NPA's A Comparative Analysis On Banks - Financial Institutions and Its Implications Sumathi Gopal PDF
NPA's A Comparative Analysis On Banks - Financial Institutions and Its Implications Sumathi Gopal PDF
NPA's A Comparative Analysis On Banks - Financial Institutions and Its Implications Sumathi Gopal PDF
DOCTOR OF PHILOSOPHY
In
BUSINESS MANAGEMENT
Submitted by
MRS. SUMATHI GOPAL
Enrolment NO: DYP-PHD-066100015.
Research Guide
DR. RAJINDER. S. AURORA
M.Com, MFM, PhD, DHE, UGC-NET
June 2010
1
NPA’s--Comparative Analysis on Banks & Financial Institutions
DOCTOR OF PHILOSOPHY
In
BUSINESS MANAGEMENT
Submitted by
MRS. SUMATHI GOPAL
Enrolment NO: DYP-PHD-066100015.
Research Guide
DR. RAJINDER. S. AURORA
M.Com, MFM, Ph.D, DHE, UGC-NET
June 2010
2
NPA’s--Comparative Analysis on Banks & Financial
Institutions and its Implications
3
DECLARATION
Place:
Date:
4
CERTIFICATE
thesis has not formed the basis for the award previously of any degree,
Place:
Date:
Signature of the
Head of the department Signature of the Guide
5
ACKNOWLEDGEMENT
valuable inputs, guidance from time to time and taking his precious time
endeavour and help me to complete this research. Last but not the least
Institutions, the subject experts and other authorities, and friends who
without the support of all my well wishers this project would not become
a reality.
Place:
6
CONTENTS
7
4.3 Highlights of the Act 52-61
4.4 Limitations of the Act 61-62
4.5 SARFAESI (Amendment) Ordinance---2004 63
4.6 Conclusion 64-65
8
8. Findings and Conclusions 264-272
8.1 Introduction 264-266
8.2 Major Findings 266-268
8.3 Priority, SSI and Non Priority Sector
Advances 269-271
8.4 Conclusions 271-272
9
Chapter No List of Tables Page No.
Sector Credit 78
of Private Bank 95
10
Executive Summary
sectors. Non-performing assets are one of the major concerns for banks
the profitability and net-worth of banks and also erodes the value of the
The problem of NPAs is not only affecting the banks but also the whole
lending also carries a risk called credit risk, which arises from the failure
such losses is not possible, but banks can always aim to keep the
Comparative analysis has been carried out between the banks and
lending, weaker sections, other Priority, Gross and Net Profit and Loss.
11
A detailed study has been worked upon development of banks and
frame work is analysed under the study to bring notice to the regulators
which put in use may reduce the level of NPA. The researcher has
adopted two tests to find out the reliability of the response collected and
secondly Chi-square method to find out the data collected is not biased.
When a bank is not able to recover the loan given or not getting regular
Also the earning capacity is adversely affected. This has direct and
prudential norms, banks are not allowed to book any income from NPA.
Also they have to make necessary provisions for NPA which affects the
growth and expansion. NPA is double edged sword. On one hand banks
diverted for provision on NPA. The high level of NPA is dangerous to the
12
Many banks in East Asian countries had to close down due to high level
of NPA. The future picture of Commercial banks more so the banks &
of banks & FI will decline marginally both in terms of Gross and Net
figures over next three years. This may be due to higher provisions,
which the banks have been providing. The real issues are percentage of
NPA declining over the years but the absolute figures seem to be
economy. The failure of the banking sector may have an adverse impact
amply clear to potential borrowers that banks resources are scarce and
these are meant to finance viable ventures so that these are repaid on
time and relevant to other needy borrowers for improving the economic
13
Chapter 1
INTRODUCTION TO NPA’S
1.1 Theme
The failure of the banking sector may have an adverse impact on other
sectors. Non-performing assets are one of the major concerns for banks
the profitability and net-worth of banks and also erodes the value of the
for financial system all over the world. The problem of NPAs is not only
affecting the banks but also the whole economy. In fact level of NPAs in
into economic growth. However lending also carries a risk called credit
along with interest forms a major hurdle in the process of credit cycle.
14
These loans affect the bank’s profitability on a large scale. Though
As per the RBI guidelines any loan repayment which is delayed beyond
180 days has to be identified as NPAs. NPAs are further classified into
i. Substandard Assets
I.e. those which are NPA for a period not exceeding two years (Up to 2
years).
I.e. Loans which have remained NPA for a period exceeding two years
and which are not considered as loss assets. NPA accounts belonging
D2 – When the account remains NPA for 4th and 5th year.
A loss asset is one where loss has been identified but the amount has
not been written off wholly or partly. In other words, such assets are
15
As per recent guidelines even on standard assets a provision @
1992 were uncomfortably high for most of our PSBs and for some, high
Capital funds was disturbing high and in some cases exceed net worth
advances in March 1993 but have since come down from 14.5% in March
1994 to around Rs.20, 000 Crores or 9.2% in March, 1997” To find out the
i. Legacy NPAs
i. Legacy NPAs
These are the NPAs acquired even before the prudential accounting
banking to the PSBs and issued guidelines and framed policies whereby
40% of the total advances must go to priority sector. Here only the
16
quantity of advances is emphasized ignoring the quality of lending. The
assets”.
“the causes of high proportion of NPAs are varied. Poor credit decision
some of the micro and macro aspects of this. This is not all. Often, as
bank lending. Social banking need not conflict with canons of sound
quantitative targets, there is, as our experience has shown, the danger
of large advances may be lower but it forms the major chunk of the total
17
NPAs. Priority sector advances, as a percentage of NPAs may be higher,
in public sector banks. Viz. the government of India had given a massive
wavier of Rs. 15,000 Crores. Performance and efficiency of the banks are
banks. Emergences of foreign banks and private banks have led a way
18
sector banks have higher NPA level than the private Sector banks.
Cooperative sector banks have more NPA than the private sector banks
NBFC comparatively have less NPA they are more cautious at the time
creative accounting and loan rollovers ever greening to keep the level of
NPA low. The share of NPA is read as interest expenses is greater than
economy. The major segment of banking sector came under the control
improved significantly with the onset of lead bank scheme and district
plan. Indian banking sector have come a long way when it competitive
19
Uniform risk rate was equally attached to all advances irrespective of
degree of risk.
and rule and regulation followed were the same between Public sector
banks and private sector banks but the competition spirit in banking
sector increased to a greater extent with the result the advances and
selection of borrowers varied with the result the profitability and quality
of the assets varied from public sector to the private sector, Hence the
study involved the comparison between the private sector and the
public sector banks. Private Banks charge high rate of interest and also
study has been compared to Public banks, Private Banks along with
20
framing banking rules and regulations. Inspite of the strict banking laws
the cooperative banks are able to meet the required formalities. The
Public Sector banks and Private sector banks Today schedule Urban
banks accepts deposits from the members and lend money to needy
issue credit cards but they issue Kissan card which is may prove to be
doubtful debts.
raise the capital through public issues. Hence Reserve Bank of India is
collateral security and also and along with collateral security they also
Finance who provides general loans .Some Non Banking Finance lend
21
1.5. Non Banking Financial Company
institutions play a very large role in the credit markets for the
information regarding these activities like retail trade are not fully
public sector banks have been geared to ‘Asset Based Lending’ rather
lending based on the forecast cash flows. Activities like trade, transport,
following:
consumer;
22
Creating a level playing field when global players enter the Indian
markets;
Hence it is necessary for the Indian financial market to bring about the
sector and non banking sector ensure the growth of the economy along
with the adequate availability of the credit to the fast growing sectors of
the economy.
attacks, portfolio expansion and so on. At times, sheer size helps one to
face the tough environment. Now the Indian banking has moved close to
23
There are many operational concerns and problems cropping
with the consolidation of banks. The important one are with regard to
the customers like interest rates of deposits, loans and advances, asset
of the acquirer and acquired banks and so on. These issues need to be
operational issues and make things hassle free for the customers of
both the banks, particularly the acquired bank. The cooperative banks
should maintain high capital adequacy ratio to meet the loss and also
1.7. Conclusions
The research thesis covers all the sectors of the banks and also
financial institutions. Since finance is very important for all the business
which may lead to NPA. The comparison of the entire sector will enable
the banks to know which sector contributes maximum NPA and the type
24
CHAPTER 2
2.1 Introduction
RBI and Govt. of India had appointed various committees and Study
have been plaguing the Indian financial sector since long but were not in
the public domain till early nineties. By that time, significant amount of
Indian banking and financial sector. NPAs reflect natural waste of any
25
2.2 Review of Literature
Mrs. Mohina satish Kulkarni1- (1986): The author reviewed the progress
credit is utilized by the rual borrowers. The study mainly deals with
agricultural credit and there was an imbalance between the states and
populations.
Srinivasan2- (1991) dealt with national level accelerated the flow of credit
strategies available for meeting the issue. The study does not aim to
26
work out purpose-related or area-based strategies for managing NPAs.
bone of the banking sector. Credit monitoring and recovery are the
Zone. Author provides insight into warning signal emitted before the
careful keeping in mind the warning signals which can avoid the
Ahmedabad zone of Central Bank of India. Non priority Sector was the
region wise award for the best performance which will increase the
27
their overdues on farm finance by the commercial banks. Overall
institutional partner namely the crop finance. Deals with areas of farm
sector banks... Study highlighted the main reason which turns the
the total working of Indian banking system and the banks looses further
categories of borrowers.
business strategies that PSBs will have to adopt to come out of adverse
effect. The research explains the changes that are necessary in the
28
namely efficiency and profitability. The author suggested that week bank
RBI. Such reform will enable to increase the profitability of Public Sector
Banks.
to identify the risk has been introduced and also the efforts are made to
bring about the awareness in the industry. The researcher in his study
brings about the performance of MGB with banking credit planning and
analyzed and examined through his study the impact of overdues of the
banks. The study revealed the external factor and internal factor as to
the cause of borrower not making the due and account becoming NPA.
borrower.
29
functions reach. The study brings about the performance of private
banks in the post liberalization era and analyzing the cause of the poor
study highlighted the strength and weakness of only the private sector
problems and encourages new technology and new products with the
the cooperative societies Act and Banking Regulation Act give full
on the fact that unless there is a reliable bench marks the study may not
30
programme mainly the prudential standards to cooperative banking on
reforms.
Foreign Banks. The result of the study suggests on a value basis, the
all other bank groups, followed by the Indian Private Banks. From the
performance.
31
SARFAESI Act and Basel II norms implies new challenges for Indian
employed as the tools. The analysis of the NPA observed the decline in
post liberalisation period .The study insisted that the ideal level
benchmark is less than 1 percent, the segments curtail the growth rate
of NPAs and followed certain policy like counterparts who had not only
bank credit role and how it is channelled to the different sectors in India.
paper also deliberated the analysis on the bank credit to the various
32
only understand the various types of emerging risks but also the ways
and means to measure and mitigate them. The paper discussed the
the backdrop of Basel II. The paper thus aimed to develop a basic
study shows the mean efficiency score of Indian banks compares well
with the world mean efficiency score and the efficiency of private sector
sector banks and foreign banks in India and brings an insight to the
has analyzed the component which determines Profit Margin (PM), Asset
Utilization (AU) and Equity Multiplier (EM). The study dealt with the
the PM and the AU which may be ultimately results into higher ROE. The
33
SSI units, particularly in the international market, is dependent on their
role played by the Government of India and the SIDBI towards achieving
modernization for SSI sector in the Ninth Plan the initiative should be
farmers. This paper also analyzes the impact of the cost of borrowing on
simple and basic point a banker has to apply his mind and be alert about
while appraising a credit proposal. And also adds the phrase as banker
the problem by the bank. The author emphasized NPA is really breaking
34
best early opportunity available to the bankers to ensure the asset
quality. Study has proved ‘adverse credit selection’ is one of the major
monetary and credit policy and its implication for Urban Cooperative
Madhava Rao Committee. The author in his study mentioned the setting
bank.
the post reform period addressed two major issues in this article, viz, to
poor and rural household to adopt new technologies and to escape the
has also dealt with the policy initiation of banking sector reforms. There
35
has been a significant and favourable changes related to reduction of
showed that most of the banks form efficient frontier in profitability and
indicators. The authors emphasized on lacuna that banks are not giving
schemes in the past to facilitate the recovery from NPAs, the success of
such efforts in terms of NPA reduction has been far from satisfactory.
money from NPAs. Attempts to provide a glimpse of the Act against this
backdrop. The author has cited certain limitation on the Act and also put
2004.
through which banks can transfer NPA to separate entity called Special
36
Management Companies are. The research paper discussed the
credit as well as the effects the policies had. The study attempted to
emption and directed credit. The indices were used to evaluate the
which strongly suggest the requirement of a tool that can convert house
implementation and other related issues that the lenders bank will face,
in the context of Indian laws, regulations and taxations. The study gives
direction and attempts to identify the possible markets for this product
loan amount becomes difficult has been evolved through this measures.
37
attempt in the article to identify the change in the instalment is based on
high or low DSCR and analyzed on the basis of the available data and
holistic manner.
Dr. Amrit Patel32 (2006) Agriculture has been the most important sector
author highlighted in his study that fragmented work will not give
complete scenario.
through these articles reveals that the NPA through educational loan
dominance of credit risk syndrome. The study reveals that dilution with
38
the major event of dilution risk loss situations. Dilution of risk is the new
with all attendant benefits of both. Bank’s charge under the suggested
notice to the public at large and other banks/ financial institution which
the NPA has been blended by the author by the asset companies which
articles.
39
environment Basel Committee announced the guidelines on Capital
Adequacy. The author stressed upon the solvency status of the bank
through the concept of capital adequacy. The study also observed the
Capital Instrument .The author also highlighted the new area through
this paper is both simple and robust and address the problem of non-
normal data.
overdue of the loan of the banking system both credit cooperative credit
like RBI,NABARD and other policy makers at national level. It also gave
sources. The author in his research has preferred drought prone areas
since the trend recovery of loan has been worsening. The demand for
40
Sankar Thappa40 (2007) has dealt with the Securitization process at the
time of lending and borrowing money from the banks and financial
financial system all over the world. As a result capital market, money
market and debt market are getting widened and deepened. The study
securitization of the assets. The author has also revealed the future for
securitization in India.
John Ferry41 December 2008 projected the most recent phase of the
financial crisis in reference to Basel lI, Pillar II that covers three aspects
for controlling risk viz. responsibility for the board and senior
suprvision and sets target for banks capital to match the risk profile of
41
Kapil Sharma and P.N.Mishra43 (2008) one of the fundamental issues in
other. The Capital Asset Pricing Model (CAPM) was the first concrete
predictions about how to measure the risk and the relation between
expected return and risk. The paper dealt with the key ideas of the
weakness.
