2 NON- PERFORMING ASSETS AND ITS IMPACT ON … PERFORMING ASSETS AND...NON- PERFORMING ASSETS AND...

International Journal of Advanced Research in Management (IJARM), ISSN 0976 – 6324

(Print), ISSN 0976 – 6332 (Online), Volume 4, Issue 2, May - August 2013 © IAEME

11

NON- PERFORMING ASSETS AND ITS IMPACT ON PERFORMANCE

OF KARNATAKA STATE CO-OPERATIVE APEX LIMITED

S.POORNIMA

M.COM, MBA, PGDBA, NET,

Associate Professor, Jss College for Women, P. G. Center, Mysore

INTRODUCTION

A strong banking sector is important for a flourishing economy. The failure of the

banking sector may have an adverse impact on other sectors. The Indian banking system,

which was operating in a closed economy, now faces the challenge of an open economy. The

main business of a banking company is to receive deposits and lend money. Receiving

deposit involves no risk, since it is the banker who owes a duty to repay the deposit,

whenever it is demanded. On the other hand, lending always involves much risk because

there is no certainty of repayment. A banker shall be very cautious in lending, because he is

not lending money out of his own capital. A major portion of the money lent comes from the

deposits received from the public. These deposits are mostly repayable on demand. Hence,

while lending money, a banker should follow a very cautious policy. The risk involved in

lending business makes it very important as it involves making prominent decisions.

Therefore while sanctioning credit the banker should appraise the project reasonably or else it

leads to the non-repayment of loans and advances. Most of the banks today in India are

facing the default risk wherein some part of the profit is reserved for covering the non-

performing assets.

The Non-Performing Assets (NPAs) of the Indian banking sector have been

incessantly rising in the past six months. Historically, in 1997, NPAs were 15.8% of loans for

the banking sector, which nosedived to 2.4% in 2008. This figure stands at 2.94% of loans in

2012. In absolute figures, NPAs have doubled from 2009 to 2012 and assets under

reconstruction had trebled during the same period. India’s biggest lender, State Bank of India,

is experiencing an NPA level of 4.99% of total loans. According to a recently published

Credit Suisse Group AG report, 10 large industrial houses account for 13% of total assets

financed by the Banking system, which means that bank lending is getting increasingly

skewed. Further, of the total reconstructed assets, 8.24% belong to the large manufacturing

sector, 3.99% are from the services sector while 1.45% are from the agricultural sector.

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Meaning of NPA Loan /lease that is not meeting its stated principal and interest payments. Banks

usually classify as nonperforming assets any commercial loans which are more than 90 days

overdue and any consumer loans which are more than 180 days overdue. More generally, and

is not producing income.

In India, an asset is classified as a Non-Performing Asset (NPA) if interest or instalments of

principal due remain unpaid for more than 180 days. However, with effect from March 2004,

default status would be given to a borrower if dues are not paid for 90 days. If any advance or

credit facilities granted by a bank to a borrower become non-performing, then the bank will

have to treat all the advances/credit facilities granted to that borrower as non-performing

without having any regard to the fact that there may still exist certain advances/credit

facilities having performing status.

Definition of NPA A non-performing asset (NPA) was defined as a credit facility in respect of which the

interest and or installment of principle has remained past due for a specific period of time.

An amount due under any credit facility is treated as past due, when it has not been paid

within 30 days from the due date. Due to improvement in the payment and settlement

systems, recovery climate, up gradation of technology in the banking system, etc. it was

decided to dispense with past due concept, with effect from March 31, 2001. Accordingly as

from that date a non-performing asset (NPA) shall be an advance where:

1. Interest and or installment of principal remain over due for a period of more than 180 days

in respect of a term loan.

2. The account remains out of order for a period of more than 180 days, in respect of an

overdraft/cash credit.

3. The bill remains overdue for a period of more than 180 days in the case of bills purchased

and discounted.

4. Interest and or installment or principal remains over due for harvest seasons but for a

Period not exceeding two half years in the case of an advance granted for agricultural

purpose.

