Rs 123.86 Mar10) while the Book value per share improved to Rs 952.50 (Rs 867.47
Mar13). Punjab National Bank continues to maintain its frontline position in the Indian
banking industry. In particular, the bank has retained its NUMBER ONE position among
the nationalized banks in terms of number of branches, Deposit, Advances, total
Business, Assets, Operating and Net profit in the year 2013-14. The impressive
operational and financial performance has been brought about by Banks focus on
customer based business with thrust on CASA deposits, Retail, SME &Agri Advances
and with more inclusive approach to banking; better asset liability management;
improved margin management, thrust on recovery and increased efficiency in core
operations of the Bank. The performance highlights of the bank in terms of business and
profit are shown below:

Rs. In Crore
Parameters

Mar11

Mar'12

Mar'13

Mar'14

CAGR (%)

Operating Profit

9056

10614

10907

11384

14.88

Net Profit

4433

4884

4748

3343

1.58

Deposit

312899

379588

391560

451397

16.56

Advance

242107

293775

308796

349269

17.69

Total Business

555005

673366

700356

800666

17.05

Bank always looked at technology as a key facilitator to provide better customer service
and ensured that its IT strategy follows the Business strategy so as to arrive at Best
13

Fit. The Bank has made rapid strides in this direction. All branches of the Bank are
under Core Banking Solution (CBS) since Dec08, thus covering 100% of its business
and providing Anytime Anywhere banking facility to all customers including customers
of more than 3200 rural & semi urban branches. The Bank has also been offering Internet
banking services to its customers which also enables on line booking of rail tickets,
payment of utilities bills, purchase of airline tickets, etc. Towards developing a cost
effective alternative channels of delivery, the Bank with 6000 ATMs has the largest ATM
network amongst Nationalized Banks.
With the help of advanced technology, the Bank has been a frontrunner in the industry so
far as the initiatives for Financial Inclusion is concerned. With its policy of inclusive
growth, the Banks mission is Banking for Unbanked. The Bank has launched a drive
for biometric smart card based technology enabled Financial Inclusion with the help of
Business Correspondents/Business Facilitators (BC/BF) so as to reach out to the last mile
customer. The Bank has started several innovative initiatives for marginal groups like
rickshaw pullers, vegetable vendors, dairy farmers, construction workers, etc. Bank has
launched a welfare scheme of adoption of village viz., PNB VIKAS. Under the scheme,
Bank has selected 117 villages (60 in lead districts and 57 in non lead district) in different
circles for all-round improvement in the living standards of the villagers. Besides, Bank
has formed PNB PRERNA, an association of the wives of the Banks senior
management. The association through its voluntary initiatives has undertaken activities
like distribution of food to the poor and needy, provision of computers, books, stationary
items to poor girl students at various orphanages and schools etc.
Backed by strong domestic performance, the Bank is planning to realize its global
aspirations. Bank has opened one branch each at Kabul and Dubai, two branches at Hong
Kong and an Off Shore Banking Unit at Mumbai. In addition to the above, Bank has
Representative offices at Almaty, Dubai, Shanghai and Oslo, a wholly owned subsidiary
in UK with 7 branches and a subsidiary each in Kazakhstan & Bhutan, and joint venture
with Everest Bank Ltd. Nepal. During the year, Bank acquired majority equity stake of
63.64% in Dana Bank of Kazakhstan.

14

SUBSIDIARIES AND JOINT VENTURES

Overseas
Punjab National Bank (International) Limited (PNBIL) is a wholly owned UK
subsidiary of Punjab National Bank, India. PNBIL was incorporated in UK on
13th April 2006 and registered with the Companies House in England & Wales
under No. 5781326. PNBIL was authorised by the Financial Services Authority
(FSA) on 13th April 2007 to conduct Banking Business in UK under
Registration No. 459701. PNBIL started banking operations in UK on 10th of
May 2007 from two locations. The corporate office of PNBIL is at 87, Gresham
Street, London EC2V 7NQ (UK). Presently PNBIL has 7 Branches as under:
1. At 87, Gresham Street, London EC2V 7NQ(UK)
2. At 90, South Road, Southall, Middlesex UB1 1RD (UK)
3. At 160 Belgrave Road, Leicester LE4 5AU (UK)
4. At 290 Soho Road, Birmingham B21 9LZ (UK)
5. At 47, Crane book Road, Ilford, Essex, London(UK)
6. At 188 Ealing Road, Wembley HA0 4QD (UK)
7. At 502-504 Dudley Road, Wolverhampton, WV2 3AA
DRUK PNB Bank Ltd
Druk PNB Bank Ltd. (DPNBL) is our Joint Venture Subsidiary in Bhutan with
our Equity participation to the extent of 51%. It started operations on
27th January, 2010 and has three branches- one each at Thimphu, Phentsholing
and Wangduephodrang.
Sh N.K. Arora, DGM is the CEO.
Contact details of Sh. N.K. Arora are :
Phone No. 00975- 17116440
E Mail id : nk_arora@pnb.co.in

JSC (SB) PNB Kazakhstan

Our bank has acquired 80.95% stake in JSC (SB) PNB, Kazakhstan. The bank
has its head quarters in Almaty. It has five branches at Almaty, Pavlador,
15

Karganda, Astana&Taraz.
Everest Bank Ltd, Kathmandu, Nepal
Everest Bank Limited (EBL) is our joint venture in Nepal with equity
participation to the extent of 20%. Under a Technical Services Agreement, our
Bank is providing Top Management Support. The operations of EBL with
Management Support from our Bank started in January, 1997. EBL presently has
a network of 44 branches in Nepal. EBL has started Financial Inclusion
concept in Nepal.

Domestic Subsidiaries
1. PNB GILTS LTD.
PNB Gilts Ltd., a subsidiary of the Bank, is engaged in the business of trading in
Govt. securities, treasury bills and Non SLR Investments. It is also engaged in
dealing in Money Market Instruments (Call/Notice/Term Money, Repo /Reverse
Repo, Inter-corporate Deposits, Commercial Paper, Certificate of Deposit) and
Mutual Funds Distribution. The company is listed at NSE and BSE.
2. PNB HOUSING FINANCE LTD
PNB Housing Finance Ltd. is engaged in providing housing loans for purchase,
construction and upgradation of a dwelling unit. The company offers Loans for
construction or for purchase of house/flat from development authorities and also
from private builders/ group housing societies as well as for renovation/ repairs.
Company also provides finance for construction of residential projects. Loans to
NRIs are also provided for purchase/ construction of house/ flat along with a
resident/ non-resident co-borrower.
3. PNB INVESTMENT SERVICES LTD
PNB Investment Services Ltd, a wholly owned subsidiary, has been set up by the
Bank for carrying out Merchant Banking Business. It provides services for
Project Appraisal, Loan Syndication, Debt Placement and to executes
IPOs/FPO/QIPs. PNBISL is registered with SEBI as a Category- I Merchant
16

Banker.

4. PNB INSURANCE BROKING Pvt. Ltd.

5. PNB LIFE INSURANCE Co. Ltd.
The Bank is holding majority stake in above two companies, jointly with Vijaya
Bank, minor shareholder.
Domestic Joint Ventures
The Bank has the following Joint Ventures:
1.
2.
3.
4.

Principal PNB Asset Management Company Pvt. Ltd

Principal Trustee Company Pvt. Ltd
Assets Care Enterprises Ltd.
India Factoring & Finance Solutions Pvt. Ltd.

