ABSTRACT

In the Indian banking system, growing non-performing assets is a repeated problem. There
have been two such episodes over the previous two decades when the banking sector has
suffered seriously from balance sheet difficulties. In this study we make a comparative
examination of two instances of the banking crisis, one that started in the late 1990s and
one that has not yet been addressed following the 2022 global financial crisis. We describe
the pre-emergency macroeconomic and banking environment, the extent and the nature of
the crises and analyse policy responses. Finally, we draw political lessons from this
conversation and suggest actions that might be taken to better address a future crisis in the
banking sector that will have little impact on the real economy.

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 CHAPTER - I
INTRODUCTION

2
 INTRODUCTION
EVOLUTION OF BANKING:
Banking, is its crude form, is an age- old phenomenon. It was in existence even in ancient
times. Revipout, a French writer, for instance, mentions about banks and bank notes in
BABYLON in 600 B.C. in India, the references to money lending are found in the Manu
smriti also.

Professor Marshall in his book, money, credit and commerce, (1923) writes about the
activities of money – changers in the temples of Olympia and other scares places on
Greece, around 2,000 B.C. To quote him “Private money changers began worth task of
reducing many metallic currencies, more or less exactly, to common unit of value, and
even to accept money on deposit at interest, and to lend it out at higher interest permitting
meanwhile drafts to be drawn on them”.

As a matter of fact, the origin of banking lies in the business of money changing in ancient
days. Another important factor that supported the emergence of banks in the early period
was the need for borrowing by the monarchical from finance companies.

In England, initially the Bank of England was established in 1964 on Italy lines to support
government with finance. In India, Modern banking started with the English agency
houses in Calcutta and Bombay began to serve as bankers to the East India Company and
the Hindustan Bank was the first banking institution of its kind to be established in 2079.

BANKING SYSTEM IN INDIA:

The word “bank” is derived from the Greek word “BANKO” which means a bench. The
real growth of modern banking in the country with the established of the presidency bank,
called the Bank of Calcutta in 1806; later on many banks had been established. In India,
the money market is still characterized by the existence of both the organizers and the
unorganized sector, comprising the moneylenders and indigenous bankers.

In the field of industrial finance, the Industrial Development Bank of India was set up in
1964, it is the Apex Bank, and there are many institution like IFCI, ICICI, SFC’S, SIDCS,
IRBI, all these institutions engaged as there are in the task of development are now

3
designated as development banks.

DEFINITION OF BANK:
A bank is an institution which deals money and credit it accepts deposits from public,
makes funds available to those who need them and helps in the remittance of money from
one place to another in fact, a modern bank performs such a Varity of functions that it is
difficult to give a precise and general definition. It is because of this reason that different
economists give different definitions of the banks.

According to John Paget, “No body can be a Banker who does not (1) Take deposit
account, (2) Take Current Accounts, (3) Issues and Pay cheques, and (4) Collect cheques
crossed and uncrossed – for its customer.”

According to the India companies act 1949, Banking means “The accepting for the
purpose of lending and investment, of deposit of money from the public, repayable on
demand or otherwise, and with draw able by cheque, draft or otherwise.”

In short, the term bank, refers to an institution having the following features:

1. It deals with money: it accepts deposit and advances and loans.

2. It deals with credit: it has an ability to create credit. I.e., the ability to expand its
liabilities as a multiple of its reserves.
3. It is a commercial institution: it aims at earning profit.
4. It is a unique financial institution that creates demand deposit, which serves as a
medium of exchange, and as a result, the banks manage the payment system of the
country.

INTRODUCTION OF NPA:
It is known fact that the banks and financial institutions in India face the problem of
swelling non-performing assets (NPAs) and the issue is becoming more and more
unmanageable. In order to bring the situation under control, some steps have been taken.
The securitization and reconstruction of financial assets and enforcement of security
interest act, 2002 was passed by parliament, which is an important step towards
elimination or reduction of NPAs.

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INDIAN ECONOMY AND NPAs:
Undoubtedly the world economy has slowed down, recession is at its peak, globally stock
markets have tumbled and itself is getting hard to do. The Indian economy has been much
affected due to high fiscal deficit, infrastructure facilities, sticky legal system, cutting of
exposures to emerging markets by fis ect.

Further, international agencies like, standard and poor have lowered India’s credit rating to
sub-investment grade. Such negative aspects have offen-outweighed positives such as
increasing forex reserves and a manageable inflation rate.

Under such a situation, it goes without saying that banks are no exception and are bound to
face the heat of a global downturn. One would be supersied to know that the banks and
financial institution in India hold non-performing assets worth Rs. 100,000 crores. Bankers
have realized that unless the level of NPAs is reduced drastically, they will find it difficult
to survive.

Why NPAs have become an asset for banks and financial institution in
india?
To start with, performance in terms of profitability in a benchmark for any business
enterprise including the banking industry. However, increasing NPAs have direct impact
on bank profitability as legally banks are not allowed to book income on such accounts and
at the same time banks are forced to make provision on such assets as per reserve bank of
India (RBI) guidelines.

Also with increasing deposit made by the public, in the banking system, the banking
industry cannot afford default by borrowers since NPAs affects the repayment capacity of
banks.

Further, RBI successfully creates excess liquidity in the system through various rate cuts
and banks fails to utilize this benefit to its advantage due to the fear of burgeoning NPA.
As per prudential norms on assets classification and provisioning all advantages to be
classified in the following categories:

5
Assets are of two types:
1. Performing assets
 Standard assets

2. Non-performing assets
 Substandard assets
 Doubtful assets
 Loss assets

Performing assets:
Standard assets:
Are those assets, which do not carry more than the normal credit risk, attached to business.
As such and all performing assets are classified as standard assets. An asset is to be treated
as performing if interest/installment is serviced promptly and there should not be more
than one-quarter installment/interest overdue as on date of balance sheet.

Non-performing assets:
Meaning of NPAs:
An asset is classified as non-performing assess (NPA) if dues in the form of principal and
interest are not paid of 90 days. If advances or credit facilities granted by banks to the
borrower becomes non performing then the bank will have to treat all the advances and
credit facilities granted too the borrower as non performing with out having any regard to
the fact that there may still exist certain advances credit facilities having performing status.

Sub-standard assets:
An asset is classified as a substandard if it remains remaining for a period not exceeding
15 months.

Doubtful assets:
An assets is classified as a doubtful assets if it remaining as non-performing for a period
exceeding 15 months.

Loss assets:
A loss asset is one, which has been identified by the bank all internal and external
auditions or RBI inspectors but the amount has not been written off wholly or partly. In
other words such an asset is considered uncollectible and of such little value that is

6
continuance as a bankable asset is not warranted although there may be some salvage or
recovery value.

NEED FOR THE STUDY

It is known fact that the banks and financial institutions in India face the problem of
swelling non-performing assets (NPAs) and the issue is becoming more and more
unmanageable. In order to bring the situation under control, some steps have been taken.

One would be surprised to know that the banks and financial institution in India hold non-
performing assets worth Rs. 100,000 crores. Bankers have realized that unless the level of
NPAs is reduced drastically, they will find it difficult to survive.

Also with increasing deposit made by the public, in the banking system, the banking
industry cannot afford default by borrowers since NPAs affects the repayment capacity of
banks.

In this scenario, it is essential to make a study of NPAs in the Indian Banking System. This
study is aimed at analyzing NPA, of ICICI Bank so that the recovery system can be
strengthened.

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SCOPE OF THE STUDY:
Performance in terms of profitability in a benchmark for any business enterprise including
the banking industry. However, increasing NPAs have direct impact on bank profitability
as legally banks are not allowed to book income on such accounts and at the same time
banks are forced to make provision on such assets as per reserve bank of India (RBI)
guidelines.

The scope of study is wide and covers all the financial institutions in the country. As it is a
vast subject, it is not possible to study the NPAs of all banks in the country/state. So the
study is limited to analysis of NPAs of ICICI Bankagain the Bank has 38 branches
spreading over few states and hence study is limited to analysis of NPAs at ICICI
branches. And also the scope of the study is for analyzing the N.P.A. of ICICI Bankfor a
period of 5 year and to find out how much amount is transferred to ARC and LPWA (loan
pending to arbiter).

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IMPORTANCE OF THE STUDY
Due to banking sector reforms initiated since 1992 in the country, the banks are facing new
challenges in ever-changing scenario. Challenges are many among them vital challenges
are 4Cs i.e. Credit (include NPA) Customer, Computer, Capital restructuring. In the
changing scenario, the banks are under tremendous pressure to redefine their priorities in
order to manage effectively there challenges for their survival and growth. Priorities are
many, but resources and time are very limited. The top most priority for any bank is to
manage its NPA at the international prescribed level of 5% on a gross basis and 2.8% on
net below. More over the RBI is going to implement in phases all the stringent
international standard for NPA. Classification in second generation of reforms as per the
recommendation of the Narasimham Committee 2nd report.

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OBJECTIVES OF THE STUDY
 To compare the last year N.P.A. to current year N.P.A of the bank.
 To study the collection process of N.P.A.
 To make suggestion for reduction of N.P.A.
 To study the general reasons for assets becoming NPAs.
 To point out the amount of NPAs in ICICI.
 To analyze the recovery procedure adopted by Bank.
 To find out the problem caused due to NPAs.
 To make suggestions to overcome the problem, if any, at ICICI regarding NPAs.

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RESEARCH METHODOLOGY
1 Research is based on the historical data
2 Primary data: Primary data refers to the data collected by the researcher directly by
interviewing
3 Secondary data: The study is based on secondary data collected through-
- Data from regional office of bank
- Annual report of ICICI Bank.
- Leading Journal such as Economic challenger

METHODOLOGY:
The NPA of past and current year have been compared to analyze the performance of the
bank. Comparative study of NPA is made by using the bar diagram, line diagram and pie
diagram.

The project has been prepared by careful study of available resources. The material
gathered is authentic character and has been collected from reliable sources. The sources
of information can be categorized into two:
 Primary Data
 Secondary Data
Primary Data:
The primary information used in this study analysis is sourced from the data gathered
from:
 Managers of the Bank
 Employees of the Bank
Secondary Data:
The main sources for secondary information are:
 Banking portals on the web
 Banking journals
 ICICI Bank Banks manuals
 The banks website

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  Annual report of concerned bank
 Published book related to the subject

LIMITATION OF THE STUDY

 Absence of relevant literature was a major hindrance to the study. The study is
primarily based on secondary data.
 Due to legal barrier and inability of the bank staff who were bounded by strict rule
and regulations as per RBI guidelines.
 Due to the confidential nature of the data, the concerned personnel were not willing
to divulge information.
 As NPA is a broader concept and consists of many dimensions, the study may not
cover all issues.
 The financial information was not available directly; the data was available only
after it was published in the Annual Report of the concern.
 The study had a time constraint of 45 days.

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 CHAPTER-II
INDUSTRY PROFILE
&
COMPANY PROFILE

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 INTRODUCTION
As per the Reserve Bank of India (RBI), India’s banking sector is sufficiently capitalised
and well-regulated. The financial and economic conditions in the country are far superior
to any other country in the world. Credit, market and liquidity risk studies suggest that
Indian banks are generally resilient and have withstood the global downturn well.

Indian banking industry has recently witnessed the roll out of innovative banking models
like payments and small finance banks. RBI’s new measures may go a long way in helping
the restructuring of the domestic banking industry.

The digital payments system in India has evolved the most among 25 countries with
India’s Immediate Payment Service (IMPS) being the only system at level 5 in the Faster
Payments Innovation Index (FPII).*

In August 2022, Global rating agency Moody's announced that its outlook for the Indian
banking system was stable. In November 2022, Global rating agency Moody's upgraded
four Indian banks from Baa3 to Baa2.