Definition given by the Narasimham Committee The Committee has defined Non-performing assets as an advance where as on the

date of Balance e sheet:

1. In respect of terms loans, interest remains past due for s period of more than 90 days.

2. Overdrafts and cash credits accounts remain out of order for more than 90 days.

3. Bills purchased and discounted remain over due and unpaid for period of more than 90

Days.

An amount is considered past due when it remains outstanding for 30 days and beyond the

due date.

RESEARCH METHODOLOGY

Statement of the Problem The main motto of co-operative banks is to serve the weaker section of the people by

providing loans and advances for the upliftment of the weaker section of the society now

days the borrowers are not repaying the amount to the co-operative banks regularly as per the

due dates; it is affecting the performance of the banks. As per the new banking regulation if



13

the borrower not paid the principle and interest amount within 90 days it is to be considered

as Non Performing Assets.

The research gaps and relevant questions which strike the mind during observation of

various studies on non- performing assets that, what are the reasons for the assets becoming

non- Performing assets and what is its impact on performance of Karnataka State co-

operative Apex Limited. Hence there arises a need to address the aforesaid questions.

Objectives of the Study The objectives of the study are to,

1) Understand the concept of Non-performing assets (NPA) of Apex bank

2) Study the general reasons for assets to become Non-performing assets.

3) Study the impact of Non-performing assets on Apex bank Ltd.

4) Study the measures taken by Apex bank to reduce Non-performing assets.

5) Offer suggestions based on findings of the study in Apex Bank.

Scope of the Study The present study of Non-performing assets is confined and restricted to the boundary of

Karnataka State Co-operative Apex bank Ltd. And data will be analyzed as provided by Apex

bank Ltd.

Data Collection: The data collected from the study is divided as

Primary data: The primary data will be obtained through interaction with the officers of the

Karnataka State Co-operative Apex bank Ltd, documents and records of Apex Bank about the

reasons becoming Non- performing.

Secondary data: secondary data will be collected from Annual reports and audited reports

of Apex bank, financial magazines, Journals, text books and websites, RBI/ IBA bulletins etc.

Tools of Data Analysis: The data collected from the primary and secondary sources relating to NPAs has been

analyzed and tabulated and drawn the appropriate tables. Interpretations were made based on

tables. The collected data were classified and tabulated and analyzed with some of the

statistical tools used as per the requirement of the study like

• Graphical representation and

• Ratio analysis

Limitations of the Study:

1) The study is based on the data given by the officials and reports of the bank.

2) The study is based only on NPA section of the bank.

3) The solutions are not applicable to every bank.

4) Due to time constraint depth analysis could not be made.

DATA ANALYSIS AND INTERPRETATION

1. Sub-standard assets

The following table shows the percentage change in sub-standard assets to Gross NPA at

KSCAB Ltd.

Sub-standard assets

Sub-standard assets (%) = *100

Gross NPA

International Journal of Advanced Research in Management (IJARM), ISSN 0976

(Print), ISSN 0976 – 6332 (Online), Volume 4, Issue 2, May

Sl.No Year Sub

1 2007-08

2 2008-09

3 2009-10

4 2010-2011

5 2011-2012

Analysis The above table depicts that, there was noticeably diminishing sub

from 2007 -08 to 2009-10, whereas in 2010

further to 60.73% in 2011-12.

Graph showing percentage change in sub

Interpretation The above graph reveals the sub

that, in 2007-08 sub standard assets was 43.43%, progressively it was decreased in 2008

with percentage of 33.52 , with good recovery policy of co

standard assets condensed to 25.81%. But bank unable to continue the recovery policy in

efficient manner with result of that we can view that sub standard assets

and 60.73% in 2011-12 and 2012

0

20

40

60

80

2007

43.43


6332 (Online), Volume 4, Issue 2, May - August 2013 © IAEME

14

TABLE NO. 1

(Rs In lakhs)

Sub-Standard

Assets

Gross NPA Sub-Standard

Assets (In %)

9074.82 20895.3 43.43

6438.28 19202 33.52

3823.42 14808.1 25.81

9670.49 17512.4 55.22

16057.5 26437.3 60.73

depicts that, there was noticeably diminishing sub-standard assets

10, whereas in 2010 -11 it raised to 55.22%. Again it amplified

Graph showing percentage change in sub-standard assets to Gross NPA given at KSCAB Ltd.

