WEST BENGAL UNIVERSITY OF TECHNOLOGY

SUMMER PROJECT REPORT

ANALYSIS OF NON-PERFORMING ASSETS

AT

SYNDICATE BANK

BY

DEEPTI DEVASIA

WBUT REGN NO: 136070912004 OF 2004-2005

WBUT ROLL NO: 13609042004

ARMY INSTITUTE OF MANAGEMENT

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CONTENTS PAGE NO.

CERTIFICATE

ACKNOWLEDGEMENTS 1

EXECUTIVE SUMMARY 2

CHAPTER I: INTRODUCTION 4

1.1 INDUSTRY PROFILE 6

1.2 COMPANY PROFILE 16

1.3 BRIEF DESCRIPTION OF PROBLEM 3

CHAPTER II: PROJECT DETAILS 36

2.1 CHAPTER SUMMARY 37

2.2 PROJECT BRIEF 39

2.3 PURPOSE & SCOPE OF STUDY 51

2.3.1 PROBLEM DIAGNOSIS 53

2.3.2 RESEARCH METHODOLOGY 56

2.3.3 PROCEDURE FOR DATA COLLECTION 60

2.4 PROJECT CONSTRAINTS 62

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CHAPTER III: COLLECTION AND ANALYSIS OF INFORMATION 63

3.1 CHAPTER SUMMARY 64

3.2 DATA COLLECTION AND ANALYSIS 67

CHAPTER IV: PROJECT FINDINGS AND RECOMMENDATIONS 97

4.1 CHAPTER SUMMERY 98

4.2 CONCLUSIONS DERIVED FROM DATA ANALYSIS 101

4.3 RECOMMENDATIONS 111

APPENDIX 115

BIBLIOGRAPHY 127

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ACKNOWLEDGEMENT

“The written word is the greatest gift mankind could ever have”- Tom Coblin

I express my profound gratitude to my internal project guide Professor Prantik Ray, lecturer, Army Institute of Management, Kolkata, who reviewed the project and whose comments and advices improved the study. I would also like to take this opportunity to express my gratitude and respect to my external guide Mr Ravi S Nair, Senior Manager, Syndicate Bank, Main Branch, Trivandrum, Kerala who guided me in all respect and whose valuable suggestions helped me in carrying out the study. My project would have been incomplete without the help given to me by Mr. K.K Shri Kumar, Manager, NPA Monitoring Cell, Syndicate Bank, Regional office, Trivandrum, Mr. N A Varughese, Chief Manager and Mrs Beena Krishnan, Syndicate Bank, Main Branch, Trivandrum. I owe my sincere thanks to all the staff members of Syndicate Bank, Main Branch, Trivandrum for the timely and willing help and assistance provided to me during the entire project duration.

I also would like to take this opportunity to thank my parents and friends especially my father Col K.J Devasia (Retd) whose valuable suggestions, advices and help enabled me to complete this project. Above all, I thank the Almighty for the blessings showered upon me and for making this project a rich and memorable professional experience.

Deepti Devasia

EXECUTIVE SUMMARY

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The project was conducted in Syndicate Bank, Main Branch and

Syndicate Bank Regional office both located at Trivandrum, Kerala State. The

Project is titled “Analysis of Non-Performing Assets”. and the same was

carried out from 12th May 2005 to 20th July 2005. The project is divided into

four major chapters

CHAPTER I: INTRODUCTION

This chapter gives an introduction of the banking industry of India.

This also includes a study of Indian Bank in general and gives a brief

description on Non-Performing Assets.

CHAPTER II: PROJECT DETAILS

This chapter covers the project in brief and the purpose and scope of

the study of Non-Performing Assets. The project constraints are also covered

in this chapter.

CHAPTER III: COLLECTION AND ANALYSIS OF INFORMATION

Analysis of the information on Non-Performing Assets collected from

Syndicate Bank New Delhi Branch and Indian Bank Regional office for the

period of two financial years 2008-2009 and 2009-10 is given in this chapter.

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CHAPTER IV: PROJECT FINDINGS AND RECOMMENDATION

Finally project findings and recommendations drawn from the

analysis of the data to reduce the incidence of Non-Performing Assets is

given in this chapter.

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CHAPTER I: INTRODUCTION

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1.1 INDUSTRY PROFILE

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1.1: BANK INDUSTRY PROFILE

DEFINITION OF BANKING BUSINESS

Banking as defined in section 5 (b) of the Banking Regulation Act, 1949 is the

business of “accepting deposits of money from the public for the purpose of lending or

investment “. These deposits are repayable on demand or otherwise and withdrawable by

a cheque, draft, and order or otherwise.

These deposits accepted by a banking company are different from those accepted

by Non Banking Finance Company (NBFC) or any other company in the nature in which

these are repayable. Banks are the only financial institutions, which can accept demand

deposits (saving/ current), which can be withdrawn by a cheque.

Section 6 of Banking Regulation Act 1949 elaborately specifies the other forms of

business which a banking company may carry in addition to banking as defined in section

5. These include:

Issuing demand drafts and travellers cheques

Collection of cheques, bills of exchange

Discounting and purchase of bills

Safe deposit lockers

Issuing letters of credit & letters of guarantee

Sale and purchase of foreign exchange

Custodial services

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Investment services

Doing all such other things as are incidental or conducive to the promotion or

advancement of the business of the company

Any other form of business which the central government may, by notification in the

official gazette, specify as a form of business in which it is lawful for a banking company

to engage

No banking company shall engage in any form of business other than those referred to

above.

BANKING INDUSTRY

The Indian banking can be broadly categorised into Nationalised banks

(Government owned), Private banks and specified banking institutions. The Reserve Bank

of India (RBI) acts as a centralised body monitoring any discrepancies and short comings

in the system. Since the nationalisation, the banks have acquired a place of prominence

and has since then seen tremendous progress. The need to become highly customer

focused has forced the slow reacting Public Sector Banks (PSB) to adopt a fast track

approach.

The unleashing of products and services through the net has galvanised players at

all levels of the banking and financial institutions market grid to look anew at their existing

portfolio offering. Conservative banking practices allowed Indian banks to be insulated

partially from the Asian currency crisis. Indian banks are now quoting higher valuation

when compared to banks in other Asian countries (Hong Kong, Singapore, Philippines

etc.) that have major problems linked to huge Non-Performing Assets (NPAs) and

payment defaults. Co-operative banks are nimble footed in approach and armed with

efficient branch networks focus primarily on the ‘high revenue’ niche retail segments.

The Indian Banking has finally woken up to the competitive dynamics of the ‘new’

Indian market and is addressing the relevant issues to take on the multifarious challenges

of globalisation. Banks that employ IT solutions are perceived to be ‘futuristic’ and

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proactive players capable of meeting the multifarious requirements of the large customer’s

base. Private Banks have been fast on the uptake and are reorienting their strategies

using the internet as a medium. The internet has emerged as the new and challenging

frontier of marketing with the conventional physical world tenets being just as applicable

like in any other marketing medium.

The Indian Banking has come a long way from being a sleepy business institution

to a highly proactive and dynamic entity. This transformation has been largely brought

about by the large dose of liberalisation and economic reforms that allowed banks to

explore new business opportunities rather than generating revenues from conventional

streams (i.e. borrowing and lending). Banking in India is highly fragmented with 30 banking

units contributing to almost 50% of deposits and 60% of advances. Indian Nationalised

Banks (banks owned by the Government) continues to be the major lenders in the

economy due to their sheer size and penetrative networks which assures them high

deposit mobilisation.

The Reserve Bank of India (RBI) acts as a centralised body monitoring any

discrepancies and shortcomings in the system. It is the foremost monitoring body in the

Indian financial sector. The nationalised banks continue to dominate the Indian banking

arena. Industry estimates indicate that out of 274 commercial banks operating in India,

223 banks are in the public sector and 51 are in the private sector. The private sector bank

grid also includes 24 foreign banks that have started their operations here. Under the

ambit of the nationalised banks come the specialised banking institutions. These co-

operatives and rural banks focus on areas of agriculture, rural development etc. Unlike

commercial banks these co-operative banks do not lend on the basis of a prime lending

rate. They also have various tax sops because of their holding pattern and structure and

hence have lower overheads. This enables them to give a marginally higher percentage

on savings deposit.

Many of these co-operative banks diversified into specialised areas (catering to the

vast retail audience) like car finance, housing loans, truck finance etc. In order to keep

pace with their public sector and private counterparts, the co-operative banks too have

invested heavily in information technology to offer high-end computerised banking services

to its clients.

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India’s banking system has several outstanding achievements to its credit, the most

striking of which is its reach. An extensive banking network has been established in the

last thirty years, and India’s banking system is no longer confined to metropolitan cities

and large towns. In fact, Indian banks are now spread out in to the remote corners of our

country. In terms of the number of branches, India’s banking system is one of the largest,

if not the largest in the world today. An even more significant achievement is the close

association of India’s banking system with India’s development efforts. The diversification

and development of our economy, and the acceleration of the growth process, are in no

small measure due to the active role that banks have played in financing economic

activities in different sectors.

We can identify three distinct phases in the history of Indian banking:

Early phase from 1786 to 1969

Nationalisation of banks and up to 1991 prior to banking sector reforms

New phase of Indian banking with the advent of financial and banking sector

reforms after 1991

The first phase is from 1786 to 1969, the early phase up to the nationalisation of

the 14 largest Indian banks. It was also the traditional or conservative phase of Indian

banking. The advent of banking system of India started with the establishment of the first

joint stock bank, The General Bank of India in the year 1786. After this first bank, Bank of

Hindustan and Bengal Bank came into existence.

During the mid 19th century, East India Company established three banks:

The Bank of Bengal in 1809

The Bank of Bombay in 1840

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The Bank of Madras in 1843

These banks were independent units and were called as the ‘Presidency Banks’.

These three banks were amalgamated in 1920 and a new bank, Imperial Bank of India

was established. All these institutions started as private shareholders banks and the

shareholders were mostly Europeans. The Allahabad Bank was established in 1865.

The next bank to be set up was The Punjab National Bank Ltd. which was

established with its headquarters at Lahore in 1894 for the first time exclusively by Indians.

Most of the Indian commercial banks, however owe their origin to the 20th century. Bank of

India, Central Bank of India, Bank of Baroda, Canara Bank, Indian Bank, and Bank of

Mysore were established between 1906 and 1913. The last major commercial bank to be

set up in this phase was The United Commercial Bank of India in 1943. Earlier, the

establishment of Reserve Bank of India in 1935 as the Central Bank of the country was an

important step in the development of commercial banking in India.

The history of joint stock banking in this first phase was characterised by slow

growth and periodic failures. There were as many as 1100 banks, mostly small banks,

which failed during the period from 1913 to 1948. The Government of India concerned by

the frequent bank failures in the country causing loss to innumerable small depositors and

others enacted The Banking Companies Act, 1949. The title of the Act was changed to

‘Banking Regulations Act 1949’, as per amending Act of 1965 (Act no.23 of 1965).

The Act was the first regulatory step undertaken by the Government to stream line

the functioning and activities of commercial banks in India. Reserve Bank of India as the

central banking authority of the country was vested with extensive powers for banking

supervision. At the time of Independence of the country in 1947, the banking sector in

India was relatively small and extremely weak. The banks were largely confined to urban

areas, extending loans primarily to trading sector dealing with agricultural produce. There

were a large number of commercial banks, but banking services were not available at rural

and semi–urban areas. Such services were not extended to different sectors of the

economy like agriculture, small industries, professionals, and self-employed

entrepreneurs, artisans, retail traders etc.

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CHRONOLOGY OF SALIENT STEPS TAKEN BY THE GOVERNMENT

AFTER INDEPENDENCE TO REGULATE BANKING INSTITUTIONS

IN THE COUNTRY:

1949: Enactment of Banking Regulation Act

1955: Nationalisation of State Bank of India

1961: Insurance cover extended to deposits

1969: Nationalisation of 14 major banks

1971: Creation of Credit Guarantee Corporation

1975: Creation of regional rural banks

1980: Nationalisation of seven banks with deposits over Rs 200 crore

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SHORTCOMINGS IN THE FUNCTIONING OF NATIONALISED

BANKING INSTITUTIONS

Nationalised banks in their enthusiasm for development banking started looking

exclusively to branch opening, deposit enhancement and social banking and neglected

prudential banking norms, profitability criteria, risk-management and building adequate

capital as a buffer to counter-balance the ever expanding risk-inherent assets held by

them. They failed to recognise the emerging Non–Performing Assets (NPAs) and to build

adequate provisions to neutralise the adverse effects of such assets. Basking in the sun

shine of Government ownership that gave to the public implicit faith and confidence about

the sustainability of Government owned institutions, they failed to collect before hand

whatever was needed for the rainy day. And surfeit blindly indulged is sure to bring the

sick hour. In the early nineties after two decades of lop–sided policies, these banks paid

heavily for their misdirected performance in place of pragmatic and balanced policies.