AWARDS (recent)

PNB Awarded Golden Peacock Business Award -2014

Vigilance Excellence Award 2013-14

PNB Awarded Overall Best Corporate Social Responsibility Awards 2012
PNB Awarded SKOCH Award on Financial Inclusion 2012
PNB bags Most Socially Responsive Bank Award 2011
PNB receives Best Bank Award-2011
PNB Bags Most Productive Public Sector Bank Award
PNB Bags MSME National Awards

PNB Awarded Golden Peacock HR Excellence Award-2011

PNB Awarded "IT for Internal Effectiveness" Awards
17

PNB Awarded Rajbhasha Awards

PNB adjudged Best Managed Bank by SCOPE
Wind Power India 2011 Awards
PNB Awarded SKOCH Challenger Award 2011 on Financial Inclusion
PNB Awarded Best Technology Bank 2010

SOME IMPORTANT FACTS ABOUT PNB(as on march 2013)

o Total branches 6081
o Circle office 65
o Employees 63,292(approx)
o Revenue 31206 crore (2013)
o Net income 4574 crore (2013)
o Total assets 373786 crore (2013)
o fortune India 500 Ranking
o Forbes global ranking

#46 in 2013
#668 in global 2000

PRODUCTS OFFERED
o
o
o
o
o
o
o

Saving fund
Fixed deposit scheme
Credit scheme
Current account
Card
Insurance
Gold
18

o Mutual fund

SWOT ANALYSIS OF BANK

STRENGTHS:
o Strong growth in business
o Good branch network
o Highest CASA among PSU
o Highest NIMs compared to peers
o Fine growth in fee income last year
o De-risked investment portfolio
o Adequate Capital
o Proactive on technology front.
WEAKNESS:
o Higher Delinquencies
o Higher provisions deterring growth in net profits
o No development on insurance venture
o Slower growth on international front
o Slow-down in treasury profits
o Its subsidiaries PNB Housing Finance & PNB Gilts are not impressive
OPPORTUNITIES:
o Expansion on international front
o Ample opportunity to expand business, as the economy is doing well.
o Growth in Insurance and Mutual Fund business

19

THREATS:
o Entry of foreign banks
o Sharp rise in interest rates can hamper economic growth
o Regulatory amendments
o Implementation of Basel II requires higher capital
o Downturn in Agriculture growth

INTRODUCTION TO TOPIC

The three letters Strike terror in banking sector and business circle today. NPA is short
form of Non Performing Asset. The dreaded NPA rule says simply this: when interest
or other due to a bank remains unpaid for more than 90 days, the entire bank loan
automatically turns a non performing asset. The recovery of loan has always been
problem for banks and financial institution. To come out of these first we need to think is
it possible to avoid NPA, no cannot be then left is to look after the factor responsible for
it and managing those factors.
A loan or lease that is not meeting its stated principal and interest payments. Banks
usually classify as non performing assets as any commercial loans which are more than
90 days overdue and Consumer loan which is more than 180 days overdue
More generally an asset which is not producing income after a stated period is called
NPA.
Borrower has to deposit a certain amount of money in to his loan a/c for up gradation to
make his a/c non-NPA.
Definitions:
An asset, including a leased asset, becomes non-performing when it ceases to generate
income for the bank.

20

A non-performing asset (NPA) was defined as a credit facility in respect of which the
interest and/ or installment of principal has remained past due for a specified period of
time.

With a view to moving towards international best practices and to ensure greater
transparency, it has been decided to adopt the 90 days overdue norm for identification
of NPAs, from the year ending March 31, 2004. Accordingly, with effect from March 31,
2004, a non-performing asset (NPA) shall be a loan or an advance where;
o Interest and/ or installment of principal remain overdue for a period of more
than 90 days in respect of a term loan,
o The account remains out of order for a period of more than 90 days, in
respect of an Overdraft/Cash Credit (OD/CC),
o The bill remains overdue for a period of more than 90 days in the case of bills
purchased and discounted,
o Interest and/or installment of principal remains overdue for two harvest
seasons but for a period not exceeding two half years in the case of an
advance granted for agricultural purposes.
As a facilitating measure for smooth transition to 90 days norm, banks have been advised
to move over to charging of interest at monthly rests, by April 1, 2002. However, the date
of classification of an advance as NPA should not be changed on account of charging of
interest at monthly rests. Banks should, therefore, continue to classify an account as NPA
only if the interest charged during any quarter is not serviced fully within 180 days from
the end of the quarter with effect from April 1, 2002 and 90 days from the end of the
quarter with effect from March 31, 2004.
Classification of assets into the following broad groups, viz.

21

1. Standard Assets
2. Sub-standard Assets
3. Doubtful Assets
4. Loss Assets
Standard Assets
Standard Asset is one which does not disclose any problems and which does not carry
more than normal risk attached to the business. Such an asset should not be an NPA.

Sub-standard Assets
1. With effect from March 31, 2005 an asset would be classified as sub-standard if it
remained NPA for a period less than or equal to 12 months. In such cases, the
current net worth of the borrowers/ guarantors or the current market value of the
security charged is not enough to ensure recovery of the dues to the banks in full.
In other words, such assets will have well defined credit weaknesses that
jeopardize the liquidation of the debt and are characterized by the distinct
possibility that the banks will sustain some loss, if deficiencies are not corrected
2. An asset where the terms of the loan agreement regarding interest and principal
have been re-negotiated or rescheduled after commencement of production,
should be classified as sub-standard and should remain in such category for at
least 12 months of satisfactory performance under the re-negotiated or
rescheduled terms. In other words, the classification of an asset should not be
upgraded merely as a result of rescheduling, unless there is satisfactory
compliance of this condition.
Doubtful Assets
22

With effect from March 31, 2005, an asset is required to be classified as doubtful, if it has
remained NPA for more than 12 months. For Tier I banks, the 12-month period of
classification of a substandard asset in doubtful category is effective from April 1, 2009.
As in the case of sub-standard assets, rescheduling does not entitle the bank to upgrade
the quality of an advance automatically. A loan classified as doubtful has all the
weaknesses inherent as that classified as sub-standard, with the added characteristic that
the weaknesses make collection or liquidation in full, on the basis of currently known
facts,

conditions

and

values,

highly

questionable

and

improbable.

Note: Consequent to change in asset classification norms w.e.f. March 31, 2005 banks are
permitted to phase the consequent additional provisioning over a five year period
commencing from the year ended March 31, 2005, with a minimum of 10 % of the
required provision in each of the first two years and the balance in equal installments
over the subsequent three years.
Loss Assets
A loss asset is one where loss has been identified by the bank or internal or external
auditors or by the Co-operation Department or by the Reserve Bank of India inspection
but the amount has not been written off, wholly or partly. In other words, such an asset is
considered un-collectible and of such little value that its continuance as a bankable asset
is not warranted although there may be some salvage or recovery value.

CREDIT RISK AND NPAs

Quite often credit risk management (CRM) is confused with managing non-performing
assets (NPAs). However there is an appreciable difference between the two. NPAs are a
result of past action whose effects are realized in the present i.e. they represent credit risk
that has already materialized and default has already taken place.
On the other hand managing credit risk is a much more forward-looking approach and is
mainly concerned with managing the quality of credit portfolio before default takes place.
23

In other words, an attempt is made to avoid possible default by properly managing credit
risk.
Considering the current global recession and unreliable inforn1ation in finaI1cial
statements, there is high credit risk in the banking and lending business.
To create a defense against such uncertainty, bankers are expected to develop an effective
internal credit risk models for the purpose of credit risk management.