GRAPH NO.1

The above graph reveals the sub-standard assets in percentage wise. We can observe

08 sub standard assets was 43.43%, progressively it was decreased in 2008

of 33.52 , with good recovery policy of co-operative bank, 2009


efficient manner with result of that we can view that sub standard assets increased to 55.52%

12 and 2012-13 respectively.

2007-082008-092009-10

2010-112011-12

43.4333.52

25.81

55.52 60.73

SUB-STANDARD ASSETS

SUB-STANDARD ASSETS


August 2013 © IAEME

(Rs In lakhs)

Standard

Assets (In %)

43.43

33.52

25.81

55.22

60.73

standard assets

11 it raised to 55.22%. Again it amplified

given at KSCAB Ltd.

standard assets in percentage wise. We can observe

08 sub standard assets was 43.43%, progressively it was decreased in 2008-09

operative bank, 2009-10 sub-


increased to 55.52%



2. Doubtful Assets

The following table shows the percentage change in doubtful assets to gross NPA.

Doubtful assets (%) =

SL.NO Year

1 2007-08

2 2008-09

3 2009-10

4 2010-11

5 2011-12

ANALYSIS

The above table exhibits that the doubtful assets increased noticeably from 2007

2008-09 and 2009-10 with percentage of

of good management recovery policy, doubtful assets decreased in 2010

with 42.70% and 35.83% respectively

Graph showing percentage change in doubtful assets to gross NPA.

Interpretation The above graph shows that doubtful assets are increasing noticeably from 2007

2008-09 and 2009-10 with 53.95%, 64.36%, and 71.91% respectively. And bank took

appropriate measures to reduce doubtful assets; as a result we can also see t

assets are decreased to 42.70% in 2010

53.95%64.36%

0.00%

20.00%

40.00%

60.00%

80.00%

2007-08 2008

DOUBTFUL ASSETS



15


doubtful assets

Doubtful assets (%) = *100

Gross NPA

TABLE NO -2

(Rs. In lakhs)

Doubtful

Assets

Gross

NPA

Doubtful Assets

(In %)

11273.7 20895.3 53.95

12358.9 19202 64.36

10648.2 14808.1 71.91

7478.44 17512.4 42.7

9474.95 26437.3 35.83

The above table exhibits that the doubtful assets increased noticeably from 2007

10 with percentage of 53.95%, 64.36%, and 71.91% respectively. Because

of good management recovery policy, doubtful assets decreased in 2010-11 and 20011

with 42.70% and 35.83% respectively.

Graph showing percentage change in doubtful assets to gross NPA.

GRAPH NO – 2

The above graph shows that doubtful assets are increasing noticeably from 2007

10 with 53.95%, 64.36%, and 71.91% respectively. And bank took

appropriate measures to reduce doubtful assets; as a result we can also see t

assets are decreased to 42.70% in 2010-11 and 35.83% in 2011-12.

64.36% 71.91%

42.70% 35.83%

2008-09 2009-10 2010-11 2011-12

DOUBTFUL ASSETS

DOUBTFUL ASSETS




Doubtful Assets

The above table exhibits that the doubtful assets increased noticeably from 2007-08,

53.95%, 64.36%, and 71.91% respectively. Because

11 and 20011-12

The above graph shows that doubtful assets are increasing noticeably from 2007-08,

10 with 53.95%, 64.36%, and 71.91% respectively. And bank took

appropriate measures to reduce doubtful assets; as a result we can also see that doubtful



3. LOSS OF ASSETS

The following table shows the percentage change in loss assets to gross NPA.

loss assets

Loss assets (%) =

Gross NPA

SL.NO Year

1 2007

2 2008

3 2009

4 2010

5 2011

Analysis The above table reveals that the loss assets of Apex bank was decreasing considerably

from 2007-08 with percentage of 2.61, 2008

11 with 2.07% but the loss of assets was increased in 2011

because bank management fail to take appropriate decisions at a right time to reduce the loss

of assets.