The Reserve Bank of India (RBI) and Government of India had to step in at the

crisis hour to implement remedial steps. Reforms in the financial and banking sectors and

liberal recapitalisation of the ailing and weakened public sector banks followed. However,

it is relevant to mention here that the advent of banking sector reforms brought the era of

modern banking of global standards in the history of Indian banking. The emphasis shifted

to efficient and prudential banking linked to better customer care and customer service.

The old ideology of social banking was not abandoned, but the responsibility for

development banking is blended with the paramount need for complying with norms of

prudence and efficiency.

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INDIAN BANKING SYSTEM

The banking system has three tiers. These are:

The scheduled commercial banks

The regional banks which operates in rural areas not covered by the scheduled

banks

The co-operative and special purpose rural banks

SCHEDULED AND NON-SCHEDULED BANKS

There are approximately 80 scheduled commercial banks, Indian and Foreign,

almost 200 regional rural banks, more than 350 central co-operative banks, 20 land

development banks, and a number of primary agricultural credit societies. In terms of

business, the public sector banks, namely the State Bank of India and the nationalised

banks dominate the banking sector.

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1.2 COMPANY PROFILE

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1.2: COMPANY PROFILE

BRIEF HISTORY

Indian Bank, established in 1907, is a major Indian Commercial Bank headquartered

in Chennai (Madras), India. It has 19,000 employees, 1,819 branches and is one of the big

public sector banks of India. It has overseas branches in Colombo , Sri Lanka , Singapore,

and 240 correspondent banks in 70 countries. The Government of India nationalized the

bank, along with 13 other major commercial banks, on 19 July 1969.

The progress of Indian bank has been synonymous with the phase of progressive

banking in India. Spanning over 103 years of pioneering expertise, the bank has created

for itself a solid customer base comprising customers of two or three generations. Being

firmly rooted in rural India and understanding the grass root realities, the bank’s perception

had vision of future India. It has been propagating innovations in banking and also has

been receptive to new ideas, without however getting uprooted from its distinctive socio-

economic and cultural ethos. Its philosophy of growth by mutual sustenance of both the

bank and the people has paid rich dividends. The bank has been operating as a catalyst of

development across the country with particular reference to the common man at the

individual level and in rural/semi urban centres at the area level.

The bank is well equipped to meet the challenges of the 21st century in the areas of

information technology, knowledge and competition. A comprehensive IT plan is being put

in place and the skills and knowledge of the bank’s personnel are being upgraded through

a variety of training programmes to promote customer delight in every sphere of its

activity.

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MEMORABLE MILESTONES IN AN 104 YEAR JOURNEY

1907:

Established on 15 August as a part of Swadeshi movement.

1932:

Indian Bank opened a branch in Colombo including a Foreign Currency Banking Unit.

1935:

Indian Bank opened a branch in Jaffna.

1940:

Indian Bank opened a branch in Rangoon (Yangon).

1941:

Indian Bank closed the Rangoon branch but opened branches in Singapore (where future

branch manager KB Pisharody (1915–1998) started his career in the same year), and

in Kuala Lumpur, Ipoh, and Penang. The rapid advance of the Japanese Army forced

Indian Bank to close all its branches in Malaya and Singapore.

1942:

Indian Bank closed the Colombo branch. Post-WWII: Indian Bank reopened its Malayan

and Singapore branches.

1948:

Indian Bank reopened its branch in Colombo.

1960s:

Indian Bank acquired Mannargudi Bank (est. 1932) and Salem Bank (est. 1925).

1969:

The Government of India nationalized 14 top banks, including Indian Bank.

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1973:

Indian Overseas Bank, Indian Bank and United Commercial Bank established United

Asian Bank Berhad in which IOB held 16.67% of the paid up capital, as a result of a new

banking law in Malaysia that prohibited foreign government banks from operating in the

country.

1978:

Indian Bank became a technical adviser to P T Bank Rama in Indonesia, the result of the

merger of P T Bank Masyarakat and P T Bank Ramayana.

1980:

Indian Bank, Bank of Baroda, and Union Bank of India established IUB International

Finance, a licensed deposit taker in Hong Kong. Each of the three banks took an equal

share in the joint venture.

1987:

Indian Bank acquired Bank of Tanjore (Bank of Thanjavur) in Tamil Nadu in a rescue.

1998:

 Bank of Baroda bought out its partners in IUB Intl. Fin. in Hong Kong. Apparently this was

a response to regulatory changes following Hong Kong’s reversion. IUB became Bank of

Baroda (Hong Kong), a restricted license bank.

2007:

Indian Bank celebrated its centenary year.

2008:

Become fully CBS (Core Banking Solution) on 23 March 2008.

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A Front Runner in Specialised Banking 97 Forex Authorised branches inclusive of 1 Specialised Overseas Branch at

Chennai exclusively for handling forex transactions arising out of Export, Import,

Remittances and Non Resident Indian business

62 Special SME Branches extending finance exclusively to SSI units.

Leadership in Rural Development

Pioneer in introducing Self Help Groups and Financial Inclusion Project in the

country

Award winner for Excellence in Agricultural Lending from Honourable Union

Minister for Finance

Best Performer Award for Micro-Finance activities in Tamil Nadu and Union

Territory of Puducherry from NABARD

Established 7 specialized exclusive Microfinance branches called "Microsate"

across the country to cater the needs of Urban poor through SHG (Self Help

Group)/JLG (Joint Liability Group) concepts

A special window for Micro finance viz., Micro Credit Kendras are functioning in 44

Rural/Semi Urban branches

Harnessing ICT (Information and Communication Technology) for Rural

Development and Inclusive Banking

Provision of technical assistance and project reports in Agriculture to entrepreneurs

through Agricultural Consultancy & Technical Services (ACTS)

A pioneer in introducing the latest technology in Banking

100% Core Banking Solution(CBS) Branches

100% Business Computerisation

1087 Automated Teller Machines(ATM)

24 x 7 Service through 57000 ATMs under shared network

Internet and Tele Banking services to all Core Banking customers

e-payment facility for Corporate customers

Cash Management Services

Depository Services

Reuter Screen, Telerate, Reuter Monitors, Dealing System provided at Overseas

Branch, Chennai

I B Credit Card Launched

I B Gold Coin

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Diversified banking activities – 3 Subsidiary companies

IndBank Merchant Banking Services Ltd.

IndBank Housing Ltd.

Indfund Management Ltd.

Services Offered by Indian Bank

Ind Net Banking.

Ind Mobile Banking.

Ind Phone Banking.

e Payment of Indirect Taxes.

MCA Payment.

Ind Jet Remit (RTGS).

NEFT.

CMS Plus.

Multicity Cheque Facility.

IB Swarna Mudra.

Credit Cards.

ATM/ Debit Cards.

DP Services.

IB Jeevan Kalyan.

IB Varishtha.

IB Chhatra.

IB Arogyavaraksha.

e Payment of Direct Taxes.

IB Jeevan Vidhya.

Money Gram.

Janashree Bhima Yojan (Launched in association with LIC).

Universal Health Care (Launched in Association with UIIC Ltd.).

IB Grihajeevan - Group Insurance Scheme for Mortgage Borrowers.

IB Home Suraksha - Group Insurance Scheme for Mortgage Borrowers.

Xpress Money – Inward Remittance – Money Transfer Service Scheme.

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New schemes launched in Current Financial Year

A unique current account product ”Supreme Current Account” offering health and

wealth insurance cover has been introduced.

Jewel Loan for senior citizens.

Setting up for exclusive branches for Jewel Loan.

Combo loan for housing, vehicle and retail.

Application Supported by Blocked Amount (ASBA) has been implemented for all

categories of investors including qualified Institutional Buyers for applying to Public

Issues and Right Issues.

SME product –IB Contractors launched.

Tie up with Auto Bajaj Auto Ltd.for financing Three Wheelers.

Loan syndication desk setup.

SOCIAL LENDING – CONCERN FOR THE UNDER-PRIVILEGED

Social lending is the bank’s strong point since inception.

Priority sector advances as at December 2010 were Rs.25, 211 crore accounting

for 42.38 % of Adjusted net bank credit as against the mandatory requirement of

40%.

During the year Bank has disbursed Rs 1185 crore to 56938 SHGs.

Issued 4.67 lakh Kisan Credit Cards to the farmers with credit limits of over

Rs.1251 crore.

Extended education loan to 80,973 beneficiaries amounting to Rs.510.44 crore

Assisted 67,006 beneficiaries under housing for Rs.2155 crore.

Interest concession of 0.50% on applicable card rate for Girl Students.

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Under Financial Inclusion out of 1536 allotted villages 1423 will be covered through

ICT based smart card enabled BC Model, 53 villages through Banking Service

Centre / Branch and 60 villages through mobile vans.

293 villages have been provided with banking services under FI plan 2010-12 by

opening brick and mortar branch (1 village) through Banking Service Centre (19

villages), through Business Correspondent (267 villages) and through mobile

branch (6 villages) as on 31-12-2010.

24.96 Lakhs “NO FRILL” accounts are opened in various parts including villages

under FI plan.

Overdraft / GCC provided to 55,278 individuals to the tune of Rs 12.45 crore.

PERFORMANCE OF THE BANK 2009-10

MACRO ECONOMIC SCENARIO

During 2004-05, the global financial market remained buoyant marked by

comfortable liquidity conditions both in quantity and price terms. However, global

imbalances created by upward pressure on oil prices, volatile exchange rate and

occurrence of natural calamities like tsunami impaired the global growth rate. The world

economy grew at around 3.6% during 2004-05, as against 4% registered during 2003-04.

However, the macro-economic conditions for India remained favourable with the

country posting a growth of 6.3% weathering several adverse factors including deficient

monsoons and hardening international prices of oil and steel. While the growth in

agricultural sector was only 1.1% on account of deficient monsoon, the growth in industrial

sector was 7.3% with services topping the growth chart at 8%. The manufacturing, mining

and electricity sectors recorded impressive growths of 8.9%, 5.3% and 6.3% respectively.

The year gone by witnessed an average annual rate of inflation of around 6.4%.

The money supply grew by 13.28% during the financial year which was well within the

RBI’s projection of 14%. The aggregate deposits of Scheduled Commercial Banks (SCBs)

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registered a growth of 11.45% while the aggregate credit at industry level showed a robust

growth of 27.47%. The expansion in non-food credit was a healthy 28.08%. On the

external front, the country’s exports went up by 19% while the imports clocked a higher

growth of 23%. The foreign exchange reserves of the country stood at USD 141.2 billion

as at the end of March 2005.

HIGHLIGHTS OF BUSINESS PERFORMANCE

The bank turned in a highly encouraging performance during the year 2009–10,

keeping pace with the industry level growth trends.

PROFITABILITY

The bank achieved an operating profit of Rs.69.66 crore (Q3) and a net profit at

Rs.441.38 crore. Both operating and net profits would have been much higher but for the

amount that had to be appropriated towards depreciation of Rs.382 crore on account of

one time transfer of government securities to HTM category, lower profits from treasury

operations at Rs.250 crore as against the Rs.500 crore posted during the previous year

and an additional provision of Rs.92 crore towards wage revision.

GLOBAL BUSINESS

The bank’s global business reached a level of Rs. 1, 74, 937 crore in fiscal 2009-

2010 registering a fair growth of 23.02%. Credit deposit ratio improved to 73.18% in

December 2010 from 67.82% as in December 2010.

DEPOSITS

The global deposits of the bank were Rs.1, 01,015 crore in December 2010. On

the back of conscious efforts to reduce the share of high cost deposits, the deposit mix of

the bank improved in cost terms. Growth of CASA deposits was 22.65%. CASA

(Domestic) share to aggregate deposits higher at 32.9% from 31.8%.