TYPES OF NPA

A] Gross NPA
B] Net NPA
A] Gross NPA:
Gross NPAs are the sum total of all loan assets that are classified as NPAs as per RBI
guidelines as on Balance Sheet date. Gross NPA reflects the quality of the loans made
by banks. It consists of all the non-standard assets like as sub-standard, doubtful, and
loss assets.
It can be calculated with the help of following ratio:

Gross NPAs Ratio =

Gross NPAs
Gross Advances

24

B] Net NPA:
Net NPAs are those type of NPAs in which the bank has deducted the provision regarding
NPAs. Net NPA shows the actual burden of banks. Since in India, bank balance sheets
contain a huge amount of NPAs and the process of recovery and write off of loans is very
time consuming, the provisions the banks have to make against the NPAs according to the
central bank guidelines, are quite significant. That is why the difference between gross
and net NPA is quite high.
It can be calculated by following
Net NPAs =

Gross NPAs Provisions

Gross Advances - Provisions

IMPACT OF NPA ON PNB BANK AND FIs IN INDIA

To start with, performance in terms of profitability is a benchmark for any business
enterprise including the banking industry. However, increasing NPAs have a direct impact
on banks profitability as legally banks are not allowed to book income on such accounts
and at the sometime are forced to make provision on such assets as per the Reserve Bank
of India (RBI) guidelines. Also, with increasing deposits made by the public in the
banking system, the banking industry cannot afford defaults by borrower s since NPAs
affects the repayment capacity of banks.
Further, Reserve Bank of India (RBI) successfully creates excess liquidity in the system
through various rate cuts and banks fail to utilize this benefit to its advantage due to the
tear of burgeoning non-performing assets.
Followings are the impact of NPA on banks

Profitability:
25

NPA means booking of money in terms of bad asset, which occurred due to wrong choice
of client. Because of the money getting blocked the prodigality of bank decreases not
only by the amount of NPA but NPA lead to opportunity cost also as that much of profit
invested in some return earning project/asset. So NPA doesnt affect current profit but
also future stream of profit, which may lead to loss of some long-term beneficial
opportunity. Another impact of reduction in profitability is low ROI (return on
investment), which adversely affect current earning of bank.

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.

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 days
banks have special employees to deal and handle NPAs, which is additional cost to the
bank.

Credit loss:

26

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.

Not only banks get hit due to rising NPA but our economy also getting a big jolt from the
same. As India is a developing nation and need fund for the infrastructure and
development, So NPA needs to be managed. Deficit financing is not a good method to
cover all losses & increased need of fund because it makes an adverse impact on
economy as well.

INDIAN ECONOMY AND NPAs

Undoubtedly the world economy has slowed down, recession is at its peak, globally stock
markets have tumbled and business itself is getting hard to do. The Indian economy has
been much affected due to high fiscal deficit, poor infrastructure facilities, sticky legal
system, cutting of exposures to emerging markets by FIs, etc.
Further, international rating agencies like, Standard & Poor have lowered Indias credit
rating to sub-investment grade. Such negative aspects have often outweighed positives
such as increasing forex reserves and a manageable inflation rate.
Under such a situation, it goes without saying that banks are no exception and are bound
to face the heat of a global downturn. One would be surprised to know that the banks and
financial institution in India hold nonperforming assets worth Rs. 110000 crores Bankers
have realized that unless the level of NPAs is reduced drastically, they will find it difficult
to survive.

GLOBAL DEVELOPMENTS AND NPAs

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
27

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.

FACTORS FOR RISE IN NPAs

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
(A) Ineffective recovery tribunal
The Govt. has set 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, thereby reducing their profitability and liquidity.
(B) Willful Defaults

28

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.
(C) Natural calamities
This is the major 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.
(D) Industrial sickness
Improper project handling , ineffective management , lack of adequate resources , lack of
advance technology , day to day changing govt. Policies give birth to industrial sickness.
Hence the banks that finance those industries ultimately end up with a low recovery of
their loans reducing their profit and liquidity.
(E) 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. The banks recover the amount by selling of their
assets, which covers a minimum label. Thus the bank records the non-recovered part as
NPAs and has to make provision for it.
(F) Change on Govt. policies
With every new govt. banking sector gets new policies for its operation. Thus it has to
cope with the changing principles and policies for the regulation of the rising of NPAs.

29

The fallout of handloom sector is continuing as most of the weavers Co-operative

societies have become defunct largely due to withdrawal of state patronage. The
rehabilitation plan worked out by the Central government to revive the handloom sector
has not yet been implemented. So the over dues due to the handloom sectors are
becoming NPAs.
INTERNAL FACTORS
(A) Defective Lending process
There are three cardinal principles of bank lending that have been followed by the
commercial banks since long.
i.
Principles of safety
ii.
Principle of liquidity
iii.
Principles of profitability
i.

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:
a) Capacity to pay depends upon:
1. Tangible assets
2. Success in business
b) Willingness to pay depends on:
1. Character
2. Honest
3. 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.

(B) Inappropriate technology

30

Due to inappropriate technology and management information system, market

driven decisions on real time basis cannot be taken. Proper MIS and financial
accounting system is not implemented in the banks, which leads to poor credit
collection, thus NPA. All the branches of the bank should be computerized.
(C) Improper SWOT analysis
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.
Purpose of the loan
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.
(D) 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.
(E) Managerial deficiencies
The banker should always select the borrower very carefully and should take
tangible assets as security to safe guard its interests. When accepting securities
banks should consider the_
1. Marketability
2. Acceptability
3. Safety
31

4. Transferability.
The banker should follow the principle of diversification of risk based on
the famous maxim do not keep all the eggs in one basket; it means that the
banker should not grant advances to a few big farms only or to concentrate them
in few industries or in a few cities. If a new big customer meets misfortune or
certain traders or industries affected adversely, the overall position of the bank
will not be affected.
Like OSCB suffered loss due to the OTM Cuttack, and Orissa hand loom
industries. The biggest defaulters of OSCB are the OTM (117.77lakhs), and the
handloom sector Orissa hand loom WCS ltd (2439.60lakhs).
(F) Absence of regular industrial visit
The irregularities in spot visit also increases the NPAs. Absence of regularly
visit of bank officials to the customer point decreases the collection of interest and
principals on the loan. The NPAs due to willful defaulters can be collected by
regular visits.
(G)Re loaning process
Non remittance of recoveries to higher financing agencies and re loaning of the
same have already affected the smooth operation of the credit cycle. Due to re
loaning to the defaulters and CCBs and PACs, the NPAs of OSCB is increasing
day by day.

PROBLEMS DUE TO NPA

1. Owners do not receive a market return on their capital .in the worst case, if the
banks fails, owners lose their assets. In modern times this may affect a broad pool
of shareholders.
2. Depositors do not receive a market return on saving. In the worst case if the bank
fails, depositors lose their assets or uninsured balance.
32

3. Banks redistribute losses to other borrowers by charging higher interest rates,

lower deposit rates and higher lending rates repress saving and financial market,
which hamper economic growth.
4. Nonperforming loans epitomize bad investment. They misallocate credit from
good projects, which do not receive funding, to failed projects. Bad investment
ends up in misallocation of capital, and by extension, labor and natural resources.
Nonperforming asset may spill over the banking system and contract the money stock,
which may lead to economic contraction. This spillover effect can channelize through
liquidity or bank insolvency:
a) When many borrowers fail to pay interest, banks may experience

liquidity shortage.