G.C. Goel44 (2008) The Indian banks need to manage their advances
Alternate Dispute Resolution (ADR) which can entail a fair deal to all
concerned without unlawful means and pro-court bias. The articles has
settlement of NPA dues promptly and also settle various other banking
Kamal Das45 (2008) last two decades there has been a crisis due to
volume and growth of NPA that holds the prime resources resulting in
42
resolve the distressed situation and for the strategy to succeed,
S.Sundararaman46 (2008) in hot pursuit of NPA the articles dealt with the
formation and procedural aspect of DRT which also includes the issue
pressures upon the concerned borrowers which can act as deterrent for
like stock and bonds. The author observed that losses in the sub-prime
affected the entire sector shaking the trust and confidence in the
while trying to distil the lesson to be drawn and their implications for
policy.
is very essential for the banks to manage risks. Poor risk management
43
described the challenges and categorised them into people, financial
credit risk, arises out of the borrower’s default in repaying the loan with
the stipulated time. In recent years some UCBs, which are mostly
engaged in retail banking, have faced mergers and strict action by RBI
bubble of NPAs may mar the balance sheets of the banks if they fail to
NPAs. In the case study, an attempt has been made to tackle the
and deregulation of the banking sector to keep pace with the global
changes and to cope with ongoing reforms in real sector. The paper
44
though there warning signal and underlines the fact that banks have
hampering the credit growth. The present study is based on the CAMEL
Tarun Bhatia52 (2009) the global economic crisis had a significant impact
the past decade. The author observed that it is necessary and beneficial
comparison between PSB, Private Bank and NBFC. The study made has
Based Lending’ rather than lending based on the forecast cash flows.
production, exports and employment in India. The paper dealt with the
45
progress made by SSI and policy laid by the government exclusively for
power supply, human resources, availability of raw material, etc. are the
cause of obstruction for the growth of SSI. The study reveals one of the
followed by the application of the legal system for suits filed by banks
and to review the amounts blocked in civil suits. It further classifies the
analysis of the time spent at various stages of suit and general causes
prevailing in the area of NPA reduction. This study also indicated that
46
the same is not shared by the staff at operational level. NPA reduction
Indian Industries at Mumbai April 3rd to 5th 2003. The address of the
small scale industries, small business man and programmes for poverty
47
deals with the mobilized funds among competing demand. Governors
factors leading NPAs,the onus rest with the banks themselves.This calls
Mumbai on April, 2002 “It is not any more Lenders problem alone
being brought into force Mr.Muniappan, in, in his article, “The NPA
end of the articles “I am of the opinion that NPAs are avoided at the
48
appropriate credit appraisal mechanism and mindset of the borrower
of every nation. Banks are the main stimulus of the economic progress
Ethiopia. Essentially deals with the provision for doubtful debts are one
among the most important cause for reducing the profitability of the
with the Federal Reserve Bank New York, organised by NIIBM on Jan
15th & 16th, 2007, Mumbai brought an insight for the need and
system and to reap the full benefits of the migration to the revised
49
implementation of the various important elements and concluded his
The then Union Finance Minister Shri Y.B. Chavan, while meeting the
main contenders for banks credit were large and medium scale private
commercial banks, called for a new policy, both for deposit mobilization
ensuring proper endures of funds and keeps watch on the safety of the
50
industries both in the private and public sectors and indicate the broad
and the discussion that took place at the 33rd meeting of the Board in
Eastern Region, held at Gauhati on 5th July, 1976, it was decided that the
factors impending the flow of bank credit in the Region and make
factors impeding the flow of bank credit in the North Eastern Region. To
51
suitable arrangements for expeditious disbursal of credit by commercial
banks
Shri James S. Raj. The terms of reference were to assess the impact of
branch expansion that had taken place since 1969 and to examine
called for and to inquire into the present pattern of branch expansion of
public sector and to suggest the future course of action keeping in view
RBI appointed the Working Group to review the system of cash credit in
all its aspect under the Chairmanship of Mr. K.B. Chore, Additional Chief
52
7. Dr. Hate Committee on resources of Co-op Banks (1981)
RBI constituted on 22nd March, 1981, a Study Group called the “Study
Banks” under the Chairmanship of Dr. M.V. Hate, Executive Director, RBI
reference were to define and identify surplus resources with the State
and Central Co-operative Banks and to identify the causes and examine
be said to have come to an end with the formation of the National Bank
with the objective of national policies, the bank has also been insisting
on the need for reserving a portion of credit for the weaker section. This
53
At the meeting of the Finance Minister with the Chief Executive Officers
carried out with their personal participation in different districts all over
54
12. Gupta Committee on Agricultural Sector (1998)
examine the existing structure of the financial system and its various
RBI had constituted a 7 member Working Group on 15th Dec. 1997 under
IDBI, keeping in view the need for evolving an efficient and competitive
55
emerging operating environment and suggest changes and to examine
whether DFIs could be given increased access to short term funds and
under the Chairmanship of Shri S.S. Tarapore was appointed. The terms
of bank dues and reduction of NPAs and banks anks wise study on
factors responsible for the NPAs and banks specific suggestions for
recovery.
56
5. Narsimhan Committee – Reform II (1998):
Reform of the Indian banking sector is now under way following the
banks.
The RBI had set up Working Group in the month of March 1998 to review
Shri N.V. Deshpandey. The objectives of the panel were to look into
Recovery of Debts due to Banks and Financial Institutions Act, 1993 and
machinery,
57
charge of this project whereas, Shri A.S. Rao and R.M. Thakkar, both
Deputy General Managers, assisted this project. This study has been
data obtained from public sector banks and 6 private sectors banks and
the account turning NPA in respect of Public sector banks and private
sector banks.
2.5. Conclusions
Research work relating to the task of Credit, Legal Reforms and NPAs
which is very useful in this present research study. All these tasks are
58
CHAPTER 3
Need for the research study after observation that generally the authors
study on NBFC along with these sectors and compare their NPA level
have been appointed still NPA exist. As the need of time to regain trust
level of NPA on priority, Non priority and SSI has been selected. Many of
The study relates with the credit advances and recovery of loans by
research study has been carried out to find out the measure to reduce
the bad loans in different sectors and the techniques to control the level
59
of bad loan in banking sectors and Financial Institution. In the era of
after realising deficiency in the existing system. Hence the strength and
system. The researcher has tried to analyse the gaps in each sector on
Financial Institutions
sectors
60
3.4 Limitation of the Study
The study suffers from the limitations which are inherent due to
economic value and not physical value. The study is based on primary
data which carries its own limitations. The analysis is based on data
cooperative banks and Bhatti petti. The data is related to last 10 years
and empirical.
interpretation of data
Data is collected from public Sector Banks, Private Sector Banks, and
a. Primary Data:
61
PART B: SANCTION & DISBURSEMENT STAGE
Bank Officials from Public Sector Banks, Private sector Banks, and
b. Secondary Data:
62
Samples were collected at random
As far as possible the corporate office or head office or the zonal office
was presented to other facilitators to find out their views regarding bad
3.5.2.Data Collection
Data analysis was analysed to meet the objectives and were presented
objectives. Tables of all the Responses were drawn for the data. Simple
by the study.
3.6. Conclusion
The distribution of NPAs in the system follows 80-20 rule whereby 20%
value terms more than 60% of the impaired assets are amenable to be
lies in the speed of recycling these assets and their realization into
63
cash. In achieving objective the legal environment should adequately
the challenge to de-stress the system and prepare for future growth by
fueling the SMEs which is the growth engine for Indian economy in the
legislation, fund support and prompt action helped to resolve the crisis
the problem and approach professionally utilising the lessons from the
64
Chapter 4
4.1 Introduction
system all over the world1. As a result capital market, money market and
market has increased the need for innovative instruments for raising
funds. There is increasing from investors, for high quality, low risk
industry in India is the NPAs, i.e. the loans, where the principal and
interest cannot be recovered, thus the assets stop earning any income.
The unbearable level of NPAs has led to lower interest income and loan
national priority.2
(DRTs) was set up precisely to avert the said problem, to give bank
65
their loan recovery effort came in the form of the NPA Ordinance, later
and Enforcement of security Interest (SARFAESI) Act. The Act paves the
that can take the NPAs off the balance sheets of banks and recover
them.
requirement of Indian bank was the key driver behind the retail
(MBS) are more prevalent, it is the Asset Backed Securities (ABS) which
more than 50% of total issuance. In India, underlying assets which have
66
been securitized mainly include commercial vehicle loans, car loans,
ABS, MBS, single loan Collateralized Loan Obligation (CLO) and Direct
and sell them off to realize their loans, which have become NPAs. But
open.4
4.3. a. 1. In case the borrower of an NPA account fails to pay the dues of
the bank within 60 days from the date of the notice sent by the bank, the
bank can exercise any of the following rights under sub-section 13(4) to
assets
67
d. Send notice to a third person who has acquired the assets from
not less than three fourth in value on the amount outstanding are
3. After acquiring the possession of the assets charged to the bank and
selling the same and appropriation of scale proceeds towards the dues
of the bank, then the bank can approach DRT for recovering the balance
13(10)
4. If the bank feels that there can be resistance for acquiring the assets
charged to the bank from the borrower, in such a case the bank can
assets.(section 14)
borrower shall not deal with the assets which are charged to the bank.
However, dealing in the said assets in the said assets in the ordinary
transaction:
68
a. Any security interest created for payment of financial assets not
c. Any case in which the amount due is less than 20% of the
Act, 1930.
which will purchase the NPA accounts from the bank at a discounted
price. They will also take over the assets charged by the bank for the
8. Section 17, any person including the borrower may approach DRT by
filing an appeal before the DRT within 45 days from the date on which
69
steps have been taken by the bank. But such an appeal shall not be
dues of the bank is deposited in the DRT. The right to appeal before
Section 18 to any person aggrieved by the order of DRT. The ousts the
4.3. b. After the publication of this Act, several borrowers had filed writ
Act. In the landmark case of Mardia Chemical Ltd. & Others vs. Union of
India & Others (2004) 120.Comp.Case 373 (SC), the Supreme Court has
upheld the validity of the Act. Some salient features of the judgement
are:
by the borrower. The bank should apply its mind to the objections
ii. The court held that banks and financial institution have been
have been provided with guidelines by the RBI laying down the
constitution.
70
iii. Section 34 of the Act lays down that Civil Courts have no
provisions.
iv. Accordingly, the Supreme Court upheld the whole of the Act
4.3. c. The SARFAESI Act and the action of creditors have been
Chemicals Vs ICICI case, the Supreme Court upheld the Act in 2004,
tilting the balance for the banks. Meanwhile the RBI has been
encouraging the banks to use the provisions of the SARFAESI Act. Ever
order permitting banks to take over the assets hypothecated but not
tenacious litigant.6
71
institution would take over a cement plant, a boutique or a hotel and
that the bank or financial institution obtains its pound of flesh from the
asset. The ultimate aim of the secured creditor would be to ensure that
The less litigious-minded among the defaulters' list have ensured that
under the SARFAESI Act. Hence, it all boils down to the willingness of
the borrower to pay up. This is precisely the reason why certain
him all over than hang on to the asset by taking protection from any
With a view to help the Banking sector to overcome the mounting ‘non
Interest Act, 2002. The Civil Procedure Code 1908 was enacted for
enforcing substantive civil rights and it was ruling the field for several
decades. It was realized later that litigation through the Civil Procedure
72
abnormal delays and technicalities in following the Code. Added to that
public money and there was a need to rotate the money for the public
SARFAESI Act was enacted in 2002, the NPA stood at Rs. 1.10 lakh
Committee for studying and recommending the ways and means for
Debts by Banks and Financial Institutions Act 1993 was enacted with
much hope that the said Act would enable quick recovery of NPAs by
Banks and Financial Institutions. However the Act (DRT Act) failed to
yield the desired result. In Transcore, the Supreme Court itself has taken
note of the failure of the DRT Act by observing Further in cases where
the passage of time and delay in the DRT proceedings, the value of the
contingencies are not taken care of by the DRT Act and, therefore,
In the above background the policy makers and legislators realized the
73
need for further measures for the quick recovery of NPAs, and to
Corporation Acts, where there is provision for the sale of secured assets
Act 2002 (SARFAESI) was enacted. The SARFAESI Ordinance 2002 was
Financial Institutions inter alia to take possession and effect sale of the
secured assets. After the enactment of the SARFAESI Act, like any other
settle down the legal position. Two most important cases in that process
are Mardia Chemicals Ltd v. Union of India (2004 (4) CTC 759; 2004 (4)
SCC 311) and Transcore v. Union of India & Anr7 2006 (5) CTC 753; AIR
2007 SC 712) wherein the Supreme Court had settled the legal position
substantially with regard to the SARFAESI Act and made the rigor of
74
SARFAESI Act for the recovery of NPAs effective in letter and spirit.
Institutions
In Transcore case the Supreme Court has held in: “In our view, Section
17(4) shows that the secured creditor is free to take recourse to any of
in any other law for the time being in force, When the Supreme Court
compared State Revenue law with the SARFAESI Act it sent wrong
(Rule 40). The Bench also considered the rules which permitted
3.3.d. Secondly they drew an analogy with the provisions of CPC and
held that the Rules framed under the ITCP Rules largely correspond to
75
40 of the ITCP Rules corresponds to Order 21 Rule 96 C.P.C. They were
of the view that Rule 40 of the ITCP Rules dealing with the case where
possession to the auction purchaser and the tenants (who are strangers
order directing them to vacate the properties forfeiting their rights under
1. The legislation empowers one party to the dispute, i.e. the creditor
they do not examine the validity of the charge nor are they
3. The main object of the Act is fast recovery of debts. But the Act
76
5. The Act empowers the banks to take over the management of
7. In case of sale of seized assets, the seller and the beneficiary will
77
4.5 SARFAESI (Amendment) Ordinance- 2004
certain sections of the Act, which has been passed by the Parliament in
December, 2004.
the borrower.
78
4.6. Conclusion
legislation8. The only way to put a stop to NPA problem is to attack the
2. As Justice B.P.Banerjee puts in: “The Act does not provide a magic
3. The Act gives sweeping powers to banks and FIs to seize the assets
charged to them and realize their loans without any intervention of the
Court. It is a tool and not a weapon in the hands of the banks to shoot
the defaulters”10. Taking over the defaulters personal assets where the
wilful defaulters has siphoned out the assets under the banks charge
needs to be taken in the long run if the Act fails to deliver the required
result. Since the NPA is an integral part of the operational risk the
79
Company (PTC) structure and formation of a trust. Securitization can
assets.
upfront at the time of transaction as all the risks and rewards were
profit over the tenure of the transaction, thereby removing the upfront
funds.
80
CHAPTER 5
5.1. Introduction:
ii. Private Sector Banks (which are classified as old Private Sector
Bank and New Private Sector Banks that emerged after 1991.
Banks.
81
5.2. a. Pre- liberalization era:
recession
82
project with any degree of certainty during the loan payback
period.
select industries permitted change in the product mix within the overall
Indian economy registered the average growth rate of 5.3 percent per
annum (sixth five fear plan), much higher than the average growth of
3.5 percent per annum during the previous three decades. With the
April 1992.The central bank, with a cautious move, adopted time based
83
system in India places significant importance on tracking net NPA as
off accounts in present value terms using cost of carrying NPA as the
Prior to the 1991 reforms, India’s Banking system/sector had long been
been an important part of the financial strategy under which the RBI
prescribed three distinct targets for PSBs: 40% of NBC to the priority
agriculture and 10%of NBC to weaker section was fixed. In 1999 the
84
Table 5.1
85
2005 and in 2006 it decreased to 16.1 and in 2007 it further deteriorated
to 15.8% to NBC.
The PSBs are required to lend 10% of NBC to identified weaker sections
of the society. Banks to this segment is fluctuating from year to year. In
2003 the percentage dipped to 6.76% and in 2008 it increased to
9.3%.Overall during these period of study the bank could not achieve
10% target but the performance was quiet satisfactory.
Table 5.2
86
Source: RBI Publication
Priority Sector or directed credit has its origins in social control policy
of the Government of India since 1967. Later this ratio was increased to
40% which till date the same ratio. The ratio since the liberalization
period remains the same. The rational provided by the Narasimham
87
Committee-I (1991) for its reduction from 40% to 10% while narrowing
the focus of priority sector on small farmers and other low income
groups rest crucially on nonperforming advances. This situation gave
raise NPA. Table 5.3 shows that gross NPA under priority sector is
increasing since 1999 to 2008. In 1999 the gross NPA under priority
sector is 43.70% and in 2008 gross NPA is 63.62%. The share of non-
priority sector shows the reduction in gross NPA. In 1999 the gross
NPA under non-priority is 53.40% and in 2008 it has reduced to 35.63%.
Similarly the share of NPAs in public sector shows reduction of gross
NPA, from 2.90 in 1999 to 0.75 in 2008.From Table 5.3 it clearly shows
the level of NPA in public sector bank is the least and the maximum
contribution of NPA emerges from the priority sector.
Table 5.3
Sector Wise Non Performing Advances of Public Sector Banks Public
Sector Banks
Sector wise NPAs (% to Gross NPAs)
Year Ending Priority Non-Priority Public Sector Gross NPAs
March Sector Sector (Rs.Crore)
1999 43.70 53.4 2.90 51710
2000 44.50 53.5 2.00 53294
2001 45.43 51.35 3.22 53174.12
2002 44.49 53.54 2.00 56506.34
2003 47.20 50.70 2.10 52807
2004 47.74 51.14 1.12 34989.7
2005 49.05 50.00 0.94 47696.48
2006 54.07 45.11 0.82 41378.23
2007 59.46 39.27 1.27 38601.8
2008 63.62 35.63 0.75 39748.51
88
Source: RBI Publication
It has been seen from the Table 5.4 from 1999 to 2008 SBI has high NPA
as compared to PSB or nationalised in priority sector. The proportion of
gross NPAs in priority sector lending to gross NPA of SBI group was
44.6% in March 1999 and in March 2008 58.49%. Like the public sector
bank even in case of SBI non-priority sector had considerably reduced
as compared to the priority sector. In 1999 the share of SBI under non-
priority sector was 51.9% of its gross NPA and in 2008 it declined
considerably to the extent of 40.88%.The share of SBI under PSB
showed remarkable improvement. In 1999 the share of gross NPA was
3.5% and in 2008 it showed 0.63% under its public sector segment which
is very impressive.
89
Table 5.4
Bank Group wise and Sector wise NPAs (percent of NPAs to Gross NPAs)
Year Non-
Priority Public
Ending Priority
Sector Sector
March Sector
SBI PSB SBI PSB SBI PSB
1999 44.6 43.7 51.9 53.4 3.5 2.9
2000 45.2 44.5 51.9 51.5 2.8 2.0
2001 44.2 45.4 49.8 51.4 6.0 3.2
2002 45.7 44.5 51.2 53.5 3.1 2.0
2003 47.5 47.2 49.4 50.7 3.1 2.1
2004 47.07 47.54 51.48 51.24 1.45 1.22
2005 47.39 49.05 51.48 50.0 1.13 49.05
2006 54.95 54.07 44.10 45.11 0.95 0.82
2007 57.15 59.46 41.6 39.27 1.50 1.27
2008 58.49 63.62 40.88 35.63 0.63 0.75
90
with its NBC value. The ratio in a particular sector is almost identical
since the regulatory body monitors and passes the rules and regulations
on a Uniform basis.
b. Agricultural Lending
achievements of banks under the 18% targets. As per the available data
OBC had the least NPA during the research period between 1999 to
2008.The level of NPA was 6.61 in 2006.The level of NPA in three banks
Bank of India, Indian Overseas Bank and PNB are the three banks which
had the high level of NPA. Out of these three banks Bank of India had
level of PSBs. It is stipulated that 40% of the priority sector credit should
profitability of the bank because the net NPA is adjusted from the
91
reserve set aside by the bank and it reduces the profits of the banks
such. With the result it has an impact on the performance of the bank.