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ADVANCES

The global advances of the bank rose by 28.63 % and was Rs.73,919 crore in

December 2010 registering a substantial growth year-on-year from Rs 57468 crore as on

December 2009. The retail credit grew from Rs.10605 crore in December 2009 to

Rs.11,365 crore in December 2010.

CAPITAL

The net worth of the bank has improved from Rs. 7052.23 crore as on 2009-2010 to

Rs 8322.24 crore as on December 2010. The Capital to Risk weighted Assets Ratio

(CRAR) of the bank was 12.35% as at 31.12.2010.

ASSET QUALITY

The strategies adopted by the bank in managing Non-Performing Assets (NPAs)

have paid rich dividends. Both Gross and Net NPA declined in absolute and percentage

terms. Gross NPA declined to Rs.752 crore from Rs.988 crore during the previous year,

i.e. from 1.45% to 1.02%. Net NPA declined from Rs.511 crore to Rs.417 crore, i.e. from

0.76% to 0.57%. Provision coverage was further strengthened to 83.01%.

The bank has implemented the One Time Settlement (OTS) Scheme for small and

marginal farmers in consonance with the broad parameters communicated by Indian

Banks Association.

The bank is utilising the Securitisation and Reconstruction of Financial Assets and

Enforcement of Security Interest (SARFAESI) Act–2002 as an effective tool for recovery of

Non-Performing Assets. Notices were issued under the Act and bank could recover the

amount from the NPA accounts through the SARFAESI route.

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NATIONAL PRIORITIES

The bank has maintained its excellent track record of pre eminence in social

lending, which it views as a major business opportunity. The priority sector advances of

the bank reached a level of Rs.25, 211 crore constituting 42.38% of Net Bank Credit and

were well above the mandatory target of 40%. Adequate care has been taken to ensure

that the credit needs of the weaker and underprivileged section such as SC/ST, minority

communities and women are fully met.

The agricultural credit increased substantially during the year and reached the

level of Rs.10798 crore forming 18.15% of Net Bank Credit as against the mandatory

norms of 18%. In line with the policy of the government to step up the flow of credit to

agriculture, the bank’s disbursement of agricultural credit during the year amounted to Rs.

4188 crore recording an impressive increase over previous year.

COMMUNITY CONCERN

The bank effectively participated in implementing Government sponsored poverty

alleviation and employment generation schemes and organised training programmes for

skill development through Rural Entrepreneurship Development and Rural Development

Self Employment Training Institutes. during the year.

Indian bank has also contributed its share to projects and initiatives for promotion of

education, especially those with an accent on vocational and public health aspects.

ON INFORMATION TECHNOLOGY

Technology is transforming the business landscape of banking. The bank has

therefore continued its measures to develop a robust technology platform. The bank has

adopted Core Banking Solution (CBS) which has enabled the bank to offer alternative

channels of delivery such as ATMs, Telebanking, remote access and internet banking. As

of 31st December 2010 all branches/offices located in different centres across the country

have been placed on the CBS net that provides a single window facility for all types of

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banking transactions besides offering longer business hours, ATM cards, instant fund

transfer, multicity cheque facility, personalised cheque books and a host of other customer

services. The bank is rapidly expanding the ATM network adding 80 new ATMs during the

year taking the tally of networked ATMs to 1085, spread across all centres.

Bank has a total of ATM cum Debit card base to 53.8 lakh from 40.42 Lakh as on 31-12-

2009. Bank has installed 78 biometric ATMs enabling joint operations by SHG members.

Customers can access 65,000 ATMs across the country through our sharing

arrangements with other banks and to all members’ establishments for merchandise

purchase / availing services under Maestro Debit cards.

HUMAN RESOURCES MANAGEMENT

In a market scenario characterised by heightened competition, growing customer

needs and technological up gradation, the bank has fine tuned its HR policy to meet its

corporate objectives. New training systems have been developed to impart competencies

and a broad range of skills among the employees to deliver faster and superior service

that can delight the customer. The Industrial Relations in the bank have been harmonious

and cordial.

SHAREHOLDER VALUE

The sound performance of the bank during the previous year impacted the capital

market sentiments positively as reflected in the bank’s market capitalisation, which has

risen substantially from 39.99% from December 2009 to 44.63 % in December 2010. The

book value of share has gone up from Rs.154.16 to Rs.184.34

RISK MANAGEMENT

The bank has given due recognition to the importance of risk management for its

growth and its stability and a well designed comprehensive risk management system has

been put in place. The risk management system comprises policies, procedures,

organisational structures and control systems for the identification, measurement,

monitoring and management of various risks. The bank is continuously upgrading and

enhancing the capabilities of its risk management system in tune with guidelines and

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directions of the Reserve Bank of India and is well equipped to make the transition to

Basel II norms.

CORPORATE GOVERNANCE

The bank has adopted a highly effective system of Corporate Governance to ensure

continued growth of shareholder value keeping in view the interests of all stakeholders.

The system permits adequate autonomy to the Board of Directors and the top

management to take decisions that can further the progress of the bank within the

framework of regulatory prescriptions, corporate goals and social responsibilities. The

audit committee of the Board oversees the quality of the internal audit systems and

monitoring mechanism apart from reviewing the financial accounts. The bank has been

actively promoting greater transparency as a part of its measures through wider disclosure

of information that reflects the quality of governance.

21 ST CENTURY CHALLENGES – FACING THE FUTURE

21st century will be dominated by Information Technology, knowledge and

competition. Bank is gearing itself adequately to meet these challenges.

Knowledge and skill levels of employees are upgraded through strengthening the

training infrastructure with computer labs and other modern teaching methods.

Bank’s constant focus is to provide innovative products and services for moving

towards customer delight.

30

AWARDS WON BY THE BANK

Bank conferred with Skoch Financial Inclusion Award 2011 for SHG.

No.1 in Asset Quality & Efficiency for 2010 as per Business world and

Pricewaterhouse cooper’s study.

INDIAN BANK: MISSION

INDIAN BANK: MOTTO

31

1.3 BRIEF DESCRIPTION OF THE PROBLEM

32

1.3: BRIEF DESCRIPTION OF PROBLEM

The banking business is of mobilising the deposits and utilising it for lending.

Lending business is generally encouraged because it has the effect of funds being

transferred from the system to production purposes which results into economic growth.

One of the major threats to the health of the Indian banking system comes from the

high level of Non-Performing Assets (NPAs). NPAs of banks are the loans which are

unlikely to be paid. This means either interest or principle payments have been

outstanding on these loans for more than 90 days.

Increasing NPAs have a direct impact on bank’s profitability as legally banks are

forced to make provisions on such assets as per the RBI guide lines.

Banking system in our country is burdened with a huge volume of Non-Performing

Assets or loans on which borrowers have defaulted on interest and amortisation of

payment. What is noteworthy is that much of the NPAs burden was accumulated during

the years of reforms. NPAs of Indian Banks rose from Rs 37,500 crore at the end of

financial year 1991-92 to Rs 70,000 crore at the end of 2001-02 at 10.4% of advances as

Gross NPAs and 5.5% Net NPAs. Given their importance within the banking system, the

public sector banks were major contributors to NPAs in the system. At the end of financial

year 2002 the accumulated NPAs of 27 public sector banks totalled Rs 56,000 crore.

The distribution of these NPAs was skewed in favour of big borrowers since large

borrowers with 11,000 individual accounts accounted for as much as Rs 40,000 crore of

total bad debts. Among public sector banks too, high value default involving 1,741

accounts over Rs 5 crore amounted to Rs 22,866 crore or 40 percent of the total.

Since this concentration of bad debt was among large borrowers, it should have

made recovery easier. But the actual record of recovery has been extremely poor. During

the preceding eight years less than Rs 5000 crore of bad debt has only been recovered.

33

A question that arises is how much risk can a bank afford to take? Recent

happenings in the business world-Enron, world com, Xerox etc do not give much

confidence to banks. In case after case, these giant corporations became bankrupt and

failed to provide investors with cleaner and more complete information thereby introducing

a degree of risk that many investors could neither anticipate nor welcome. The history of

financial institutions also reveals the fact that the biggest banking failures were due to

credit risk.

34

CHAPTER II : PROJECT DETAILS

35

2.1: CHAPTER SUMMARY

This chapter explains the project brief, purpose and scope of the project and project

constraints.

PROJECT BRIEF: The project brief explains the meaning of Non-Performing

Assets (NPAs) and the steps taken by the Reserve Bank of India and Government

of India to solve the problem of increasing NPAs. This chapter also explains as to

why the problem of Non-Performing Assets still persists even after the efforts of the

Reserve Bank of India and Government of India. The objective of the study is also

covered under the same heading.

PURPOSE AND SCOPE OF STUDY: The purpose and scope of the study

has been sub divided into the following topics:

(A) PROBLEM DIAGNOSIS: The entire banking industry is seriously affected by

the high incidence of NPAs. NPAs are a drag on the bank’s balance sheet.

(B) RESEARCH METHODOLOGY: Under this topic the research design and

the types of data are explained.

(C) PROCEDURE FOR DATA COLLECTION: For the collection of data

internal sources like year end files, balance sheet, meetings and conferences with

the bank executives were held. External data was collected through sources like

internet and periodicals.

PROJECT CONSTRAINT: There were only challenges, no major constraints

was encountered in the project study.

36

2.2 PROJECT BRIEF

37

2.2: PROJECT BRIEF

Non-Performing Assets (NPAs) of banks are the loans which are unlikely to be

paid. This means either interest or principle payments have been outstanding on these

loans for more than 90 days. An asset is termed as NPAs when:

LOANS : Treated as NPAs if interest and/or principal remain overdue for a period of

more than 90 days.

CASH CREDIT/OVERDRAFT : To be treated as NPAs if it remains “out of order “for

90 days.

BILLS PURCHASED/DISCOUNTED : Treated as NPAs if it remains overdue for a

period of more than 90 days.

AGRICULTURAL LOANS : Interest/instalment of principal remains overdue for two

harvest seasons but for a period not exceeding 2 ½ years.

OTHER ACCOUNTS : Any other credit facility shall be treated as NPAs if any

amount remains overdue for more than 90 days.

Accounts which need not be classified as NPAs are:

Loans on deposits and loans against government securities.

Advance guaranteed by state/central government.

38

In line with Reserve Bank of India (RBI) guide lines from time to time the loans

given by banks are classified as performing and non-performing for the purpose of income

recognition and provisioning. The criteria for classification are:

PERFORMING/STANDARD ASSETS: Loans in respect of which interest and

principal are received regularly are called standard or performing assets. Standard assets

also include loans where arrears of interest and/or of principal do not exceed 90 days as at

the end of a financial year. No provision is required for such loans.

NON-PERFORMING ASSETS: According to RBI rules any loan repayment which is

delayed beyond 90 days has to be identified as an NPA. NPAs are further sub-classified

into sub-standard, doubtful and loss assets:

(A) SUB-STANDARD ASSETS: Sub-standard assets are those which are non-

performing for a period not exceeding two years. Also, in cases where the loans

repayment is rescheduled, RBI has asked banks to recognise the loans as sub-standard at

least for one year.

(B) DOUBTFUL ASSETS: Loans which have remained non-performing for a period

exceeding two years and which are not considered as loss asset. A major portion of

assets under this category relate to ‘sick’ companies referred to the Board for Industrial

and Financial Reconstruction (BIFR) and awaiting finalisation of rehabilitation packages.

(C) LOSS ASSETS: A loss asset is one where loss has been identified but the amount

has not been written off wholly or partly. In other words, such an asset is considered

uncollectible except for some salvage value.

39

PROVISIONS- The Reserve Bank of India has laid down provisioning rules for the Non-

Performing Assets. This means banks have to set aside a portion of their funds to

safeguard against any losses incurred on impaired loans. As and when an asset is

classified as an NPA, the bank has to further sub-classify it into sub-standard, loss and

doubtful assets. Based on this classification, banks make the necessary provision against

these assets.

In case of loss assets, guidelines specifically require that full provision for the

amount outstanding should be made by the concerned bank. This is justified on the

grounds that such an asset is considered uncollectible and cannot be classified as

bankable asset.

Also in case of doubtful assets, guidelines requires the bank concerned to provide

entirely the unsecured portion and in case of secured portion an additional provision of

20% to 50% of the secured portion should be made depending upon the period for which

the advances has been considered as doubtful.

In case of a sub-standard asset, a general provision of 10% of total outstanding

should be made.