This can jam payment across the country.

b) Illiquidity constraints bank in paying depositors
c) Undercapitalized banks exceed the banks capital base.

'Out of Order' status:

An account should be treated as 'out of order' if the outstanding balance

remains continuously in excess of the sanctioned limit/drawing power. In cases where the
outstanding balance in the principal operating account is less than the sanctioned
limit/drawing power, but there are no credits continuously for six months as on the date
of Balance Sheet or credits are not enough to cover the interest debited during the same
period, these accounts should be treated as 'out of order'.
Overdue:
Any amount due to the bank under any credit facility is overdue if it is not
paid on the due date fixed by the bank.
33

TOOLS FOR RECOVERY OF NPA

Once NPA occurred, one must come out of it or it should be managed inmost efficient
manner. Legal ways and means are there to overcome and manage NPAs. We will look
into each one of it.
1Willful Default:A] LokAdalat and Debt Recovery Tribunal
B] Securitization Act
C] Asset Reconstruction
Lok Adalat:
LokAdalat institutions help banks to settle disputes involving account in doubtful and
loss category, with outstanding balance of Rs.5 lakh for compromise settlement under
LokAdalat. Debt recovery tribunals have been empowered to organize LokAdalat to
decide on cases of NPAs of Rs. 10 lakh and above. This mechanism has proved tobe quite
effective for speedy justice and recovery of small loans. Theprogress through this channel
is expected to pick up in the coming years.
Debt Recovery Tribunals (DRT):
The recovery of debts due tobanks and financial institution passed in March 2000 has
helped in strengthening the function of DRTs. Provision for placement of more than one
recovery officer, power to attach defendants property/assets before judgment, penal
provision for disobedience of tribunals order or for breach of any terms of order and
appointment of receiver with power ofrealization, management, protection and
preservation of property are expected to provide necessary teeth to the DRTs and speed
up therecovery of NPAs in the times to come. DRTs which have been set up by

34

the Government to facilitate speedy recovery by banks/DFIs, have notbeen able make
much impact on loan recovery due to variety of reasonslike inadequate number, lack of
infrastructure, under staffing and frequent adjournment of cases. It is essential that DRT
mechanism is strengthened and vested with a proper enforcement mechanism to enforce
their orders. On observation of any order passed by the tribunal should amount to
contempt of court, the DRT should have right to initiate contempt proceedings. The DRT
should empowered to sell asset of the debtor companies and forward the proceed to the
winding up court for distribution among the lenders.
2Inabilities to Pay
Consortium arrangements:
Asset classification of accounts under consortium should be based on the record of
recovery of the individual member banksand other aspects having a bearing on the
recoverability of the advances. Where the remittances by the borrower under consortium
lending arrangements are pooled with one bank and/or where the bank receiving
remittances is not parting with the share of other member banks, the account will be
treated as not serviced in the books of the other member banks and therefore, be treated
as NPA. The banks participating in the consortium should, therefore, arrange to get their
share of recovery transferred from the lead bank or get an express consent from the lead
bank for the transfer of their share of recovery, to ensure proper asset classification in
their respective books.
3Restructuring / Rescheduling of Loans
A standard asset where the terms of the loan agreement regarding Interest and principal
have been renegotiated or rescheduled after commencement of production should be
classified as sub-standard and should remain in such category for at least one year of
satisfactory performance under the renegotiated or rescheduled terms. In the case of substandard and doubtful assets also, rescheduling does not entitle a bank to upgrade the
quality of advance automatically unless there is satisfactory performance under the
rescheduled / renegotiated terms. Following representations from banks that the
foregoing stipulations deter the banks from restructuring of standard and sub35

standard loan assets even though the modification of terms might not jeopardize the
assurance of repayment of dues from the borrower, the norms relating to restructuring of
standard and sub-standard assets were reviewed in March2001. In the context of
restructuring of the accounts, the following stages at which the restructuring /
rescheduling / renegotiation of the terms of
Loan agreement could take place, can be identified:
1) Before commencement of commercial production;
2) After commencement of commercial production but before the asset has been
classified as substandard,
3) After commencement of commercial production and after the asset has been
classified as substandard.
In each of the foregoing three stages, the rescheduling, etc., of principal and/or of interest
could take place, with or without sacrifice, as part of the restructuring package evolved.
4 Treatments of Restructured Standard Accounts:
A rescheduling of the installments of principal alone, at any of the aforesaid first two
stages would not cause a standard asset to be classified in the substandard category
provided the loan/credit facility is fully secured.
A rescheduling of interest element at any of the foregoing first two stages would not
cause an asset to be downgraded to substandard category subject to the condition that the
amount of sacrifice, if any, in the element of interest, measured in present value terms,
is either written off or provision is made to the extent of the sacrifice involved. For the
purpose, the future interest due as per the original loan agreement in respect of an account
should be discounted to the present value at a rate appropriate to the risk category of the
borrower (i.e., current PLR+ the appropriate credit risk premium for the borrowercategory) and compared with the present value of the dues expected to be received under
the restructuring package, discounted on the same basis.
In case there is a sacrifice involved in the amount of interest in present value terms, as at
(b) above, the amount of sacrifice should eitherbe written off or provision made to the
extent of the sacrifice involved.
36

5 Treatment of restructured sub-standard accounts:

A rescheduling of the installments of principal alone would render a sub-standard asset
eligible to be continued in the sub-standard category for the specified period, provided
the loan/credit facility is fully secured.
A rescheduling of interest element would render a sub-standard asset eligible to be
continued to be classified in substandard category for the specified period subject to the
condition that the amount of sacrifice, if any, in the element of interest, measured in
present value terms, is either written off or provision is made to the extent of the
sacrifice involved. For the purpose, the future interest due as per the original loan
agreement in respect of an account should be discounted to the present value at a rate
appropriate to the risk category of the borrower (i.e., current PLR + the appropriate credit
risk premium for the borrower category)and compared with the present value of the dues
expected to be received under the restructuring package, discounted on the same basis.
In case there is a sacrifice involved in the amount of interest in present value terms, as at
(b) above, the amount of sacrifice should eitherbe written off or provision made to the
extent of the sacrifice involved. Even in cases where the sacrifice is by way of write off
of the past interest dues, the asset should continue to be treated as sub-standard.
6Up gradation of restructured accounts:
The sub-standard accounts which have been subjected to restructuring etc., whether in
respect of principal installment or interest amount, by whatever modality, would be
eligible to be upgraded to the standard category only after the specified period i.e., a
period of one year after the date when first payment of interest or of principal, whichever
is earlier, falls due, subject to satisfactory performance during the period. The amount of
provision made earlier, net of the amount provided for the sacrifice in the interest amount
in present value terms as aforesaid, could also be reversed after the one year period.
During this one-year period, the sub-standard asset will not deteriorate in its classification
if satisfactory performance of the account is demonstrated during the period. In case,
however, the satisfactory performance during the one-year period is not evidenced, the
37

asset classification of the restructured account would be governed as per the applicable
prudential norms with reference to the pre-restructuring payment schedule.