Graph shows the percentage change in loss assets to gross NPA

Interpretation The above graph reveals the loss assets to Apex bank. In 2007

apex bank was 2.61%. In 2008

marginally to 2.27% because bank fails to take proper decisions at right t

the loss of assets the bank have taken appropriate decision i.e. bank adopted SARFAESI act

to reduce the loss in assets as a result it is reduced to 2.07% in 2010

taken by Bank did not serve the purpose in 2011

increased to 3.42%.

2.61%0.00%

2.00%

4.00%

2007



16

The following table shows the percentage change in loss assets to gross NPA.

loss assets

* 100

Gross NPA

TABLE NO -3

Year Loss

Assets

Gross NPA Loss

Assets (In

%)

2007-08 546.77 20895.3 2.61

2008-09 404.82 19202 2.1

2009-10 336.52 14808.1 2.27

2010-11 363.47 17512.4 2.07

2011-12 904.88 26437.3 3.42

The above table reveals that the loss assets of Apex bank was decreasing considerably

08 with percentage of 2.61, 2008-09 with 2.10%, 2009-10 with 2.27% and 2010

of assets was increased in 2011-12 with percentage of 3.42%,


Graph shows the percentage change in loss assets to gross NPA

GRAPH NO.3

The above graph reveals the loss assets to Apex bank. In 2007-08 the loss assets of

apex bank was 2.61%. In 2008-09 it decreased to 2.10% and in 2009-10 it increased

marginally to 2.27% because bank fails to take proper decisions at right time. In order reduce


to reduce the loss in assets as a result it is reduced to 2.07% in 2010-11 But the decisions

taken by Bank did not serve the purpose in 2011-12 because of which loss of assets

2.61% 2.10% 2.27% 2.07%3.42%

2007-08 2008-09 2009-10 2010-11 2011-12

LOSS ASSETS

LOSS ASSETS



Assets (In

The above table reveals that the loss assets of Apex bank was decreasing considerably

10 with 2.27% and 2010-

12 with percentage of 3.42%,


08 the loss assets of

10 it increased

ime. In order reduce


11 But the decisions

because of which loss of assets



4. RATIO OF GROSS NPA TO TATAL ADVANCES

The table shows the percentage change in Gross NPA to total advances at the KSCAB

Limited

Gross NPA Ratio (%) =

SL.NO Year

1 2007-08

2 2008-09

3 2009-10

4 2010-11

5 2011-12

Analysis The above table reveals the gross NPA of Apex bank. Gross NPA reduced step by

step from 7.44% in 2007-08 to 4.31% in 2010

4.91% in 2011-12

Graph shows the percentage change in Gross NPA to total advances at the KSCAB ltd..,

Interpretation The above graph reveals the total gross NPA in total advances from 2007

12. The total gross NPA gradually reduced because of good credit appraisal policy. In 2007

08 the gross NPA was 7.44% over its

2009-10 it further reduced to 4.70% and in 2010

2011-12 it increased marginally to 4.91% over its total advances.

7.44%

0.00%

2.00%

4.00%

6.00%

8.00%

2007-08

Gross NPA in total advances



17

RATIO OF GROSS NPA TO TATAL ADVANCES


Gross NPA

Gross NPA Ratio (%) = *100

Total advances

TABLE NO. 4

Gross NPA Total Advances Gross

NPA (In

%)

08 20895.3 280484 7.44

09 19202 349255 5.49

10 14808.1 314628 4.7

11 17512.4 406284 4.31

12 26437.3 538151 4.91

The above table reveals the gross NPA of Apex bank. Gross NPA reduced step by

08 to 4.31% in 2010-11 progressively, but slightly increased to


GRAPH NO.4

reveals the total gross NPA in total advances from 2007

12. The total gross NPA gradually reduced because of good credit appraisal policy. In 2007

08 the gross NPA was 7.44% over its total advances. In 2008-09 it reduced to 5.49%, in

further reduced to 4.70% and in 2010-11 it got further reduced to 4.31% but in

12 it increased marginally to 4.91% over its total advances.