Under PSB the highest level of NPA was 37.8% to gross NPA and
1999 and it further reduced and in 2007 it reached to the extent of 5.7%
and in 2008 it showed an increase in the same level and increased to the
tune of 9% in 2008.In the case of SBI group the lowest level of NPA
level to the extent of 6.31% in 2008 and highest level of NPA in 1999 was
37.8% and in the same segment the least NPA level was 14.1% in 2007
and in 2008 It increased to 15.2 which clearly shows that there is some
fault in the system and which should be monitored and reduced to the
previous level or even lesser than the same. In 2000 the level of gross
under this segment and reached to the level of 13.7% in 2007 and again
in 2008 it increased to 19.8%. During this period the study also reveals
that Indian bank in the year 1999 it had the gross NPA level to the extent
later reduced to 34.0% in 2008. These study shows that these level of
NPAs need to draw up a time bound strategy For reducing their NPA
levels need to draw a time bound strategy for reducing their NPA level in
92
4. Other priority Sector
Table 5.5
Bank Group wise NPAs in Other Priority Sector Credit to Gross NPAs of
Sr. Bank
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
No Group
State
A Bank
Group
Lowest 5.6 8.0 5.5 2.4 10.1 8.5 14.4 14.1 12.4 16.1
Average 10.2 11.2 10.4 11.1 11.9 15.5 19.7 25.4 27.4 26.6
Highest 16.0 17.8 12.0 22.1 19.2 22.9 26.0 31.3 31.3 33.9
Public
B Sector
Bank
Lowest 5.6 6.9 5.5 2.4 8.2 9.9 7.1 15.4 15.7 17.1
Average 10.9 11.8 12.1 11.9 11.9 15.5 17.4 22.4 27.5 28.2
Highest 17.7 22.0 22.3 22.2 22.2 29.3 33.3 32.6 36.6 39.9
93
The advances granted to small business, retail trades, roads and water
etc, are usually covered under the other priority (OPS). During the recent
years the share of OPS to NBC of the PSBs has been increasing. During
the reform period (1991-1996) the share of OPS to NBC of the PSB was
8% to 10%, it got slightly reduced in 1997 and 1998.Since then there was
an increase in the OPS advances. In PSB the lowest level of NPA was 2.4
% in 2002 and in the same level it was 17.1% in 2008 this shows an
increase in the level of NPA. In 1999 the ratio of NPA was 5.6% and there
was reduction until 2002 and steep increase in the level of NPA. In the
highest level the PSB shows an increase ratio. In 1999 it had the
NPA Bank group wise data shows the NPA level in SBI and its
Associates in lower segment it was 5.6% in 1999 and 2.4% in 2002. This
shows that in the year 2002 the performance of the PSB and S.
BIremains the same. In the highest segment in 1999 the NPA showed
16% of its SSI gross NPA and there was reduction in the level of NPA
an increase and it reached to the extent of 39.9% under the highest level
in SSI segment. Bank wise data from 1999 to 2004 the ratio of NPA was
under control i.e. the ratio was less than 30%.Since 2005 onwards they
exceeded the limit of 30% gross NPA. Canara bank in the year 2007 had
and Indian Bank in 2006 and 2007 had 31.8% and 39.4% respectively
Union bank of India showed in 2007 31.3% and in 2008 39%, similarly
94
Corporation Bank in 2007 had a gross NPA of 34.9% and in 2008
exhibited a ratio of 39.9%. Union Bank of India showed 31.9 in 2007 and
39.0%. These ratios give an alarming status to the banks. These PSBs
5.4.1 The year 2002-03 was marked by a revival in industrial growth with
health.
95
5.4.3. Asset Classification and Provisioning Norms:
The asset classification and provisioning norms for Tier I UCBs would
continue to be different from Tier II UCBs as follows: (i) the 180 day loan
delinquency norm for NPAs was extended by one year, i.e., up to March
adequacy and attracted risk weight of 125 per cent. After a review, UCBs
were advised not to classify education loans as 'consumer credit' for the
software (OSS).
The NPAs to loans ratio of DCCBs improved to 18.5 per cent at end-
March 2007 from 19.8 per cent at end-March 2006. This was mainly due
slippage was noticed both in the ‘doubtful’ and ‘loss assets’ category.
of DCCBs varied significantly across the States from 4.8 per cent to 76.4
96
Pradesh, Punjab and Rajasthan), the NPA ratio was less than 10 per
cent, while the NPA ratio was higher than 50 per cent in Jharkhand (76.4
per cent) and Bihar (54.5 per cent). NPAs in two States, viz., Jharkhand
and Tamil Nadu declined in 2006-07 as compared with the previous year.
However, the NPA ratio in three States, Haryana, Himachal Pradesh and
Punjab, which traditionally had relatively lower NPAs (less than 20 per
SCARDBs, varied widely across States at end-March 2007 from 100 per
(Assam, Manipur, Orissa, Jammu and Kashmir, Bihar, Gujarat and Uttar
Pradesh), the NPA ratio was more than 50 per cent. In all, the NPA ratio
in only four States (Punjab, Kerala, Madhya Pradesh and West Bengal)
Table 5.6
Banks
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
97
Source:RBI Report
The trend analysis in Table 5.6 shows that there is a fluctuation in the
and in 2003 it reduced to 19% and again in 2004 it rose to 22.7% and in
banks cooperative bank has more NPA since they give preferences to
priority and weaker section of the borrowers. The data for net NPA to
98
total advances is available only from 2003. Hence in trend analysis in
the percentage of net NPA was 13.0 and 2005 there is an increase in the
net NPA. Later there was a reduction in the level of NPA and 2008 the
net NPA exhibited 7.7% under the banner of cooperative bank (Refer to
Appendix 4). The Reserve Bank of India Act, 1934 was amended in
compulsory registration and minimum NOF for all NBFCs. The RBI
revised the approach towards detecting the frauds in the parent body
performance was excellent. 96.4 % of the assets were free from default
and the gross NPAs formed 3.6% only. In view of large increase in credit
to the commercial real estate sector over the last one year and the
The recovery performance was excellent. 96.4 % of the assets were free
from default and the gross NPAs formed 3.6% only. Loss assets
accounted for 0.8% only. NBFC is very cautious in lending the loan.
99
Table 5.7
Advance of NBFC
The trend analysis in Table 5.7 Gross NPA and Net NPA of NBFC clearly
exhibit that there is overall reduction in the Gross and Net NPA since
2001 to 2009.since the Net NPA is calculated after the adjustment made
from the reserves set aside in the balance sheet. In 2001and 2002 the
100
Net NPA is approximately 50% of gross NPA and since 2003 onwards it
is more than 50% difference between Gross NPA and Net NPA.
The Private Banks are generally classified as Old Private Banks and
banks and no classification have been made since many merger and
5.5.1. Weaker section advances made by the private banks with respect
loan to the extent of 42.43% to the weaker sections. The very same year
Jammu and Kashmir Bank Ltd gave 27.91 % to the weaker sections
101
5.5.2. Agricultural Advances:
As per the available data the agricultural advances by the private banks
shows that in the year 2000 the advance provided 10.44% and there is a
steep increase in the year 2004 which shows average lending towards
progress during the study period. This classification is not available for
the year 1999 and 2000. In 2001 it shows indirect agricultural lending
lending. In 2005 and 2006 the lending rate was moderate and it
102
reduced to 4.89% of its total agricultural advances. In 2003 it increased
recovery made during the credit period. In 2001 the level of agricultural
NPA was 5.83% and slowly it increased to 12.54% in 2006 and in 2007 it
the crops etc, there seems to be more contingent factor which leads to
non performing assets. The NPA level under the category of advance
the year 2001 the NPA level under advance to weaker section exhibited
103
Priority Sector Bank: Table 5.8
Advances to the Priority Sector by Private Bank as on Last Friday of the
Year
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Agriculture 9.5 9.1 9.6 8.5 10.8 12.3 12.1 13.5 12.8 15.4
SSI/Small
18.9 15.7 14.4 13.7 8.3 7.1 5.4 4.2 3.9 13.4
Enterprise
Other Priority 13.0 13.9 14.42 14.4 21.3 23.1 24.5 23.4 22.9 17.5
advances in 2008 is the highest i.e. 15.4% and lowest is 8.5% in the year
movement and later it increased in 2008.In case of SSI the trend shows
sector. In the year 1999 it had the highest advance in SSI sector to the
This shows that once again the concentration in SSI unit has increased.
104
In case of other priority sector the trend shows there was an increase
since 1999 to 2005 and since then there is a reduction in the advances
2005 it showed the highest level of the advances 24.5% and later it
showed positive trend i.e. there was reduction in the level of NPA but the
priority sector showed increased level. The average of all the banks NPA
under priority sector and in 2008 the level of NPA was 41.61%.This
SSI and Priority Sector the level of NPA under priority sector is very
high. The cause of high level NPA in sector shall be analysed in the
sixth chapter of this research. Bank wise analysis shows the level of
NPA in SBI Commercial and International Bank Ltd had 100% NPA under
priority sector during 2006 and 2008.Nainital Bank had 82.78% in 2001
and 70.15% in 2004. Many other banks at various levels had above 50%
The general trend in the level of NPA under SSI is reducing since 2001 to
2008. The percentage of NPA is not available for the year 1999 and
2000.The level of NPA in the year 2001 was 17.73% and it marginally
reduction in the level of NPA from 14.65% to 13.12% in 2008. During this
105
research period as compared to Priority Sector, Agricultural lending and
SSI lending the level of NPA under SSI sector is marginal and the
and regulations imposed by the RBI and Basel II norms. Initially banks
like Catholic Syrian Bank, ICICI Bank, Karur Vysya Bank, Development
Bank, City Union bank Ltd, J&K Ltd, Ratnakar Bank Ltd, SBI
international, Sangali Bank and Bank of Punjab showed the level of NPA
2008. Tamilnad Mercantile Bank had 30.07% NPA level under SSI sector
to Public Sector Bank but it reduced to a great extent in the year 2008.
(Refer to Appendix 7)
The RBI has classified the different sector as priority sector, agricultural
sector, non priority sector, SSI and other priority sector. The cumulative
level of NPA under other priority sector also showed an increasing trend
like priority sector. Under the said classification only the SSI sector
revealed the declining trend. These classifications were not available for
1999 and 2000. In 2001 it has exhibited 9.89% as its level of NPA under
private banks and later increased to 13.00% in the year 2003 and in the
revealed upward trend i.e. since 2005 it had 13.5% and in 2006 the level
106
of NPA under OPS (Other Priority Sector) had 15.79%, in 2007 the level
revealed Nainital bank had consistently high level of NPA since 2003
2004, 2005, 2006, 2007 and 2008 respectively. Other private banks had
moderate level of NPA and it can be controlled and reduced with proper
Table 5.9
107
In the aforesaid Table 5.9 comparison is brought about between Gross
NPA and Net NPA as to private banks with respect to the total advance
made by the entire sector. There is certainly reduction in the gross and
net NPA as to its advances. In 1999 the gross NPA was 11.5% in 2000 it
was reduced to 9.77% but in 2001 there was an increase in level of NPA
private banks. Since 2003 onwards there is a reduction in the gross NPA
The level of NPA reduced in the year 1999,2000 & 2001.In 2002 the level
level of NPA. In 2008 the level of net NPA was 0.91% to its advances.
Hence the legal frame work and recovery procedures are being properly
5.5.6. In the below mentioned table it shows that Private banks Gross
NPA and Net NPA with relation to the total assets. (Gross NPA/Total
Assets & Net NPA/Total Assets) As per the table shown the gross NPA
in 1999 was 5.55% of its total Assets. Later there was a reduction in the
108
Gross NPA and Net NPA in a Private Sector Banks
This statistics shows that the reserves retained by the bank during this
period could adjust the gross NPA and mitigate majority of the NPA and
Table 5.10
109
5.5.7 Table 5.11
The aforesaid Table 5.11 shows the comparison between the Gross
Profit/Loss and Net Profit/Loss. In 1999 the gross profit made by the
private banks were 1.42% and net profit was 0.72 which means in 1999
the net profit earned is 50% of the gross profit. There is no stability in
the profitability of the private banking sector. The earning varies from
110
year to year. Since the profit depends upon various other factors such
capacity of the banks. In 2002 the gross profit earned by the private
banking sector was 2.35%, in 2003 the gross profit was 2.41% and 2004
again it reduced to 2.36%. In 2008 the gross profit earned by the private
banks was 1.85%.Similarly the net profit earned by the banks were
0.72% and in 2001 the net profit was 0.48 and again there is a dip in the
profit in the year 2005 0.23% of the profit and in 2007 further there is a
1.98% and net profit was0.98, almost 50% of the gross profit.
5.6. Conclusions:
In many other studies the researchers have done a study separately Public
Sector bank, Private Sector Bank, Cooperative Banks. In this research the
detailed study has been covered by comparison and the position has been
highlighted. Minute details have been included and each sector has been
analyzed. In this chapter secondary data are collected and the analysis
111
CHAPTER 6
6.1. Introduction
As far as possible the corporate office or head office or the zonal office
112
could provide information for the entire banks. Similarly questionnaire
was presented to other facilitators to find out their views regarding bad
Data analysis was analysed to meet the objectives and were presented
objectives. Tables of all the Responses were drawn for the data. Simple
by the study. Apart from the graphical representation the data were
tested through Cornbach Alpha for finding the reliability of the data
SSI and Non priority sector were put to CHI-SQUARE testing. The result
6.1.b.CHI-SQUARE TEST
percentage?
No of 14 31 16 36
Responses
Solution:
Every Response can only be any of the one response above, i.e. 1/4.
113
2
Observed Desired (Oi - 2
(Oi - Ei)
(Oi - Ei)
Frequency OiF Frequency Ei Ei) /Ei
Weaker
Section 16 24.25 -8.25 68.06 2.81
Non-
priority 36 24.25 11.75 138.06 5.69
14.71
114
Analysis Reveals
terms of the Business. Cumulative score has an equal share from the
operative Banks has a turnover less than 25000 Crores. In case of NDFC
and private Bank less than 50% has the business less than 25000
115
Analysis Reveals
All the banks incorporated the integrated management except few of the
cooperative banks Because of the size of the banks. Total 15 SUC banks
Private Banks, NBFC all the banks adopted integrated management. PSB
was 25 in number including. The SBI and its associates, Private banks
Analysis Reveals
All the Banks under study compulsorily follows the Operational Risk
Management Policy. The question asked was close end questions and
116
100% were in positive reaction stating that their banks have adopted the
Analysis Reveals
All the Banks under study compulsorily follows the Operational Risk
Management Policy. The question asked was close end questions and
100% were in positive reaction stating that their banks have adopted
117
q2_d Information Technology Policy YES NO
Co-op Bank 100% 0%
NBFC 100% 0%
Private Sector 100% 0%
Public Sector 96% 4%
Cumulative Score 98% 2%
Analysis Reveals
Analysis Reveals
All the banks have adopted the information technology to meet the
customer’s needs and only a small portion of the public sector ban has
118
Analysis Reveals
Analysis Reveals
Equal Responses have been observed during the Early stage and Alert
itself.
119
Analysis Reveals
42% of the cumulative score says their progress is Good. Almost equal
% has the opinion on Slow and Moderate Progress. Across Groups the
Responses for Poor and Slow are Minor as compare to Moderate and
Good
120
Analysis Reveals
All the Banks under study had expressed the Quantum of Losses
because of frauds to be less than 25%.In case of private banks and Co-
operative Banks all the respondents accepted for fraud less than
25%.As per information provided by the NBFC 13% of fraud lie between
25% and 50%.4% of the public banks were of the opinion that their fraud
121
Analysis Reveals
Majority of the banks under study belongs to low and medium term
study revels that 53% of the priority sector outstanding against the
revels that in case of public sector bank 36% of the respondent banks
informed that their outstanding againt priority sector is poor and 40%
122
Analysis Reveals
Marjory All the Banks under study Responded to RBIs Risk Based
Private Sector with a minor share. 100% Public Sector banks followed
the Risk Based Supervision. 94% Private Banks, 88% NBFC, And 87% of
123
Analysis Reveals
Majorly All the Banks under study Expressed Medium and Low View on
opinion that the regulatory measures proposed by BIS are low, 71% of
each Co-operative Bank and Public Sector Banks is of the opinion that
124
Analysis Reveals
Majorly All the Banks under study Expressed that the Percentage is
observed for above 50%. 100% NBFC, 70% Private Bank and 53% Public
sector Banks is of the opinion that 25% are the regulatory measures
operative Banks and 21% Public Sector Banks are of the opinion that it
ranges between 50% to 75% and 25% Cooperative Bank and 11% are
125
Analysis Reveals
Majorly All the Banks under study Expressed that the Percentage is
Private Bank and 84% Public sector has expressed their opinion that
126
Analysis Reveals
such as 78% Co-operative Bank, 60% NBFC, 63% Private Sector Bank
and 56% Public Sector Banks accept both Guarantee and collateral
security.