7General:
These instructions would be applicable to all type of credit facilities including working
capital limits, extended to industrial units, provided they are fully covered by tangible
securities.
As trading involves only buying and selling of commodities and the problems associated
with manufacturing units such as bottleneck in commercial production, time and cost
escalation etc. are not applicable to them, these guidelines should not be applied to
restructuring/ rescheduling of credit facilities extended to traders.
While assessing the extent of security cover available to the credit facilities, which are
being restructured/ rescheduled, collateral security would also be reckoned, provided
such collateral is a tangible security properly charged to the bank and is not in the
intangible form like guarantee etc. of the promoter/ others.
8 Income recognition
There will be no change in the existing instructions on income recognition. Consequently,
banks should not recognize income on accrual basis in respect of the projects even though
the asset is classified as a standard asset if the asset is a "non performing asset" in terms
of the extant instructions. In other words, while the accounts of the project maybe
classified as a standard asset, banks shall recognize income in such accounts only on
realization on cash basis if the asset has otherwise become non performing as per the
extant delinquency norm of 180 days. The delinquency norm would become 90 days with
effect from 31 March2004.

38

Consequently, banks, which have wrongly recognized income in the past, should reverse
the interest if it was recognized as income during the current year or make a provision for
an equivalent amount if it was recognized as income in the previous year(s). As regards
the regulatory treatment of income recognized as funded interest and conversion into
equity, debentures or any other instrument banks should adopt the following:
9 Funded Interests:
Income recognition in respect of the NPAs, regardless of whether these are or are not
subjected to restructuring/rescheduling/ renegotiation of terms of the loan agreement,
should be done strictly on cash basis, only on realization and not if the amount of interest
overdue has been funded. If, however, the amount of funded interest is recognized as
income, a provision for an equal amount should also be made simultaneously. In other
words, any funding of interest in respect of NPAs, if recognized as income, should be
fully provided for.
9.1. Conversion into equity, debentures or any other instrument:
The amount outstanding converted into other instruments would normally comprise
principal and the interest components. If the amount of interest dues is converted into
equity or any other instrument, and income is recognized in consequence, full provision
should be made for the amount of income so recognized to offset the effect of such
income recognition. Such provision would be in addition to the amount of provision that
may be necessary for the depreciation in the value of the equity or other instruments, as
per the investment valuation norms. However, if the conversion of interest is into equity,
which is quoted, interest income can be recognized at market value of equity, as on the
date of conversion, not exceeding the amount of interest converted to equity. Such equity
must thereafter be classified in the "available for sale" category and valued at lower of
cost or market value. In case of conversion of principal and /or interest in respect of
NPAs into debentures, such debentures should be treated as NPA, ab initio, in the same
asset classification as was applicable to loan just before conversion and provision made
as per norms. This norm would also apply to zero coupon bonds or other
39

Instruments which seek to defer the liability of the issuer. On such debentures, income
should be recognized only on realization basis. The income in respect of unrealized
interest, which is converted into debentures or any other fixed maturity instrument,
should be recognized only on redemption of such instrument. Subject to the above, the
equity shares or other instruments arising from conversion of the principal amount of
loan would also be subject to the usual prudential valuation norms as applicable to such
instruments.

9.2. Provisioning
While there will be no change in the extant norms on provisioning for NPAs, banks
which are already holding provisions against some of the accounts, which may now be
classified as standard, shall continue to hold the provisions and shall not reverse the
same.

40

OBJECTIVES

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

To know about the concept of NPA

To understand the causes & effects of NPA

To study the past trends of NPA.

To evaluate NPAs (Gross and Net) in PNB and other public sector banks, Pvt.
Sector banks & foreign banks operating in INDIA.

To see whether INDIAN banking industry is following international norms

regarding NPA or not.

41

RESEARCH METHODOLOGY
Research can simply be defined as search for knowledge; it is an art of scientific
investigation.
In this project report a research has been conducted to know about NPA of PNB
organization and PNB branch Bhagwangarh, reasons of NPA and branch policies to
recover NPAs.
In this report descriptive research has been used.

SCOPE OF THE STUDY:

o NPA ,Indian banking sector, Indian economy & world
o PNB Bhagwangarh branch Yamunanagar
o Tools to deal with NPA
RESEARCH PROCESS
1. Define research problem and objective: - first of all we need to define research
problem with out which we can not proceed. In our study our research problem and
Objectives is to know about NPA in PNB & its reasons
42

2. Define the information needed: - here we need to define the information actually
required for our study. In the offered project information is needed about
o
o
o
o

Indian banking sector

NPA its reasons and impact
Total NPA in PNB and Bhagwangarh branch
Methods to deal with NPA

3. Research design: - A research design is a framework or conceptual structure

with in which research would be conducted and also helps us to collect
maximum information with minimal expenditure of effort, time and money. In
this project Descriptive Research (in which researcher has no control over
variables) is designed.
4.

Collection of data: - In this project primary as well as secondary data has

been used and the same is collected from various sources like PNB
Bhagwangarh branch, internet, books etc.

5. Analysis of data: - After collection of dataanalysis is done to make it

understandable and to draw a conclusion.

43

DATA ANALYSIS AND INTERPRETATION

After collection of data analysis is done to make it understandable and to draw a
conclusion. For the purpose of analysis I have included total deposit, advances, gross
NPA, net NPA of public sector banks. This report also has NPA of Pvt. Sector banks and
foreign banks operating in India
While analyzing the data of PNB organization I found that the organization getting its
position good continuously.
I also have also included data of PNB branch Bhagwangarh which was established in
1971 and is the oldest branch in our region.

44

(1) Table shows the DEPOSIT of public sector banks

45

As on
march
31
S.No.

fig. in crore
PUBLIC SECTOR BANK

: DEPOSITS
Deposits

BANKS
NATIONALISED

BANKS

2011

2012

2013

1
2
3
4
5
6
7
8
9
10
11

Allahabad Bank
Andhra Bank
Bank of Baroda
Bank of India
Bank of Maharashtra
Canara Bank
Central Bank of India
Corporation Bank
Dena Bank
Indian Bank
Indian Overseas Bank
Oriental Bank of

84,972
59,390
192,397
189,708
52,255
186,893
131,272
73,984
43,051
72,582
100,116

106,056
77,688
241,262
229,762
63,304
234,651
162,107
92,734
51,344
88,228
110,795

131,887
92,156
305,439
298,886
66,845
293,973
179,356
116,747
64,210
105,804
145,229

12
13
14
15
16
17
18
19

Commerce
Punjab & Sind Bank
Punjab National Bank
Syndicate Bank
UCO Bank
Union Bank of India
United Bank of India
Vijaya Bank
TOTAL OF 19

98,369
34,676
209,760
115,885
100,222
138,703
54,536
54,535

120,258
49,155
249,330
117,026
122,416
170,040
68,180
61,932

139,054
59,723
312,899
135,596
145,278
202,461
77,845
73,248

1,993,305

2,416,267

2,946,636

742,073

804,116

933,933

264,968

303,969

311,930

1,007,041

1,108,086

1,245,862

112,401

167,667

180,486

3,112,747

3,692,019

4,372,985

NATIONALISED
II

BANKS
State Bank of India (SBI)
TOTAL OF
ASSOCIATES
TOTAL OF STATE

IV
1

BANK GROUP
Other Public Sector Bank
IDBI Ltd.
TOTAL OF PUBLIC
SECTOR
BANKS[I+II+III+IV]

46

The above data shows the total deposit of public sector banks which shows an increasing
trend.SBI the largest bank is leader in deposits followed by PNB, Bank of Baroda, Bank
of Indiaand Bank of Maharashtra is the last player in the list.
(2) Table shows the ADVANCES of public sector banks