Market Size
 The Indian banking system consists of 27 public sector banks, 26 private sector
banks, 46 foreign banks, 56 regional rural banks, 1,574 urban cooperative banks
and 93,916 rural cooperative banks, in addition to cooperative credit institutions.
Public-sector banks control more than 70 per cent of the banking system assets,
thereby leaving a comparatively smaller share for its private peers. Banks are also
encouraging their customers to manage their finances using mobile phones.
 As the Reserve Bank of India (RBI) allows more features such as unlimited fund
transfers between wallets and bank accounts, mobile wallets are expected to
become strong players in the financial ecosystem.
 The unorganised retail sector in India has huge untapped potential for adopting
digital mode of payments, as 63 per cent of the retailers are interested in using

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 digital payments like mobile and card payments, as per a report by Centre for
Digital Financial Inclusion (CDFI).
ICRA estimates that credit growth in India’s banking sector would be at 7-8 per cent in FY
2022-18.

Investments/developments
Key investments and developments in India’s banking industry include:
 The bank recapitalisation plan by Government of India is expected to push credit
growth in the country to 18 per cent and as a result help the GDP grow by 7 per
cent in FY19. ^
 Public sector banks are lining up to raise funds via qualified institutional
placements (QIP), backed by better investor sentiment after the Government of
India's bank recapitalisation plan and an upgrade in India's sovereign rating by
Moody's Investor Service.
 The RBI amends statutes thereby allowing lenders to invest in real estate
investment trusts (REITs) and infrastructure investment trusts (InvITs) not
exceeding 10 per cent of the unit capital of such instruments.

Government Initiatives
 The Government of India is planning to introduce a two percentage point discount
in the Goods and Services Tax (GST) on business-to-consumer (B2C) transactions
made via digital payments.
 A new portal named 'Udyami Mitra' has been launched by the Small Industries
Development Bank of India (SIDBI) with the aim of improving credit availability
to Micro, Small and Medium Enterprises' (MSMEs) in the country.
 Mr Arun Jaitley, Minister of Finance, Government of India, introduced 'The
Banking Regulation (Amendment) Bill,2022', which will replace the Banking
Regulation (Amendment) Ordinance, 2022, to allow the Reserve Bank of India
(RBI) to guide banks for resolving the problems of stressed assets.
The government and the regulator have undertaken several measures to strengthen the
Indian banking sector.
 A two-year plan to strengthen the public sector banks through reforms and capital
infusion of Rs 2.11 lakh crore (US$ 32.5 billion), has been unveiled by the

15
 Government of India that will enable these banks to play a much larger role in the
financial system and give a boost to the MSME sector. In this regard, the Lok
Sabha has approved recapitalisation bonds worth Rs 80,000 crore (US$ 15.62
billion) for public sector banks, which will be accompanied by a series of reforms,
according to Mr Arun Jaitley, Minister of Finance, Government of India.
 The Insolvency and Bankruptcy Code (Amendment) Ordinance, 2022 Bill has been
passed by Rajya Sabha and is expected to strengthen the banking sector.

Road Ahead
Enhanced spending on infrastructure, speedy implementation of projects and continuation
of reforms are expected to provide further impetus to growth. All these factors suggest that
India’s banking sector is also poised for robust growth as the rapidly growing business
would turn to banks for their credit needs.

Also, the advancements in technology have brought the mobile and internet banking
services to the fore. The banking sector is laying greater emphasis on providing improved
services to their clients and also upgrading their technology infrastructure, in order to
enhance the customer’s overall experience as well as give banks a competitive edge.

Many banks, including HDFC, ICICI and AXIS are exploring the option to launch contact-
less credit and debit cards in the market shortly. The cards, which use near field
communication (NFC) mechanism, will allow customers to transact without having to
insert or swipe.

Mr Bill Gates, Co-founder of Microsoft Corp, has stated that India will move quite rapidly
to a digital payments economy in as little as seven years, based on the introduction of
digital payment banks combined with other things like direct benefit transfers, universal
payments interface and Aadhaar.

Banks in India

ICICI Bank is India's largest private sector bank with

total assets of Rs 5,367.95 billion (US$ 89.24 billion) for
the year ended March 31, 2018. The bank has a network
of 3,753 branches and 11,292 ATMs in India, and has a
presence in 18 other countries. It offers a wide range of

16
banking products and financial services to corporate and retail ....

Kotak Mahindra Bank Ltd is a one stop shop for all banking needs. The bank offers
personal finance solutions of every kind from savings
accounts to credit cards, distribution of mutual funds to life
insurance products. Kotak Mahindra Bank offers transaction
banking, operates lending verticals, manages IPOs and provides working capital loans.
Kotak has one of the largest and most respected Wealth Management teams in India,
providing the widest range of solutions to high net worth individuals, entrepreneurs,
business families and employed professionals.

Karnataka Bank is a major banking institution based in

the coastal city of Mangalore in Karnataka. The Reserve
Bank of India (RBI) has designated Karnataka Bank as an
A1+ class scheduled commercial bank. The bank now has
a national presence with a network of 688 branches and
above 1,000 ATMs across 21 states and two Union territories.

Federal Bank Ltd is a major Indian commercial bank in

the private sector headquartered in Kerala having more
than thousand branches and ATMs spread across
different States in India. It is the fourth largest bank in
India in terms of capital base. The rating factors in the
long standing track record of the bank, high level of capitalization…

Indian Overseas Bank (IOB) was founded on February

10, 1937, by Mr M Ct M Chidambaram Chettyar, a
pioneer in many fields - Banking, Insurance and Industry
with the twin objectives of specialising in foreign
exchange business and overseas banking. IOB had the
unique distinction of commencing business on February 10, 1937 (on the inaugural day

17
itself...

Bank of India was founded on September 7, 1906 by a group

of eminent businessmen from Mumbai. The bank was under
private ownership and control till July 1969 when it was
nationalised along with 16 other banks. The bank has made a
rapid growth over the years and has become one of the largest public sector banks with a
strong national presence an...

Vijaya Bank has grown from being a bank focussed in

Karnataka to becoming an all-India bank with the
merger of nine smaller banks in the decade of 1960. The
bank has built a network of 1,701 branches, 49
extension counters and 1,458 ATMs, that span all 28
states and four union territories in the country.
Canara Bank was founded in 1906 by Mr Ammembal
Subba Rao Pai at Mangalore in Karnataka. The bank has
gone through various phases of growth trajectory in over
hundred years of its existence. The growth of the bank
has been phenomenal, especially after nationalisation in
1969 and attaining the status of a national level player in terms of geographical..

Bank of Baroda was founded by Maharaja Sayajirao

Gaekwad on July 20, 1908. It was set up under the
Companies Act of 1897. At present, Bank of Baroda is
one of the largest banks in India as well as part of NIFTY
Index of the National Stock Exchange. As of March 31,
2020, the bank had total asset size of Rs 717,988.55 crore (US$ 117.23 billion), …

The Hongkong and Shanghai Banking Corporation

(HSBC) is one of the foremost foreign banks in India.
Headquartered in London, it was originally established in
Hong Kong by Mr Thomas Sutherland in 1865, with a
view to serve the needs of the merchants of the China
coast and finance the growing trade between China,

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Europe and the United States. HSBC ca...

Punjab National bank (PNB) is one of the largest nationalised banks in India providing
services to its customers. The bank enjoys strong fundamentals, large franchise value and
good brand image. PNB was founded on May 19, 1894. The founding board was drawn
from different parts of India professing different faiths and having varied backgrounds, …

Established in 1955, State Bank of India (SBI) is the

largest public sector bank in India. The bank is capitalised
to the extent of US$ 159.3 million with a government
holding of 62.31 per cent as on May 2018. The bank’s
main divisions include treasury, retail banking,
corporate/wholesale banking and other banking businesses.

Axis Bank is the third largest private sector bank in India.

It offers the entire spectrum of financial services to
customer segments, covering large and mid-corporates,
MSME, agriculture and retail businesses. As on March
31, 2018, the bank had a large footprint of 1947 domestic
branches (including extension counters) and 11,245 ATMs spread..

HDFC Bank Established in 1994, Housing Development

Finance Corporation Ltd (HDFC) Bank is an Indian
financial services company based in Mumbai,
Maharashtra. The bank is the first of its kind to receive an
in-principle approval from the Reserve Bank of India
(RBI) for establishment of a bank in the private sector..

History

Origin of the word

The name bank derives from the Italian word banco "desk/bench", used during the
Renaissance by Jewish Florentine bankers, who used to make their transactions above a
desk covered by a green tablecloth. However, there are traces of banking activity even in
ancient times, which indicates that the word 'bank' might not necessarily come from the

19
word 'banco'.

In fact, the word traces its origins back to the Ancient Roman Empire, where
moneylenders would set up their stalls in the middle of enclosed courtyards called macella
on a long bench called a bancu, from which the words banco and bank are derived. As a
moneychanger, the merchant at the bancu did not so much invest money as merely convert
the foreign currency into the only legal tender in Rome—that of the Imperial Mint.

The earliest evidence of money-changing activity is depicted on a silver drachm coin from
ancient Hellenic colony Trapezus on the Black Sea, modern Trabzon, c. 350–325 BC,
presented in the British Museum in London. The coin shows a banker's table (trapeza)
laden with coins, a pun on the name of the city.

In fact, even today in Modern Greek the word Trapeza (Τράπεζα) means both a table and a
bank.

Traditional banking activities

Banks act as payment agents by conducting checking or current accounts for customers,
paying cheques drawn by customers on the bank, and collecting cheques deposited to
customers' current accounts. Banks also enable customer payments via other payment
methods such as telegraphic transfer, EFTPOS, and ATM.

Banks borrow money by accepting funds deposited on current accounts, by accepting term
deposits, and by issuing debt securities such as banknotes and bonds. Banks lend money
by making advances to customers on current accounts, by making installment loans, and
by investing in marketable debt securities and other forms of money lending.

Banks provide almost all payment services, and a bank account is considered indispensable
by most businesses, individuals and governments. Non-banks that provide payment
services such as remittance companies are not normally considered an adequate substitute
for having a bank account.

Banks borrow most funds from households and non-financial businesses, and lend most
funds to households and non-financial businesses, but non-bank lenders provide a
significant and in many cases adequate substitute for bank loans, and money market funds,
cash management trusts and other non-bank financial institutions in many cases provide an

20
adequate substitute to banks for lending savings to.

Entry regulation
Currently in most jurisdictions commercial banks are regulated by government entities and
require a special bank licence to operate.

Usually the definition of the business of banking for the purposes of regulation is extended
to include acceptance of deposits, even if they are not repayable to the customer's order—
although money lending, by itself, is generally not included in the definition.

Unlike most other regulated industries, the regulator is typically also a participant in the
market, i.e. a government-owned (central) bank. Central banks also typically have a
monopoly on the business of issuing banknotes. However, in some countries this is not the
case. In the UK, for example, the Financial Services Authority licences banks, and some
commercial banks (such as the Bank of Scotland) issue their own banknotes in addition to
those issued by the Bank of England, the UK government's central bank.

Accounting for bank accounts

Bank statements are accounting records produced by banks under the various accounting
standards of the world. Under GAAP and IFRS there are two kinds of accounts: debit and
credit. Credit accounts are Revenue, Equity and Liabilities. Debit Accounts are Assets and
Expenses. This means you credit a credit account to increase its balance, and you debit a
debit account to decrease its balance.

This also means you debit your savings account every time you deposit money into it (and
the account is normally in deficit), while you credit your credit card account every time
you spend money from it (and the account is normally in credit).