7.44%

5.49%4.70% 4.31%

4.91%

08 2008-09 2009-10 2010-11 2011-12

Gross NPA in total advances

Gross NPA




Gross

NPA (In

%)

7.44

5.49

4.7

4.31

4.91

The above table reveals the gross NPA of Apex bank. Gross NPA reduced step by

11 progressively, but slightly increased to


reveals the total gross NPA in total advances from 2007-08 to 2011-

12. The total gross NPA gradually reduced because of good credit appraisal policy. In 2007-

educed to 5.49%, in

11 it got further reduced to 4.31% but in



5. NPA IN AGRICULTURE SECTOR

The percentage change in NPA in Agriculture sector to total advances

sector at KSCAB Ltd is given in the following table

SL.NO Year

1 2007-

2 2008-

3 2009-

4 2010-

5 2011-

Analysis The percentage of NPA to total advance in Agriculture sector is showing as increasing

trend only during the financial year 2007

year 2009-10, 2010-11 and 2011

noticed that all farmers who took the advances, paid very promptly to the bank within due

date. The above results reveal the effort has been taken to control NPA in agriculture sector

advances.

Interpretation

The above chart reveals the NPA in agriculture sector to total advances from 2007

to 2011-12. The NPA control in agriculture is good, it reduced year by year. The specific

findings of the study are that, the bank took proper measure t

sector.

0

1

2

3

2007-082008-09

2007-08

NPA (in %) 2.44

NPA IN AGRICULTURE SECTOR



18


The percentage change in NPA in Agriculture sector to total advances in Agriculture

sector at KSCAB Ltd is given in the following table

TABLE NO – 5

Year NPA (Rs in

lakhs)

Total

advance (Rs

in lakhs)

NPA (in

%)

08 5117.88 209012 2.44

09 4765.47 272614 1.74

10 0 226798 0

11 0 269925 0

12 0 380227 0

The percentage of NPA to total advance in Agriculture sector is showing as increasing

trend only during the financial year 2007-08 and 2008-09 and there is no NPA in the financial

11 and 2011-2012. It was completely recovered by the bank and it is



GRAPH NO – 5

The above chart reveals the NPA in agriculture sector to total advances from 2007

12. The NPA control in agriculture is good, it reduced year by year. The specific

findings of the study are that, the bank took proper measure to monitor NPA in agriculture

NPA (in %)2009-10

2010-112011-12

2008-09 2009-10 2010-11 2011-12

1.74 0 0 0




in Agriculture

NPA (in

2.44

1.74

The percentage of NPA to total advance in Agriculture sector is showing as increasing

09 and there is no NPA in the financial

was completely recovered by the bank and it is



The above chart reveals the NPA in agriculture sector to total advances from 2007-08

12. The NPA control in agriculture is good, it reduced year by year. The specific

o monitor NPA in agriculture

12



6. NPA IN SUGAR SECTOR

The percentage change in NPA in sugar sector to total advance given in sugar sector

at KSCAB ltd.

SL.NO Year

1 2007-08

2 2008-09

3 2009-10

4 2010-11

5 2011-12

Analysis The percentage of NPA to total advance in Sugar sector is shows increasing trend in

the financial years 2007-08, 2008

2010-11 and 2011-12. The above results reveal the efforts taken to control NPA in Sugar

sector advances were more effective in the first three years.

The percentage change in NPA in sugar sector to total advance given in sugar sector at

KSCAB ltd is represented in the following graph.

Interpretation The above graph reveals decreasing trend in NPA in Sugar sector to total advances

from 2007-08 to 2010-11 and marginal increase in 2011

sector shows that is more than 30% of the total credit given,

Hence the bank has to take proper measure to monitor NPA in Sugar sector in time.

0

20

40

60

80

2007-082008

64.7661.52

2007

NPA (in %) 64.76

NPA IN SUGAR SECTOR



19


TABLE NO: 6

Year NPA (Rs in

lakhs)

Total advance

(Rs in lakhs)

NPA (in

%)

08 12711.8 19627.1 64.76

09 11501 18693.5 61.52

10 10755.5 20039.5 53.67

11 7511.39 23489.1 31.97

12 7392.35 21936.8 33.09

The percentage of NPA to total advance in Sugar sector is shows increasing trend in

08, 2008-09 and 2009-10. But slightly decreased during the years

12. The above results reveal the efforts taken to control NPA in Sugar

sector advances were more effective in the first three years.

ge in NPA in sugar sector to total advance given in sugar sector at

KSCAB ltd is represented in the following graph.