NPAs can be classified into two types.

GROSS NPAs: Total of all the non performing assets from the total advances

NET NPAs: Gross NPAs minus Provisions.

40

STEPS TAKEN TO REDUCE NON-PERFORMING ASSETS

An effective solution to the huge rate of NPAs for long eluded the Indian financial

sector. Among the many routes that were pursued to deal with the accumulating bad-debt

legacy, there were some that received special attention.

The first and most obvious route was the restructure of existing loans and advances

so as to reduce the burden of payment and extend the dead line faced by borrowers so

that they could revive themselves. Such restructuring involved some temporary sacrifice

on the part of the banks aimed at encouraging revival of the afflicted unit.

The second was to set aside potential profits as provisions for bad assets. Banks

have gone part of the way in this direction. The cumulative provisions against loan losses

of the public sector banks worked out to be 42.5% of gross NPAs for the year that ended

31st March 2002.

The third was infusion of capital by the government into public sector banks. It is

estimated that the government had already injected a massive Rs 20,446 crore towards

recapitalization of public sector banks till end march 1999 to help them fulfil the new

capital adequacy norms which involved large sums of tax payer’s money.

The other step taken by RBI and the government of India was establishment of

DEBT RECOVERY TRIBUNALS to deal with defaulting borrowers accounts of

above Rs 10 lakh. This tribunal was established in 1993.

41

RECOVERY OF DEBT DUE TO BANKS AND FINANCIAL

INSTITUTION ACT 1993 was a welcome step taken by the legislature in ensuring

speedy recovery of bank dues. Civil courts had come to the conclusion after decades of

reviewing case laws, that in almost all cases in the litigation instituted by banks and

financial institutions there is hardly any defence and that the delay in disposal of the cases

in the court is not due to the fault of banks or financial institutions. The rationale behind the

Act is that the civil courts are burdened with diverse types of cases. Recovery of dues due

to the banks and financial institutions is not given any priority by the civil courts. The banks

and financial institutions like any other litigants have to go through a process of pursuing

the cases for recovery through civil courts for unduly long period.

The committee of financial system chaired by Shri Narasimham in its report to the

ministry of finance, Government of India in 1991 endorsed the views for setting up special

legislation and special tribunals to expedite the recovery process in the financial sector.

Thus came the Recovery of Debt due to Banks and Financial Institutions Act, 1993.

The other main step taken was the SECURITISATION AND

RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF

SECURITY INTEREST ACT, 2002.The financial sector has been the key drivers in

India’s efforts to achieve success in rapidly developing its economy. While the banking

industry in India is progressively complying with the international prudential norms and

accounting practices, there are certain areas in which the banking and financial sector do

not have a level playing field as compared to other participants in the financial markets in

the world. There was no legal provision for facilitating securitisation of financial assets of

banks and financial institutions. Further unlike international banks, the banks and financial

institutions in India did not have power to take possession of securities and sell them

without the intervention of the courts of law.

Our existing legal framework relating to commercial transactions has not kept pace

with the changing commercial practices and financial sector reforms. This has resulted in

slow pace of recovery of defaulting loans and mounting levels of Non-Performing Assets of

banks and financial institutions.

42

Narasimham Committee I and II and Andhyarujina Committee constituted by central

government for the purpose of examining banking sector reforms have considered the

need for change in the legal system in respect of these areas. These committees, inter

alia, suggested enactment of a new legislation for securitisation and empowering banks

and financial institutions to take possession of the securities and to sell them without the

intervention of the court. Acting on these suggestions, the Securitisation and

Reconstruction of Financial Assets and Enforcement of Security interest Ordinance, 2002

was promulgated on 21st June, 2002 to regulate securitisation and reconstruction of

financial assets and enforcement of security interest and for matters connected therewith

or incidental thereto. The provisions of the Ordinance would enable banks and financial

institutions to realise long term assets, manage problem of liquidity, asset liability

mismatches and improve recovery by exercising powers to take possession of securities,

sell them and reduce Non–Performing Assets by adopting measures for recovery or

reconstruction.

The other significant step was the establishment of ASSET

RECONSTRUCTION COMPANIES in which the power granted by the ordinance to

original lenders would be applicable to Asset Reconstruction Companies (ARC) which

would be set up to recover loans. The ARCs would buy the loans from the original lender

at a discount. This would help free funds for lending and with ARCs focusing on recovery

alone lenders would find their books much cleaner.

The other significant steps taken by RBI and government of India were as follows :

(A) Lok Adalats were permitted to deal with smaller loans upto Rs 10 lakh.

(B) RBI also permitted the banks to form policy for non-discriminatory and non-

discretionary one time settlement for early recovery of NPAs.

(C) Issued guidelines on Corporate Debt Restructuring (CDR), which are not

coming under the purview of DRT and Board for Industrial and Financial Reconstruction

(BIFR).

43

(D) Set up Credit information Bureau of India in January 2001 by the SBI in

collaboration with HDFC Ltd. and Trans Union International Inc. for curbing the growth of

NPAs.

RBI has also come down heavily on wilful defaulters. So far, it has only published

details of such defaulters to caution lenders. Now, the Central Bank has barred wilful

defaulters from getting further loans from scheduled commercial banks, development

financial institutions, government owned NBFC’s and investment institutions for five years

from the date of being classified a wilful defaulter. In case of companies, RBI has ordered

that directors on the board of defaulting companies should not be allowed on the board of

any company in which the financial institution concerned has a stake. This step should

take care of any circumvention of penal action by the directors by moving to other

companies.

The above measures spell a healthier balance sheet and bottom-line for banks.

Due to these steps taken the economic survey spelt good news for the banking industry

with the net Non-Performing Assets level dropping to 1.2% during fiscal year 2003-04 as

against 1.9% in the previous year.

44

THE PROBLEM STILL PERSISTS

Fourteen of the largest and major banks were nationalised in 1969 and Non–

Performing Assets figure were Rs 70,000 crore in year 2001-02 within the period of 23

years. The banks had to file a suite against their customers in civil court and after decision

of trial court there was an appeal in the high court. The banks practically did not recover

their dues. The government after 23 years had established Debt Recovery Tribunal for the

banks in 1993. The exclusive jurisdiction of the Debt Recovery Tribunal was not sufficient

remedy to recover the dues of the banks promptly for the debtors of the banks.

The Central Government has taken 32 years to pass an Act “Securitisation and

Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 “. The

Act enables the setting up of assets management companies, addressing the problems of

Non-Performing Assets of banks and financial institutions and enhancing rights of the

creditors.

This is a classic case where Reserve Bank of India, State Bank of India and other

Banks and the Central Government did not apply their minds to find out the right remedy to

recover dues in time. Due to delay in finding out a remedy Non-Performing Assets have

increased to Rs 1, 10,000 crore at the end of year 2004-05.

There are number of other instances which can be given where decisions are not

taken at proper time, which has resulted in enormous loss of public money.

The issues relating to definitions, management or mismanagement and

recommendations calling for spectacular solutions to the problem of Non-Performing

Assets of banks are being deliberated at frequent intervals during a decade or so. It all

started in the late 80’s the concept of classification of banks advances in several health -

code categories though the terminology of NPAs was not existent at that time. This

followed, in early 90’s, with Anglo-American model of categorisation of bank lending

portfolio in several blocks of nomenclature that includes the NPAs.

45

The opening up of the Indian economy and consequent pressure from western

powers to influence our banking system in the name of international standards of

accounting, congruence of banking supervision by Basle Committee, and so on has also

contributed in a big way in formulation of the banking policies in the last decade.

The sudden shock of guidelines relating to Non-Performing Assets and

simultaneous standard of income recognition made the Indian banking system totter and a

number of public sector banks started incurring losses from mid-nineties. Then came the

recommendation of the Narasimham Committee with the proposition of creating asset

reconstruction fund for cleaning the balance sheets of the banks of Non-Performing

Advances as a one-time measure. For reasons best known to the government and the

Central Bank, it remained a non-starter.

The latest two developments in this regards are more perplexing. The reported

recommendation by the sub-committee of Confederation of Indian Industry (CII) for closure

of weak banks plagued by the serious problem of Non-Performing Assets (later withdrawn

by them) and now the apparent move to form corporate debt recast body modelled on the

Corporate Debt-Recast Advisory Committee( CDRAC) of the bank of Thailand.

A critical analysis of the chronology of event described above leads to certain

definite conclusions. First, the entire process of definition and classification of Non–

Performing Advances of the banking system was a blind copy of the Anglo-American

system.

Second, it was adopted by the regulators in India as an integral part of the overall

liberalisation of the financial system in terms of the Uruguay round of conference of GATT

and, therefore, merely as a tool given to be implemented and not to be debated.

Third, that the implication of implantation of an idea from foreign source to the

domestic soil might be hazardous to the survival of the system itself was not given an

adequate consideration.

46

Fourth, both the government and the Reserve Bank of India did not possibly make

either the system i.e., the financial markets in general or the players i.e., the banks,

particularly the domestic state-owned ones, ready in terms of financial as well as human

resources that could counter such a swift move to bring the system totally open and

transparent in terms of global standards.

Fifth, the remedial measures were neither effective nor implemented with full

commitment. These were piecemeal in nature and lacked holistic approach. Some never

saw light of the day like Asset Reconstruction Fund (ARF).

Sixth, the mandatory provisions of classification coupled with absence of effective

counter–measures made the system totally vulnerable and possible beyond management.

NPAs mounted to around Rs 1, 10,000 crore as at the end of 2004-05, being

approximately 16% of total credit much beyond that of international average.

Seventh, these frightening figures made the recently government -appointed bodies

like Verma panel, etc, to come out with extreme measures like Voluntary Retirement

Scheme(VRS) for the staff without understanding the social insurance and aspects thereof

in a country like India that does not have any social insurance including medical benefit

scheme. No doubt automation and the gradual transformation into e-banking did call for

certain amount of restructuring in human resources, but then that is no excuse for alluring

the staff for an apparently attractive looking VRS.

Eight, once NPAs do come into existence, the problem can be solved only if there

is enabling legal structure, since recovery of NPAs often require litigation and court orders

to recover stuck loans. With long winding litigation in India, debt recovery takes a long

time. To that extant it is to be appreciated that even though late, the enactment of

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest

Act, 2002 is an experiment that may lead to better and suitable legislation in management

of NPAs.

47

Another reason for lower NPAs has been reluctance on the part of public sector

bank to recognise bad loans as non performing assets. Instead they have tended to resort

to restructuring or even “ever greening” which refers to defaulters obtaining new loans so

that they can repay existing debt and be counted as good customers.

This year most banks have initiated drive to clean up their balance sheet. A

reduction in net NPAs does not necessarily imply that some of the loans have been

unexpectedly recovered. It just means that capital or profit have been set aside as a cover

for these bad loans. Though several banks meet the crucial criteria concerning NPAs in

the new RBI diktat, they are not overly enthusiast by the turn of events and play down the

significance of zero net NPAs which actually means that the provisions cover 100 percent.

They have been able to enhance provisions for bad loans because of windfall profits that a

plunge in interest rates bestowed on them.

OBJECTIVE OF THE STUDY

48

The major objective of the study is to study the incidence of Non-Performing Assets

(NPAs) in the banking sector as a whole. It can help in identifying the reasons and causes

of this major problem faced by banks today. An important parameter in the analysis of

financial performance of banks is the level of NPAs.

The study was conducted in Syndicate Bank (Main branch) and to widen the scope

of study and for comparative analysis performance of Syndicate bank (Trivandrum region)

was taken as a whole.

The study will be of much help to the NPA monitoring Cell of Syndicate Bank,

Regional Office, Trivandrum and may help authorities in the close supervision and follow

up of accounts coupled with comprehensive risk assessment, which will help curtail the

NPAs. Moreover, the deployment of funds shall be made after proper evaluation of the

opportunities and their due application would result in better credit management. Timely

detection of problem loan accounts, initiation of immediate and appropriate action and

close monitoring can prevent their slippage into the NPA category and go a long way in

curtailing growth of NPAs

Maximizing the NPA recoveries will ensure minimizing the losses to the bank and

bring about net reduction in NPAs. Further, various suggestions to improve the recovery,

obtained from the authorities, if implemented successfully, can solve NPA problem to a

great extent. The study can help in analysing the reasons for default. It can also help in

identifying the group/sector where the incidence of default occurs more. The study can be

of much help in identifying the number of NPAs scheme wise.