127
Analysis Reveals
Majority of the Banks under study prefers Retail and Agricultural loan.
Public Sector bank doesn’t prefer Personal Loan. Almost all the sector
gives equal importance to all kinds of loan except Public Sector Banks..
31% of the private banks gives loan to this category. Public Sector bank
128
Analysis Reveals
below 25 and above 60 yrs. 26% of NBFC and public sector banks prefer
to give loan to the age group of 18 years to 25 years. Majority of the CO-
banks and 46% of private banks prefer to give loan to borrowers less
than 40 years. 37% of the NBFC gives loan to age between the ages of
40 to 60 years.
129
Analysis Reveals
More than 75% prefers to Collateral Security, and Filing suit for
Banks.40% each Private Bank and public bank prefer to file a suit in the
130
Analysis Reveals
Majority of the Banks under study Prefers Mortgage, over pledge. Pledge
Co-operative Banks prefer only pledge and 32% private banks prefer
100% NBFC prefer Mortgage.68% Private Bank and 77% public Banks
131
Analysis Reveals
73% agrees that Issue of credit card has been a cause for NPA for range
of less than 25%. 67% of the Co-operative is of the opinion that if the
credit card is issued it could cause at least less than 25% of NPA. Hence
the cooperative banks do not prefer credit card. They prefer Kissan Card.
NBFC is also of the same opinion like the Co-operative banks. 75% of
private Banks and 79% of the Public Sector banks share the same views
that it could cause less than 75% of NPA if the cards are issued.67% of
132
Analysis Reveals
The Cooperative Banks refer to their Kissan credit card only should be
able to read and write and basic literacy.13% cooperative bank deals
with the educational ad age factor of the card holder. 61% give
importance to the monthly remuneration of the card holder.13%.In case
of default the lender can recover the money from sale of the property.
50% each NBFC gives importance to age and wages in case of issue of
credit card. In case of private banks 24% provide weight age to
educational background,38% weight age to the age of the borrowers and
33% weight age to the monthly income of the borrowers so that the
bankers can avoid the account to be termed as NPA. 19% public sector
bank gives importance to educational background.
133
Analysis Reveals
Medium Risk. 40% and 46% 0f the Cooperative banks feels that risk
respondent feel that it is medium risk. 20% of the private banks opine
the educational rule has high risk than any other kinds and 50% accept
134
Analysis Reveals
committed by the officer. Later 29% opined that general manager should
be made accountable.
135
Analysis Reveals
Reasonable share of responses also agrees that employee and bank
situation equal percentage have stated that the employee and the
by the customer. 67% of the responses of the private bank are customer
should be made liable. 43% and 31% of the responses of the public bank
136
Analysis Reveals
The awareness is largely being brought in case of will full Defaulters,
default. Only 12% responses were under the opinion that initial default
137
22 In realizing the Recovery Files Meeting Appointm
amount whom agent Suit with ent of
does your bank Borrower Arbitrator
appoint?
Co-op Bank 11% 27% 31% 31%
NBFC 18% 26% 30% 26%
Private Sector 18% 31% 40% 11%
Public Sector 22% 35% 39% 4%
Cumulative Score 18% 31% 36% 15%
Analysis Reveals
Meeting with the Borrower is the Most Preferred way for Recovery. Filing
wherein 31% each meeting with borrowers and appointing arbitrator 27%
response prefer to file a suit and 11% prefer to appoint recovery agent. In
case of NBFC 26% each of response goes in favour of filing a suit and
filing a suit and 40% is in favour of meeting the borrower. Other category
138
response is in favour of filing suit in court and 39 % is in favour
Analysis Reveals
Majorly Banks under study consider Low and Medium Level contribution
response states high level of cost involved with the result reducing the
favour of medium cost involved and to that extent they opine that
139
profitability is reduced. In case of private sector bank 75% response
received highlights medium cost and 13% cost involved is low cost in
response received is low cost incurred for recovery procedure and 27%
Analysis Reveals
Issuing of Credit Card to Farmers is only encouraged by the Co-op
i.e. Kissan card to farmers and vendors who are dealing in cultivated
140
opinion pertaining to issuing credit card to students and weaker section.
as aforesaid who are small time vendors selling cultivable goods. NBFC
sections and Student received 33% each response and 23% response in
141
Analysis Reveals
As Students and weaker Sections are Preferred in terms of issuing of
from the farmers and vendors. As far as NBFC is concerned the analysis
dues and vendor’s contribution is equal i.e. 50% each. In case of private
banks all section contribute to the outstanding amount out of which 40%
farmer and 10% from vendor. PSB is similar to private banks wherein all
from students,29% from weaker section, 17% from vendor and 13%
against farmers.
142
Analysis Reveals
NBFC and private bank has 39% remedial measures and PSB has made
private banks and 34% in case of PSB.2% of the private bank did not
respond.
143
Analysis Reveals
Apart from NBFC, all other amongst the group majorly recover the
money within the Time Limit. Beyond the Time limit is almost 50% in
evident that NBFC has 50% share in both stages i.e. within time limit and
beyond time limit whereas Co-operative bank has 71%, Private Banks
71% and PSB 66% within time limit. In case beyond time limit Co-
operative bank has 29%, Private bank has 29% and PSB has 34%
respectively.
144
Analysis Reveals
Majority of the Foreign Currency is given in India only, where as foreign
Hence it shows Nil. Private sector and Public sector has these kinds of
facilities for their customers. Private Banks and PSB also facilitate the
145
Analysis Reveals
complex loan, 33% finance for the development of agricultural land, 25%
the underdeveloped areas. Public bank through their study explains that
commercial purpose.
146
30 Which sector does Priority Cooperative Weaker Commercial
bank prefer to give Section Establishment
loan to their
borrowers?
Co-op Bank 43% 18% 18% 21%
NBFC 20% 27% 6% 47%
Private Sector 43% 17% 17% 23%
Public Sector 30% 25% 27% 18%
Cumulative Score 34% 22% 21% 23%
Analysis Reveals
Every Institution has their own set Priority sector, which they prefer to
Lend over the other sector. The Cooperative banks feedback shows that
147
followed by 23% for commercial establishment and remaining sector
Analysis Reveals
148
Priority sector, followed by Agriculture. Maximum NPA in case of
40% from agricultural sector. In case of private sector 40% NPA is from
Non-priority sector and 30% from agricultural sector, 17% from weaker
sections and 13% from SSI. PSB has 39% level of NPA from agricultural
sector, 29% from Non-priority sector, 20% from weaker section and 12%
from SSI.
149
Analysis Reveals
Cooperative banks, NBFC, Private Bank and PSB feel one of the causes
for account becoming bad or NPA is the criticality of the business is not
150
Analysis Reveals
this factor and 40% of the PSB strongly disagrees to this factor. The
analysis shows that the banker is unable to get the clear idea about the
and 75% of the NBFC also agrees along with the private sector banks.
151
Analysis Reveals
Majority of the Group Agrees, that there are unrealistic projects
that the bankers is of the opinion that there are unrealistic project
support from the private sector bank to the extent of 80% of the private
banks in the study sample was of the opinion that they present project
the views of the private banks. 38% cumulatively disagreed to the views
Analysis Reveals
152
Analysis Reveals
When the question was raised to the respondent the study sample
153
Analysis Reveals
where in NBFC strongly disagrees with it.80% of Private banks and 72%
factor for bad loan or NPA.63% of the NBFC disagreed and 47%
154
Analysis Reveals
All the Group under study has almost 50 - 50 view, pertaining to non
Cooperative banks and 56% PSB agrees to the non availability of the
reliable market study and 63% NBFC strongly disagrees to the non
disagreed.
Part A_7
Analysis Reveals
155
agrees to the same, to which NBFC strongly disagrees. when the
response was put before the response and 64% PSB and 60% Private
banks agree to the non availability of the industry wise data for
Part A_8
Analysis Reveals
Majority group in the study agrees that relying on the unaudited and
156
provisional data and 33% disagree to the fact. 93% of private banks,67%
Part A_9
Analysis Reveals
amongst the branches /banks enabling the borrowers to enjoy the fund
from more than one bank. Multiple borrowing is one of the factors for an
account turning NPA. Cumulative score of 72% banks from the study
157
cooperative banks and 72% PSB agree. In case of NBFC 63% agrees and
Part A_10
Analysis Reveals
Majority group in the study disagrees of having 70% score in the study
158
Part A_11
Lack of knowledge in the subject to
Agree Disagree
credit officer
Co-operative Bank 20% 80%
NBFC 25% 75%
Private Bank 40% 60%
Public Sector 32% 68%
Cumulative Score 30% 70%
Analysis Reveals
credit officers. Whereas 68% PSB disagreed. The opinion of the private
agreed to this factor and 32% of PSB agreed. Minor strength agreed and
159
Part A_12
Lack of Economy Lack of
economic Study on the Production Agree Disagree
activity of the proposed borrower
Co-operative Bank 73% 27%
NBFC 50% 50%
Private Bank 53% 47%
Public Sector 48% 52%
Cumulative Score 56% 44%
Analysis Reveals
Majority in the study sample agrees to the fact regarding the lack of
NBFC has 50-50 views on this factor.73% of the Co-operative banks and
the fact that the lenders have lack of knowledge on the economic
160
Part A_13
Analysis Reveals
65% of the study sample agrees for the factor that staff fear for being
analyzing the figures it is found that almost the opinion of PSB agreeing
161
Part A_14
Analysis Reveals
right to choose the borrowers. They can perform their duties through
Private banks asserts this views and 56% PSB also asserted their views
and agreed to this fact regarding lack of power to choose by the credit
162
Part A_15
Non-availability of skilled/ trained staff
Agree Disagree
in credit department
Co-operative Bank 33% 67%
NBFC 12% 88%
Private Bank 60% 40%
Public Sector 40% 60%
Cumulative Score 40% 60%
Analysis Reveals
about the non availability of the skilled staff in the credit department to
which 40% agrees. Sector wise analysis shows that 67% of the Co-
operative banks, 88% of the NBFC and 60% of the PSB strongly
disagrees to the fact about the non availability of the skilled staff in the
department. 60% of the private bank agrees to this fact regarding non
availability of the skilled staff in the department is one of the cause for
163
Part A_16
Fraudulent approach of borrowers Agree Disagree
Co-operative Bank 46% 54%
NBFC 25% 75%
Private Bank 80% 20%
Public Sector 36% 64%
Cumulative Score 48% 52%
Analysis Reveals
Average of the cumulative score of the study group has almost similar
shows 52% disagreed and 48% agreed to the fraudulent approach of the
borrowers. Sectoral analysis of the study sample shows that 54% of the
the fact that borrowers fraudulent approach can be one of the cause for
164
Part A_17
Fraudulent and irresponsible attitude of
Agree Disagree
bank officials
Co-operative Bank 67% 33%
NBFC 75% 25%
Private Bank 79% 21%
Public Sector 37% 63%
Cumulative Score 59% 41%
Analysis Reveals
41% of the banks disagree and 59% agree with respect to bank official
banks, 75% of NBFC and 79% private banks agrees with fraudulent and
irresponsible attitude of the bank officials but opinion of PSB differ from
these views.63% of PSB disagree with the views of other sectoral banks
165
Part B: Sanction and Disbursement
Part B_1
Analysis Reveals
166
Part B_2
Political interference i.e. pressure to
Agree Disagree
sanction loan
Co-operative Bank 29% 71%
NBFC 50% 50%
Private Bank 60% 40%
Public Sector 68% 32%
Cumulative Score 55% 45%
Analysis Reveals
political interference for sanctioning the loan and 45% disagreed on this
to the political interference and 60% of Private Banks and 68% of PSB
167
Part B_3
Analysis Reveals
168
Part B_4
Analysis Reveals
Majority of the group under the study agrees that delay in decision
the private sector, 68% of the PSB agrees to these views. Since there is
with the result the account may turn NPA. Maximum percentage of
169
Part B_5
Analysis Reveals
the study group were conducted the analysis shows that cumulative
had a major share in disagreeing the fact. Other banks have much less
came from the private sector for delay in disbursement. 73% cooperative
170
Part B_6
Disbursement of loan before the
compliance of terms and conditions Agree Disagree
of sanction
Co-operative Bank 53% 47%
NBFC 50% 50%
Private Bank 60% 40%
Public Sector 76% 24%
Cumulative Score 63% 37%
Analysis Reveals
Majority of the group agrees that Disbursement of loan before the
disagrees to the fact of compliance of the loan account. NBFC has 50%-
50% views. exactly 50% agrees and 50% disagrees the same. Study
group which comprise of 25 PSB out of which 76% PSB agrees to the
and out of 15 private sector banks 60% agrees to the compliance of the
terms and conditions only after the disbursement of loan. 53% of the
171
agree to the fact that disbursement of loan should be made before
Part B_7
Analysis Reveals
84% of the PSB under study group consisting of sample size of 25 banks
including SBI and its associates agrees to incomplete and defective legal
172
the incomplete and defective legal documents.60% of the study group
35% disagreed on the fact that one of the reason for the account turning
Part C_1
173
Analysis Reveals
Cumulative score of 68% of the group under study disagrees to the fact
cause of NPA. Only 67% of private banks agree to the non availability of
the audited financial account 87% Cooperative banks, 75% NBFC and
76% PSB disagrees to the fact that non availability of the audited
bad or NPA.
Part C_2
174
Analysis Reveals
Cumulative score under the study group exhibits 51% agrees and 49%
disagrees to the fact that non submission of stock and other required
statement by the borrowers. 80% Private banks and 52% PSB agree to
the fact that due to non submission of stock and other required
information.
Part C_3
Negligent approach by the bank officials in
Agree Disagree
regards to inspection of stock etc.
Co-operative Bank 53% 47%
NBFC 88% 12%
Private Bank 67% 33%
Public Sector 60% 40%
Cumulative Score 63% 37%
175
Analysis Reveals
Cumulative score of the group under the study shows that 63% agrees
disagrees. They opine that the officials approach is not negligent. 53%
fact that feels that one of the factors for an account becoming NPA
Part C_4
176
Analysis Reveals
Cumulative score of group under the study 56% agrees regarding the
issue raised to the banks. The issues were with respect to non
NBFC and 80% PSB agrees to the fact that Cause of account becoming
Part C_5
177
Analysis Reveals
Cumulative score of the group under study shows 52% agreed for the
NBFC agreed and disagreed equal in number. The 67% score of private
also agrees to the fact like private banks that there is absence of close
Part C_6
178
Analysis Reveals
Study group is under the impression that there is still delayed detection
Part C_7
179
Analysis Reveals
62% cumulative score of the group under study agrees that delay in
to the fact. Individual sector wise analysis exhibit that 93% private
and only a marginal percentage disagrees to the fact. 62% NBFC also
legal and remedial action against the defaulters.60% under the sample
size of SUC bank has the same opinion as that of Private banks and
NBFC Only 56% of the PSB dies agree and feels there is no delay in
remedial measures.
180
Analysis Reveals
Cumulative Score of the group under the study shows that 82% agrees
to the compromise and settle to reduce the level of NPA in their bank to
reducing the level of NPA. Similarly 75% of the NBFC sample study and
NPA to which 87% PSB agrees overall from the sample size as
sec3_2
Can this method develop a tendency among bank
borrowers to make deliberate attempt of default YES NO
and then ask for concession in interest?
Co-operative Bank 40% 60%
NBFC 75% 25%
Private Bank 80% 20%
Public Sector 65% 35%
Cumulative Score 62% 38%
181
Analysis Reveals
Cumulative score of the group under the study shows that 62% agrees
so also 75% NBFC agrees and similarly 65% of PSB under study groups
to the views presented by other three groups that this settlement can be
sec3_3
182
Analysis Reveals
Cumulative score of the group under the study shows that 64% agrees
disagrees. Private banks strongly agrees with 80% score whereas 67%
PSB with 61% agrees to the view that the existing system is adequate to
disagreement.
sec3_4
Do you feel that improvement in this
YES NO
system is necessary?
Co-operative Bank 80% 20%
NBFC 38% 62%
Private Bank 80% 20%
Public Sector 65% 35%
Cumulative Score 68% 32%
183
Analysis Reveals
Cumulative Score of the group under study shows that 68% feels there
which 32% of the study sample disagrees. Cooperative bank and private
bank with score of 80% each agrees that there is a need for
improvement and PSB with a score of 65% agrees for the need to
improve the system. NBFC with a score of 62% disagrees to the need for
improvement.
sec3_5
184
Analysis Reveals
Cumulative Score of the group under study shows that 62% feels there
is a need for specialised and skilled officer to be selected for the credit
bank with 53% score agrees and private bank with score of 90% agrees
that there is a need for specialised and skilled officer to selected for the
credit department and PSB with a score of 59% agrees for the need for
specialized and skilled officer. NBFC with a score of 50% disagrees and
50% agrees for specialized and skilled officer in the credit department
sec3_6
185
Analysis Reveals
Cumulative Score of the group under study shows that 70% feels there
is a need for specialised and skilled officer to be selected for the credit
department will reduce the level of NPA to which 30% of the study
sample disagrees. Cooperative bank with 67% score agrees and private
bank with score of 80% agrees that there is a need for specialised and
skilled officer to selected for the credit department with the result the
NPA percentage can be reduced and PSB with a score of 70% agrees for
the need for specialized and skilled officer to bring down the NPA
percentage. NBFC with a score of 62% agrees and 37% disagrees for
sec3_7
186
Analysis Reveals
Cumulative Score of the group under study shows that 62% feels there is
department will reduce the level of NPA to which 37% of the study sample
disagrees. Cooperative bank with 60% score agrees and private bank with
score of 80% disagrees that there is a need for special recovery officer to
selected for the credit department with the result the NPA percentage can
be reduced and PSB with a score of 78% agrees for the need for special
recovery officer to bring down the NPA percentage. NBFC with a score of
sec3_8
187
Analysis Reveals
Cumulative Score of the group under study shows that 71% feels there
is a need for external recovery agent for collection of hard core dues to
reduce the level of NPA to which 29% of the study sample disagrees.