Public sector bank :ADVANCES

As on
March 31

fig. in Crore)
Advances

S.No.
I

BANKS
NATIONALISED BANKS

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19

Allahabad Bank
Andhra Bank
Bank of Baroda
Bank of India
Bank of Maharashtra
Canara Bank
Central Bank of India
Corporation Bank
Dena Bank
Indian Bank
Indian Overseas Bank
Oriental Bank of Commerce
Punjab & Sind Bank
Punjab National Bank
Syndicate Bank
UCO Bank
Union Bank of India
United Bank of India
Vijaya Bank
TOTAL OF 19

II
III

IV
1

NATIONALISED BANKS
State Bank of India (SBI)
ASSOCIATES OF SBI
TOTAL OF ASSOCIATES
TOTAL OF STATE BANK
GROUP
Other Public Sector Bank
IDBI Ltd.
47

2011

2012

2013

58,802
44,139
143,251
142,909
34,291
138,219
85,483
48,512
28,878
51,396
74,885
69,065
24,615
154,703
81,532
68,804
96,534
35,394
35,468

71,605
56,114
175,035
168,491
40,315
169,335
105,383
63,203
35,462
62,146
78,999
83,489
32,639
186,601
90,406
82,505
119,315
42,330
41,507

93,625
71,435
228,676
213,096
46,881
212,467
129,725
86,850
44,828
75,250
111,833
95,908
42,638
242,107
106,782
99,071
150,986
53,502
48,719

1,416,881

1,704,880

2,154,380

542,503

631,914

756,719

196,947

226,023

237,434

739,450

857,937

994,154

103,428

138,202

157,098

TOTAL OF PUBLIC
SECTOR

2,259,759

2,701,019

3,305,632

BANKS[I+II+III+IV]

Above data shows the credits extended by the bank. Here SBI also leads in the same
followed by second largest bank PNB, BOB is at third place and last in the list is bank of
Maharashtra.
(3) Table shows the GROSS NPA of public sector banks
Public Sector Banks : Gross NPA

As on March 31
Gross NPA
S.No.
I

BANKS
NATIONALISED BANKS

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19

Allahabad Bank
Andhra Bank
Bank of Baroda
Bank of India
Bank of Maharashtra
Canara Bank
Central Bank of India
Corporation Bank
Dena Bank
Indian Bank
Indian Overseas Bank
Oriental Bank of Commerce
Punjab & Sind Bank
Punjab National Bank
Syndicate Bank
UCO Bank
Union Bank of India
United Bank of India
Vijaya Bank
TOTAL OF 19 NATIONALISED BANKS
State Bank of India (SBI)
ASSOCIATES OF SBI
TOTAL OF ASSOCIATES
TOTAL OF STATE BANK GROUP

II
III

48

2011

2012

2013

1,078
368
1,843
2,471
798
2,168
2,317
559
621
459
1,923
1,058
161
2,507
1,595
1,540
1,923
1,020
699
25,108
15,714

1,222
488
2,401
4,883
1,210
2,590
2,458
651
642
510
3,611
1,469
206
3,214
2,007
1,666
2,671
1,372
994
34,265
19,535

1,648
996
3,153
4,812
1,174
3,089
2,394
790
842
740
3,090
1,921
424
4,379
2,599
3,150
3,623
1,356
125
40,304
25,326

2,733
18,447

3,998
23,533

5,066
30,393

IV
1

Other Public Sector Banks

IDBI Ltd
TOTAL OF PUBLIC SECTOR
BANKS[I+II+III+IV]

1,436

2,129

2,785

44,991

59,927

73,481

Above table shows the gross NPA of Indian Banks. All banks are having the problem
.Amount of NPA shows the efficiency of bank operations and the same need to be
managed carefully. And here PNB shows its good position and having least amount of
NPA.

(4) Table shows the NET NPA of public sector banks

Public Sector Banks : Net NPA

As on March 31

( ` Crore)
Net NPA

S.No
.
I
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19

BANKS
NATIONALISED BANKS
Allahabad Bank
Andhra Bank
Bank of Baroda
Bank of India
Bank of Maharashtra
Canara Bank
Central Bank of India
Corporation Bank
Dena Bank
Indian Bank
Indian Overseas Bank
Oriental Bank of Commerce
Punjab & Sind Bank
Punjab National Bank
Syndicate Bank
UCO Bank
Union Bank of India
United Bank of India
Vijaya Bank
TOTAL OF 19

2011
422
79
449
628
272
1,507
1,063
138
313
94
999
442
78
264
632
813
326
525
292
9,337

49

2012
470
96
602
2,207
662
1,800
727
197
428
145
1,995
724
117
982
963
966
965
779
582
15,407

2013
736
274
791
1,945
619
2,347
847
398
549
398
1,328
939
238
2,039
1,031
1,825
1,803
757
741
19,605

II
III

IV
1

NATIONALISED BANKS
State Bank of India (SBI)
ASSOCIATES OF SBI
TOTAL OF ASSOCIATES
TOTAL OF STATE BANK
GROUP
Other Public Sector Banks
IDBI Ltd
TOTAL OF PUBLIC SECTOR
BANKS[I+II+III+IV]

9,677

10,870

12,347

1,192

1,960

2,444

10,869

12,830

14,791

949

1,406

1,678

21,155

29,644

36,074

All banks are having the provision for the NPA .after deducting the provision from Gross
NPA we get net NPA. Above table shows the net NPA of public sector banks.
(5) Percentage of net NPA to advances in Pvt. Sector banks

Private Sector Banks

As on March 31
Net NPA to Net Advances
S.No.
I

BANKS

1
2

City Union Bank Ltd.

ING Vysya Bank Ltd.
SBI Commercial &

1.08
1.20

0.58
1.20

0.52
0.39

3
4
5
6
7
8

International Bank Ltd.*

Tamilnad Mercantile Bank Ltd.
The Bank of Rajasthan Ltd.
The Catholic Syrian Bank Ltd.
The Dhanalakshmi Bank Ltd.
The Federal Bank Ltd.
The Jammu & Kashmir Bank

0.00
0.34
0.73
2.39
0.88
0.30

0.00
0.24
1.60
1.58
0.84
0.48

0.00
0.27
0.00
1.74
0.30
0.60

9
10
11
12
13
14
15

Ltd.
The Karnataka Bank Ltd.
The KarurVysya Bank Ltd.
The Lakshmi Vilas Bank Ltd.
Nainital Bank Ltd.
The Ratnakar Bank Ltd.
The South Indian Bank Ltd.

1.37
0.98
0.25
1.24
0.00
0.68
1.13

0.28
1.31
0.23
4.11
0.00
0.97
0.39

0.20
1.62
0.07
0.90
0.00
0.36
0.29

2011

50

(in %)
2012

2013

AVERAGE OF 15 PVT
I

BANKS [I]
NEW PRIVATE SECTOR

0.90

0.83

0.61

II
16
17
18
19
20
21
22

BANKS
Axis Bank Ltd.
Development Credit Bank Ltd.
HDFC Bank Ltd.
ICICI Bank Ltd.
Indusind Bank Ltd.
Kotak Mahindra Bank Ltd.
YES Bank
AVERAGE OF 7 NEW PVT

0.40
3.88
0.63
2.09
1.14
2.39
0.33

0.40
3.11
0.31
2.12
0.50
1.73
0.06

0.29
0.97
0.19
1.11
0.28
0.72
0.03

II

BANKS [II]
AVERAGE OF 22 PVT

1.40

1.09

0.56

III

BANKS [I+II]

1.29

1.03

0.57

This table shows the net NPA in percentage to net advances of Pvt. Sector banks in India.