However, if you read your bank statement, it will say the opposite—that you credit your
account when you deposit money, and you debit it when you withdraw funds. If you have
cash in your account, you have a positive (or credit) balance; if you are overdrawn, you
have a negative (or deficit) balance.

The reason for this is that the bank, and not you, has produced the bank statement. Your
savings might be your assets, but the bank's liability, so they are credit accounts (which
should have a positive balance). Conversely, your loans are your liabilities but the bank's

21
assets, so they are debit accounts (which should also have a positive balance).

Where bank transactions, balances, credits and debits are discussed below, they are done
so from the viewpoint of the account holder—which is traditionally what most people are
used to seeing.

Economic functions
1. issue of money, in the form of banknotes and current accounts subject to cheque or
payment at the customer's order. These claims on banks can act as money because
they are negotiable and/or repayable on demand, and hence valued at par. They are
effectively transferable by mere delivery, in the case of banknotes, or by drawing a
cheque that the payee may bank or cash.
2. netting and settlement of payments – banks act as both collection and paying agents
for customers, participating in interbank clearing and settlement systems to collect,
present, be presented with, and pay payment instruments. This enables banks to
economise on reserves held for settlement of payments, since inward and outward
payments offset each other. It also enables the offsetting of payment flows between
geographical areas, reducing the cost of settlement between them.
3. credit intermediation – banks borrow and lend back-to-back on their own account
as middle men.
4. credit quality improvement – banks lend money to ordinary commercial and
personal borrowers (ordinary credit quality), but are high quality borrowers. The
improvement comes from diversification of the bank's assets and capital which
provides a buffer to absorb losses without defaulting on its obligations. However,
banknotes and deposits are generally unsecured; if the bank gets into difficulty and
pledges assets as security, to raise the funding it needs to continue to operate, this
puts the note holders and depositors in an economically subordinated position.
5. maturity transformation – banks borrow more on demand debt and short term debt,
but provide more long term loans. In other words, they borrow short and lend long.
With a stronger credit quality than most other borrowers, banks can do this by
aggregating issues (e.g. accepting deposits and issuing banknotes) and redemptions
(e.g. withdrawals and redemptions of banknotes), maintaining reserves of cash,
investing in marketable securities that can be readily converted to cash if needed,

22
 and raising replacement funding as needed from various sources (e.g. wholesale
cash markets and securities markets).

Law of banking
Banking law is based on a contractual analysis of the relationship between the bank
(defined above) and the customer—defined as any entity for which the bank agrees to
conduct an account.

The law implies rights and obligations into this relationship as follows:
1. The bank account balance is the financial position between the bank and the
customer: when the account is in credit, the bank owes the balance to the customer;
when the account is overdrawn, the customer owes the balance to the bank.
2. The bank agrees to pay the customer's cheques up to the amount standing to the
credit of the customer's account, plus any agreed overdraft limit.
3. The bank may not pay from the customer's account without a mandate from the
customer, e.g. a cheque drawn by the customer.
4. The bank agrees to promptly collect the cheques deposited to the customer's
account as the customer's agent, and to credit the proceeds to the customer's
account.
5. The bank has a right to combine the customer's accounts, since each account is just
an aspect of the same credit relationship.
6. The bank has a lien on cheques deposited to the customer's account, to the extent
that the customer is indebted to the bank.
7. The bank must not disclose details of transactions through the customer's account
—unless the customer consents, there is a public duty to disclose, the bank's
interests require it, or the law demands it.
8. The bank must not close a customer's account without reasonable notice, since
cheques are outstanding in the ordinary course of business for several days.

These implied contractual terms may be modified by express agreement between the
customer and the bank. The statutes and regulations in force within a particular jurisdiction
may also modify the above terms and/or create new rights, obligations or limitations
relevant to the bank-customer relationship.

Some types of financial institution, such as building societies and credit unions, may be

23
partly or wholly exempt from bank licence requirements, and therefore regulated under
separate rules.

The requirements for the issue of a bank licence vary between jurisdictions but typically
include:
1. Minimum capital
2. Minimum capital ratio
3. 'Fit and Proper' requirements for the bank's controllers, owners, directors, and/or
senior officers
4. Approval of the bank's business plan as being sufficiently prudent and plausible.

Types of banks
Banks' activities can be divided into retail banking, dealing directly with individuals and
small businesses; business banking, providing services to mid-market business; corporate
banking, directed at large business entities; private banking, providing wealth management
services to high net worth individuals and families; and investment banking, relating to
activities on the financial markets. Most banks are profit-making, private enterprises.
However, some are owned by government, or are non-profit organizations.

Central banks are normally government-owned and charged with quasi-regulatory

responsibilities, such as supervising commercial banks, or controlling the cash interest
rate. They generally provide liquidity to the banking system and act as the lender of last
resort in event of a crisis.

Types of retail banks

 Commercial bank: the term used for a normal bank to distinguish it from an
investment bank. After the Great Depression, the U.S. Congress required that banks
only engage in banking activities, whereas investment banks were limited to capital
market activities. Since the two no longer have to be under separate ownership,
some use the term "commercial bank" to refer to a bank or a division of a bank that
mostly deals with deposits and loans from corporations or large businesses.
 Community Banks: locally operated financial institutions that empower employees
to make local decisions to serve their customers and the partners.
 Community development banks: regulated banks that provide financial services
and credit to under-served markets or populations.

24
  Postal savings banks: savings banks associated with national postal systems.
 Private banks: banks that manage the assets of high net worth individuals.
 Offshore banks: banks located in jurisdictions with low taxation and regulation.
Many offshore banks are essentially private banks.
 Savings bank: in Europe, savings banks take their roots in the 19th or sometimes
even 18th century. Their original objective was to provide easily accessible savings
products to all strata of the population. In some countries, savings banks were
created on public initiative; in others, socially committed individuals created
foundations to put in place the necessary infrastructure. Nowadays, European
savings banks have kept their focus on retail banking: payments, savings products,
credits and insurances for individuals or small and medium-sized enterprises. Apart
from this retail focus, they also differ from commercial banks by their broadly
decentralised distribution network, providing local and regional outreach—and by
their socially responsible approach to business and society.
 Building societies and Landesbanks: institutions that conduct retail banking.
 Ethical banks: banks that prioritize the transparency of all operations and make
only what they consider to be socially-responsible investments.
 Islamic banks: Banks that transact according to Islamic principles.

Types of investment banks

 Investment banks "underwrite" (guarantee the sale of) stock and bond issues, trade
for their own accounts, make markets, and advise corporations on capital market
activities such as mergers and acquisitions.
 Merchant banks were traditionally banks which engaged in trade finance. The
modern definition, however, refers to banks which provide capital to firms in the
form of shares rather than loans. Unlike venture capital firms, they tend not to
invest in new companies.

Both combined
 Universal banks, more commonly known as financial services companies, engage
in several of these activities. These big banks are very diversified groups that,
among other services, also distribute insurance— hence the term bancassurance, a
portmanteau word combining "banque or bank" and "assurance", signifying that
both banking and insurance are provided by the same corporate entity.

25
Other types of banks
Islamic banks adhere to the concepts of Islamic law. This form of banking revolves around
several well-established principles based on Islamic canons. All banking activities must
avoid interest, a concept that is forbidden in Islam. Instead, the bank earns profit (markup)
and fees on the financing facilities that it extends to customers.

Indian banking sector credit growth has grown at a healthy pace

 Credit off-take has been surging ahead over the past decade, aided by strong
economic growth, rising disposable incomes, increasing consumerism and easier
access to credit
 Total credit extended went up to US$ 1,089 billion by FY18
 Credit to non-food industries increased 9.75 per cent to US$ 1,073.4 billion in
FY18, from the previous financial year
 Demand has grown for both corporate and retail loans

26
 COMPANY PROFILE

ICICI Bank is India's largest private sector bank with total assets of Rs. 7,206.95 billion
(US$ 109 billion) at March 31, 2021 and profit after tax Rs. 97.26 billion (US$ 1,468
million) for the year ended March 31, 2021. ICICI Bank currently has a network of 4,850
Branches and 16,780 ATM's across India.

History
ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian financial
institution, and was its wholly-owned subsidiary. ICICI's shareholding in ICICI Bank was
reduced to 46% through a public offering of shares in India in fiscal 1998, an equity
offering in the form of ADRs listed on the NYSE in fiscal 2000, ICICI Bank's acquisition
of Bank of Madura Limited in an all-stock amalgamation in fiscal 2001, and secondary
market sales by ICICI to institutional investors in fiscal 2001 and fiscal 2002. ICICI was
formed in 1955 at the initiative of the World Bank, the Government of India and
representatives of Indian industry. The principal objective was to create a development
financial institution for providing medium-term and long-term project financing to Indian
businesses.

In the 1990s, ICICI transformed its business from a development financial institution
offering only project finance to a diversified financial services group offering a wide
variety of products and services, both directly and through a number of subsidiaries and
affiliates like ICICI Bank. In 1999, ICICI become the first Indian company and the first
bank or financial institution from non-Japan Asia to be listed on the NYSE.

After consideration of various corporate structuring alternatives in the context of the

emerging competitive scenario in the Indian banking industry, and the move towards
universal banking, the managements of ICICI and ICICI Bank formed the view that the
merger of ICICI with ICICI Bank would be the optimal strategic alternative for both
entities, and would create the optimal legal structure for the ICICI group's universal
banking strategy. The merger would enhance value for ICICI shareholders through the
merged entity's access to low-cost deposits, greater opportunities for earning fee-based
income and the ability to participate in the payments system and provide transaction-
banking services. The merger would enhance value for ICICI Bank shareholders through a

27
large capital base and scale of operations, seamless access to ICICI's strong corporate
relationships built up over five decades, entry into new business segments, higher market
share in various business segments, particularly fee-based services, and access to the vast
talent pool of ICICI and its subsidiaries.

In October 2001, the Boards of Directors of ICICI and ICICI Bank approved the merger
of ICICI and two of its wholly-owned retail finance subsidiaries, ICICI Personal Financial
Services Limited and ICICI Capital Services Limited, with ICICI Bank. The merger was
approved by shareholders of ICICI and ICICI Bank in January 2002, by the High Court of
Gujarat at Ahmedabad in March 2002, and by the High Court of Judicature at Mumbai and
the Reserve Bank of India in April 2002. Consequent to the merger, the ICICI group's
financing and banking operations, both wholesale and retail, have been integrated in a
single entity.