Cooperative bank with 47% score agrees and disagrees with 53% and
private bank with score of 80% agrees that there is a need for recovery
agent for collection of hard core dues to reduce the level of NPA
percentage can be reduced and PSB with a score of 83% agrees for the
need for recovery agent for collection of dues to bring down the NPA
percentage. NBFC with a score of 75% agrees and 25% disagrees for
sec3_9
188
Analysis Reveals
Cumulative Score of the group under study shows that 64% feels there
is a need for incentives to staff is good option and will reduce the level
with 47% score agrees and private bank with score of 80% agrees that
there is a need for incentives to staff with the result the NPA
percentage can be reduced and PSB with a score of 74% agrees for the
need for incentives to staff shall motivate them to work hard and bring
down the NPA percentage. NBFC with a score of 50% agrees and 50%
189
sec3_10
Analysis Reveals
Cumulative Score of the group under study shows that 68% feels there
option and will reduce the level of NPA to which 32% of the study
sample disagrees. Cooperative bank with 53% score agrees and private
bank with score of 50% agrees that there is a need for introducing a
credit before disbursement and with the result the NPA percentage can
be reduced and PSB with a score of 83% agrees for the need for audit
190
before the disbursement to bring down the NPA percentage. NBFC with
a score of 75% agrees and 25% disagrees for reduction in bad loans.
sec3_11
Analysis Reveals
Cumulative Score of the group under study shows that 68% feels there
option and should be made compulsory and will reduce the level of NPA
to which 32% of the study sample disagree. Cooperative bank with 67%
score agrees and private bank with score of 40% agrees and 60%
191
result NPA percentage can be reduced and PSB with a score of 70%
down the NPA percentage. NBFC with a score of 100% agrees for
sec3_12
Whether the scope of separate Rating YES NO
Agencies like ICRA, CRISIL, CARE etc. be
extended for the purpose of giving risk
rating to borrowable parties in order to
sanction loan speedily?
Co-operative Bank 67% 33%
NBFC 50% 50%
Private Bank 70% 30%
Public Sector 74% 26%
Cumulative Score 68% 32%
Analysis Reveals
Cumulative Score of the group under study shows that 68% feels that
the level of NPA to which 32% of the study sample disagrees. Co-
192
operative bank with 67% score agrees and private bank with score of
70% agrees that there is a need for separate rating agency is with the
result the NPA percentage can be reduced and PSB with a score of 74%
agrees for the setting up a separate rating agency to bring down the
NPA percentage. NBFC with a score of 50% agrees and 50% disagrees
sec3_13
Whether such risk rating system if introduced
should cover all the aspects of credit
proposal such as type of product, nature of YES NO
industries, market demand and supply,
technology changes, interest structures etc.
Co-operative Bank 87% 13%
NBFC 50% 50%
Private Bank 90% 10%
Public Sector 83% 17%
Cumulative Score 80% 20%
Analysis Reveals
Cumulative Score of the group under study shows that 80% feels the
rating System should cover all items such as type of product, nature of
193
the industries, Market demand and supply, technology changes, interest
rate etc. shall reduce the level of NPA to which 20% of the study sample
disagrees. Cooperative bank with 87% score agrees and private bank
with score of 90% agrees that there is a need for rating system with all
the details such as demand, supply, technology etcwith the result the
NPA percentage can be reduced and PSB with a score of 83% agrees
for the need to have systematic rating system which shall bring down
the NPA percentage. NBFC with a score of 50% agrees and 50%
sec3_14
194
Analysis Reveals
Cumulative Score of the group under study shows that 80% agrees that
disagrees. Cooperative bank with 60% score agrees and private bank
information system. PSB with a score of 96% agrees for the need for
NBFC with a score of 63% agrees and 37% disagrees for reduction in
bad loans.
sec3_15
195
Analysis Reveals
Cumulative Score of the group under study shows that 76% feels there
is a need for fixing of bank officials for an account to become NPA due
24% of the study sample disagrees. Cooperative bank with 64% score
agrees and private bank with score of 70 % agrees that there is a need
for fixing of bank officials with the result the NPA percentage can be
reduced and PSB with a score of 91% agrees for the need for
specialized and skilled officer to bring down the NPA percentage. NBFC
with a score of 62% agrees and 37% disagree for reduction in bad loans
sec3_16
196
Analysis Reveals
Cumulative Score of the group under study shows that 89% feels that
concept of Strict appraisal will reduce the level of NPA to which 11% of
and private bank with score of 90% agrees that there is a need for strict
appraisal with the result the NPA percentage can be reduced and PSB
with a score of 91% agrees for the need for specialized and skilled
officer to bring down the NPA percentage. NBFC with a score of 75%
sec3_17
Whether this “Strict Appraisal” will become
YES NO
harassment to the borrower?
Co-operative Bank 73% 27%
NBFC 88% 12%
Private Bank 70% 30%
Public Sector 78% 22%
Cumulative Score 77% 23%
197
Analysis Reveals
Cumulative Score of the group under study shows that 77% feels that
and will reduce the level of NPA to which 23% of the study sample
disagrees. Cooperative bank with 73% score agrees and private bank
with score of 70% agrees that for strict appraisal will become
harassment for the credit department and PSB with a score of 78%
agrees for the need for harassment to the borrowers. NBFC with a score
198
6.5. SECTION IV
sec4_1
It is often said that Lawyers/ advocates
delays the hearing of the case before Courts YES NO
by taking dates. Do you agree.
Co-operative Bank 60% 40%
NBFC 75% 25%
Private Bank 90% 10%
Public Sector 65% 35%
Cumulative Score 70% 30%
Analysis Reveals
Cumulative Score of the group under study shows that 70% feels that
bank with 60 % score agrees and private bank with score of 90% agrees
that lawyers are the cause for the delay in court orders. and PSB with a
score of 65% agrees that advocate is the cause for the delay. NBFC with
a score of 75% agrees and 25% disagrees for the cause of delay.
199
sec4_2
Analysis Reveals
Cumulative Score of the group under study shows that 59% feels that
disagrees. Cooperative bank with 47% score agrees and private bank
for the delay in court orders and PSB with a score of 48% agrees that
a score of 88% agrees and 12% disagrees for the cause of delay.
200
sec4_3
Analysis Reveals
Cumulative Score of the group under study shows that 55% feels that
Cooperative bank with 40% score agrees and private bank with score of
80% agrees that non renewal or delayed renewal is a cause for the delay
in court orders and PSB with a score of 61% agrees the same. NBFC
with a score of 50% agrees and 50% disagrees for the cause of delay.
201
sec4_4
Analysis Reveals
Cumulative Score of the group under study shows that 52% feels that
delay in getting decree from the court to recover dues makes recovery
Cooperative bank with 60% score agrees and private bank with score of
40% agrees that delay in getting decree is one of the cause for the delay
in recovery procedures and PSB with a score of 61% agrees the same.
NBFC with a score of 25% agree and 75% disagrees for the cause of
delay.
202
sec4_5
Analysis Reveals
Cumulative Score of the group under study shows that 68% feels that
lengthy and tedious procedures are the cause for delay in recovery of
the dues. to which 32% of the study sample disagrees. Cooperative bank
with 67% score agrees and private bank with score of 70% agrees that
delay in recovery of the dues is one of the cause for the delay in
recovery procedures and PSB with a score of 65% agrees the same.
NBFC with a score of 75% agree and 25% disagrees for the cause of
delay.
203
sec4_6
Analysis Reveals
Cumulative Score of the group under study shows that 82% feels that
disagrees. Cooperative bank with 67% score agrees and private bank
with score of 80% agrees that amendment need to be made quite often to
keep pace with the current scenario. PSB with a score of 87% agrees the
same. NBFC with a score of 100% agree for the cause of delay to be
outdated laws.
204
sec4_7
Analysis Reveals
Cumulative Score of the group under study shows that 77% feels that
Cooperative bank with 60% score agrees and private bank with score of
90% agrees that effective functioning of BIFR will reduce the NPA
level.PSB with a score of 87% agrees the same. NBFC with a score of
205
sec4_8
Analysis Reveals
All three groups in the study have almost similar views. 80% borrowers
agree that DRT should work more effectively and should be extended to
which 20% borrowers, 14% facilitators and 18% banks disagree with the
206
Sec4_9 is an open end question. The question asked was regarding the
reason for considerable delay in getting the decree from the court for
bank’s dues. Since it is an open end question with three reasons for the
APPRAISAL STAGE:
Part A_1
207
Analysis Reveals
Borrowers and facilitators have similar stand point as 90% agrees and
10% disagrees. Banks has slight difference where 78% agrees and 22%
Part A_2
Analysis Reveals
attempt of loose appraisal. 73% banks strongly agree to this factor and
27% of the bank strongly disagrees to this factor. The analysis shows
that the banker is unable to get the clear idea about the borrowers
business and their intention. 80% 0f the facilitator and 90% of the
208
Part A_3
Analysis Reveals
this factor and 38% of the bank strongly disagrees to this factor. The
analysis shows that the banker is unable to get the clear idea about the
borrowers business and their intention. 71% 0f the facilitator and 70% of
209
Part A_4
Analysis Reveals
210
Part A_5
Incorporation of improper assessment of
experience of the borrower or his capacity Agree Disagree
to pursue the business activity.
Borrower 60% 40%
Facilitator 65% 35%
BANK 65% 35%
Analysis Reveals
All the three groups in the study has almost same stand bearing a
211
Part A_6
Analysis Reveal
fact and 40% disagrees to this statement where as 63% of the facilitators
and 52% of the banks revealed their consent to agree 37% facilitators
and 48% banks disagrees with the non availability of credit officer
Part A_7
212
Analysis Reveals
The entire group in the study has different views pertaining to non
Part A_8
213
Analysis Reveals
The entire group in the study has different views reliability on the
similar views. 65% borrowers and 65% facilitators were having their
agree to this views and 29% disagrees.59% opine that there is no proper
Part A_9
214
Analysis Reveals
All the group in the study has almost similar stand point.75% of
banks enabling borrowers to enjoying bank funds from more than one
bank and 80% facilitators have similar views.78% banks from the sample
Part A_10
215
Analysis Reveals
All the group in the study has different stand point.50% of borrowers
selected agree to the lack of confidence level on the credit officer and
employees
Part A_11
216
Analysis Reveals
All the group in the study has different stand point.50% of borrowers
agree there is lack of knowledge in the subject to the credit officers and
37% facilitators agree to this views and 63% disagree regarding the level
Part A_12
217
Analysis Reveals
All the group in the study has same stand point.55% of borrowers agree
proposed borrower and 55% facilitators agree to this views and 45%
Part A_13
218
Analysis Reveals
All the group in the study has different stand point.70% of borrowers
future in the minds of the credit officer and 55% facilitators agree to this
Part A_14
Absence of right to select good
Agree Disagree
borrowers by the credit department
Borrower 85% 15%
Facilitator 49% 51%
BANK 56% 44%
219
Analysis Reveals
The entire group in the study has different stand point.85 % of borrowers
strongly agree that the credit department does not have any option to
sample selected agree to the non availability of the option by the credit
the borrower.
Part A_15
220
Analysis Reveals
Bank responded 60% against the views of non availability of skilled and
trained staff and only 40% accepted it. Similarly Borrower’s opinion and
Facilitator’s opinion were very similar and 55% agreed to the fact due to
lack of trained and skilled staff were as 45% failed to disagree this issue.
Part A_16
221
Analysis Reveals
Average of the study group reveals that 55% of the borrowers admit that
the facilitator opines this issue. Similarly 48% bank is under the opinion
that fraudulent act of the borrower is one of the causes for NPA in
banking industry.
Part A_17
222
Analysis Reveals
attitude of the bank official and 67% facilitators agree to this views and
33% disagree regarding the fraudulent act of the bank official.59% banks
from the sample selected agree to the fraudulent act of the bank official
223
Analysis Reveals
Borrowers and facilitators have similar stand point as 90% agrees and
10% disagrees. Banks has slight difference where 78% agrees and 22%
Part B_2
Political interference i.e. pressure to
Agree Disagree
sanction loan
Borrower 30% 70%
Facilitator 61% 39%
BANK 55% 45%
Analysis Reveals
61% and 55% agree to this views and 39 % disagree regarding political
opinion.
224
Part B_3
Political favouritism to particular borrower
Agree Disagree
in order to please politicians
Borrower 45% 55%
Facilitator 63% 37%
BANK 71% 29%
Analysis Reveals
concept. Banks and facilitators possess similar opinion 71% and 63%
opinion.
Part B_4
Delay in decision making in
Agree Disagree
sanction of loan
Borrower 55% 45%
Facilitator 76% 24%
BANK 71% 29%
225
Analysis Reveals
result the project and the business could be termed old and out of
possess similar opinion 71% and 76% agree to this views and 29 %
this opinion.
Part B_5
Delay in disbursement in credit
Agree Disagree
facilities i.e. untimely finance
226
Analysis Reveals
NPA because when there is a delay the project viability may become
obsolete and out dated. With the result the project and the business
could be termed old and out of fashion and 42% disagree to this
concept. Banks and facilitators possess similar opinion 67% and 64%
Part B_6
Disbursement of loan before the
compliance of terms and conditions of Agree Disagree
sanction
Borrower 50% 50%
Facilitator 69% 31%
BANK 63% 37%
227
Analysis Reveals
Borrowers have 50-50 stand in terms of instances where the loans are
sanction. 50% disagree to this concept. 63% Banks and 69% facilitators
possess similar opinion and 37% banks and 31% facilitators disagree
the means the loan sanctioning should be kept ready at the time of final
Part B_7
Incomplete and defective legal
Agree Disagree
documentation
Borrower 55% 45%
Facilitator 65% 35%
BANK 65% 35%
228
Analysis Reveals
views. 35% of both facilitators as well as banks disagree that there are
Part C_1
Unavailability of audited financial
Agree Disagree
statements in time.
Borrower 30% 70%
Facilitator 33% 67%
BANK 32% 68%
229
Analysis Reveals
All the three groups share similar views. 32% amongst across the
statement is a concern for the cause of NPA, but 68% had different
Part C_2
230
Analysis Reveals
All the three groups have distinct response to this statement. A concern
for the 35% borrowers had the opinion that non submission of
borrower be the cause for NPA. 43% facilitators opined that non
Part C_3
231
Analysis Reveals
All the three groups have distinct response to this statement. A concern
for the 50% borrowers had the opinion that negligent approach by the
bank officials in regard to inspection of stock can be the cause for NPA.
can be the problem of NPA.63 % banks are also of the same opinion as
Part C_4
Absence of effective monitoring Agree Disagree
Borrower 60% 40%
Facilitator 53% 47%
BANK 56% 44%
232
Analysis Reveals
All the three groups have similar response for absence of effective
monitoring by the bank officials in regard can be the cause for NPA.
the officer in-charge can be the problem of NPA.56 % banks are also of
Part C_5
233
Analysis Reveals
All the three groups have different response for absence of close
close knit. 60% borrowers had the opinion that absence of effective
supervision by the bank officials in regard can be the cause for NPA.
the officer in-charge can be the problem of NPA.52 % banks are also of
Part C_6
Delayed detection of warning signals Agree Disagree
Borrower 65% 35%
Facilitator 76% 24%
BANK 60% 40%
234
Analysis Reveals
Bank and the borrower has almost similar approach.60% borrowers had
the opinion that delayed detection of warning signal can be the cause
for NPA. 51% facilitators agrees that delayed detection of warning signal
can be the source for the loan account becoming NPA.52 % banks are
Part C_7
Delay in initiating remedial
Agree Disagree
measures and actions
Borrower 65% 35%
Facilitator 78% 22%
BANK 62% 38%
235
Analysis Reveals
borrowers and banks are close knit. 65% borrowers had the opinion that
the cause for NPA. 78% facilitators opined that absence of initiative by
the bank officer for remedial measures can be the problem of NPA.62 %
SECTION – III
sec3_1
236
Analysis Reveals
made by borrowers, facilitators and banks are close knit. 85% borrowers
had the opinion that compromise and settlement can be the cause for
NPA. 80% facilitators opined that one time settlement and compromise
by the borrowers to the bank official can reduce the problem of NPA.82
which 15% borrowers, 20% facilitators and 18% banks disagreed to the
sec3_2
Can this method develop a tendency
among bank borrowers to make deliberate
YES NO
attempt of default and then ask for
concession in interest?