49

2.3 PURPOSE AND SCOPE OF STUDY

50

2.3.1 PROBLEM DIAGNOSIS

2.3.1: PROBLEM DIAGNOSIS

51

Management of Non-Performing Assets (NPAs) assumes added importance in the

current scenario of low spread and the credit off-take does not adequately compensate for

fall in average yield on advances.

The entire banking industry has been seriously affected by the high incidence of

NPAs and if the banks are not in a position to arrest and reverse this trend, it will snowball

into a crisis in the industry crippling the economy itself. In response to this situation,

several initiatives have been taken to release huge amounts holed up in this manner.

NPAs are a drag on the bank’s balance sheet as they affect yield on advances,

return on assets and substantially reduce the earning capacity of assets. They are in the

nature of dead weight for the bank, as they make no contribution to the earnings, yet

adversely affect the Capital Adequacy Ratio. Moreover, the net profit is also lowered to the

extent of provisioning required. The carrying cost of NPAs is nearly 11% which consists of

cost of capital adequacy, cost of funds blocked and operating costs.

After the nationalisation of banks, increasing adoption of technology, continuous

mergers in the banking, modernising, backroom operation in the banks and competition

paved the path of growth of Indian banking. By the mid 1990, the near monopoly of Public

Sector Banks faced the competition by the more customer-focused private sector entrants.

This competition forced older and nationalised banks to revitalise their operations. Year

1992 was the golden period of Indian banking system due to the scam-tainted stock

market. Large proportion of household saving moved into the banking system, which

recorded an annual growth of 20% in deposit. However, along with the continuous growth

and modernisation, there are several challenges confronting the banking sector.

The main challenges facing the banking sector are the deployment of funds in

quality assets and the management of revenue and cost. The problem of NPAs and

overall credit recovery system still exists. There is continuous reforms and modernisation

in process. A number of recommendations of two Narasimham Committees have been

52

implemented. Foreign banks focuses on corporate and on the middle class consumers by

providing them with better service. Nationalised banks are also attempting to get on the

path of automation. Strong banks will acquire the weaker banks. The number of foreign

banks operating in India has increased significantly and their share of total assets has

increased. In the year 2001 foreign banks accounted for 14.7% of the total net profit of

commercial banking sector in India. Inspite of tangible progress and the contribution of

Narasimham Committee reports, the banking sector in India is suffering from systematic

and structural problems.

Non-Performing Assets is a real concern of any bank and keeping it under check is

a challenge to bank management.

53

2.3.2 RESEARCH METHODOLOGY

2.3.2: RESEARCH METHODOLOGY

RESEARCH DESIGN

54

DESCRIPTIVE STUDIES

Descriptive studies are undertaken in many circumstances. When the researcher is

interested in knowing the characteristics of certain groups such as age, sex, educational

level, occupation or income, a descriptive study may be necessary. Other cases when a

descriptive study could be taken up are when the researcher is interested in knowing the

proportion of people in a given population who behaved in a particular manner. This type

of study is also for making projections a certainty; or determining the relationship between

two or more variables. The objective of such study is to answer the “Who, What, When,

Where and How “of the subject under investigation.

There is a general feeling that descriptive studies are factual and are very simple.

This is not necessarily true. Descriptive studies can be complex, demanding and need a

high degree of scientific skill on the part of the researcher.

Descriptive studies are well structured. An exploratory study needs to be flexible in

its approach, but a descriptive study, in contrast, tends to be rigid and its approach cannot

be changed every now and then. It is therefore necessary that the researcher give

sufficient thought to framing research questions and deciding the types of data to be

collected and procedure to be used for this purpose.

NATURE OF DATA

There are two different types of data available in a broad classification. They are:

55

Primary Data

Secondary Data

PRIMARY DATA: Those data, which are collected first hand, either by the researcher or

by someone else especially for the purpose of the study is known as primary data.

SECONDRY DATA: Any data, which was gathered earlier for some other purpose, are

secondary data in the hand of the researcher.

SOURCES OF SECONDRY DATA

Secondary data can be obtained

Internally, i.e. within the firm. Internal secondary data are those which are

generated within the firm through accounting records, internal reports etc.

Externally, i.e. from one or more outside agencies. Various sources of secondary

data are government publications, non–publications, syndicated services,

publications of internal organizations etc.

COMMUNICATION METHOD

This method in effect is the method for designing questionnaires with a view to

collect the requisite information. The questionnaires can be classified into four types:

56

1. Structured – Non – disguised

2. Structured – Disguised

3. Non – Structured – Non – Disguised

4. Non – Structured – Disguised

A structured questionnaire is a formal list of questions framed so as to get the facts.

The interviewer asks the questions strictly in accordance with a pre–arranged order. A

structured questionnaire can be of two types, namely, disguised and non–disguised. This

classification is based on whether the object or purpose of the survey is revealed or

undisclosed to the respondent. Thus, a structured–non–disguised questionnaire is one

where the listing of questions is in a prearranged order and where the object of enquiry is

revealed to the respondent. In case of a structured–disguised questionnaire, the

researcher does not disclose the object of the survey.

A non–structured questionnaire is one in which the questions are not structured and

the order in which they are to be asked from the respondent is left entirely to the

researcher. He asks the questions in a manner, which he feels, fits in a particular

situation.

57

2.3.3 PROCEDURE FOR DATA COLLECTION

2.3.3: PROCEDURE FOR DATA COLLECTION AND

ANALYSIS

The data collected is DESCRIPTIVE in nature and is in the form of SECONDARY

DATA. The data was collected through internal sources like year end files of the bank and

58

also through external source like the internet. Data collection was also in the form of

personal contact with the officials at Syndicate bank (Main Branch) and Syndicate bank

(Regional Office), Trivandrum.

From Syndicate bank (Main Branch) the data collected was through NON-

STRUCTURED-NON-DISGUISED communication method.

On the basis of data collected from Syndicate bank (Main Branch) a questionnaire

was formed in the form on STRUCTURED-NON-DISGUISED communication method.

This questionnaire was used for data collection purpose from Syndicate bank (Regional

Office) for data relating to status of Non–Performing Assets in Trivandrum Region

(Appendix- A).

59

2.4 PROJECT CONSTRAINTS

2.4: PROJECT CONSTRAINTS

Constraints faced during the project study are:

Collection of some data of confidential nature was not possible.

Required data with complete details at all India level for comparative study and

analysis was not available.

60

61

CHAPTER III : COLLECTION AND ANALYSIS OF INFORMATION

3.1: CHAPTER SUMMARY

Data pertaining to the Non Performing Assets in Syndicate Bank Trivandrum for

financial years 2003-2004 and 2004-2005 was collected, compiled and analysed under

two main categories. These are the Priority Sector and Non Priority Sector. The summary

of loans and advances given, NPAs and Provisions are given below:

GROSS LOANS AND ADVANCES

Total Advances ( Rs Total NPAs ( Rs in Total Provisions

62

in crore) crore)

2003-04 2004-05 2003-04 2004-05 2003-04 2004-05

Trivandrum

Region

364.05 480.63 25.15 32.43 35.14% 46.23%

Main

Branch

133.25 149.51 3.70 3.69 33.83% 79.68%

PRIORITY SECTOR

Total Advances (Rs

in crore)

Total NPAs (Rs in

crore)

Total Provisions

2003-04 2004-05 2003-04 2004-05 2003-04 2004-05

Trivandrum

Region

133.91 188.86 17.80 19.19 30.58% 46.23%

Main

Branch

3.02 3.26 1.32 1.41 18.65% 70.12%

NON-PRIORITY SECTOR

Total Advances (Rs

in crore)

Total NPAs (Rs in

crore)

Total Provisions

2003-04 2004-05 2003-04 2004-05 2003-04 2004-05

Trivandrum

Region

230.13 291.77 7.34 13.24 60.56% 46.24%

Main

Branch

130.23 146.24 1.78 1.94 38.68% 100%

A comparative analysis of the data pertaining to the entire Trivandrum Region and

Syndicate bank Main branch is also given in this chapter.

63

3.2 DATA COLLECTION AND ANALYSIS

64

3.2: DATA COLLECTION AND ANALYSIS

For the purpose of analysis, data was collected relating to Non-Performing Assets

from Syndicate bank (Main Branch).

In order to widen the research, data was collected pertaining to the bank’s

performance in relation to Non-performing Assets (NPAs) through out Trivandrum Region

from Syndicate bank (Regional Office).

The bank deals with two categories of loans and advances which are:

Priority Sector

65

Non-Priority Sector

PRIORITY SECTOR - Following schemes of loans and advances fall under priority

sector:

Agriculture Loans

Small Scale Industries (SSI) Loans

Small Road Transport Operators Loans

Retail Trade Loans

Small Business Loans

Professional & Self Employed Loans

Education Loans

Housing Loans

Other Priority Sector Loans

NON – PRIORITY SECTOR - Following schemes of loans and advances fall

under Non - Priority sector:

Whole Sale Trade Loans

Medium & Large Industries Loans

Banks Loans

Non-Banking Financial Institution Loans

66

Other Public Sector Units Loans

Housing loans Under Staff Schemes

Housing Loans

Loans For Consumer Durables

Other Personal Loans Under Personal Banking Schemes

Credit Card Receivables

Loans To Automobiles

All Other Loans under non-priority sector

The bank also deals in government schemes which are directed in nature. This

means that the bank is directed by the government to allocate loans under government

scheme.

The data was acquired on the basis of last two financial years 2003-2004 and 2004-

2005.

From Syndicate Bank (Main branch) the total amount of advances was Rs 133.25

crore for the financial year 2003-04 with Rs 3.02 crore under Priority Sector and Rs 130.23

crore under Non-Priority Sector. For the financial year 2004-05 the total amount of

advances increased to Rs 149 .51 crore with Rs 3.26 crore under Priority Sector and Rs

146.24 crore under Non-Priority Sector.

67

As far as Trivandrum Region is concerned the total amount of advances was Rs

364.05 crore for the financial year 2003-04 with Rs 133.91 crore under Priority Sector and

Rs 230.13 crore under Non-Priority sector.

While in the financial year 2004-05 the total amount of advances increased to Rs

480.63 crore with Rs 188.86 crore under Priority Sector and Rs 291.77 crore under Non-

Priority Sector.

The highest amount of loans and advances for the year 2003-04 was allocated to

housing loans under Trivandrum Region amounting to Rs 48.06 crore. For Main Branch

the highest amount of loans and advances in the same financial year was given to other

personal loans under personal banking schemes amounting to Rs 2.91 crore.

Continuing the same trend in the year 2004-05 also, the highest amount of loans

and advances was allocated to housing loans under priority sector under Trivandrum

Region amounting to Rs 83.51 crore. For Main Branch the highest amount of loans and

advances was given to other personal loans under banking schemes amounting to Rs

2.21 crore.

The lowest amount of loans and advances for the year 2003-04 was allocated to

Large and Medium Scale Industries under Trivandrum Region amounting to Rs 1.57

crore. From Main Branch the lowest amount of loans and advances was given to Small

Road and Transport Operators amounting to Rs 56,000.

In the financial year 2004-05 the lowest amount of advances came under Small

Road and Transport Operators for Trivandrum Region as well as Main Branch amounting

to Rs 1.90 crore and Rs 31,000 respectively.

Along with advances the amount of total Non-Performing Assets increased to Rs

32.43 crore for year 2004-05 from Rs 25.15 crore in financial years 2003-04 under

Trivandrum Region. However percentage wise the Non-Performing Assets have

decreased from 6.90% in 2003-04 to 6.74% in 2004-05.

68

But on the other hand for the Main Branch the total advances increased from Rs

133.25 crore to Rs 149.51 crore from 2003-04 to 2004-05. But unlike Trivandrum Region

the amount of Non-Performing Assets (NPAs) decreased from Rs 3.70 crore to Rs 3.69

crore respectively.

This shows that the Main Branch was able to keep a check on NPAs in 2004-05. It

should also be noted that the amount of Non-Performing Assets was Rs 2.14 crore for the

year 2002-03 which increased by 72% to Rs 3.70 crore in the next financial year 2003-04.

This drastic increase shows that the bank was unprepared to handle the increase in

NPAs which was to an amount of Rs 1.3 crore. However credit should be given to the

bank for reversing the trend in 2004-05.