ICICI Group Companies

ICICI Group
http://www.icicigroupcompanies.com

ICICI Prudential Life Insurance Company

http://www.iciciprulife.com/public/default.htm

ICICI Securities
http://www.icicisecurities.com

ICICI Lombard General Insurance Company

http://www.icicilombard.com

ICICI Prudential AMC & Trust

http://www.icicipruamc.com

ICICI Venture
http://www.iciciventure.com

ICICI Direct

28
http://www.icicidirect.com

ICICI Foundation
http://www.icicifoundation.org

Disha Financial Counselling

http://www.icicifoundation.org

ICICI Bank also has banking subsidiaries in UK and Canada

BOARD DIRECTORS
Mr. M. K. Sharma, Chairman
..............................................
Mr. Dileep Choksi
..............................................
Mr. Homi R. Khusrokhan
..............................................
Dr. Tushaar Shah
..............................................
Mr. V. K. Sharma
..............................................
Mr. V. Sridar
..............................................
Mr. Amit Agrawal
Ms. Chanda Kochhar,
Managing Director & CEO
...........................................
Mr. N. S. Kannan,
Executive Director
...........................................
Ms. Vishakha Mulye,
Executive Director
...........................................
Mr. Vijay Chandok,

29
Executive Director
...........................................
Mr. Anup Bagchi,
Executive Director

AWARDS
2022
 ICICI Bank won the award in the ‘End Users of IT’ category for Chatbot on iMobile
and Software Robotics at the IMC Digital Technology Awards 2021
 ICICI Bank emerged as the ‘Best Bank for SMEs’ at the Asiamoney India Banking
Awards 2022. The Bank has won this award for its automation initiative ‘COLORS’
(Corporate Loan Origination System). COLORS is a system deployed within the Bank.
It has an end-to-end automated workflow right from logging in an application to
disbursing the loan to SMEs.
 ICICI Bank won the Gold Award in the ‘Banks and Credit Cards’ category, as per the
Readers Digest Trusted Brand Survey 2022.
 ICICI Bank won the ‘Best Retail Bank in India’ award for the fourth consecutive year
at the Asian Banker Excellence in Retail Financial Services International Awards
2022.
 ICICI Bank received two awards at the National Payments Excellence Awards 2021 in
the ‘Large Bank’ category organised by NPCI (National Payments Corporation of
India). The Bank was declared winner for the ‘Immediate Payment System’ (IMPS)
application and first runner up for ‘Cheque Truncation System’ (CTS).
 ICICI Bank’s Pockets has been selected as ‘App of the year’ for 2020-19 at the FE
Best Banks awards organised by The Financial Express.
 Ms. Chanda Kochhar featured as an Evergreen Woman Leader in ‘BW’s Most
Influential Women’ list by Business World magazine.
 Ms. Chanda Kochhar voted as the ‘Favorite Female Business Icon’ by women
professionals aged 29 years and above, according to nationwide survey conducted by
Talentedge, a Delhi based education technology firm.
 ICICI Bank received runners-up awards in the categories of ‘Lean’, ‘DFSS’ (Design
For Six Sigma) and ‘DMAIC’ (Define, Measure, Analyze, Improve, and Control) at

30
 the Six Sigma Case Study Presentation Contest 2022 organised by the Indian Statistical
Institute, Bangalore.
 ICICI Bank has been voted as the 'Top Borrower in Asia – India' for the fifth
consecutive year and the 'Most Impressive Investment grade Financial Institution from
Asia' in the online poll conducted by FinanceAsia magazine in 2021.
 ICICI Bank won the 'Best Company to Work for' Award of Business Today magazine
in the Banking, Financial Services and Insurance sector.
 ICICI Bank was declared winner in four categories and first runner-up in one category
among 'Large Banks' at the IBA Banking Technology Awards 2022. The Bank won the
award for the 'Best Technology Bank of the Year'. It also won awards in the categories
of 'Best Use of Analytics for Business Outcome', Best Use of Digital and Channels'
and 'Best Payments Initiative'. The Bank was declared first runner-up in the category of
'Best IT Risk and Cyber Security Initiatives'.
 ICICI Bank was awarded the ‘Gold category’ recognition at the Energy And
Environment Foundation Global Safety Award 2022. This is the highest award
received by a bank in the Financial Sector – Banking/Non-Banking Finance
Companies, for its constant effort towards encouraging safe work practices across
operations.
 ICICI Bank won two awards at the Asset Triple A Country Awards 2021. The Bank
won the Best Bond House-Domestic Award in the 'Best House' category and the Best
Syndicated Loan Award in the 'Best Deal' category respectively.
 ICICI Bank won two awards for its Tax Payment Through Alternate Channels and
Smart Vault projects at Finnoviti 2022, a conference and award ceremony organised by
the Banking Frontiers magazine to recognise innovations in the Indian Banking,
Financial Services & Insurance (BFSI) industry.
 ICICI Bank ranked first among private sector banks in India as per Brand Equity's
'Most Trusted Brands of 2021' survey. Brand Equity is a supplement of The Economic
Times. The Bank is the only private sector bank to be featured among the top 100
brands in this survey.
 ICICI Foundation won the 'Best CSR & Sustainability Practices Award for 2021' at the
4th Asia Business Responsibility Summit.

31
2021

 ICICI Bank wins the National Securities Depository Limited Top Performer Award for
opening the highest number of demat accounts in 2021
 ICICI Bank is awarded the ‘Best Bond House’-Domestic at the Asset Triple A Country
Awards 2021.
 ICICI Bank wins the award in the ‘Best Syndicated Loan’ category at the Asset Triple
A Country Awards 2021.
 ICICI Bank features as one of the top 10 organisations in the list of ‘Best Companies
for Women in India’, according to a study conducted by Working Mother Media.
 ICICI Bank wins three awards in the Safety Innovation category for its ‘iTravel Safe’,
‘Master Switch’ and ‘Report a Safety Incident’ applications at Occupation Safety and
Health (OSH) India 2021 exhibition organised by UBM India Pvt. Ltd
 ICICI Bank has won the BFSI Digital Innovators Award 2021 for its Software
Robotics initiative in the 'Innovative Usage of Emerging Technology' category.
 ICICI Bank wins six awards for its various projects at the Finacle Client Innovation
Awards organised by Infosys. The Bank was declared winner in 'Product Innovation'
category for introducing innovative products like cashless payments on online
purchases at the time of delivery, API based Smartkeys on iMobile, NFC based Touch
and Pay solution; 'Process Innovation' category for Electronic Mutual Fund & Personal
Discussion App; and 'Project Management’ category for best practices on upgrade to
Finacle 10 across multiple foreign country operations. ICICI Bank was runners-up in
the 'Customer Service Innovation' category for mVisa and tax payment on iMobile;
'Channel Innovation' category for Money2India Europe Mobile App (Video KYC); and
'Innovative Customs Component' category for ICORE-India Single Screen project.
 ICICI Bank won CNBC TV 18's Financial Inclusion Award 2021 for Banks/NBFCs in
'Impactful Financial Inclusion Through Innovation & Processes' category.
 ICICI Learning Center in Vallerina & ICICI Management Learning Center in
Khandala were awarded 'Platinum' rating by the Indian Green Building Council.
 ICICI Bank won the Emerson Cup 2021 award during 17th Indian Green Building
Congress in Mumbai.
 ICICI Bank's corporate office at Bandra Kurla Complex was awarded 'Platinum' rating
by Indian Green Building Council.

32
 ICICI Bank won awards under the 'Best Derivatives House of the Year' and 'Best
Structured Products House of the Year' categories respectively, in the Indian region at
The Asset Triple A Private Banking, Wealth Management, Investment and ETF
Awards 2021.
 ICICI Bank is voted the ‘Best Domestic Providers of FX Services’ by financial
institutions in the Asiamoney FX Poll 2021.
 ICICI Bank recognized as the 'Best Foreign Exchange Provider' in India by Global
Finance magazine.
 Ms. Chanda Kochhar featured in Business Today’s 2021 ‘Hall of Fame’ list.
 Ms. Vishakha Mulye featured in Business Today's 2021 list of ‘Most Powerful Women
in Business’.
 ICICI Bank has won the ‘Best Private Sector Bank ’ award under the Global
Businesses category at Dun & Bradstreet Banking Awards 2021.
 ICICI Bank has won 11 awards at the 20th National Awards for Excellence in Energy
Management organized by the Confederation of Indian Industries (CII).
 ICICI Bank has won bronze in the ‘Banking Services’ category at the Golden Cart
Summit and Awards 2021.
 ICICI Bank Tower- Gachibowli, Hyderabad and ICICI Bank Branch- Madhapur,
Hyderabad, have been awarded 4 star and 3 star ratings respectively in the ‘Service/
Office/ Software’ category at the CII (South Region) Leadership and Excellence
Awards in Environment, Health and Safety – 2021.
 ICICI Bank has won Gold at the Energy and Environment Foundation (EEF) Global
Environment Award 2021 during the World Renewable Energy Technology Congress
& Expo-2021.
 ICICI Bank has won Gold in ‘Not-for-Profit’ (Interactive Campaign) and Silver in
‘Creative Affectiveness, Social Media’, both for the #GiftALivelihood campaign at
2021 DMA Asia ECHO Awards India edition.
 ICICI Bank has won Gold for ‘#GiftALivelihood’ in the ‘Social Cause Supported by a
Corporate/Brand’ category at Campaign India Digital Crest Awards (CIDCA), 2021.
 ICICI Bank was the exclusive recipient of awards in the categories of ‘Website of the
Year – India’ and ‘Core Banking System Initiative of the Year – India’ and received a
silver in the category of ‘Branch Innovation of the Year’ in the Asian Banking and
Finance (ABF) Retail Banking Awards 2021.

33
 ICICI Bank has been declared winner in the category of ‘Enterprise Mobility’ at
Intelligent Enterprise Awards 2021, organised by the Indian Express Group.
 ICICI Bank has won Gold awards in the ‘Bank’ and ‘Credit card issuing Bank’
segments under Finance category in the Reader’s Digest Trusted Brand 2021 Survey.
 ICICI Bank has won second prize for the ICICI Bank – BKC Tower in the ‘Service’
category at 15th - CII (Western Region) Safety, Health and Environment Excellence
Award 2020-19.
 ICICI Bank has won two awards in the categories of ‘Best Core Banking Project-
Single Country’ and ‘Best Retail Payments Project’ at The Asian Banker Technology
Innovation Awards 2021.
 ICICI Bank has been declared as winner in the category of ‘Private - Service Sector
(Large)' at the 16th National Awards for Excellence in Cost Management-2020.
 ICICI Bank Canada won the 2021 Employment Equity Achievement Award for
‘Improved Representation’ by the Government of Canada’s Ministry of Employment,
Workforce Development and Labour.
 ICICI Bank won the Golden Peacock Innovative Product/Service Award for the year
2021 under the category of ‘Financial Sector (Banking)’. The Bank received the award
for the project on ‘One kWp solar retrofit system for ensuring un-interrupted power
supply to gramin branches’.
 ICICI Bank has been declared national runner-up in ‘Commercial Vehicle Financers’
category at the 5th edition of Mahindra Transport Excellence Awards, organised by
Mahindra & Mahindra Limited.
 ICICI Bank was ranked first in the ‘Best Bank- Innovation’ category in the Business
Today-KPMG survey on India's best banks. The Bank was ranked second in the
category of ‘Bank of the Year’.
 ICICI Bank was ranked first in ‘The Brand Trust Report, India Study 2021’ done by
Trust Research Advisory (TRA) under the BFSI category. The Bank was also ranked
10th among the overall 1,000 brands as per the report.
 ICICI Bank has won two awards in the categories of ‘Best Retail Bank in India’ and
‘Best Employee Engagement Initiative’ in Asia Pacific, Middle-East and Africa at the
Asian Banker Excellence in Retail Financial Services International Awards 2021. The
award programme is the most prestigious of its kind in the industry. More than 250
banks across 42 countries were evaluated for the awards this year.

34
 ICICI Bank was ranked second in ‘Total Income Listing’ and ranked seventh in ‘Total
Business Listing’ in the list of ‘India's Leading BFSI Companies 2021’ by Dun &
Bradstreet.
 ICICI Bank received two awards at the ‘IBA Banking Technology Awards 2021’. In
the large banks segment, the Bank was declared winner in the category of 'The Best
Use of Technology to Enhance Customer Experience' and runner up in the category of
'The Best Use of Digital and Channels Technology'.
 ICICI Bank won the bronze under the ‘Financial Services’ category for advertising
effectiveness on the Expressions Debit Card campaign at 2020 Effie Awards.
 ICICI Bank won the 'Global Safety Awards 2021' organised by The Energy and
Environment Foundation. This award is sponsored by Ministry of Power, Ministry of
Petroleum & Natural Gas and Ministry of Coal, Government of India.
 ICICI Bank’s corporate office, Chandivali, Mumbai won the first prize, and CIBD
office, Vashi, won the third prize under ‘Commercial Building’ category at the 10th
State Level Awards for Excellence in Energy Conservation and Management,
organised by Maharashtra Energy Development Agency.
 ICICI Bank was ranked first in India at the Euromoney ‘Private Banking & Wealth
Management Survey’, in four categories. They were: Net-worth-specific services,
Philanthropic Advice, SRI/Social Impact Investing and Innovative Technology - Client
Experience. The Bank was ranked sixth in Asia, in the category of Innovative
Technology - Client Experience.
 ICICI Bank was declared runner up in the categories of IMPS (Immediate Payment
Service), CTS (Cheque Truncation System) and NFS (National Financial Switch) at
the National Payments Excellence Awards 2020 organised by the NPCI (National
Payments Corporation of India). The Bank was also felicitated with a special award for
issuing large number of RuPay Platinum cards.