Borrower 70% 30%
Facilitator 69% 31%
BANK 62% 38%
237
Analysis Reveals
Banks borrowers and facilitator have slightly similar opinion. Approach
made by borrowers, facilitators and banks are close knit.62% across the
group agrees that borrower may misuses the compromise options. 70%
interest is a concern and can be the cause for NPA. 69% facilitators
borrowers to the bank official can be the problem of NPA. 63% banks
are also of the same opinion as borrowers and facilitators to which 30%
interest rate.
238
sec3_3
Analysis Reveals
account can be the cause for NPA. 55% facilitators opined that credit
the banks to reduce the problem of NPA.64 % banks are also of the
239
sec3_4
Analysis Reveals
borrowers had the opinion that improvement in the system can reduce
the level of NPA. 64% facilitators opined that system is in adequate and
are also of the same opinion as borrowers and facilitators to which 55%
240
sec3_5
Analysis Reveals
All three groups in the study have similar views. 66% average across
the group agrees that specialised and skilled officer can definitely
contribute well. 60% borrowers had the opinion that skilled and efficient
credit officer can reduce the level of NPA. 76% facilitators opined that
skilled officer to reduce the level of NPA.70 % banks are also of the
241
33% facilitators and 38% banks disagreed to the fact that skilled and
sec3_6
Analysis Reveals
All three groups in the study have marginal difference in their views.
60% borrowers had the opinion that selection of skilled and efficient
credit officer can reduce the level of NPA in early stage or in future. 76%
242
24% facilitators and 30% banks disagreed to the fact that skilled and
sec3_7
Analysis Reveals
All three groups in the study have marginal similarities in their views.
75% borrowers had the opinion that selection of recovery officer can
243
will reduce the level of NPA and possible to be deducted at early stage
disagreed to the fact that appointment of recovery officer shall not make
sec3_8
Analysis Reveals
All three groups in the study have marginal similarities in their views.
hard core due which enable to reduce the level of NPA in early stage or
244
produce better performance to recover the dues efficiently which in turn
will reduce the level of NPA and possible to be deducted at early stage
disagreed to the fact that appointment of recovery agent shall not make
bank.
sec3_9
Analysis Reveals
All three groups in the study have marginal similarities in their views.
60% borrowers agree for cash incentives for recovery of hard core due
245
which enable to reduce the level of NPA in early stage or in future. 55%
facilitators opined that cash incentives can motivate the staff and can
will reduce the level of NPA and possible to be deducted at early stage
disagreed to the fact that cash incentives shall not make any difference
sec3_10
Whether a system of “credit audit” i.e.
verification of total proposal financially and
technically by audit people before YES NO
disbursement of loan be introduced in
banking industry? (Above certain limit)
Borrower 45% 55%
Facilitator 65% 35%
BANK 68% 32%
246
Analysis Reveals
All three groups in the study have difference in their views. 60%
borrowers agree with the concept of credit audit. Credit audit should be
which in turn will reduce the level of NPA and possible to be deducted
36% banks disagreed to the fact that there could be any difference in the
sec3_11
Can this system be made compulsory/
statutory like or similar to internal audit in YES NO
the bank?
Borrower 60% 40%
Facilitator 71% 29%
BANK 68% 32%
247
Analysis Reveals
All three groups in the study have difference in their views. 60%
borrowers agree with the concept of credit audit. and also agreed that it
defective loan account which in turn will reduce the level of NPA and
29% facilitators and 32% banks disagreed to the fact that there could be
sec3_12
248
Analysis Reveals
All three groups in the study have difference in their views. 60%
loan account which in turn will reduce the level of NPA and possible to
facilitators and 32% banks disagreed to the fact that there could be no
sec3_13
249
Analysis Reveals
All three groups in the study have difference in their views. 50%
borrowers agree to the audit and rating system to cover all the factors
and banks are also of the same opinion as borrowers and facilitators to
which 50% borrowers, 27% facilitators and 20% banks disagreed to the
sec3_14
250
Analysis Reveals
All three groups in the study have difference in their views. 45%
increasing the performance of the bank. 80% banks are also of the same
facilitators and 20% banks disagreed to the fact that there could be no
sec3_15
251
Analysis Reveals
All three groups in the study have difference in their views. 75%
are also of the same opinion as borrowers and facilitators to which 25%
borrowers, 18% facilitators and 24% banks disagreed to the fact that
there could be no difference shall be made in case the officials are held
responsible.
sec3_16
252
Analysis Reveals
All three groups in the study have slightly similar views. 75% borrowers
agree to the concept that strict appraisal can reduce the account turning
NPA. 88% facilitator’s opinion shows that having 89% banks are also of
12% facilitators and 11% banks disagreed to the fact that there should
sec3_17
253
Analysis Reveals
All three groups in the study have slightly similar views. 75% borrowers
agree to that strict appraisal being a kind of harassment can reduce the
are also of the same opinion as borrowers and facilitators to which 25%
borrowers, 12% facilitators and 11% banks disagreed to the fact that
SECTION IV
sec4_1
It is often said that Lawyers/ advocates
delays the hearing of the case before Courts YES NO
by taking dates. Do you agree.
Borrower 80% 20%
Facilitator 73% 27%
BANK 70% 30%
254
Analysis Reveals
All three groups in the study have slightly similar views. 80% borrowers
opinion shows that the court order is delayed due adjournment opted by
30% banks disagreed to the fact that advocates or lawyers are the cause
sec4_2
255
Analysis Reveals
All three groups in the study have slightly similar views. 65% borrowers
proper document during hearing of the case before the court. 61%
which 20% borrowers, 27% facilitators and 30% banks disagreed to the
sec4_3
256
Analysis Reveals
All three groups in the study have slightly similar views. 60% borrowers
agree that banks do not renew the loan account from time to time.55%
45% facilitators and 45% banks disagreed that non renewal of the loan
sec4_4
257
Analysis Reveals
All three groups in the study have different views. 65% borrowers agree
that delay in getting the decree creates recovery of loan amount difficult
.52 % banks are also of the same opinion as borrowers and facilitators to
which 35% borrowers, 55% facilitators and 48% banks disagreed that
sec4_5
258
Analysis Reveals
All three groups in the study have identical views. 60% borrowers agree
that tedious and time consuming legal procedure are one of the factors
which 40% borrowers, 32% facilitators and 32% banks disagreed for
sec4_6
259
Analysis Reveals
All three groups in the study have different views. 40% borrowers agree
sec4_7
260
Analysis Reveals
All three groups in the study have different views. 60% borrowers agree
sec4_8
261
Analysis Reveals
All three groups in the study have almost similar views. 80% borrowers
agree that DRT should work more effectively and should be extended to
which 20% borrowers, 14% facilitators and 18% banks disagree with the
6.7. Conclusions
In this chapter the analysis have been carried out in two parts:
262
In both the comparison the analysis has been classified into three stages
and four sections. In section II there are open end questions which are
research thesis. The views of respondents are taken for the suggestion
they are not exhibited in the graphical representations. All close end
which gives clear idea as to what percentage of response from the banks
have been received and what is their opinions available and the
263
CHAPTER 7
7.1 Introduction
Priority sector was regarded as a “People’s Sector” by the policy
makers, regulators and banks till 1990. As stated earlier, during 1969-
in profit margins and increased over dues. The NC-I tried to correct
40-10 percent. The GoI did not accept this recommendation. In Indian
economy feels that the high level of the NPAs and low productivity of
capital that the economy had in the late 1980s and early 1990s was
caused by directed credit. Government of India and the RBI have not
units by the branch staff to monitor the operations; and lack of proper
264
show that the problem of NPAs is perceived as post-sanction
the funds .This perception may not be altogether wrong, but the real
problem lies elsewhere. According to many bankers who were and are
identified by these studies are factors beyond the scope of activities and
of loans; and
265
deficiencies in the loan policies and procedures, ineffective supervision
and improper monitoring of the end and the use of credit, poor customer
resources and is closely linked with the banks heading towards a state
at appropriate time and place for detection of loan account turning bad.
change the situation of NPAs in the Indian Banking system at par with
implemented.
staff for recovering efficiently and reward for long associations and
266
7.2. a. Financing Small and Marginal Farmers
Table7.1
As per Table 7.1 in the year 2006-07, commercial banks were advised to
grant relief of two percentage points in the interest rate on the principal
kharif and Rabi of 2005-06, and credit the relief so granted to the
267
banks. The credit limit has increased from 23716 to 48258 in the year
farmer suicide and there was a reduction by the Cooperative Banks. The
As mentioned in Table 7.2 in the next page the Kissan Credit Card (KCC)
agricultural inputs and draw cash for their production needs. During
2007-08, 84.7 lakh KCCs amounting with limits aggregating Rs. 88,264
Crores were issued. During 2008-09 (till February 2009), a total of 47.26
lakh KCCs amounting with limits aggregating Rs. 26,828 Crores were
Sector Commercial Banks and RRB issued 112.63 lakh. Major KCC is
issued by the Cooperative banks to help the farmers though involve risk
The major factors that affect banker and farmer behaviour in on-farm
lending operations are the expected profitability of and the risks related
268
those associated with the impact of unfavourable weather on production
(drought, hail, floods etc.) diseases and pest’s damage, economic risks
Table7.2
Agency-wise KCCs issued
(Lakh)
Year Co-operative RRBs Public sector Total
Banks commercial banks
1998-99 1.56 0.06 6.22 7.84
1999-00 35.95 1.73 13.66 51.34
2000-01 56.14 6.48 23.90 86.52
2001-02 54.36 8.34 30.71 93.41
2002-03 45.79 9.64 27.00 82.43
2003-04 48.78 12.75 30.94 92.47
2004-05 35.56 17.29 43.95 96.8
2005-06 25.98 12.49 41.65 80.12
2006-07 22.97 14.06 48.08 85.11
2007-08 20.91 17.73 46.06 84.7
2008-09# 10.63 12.06 24.57 47.26
Total 358.63 112.63 336.74 808.00
countries.
269
7.3. c. Risk of loan: collateral limitations
Problems associated with inadequate loan collateral pose specific
problems to rural lenders. Land is the most widely accepted asset for
often prized by owners above its market value and it has a high scarcity
value in densely populated area. Small holder farmers with land that has
limited value, or those who have only usufruct rights, are less likely to
Potentially serious risk problems have raised from the effects of failed
both borrowers and lenders. For the latter they can contribute significantly
adjustment program have slashed their farming subsidies. This has had,
for instance, a serious effect on the costs and the demand for
270
production levels, if extension services are suddenly discontinued.
It was assumed that most farmers were too poor to save, that informal
charged usurious interest rates, and that commercial banks were too
projects.
it is said that strength of the chain lies in the weakest link, so whichever
271
is the weakest point of our processing of proposal will be vulnerable to
banks to excel performance and to grab more and more business from
others have made the banks to let loose internal control system, norms
and procedures.
Sanmati Sahakari Bank Ltd; selected for the present study was
two important prizes are “The Best Bank Management Prize” and
Though the bank was established in 1996, the study covered the
analyzed.. The bank’s major loan segments are allied sector, auto
272
Cooperative Association Ltd; through the category of Small
Table 7.3
Gross and Net NPA of Sanmati Sahakari Bank Ltd. (Rs. In lakh)
Year (End March) Gross NPA Net NPA
2002 27.85 (8.13) 19.29 (5.77)
2003 46.11 (10.81) 32.16 (7.78)
2004 76.12 (13.20) 37.26 (6.93)
2005 96.07 (13.79) 42.21 (6.56)
2006 88.05 (9.98) 13.59 (1.59)
2007 95.65 (8.54) 61.15 (6.320
2008 150.30 (11.31) 26.08 (2.03)
It can be seen that the standard assets of the Sanmati Sahakari Bank as
per prudential norms by RBI. It can be seen that standard assets i.e.
that the bank has got good revenue generating power because 89% of
loan is disbursed which have been giving the bank regular and steady
273
alarming signals of NPAs and achieved good consistency in maintaining
its asset quality. Certain assets show that they are under the shadow of
NPA. This shows bank management has been very careful in preventing
their assets from slippage to NPAs. Gross and Net NPA both are in grey
For Cooperative bank Gross NPA should never increase beyond 15%
and Net NPA 10%. Gross NPA has increased from 27.85 Lakh in 2002 to
150.30 Lakh in 2008.It has increased almost 5.40 times. However the
percentage of gross NPA has increased to 1.39 times over the same
period. Further Net NPA has increased from 19.29 in 2002 to 26.08 Lakh
Management of Net NPA is quiet rigorous than its Gross NPAs. On the
quiet satisfactory.
had. But during 1982-1999 the same had fallen to less than 1%.Indeed a
274
study carried out by the Credit Suisse revealed that equity investment in
the US yielded almost close to zero return in real terms during 2000-
such untruly profit without proper supervision and credit bubble finally
exceeding Rs. 10000/- for depositors of the Global Trust Bank (GTB).
hours though announcing the merger of the bank with Oriental Bank of
Bank within two preceding years to GTB. The fall of GTB is special for
several reasons. For one, unlike the failures, GTB is a “new” PSB started
Finance Corporation. The case also raises troubling questions about the
portfolio, 20% of which was made of NPAs. Its total losses amounted to a
whopping Rs. 272 Crores in 2003-04.The RBI was aware of the problems
275
of GTB since at least 2001-02.In March 2002, RBI’s special audit found
that GTB had a negative net worth, a quiet different figure from GTB’s
own audited results showing a net worth of Rs.400 Crores. The RBI
forced GTB to change its auditors and complained about the old auditors
close inspection since then and in September, 2003 the apex bank
The financial mismanagement is only one portion of the fact. The bank’s
Ketan Parekh, master mind behind a major stock market scam. The
promoters had been blamed for rigging the stock price of GTB before a
proposed merger with the UTI bank in 2001.Gelli was forced to step
down as GTB chairman after these findings. He made his way back to the
GTB board yet again. These issues raise important questions about
the system.
favoured strategy of the RBI and government. Benares State Bank was
merged with the Bank of Baroda and Nedungadi Bank with Punjab
National Bank. With the merger of GTB with the several times larger
OBC, a bank with Zero NPAs and a profit of Rs.686 Crores in 2003-04,
confirms the pattern. Apparently OBC was on a look out for a bank with
strong presence in the south and GTB fitted the bill in that regard.
Clearly the government will not let private bank depositors suffer.
276
Notwithstanding the moral hazard issues pointed by many, probably
best serves the depositors. The effect on the PSB with which they are
7.5. Conclusions
banks in past few years. It has also fuelled overall economic growth.
retail loan is different ball game and banks have no previous experience,
shelter to the people and therefore a lot of initiatives are being taken by
above mentioned precautions will enable the bankers to curb frauds and
The traditional canons of lending and investment VIZ liquidity, safety and
277
way of payment of interest and repayment of instalment by borrowers
can be ensured by lending to those who can repay the loans. Safety of
required margins. Thus in absolute terms both gross NPA and net NPA
significant shocks arising from the credit quality, interest rate and
sector.
278
CHAPTER 8
8.1. Introduction
dominated until 1990s and enjoyed strong system support and the
and are wilfully moving away from the bank brand hub with more focus
on the other channels like online banking mobile banking etc. New
private sector banks in the country are leading from the front with the
279
When a bank is not able to recover the loan given or not getting regular
Also the earning capacity is adversely affected. This has direct and
prudential norms, banks are not allowed to book any income from NPA.
Also they have to make necessary provisions for NPA which affects the
growth and expansion. NPA is double edged sword. On one hand banks
diverted for provision on NPA. The high level of NPA is dangerous to the
8.1. b. Since there is slow down in economy since last two years, credit
off take has come down significantly. While there is plenty of liquidity,
8.1. c. Public sector banks in India are covering nearly 85% of Indian
280
efficiency of each PSB is different from that of others and most of them
process.
secondary data
8.2. b.The banks and NBFC has incorporated the operational risk
laid down by regulators for prevention of frauds the banks are of the
8.2. c. NBFC focus on Collateral security and guarantee, with the result
NBFC has least percentage of NPA and all the banks and the financial
causes for NPA especially in private sector. Private Banks issue credit
281
card to weaker sections and students and outstanding amount against
8.2. e. Educational loan is the least risk based since they are issued
bar-coding the mark sheets the suggestion put forward by the banks
borrower that would provide the loan details. This will enable the bank
8.2. f. CIBIL enables to get information about defaulters but the small
fees.
8.2. g. The banks prefer to lend loans to priority and agricultural sector
as per the RBI norms and maintain the percentage notified by the RBI. In
the Cooperative banks NBFC and public sector were neutral in its
282
Monitoring Officer by scrutinizing thoroughly all documents and
NPA.