This is not the case with Trivandrum Region which though shows a decrease

percentage wise of Non–Performing Assets but amount wise there was an increase of Rs

7.28 crore in 2004-05. This shows that unlike the Main Branch few branches of Syndicate

Bank all over Trivandrum could not keep a check of their Non-Performing Assets.

The total incidence of Non-Performing Assets of Trivandrum Region and Main

Branch is represented by the bar charts shown below:

GROSS NPAs

69

2003-04 2004-05

Trivandrum Region 6.90% 6.74%

Main Branch 2.78% 2.47%

TOTAL ADVANCES VS. NPAs

Total Advances ( Rs

in crore)

Total NPAs ( Rs in

crore)

Total Provisions

2003-04 2004-05 2003-04 2004-05 2003-04 2004-05

Trivandrum

Region

364.05 480.63 25.15 32.43 35.14% 46.23%

Main

Branch

133.25 149.51 3.70 3.69 33.83% 79.68%

As discussed, the above figure shows that though percentage wise the Gross

NPAs have reduced it has increased amount wise by 28.94% in Trivandrum Region unlike

Main Branch, where the percentage as well as the amount of NPAs has reduced. The

bank has made better provisions also.

PRIORITY SECTOR

70

2003-04 2004-05

Trivandrum Region 13.29% 10.16%

Main Branch 4.2% 3.8%

TOTAL ADVANCES VS. NPAs IN PRIORITY SECTOR

Total Advances (Rs

in crore)

Total NPAs (Rs in

crore)

Total Provisions

2003-04 2004-05 2003-04 2004-05 2003-04 2004-05

Trivandrum

Region

133.91 188.86 17.80 19.19 30.58% 46.23%

Main

Branch

3.02 3.26 1.32 1.41 18.65% 70.12%

71

If a close analysis of the graph above is made we find that the initial NPAs level

in both Trivandrum Region and Main Branch were low amount wise and went on to

increase in the financial year 2004-05 by 7.805 for Trivandrum Region and 6.815 for Main

Branch. On the other hand it can be seen that as compared to total advances the

percentage of NPAs have reduced. As far as provisions are concerned the percentage has

improved over the last two years.

NON- PRIORITY SECTOR

72

2003-04 2004-05

Trivandrum Region 3.19% 4.53%

Main Branch 1.36% 1.33%

ADVANCES VS. NPAs IN NON-PRIORITY SECTOR

Total Advances (Rs

in crore)

Total NPAs (Rs in

crore)

Total Provisions

2003-04 2004-05 2003-04 2004-05 2003-04 2004-05

Trivandrum

Region

230.13 291.77 7.34 13.24 60.56% 46.24%

Main

Branch

130.23 146.24 1.78 1.94 38.68% 100%

As shown in the diagram the NPAs in Non-Priority Sector in Main Branch has

increased amount wise by 8.98%but reduced percentage wise as was in the case of

73

priority sector. On the other hand the NPAs have increased in the Trivandrum Region both

amount wise and percentage wise.

It should be noted that comparing both the figures it can be seen that the

Trivandrum Region and Main Branch has higher percentage of NPAs in Priority Sector as

compared to the non-priority sector.

The scheme wise analysis of Priority sector is shown below with the help of bar charts and

figures.

AGRICULTURE

74

2003-04 2004-05

Trivandrum Region 10.68% 6.28%

Main Branch - -

ADVANCES VS. NPAs: AGRICULTURE SECTOR

Total Advances ( Rs

in Crore)

Total NPAs ( Rs in

crore)

Total Provisions

2003-04 2004-05 2003-04 2004-05 2003-04 2004-05

Trivandrum

Region

27.28 32.44 2.80 1.97 37.68% 55.13%

Main

Branch

- - - - - -

The percentage of NPAs in agriculture loans has reduced in Trivandrum Region. It

should be noted here that the provisions for NPAs also improved. Main branch did not

allocate advances towards agriculture loans for last two financial years.

75

SMALL SCALE INDUSTRIES(SSI)

2003-04 2004-05

Trivandrum Region 37.92 % 31.90%

Main Branch 90.80% 78.17%

ADVANCES VS. NPAs: SSI

Total Advances (Rs

in crore)

Total NPAs (Rs in

crore)

Total Provisions

2003-04 2004-05 2003-04 2004-05 2003-04 2004-05

Trivandrum

Region

15.63 18.74 5.93 5.98 42.50% 54.37%

Main

Branch

1.39 1.62 1.27 1.26 41.65% 70.26%

Here the analysis shows that there is high incidence of NPAs under Main Branch

during financial year 2003-04. This has reduced in financial year 2004-05 and the

provisions have also improved from 41.65% to 70.26%. It should be noted that the Main

Branch has not followed the same trend as Trivandrum Region which has shown an

improvement in the percentage of NPAs. The main point to notice here is that though

76

Trivandrum Region has improved its NPAs percentage wise, amount wise it has increased

by 0.83%. It is noticeable that there is lower percentage of NPAs in Main Branch.

SMALL ROAD TRANSPORT

2003-04 2004-05

Trivandrum Region 33.17% 25.91%

Main Branch 100% 100%

ADVANCE VS. NPAs: SMALL ROAD TRANSPORTS

Total Advances ( Rs

in crore)

Total NPAs (Rs in

crore)

Total Provisions

2003-04 2004-05 2003-04 2004-05 2003-04 2004-05

Trivandrum 1.87 1.90 0.6217 0.4931 48.77% 62.38%

77

Region

Main

Branch

0.005626 0.003149 0.005626 0.003149 60.89% 76.18%

As it can be seen clearly that the incidence of NPAs in Main Branch is very high

though the amount of advance allocated each year is low compared to the other schemes.

The amount of NPAs reduced from Rs56.26 thousand in 2003-04 to Rs 31.49 thousand in

2004-05. On the other hand the amount of NPAs in Trivandrum Region is much more than

Main Branch though the percentage is comparatively low because of the high amount of

advances. The provisions have improved in both Main Branch and Trivandrum Region.

RETAIL TRADE

78

2003-04 2004-05

Trivandrum Region 16.12 % 17.95 %

Main Branch 8.55% 37.90%

ADVANCES VS. NPAs: RETAIL TRADE

Total Advances (Rs

in crore)

Total NPAs (Rs in

crore)

Total Provisions

2003-04 2004-05 2003-04 2004-05 2003-04 2004-05

Trivandrum

Region

23.70 24.94 3.82 4.47 31.34% 46.77%

Main

Branch

0.3345 0.2343 0.0286 0.0888 53.61% 73.46%

The analysis shows that there was a high increase in the percentage of NPAs in the

Main Branch. This can be due to the reason that there was a reduction in the amount of

advances given by 29.94%. It is also seen that the coverage through provisions has

improved. In the same way the percentage of NPAs in Trivandrum Region has increased.

Unlike Main Branch the total advances increased in Trivandrum Region by 5.23%.

SMALL BUSINESS

79

2003-04 2004-05

Trivandrum Region 21.81% 21.90%

Main Branch 24.11% 21.00%

ADVANCE VS. NPAs: SMALL BUSINESS

Total Advances (Rs

in crore)

Total NPAs Total Provisions

2003-04 2004-05 2003-04 2004-05 2003-04 2004-05

Trivandrum

Region

5.17 6.53 1.12 1.43 37.95% 46.33%

Main

Branch

0.0296 0.0713 0.007163 0.0149 26.93% 91.01%

The percentage of NPAs has reduced in Main Branch but the amount has

increased by 109% from Rs. 71.63 thousand to Rs 1.49 lakh. The total provisions have

improved from 26.93% to 91.01% positively. On the other hand the percentage as well as

the amount of NPAs in Trivandrum Region has increased but the provision coverage has

also improved.

.PROFESSIONAL AND SELF EMPLOYED

80

2003-04 2004-05

Trivandrum Region 27.50 % 27.36%

Main Branch 52.92% 88.24%

ADVANCE VS. NPAs: PROFESSIONAL AND SELF EMPLOYED

Total Advances (Rs

in crore)

Total NPAs (Rs in

crore)

Total Provisions

2003-04 2004-05 2003-04 2004-05 2003-04 2004-05

Trivandrum

Region

5.03 6.29 1.38 1.72 39.65% 43.04%

Main branch 0.0297 0.0298 0.0157 0.0263 l 88.68% 65.53%

Here it can be seen that the percentage of NPAs level in Trivandrum Region

decreased from 27.50% to 27.36% but amount wise increased by 24.03% from Rs 1.38

crore to Rs 1.72 crore. The provisions have also improved. On the other hand the NPAs

level has increased drastically in the Main Branch. It is also noticed that the provision level

has reduced from 88.68% to 65.53%.

EDUCATION

81

2003-04 2004-05

Trivandrum Region 1.04% 1.07%

Main Branch - -

ADVANCE VS. NPAs: EDUCATION

Total Advances (Rs

in crore)

Total NPAs (Rs in

crore)

Total Provisions

2003-04 2004-05 2003-04 2004-05 2003-04 2004-05

Trivandrum

Region

5.20 10.51 0.0545 0.1133 24.43% 41.29%

Main

Branch

0.4209 0.5309 - - - -

Here it can be easily seen that the percentage of NPAs has increased in a minimal

way in Trivandrum Region percentage wise but has almost doubled amount wise from Rs

5.45 lakh to Rs 11.33 lakh resulting in 107.88% increase. The provisions though have

improved.

HOUSING LOAN UNDER PRIORITY SECTOR

82

2003-04 2004-05

Trivandrum Region 4.01% 3.32%

Main Branch - 1.69%

ADVANCE VS. NPAs: HOUSING LOANS

Total Advances (Rs

in crore)

Total NPAs (Rs in

crore)

Total Provisions

2003-04 2004-05 2003-04 2004-05 2003-04 2004-05

Trivandrum

Region

48.06 83.51 1.92 2.77 12.82% 19.67%

Main

Branch

0.7903 0.7664 - 0.0129 l - 19.99%

It is shown here that though the advances decreased in Main Branch there was

occurrence of new NPAs which is covered by just 19.99% of provision. On the other hand

the amount of NPAs increased by 44.27% in Trivandrum Region though percentage wise it

83

came down from4.01% to 3.32%. In Main Branch and Trivandrum Region the percentage

of provision is low.

OTHER PRIORITY SECTOR LOANS

2003-04 2004-05

Trivandrum Region 6.44% 5.58%

Main Branch - 16.17%

ADVANCE VS. NPAs: OTHER PRIORITY SECTOR LOANS

Total Advances (Rs

in crore)

Total NPAs Total Provisions

2003-04 2004-05 2003-04 2004-05 2003-04 2004-05

Trivandrum 1.93 3.97 0.1247 0.2219 12.47% 59.90%

84

Region

Main branch 0.0123 0.009702 - 0.002610 - 60.13%

It is evident in the case above that there were no NPAs in 2003-04 but in 2004-05

the amount increased to Rs 26.10 thousand which is covered by 60% provision. While in

the Trivandrum Region the NPAs has increased amount wise by 77.94% though the

percentage reduced from 6.44% to 5.58% and the provision has improved from 12.47% to

59.90%.

The following figures show few of the main schemes in Non - Priority Sector

WHOLE SALE

85

2003-04 2004-05

Trivandrum Region 1.50% 4.34%

Main Branch - -

ADVANCE VS. NPAs: WHOLE SALE

Total Advances (Rs

in crore)

Total NPAs (Rs in

lakh)

Total Provisions

2003-04 2004-05 2003-04 2004-05 2003-04 2004-05

Trivandrum

Region

3.01 2.39 4.55 10.41 30.00% 9.99%

Main

Branch

- - - - - -

As the figure shows the NPAs have increased in Trivandrum Region. It should be

noted here that the provision diminished from 30% to 9.99%. The Main Branch does not

deal in whole sale schemes.

86

LOANS FOR CONSUMER DURABLES

2003-04 2004-05

Trivandrum Region 9.83 % 14.60 %

Main Branch 21.47% 27.86%

ADVANCE VS. NPAs: LOANS TO CONSUMER DURABLES

Total Advances (Rs

in lakh)

Total NPAs (Rs in

Lakh)

Total Provisions

2003-04 2004-05 2003-04 2004-05 2003-04 2004-05

Trivandrum

Region

93.80 97.98 9.22 14.31 29.92% 36.47%

Main

Branch

5. 68 4.97 l 1.22 1.38 100% 71.14%

From the above analysis it it’s shown that in Main Branch the percentage of NPAs

have increased from 21.47% to 27.86%. Interestingly it is seen that the advances reduced

from Rs 5.68 lakh to Rs 4.97 lakh in 2003-04 and 2004-05 respectively and with this the

provisions also reduced from 100% to 71.14%.