2020

 ICICI Bank was ranked first among private banks as per Brand Equity's Most Trusted
Brands survey 2020, an initiative of The Economic Times. The Bank was ranked 10th
in the list of overall best service brands in the same survey.

35
 ICICI Bank was declared the winner in the ‘Sustainable Business’ category and
runners up in the ‘Big Data & Analytics’ category at the EFMA- Accenture Innovation
Awards in Amsterdam.
 ICICI Bank won the 'Best Local Trade Finance Bank in India' at Global Trade Review
(GTR) 'Asia Leaders in Trade Awards 2020'.
 The Central Monitoring System (CMS) project of ICICI Bank involving
implementation of security systems at branches and 24x7 remote monitoring at a
central Network Operations Center (NOC) was adjudged the best 'IT Security Initiative
Project' at Elets 11th Annual eINDIA Summit Awards 2020 held in Mumbai.
 ICICI Bank won the 'Best Website Design' in Asia-Pacific at Global Finance's 2020
World's Best Digital Bank Awards.
 ICICI Bank won the first prize at the National Energy Conservation Award 2020 under
the office buildings category.
 Ms. Chanda Kochhar featured in Fortune India’s list of Most Powerful Women in
Business.
 ICICI Bank won awards in the categories of ‘Use of Technology for Fraud Prevention
and NPA Management’ among large banks and ‘Evangelising Technology Adoption’
among large banks at the IDRBT Banking Technology Excellence Awards 2020.
 Ms. Chanda Kochhar was conferred with the 2020 Asia Game Changers Award.
 ICICI Bank won the award of 'Top Borrowers in Asia - India' at 2020 Fixed Income
Research Poll in a poll conducted by FinanceAsia magazine.
 ICICI Bank won ‘Best Private Sector Bank’ under ‘Global Business’ category at the
‘Dun & Bradstreet Banking Awards 2020’.
 Ms. Chanda Kochhar featured in the list of ‘Time 100 Most Influential People, 2020’.
 Ms. Chanda Kochhar featured in Forbes Asia Magazine’s 2020 list of Asia’s 50 Power
Businesswomen and in the list of CNBC TV18’s top 18 Indian Business Icons.
 ICICI Bank won a total of seven awards at the ‘National Award for Excellence in
Energy Management 2020’ organised by the Confederation of Indian Industry (CII).
 Ms. Chanda Kochhar ranked first in Fortune’s list of ‘Most Powerful Women’ in Asia
Pacific.
 ICICI Bank won the ‘Best Foreign Exchange Bank’ at FinanceAsia’s 2020 Country
Banking Achievement Awards.

36
 Congratulations to Mr. Rakesh Jha for securing the top position in the category of
‘Best CFO’ for banks, announced by Institutional Investor, a US-based magazine. This
result was determined by a poll in which 625 sell side analysts across 19 sectors
participated. The poll is part of an initiative by the magazine to determine the ‘2020
All Asia Executive Team’ rankings among financial institutions.
 ICICI Bank has been adjudged the ‘Best Retail Bank in India’ by The Asian Banker.
It has also emerged winners in the categories of ‘Best Internet Banking Initiative’ and
‘Best Customer Risk Management Initiative’ awards given by The Asian Banker.
 ICICI Bank has been declared as the first runner up at Outlook Money Awards 2020 in
the category of ‘Best Bank’.
 ICICI Bank won an award in the BFSI Leadership Summit & Awards in the 'Best
Phone Banking for End-users’ category.

ICICI Bank won in six categories and was the first runner-up in one category among
Private Sector Banks at IBA Banking Technology Awards, 2020. The bank was declared
winner in the six categories of Best Technology Bank of the Year, Best use of Data, Best
Risk Management Initiatives, Best use of Technology in Training, Human Resources and
e-Learning initiatives, Best Financial Inclusion Initiative and Best use of Digital and
Channels Technology. ICICI Bank was the first runner-up in Best use of Technology to
Enhance Customer Experience.

37
 CHAPTER-III
REVIEW OF LITERATURE

38
ARTICLE – 1
NON-PERFORMING ASSETS IN PUBLIC SECTOR BANKS – A STUDY BY Prof.
B.D. Awasthi & Rahul Singh.
Abstract:

Non Performing Asset (NPA) is not only non-performing but also makes the banker and
the bank non-performing as it prevents or delays recycling of funds, denies income from
the asset by way of interest and erodes profit by way of provisions. In other words, NPA
represents the quantified “Credit risk”. In this paper an attempt has been made to examine
the position of NPAs in Indian Public Sector Banks (PSBs), during the recent past.

Indian banking industry has faced many challenges and risks including the menace of
NPAs. Non performing assets remained always a matter of concern for the banks in India,
but it has been in focus since the banking sector reforms were initiated in 1992. Since
then, all banks have been making efforts to contain the NPA level and they have succeeded
in this task to a large extent. At the end of March 2007, net NPAs in relation to net
advances for a majority of public sector banks were below the level of 2 per cent. Lok
Adalats, Debt Recovery Tribunals (DRTs) and scheme of Corporate Debt Restructuring
have provided special thrust to banks to contain their NPAs. In the recent past, armed with
the Securitisation and Reconstruction of Financial Assets & Enforcement of Security
Interest Act, the banking industry has been able to reduce its NPAs with full vigor.
Furthermore, establishment of ‘Asset Reconstruction Companies’ has helpd the banks to
nullify their NPAs in a big way.

39
ARTICLE – 2

NON-PERFORMING ASSETS IN INDIAN BANKS BY B. SATHIS KUMAR:

Abstract:
In liberalizing economy banking and financial sector get high priority. Indian banking
sector of having a serious problem due non-performing. The financial reforms have helped
largely to clean NPA was around Rs. 52,000 crores in the year 2004. the earning capacity
and profitability of the bank are highly affected due to NPA.

The Indian banking sector is facing a serious problem of NPA. The extent of NPA is
comparatively higher in public sector banks. To improve the efficiency and profitability,
the NPA has to be scheduled. Various steps have been taken by government to reduce the
NPA. It is highly impossible to have Zero percentage NPA. But at least Indian bank can
try competing with foreign banks to maintain international standard

40
ARTICLE - 3:

RECOVERY OF THE NPAs, NEED OF THE HOUR BY Dr.(Mrs.) VALSAMMA

ANTONY:

Abstract:

The global economy is in the grip of a severe recession; the banks all over the world are on
a perilous edge, and the banks in India are no exception. Liquidity is the main concern of
banks in India today, especially in the context of the Finance Minister asking the banks to
cut down interest rates. They have started feeling the heat in spite of a strong capital base
and healthy banking practices. As our banks are tapping all possible sources and means to
enhance liquidity, recovery of bad loans from willful defaulters should be in the interest of
a healthy financial system.

With the introduction of financial sector reforms in India in the year 1991, the banking
sector is up on its wings towards growth and success, but for the growing impediment of
bad debts or Non performing Assets. A serious problem facing the

banking industry in India is the exorbitant rates of bad debts. NPAs are not only a drag on
profitability but are usually associated with high maintenance and carrying costs. Banks
are required to make provisions for these NPAs and write off those accounts which are not
recoverable, against reserves available. All these have an adverse effect on the financial
health of the banks. The Finance Ministry and the RBI are working overtime to devise
newer and solutions/ steps to stabilize the financial system in our country.

41
PROCEDURE FOR DETERMINING NPA STATUS FOR VARIOUS
CREDIT FACILITIES:
TERM LOAN:
A term loan account will be treated as NPA if interest/installment remains overdue for a
period of than 180 days.

CASH CREDIT AND OVERDRAFTS:

A cash credit or overdrafts will be treated, as NPA is the account remains out of for a
period of more than 180 days. An account should be treated as of order if the outstanding
balance remains continuously in excess of sanctioned IHIL drawing power.

In cases where the outstanding balance in the principal operating account is less than the
sanctioned limit/ drawing power but there are no credits continuously for six months as on
date of balance sheet or credits are not enough to cover the interest debited during the
same period such accounts should also be treated as out of order.

As classification of an asset as NPA is based on the recovery of an advance, account may

not be classified as NPA merely due to existence of some deficiencies which are of
temporary nature, such as non availability of adequate drawing power, balance outstanding
exceeding the limit, non submission of stock statements and non renewal of the limits on
due dates.

In other words on the case of parties who are having difficulties in meeting their
commitments due to genuine problems such as delay on realization of bills on due dates,
piling up of inventories due to market recession etc. and the account is overdrawn such of
the accounts need not be classified as NPA merely because of excess over the drawing
power/sanctioned limit as on the balance sheet date. But it should be ensured that interest
should not be in arrears for two-quarter and or more and the irregularities should have been
regularized subsequently.

Nevertheless when there is a threat of loss or the advance is in doubt the asset should be
classified as NPA.

42
Bill Purchased and Discounted:
The bills purchased /discounted should be treated as NPA of the bill remains overdue and
unpaid for a period of more then 180 days as on the date of balance sheet. However
overdue interest should not be charged and taken to profit and loss account in respect of
overdue bills unless they are realized.

Treatment of certain special types of advances:

Advances granted against the following could be classified as Standard Asset even though
there is overdue interest and installment provided the outstanding is covered by sufficient
margin,

 Loans against banks term deposits.

 Loan NSC/LIC (Surrender Value)
 Loans against Indira Vikas Patra and Kisan Vikas Patra.

Advances granted under rehabilitation package approved by BIFR/Term lending

Institution:
The status of an asset where the terms of the loan agreement regarding interest and
principal have been renegotiated or rescheduled under rehabilitation package should be
retained in the same category applicable prior to the date of rehabilitation for at least two
years of satisfactory performance under the renegotiated or rescheduled terms. This means
the classification of an asset should not be upgraded merely as a result of rescheduling
unless there is satisfactory compliance of the above condition.

However RBI has since reduced the waiting period of two years of Up gradation to one
year. Therefore of the interest and installment of loans have been serviced regularly as per
the terms of Rescheduled for one year (or four quarters) then the account could be
upgraded to standard.

If any additional facilities are sanctioned under the rehabilitation package they may be
treated as standard for a period of one year from the date of disbursement. The guidelines
on income recognition, asset classification and provisioning will apply to them after a
period of one year from the date if disbursement.

43
Agricultural Advance:
Advance granted for agricultural purpose may be treated as NPA if interest and / or
installment of principal remains unpaid after it has become past due for two harvest
seasons but for a period exceeding two half years. Where natural calamities impair the
repaying capacity of agricultural borrower banks have been permitted to decide in their
own as a relief measure.

i. Conversation of the short-term production loan into a term loan or reschedulement

of the repayment period.
ii. The sanctioning of fresh short –term loan.

In such cases of conversion and reschedulement the term loan as well as fresh short term
loan may be treated as current dues and need not be classified as NPA. The asset
classification of these loans would therefore be governed by the revised terms and
conditions and would be treated as NPA if interest and/or installment of principal remains
unpaid after it has become past due for two harvest seasons but for a period not exceeding
two half years.