8.2. j. A realistic and timely action or check would help the banks and
decisions which think are in the best interest of the borrowers and bank
policies are not followed there could be delay and fluctuation in the
economic conditions may cause imbalances and the entire act of the
borrower and the bank may become futile. Failure to perform this act
8.2. k. Unstructured interviews were carried out with banks officials and
Bank Compulsory credit audit is opined by the banks and NBFC except
283
8.3. Priority, SSI and Non-Priority Sector Advances of Banks
bank’s credit the total NPAs would be less than they are in fact. The
commit default and avail priority loans. As such priority sector may have
a greater tendency of NPA in all the banks still they account only for a
8.3.b. Impact was high during first phase of reform period, subsequently
rule in their notification that priority lending should be 40% out of which
18% shall be for agricultural advances 10% for SSI. Since agricultural
and weaker section did not get much attention there is a credit crunch
1999 the percentage of SSI advances achieved was 17.3% were as in the
8.3.c. The trend analysis shows that there is a fluctuation in the gross
2003 it reduced to 19% and again in 2004 it rose to 22.7% and in 2005 it
284
cooperative bank has more NPA since they give preferences to priority
8.3. d. The trend analysis of Gross NPA and Net NPA of NBFC clearly
shows that there is overall reduction in the Gross and Net NPA since
made from the reserves set aside in the balance sheet. In 2001and
2002 the Net NPA is approximately 50% of gross NPA and since 2003
onwards it is more than 50% difference between Gross and Net NPA.
identified the main causes for the increasing of NPAs in priority sector
advances of the banks. The banks face NPAs due to external and
rural areas. The internal factors are due to faulty assessment of the
than curing it at a later date. Reward for the bank staff and punishment
for the defaulter borrowers. The banker should realize that they have
lent the loan and should also recover personally and should not
285
banking service. One of the main causes of NPAs into banking sector
sector. The problem India faces is not lack of strict prudential norms
but
8.4. Conclusions
After the Detailed analysis, they found that; The Financial requirement
Bank for availing the Loan is not a viable option. As the rural person or
farmer has to travel to a long distance, due to which the loss of time and
money for travel is one of the major reason, along with the disturbance
in routine farm activity. All these Factors make the loan Disbursement a
Painful task for the Rural Customer. Over and above this, at times the
Farmer and Agro allied activity, which further increases the frustration
of rural customer while availing the loan. All these Findings were
286
analyzed, and a Recommendation was given to Saraswat Bank. And
Bhagirathi’s Team also suggested that; Rural People are basically very
Loans are disbursed in single Visit and also Bank officials Good
Behaviour which would make the rural customer feel Respected and his
dignity is maintained. As the Rural Customer would make all his efforts
to maintain the relation with the bank, and he will ensure that the Dues
the Rural Customers, Saraswat Bank’s Senior Officials are also assured
Source:
(Website: www.bhagirathgram.org)
287
CHAPTER 9
9.1. The future picture of Commercial banks more so the banks &
of banks & FI will decline marginally both in terms of Gross and Net
figures over next three years. This may be due to higher provisions,
which the banks have been providing. The real issues are percentage of
NPA declining over the years but the absolute figures seem to be
economy. The failure of the banking sector may have an adverse impact
on other sectors.
potential borrowers that banks resources are scarce and these are
meant to finance viable ventures so that these are repaid on time and
288
necessary pre-conditions for preventing or minimizing the incidence of
new NPAs.
9.3. RBI should provide a Credit Code Number to each borrower & that
number. This measure will reduce the multiple borrowing & with the
result the creditors can assess the creditability of the borrowers & his
repayment capacity.
9.4. RBI should bring about a notification with respect to Guarantor his
credit code number can also be verified and the solvency state of the
on a regular basis.
favouritism & obligations from either side. The RBI should maintain a
site exclusively where a creditor gets detaild information along with his
existing loan and solvency state. Similarly RBI should maintain in its
site Red, Amber and Green. It enables the creditor to know that whether
289
the borrower is a defaulter, or casual defaulter or a regular in honouring
his commitment
9.6. The landmark change in rural banking was achieved when the
scheme of social control was adopted in 1967, and it was given a boost
focus shifted to rural India which constituted the bulk of the neglected
growth.
9.7. The project based approach in the rural sector will not only allow
processing) and the large scale segment but also extend commercial
Thus the banks and FI can help the borrowers in rural India by
sector
290
Data base development (farmers, crops, pricing land mapping)
farmers
rural entrepreneur/farmer/developer
9.8. Therefore, the future vision strategy is very crucial for developing a
Banks and NBFC for the needs of rural India for achieving holistic
9.9. Future scope of study the researcher can take long term or term
Institutions.
291
Appendix 1
Name of the
Sr.No Banks 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
1 State Bank of
India Group 15.1 14.90 14.90 13.80 17.50 16.50 15.36 17.46 18.93 21.82
2 Bank of India 13.32 18.62 13.80 11.69 14.08 19.10 17.88 21.34 20.57 32.01
3 Canara Bank 10.87 15.93 16.60 20.17 15.55 13.99 10.34 18.69 15.36 18.72
4 Indian Bank 8.74 8.21 11.20 9.32 11.87 29.40 17.58 16.97 11.78 9.93
5 Punjab
National Bank 15.11 12.12 11.20 10.72 10.29 19.87 9.47 13.77 19.09 30.48
6 Union Bank of
India 17.60 15.15 13.70 12.65 12.35 20.60 13.57 16.96 17.64 19.59
7 Bank of
Maharashtra 16.79 15.35 20.50 23.36 20.90 21.23 18.14 15.71 12.17 13.84
8 Oriental Bank
of Commerce 12.15 10.78 18.20 10.48 10.78 25.36 7.14 6.61 8.88 13.06
9 Allahabad
Bank 12.29 11.59 10.10 11.09 12.46 13.36 19.95 19.77 29.34 27.52
10 Corporation
Bank 14.52 15.66 13.80 14.64 12.84 10.50 9.93 7.23 10.39 13.2
11 Indian
Overseas
Bank 11.17 10.35 11.60 9.72 10.66 24.15 7.10 7.81 8.16 30.72
12 Bank of
Baroda 15.59 15.96 16.70 14.39 15.13 16.44 14.08 14.68 20.48 22.11
13 Dena Bank 11.80 12.88 7.90 8.09 8.74 20.10 12.92 11.85 12.87 22.04
292
14 United Bank of
India 13.43 16.78 15.00 15.08 19.01 20.36 20.81 19.69 18.10 17.56
15 Central Bank
of India 13.02 10.91 10.70 11.74 13.60 22.1 13.59 15.4 17.52 22.8
16 Andhra Bank 11.38 10.48 11.27 16.71 16.18 17.30 10.11 9.67 4.70 3.42
17 Punjab and
Sind Bank 8.28 8.93 8.31 6.96 9.92 10.73 56.86 8.33 21.65 39.28
18 Syndicate
Bank 13.76 13.36 14.63 15.03 15.55 14.11 11.07 12.42 12.78 14.01
19 Uco Bank 16.58 13.37 16.72 15.17 14.33 12.21 10.7 14.73 17.51 21.11
20 Vijaya Bank 13.62 13.35 17.71 16.96 16.60 23.46 12.48 6.55 8.69 10.75
293
Appendix 2
1 State Bank of
India Group 19.4 19.1 18.8 18.6 18.1 15.0 12.36 12.1 10.8 10.1
2 Bank of India 12.4 10.7 15.6 15.4 18.3 19.1 19.1 21.3 21.9 22.9
3 Canara Bank 18.7 22.0 31.8 22.5 24.2 14.0 12.9 24.0 10.1 4.72
4 Indian Bank 13.2 14.3 19.8 18.2 23.8 29.4 35.8 36.7 34.3 34.0
5 Punjab
National Bank 17.1 23.6 21.1 19.4 14.7 19.9 24.3 25.4 29.2 27.4
6 Union Bank
of India 24.1 20.7 17.2 16.2 19.6 20.6 18.1 14.7 13.4 17.4
7 Bank of
Maharashtra 18.4 19.9 27.5 21.9 21.8 21.2 20.3 18.6 15.3 15.5
8 Oriental Bank
of Commerce 27.5 31.4 14.5 26.6 21.2 25.4 19.0 14.5 13.7 19.8
9 Allahabad 18.4 17.5 14.4 14.3 14.6 13.4 18.5 13.0 14.3 12.5
10 Corporation 18.0 16.3 17.8 11.2 12.4 10.5 9.7 7.11 5.7 9.0
11 Indian
Overseas
Bank 20.3 20.6 20.9 20.9 20.2 24.2 25.1 27.4 33.2 26.6
12 Bank of
Baroda 22.2 16.9 18.7 17.5 18.8 16.4 18.4 20.8 13.8 12.4
13 Dena Bank 21.4 14.1 13.6 17.8 19.7 20.1 19.3 19.3 17.3 10.2
294
14 United Bank
of India 24.1 20.7 17.2 16.2 19.6 20.4 20.5 19.1 18.1 23.2
15 Central Bank
of India 24.5 23.5 22.7 23.4 23.0 22.1 23.9 22.6 20.2 27.1
16 Andhra Bank 23.9 22.6 22.6 24.3 22 18.9 17.3 14.9 9.7 18.9
17 Punjab and
Sind Bank 18.7 18.8 21.1 19.4 14.7 12.9 7.2 21.1 14.4 18.0
18 Syndicate
Bank 24.2 23.2 22.9 22.5 19.7 19.2 18.1 13.4 43.5 9.8
19 Uco Bank 23.9 24.8 16.4 14.3 16.3 11.0 12.1 12.9 33.4 11.8
20 Vijaya Bank 14.9 14.8 22.8 15.8 15.3 15.5 11.8 5.8 56.4 6.6
295
Appendix 3
Proportion of NPA in Other priority Sector Credit to Gross NPAs of Public Sector Banks
Percentage of NPAs in Other Priority Sector to Gross NPAs (March Ending)
Sr.
No Name of the Bank 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
1 State Bank Group 10.2 11.2 10.4 11.1 11.9 15.5 19.7 25.4 27.4 26.6
2 Bank of India 8.7 6.9 11.0 10.1 10.5 12.9 14.5 18.1 23.8 29.2
3 Canara Bank 8.2 13.0 12.0 7.6 14.6 14.5 18.8 18.2 36.6 25.3
4 Indian Bank 7.0 7.5 8.9 8.9 13.2 24.2 29.8 31.8 39.4 17.1
Punjab National
5 Bank 9.1 11.2 13.5 14.4 13.0 12.4 12.8 18.5 25.7 25.3
6 Union Bank of India 16.8 21.7 18.5 22.2 26.9 29.3 21.3 28.9 31.3 39.0
Bank of
7 Maharashtra 17.7 22.0 16.5 15.7 17.3 19.3 20.2 19.1 27.9 34.6
Oriental bank of
8 Commerce 9.6 14.7 22.3 9.1 8.7 12.1 8.0 11.3 15.65 21.4
9 Allahabad bank 12.7 12.1 13.2 13.3 14.9 22.5 21.8 29.9 27.7 31.8
10 Corporation bank 11.0 18.0 14.5 14.9 16.1 22.6 30.5 26.0 34.9 39.9
Indian Overseas
11 Bank 8.9 8.1 8.7 7.8 6.2 11.7 14.2 17.2 21.9 24.8
12 Bank of Baroda 9.8 10.6 9.3 8.9 8.8 9.9 11.1 15.4 19.8 31.3
13 Union Bank of India 15.0 14.1 14.2 13.8 15.1 17.0 21.3 28.9 31.3 39.0
United Bank of
14 India 16.8 21.7 18.5 22.2 26.9 29.3 33.3 32.6 29.4 30.6
Central Bank of
15 India 15.6 15.5 15.3 15.5 16.4 18.8 23.0 21.5 24.4 20.4
296
16 Andhra Bank 14.2 14.1 14.04 17.04 15.65 20.79 27.08 25.11 23.84 14.35
18 Syndicate Bank 9.30 13.4 14.84 14.85 14.63 17.36 23.10 29.50 43.47 35.88
19 Uco Bank 17.4 17.7 22.29 17.87 18.83 19.91 21.33 24.27 33.35 39.40
20 Vijaya Bank 12.0 12.1 17.06 19.13 35.55 19.35 25.24 47.71 56.38 60.84
297
Appendix 4
Table: Loans Sanctioned and Disbursed under RIDF
(As at end-March 2009)
Source: NABARD.
Ratio of loans
Loans
No. of Corpus Loans Sanctioned disbursed to loans
RIDF Year Disbursed
Projects (Rs. Crores) (Rs. Crores) sanctioned
(Rs. Crores)
(Per cent)
1 2 3 4 5 6 7
I 1995 4,168 2,000 1,906 1,761 92.4
II 1996 8,193 2,500 2,636 2,398 91.0
III 1997 14,345 2,500 2,733 2,454 89.8
IV 1998 6,171 3,000 2,903 2,482 85.5
V 1999 12,106 3,500 3,434 3,055 89.0
VI 2000 43,168 4,500 4,489 4,071 90.7
VII 2001 24,598 5,000 4,582 4,053 88.5
VIII 2002 20,887 5,500 5,950 5,142 86.4
IX 2003 19,548 5,500 5,639 4,870 86.4
X 2004 17,190 8,000 7,717 6,198 80.3
XI 2005 29,875 8,000 8,301 5,728 69.0
XII 2006 42,279 10,000 10,601 5,771 54.4
XIII 2007 36,948 12,000 12,749 5,057 39.7
XIV 2008 85,527 14,000 14,719 3,013 20.5
Total 3,65,003 86,000 88,359 56,052 63.4
Separate window of Bharat Nirman Programme
XII 2006 4,000 4,000 4,000 100.0
XIII 2007 4,000 4,000 4,000 100.0
XIV 2008 4,000 4,000 4,000 100.0
Total 12,000 12,000 12,000 100.0
Source: NABARD.
298
Appendix 5
Advances of private Bank to Agriculture & weaker Sections as on last reporting Friday 0f March
Weaker Section Advances
Sr.
No Name of the Bank 2001 2002 2003 2004 2005 2006 2007 2008
299
Lord Krishna Bank
21 Ltd _ _ _ 0.13 0.29 0.9 1.03 NA
22 Nainital Bank Ltd 9.1 6.40 5.10 0.19 3.08 2.4 1.24 8.2
23 Ratnakar Bank Ltd 2.7 1.71 1.51 0.09 0.98 1.8 2.23 2.41
SBI Commercial &
24 International Bank Ltd _ _ 0.00 0.00 _ _ _ _
25 South Indian Bank Ltd 2.60 2.17 1.94 2.87 3.42 2.7 4.05 4.49
26 Sangli Bank Ltd 3.94 4.28 5.08 0.28 2.28 2.0 7.63 NA
United Western India
27 Ltd 2.04 7.32 5.35 10.32 4.84 5.1 NA NA
28 Bank of Punjab _ 0.00 0.00 23.62 3.39 0.8 0.53 0.24
29 Global Trust Bank _ 0.00 0.10 0.00 NA NA NA NA
30 IDBI Bank Ltd _ 0.00 0.00 0.00 NA NA NA NA
UTI Bank Ltd/Axis
31 Bank Ltd _ 0.16 0.00 0.32 0.13 0.5 NA NA
300
Appendix 6
Non-Performing Assets in Advances to Weaker Section Under Priority Sector with reference to Private
Sector Banks
Sr.