87

In Trivandrum Region similar trend is visible as far as percentage of NPAs is

concerned which has increased. But unlike Main Branch there is increase in total amount

of advances and also improvement in the provisions.

OTHER PERSONAL LOANS UNDER PERSONAL BANKING

SCHEMES(PBS)

2003-04 2004-05

Trivandrum Region 10.13% 12.13%

Main Branch 20.42% 47.99%

ADVANCE VS NPAs: OTHER PERSONAL LOANS UNDER PBS

Total Advances (Rs

in crore)

Total NPAs (Rs in

crore)

Total Provisions

2003-04 2004-05 2003-04 2004-05 2003-04 2004-05

Trivandrum 33.28 62.26 3.37 7.55 25.13% 47.47%

88

Region

Main

Branch

2.91 2.21 0.5947 1.06 13.47% 84.18%

In Main branch the percentage of NPAs is high compared to Trivandrum Region.

The provisions have improved in both Trivandrum Region and Main Branch. However the

total advances decreased by 24.04% in Main Branch.

ALL OTHER LOANS IN NON-PRIORITY SECTOR

89

2003-04 2004-05

Trivandrum region 2.10% 2.72%

Main branch 0.97% 0.83%

ADVANCE VS. NPAs: ALL OTHER LOANS

Total Advances (Rs

in crore)

Total NPAs (Rs in

crore)

Total provisions

2003-04 2004-05 2003-04 2004-05 2003-04 2004-05

Trivandrum

Region

172.56 184.78 3.63 5.02 42.95% 47.28%

Main

Branch

122 143.19 1.18 1.20 56.26% 87.07%

Here it can be seen that during 2003-04 the percentage of NPAs in Main Branch

was lower in comparison to Trivandrum Region and reduced in 2004-05. Though

percentage wise it reduced but amount wise the NPAs increased by 1.69%. The

provisions have improved for both Main Branch and Trivandrum Region.

The following figures show other schemes covered by the bank other than

priority and non – priority sector.

GOVERNMENT SPONSORED SCHEMES

90

2003-04 2004-05

Trivandrum Region 44.64% 39.61%

Main Branch 46.62% 58.37%

ADVANCE VS. NPAs: GOVERNMENT SPONCERED SCHEMES

Total Advances (Rs

in crore)

Total NPAs (Rs in

crore)

Total Provisions

2003-04 2004-05 2003-04 2004-05 2003-04 2004-05

Trivandrum

Region

6.36 7.17 2.84 2.84 43.24% 47.73%

Main

Branch

0.042 0.0409 0.0199 0.0239 41.32% 45.65%

As mentioned before government loans are directed loans which the bank has to

pay to the various classes of society covered under the schemes specially the

unemployed, poor and also for relief funds. This is the main reason of high NPAs in

government schemes as the customers are not in a position to pay back. In the Main

91

Branch the percentage as well as the amount of NPAs has increased while in Trivandrum

Region in totality have managed to keep the level low.

LOANS TO THE WEAKER SECTIONS

2003-04 2004-05

Trivandrum Region 17.33% 14.94%

Main Branch - -

ADVANCE VS. NPAs: LOANS TO WEAKER SECTION

Total Advances ( Rs

in crore)

Total NPAs (Rs in

crore)

Total Provisions

2003-04 2004-05 2003-04 2004-05 2003-04 2004-05

Trivandrum

Region

10.47 19.62 1.81 2.93 35.14% 44.77%

92

Main

Branch

- - - - - -

It should be noted down here that unlike government schemes the percentage of

NPAs is low and has reduced over last two years. However amount wise it has increased

from Rs 1.81 crore to Rs 2.93 crore i.e. by 61.86%. The provisions have also improved in

this category of loan.

STEPS TAKEN BY THE BANK TO REDUCE NPAs

As part of the strategy for management of NPAs an ‘early alert system’ has been

put in place by the Bank. This system of monitoring Standard ‘ C ‘ assets has

enabled the Bank in containing fresh slippage of loan assets through appropriate

93

measures including recovery of critical amount, restructure, reschedulement,

rephasement etc.

The Bank has framed a policy for One Time Settlement of NPAs based on a matrix

formula that aims at better negotiation skills, operational flexibility, delegation and

decentralisation of powers. For Trivandrum region in the financial year 2003-04 a

total of 172 accounts involving an amount worth Rs 1.30 crore and for 2004-05 a

total of 169 accounts involving a sum of Rs 9.51 crore were settled through One

Time Settlement. In Main branch Rs 2.01 crore was retrieved under One Time

Settlement for the year 2003-04 which decreased to Rs 7.60 lakh involving

one account in 2004-05.

The bank is utilising the Securitisation and Reconstruction of Financial Assets and

Enforcement of Security Interest (SARFAESI) Act–2002 as an effective tool for

recovery of non-performing assets. In Trivandrum region, defaulters holding

12, 944 accounts were issued notice involving an amount of Rs 89.86 crore in

2004-05 while in Main branch 150 account holders whose accounts were worth Rs

44.56 lakh were issued notice for 2004-05.

In Trivandrum region the total amount of NPAs written off as bad debt was Rs 54.86

lakh in 2003-04 which went on to reduce to Rs 44.95 lakh in 2004-05. In Main

branch Rs 3.56 lakh was written off as bad debt in 2003-04 which again reduced to

Rs 3.75 thousand in 2004-05.

In Trivandrum region Rs 6.24 lakh worth of accounts were upgraded in 2003-04

which increased to Rs 70.26 lakh in 2004-05. On the other hand in Main branch it is

94

seen that for the year 2003-04 there was no up gradation of NPAs to standard

assets but for financial year 2004-05 eight accounts were upgraded involving an

amount of Rs 22.79 lakh.

95

CHAPTER IV : PROJECT FINDINGS AND RECOMMENDATIONS

4.1 CHAPTER SUMMARY

In this chapter conclusion is drawn from the data collected and some recommendations to

reduce the incidence of NPAs are given. Important conclusions are:

The bank was concentrating more on allocating advances under non priority sector

than priority sector.

96

The percentage as well as amount of NPAs is less in non priority sector than

priority sector.

The gross NPAs in Syndicate bank, Trivandrum region increased from Rs 25.15

crore to Rs 32.43 crore during financial year 2003-04 and 2004-05 respectively

whereas during the same period it reduced from Rs 3.70 crore to Rs 3.69 crore in

Syndicate Bank, Main branch.

In terms of the percentage of NPAs it reduced from 6.90% to 6.74% in Trivandrum

region and from 2.78% to 2.47% in Main branch.

The major reasons for the NPAs are:

Failure of business units due to change in technology, demand pattern, cost and

time over runs.

Improper risk assessment and monitoring system.

Wilful default.

Political and government interference in the working of the banking system.

Diversion of funds by the borrowers and inefficient management.

Major recommendations are:

The bank should concentrate more on priority sector.

Resorting to stringent deterrents for non payment.

Speedy recovery process.

Resorting to restructuring under corporate debt scheme.

97

Selling of assets to Assets Reconstruction Company.

Appointing Recovery agents.

Enhance the quality of credit appraisal system.

Identifying potential NPA accounts before it actually occurs.

4.2 CONCLUSIONS DERIVED FROM DATA ANALYSIS

98

4.2: CONCLUSIONS DERIVED FROM DATA ANALYSIS

The total loans and advance from Syndicate bank (Main Branch) increased from

Rs 133.25 crore in financial year 2003-04 to Rs 149.51 crore in financial year 2004-05 by

12.20 %. On the other hand the total advances given by Syndicate bank (Trivandrum

Region) increased from Rs 364.05 crore to Rs 480.63 crore by 32.02% in the same period.

This shows that there has been positive growth in total advances over the last two years

though under Trivandrum region the growth was more as compared to Syndicate bank

(Main Branch).

99

The Gross Non-Performing Assets (NPAs) of Syndicate Bank (Main Branch)

reduced from Rs 3.70 crore to Rs 3.69 crore by 0.32% from 2.78% to 2.47% while the total

amount of Gross NPAs of Syndicate bank (Trivandrum Region) increased from Rs 25.15

crore to Rs 32.43 crore by 28.96% during financial year 2003-04 to 2004-05 though

percentage wise it came down from 6.90% to 6.74%.

It is seen that the Syndicate bank (Trivandrum region) including Syndicate bank

(Main branch) concentrated more on allocating advances under Non–Priority Sector than

Priority Sector. It is also seen that the percentage as well as the amount of NPAs is less

in Non–Priority sector than Priority sector.

It should also be taken into consideration that Syndicate Bank (Trivandrum Region)

has higher percentage of NPAs compared to Syndicate Bank (Main Branch) in the case of

Priority Sector. In this category percentage of NPAs reduced from 13.29% to 10.69% from

financial year 2003-04 to 2004-05 for Trivandrum Region. On the other hand the

percentage of NPAs reduced from 4.2% to 3.8% from financial year 2003-04 to 2004-05

for Main Branch. This shows that the Main Branch has performed better than other

branches in Trivandrum Region in the case of Priority Sector. While in the case of Non–

Priority Sector the performance of Main Branch and Trivandrum region is more or less

same. The percentage of NPAs increased from 3.19% to 4.53% in the last two financial

years 2003-04 and 2004-05 respectively in Trivandrum Region while the percentage of

NPAs reduced from 1.36% to 1.33% respectively for Main Branch for the financial years

2003-04 and 2004-05. This also bring to conclusion that the percentage of NPAs is

reducing in Priority Sector and increasing in Non–Priority sector for Trivandrum region

while for Main branch the percentage of NPAs in both the categories is reducing.

100

In the following cases it is seen that though the percentage of NPAs has reduced

the amount of NPAs has increased

(A) GROSS NON-PERFORMING ASSETS (NPAs) : In Trivandrum Region

percentage of NPAs reduced from 6.90% to 6.74% while the amount increased

from Rs 25.15 crore to Rs 32.43 crore.

(B) PRIORITY SECTOR : Under Trivandrum Region the percentage of NPAs

reduced from 13.29% to 10.69%. However the amount of NPAs increased from Rs

17.80 core to Rs 19.19 crore in financial year 2003-04 to financial year 2004-05. In

Main Branch the percentage of NPAs reduced from 4.2% to 3.8% while the amount

of NPAs increased from Rs 1.32 crore to Rs 1.41 crore for the last two financial

years.

(C) NON-PRIORITY SECTOR : In Syndicate Bank (Main Branch) the percentage of

NPAs reduced from 1.36% to 1.33% while the amount increased from Rs.1.78 crore

to Rs 1.94 crore.

(D) SMALL BUSINESS : Under this scheme the percentage of NPAs in Syndicate

bank (Main Branch) reduced from 24.11% to 21.00% while the amount of NPAs

increased from Rs 71.63 thousand to Rs 1.49 lakh.

(E) PROFESSIONAL AND SELF EMPLOYED : In Trivandrum Region the

percentage of NPAs reduced from 27.50% to 27.36% while the amount of NPAs

increased from Rs 1.38 crore to Rs 1.72 crore.

(F) HOUSING SCHEMES : Under this the percentage of NPAs reduced from

4.01% to 3.32% for Trivandrum Region while the amount increased from Rs 1.92

crore to Rs 2.77 crore for the last two financial years 2003-04 and 2004-05.

101

(G) OTHER PRIORITY SCHEMES : Under Trivandrum Region the percentage of

NPAs reduced from 6.44% to 5.58% while the amount of NPAs increased from Rs

12.47 lakh to Rs 22. 19 lakh.

(H) ALL OTHER SCHEMES UNDER NON-PRIORITY SECTOR : In

Syndicate bank (Main Branch) percentage wise the NPAs came down from 0.97%

to 0.83% but amount wise the NPAs rose from Rs 1.18 crore to Rs 1.20 crore.

(I) LOANS TO WEAKER SECTION : Under this for Trivandrum Region the

percentage came down from 17.33% to 14.94% but amount wise increased from Rs

1.18 crore to Rs 2.93 crore.