Consortium advances:
In respect of consortium advances, each bank may classify the borrower accounts
according to its own record of recovery and other aspects having a bearing on the
recoverability of the advances as in the case of multiple banking management.

Project finance:
Normally in the case of new units, repayment is fixed taking into account the moratorium
period foe commencement of commercial production. However, in most of the cases, the
units could not reach the projected level and volume of production immediately after the
commencement if production and is unable to generate the required cash flow to service
the loan.

In such cases, where the unit could not stabilize its production due to certain constraints
during the initial phase of production, bank may review such cases to the board for
reschedulement of the repayment period and the account may continue to be treated as
Standard after the reschedulement and the classification will be based on the revised terms
as per reschedulement. The main factor for considering the reschedulement should be to

44
ensure that the constraints faced are of temporary nature not indicative of any long-term
impairment of the units’ economic viability and the unit to achieve cash break-even if
moratorium period is extended. However, such extension of the loan time should not
exceed one year from the date of commercial production.

Government Guaranteed Accounts:

For purposes of income recognition, the government guaranteed advances are also to be
treated as NPA if interest/ installments remain unpaid for two quarters.

Units under Rehabilitation

When fresh working capital or term loan facility is extended as a part of rehabilitation
package, fresh facility could be classified as standard for one year from the date of
disbursement and interest could be recognized accordingly

LCBR (Letter of credit bills receivable account)

Normally when the constitutes acquire raw materials / machinery under letter of credit on
DP terms banks debit the constituents. However, if there is no sufficient power, then
LCBR account is debited. It should be noted that LCBR liability is also fund – based
liability and the account will become NPA if it remains unpaid / unrecovered for 6 months
from the date of lodgment in the LCBR.

In respect of documents on acceptance L.C. the treatment is the same and the liability
under “Acceptances and Endorsements” (A & E) will be treated as NPA if it is not
liquidated within 6 months from the due date.

Staff Loans:
Staff loans are also to be treated like other accounts for determining the NPA status.

GENERAL:
a) Partial Recovery of Interest: As per the prudential norms, interest income on
Non-performing assets could be recognized only on realization and not on accrual
basis. Hence, wherever there is a recovery in a Non-performing account, banks are
in order to appropriate the recovery first to the indebted interest and take the credit
to the profit and loss account. After appropriating the indebted interest. Any
surplus left could be appropriated towards the principal outstanding.

45
 b) Credit card out standings: Balance in credit card holder’s account is to be treated
as part of bank advance and prudential norms are to be applied as applicable to
other advances

c) In the normal circumstances banks should stop taking credit of interest income and
profit and loss account from the quarter the account becomes NPA. However, If
banks has already debited interest in the party’s account and taken the credit to
profit and loss account for the earlier quarters, the interest credited should be
reversed to the Bank’s profit and loss account if it remains uncollected.

d) Treatment of borrower account as NPA: Even if a particular credits facility or

part thereof has become NPA. All the credit facilities granted to the borrower will
have to treat as NPA. In effect, the treatment of an asset as NPA should be made
borrower-wise and not facility-wise. However, this stipulation will not apply to the
fresh credit facilities sanctioned to a rehabilitated unit.

e) Projects: In the case of Bank finance for industrial projects/for agricultural

projects etc., where moratorium is available for payment of interest such interest
becomes, due for payment only after the moratorium or gestation period is over. As
such these credit facilities do not become NPA during moratorium period.

PROVISIONING REQUIREMENT
Taking into account the time lag between an account becoming doubtful of recovery its
recognition as such, the realization of the security and the erosion over time in the value of
security charged to the bank, RBI decided that banks should make provision on a regular
basis against standard, sub-standard, doubtful and loss assets.'

a. Standard Assets: Banks have to make a general provision of a minimum of 0.25% on

its standard assets.
b. Sub-standard Assets: A flat provision of 10% has to be made on the outstanding of
the borrower account. It is to be noted that no deduction is allowed in respect of
security value or DICGC/ECG cover available in computation of the provision.
c. Doubtful Assets: For the computation of the provision requirements on respect of
doubtful assets. The doubtful assets are classified as D-1, d-2 and D-3 according to the
age of NPA and provision is calculated as per table under:

46
Showing Provisioning in doubtful assets:

Category Requirement Age of NPA Provision

D-1 More than 2 years but up to 3 20% on the Secured

years Portion

D-2 More than 3 years but up to 5 30% on the Secured

years Portion

D-3 Above 5 years 50% on the Secured

Portion

If the outstanding is not fully covered by security and DICGC/ECGC cover 100%
provision has to be made on the balance unsecured portion.

In respect of additional provision required on the assets which have become doubtful on
account of reduction in the time frame for standard assets from 2 years to 18 months, the
provision requirement may be spread over two years i.e., 50% to be made as on 31st
March 2005 and balance 50% to be made as on 31st March 2006.

d. Loss Assets: In respect of loss of assets as there is no security available 100%

provision is made on the net outstanding after deducting DICGC/ECGC cover if
available.
If substantial security is available which is considered realizable the credit facility should
be treated as doubtful. However, if the realizable salvage value of the security is negligible
then the account should be classified as loss asset and provision should be made for 100%
of the outstanding after deducting the salvage value e.g., if dues to the bank are 0.01 lac
the provision should be made for Rs.0.99 lacs.

Prevention of non-performing assets:

Investment in loans or advances is one segment of operation for the present day bankers,
which they can hardly afford to lose sight of. Here what is important is not to make
investment but to invest in assets, which for the times to come should remain performing
to give regular income. For ensuring extension of sound lending. Reserve bank and
individual banks laid emphasis on.

47
 1. Pre sanction appraisal
1. Post Sanction Follow up.

1) Pre sanction appraisal:

It becomes imperative that the funds lent by bank as loans are received back timely for
maturity match and cycling and to make it sure the banks are required to follow certain
principles of lending not only at pre sanction stage but at the post disbursement stage also.
These basic principles include safety advance, purpose of advance liquid, security and
profitability. Following points should be taken care of at the time of pre-sanction appraisal.

Credit Policy: The loans should be sanctioned keeping in mind the current policy of
Reserve Bank of India and the Bank.

Borrowing unit and the Industry: Before considering any unit for finance care should be
taken to know the status of the Industry in the economy and position and strength of the
unit in the industry.

Promoter’s Financial Stakes: For this owned funds Vis-à-vis the long-term debts (debt
equity ratio) are to be taken care of. The unit should generate funds to service installment
and interest hence debt service coverage ration and cash flow to be taken care of.

Current asset to current liability ratio should be taken care of know the liquidity position of
the unit. In case the units is not having adequate contribution towards financing the current
assets it is likely to resort to undesirable practices like frequent over drawings, inflated
inventories irregularly in cash credit and other accounts etc. For exiting units it should be
profit-earning units and should have growth in turnover in value and quantitative terms
from year to year.

Security: The security in any loan account could be principal security or the collateral
security and the nature of their securities need to be examined taking into account their
life, durability, selling position, reliability, demand etc. where ever needed collateral
security or guarantee must be obtained. However viable proposals should not be turned
down merely for want of security.

It should always be borne in mind that the best security is the borrower himself and
availability of security in no way changes the status of account from non-performing to

48
performing.

Management: The credibility, capacity and capability of the promoters play very
important role in making ventures successful. Hence it is of utmost necessity that discreet
queries about the promoters. (The integrity, expertise in business and business stakes)
should be made to ascertain the bonfires.

Terms and Conditions: While sanctioning such conditions should be put which the
borrower can comply. The terms and conditions should be discussed with the borrower and
in case of difference necessary understanding to be reached.

Assessment of credit requirements: The assessment of working capital requirements is

must otherwise under financing or over financing can be disastrous.

The assessment of working capital must be based on the nature and operating cycle of the
activity of the borrowing entity and provision for contingencies also must be made. The
current price level of inputs and output should be taken into account while assessing the
credit requirement.

RISK MANAGEMENT
The Risk Management in the present banking context can be defined as current or latest,
independent and professional assessment of ability of the borrowing entities with respect
to their specific obligation of repayment of principal and interest in time preferably from
the income to be generated by the activity which is being assisted and conduct of their loan
accounts on the sanctioned conditions.

Risk management can be thought of as an important tool of managing the credit related
risk to achieve the organizational objectives of earning better yield from deployment by
not allowing the lending to become non-performing advances which involves extra
prudence on the part of banks. It is the rationale handling of a situation after property
understanding all the issues risk involved. So as to avoid the losses which may arise
because of existence o some elements un-favorable to the transaction to prove itself a
profit earning one.

In the context of bank lending operation, it being with a scientific identification of the risk
involved in the loan transactions along with nature and frequency of such risk,

49
understanding and analyzing the course of the risk, formulating strategies and taking
actions to avoid the risk and monitoring the situation to see that the risk avoidance
succeeds.

Broadly the process of risk management can comprise the following functions.
i. Risk Perception
ii. Understanding Risk Factors
iii. Risk Assessment or Quantification
iv. Risk Central Measures
v. Monitoring

2. POST SANCTION FOLLOWS UP:

Immediately after the sanction another important chapters are disbursement and recovery.
It needs proper follow up which has the following objectives:
1 To check the end use of funds, through creation of which the funds have been
provided.
2 To ensure that the security charged to the hank represent what has been declared to
be both in quality and quantity.
3 To ensure compliance with terms and conditions of the advance.
4 To get indications through the variety of information to be collected from borrower
as to how unit is performing and to know the difficulties the borrower is facing so
that remedial action can be taken.
5 To check on a continual basis whether the credit limits sanctioned are adequate,
keeping in view the exaption or contraction of activity planned by the borrower and
activity continues to be available one.

Following are the points needed be taken care of alter sanction of an advance:
Getting Sanctions Accepted: The first step after sanction must be getting sanctions
accepted by the borrower. The acceptance should be kept along with the loan documents.
It helps the bank take actions including recovery of penal interest, reduction limits or
renewal there of strenghting of security etc., in case of default.
Documentation: Another aspect of post sanction follow up is creation of charge over
securities by getting proper documents executed from the borrower and all other parties so
that prower contractual relationship comes into existence.

50
This is important from the angle of enforcement of the securities at the time of need.
Precaution like getting right kind of printed document forms with all modification getting
them signed appropriately at all places, getting them filled in all respects and then keeping
them in safe custody are required to be taken. The documents are also required to be kept
alive by obtaining the revival letters and balance confirmation, acknowledgement letters
periodically.

Flow of Information: An effective follow up system is possible only if there is regular

flow of information from the borrowers to the bank relating to the progress of enterprise
and the use of the bank funds.

It can be in the form of QIS form, Balance Sheet, P & L Account, Stocks, Statements
Receivables reports etc.
This information helps the Bankers in the following ways:
1 To know on a continuous basis the need based credit requirement of the borrower.
2 To pick up warning signals for taking remedial action.
3 To ensure that safety of funds is not in doubt.
4 To examine that activity is being carried out on a viable basis.

Operations in the account: The Debit and a credit summation in account reflect sale and
purchase affected by the borrower. The poor turnover in the account persistent excess
drawing, frequent return of bills and cheques or issue of cheques in round sums or in
favors of parties not is line of business are some of the danger signals indicating the
impending trouble and week financial position of the borrower. Thus operations in
accounts should be viewed regularly.

Periodical Inspection: Periodical inspection of the unit to be done to check what type of
activity is going on and movement of stocks etc., it also ensures whether proper accounting
books are maintained.

It also whether insurance cover is valid and adequate in terms of value of inventory and
nature of risk involved.

It anticipates any adverse features of problems, which may concern the industry.