GRAPH NO – 6

The above graph reveals decreasing trend in NPA in Sugar sector to total advances

11 and marginal increase in 2011-12. However, the NPA in Sugar

sector shows that is more than 30% of the total credit given, it indicates dangerous signal.


NPA (in %)2008-09

2009-102010-11

2011-12

61.5253.67

31.97 33.09

2007-08 2008-09 2009-10 2010-11 2011-12

64.76 61.52 53.67 31.97 33.09

NPA IN SUGAR SECTOR




NPA (in

%)

64.76

61.52

53.67

31.97

33.09

The percentage of NPA to total advance in Sugar sector is shows increasing trend in

10. But slightly decreased during the years

12. The above results reveal the efforts taken to control NPA in Sugar

ge in NPA in sugar sector to total advance given in sugar sector at

The above graph reveals decreasing trend in NPA in Sugar sector to total advances

12. However, the NPA in Sugar

indicates dangerous signal.




7. NPA IN OTHER SECTORS

The percentage change in NPA in other sector (other than Agriculture and sugar) to

total advance given by KSCAB ltd.

SL.NO Year

1 2007-08

2 2008-09

3 2009-10

4 2010-11

5 2011-12

Analysis The percentage of the total NPA in other sector to total credit given shows the

decreasing trend during the financial year 2007

increasing trend during the years 2009

The percentage change in NPA in other sector to total ad

KSCAB ltd

Interpretation

The above graph reveals the NPA in other sector to total advances is decreasing from

2007-08 to 2008-09. And thereafter, there is

indicates unsafe/ dangerous signal. Hence bank has to take proper measure to monitor NPA

in other sector.

2007

NPA (in %)

0

2

4

6

8

10

12

14

16



20

PA IN OTHER SECTORS


total advance given by KSCAB ltd.

TABLE NO – 7

Year NPA (Rs in

lakhs)

Total

advance (Rs

in lakhs)

NPA (in

%)

08 3065.61 51844.1 5.91

09 2935.5 57946.8 5.06

10 3847.08 67790.8 5.67

11 10001 112869 8.86

12 19044.9 135684 14.03

The percentage of the total NPA in other sector to total credit given shows the

decreasing trend during the financial year 2007-08, 2008-09 and thereafter ,it shows

increasing trend during the years 2009-10, 2010-11 and 2011-12.

in NPA in other sector to total advances given in other sector at

GRAPH NO - 7


09. And thereafter, there is step increase in the following four years


2007-08 2008-09 2009-10 2010-11 2011-12

5.91 5.06 5.67 8.86 14.03

NPA IN OTHER SECTOR




NPA (in

5.91

5.06

5.67

8.86

14.03

The percentage of the total NPA in other sector to total credit given shows the

09 and thereafter ,it shows

vances given in other sector at


step increase in the following four years




21

FINDINGS, SUGGESTION AND CONCLUSIONS

FINDINGS

Following are the findings of the study on Karnataka State Co-operative Apex Bank Ltd.

1. The Non-performing Assets of the bank stood at Rs. 26437.29 lakhs as on 31-03-2012

as against Rs.17512.50 lakhs as on 31-03-2011. As on 31-03-2012 NPA is 4.91%.

2. In respect of agriculture loans, the percentage of recovery as on 31-03-2012 was

100%. For the corresponding period of the previous year also recovery percentage

stood at 100%.

3. The total advance given to sugar sector is very less compared to agriculture sector.

But total NPA in sugar sector is very high compared to agriculture sector. Advances

given to the sugar sector in which more than 30% has become NPA.

4. Based on the observation in 2007-08 Sub standard asset was 43.43%, progressively it

was decreased in 2008-09 with percentage of 33.52, with good recovery policy of co-

operative bank, 2009-10 Sub standard assets condensed to 25.81%.