(6) Table shows the Gross & net NPA of foreign banks in INDIA

Foreign Banks :Gross NPA/Net NPA

(Crore
As on March 31
S.N
o

Name of the Bank

AB Bank Ltd.
Abu Dhabi Commercial Bank

2
3

)
Gross NPA

Net NPA

2011

2012

2013

2011

2012

2013

Limited
American Express Banking

14

14

13

Corporation

45

17

20

30

14

16

51

4
5
6

Antwerp Diamond Bank N.V.

Bank Internasional Indonesia #
Bank of America NA
Bank of Bahrain and Kuwait

7
8

B.S.C.
Bank of Ceylon

9
10
11

26
0
1

100
0
1

100
0
1

23
0
-

64
0
-

18
0
-

12
5

11
2
1,42

10
2

0
-

8
-

2
-

Barclays Bank PLC

BNP Paribas
Chinatrust Commercial Bank

1,048
68
0

2
68
3
1,27

781
11
3

485
32
1,05

389
0
3

122
0
3

12

Citibank N.A..
Commonwealth Bank of

1,806

839

784

493

13

Australia
Credit Agricole Corporate &

14
15
16
17
18
19
20

Investment Bank
Credit Suisse AG
DBS Bank Ltd.
Deutsche Bank AG
FirstRand Bank Ltd.
JPMorgan Chase Bank
JSC VTB Bank
Krung Thai Bank Public

277

138

31
243
61
0

76
261
0
95
--

199
0
83
179
0
27
--

15
77
9
0

40
102
0
29
--

0
0
23
33
0
0
--

21
22
23

Company Limited
Mashreqbankpsc
MIZUHO Corporate Bank Ltd.
Oman International Bank

0
0
6

0
0
6

0
0
6

0
0
0

0
0
0

0
0
0

24
25
26
27
28

S.A.O.G.
Sberbank
Shinhan Bank
SocieteGenerale
Sonali Bank #

0
0
1

0
1
1
1,09

0
0
0
1
1
1,14

0
0
0

0
0
0

0
0
0
0
0

29
30
31

Standard Chartered Bank

State Bank of Mauritius Ltd.
The Bank of Nova Scotia
The Bank of Tokyo-Mitsubishi

928
0
2

6
19
10

8
18
10

514
0
0

580
17
0

132
13
0

32

UFJ Ltd.

7
1,68

33

HSBC Ltd

1,316

996

391

543

249

52

The Royal Bank of Scotland

34
35
36

NV
UBS AG
United Overseas Bank Ltd.
Total of Foreign Banks in

819
0

India

685
0
0
7,13

614
0
0
5,07

6,445

366
0

174
0
0

2,99

261
0
0
2,97

1,283

Foreign banks are also operating in India. The above table is all about NPA (gross & net)
of foreign banks.

DATA ANALYSIS & INTERPRETATION

(Figures in crore)
The following data is about PNB its deposit, Advances, gross NPA, CD Ratio, net NPA
Ratio, Capital Adequacy Ratio and sectoral NPA of the organization.

1. Deposit of PNB organization

year
deposit

2009
139860

2010
166457

2011
209760

53

2012
249330

2013
312899

deposit
350000
300000
250000

deposit

200000
150000
100000
50000
0
1

From the above table and diagram we can see that the total deposit of PNB organization
has been increasing year by year. It shows the increasing trend in the business of PNB
which is second largest public sector bank of INDIA.
The deposit shown here is the total deposit of PNB under all the schemes and services
being provided by the bank.
2. Advances of PNB organization

year
Advances

2009
96597

2010
119502

2011
154703

54

2012
186601

2013
242107

Advances
250000
200000
Advances

150000
100000
50000
0
1

We know all commercial banks exist for the purpose of profit & main source of there
earning is the interest from loans and advances.
From the above diagram we can see the increasing trend of total advances of bank year
by year which lead to the increase in the income of the bank.

3. Deposit V advances
year
deposit
advances

2009
139860
96597

2010
166457
119502

55

2011
209760
154703

2012
249330
186601

2013
312899
242107

350000
300000
250000
200000

deposit

150000

advances

100000
50000
0
1

Here we can see the increasing trend in the business of bank. Both deposit and advances
of the organization is increasing year by year. In the year 2013deposite of bank was
312899 cr. And advances were 242107 cr.

4. Credit to Deposit ratio of PNB

year
deposit
advances
CD ratio

2009
139860
96597
69.06

2010
166457
119502
71.79

56

2011
209760
154703
73.75

2012
249330
186601
74.84

2013
312899
242107
77.37

CD ratio
78
76
74

ratio

72
70
68
66
64
1

CD ratio is an index of the health of banking system in terms of demand for credit in
proportion to total deposit growth in the banking sector. A declining CD ratio implies that
banking sector was flush with funds without any corresponding demand for credit
affecting the bank's profitability in the long run as they have to pay interest to depositors
without corresponding income from the credit outflow.
The above table and diagram shows the credit deposit ratio of the bank. It is the ratio of
total credit to the total deposit of the bank. CD ratio should be near about 75 % .bank can
extend credit less than its deposits, so PNB is having good CD ratio.

5. Gross NPA of PNB

year
Gross NPA

2009
3391

2010
3319

57

2011
2767

2012
3645

2013
4379

Gross NPA
4500
4000
3500
Gross NPA

3000
2500
2000
1500
1000
500
0
1

Diagram shows the gross NPA of PNB

From above data it is seen that gross NPA of PNB in 2013 is 4379 which is the highest
from recent years

6. Percentage of gross NPA to advances

Year
Advances
Gross NPA
percentage

2009
96597
3391
3.51

2010
119502
3319
2.77
58

2011
154703
2767
1.78

2012
186601
3645
1.95

2013
242107
4379
1.80

percentage of gross NPA to advances

4
3.5
3

percentage of gross
NPA to advances

2.5
2
1.5
1
0.5
0
1

The table shows the increasing advances of PNB year by year which indicates its
increasing business capabilities and growth on the same time organization reduced its
NPA percentage to near about 2 from 3.5 which shows the efficiency of the bank.

7. Net NPA ratio of PNB

Year
Net NPA

2009
0.76

2010
0.64

2011
0.17

ratio
59

2012
0.53

2013
0.85

Net NPA ratio

0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0

Net NPA ratio

The net NPA ratio of the PNB is fluctuating. It was reduced to 0.17% from 0.76%
in 2013 but it rises again in 2013 to 0.85%

60

FINDINGS
On an overall, in comparison to the gross NPA portfolio of the financial sector in India
for the year ended March 31, 2011 approximately Rs 952 billion from the total gross
NPAs of Indian banking sectors
o
o
o
o

Public Sector Banks cover 55% of gross NPAs

Private Sector banks cover 11% of gross NPAs
Foreign Sector banks cover 3.02% and
Financial Institutions cover 29%

FINDINGS
Working on a project is a challenging task for a person who undertakes the same. While
working on the presented project I Have learned a lot about the topic.
Various new facts came to my knowledge during the work.

o I found that the advances of the bank are increasing continuously which
leads to increase in the profits also.
o The CD ratio of the bank is good which makes it position strong.
o NPA has been reduced to 2 % which is very good and showing the strong
position of the bank.
o The recovery system of the bank needs to be stronger which can help the
bank to make its position better.
61

o The fluctuations in the amount of NPA were due to various reasons

(internal & external).
o Various bank loans are not utilized for the same purpose for which they
are granted specially in agricultural sector.
o Since PNB is the second largest Indian public sector bank and has a great
opportunity of growth but various times due to some factors bank uses
conservative measures which hindrance for the bank to grab the
opportunity.