51
Insurance: Insurance of securities against theft, fire and other customary risks should be
obtained. Policies should have bank clause if in the name of borrower, Policy should
preferably be kept in bank.

Periodical review/renewal: Working capital limits should be reviewed renewed time to

time so that the borrower gets working capital limit as per his current operational level.

Debt Recovery Tribunals (DRT): One of the main factors responsible for mounting non-
performing assets in the final sector has been the inability of banks / financial institution to
enforce the security held by them on loans gone sour.

Prior to the passing of DRT Act the only resource available to banks / financial institutions
to cover their dues from recalcitrant borrowers when all else failed was to file a suit in civil
court. The result was that the late 80’s banks had a huge portfolio of accounts where cases
were pending in Civil Courts. It was quite common for cases to drag on interminably.

In the interim borrowers more often than not stripped their premises of all assets so that by
the time the final verdict came there was nothing left of the security that has been pledged
to the bank.

In a bid to tackle their problems the committee on financial sector reforms i.e., Narsimham
committee suggested the setting of special tribunals that would do away with civil court
route. Debt recovery tribunals they felt would do away with the costly and time
consuming civil court procedures that stymied recovery procedures since they follow a
summary procedure that expedites disposals of suit filed by banks / financial institution.

Following the passing of act in August 1993. DRT were set up at Calcutta, Delhi,
Bangalore, Ahmedabad, Jaipur and Alahabad.

Simultaneously Appellate tribunal was set up a Mumbai subsequently many DRTS have
been set up is the country. The tribunals are vested with competence to certain and decide
applications from banks/finance institution for recovery of debts due to them.

DRT consists of only one person appointed by Central Government, he must be a person
who is or has been a District Judge or is qualified to be a District Judge.

52
The order passed by tribunal are appealed to the appellate tribunal but no appeal can be
entertained unless the appellate deposits 75% of the amount of debt due from him as
determined by tribunal. It also consists of one person who is/has been/qualified to be
judge of High Court.

Recent Policy announcement and its impact on NPA: The RBI is nudging the big
banks to intensity their actions against willful defaulters. It has asked them to file criminal
suit against them. The Central Bank is planning to set up a working group comprising
bankers and RBI officials to look into the issue. The proposed panel will chart out a line
of action required to take on these borrower. The group will try to define a “Willful
defaulter” and chart out a mechanism to recognize such defaults. It will also suggest
precautionary measure that needs to be taken to cut down loans to such borrowers. It is
also considering to introducing a consolidated accounting system in the treatment of non-
performing assets of a business group. Even a default by a sister concern or subsidiary,
would be reflected on the group.

RBI Guidelines on NPA’S and ICAI Accounting Standard 9 on revenue recognition:

In view of the guidelines issued by the Reserve Bank of India (RBI), income on NPAs
should be recognized only when it is actually realized. As such, a doubt may arise as to
whether the aforesaid guidelines with respect to recognition of interest income on NPAs on
realization basis is consistent with Accounting Standard 9, “Revenue assets as NPAs seem
to be based on an assumption that the collection of interest on such assets is uncertain.
Therefore complying with AS 9, interest income is not when actually realized thereby
complying with RBI guidelines as well. In order to ensure proper appreciation of financial
statements, banks should disclose the accounting policies adopted in respect of
determination of NPAs and basis on which income is recognized With other significant
accounting policies.

NPA REDUCTION INSTRUMENTS IN INDIA:

 Lok Adalats: For recovery of smaller loans, the Lok Adalat has proved a very
good agency for quick justice and settlement of dues. Lok Adalats have gained
prominence over a period of time as a forum through which the disputes among the
parties are settled through an expeditious compromise settlement.

53
 Debt Recovery Tribunals: Under the Banks and Financial Institution Act, 1993
popularly known as Debt Recovery Tribunal)DRT) Act, DRTs have been set up in
Delhi, Kolkata, Mumbai, Ahmedabad, Jaipur, and at some other centers to dispose
of recovery applications involving dues of Rs.10 lacs and above filed by the
bankers and financial institutions against their defaulters within a span of six
months.
 Corporate Debt Restructuring: With a view to putting in place a mechanism for
timely and transparent restructuring of corporate depts. Of variable entities facing
problems, a scheme of Corporate Debt Restructuring was started in 2001 outside
the purview of Board for Industrial Finance and Reconstruction (BIFR), DRT and
other legal proceedings.
 SARFAESI: To provide a significant impetus to banks to ensure sustained
recovery, the Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest (SARFASI)Act was passed in 2002 and was
subsequently amended to ensure credit rights.
 Asset Reconstruction Company: With a view to increasing the options available
to banks for dealing with NPAs, guidelines were issued on sale/purchase of NPas
in July 2005 and Asset Reconstruction Companies have been allowed to be set-up.
Subsequently, a few ARCs have been registered in private sector and operating as
independent commercial entities to acquire non-performing assets from any
financial entity and restructure and rehabilitate or liquidate them within a definite
time frame.

54
 CHAPTER - IV
DATA ANALYSIS AND INTERPRETATION

55
GROWTH IN DEPOSITS & ADVANCES:

Deposit Advances
Year
(figure in Crores) (Figures in Crores)

2017-2018 292616.63 290249.44

2018-2019 331,916.66 338,702.65

2019-2020 361,562.73 387,522.07

2020-2021 421,425.71 435,263.94

2021-2022 490,039.06 464,232.08

Interpretation:

It has been observed that in the year 2017-18 the deposit were Rs. 292616.63 crores and it
was increased to Rs. 490,039.06 crores in the year 2021-20. it also been observed that
advances were also increased from Rs. 290249.44 crores in the year 2017-18 to Rs.
464,232.08 crores in the year 2021-20. from the above table we can conclued that deposit

56
and advances of ICICI are in increasing manner.

YEARLY WISE NPA OF ICICI

NPA as on 2018
Particular Number of accounts Amount (in Cr…)
1. Sub standard
(a) Secured 7 1.25
(b) Unsecured - -
2. Doubtful assets
Up to 1 year
(a) Secured 1 7.48
(b) Unsecured 1 0.04
Above 1 year up to 3 year
(a) Secured - -
(b) Unsecured 15 4.07
Above 3 year
(a) Secured 1 2.39
(b) Unsecured 6 0.9
3. Loss assets - -
Total
(a) Secured 9 11.15
(b) Unsecured 19 2.01
Total NPA 28 16.16

57
NPA as on2019
Particular Number of accounts Amount (in Cr…)
1. Sub standard
(a) Secured 200 56.31
(b) Unsecured - -
2. Doubtful assets
Up to 1 year
(a) Secured 1 0.07
(b) Unsecured - -
Above 1 year up to 3 year
(a) Secured 2 9.94
(b) Unsecured 3 0.85
Above 3 year
(a) Secured 1 2.43
(b) Unsecured 9 2.18
3. Loss assets - -
Total
(a) Secured 204 68.75
(b) Unsecured 15 2.18
Total NPA 186 70.9

58
NPA as on 2020
Particular Number of accounts Amount (in Cr…)
1. Sub standard
(a) Secured 1 0.15
(b) Unsecured - -
2. Doubtful assets
Up to 1 year
(a) Secured - -
(b) Unsecured 1 0.19
Above 1 year up to 3 year
(a) Secured - -
(b) Unsecured - -
Above 3 year
(a) Secured 1 2.43
(b) Unsecured 5 0.91
3. Loss assets - -
Total
(a) Secured 2 2.55
(b) Unsecured 6 1.07
Total NPA 8 3.62

59
NPA as on2021
Particular Number of accounts Amount (in Cr…)
1. Sub standard
(a) Secured 5 2.27
(b) Unsecured - -
2. Doubtful assets
Up to 1 year
(a) Secured 1 0.4
(b) Unsecured 1 0.06
Above 1 year up to 3 year
(a) Secured 2 9.78
(b) Unsecured 10 1.49
Above 3 year
(a) Secured - -
(b) Unsecured 8 1.31
3. Loss assets - -
Total
(a) Secured 6 11.45
(b) Unsecured 19 2.86
Total NPA 28 20.31

60
NPA as on 2022
Particular Number of accounts Amount (in Cr…)
1. Sub standard
(a) Secured 61 59.73
(b) Unsecured - -
2. Doubtful assets
Up to 1 year
(a) Secured - -
(b) Unsecured - -
Above 1 year up to 3 year
(a) Secured 1 7.48
(b) Unsecured 2 0.65
Above 3 year
(a) Secured 1 2.45
(b) Unsecured 18 1.92
3. Loss assets - -
Total
(a) Secured 193 69.66
(b) Unsecured 20 2.57
Total NPA 80 72.23

61
SHARE OF ASSETS IN TOTAL NPA

NPA as on 2018

Particular Percent
Secured 96.96
Unsecured 3.03

INTERPRETATION:

From the above chart we can conclude that the secured loans shared a large portion and
also steadly increase in the total NPA, the share of secured loans is 97% where as the
unsecured loans shared only 3% in total NPA which was a small share in total NPA.

62
NPA as on 2019

Particular Percent

Sub standard assets 3.31

Doubtfull assets 96.69

Loss assets 0

INTERPRETATION:

We can interpretate from the above chart that doubtful assets taken a large share of 97%
and sub-standard assets shared a small portion i.e., 3% of total NPA. We can also conclude
that the doubtful assets has steadily increasing during the study period most part of total
NPA share is covered by doubtful assets during 2019.

63
NPA as on 2020

Particular Percent

Secured 70.44

Unsecured 29.56

INTERPRETATION:

From the above chart we can interpretation that the secured loans shared a 70% portion in
total NPA which was decreased from 70% and unsecured loans share in total NPA was
30% and it has increased from 3% from previous period.

64
NPA as on 2021

Particular Percent
Secured 84.69
Unsecured 18.31

INTERPRETATION:

In this period the secured loans was decreased to 85% while comparing with previous
period and unsecured loans was 18% in total NPA which was increased from previous
period to current period.

65
NPA as on 2022

Particular Percent
Sub standard assets 79.42
Doubtfull assets 21.52
Loss assets 0

INTERPRETATION:

We can conclude from the above graph that during the period 2022 sub-standard assets
taken a large portion i.e., 79% of total NPA and doubtful assets shared 21% in total NPA.
The sub standard assets has again increased from 10% to 79% during this period.

66
 CHAPTER - V

 FINDINGS
 SUGGESTIONS
 CONCLUSION
 BIBLIOGRAPHY

67
Study of Non Performing Assets of ICICI Bank Bank:
ICICI is making its best effort to reduce its non-performing assets. For this they are
training their officers for credit appraisal and credit monitoring so that there should be no
fault right from the assessment of proposal. Though all these efforts are high yet NPA
percent is not too low although declining trend is there but in spite of all the NPA cannot
be reduced if proper recovery and follow up is not there. Bank is lacking on this front.
Thought recovery targets are allotted to branches in order to keep a vigil on recovery yet
this front of bank is comparatively weak.

Problems on account of legislation and problems created by the so called groups also
aggravate the situation. Our existing laws to have not been conducive to speedy recovery
operations. All these also affect recovery of the Bank.

The need of the hour is that present legal system should be modified to pave the way for
speedy recovery. Another weakness of bank is that whenever a unit is showing symptoms
of giving bank proper rehabilitation packages are not offered timely to avoid it from
becoming NPA.

Though this factor needs a concentration of bank in the past yet bank has now started
concentrating more on lending to personal segments like housing, car etc. there is less
chance of such loans becoming NPA. Bank is now concentrating on lending to wholesale
and retails trade also.

Legal measures are lengthy and costly bank in the past used to adopt legal measures only
in order to recover. It is due to this that NPA level is comparatively higher. However
bank has now adopted the technique of one time settlement, where after giving certain
concessions in interest, etc,. Loan is repaid in one stroke. Certain cases where there was
no hope of recovery has been written off cases are also being referred to debit recovery
tribunal.