5. The percentage of total NPA in other sector has continuously increasing trend during

the year 2009-2011, and as on 31-03-2012 it was increased at 3.54%.

6. The specific findings from the study are that, there is still a need to have controlling

devices to monitor NPA system in the Karnataka State Co-operative Apex Bank Ltd.

SUGGESTIONS

To control the Non–performing assets in Karnataka State Co-operative Apex Bank

Limited, some remedial measures are suggested as follows:

1. There must be an effective and regular follow-up with the customers and need to

watch is there any diversion of funds. This process can be taken up at regular

intervals.

2. A number of personal visits after sanction and disbursal of credit and close

monitoring of the operations of the accounts of borrowed units.

3. Between the Bankers – borrower a healthy relationship should be developed. Many

instances reported that the banks uses force in recovery of loans, which is unethical.

4. Managers in charge of non-performing assets should have dynamism and seal in their

work.

5. Frequent discussions with the staff in the branch and taking their suggestions for

recovery of NPAs make them feel responsible.

6. Assisting the borrowers in developing his/her entrepreneurial skill will not only

establish a good relation between the borrowers but also help the bankers to keep a

track of their funds.

7. RBI need to take necessary actions against defaulters like, publishing names of

defaulters in News papers, broad-casting media, which is helpful to other banks and

financial institutions.

8. Create awareness among the customers and staff about the effect of Non –performing

assets on the performance of the banks and ultimate on the customers.

9. The bank has to take care of recovery management in sugar and other sector.

10. The bank should avoid the wrong selection of borrowers. The staff must be

additionally trained to assess the borrower efficiency by proper credit appraisal.

11. Quality of advances can be improved by using the tools and techniques of credit

appraisal and applying the same effectively.

12. Establish special task force for the recovery of dues, which have fallen under the

category of Non –performing assets.



22

13. The bank should fully understand the borrowers’ financial position before issuing

loans.

14. The manager must take actions of recovery of loans and advances within a specified

time frame with rational decisions.

CONCLUSION

Finally we can conclude that the Apex bank can avoid sanctioning loans to the non

creditworthy borrowers by adopting certain measures. They are careful appraisal of the

project which involves checking the economic capability of the project.

Apex banker must consider the homecoming on investment on a proposed project. If

the calculated return is sufficiently higher than the credit amount he can sanction the loan.

Secondly, banker can constantly monitor the borrower in order to ensure that the amount

sanctioned is utilized properly for the purpose to which it has been sanctioned. This involves

the post sanction inspection by the Apex bank.

Thirdly, the banker should get both the formal and informal reports about the

goodwill of the customer. If he had already proven as a defaulter then there is no question of

sanctioning loan to him.

Fourthly, the banker also has to educate the borrowers regarding the effects and

consequences of defaulting. By considering all the above factors the banker can reduce the

non-performing assets in a bank. .

The use of technology like Core Banking Solutions in Apex bank should make more

reachable to all borrowers.

At last the problem of NPAs has been a major issue for the banking industry. The RBI

which is the apex body for controlling level of non-performing assets have been giving

guidelines and getting norms for the banks in order to control the incidents of faults.

Reduction of NPAs in banking sector should be treated as national priority item to make the

Indian Banking system more strong, vibrant and geared to meet the challenges of

globalization

REFERENCES

1. Aggarwal, S., & Mittal, P. (2012). Non-Performing Asset: Comparative Position of

Public and Private Sector Banks in India, International Journal of Business and

Management Tomorrow, Vol.2 (1).

2. Boudriga, A., Taktak, NB., & Jellouli, S. (2009). Bank specific business and

institutional environment determinants of nonperforming loans: Evidence from MENA

countries, ERF 16th Annual Conference on Shocks, Vulnerability and Therapy,

November 2009.

3. Chaudhary, S., & Singh, S. (2012). Impact of Reforms on the Asset Quality in Indian

Banking, International Journal of Multidisciplinary Research Vol.2(1).13-31. Chhimpa,

J. (2002), Incremental NPA: Stem that Inflow, Vinimaya, 23(3): 18-21.

4. Collins, NJ., & Wanjau, K. (2011). The Effects of Interest Rate Spread on the Level of

Non-Performing Assets: A Case of Commercial Banks in Kenya, International Journal

of Business and Public Management Vol. 1(1).