62

LIMITATIONS OF THE STUDY

Nothing in the world is complete and my presented work is not an exception to this
saying.
Since banking is a very vast topic to cover, it includes a lot of things and NPA is also a
very big affair. The limitations that I felt in my study are:

o It was critical for me to gather the financial data of the bank so the better
evaluation of the performance of the bank is not possible.
o Since my study is based on the secondary data, the practical operations as related
to the NPAs are adopted by the bank are not learned.
o There is also variation in figures available at different sources which create
confusion.
o Provision for the classification of the Assets / NPAs differs within each public
sector bank & this information is not available publicly.
o The RBI norms for the classification of assets / NPAs are available on a pay site
& not publicly available through any source.

63

RECOMMENDATIONS
As we know due to inflation and increasing population worldwide more infrastructure
and funds are required and banks and financial institutions play very important role in the
same.
During global slowdown in 2011 India was not much affected due to its strong banking
system and also during the phase of euro zone crises India was partially affected.
Through RBI has introduced number of measures to reduce the problem of increasing
NPAs of the bank such as CDR mechanism, one time settlement schemes, enacted of
SRFAESI ACT etc. A lot of measures desired in terms of effectiveness of these measures.
What I should suggest for introducing. The evolutions of the NPAs of public sector banks
as under:-o Each bank should have its own independence credit rating agency which should
evaluate the financial capacity and credit history of the borrower before extending
credit facility.
o The credit rating agencies should regularly evaluate the financial condition of the
clients.
o Special accounts should be made of the clients where monthly loan concentration
report should be made.
o Bank should evaluate the SWOT analysis of the borrower to know how they
would face the environmental threats and opportunities with the use of their
strength and weakness, and what will be their possible future growth in concerned
to financial and operation performance.

64

o There should be proper monitoring of the restructuring accounts because there is

every possibility of the loan slipping into NPAs category again.
o Proper training is important to the staff of the banks at the appropriate level so
that they should deal with the problem of NPAs and what continues steps should
take to reduce the NPAs.
o Willful default of bank loans should be made a criminal offence.
o Strong laws need to be enacted to deal with the problem of NPA.
o No loan is to be given to a group whose one or the other undertaking became a
defaulter.
o

Settlement procedure should be more strict and faster.

o A careful appraisal of the bank assets quality in relation to financial situation need
to be made on regular basis which will keep a check on the NPA as the level of
doubtful assets is increasing continuously.
o The overall banking environment should be improved through reduction of govt.
intervention in credit mgmt.

65

CONCLUSION
A report is not said to be completed unless and until the conclusion is given to the reports.
A conclusion reveals the explanations about what the report has covered and what is the
essence of the study. What my project report cover is concluded below.
The problem on which I focused my study is NPAs the big challenge before the public
sector banks .The Indian Banking sector is the important service sector that helps the
people of the India to achieve the socio economic objective. The Indian banking sector is
developing with good appreciate as compared to the global benchmark banks. The Indian
banking system is classified into schedule and non schedule banks. The public sector
banks play very important role in developing the nation in terms of providing good
financial service. The public sector banks have also shown good performance in the last
few years.
The only problem is that the public sector banks are facing today is the problem of
nonperforming assets. The non performing assets means those assets which are classified
as bad assets which are not possibly by return back to the banks by the borrowers. If the
proper management of the NPAs is not undertaken it would be hampers the business of
the banks. The NPAs would as try the current profit, interest income due to large
provisions of the NPAs and would affect the smooth functioning of the recycling of the
funds.

66

If we analyze the past years data, we may come to know that the NPAs have increased
very drastically after 2001, in 1997 the gross NPAs of the Indian banking sector
was47,300 crore where as in 2001 the fig was63,883 and which increase at faster rate in
2003 with 94,905 crore. The public sector banks involve its nearly 50% of share in the
NPAs .The RBI has been trying to take number of measures but the ratio of NPAs is not
decreasing of the banks. The banks must find out the measures to reduce the evolving
problem of the NPAs. If the concept of NPAs is taken very lightly it would be dangerous
for the Indian banking sector. The reduction of the NPAs would help the banks to boost
up their profits, smooth recycling of funds in the nation. This would help the nation to
develop more banking branches and developing the economy by providing the better
financial services to the nation.
The Punjab National Bank or PNB is one of the well known commercial and banking
institutions in India. It is the second largest government owned and regulated commercial
bank in the country and offers specialized solutions and financial services in a number of
sectors. Around 37 million customers are served by the bank on an average basis. The
customized facilities and services make it a trusted name in the domain of banking. Its
deposit has touched 312899 crore and advances 242107 crore in 2011 and aims Rs 10
lakh crore turnover by 2013.
PNB in March 2012 plans to undertake capital infusion to the tune of Rs 2,360 crore to
maintain the financial strength of the bank. While the bank would go for capital infusion
of Rs 1,075 crore from LIC of India, an amount of Rs 1,285 crore has been sought from
the government,
The performance of the bank during the first nine months of the current fiscal total
business of the bank crossed Rs 6,00,000 crore milestone to reach Rs 6,19,122 crore,
recording a growth of 21.4%.
PNB's net profit for nine months ended December, 2011, stood at Rs 3,460 crore,
registering a year-on-year growth of 7%,adding net profit of the bank for the third quarter
of 2011-12 recorded a growth of 5.5% to reach Rs 1,150 crore but it also has to take more
measure to deal with NPAs which can increase its profitability.
67

As NPA is big threat to profitability of all banks and need to be managed

effectively

NPA of PSB is much more than Pvt. Sector banks and foreign banks.

As for as PNB is concerned have less amount of NPA as compare to other PSB.

However with the introduction of SARFAECI ACT (The Securitisation and

Reconstruction of Financial Assets and Enforcement of Security Interest Act,
2002) banks can issue notices to defaulters to repay their loans. Also, the Supreme
Court has given the banks the freedom to sell mortgage assets of the borrowers, if
they do not respond to the legal proceedings initiated by lender. This enables
banks to get rid of sticky loans thereby improving their bottom lines.

Various steps have been taken by government to reduce the NPA. It is highly
impossible to have zero percentage NPA. But at least Indian banks can try
competing with foreign banks to maintain international standard.

68

REFERENCES
Books

1.

GoyalTarun, General knowledge 2011, Arihant Publications (I) Pvt. Ltd, Meerut,
p

2.

59-60

Rajeev Kumar, Indian Economy and development 2010, Embassy Books,

Mumbai, p

3.

73-74

Bhole, L. M., Financial Institutions and Markets, Tata McGraw Hills, New
Delhi, p

4.26-4.27

Magazine
o Economic and political weekly, January 16, 2012, CARLTON PEREIRA,
INVESTING IN NPAs.
o Pratiyogita Darpan monthly, November 2011/869,impact of NPA in INDIAN
banking system
Web
o www.projectsformba.com
o www.rbi.org.in
o www.iba.com

69

70