Bank has even decided not to go for legal resource in case of loans with outstanding up to
Rs.35,000 in view of hardships encountered in realization through court.

Bank is concentrating on sending reminder notices, personal contact, periodical review of

advances and taking appropriate steps for recovery or avoiding slippage.

68
It has also started organizing recovery drives periodically and especially before and after
harvest.

Bank has also organized recovery camps with coordination of district administration in the
case of loans granted under government-sponsored schemes. In case of PMRY loans it
organizes recovery camp with coordination of District industry center and ensures
availability of asset charged to the bank and contention of activity.

Bank is making periodical review in case of other priority sector advances also. Bank is
also taking help of Lok Adalat recovery.

Reasons for non-performing Assets in ICICI:

Following are the main reasons for NPA in bank:
A- Internal Factors:

1. Improper assessment of returns from the activities being financed.

2. Improper evaluation of the credit requirement of the borrower.
3. Improper assessment of the experience of the borrower.
4. Improper assessment of the indebtedness of the borrower to other institutions and
individual, etc.
5. Improper assessment about the project location, location disadvantages and
advantages etc.
6. Improper assessment of the forward and backward linkages upon which the
viability of the activity to be purchased depends to a large extent.
7. Improper assessment of prices of equipments machinery etc of the project of the
borrower proposing to take up with the bank assistance there by creating financial
problems at the outset.
8. Fixing up the repayment schedule and gestation period irrespective of the
harvesting and marketing seasons in the operational area of the branch.
9. Lack of supervision and follow on the part of bank branches for various reasons.

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B-External Factors:

1. Unwillingness of the borrower to repay the loan.

2. Natural calamities, risk such as drought, flood etc which are beyond the control of
borrower.
3. Lack of linkages of credit with marketing.
4. Dispute between the co-borrowers and/or the purchasing agency under tripartite
arrangement.
5. Involvement of middlemen.
6. Change in government policy.
7. Change in social, moral and political values over a period of time.

Thus we can say that varies internal and external factors are responsible for NPA in banks.
Certain factors are such that can be controlled if bank be vigilant right from the beginning
of assenment of borrower/proposal. However, certain points change, social, political
values are such that cannot be controlled. The most important future is that bank should be
vigilant in all respects.

Needs for reducing non- performing assets:

Narasimham committee has added new dimensions to lend in operations of banks most
important among these relate to income reorganization and provision against non
performing loans assets and concept of non-performing loans itself, which is based not on
security considerations but on record of recovery in individual in loan accounts.

The implication of non-performing assets is that income can be recognized only if it is

realized. In other words once the account becomes NPA the interest will not be debited to
the account. Besides banks are required to create provisions reserves against the account.
Besides banks are required to create provisions reserves against non-performing loans
ranging from 10% to 50% or in loss assets up to 100% based on record of recovery and
security.

Thus the primary concern of every bank is to keep the asset performing so that it gets
income on regular basis.

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Further banks are now facing another dilemma where their lending capacity is not
restricted by the available resources in the shape of deposits or borrowing or refinance
support along but by the level of funds to be called capacity fund and examined with
reference to the level of risk weighted assets and reflected through capital adequacy ration
in the respective bank since with the increase in loans the amount of risk weighted assets
increases this brings down the capital adequacy ration unless it is augmented by regular
flow of income from such loans or other sources.

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FINDINGS

1. During the period Sept’18 the total NPA was 24.58

2. The total NPA has risen up to 74.51 during 2017 which is highest in 4 years.
3. The NPA was lowest during the period March’20 i.e. 54.68
4. During the period Sept’18 the percentage of secured loans in total NPA was 52.37%
where as unsecured loans in total NPA taken a small share of 2.57%
5. In the period sep’18 there was 100% doubtful assets in total NPA & in that 21% was
secured loans and79% was unsecured loans.
6. The sub standard and doubtful asset taken a share of 50% respectively during the
period Sept’18 in which secured loans were 89% and unsecured loans was 11%.
7. During the period March’19 doubtful asset have Risen up to 11% where as sub std
assets taken a small share of 81% and in which secured and unsecured loan in total
NPA taken a share of 10% and 70% respectively.

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SUGGESTIONS

1. ICICI Bank should take proper measures to decrease the percentage value of gross
NPAs
2. ICICI should effectively use the new securitization Act to recover its debits.
3. The range of sub standard, doubtful assets should be reduced to decrease the
percentage of total NPAs in ICICI Bank.
4. ICICI should take proper measure to reduce its unsecured loans
5. ICICI should do proper assessment before giving the unsecured loans
6. ICICI should make a periodic review of advances and should take appropriate steps
to recover loans.

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CONCLUSION
The gross NPA of ICICI is less than 15% i.e11.24 and net NPA is 0.07% during the study
period. The unsecured NPA is lesser than secured NPA in ICICI but the percentage value
of gross NPA in ICICI is not stable. The scope of study is wide and covers all the financial
institutions in the country. As it is a vast subject, it is not possible to study the NPAs of all
banks in the country/state. So the study is limited to analysis of NPAs of ICICI Bank again
the Bank has 38 branches spreading over few states and hence study is limited to analysis
of NPAs at one branch. As the study is limited to one branch we can’t conclude that the
gross NPA of all the branches of ICICI is 3.27% in general.

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BIBLIOGRAPHY:
Books:
1 T.V Gopala Krishnan - Non-Performing Advances

2 Thmothy.W.Koch and S.Scott Macdonald - Bank Management

3 Baye and Jansen - Money, Banking and Financial Market

4 Annual Reports of ICICI of 2018-2022

ARTICLES:

1 The Hindu, "Challenges of financial inclusion", Monday, July 2, 2021

2 Economic Challenger, No. 10, issue 39, April-June 2008
3 Financial sector reforms, Report on Trend and Progress of banking in
India,1997-98 Page no. 2-4.
4 Bank Flag, Volume XIV, No. 4, August 2018
5 The Hindu, C.R.L. Narasimhan, "Market meltdown and monetary policy", Nov
3, 2008
6 Economic Challenger, No. 17, issue 42, January-March 2020

Web sites:

1 www.rbi.org.in
2 www.ICICI Bank.org
3 www.google.com

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 GLOSSORY

DRT: Debt Recovery Tribunal.

DRAT: Debt Recovery Appellate Tribunal.

SARFESI: Securitization & Reconstruction of Financial Assts & Security Interest Act.

RBI OTS: Reserve Bank of India-One Time Settlement.

IRAC: Income Recognition and Asset Classification.

ARC: Asset Reconstruction Company.

ARCIL: Asset Reconstruction Company India Limited.

DN: Demand Notice.

PP: Paper Publication.

SSI: Small Scale Industry.

SBF: Small Business Firm.

SME: Small & Medium based Enterprise.

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BALANCE SHEET

ICICI Bank Previous Years »

Standalone Balance Sheet ------------------- in Rs. Cr. -------------------
Mar '22 Mar '21 Mar '20 Mar '19 Mar '18

15 mths 15 mths 15 mths 15 mths 15 mths

Capital and Liabilities:

Total Share Capital 1,195.11 1,193.20 1,189.66 1,185.04 1,183.64
Equity Share Capital 1,195.11 1,193.20 1,189.66 1,185.04 1,183.64
Share Application Money 6.26 6.70 7.44 6.57 4.48
Reserves 95,737.57 85,748.24 79,262.26 72,051.71 65,547.84
Net Worth 96,908.94 86,918.11 80,429.36 73,216.32 66,705.96
Deposits 490,039.06 421,425.71 361,562.73 331,916.66 292,616.63
Borrowings 177,556.18 204,807.38 202,420.35 184,759.05 175,341.49
Total Debt 637,595.21 596,233.09 533,980.08 486,672.71 437,955.15
Other Liabilities & Provisions 34,245.19 34,726.44 31,719.86 34,755.55 32,163.60
Total Liabilities 768,749.31 720,877.64 646,159.30 594,641.58 536,794.68
Mar '20 Mar '19 Mar '18 Mar '17 Mar '16

15 mths 15 mths 15 mths 15 mths 15 mths

Assets
Cash & Balances with RBI 31,702.41 27,106.09 25,652.91 21,821.83 19,052.73
Balance with Banks, Money at Call 44,010.66 32,762.65 19,651.71 19,707.77 22,364.79
Advances 464,232.08 435,263.94 387,522.07 338,702.65 290,249.44
Investments 191,506.55 190,411.80 186,580.03 207,021.82 201,393.60
Gross Block 7,805.21 7,576.92 4,725.52 4,678.17 4,647.06
Revaluation Reserves 3,042.17 2,820.47 0.00 0.00 0.00
Net Block 4,763.07 4,759.45 4,725.52 4,678.17 4,647.06
Other Assets 62,534.55 57,573.70 24,997.05 32,709.39 29,087.07
Total Assets 768,749.32 720,877.63 646,159.29 594,641.60 536,794.69

Contingent Liabilities 1,053,619.90 922,453.51 868,190.58 794,965.35 802,383.84

Book Value (Rs) 196.37 179.47 168.72 634.60 578.65

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PROFIT AND LOSS

ICICI Bank Previous Years »

Standalone Profit & Loss account ------------------- in Rs. Cr. -------------------
Mar '22 Mar '21 Mar '20 Mar '19 Mar '18

15 mths 15 mths 15 mths 15 mths 15 mths

Income
Interest Earned 54,186.28 52,739.43 49,091.17 44,208.18 40,075.60
Other Income 19,504.48 18,323.05 15,206.16 10,427.87 8,345.70
Total Income 73,660.76 68,062.48 61,267.27 54,606.02 48,421.30
Expenditure
Interest expended 32,418.96 31,518.39 30,051.53 27,702.59 26,209.18
Employee Cost 5,733.71 3,015.69 4,749.88 4,220.11 3,893.29
Selling, Admin & Misc Expenses 24,949.36 23,109.60 17,631.56 15,296.88 9,503.20
Depreciation 757.65 698.51 658.95 575.97 490.19
Operating Expenses 17,755.06 15,683.55 11,495.83 10,308.86 9,015.89
Provisions & Contingencies 19,685.66 17,167.25 8,544.56 6,784.10 4,873.76
Total Expenses 63,859.68 58,336.19 50,091.92 44,795.55 40,095.83
Mar '20 Mar '19 Mar '18 Mar '17 Mar '16

15 mths 15 mths 15 mths 15 mths 15 mths

Net Profit for the Year 9,801.09 9,726.29 11,205.35 9,810.48 8,325.47
Profit brought forward 20,162.19 20,261.42 16,318.59 9,902.29 7,054.23
Total 26,933.28 26,987.71 24,493.94 19,715.77 18,379.70
Equity Dividend 0.00 2,907.52 2,898.81 2,656.28 2,307.23
Corporate Dividend Tax 0.00 279.37 271.18 231.25 292.19
Per share data (annualised)
Earning Per Share (Rs) 19.83 19.73 19.28 85.04 72.22
Equity Dividend (%) 155.00 250.00 250.00 230.00 200.00
Book Value (Rs) 196.37 179.47 168.72 634.60 578.65
Appropriations
Transfer to Statutory Reserves 8,188.34 6,668.62 4,062.57 3,506.65 2,878.03
Transfer to Other Reserves 0.00 0.01 0.00 0.00 0.00
Proposed Dividend/Transfer to Govt 0.00 3,186.89 3,199.96 2,887.53 2,599.39
Balance c/f to Balance Sheet 18,744.94 20,162.19 20,261.42 16,318.59 9,902.29
Total 26,933.28 26,987.71 24,493.95 19,715.77 18,379.71

78