5. Dash, MK., & Kabra, G. (2010). The Determinants of Non-Performing Assets in Indian

Commercial Banks: an Econometric Study, Middle Eastern Finance and Economics,

Issue 7 (2010).

6. Espinoza, R., & Prasad, A. (2010). Non Performing Loans in the GCC Banking System

and their Macro Economic Effects, IMF Working Paper series, WP/10/224.



23

7. Fainstein, G. (2011). The Comparative Analysis of Credit Risk Determinants - In the

Banking Sector of the Baltic States, Review of Economics & Finance, March 2011.

8. Heid, F., & Kruger, U. (2011). Do Capital buffers mitigate volatility of bank lending?A

simulation study, Discussion Paper Series 2 Banking and Financial Studies N0 03/2011

9. Jigar J. Soni, 2009. A Project on Comparative Analysis on Non Performing Assets of

Private and Public Sector Banks, IBM Ahemadabad.

10. Karunakar, M., Vasuki, K., & Saravanan, S. (2008). Are non - Performing Assets

Gloomy or Greedy from Indian Perspective?, Research Journal of Social Sciences, 3: 4-

12, 2008

11. Lending and Its Implications for Monetary Policy, OECD Economics Department

Working Paper No. 107.

12. Management and resolution of NPAs legal and regulatory regime, [Online] Available

at: http:// www. mbaknol. com [Accessed 20thDec 2011]

13. Misra, B.M., & Dhal, S. (2011). Pro-cyclical Management of Banks’ Non-Performing

Loans by the Indian Public Sector Banks,

14. Ms. Kanika Goyal, 2010. Empirical Study of Non Performing Assets Management of

Indian Public Sector Banks, APJRBM Volume 1, Issue 1, October 2010.

15. Narasimham, M.S. & Thampy, A. (2002), Activity Based Costing in Banking Service:

A Case Study of a Large Indian Private Sector Bank, Prajnan, 31(2): 95-110.

16. Pal Ved & Malik N.S. (2007), A Multivariate Analysis of the financial characteristics of

Commercial Banks in India. The Icfai Journal of Bank Management .VI (3).

17. Panta, R., (2007). Challenges in Banking: A Nepalese Diaspora, Socio-Economic

Development Panorama, Vol. 1(2), 9 -22

18. Prof. G. V. Bhavani Prasad; D. Veena (2011), “NPAS in indian banking sector- trends

and issues,”Volume 1, Issue 9.

19. Reserve Bank of India, Report on Trend and Progress of banking in India, Various

issues, Bombay, India. Reserve Bank of India (2010), Trend and Progress of Banking in

India

20. Sethi, J., & Bhatia, N. (2007). Elements of Banking and Insurance, 2nd Edition,

Prentice Hall India Publications

21. Tracey, M., & Leon, H. (2011). The Impact of Non-performing Loans on Loan growth,

IMF working Paper.

22. Vashist, A. K. (2004), Commercial Banking in the Globalized Environment, Political

Journal of India, 13(2): 1-10.

23. Yadav, M.S. (2011), Impact of Non Performing Assets on Profitability and Productivity

of Public Sector Banks in India, AFBE Journal, Vol.4, No. 1

24. R.Shenbagavalli, S.Senthilkumar and Dr.T.Ramachandran, “A Strategy to Manage the

NPAs of Public Sector Banks”, International Journal of Management (IJM), Volume 4,

Issue 3, 2013, pp. 1 - 7, ISSN Print: 0976-6502, ISSN Online: 0976-6510.

BOOKS � Prof. H.R. Appannaiah, Dr .P.N. Reddy, Vijayendra .S (2010) Law and practice of

banking, Himalaya publishing House.

� Jagroop Singh (2011). Law and practice of Banking, Kalyani Publishers.

WEBSITES � http://www.karnatakaapex.com

� http://www.ebsco.com

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