No Name of the Bank 2001 2002 2003 2004 2005 2006 2007 2008
301
Appendix 7
Sectorwise Non Performing Assetsof Private Sector Bank As on 31st March -----(SSI)
Sr. Name of the Bank 2001 2002 2003 2004 2005 2006 2007 2008
No
1 Catholic Syrian 21.19 23.62 21.92 22.29 22.30 19.95 26.76 19.78
Bank Ltd
2 Indus Ind Bank 19.87 10.67 13.95 7.35 3.78 4.81 1.04 0.81
3 HDFC Bank Ltd 9.73 12.02 11.30 7.59 4.48 3.28 8.91 12.23
4 ICICI Bank Ltd 21.92 3.04 2.48 3.27 1.83 1.60 0.03 0.31
5 UTI Bank Ltd/Axis 5.52 5.66 4.04 10.94 11.38 3.70 6.59 3.04
Bank Ltd
6 Karur Vysya Bank 20.27 27.52 24.97 28.37 31.03 24.40 26.37 24.16
Ltd
7 Bank of Rajasthan 7.60 16.61 7.25 9.54 11.3 11.81 9.82 16.56
8 Tamilnad 30.07 28.34 25.72 27.51 26.48 30.19 20.38 18.61
Mercantile Bank
Ltd
9 Danalakshmi Bank 10.92 9.16 9.19 20.93 18.88 17.48 14.74 13.05
Ltd
10 Lakshmi Vilas 19.65 22.32 26.92 21.17 23.80 22.71 23.82 10.99
Bank
11 Kotak Mahindra _ _ _ 0.00 _ _ _ 7.47
Bank Ltd
12 Fedral Bank Ltd 11.72 13.39 15.62 13.97 14.74 13.95 12.48 9.12
13 Yes Bank Ltd _ _ _ _ _ _ _ _
14 Development 26.47 32.54 33.09 25.36 14.26 18.79 38.98 12.57
credit Bank
15 Vysya Bank/Ing 15.90 16.64 11.23 16.45 11.27 14.80 15.77 6.99
Bank Ltd
302
16 Centurion Bank 0.32 4.40 _ 0.00 _ 3.57 2.67 18.30
Ltd
17 City Union Bank 24.10 30.05 27.51 27.92 21.41 12.60 4.58 7.46
Ltd
18 Jammu and 27.27 32.30 21.49 17.69 20.22 15.86 5.69 8.37
Kashmir Bank Ltd
19 Karnataka Bank 18.07 19.34 17.50 17.97 20.62 19.32 15.87 16.76
Ltd
20 Ganesh Khurwad 16.84 9.64 13.45 6.82 14.79 16 NA NA
Bank Ltd
21 Lord Krishna Bank 12.47 9.47 8.90 9.47 9.49 10.54 2.85 NA
Ltd
22 Nainital Bank Ltd 47.73 38.11 19.16 14.42 10.96 8.24 10.78 16.51
23 Ratnakar Bank Ltd 24.22 16.77 21.74 22.02 25.47 26.38 26.79 29.58
24 SBI Commercial & 20.57 7.21 4.15 17.96 0.71 _ _ _
International Bank
Ltd
25 South Indian Bank 18.13 27.86 16.06 38.56 18.41 13.56 13.88 23.04
Ltd
26 Sangli Bank Ltd 20.57 7.21 4.15 17.96 0.71 _ _ _
27 United Western 7.33 23.36 11.53 13.87 15.88 16.42 NA NA
India Ltd
28 Bank of Punjab 25.05 12.17 8.06 7.69 4.40 NA NA NA
29 Global Trust Bank 7.54 43.03 21.46 11.79 NA NA NA NA
30 IDBI Bank Ltd _ 10.21 3.44 7.86 NA NA NA NA
31 UTI Bank Ltd/Axis 5.52 5.66 4.04 10.94 11.38 3.70 NA NA
Bank Ltd
Source: RBI Publication & WWW.rbi.org.in
303
Appendix 8 Source: RBI Publication & WWW.rbi.org.in
Sectorwise Non Performing Assets of Private Sector Bank As on 31st March -----Other
Priority
Name of the
Sr.No Bank 2001 2002 2003 2004 2005 2006 2007 2008
Catholic Syrian
1 Bank Ltd 24.67 24.31 23.43 26.94 26.64 27.61 38.19 34.95
2 Indus Ind Bank 0.15 4.72 1.86 10.42 9.23 7.11 7.65
3 HDFC Bank Ltd _ _ _ 0.00 _ 29.88 11.80 5.28
4 ICICI Bank Ltd _ 0.20 0.01 0.05 0.11 0.59 14.03 4.68
UTI Bank
Ltd/Axis Bank
5 Ltd 6.54 0.22 0.91 0.00 1.46 0.08 _ 17.85
Karur Vysya
6 Bank Ltd 6.50 3.93 5.37 6.29 6.36 7.02 10.46 8.94
Bank of
7 Rajasthan 6.18 11.58 11.20 11.15 10.95 11.31 14.78
Tamilnad
Mercantile Bank
8 Ltd 8.84 14.09 22.45 13.46 7.07 13.36 13.58 17.11
Danalakshmi
9 Bank Ltd 15.61 13.46 18.68 40.40 18.74 0.75 35.92 23.46
Lakshmi Vilas
10 Bank 5.80 7.35 10.88 20.20 18.50 24.03 21.69 20.62
Kotak Mahindra
11 Bank Ltd _ _ 35.74 23.19 38.49 4.95 0.89
12 Fedral Bank Ltd 11.99 15.36 18.72 21.00 21.69 29.56 43.73 51.86
13 Yes Bank Ltd _ _ _ _ _ _ _ _
Development
14 credit Bank 18.26 11.40 9.45 11.37 5.92 4.53 5.14 3.20
Vysya Bank/Ing
15 Bank Ltd 8.66 25.70 33.70 13.46 18.81 20.08 9.53 24.98
304
Centurion Bank
16 Ltd _ _ _ 3.81 3.07 2.85 0.28 7.09
City Union Bank
17 Ltd 6.7 7.4 7.31 9.86 9.33 7.99 9.18 11.60
Jammu and
Kashmir Bank
18 Ltd 18.89 20.28 20.28 18.47 30.36 25.41 24.33 30.53
Karnataka Bank
19 Ltd 5.96 6.49 5.67 6.04 7.28 11.16 12.98 13.76
Ganesh
Khurwad Bank
20 Ltd 10.69 11.40 13.71 9.87 15.73 16.90 NA NA
Lord Krishna
21 Bank Ltd 1.41 1.85 2.47 3.62 3.86 4.37 3.81 NA
Nainital Bank
22 Ltd 18.03 15.83 39.42 40.54 40.32 42.62 34.05 36.48
Ratnakar Bank
23 Ltd 15.50 12.28 20.60 20.48 14.33 33.82 32.28 23.62
SBI Commercial
& International
24 Bank Ltd _ _ _ 0.00 _ _ 4.05 _
South Indian
25 Bank Ltd 10.57 11.24 8.97 18.92 14.60 18.22 46.33 49.61
26 Sangli Bank Ltd 10.66 9.76 8.53 6.31 6.40 6.47 49.06 NA
United Western
27 India Ltd 8.36 8.50 10.29 13.75 24.18 24.62 NA NA
28 Bank of Punjab 1.15 1.53 1.24 2.76 0.94 NA NA NA
Global Trust
29 Bank _ 0.29 _ 0.00 NA NA NA NA
30 IDBI Bank Ltd _ _ 7.06 23.83 NA NA NA NA
UTI Bank
Ltd/Axis Bank
31 Ltd 6.54 0.22 0.19 0.00 1.46 0.08 NA NA
305
Appendix 8-A - Comparison with other priorities
Advances of private Bank to Agriculture & weaker Sections
Weaker Section Advances
Sr
.
N
o Name of the Bank 2001 2002 2003 2004 2005 2006 2007 2008
Catholic Syrian
1 Bank Ltd 2.72 6.09 0.93 0.00 1.45 1.6 1.69 1.63
Development Credit
2 Bank Ltd. 0.08 4.93 0.05 0.01 0.67 0.7 3.29 3.79
3 HDFC Bank Ltd _ 6.23 0.00 0.00 0.10 1.0 0.70 2.30
4 ICICI Bank Ltd 0.65 7.55 0.00 42.43 0.07 0.5 0.80 0.72
UTI Bank Ltd/Axis
5 Bank Ltd _ 6.82 0.00 0.32 0.13 0.5 1.11 2.03
Karur Vysya Bank
6 Ltd 3.75 9.41 4.30 1.02 4.12 4.5 4.17 4.16
7 Indus Ind Bank _ 6.45 0.00 0.00 _ _ 0.09 0.31
Tamilnad Mercantile
8 Bank Ltd 1.59 8.78 0.00 1.34 2.39 6.9 6.27 6.56
Danalakshmi Bank
9 Ltd 1.94 7.04 2.09 1.65 0.67 3.2 6.43 7.18
10 Lakshmi Vilas Bank 4.02 11.58 3.76 0.37 5.33 5.1 6.59 6.92
Kotak Mahindra
11 Bank Ltd _ _ _ 0.00 _ _ _ _
12 Fedral Bank Ltd 6.53 14.68 4.36 8.24 3.16 7.2 6.50 9.06
13 Yes Bank Ltd _ _ _ _ _ _ _ _
14 Bank of Rajasthan 3.27 8.83 2.46 2.53 _ 1.9 1.12 1.42
Vysya Bank/Ing
15 Bank Ltd 1.65 13.04 3.59 2.04 3.16 3.8 3.86 2.65
16 Centurion Bank Ltd _ 0.00 0.00 23.62 3.39 0.8 0.53 0.24
17 City Union Bank Ltd 4.5 2.66 0.82 0.64 1.36 1.7 1.54 1.83
306
Jammu and Kashmir
18 Bank Ltd 12.1 3.07 3.62 27.91 3.04 3.1 3.13 6.03
19 Karnataka Bank Ltd 1.3 2.04 2.04 4.18 2.07 1.7 1.37 1.26
Ganesh Khurwad 10.1
20 Bank Ltd _ _ _ 1.11 2 10.2 NA NA
Lord Krishna Bank
21 Ltd _ _ _ 0.13 0.29 0.9 1.03 NA
22 Nainital Bank Ltd 9.1 6.40 5.10 0.19 3.08 2.4 1.24 8.2
23 Ratnakar Bank Ltd 2.7 1.71 1.51 0.09 0.98 1.8 2.23 2.41
SBI Commercial &
International Bank
24 Ltd _ _ 0.00 0.00 _ _ _ _
South Indian Bank
25 Ltd 2.60 2.17 1.94 2.87 3.42 2.7 4.05 4.49
26 Sangli Bank Ltd 3.94 4.28 5.08 0.28 2.28 2.0 7.63 NA
United Western
27 India Ltd 2.04 7.32 5.35 10.32 4.84 5.1 NA NA
28 Bank of Punjab _ 0.00 0.00 23.62 3.39 0.8 0.53 0.24
29 Global Trust Bank _ 0.00 0.10 0.00 NA NA NA NA
30 IDBI Bank Ltd _ 0.00 0.00 0.00 NA NA NA NA
UTI Bank Ltd/Axis
31 Bank Ltd _ 0.16 0.00 0.32 0.13 0.5 NA NA
307
Sir / Ma’am,
Yours truly,
Mrs. Sumathi Gopal
Research Scholar
Annexure-QUESTIONNAIRE-1
*******
308
Name of the Bank & Address:
______________________________________________________________
______________________________________________________________
309
5. What is the quantum of losses because of ‘frauds’ in your bank?
Yes No
11. What precautions does your bank adopt in providing loan to the
customer?
310
13. What age group does your bank prefer in providing credit to the
customer? Why?
14. What are the follow up measures in reading the outstanding credit?
Pledge Mortgage
17. What measures do you take while issuing Credit Card to your
customer?
311
20. Who shall be made liable incase of failure to recover the outstanding
loan amount?
Above
23. Does your bank incur losses since recovery involves a huge cost
thus resulting in reduction in banks profit?
Vendors
312
27. How much time does it take to recover the money from your
customer?
28. Whether a Foreign Currency Loan is also available from the Bank, if
yes, whether it be availed overseas?
30. Which sector does bank prefer to give loan to their borrowers?
31. Which sector contributes maximum NPA in their bank and their
percentage?
313
ANNEXURE- Questionnaire 2
INTERVIEW FOR THE PURPOSE OF RESEARCH ON NPA/ BAD LOANS
FOR PH.D.
NAME: _______________________________________________________
STATUS : __________________________________________________
ADDRESS : ___________________________________________________
__________________________________________________
QUALIFICATION: _______________________TEL. NO.________________
SECTION – I
Following are some of the causes of any Bank Account turning NPA/
BAD. In case you disagree with any of the cause please give reason in
support.
314
11) Lack of confidence in credit officers Agree
__________________________________________________
Disagree
12) Lack of knowledge in the subject to credit officer Agree
__________________________________________________
Disagree
13) Fear of staff accountability on account turning NPA in Agree
future in the mind of credit officer at the time of appraisal
Disagree
__________________________________________________
14) Absence of right to select good borrowers by the credit Agree
department
Disagree
__________________________________________________
15) Non-availability of skilled/ trained staff in credit Agree
department
Disagree
__________________________________________________
16) Fraudulent approach of borrowers Agree
__________________________________________________
Disagree
17) Fraudulent and irresponsible attitude of bank officials Agree
__________________________________________________
Disagree
315
PART C : POST DISBURSEMENT STAGE
SECTION – II
PART – A
In your opinion are three any causes other than mentioned above
1) ________________________________________________________
2) ________________________________________________________
3) ________________________________________________________
4) ________________________________________________________
5) ________________________________________________________
PART – B
Which in your opinion and experience are the main causes responsible
for any account turning NPA out of causes mentioned above. (Only five
in each of the following category)
316
1) Any account going bad at an early stage
1) ________________________________________________________
2) ________________________________________________________
3) ________________________________________________________
4) ________________________________________________________
5) ________________________________________________________
SECTION – III
1. Out of various steps to reduce NPA level one way is to go YES/NO
for compromise settlement. Are you in favour of this
method?
2. Can this method develop a tendency among bank YES/NO
borrowers to make deliberate attempt of default and then
ask for concession in interest?
3. What is your opinion about credit monitoring system YES/NO
existing presently in Indian banking system, is it
adequate?
4. Do you feel that improvement in this system is necessary? YES/NO
5. Do you feel that specialized cadre skilled officer be YES/NO
selected and posted in credit department of bank for better
appraisal and delivery of the credit?
6. Will this selection help bank to reduce the risk of account YES/NO
becoming NPA in early stage or even in future?
7. Whether there is a need of a special recovery officer in YES/NO
bank for better recovery?
317
8. Do you favour appointments of External Recovery Agents YES/NO
to recover banks hard core dues?
9. Do you favour cash incentive scheme for banks staff for YES/NO
recovery of dues
10. Whether a system of “credit audit” i.e. verification of total YES/NO
proposal financially and technically by audit people before
disbursement of loan be introduced in banking industry?
(Above certain limit)
11. Can this system be made compulsory/ statutory like or YES/NO
similar to internal audit in the bank?
12. Whether the scope of separate Rating Agencies like ICRA, YES/NO
CRISIL, CARE etc. be extended for the purpose of giving
risk rating to borrowal parties in order to sanction loan
speedily?
13. Whether such risk rating system if introduced should YES/NO
cover all the aspects of credit proposal such as type of
product, nature of industries, market demand and supply,
technology changes, interest structures etc.
14. Whether Management Information System on the YES/NO
performance of various sectors of the economy as also
NPA data covering banks be developed in banking
industries for better credit appraisal?
15. Are you in favour of fixing of responsible on bank officials YES/NO
when particular accounts turns NPA?
16. Whether in your opinion “strict appraisal” will help to YES/NO
reduce the chances of any account turning NPA?
17. Whether this “Strict Appraisal” will become harassment to YES/NO
the borrower?
318
SECTION - IV
1. It is often said that Lawyers/ advocates delays the hearing of the YES/NO
case before Courts by taking dates. Do you agree.
2. Is it a fact that bank does not provide their advocates with proper YES/NO
papers/ list of securities and documents during hearing of the
case before Court?
3. Is it true that most of the bankers does not care to renew loan
documents in time?
4. Do you feel that delay in getting decree from court to recover
bank’s dues make such recovery impossible difficult?
5. Do you agree that time consuming and tedious legal procedure is
responsible for slow recovery of banks overdues?
6. Do you agree that outdated laws are the major causes for
ineffective recovery of banks dues?
7. Do you feel that effective working of Board for Industrial and
Financial Reconstruction (BIFR) will help banks to recover the
long outstanding dues?
8. Do you feel that the Public Debt Recovery Act (DRT) be extended
or made applicable in all the states of India for fast recovery of
banks dues?
9. What in your opinion are the main reasons for considerable delay
in getting decree from the Court of law for Bank’s dues?
i) ______________________________________________________
_________________________________________________________
ii) ______________________________________________________
_________________________________________________________
iii)______________________________________________________
_________________________________________________________
319
Abbreviation
320
DICGC: Deposit Insurance and credit Guarantee Corporation
321
NC: Narasimham Committee
322
SLR: Statutory liquid Ratio
323
BIBLIOGRAPHY
CHAPTER 1
1. Ajay Sinha (2009) “An Approach for Estimating Loss Given Default”
3. C.H. Hanumantha Rao, (1989) S.P. Gupta and K.L. Dutta – “14
August 5,
CHAPTER 2
324
3. Chandran Sankarnarayanan3- (1992): A Study of NPA of Bank of
India-NIBM
Mumbai University
Annamalai University
University
325
12. Gita A. Kumta12- (1997) Fund Management in District central
publication pp-28-35
280
326
22. P.T.George, D.Namasivayam, G.Ramachandraiah22 (1999) Rural
23. Shri TCG Namboodiri23 (2002) NPA: Prevention Is Better Than Cure
25. N.B. Shete25, (2003), Priority Sector Advance of Banks during the
pp21-37
45
327
30. Kanishka Garg30 (2006) Reverse Mortgage Loans: The Scope
publication pp 35-45
32. Dr. Amrit Patel32 (2006) “Financing Small and Marginal Farmers:
No.5,May, pp 16-18
34. Bagchi34 (2006) “Dilution Risk: A silent Killer under Banking Credit
May, pp 35-37
No.5October, pp 38-41
31-34
328
38. M.V. Narayanaswmy, K.Aruna Rao and Srimathi .S.Mayya38 (2007)
publication, pp 7-11
pp 60-63
publication, pp 20-28
publication,pp 29-38
329
47. Usha Janakiraman47 (2008) “From Sub-Prime Mortgage crisis to
59, 62-63
70 &72
330
55. Ghatponde55: “Recovery of Bank loans – an investigation into the
Banks: The Role of the Central Banker and the Market Players,
331
63. RBI, “Report of the Committee on banking Sector Reforms”
(Narasimham Committee)
Committee),Mumbai
CHAPTER 4
2007, pp 60
4) Ibid (3)
5) Ibid (2)
7) Ibid (7)
Publication.
332
11) Chalam (1999), Gopal, “Securitization-General Principle”, the
CHAPTER 5
References:
1. In the 1960s and 1970s the CRR was 5% but was raised to 15% in early
1991.The SLR was 25% in 1970 and was increased to 38.5% in 1991-
target of 33% of total advances was introduced in 1974 with the ratio
333
6. Reserve Bank of India Bulletin, August 97, p. 591
10. CMIE, Monthly Review of Indian Economy, May 1999, pp. 119.
11. CMIE, Monthly Review of Indian Economy, June 1999, pp. 110.
CHAPTER 7
pp21-37
334
7. RBI ‘Guidance Note on Credit Risk Market’, 12th October, 2002
2003
335