From the study above the conclusion can be drawn that though in percentage terms

the Non–Performing Assets (NPAs) have come down over the last two financial years

2003-04 and 2004-05, in absolute terms they have grown, signifying that while new NPAs

were being added to the bank’s operation every year, recovery of the old dues is also

taking too long specially in the case of other branches in Trivandrum Region other than

Main Branch.

Syndicate Bank ( Main Branch) has performed well in the following schemes of

loans and advances :

(A) GROSS NPAs : Here the percentage of NPAs reduced from 2.78% to 2.47%.

(B) SMALL SCALE INDUSTRIES (SSI) : Here the percentage of NPAs reduced

from 90.80% to 78.17%.

(C) EDUCATION LOANS : The Main Branch did not accumulate any amount of

Non-Performing Assets in the last two years unlike Trivandrum Region.

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(D) ALL OTHER NON-PRIORITY SCHEMS : Under Syndicate bank (Main

Branch) the percentage of NPAs has been more from Trivandrum Region as can be

seen from analysis.

Trivandrum Region performed well in the following schemes of loans and

advances:

(A) AGRICULTURE LOANS: Here the percentage of NPAs reduced from 10.68%

to 6.28%.

(B) SMALL ROAD AND TRANSPORT LOANS : Here the percentage of NPAs

reduced from 33.17% to 25.91%

In most of the schemes the Main branch performed better than Trivandrum Region

except for the following few:

(A) SMALL SCALE INDUSTRIES (SSI): Here the percentage of NPAs was

more than Trivandrum Region. For year 2003-04 and 2004-05 the percentage of

NPAs decreased from 90.80% to 78.17% while for Trivandrum Region the

percentage of NPA reduced from 37.92% to 31.90%.

(B) SMALL ROAD AND TRANSPORT: In Main Branch the percentage of NPAs

has been 100% for the last two financial years 2003-04 and 2004-05. While for

Trivandrum Region the percentage of NPAs has reduced from 33.17% to 25.91%.

(C) RETAIL TRADE : The percentage of NPAs for Main Branch was very low in

2003-04 which increased from 8.55% to 37.90% in 2004-05 which is quite high

compared to Trivandrum region.

(D) PROFESSIONAL AND SELF EMPLOYED: Here the percentage of NPAs

for Main Branch increased from 52.92% to 88.24% from 2003-04 to 2004-05

which is comparatively higher to that of Trivandrum Region.

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(E) OTHER PRIORITY SECTOR LOANS: Under this there was no amount of

NPAs for the year 2003-04 in Main Branch. But in 2004-05 the percentage of

NPAs was 16.17% which is much higher than Trivandrum Region.

(F) LOANS FOR CONSUMER DURABLE : In this as shown in the analysis the

percentage of NPAs for Main Branch for both years 2003-04 and 2004-05 was

more than Trivandrum Region.

(G) OTHER PERSONAL LOANS UNDER PERSONAL BANKING

SCHEMES : Here too the percentage of NPAs increased for Main branch in

comparison to Trivandrum Region.

(H) GOVERNMENT SPONSORED SCHEMES: Here as can be seen in the

analysis the percentage of NPAs has been more than Trivandrum Region in the

past two financial years 2003-04 and 2004-05.

Thus we draw to the conclusion that the Main Branch should concentrate in the

recovery process of the above shown schemes and try to perform better than the other

branches in Trivandrum Region.

There has been a positive increase in provisions for Trivandrum Region and Main

Branch in the last two year in most of the schemes. Due to this reason net NPAs has

reduced drastically.

The problem of NPAs is exacerbating by existing bad assets, due to poor debt

recovery and inadequate legal provision.

The analysis of the reasons as to why such a disproportionate amount of the bank

advances has degraded into bad category shows the following :

(A) Failure of a business unit either resulting from lack of its own competitive advantage

or from generic weakness of the industry (cyclical or otherwise), change in

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technology, demand pattern and other policy, non-completion of project due to cost,

time, over run etc:

Any borrowing unit facing a problem because of the above reason is obviously

beyond its control and deserves from the financing institution a reasonable rehabilitation

treatment like, injection of further capital, postponement of recovery, recasting of debt,

conversion of debt into equity, etc. What is important in such cases is that bank officials

need to understand and appreciate the causes of Non-Performance of the unit and

prescribe possible remedial measures.

(B) Lack of adequate risk assessment and monitoring system within the bank:

The second given reason i.e. absence of proper credit management system is a

very serious issue with many of the India banks, particularly the Nationalised Banks. There

are several dimensions to the problem the most important being lack of trained man-power

i.e. analysts in adequate number to appraise critically the credit worthiness of the potential

client.

Thus the bank has to be very careful in checking the credit worthiness.

(C) Hesitation on part of the management of the borrowing units to repay the loans

irrespective of the superior performance and ability to pay back, in other words wilful

default.

(D) Government or political interference in the working of the banking system.

The above two cited reasons are possibly inter-related. Apart from making the

banks more socially responsible and contributing to the economic development on an

equitable basis, the other important reason for nationalisation of banks in late sixties and

subsequently in eighties was to break the nexus between corporate and banks. The story

of Indian Banking since then has belied all expectations. Corporate interference was

substituted by government and political intervention not only in terms of government

nominees on the bank boards but also through politically motivated, guided and directed

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bank credit. In Syndicate bank under government loans schemes the NPAs are very high

compared to other loans and advances.

This is due to the reason that the government loans are directed loans i.e. the bank

is directed by the government to allocate loans and advances under the various schemes

of the government including loans and advances to the unemployed, weaker society etc.

These sections of society are not in the position to pay back the loans. Thus the high

NPAs occur.

(E) Diversion of funds by the borrowers and inefficient management of the unit financed.

It should also be taken into consideration that another major constraints that has

been faced by the branch is in getting loans repaid from the following category of people

(A) Business people

(B) Salaried people

(C) Self-employed

(D) People with income from agriculture

One of the major constraints that have been faced by the bank is in getting the

loans repaid from those falling under the first two categories i.e. business people and

salaried people. The business people do not have permanent source of income unlike

salaried people but the salaried people generally take loans for there personal lavishness,

which makes them feel that repayment for such loans are not necessary.

Given the dominance of red tapeism in India it is difficult to regain back the amount

of loan from government employees. One of the other reasons why the occurrence of

NPAs among salaried people is that the securities given by these categories of people is

of mostly of their relatives or other family members, therefore this gives them the

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opportunity to delay in payment or avoid altogether the payment of loans taken as they are

not personally affected.

Large business houses create more problems. They delay in paying the loans

which are generally high in amount. These larger business institutions have more than one

company under them. So if they need further loans they take in the names of other

companies which sometimes are also fictitious in nature.

When the banks file cases in the Debt Recovery Tribunal (DRT) the large business

houses and even rich individuals delay in payment as much as possible through the

process of stay order etc.

Initially the policy adopted by the bank was that only customers who had accounts

with the bank for at least one year could be allowed to take loan from the bank. But this

policy was given up due to the aggressive drive of the bank to increase loans and

advances. Now the bank thoroughly scrutinises the background of the potential customer

like the balance sheet, income statement, if the person has ever taken loans before and

has paid it on time etc before allocation of any loans or advances. Due to the high

incidence of NPAs among salaried and large business houses and individuals the bank

should restrict their lending operations to secured avenues only with adequate collateral

on which to fall back upon in a situation of default.

The other main reason given by the bank authorities for increase in NPAs

especially in the year 2004-05 is the change in rule of classifying NPAs. The reduction in

number of days from which the bank can classify assets as NPAs from 180 days to 90

days has affected the bank. The general trend among the customers is to pay interest on

the loans and advances within a period of 90 days or even later than that. Thus the bank

has to make sure that the customers should be punctual in paying the interest within 90

days.

Eventually increase in NPAs in the Trivandrum region or anywhere else means that

the funds locked are not being used properly or are not producing adequate returns. In the

worst case scenario the banks may not be able to earn enough to pay depositors interest

or repay their principal.

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4.3 RECOMMENDATION

108

4.3: RECOMMENDATIONS

Syndicate bank should concentrate more on priority sector. Though the advance

is lower than non-priority sector the total Non-Performing Assets (NPAs) for both financial

years 2003-04 and 2004-05 is much higher than Non-Priority sector.

The branch should have stringent deterrents for non payment. The problem of

non payment of the advance occurs when the bank fails in properly diagnosing the

financial background of the person who applies for the loan. Therefore, strict policies

should be adopted to check this problem.

Measures for speedy recovery are to be taken when default persists. Presently

legal remedies take a long time and do not yield result in account with smaller out

standings. Therefore it will be better to adopt some other recovery measures for speedy

recovery of loans sanctioned. The following are few of the steps suggested:

1. The bank should take advantage of Restructuring under Corporate Debt Scheme

(CDR): This scheme was announced as a policy statement by the finance minister in

2000-01.The aim of CDR was to ensure timely and transparent restructuring of corporate

debts. The system is relevant for those corporate accounts, which are viable but have

been struck with uncertainties of business cycle.

109

2. The bank should try to sell assets to Assets Reconstruction Companies (ARC’s).

The bank should find a way to transfer uncovered loans to ARC’s. So far only 19

nationalised banks in the country have sold bad loans to Asset Reconstruction Company

of India Ltd (ARCIL), the only asset reconstruction company in India.

3. New generation private banks buy stressed assets from their public counterparts to

build up a bigger credit portfolio. Usually in such deals, one bank buys stressed assets

from another bank at a discount and thereafter, classifies it as standard assets in its books

of accounts. It is a win-win situation for both the parties involved as the seller can reduce

its NPA level, while buyer raises its loan portfolio level. Syndicate bank may try out this

option in case of loans and advances likely to fall into NPA category.

Recovery agents should be appointed. Appointing recovery agents for the

retrieval of advances do not actually mean threatening the customers to repay the loan. It

can be done without affecting the reputation of the bank. This is possible if the authorities

are able to appoint a person who can tactfully handle the situation.

The bank should take adequate and appropriate steps towards enhancing

the quality of credit appraisal mechanism. The origin of the problem of burgeoning NPAs

lies in the quality of managing credit risk by the banks concern. What is needed is having

adequate preventive measures in place namely, fixing pre-sanctioning appraisal

responsibility and having an effective post-disbursement supervision. The bank should get

into the process of credit rating. Fundamentally credit rating implies evaluating credit

worthiness of a borrower by an independent rating agency. Here the objective is to

evaluate the probability of default. As such, credit rating does not predict loss but it

predicts the likelihood of payment problems.

Banks concerned should continuously monitor loans to identify accounts

that have potential to become non-performing.

110

It is advisable that the classification of NPAs should be done on an

ongoing basis. Doubts in asset classification due to any reason should be settled through

specific internal channels within one month from the date on which the accounts would

be classified as

NPA as per prescribed norms. This requirement presupposes that adequate provision is

also made on an ongoing basis, as the net NPAs arrived at otherwise would be showing a

distorted/inaccurate picture. It is therefore advisable that the required provisions for NPAs

should be made at quarterly intervals at the end of June, September, December and

March so that the income and expenditure account for the respective quarters as well as

the profit & loss account and balance sheet for the year end would reflect a realistic

provision made for the NPAs.

It should be better if bad loans are reduced through recoveries and

upgrades rather than through increased provision cover.

The bank should prepare plans and policies in the key areas of

performance namely deposit, credit, investment, recovery, human-resources development,

internal control and computerization to improve operational efficiency, productivity and

profitability. The bank should monitor closely the number of accounts that have migrated

from standard to sub-standard. Unless the bank is watchful slippage will occur.

No doubt, improving recovery management is an area requiring

expeditious and effective actions in legal, institutional and judicial process. Thus the bank

should design its recovery process keeping in mind these functional parameters.

******************************

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APPENDIX

112

Appendix- A(Ref to page 60)Syndicate Bank- Study of NPA AccountsQUESTIONNAIRE: TRIVANDRUM REGION

FY 2003 - 2004 FY 2004 - 2005Total Number (accounts) Of advances

1. Priority Sector

2. Non- Priority Sector

Total Amount Of Gross Advances

1. Priority Sector

2. Non-Priority Sector

Total Provisions Made

1. Priority Sector

2. Non-Priority Sector

Total Number Of Gross NPAs

1. Priority Sector

2. Non-Priority Sector

Total Amount Of Gross NPAs

1. Priority Sector

2. Non-Priority Sector

Total Cash recoveries Of NPAs

1. Priority Sector

2. Non-priority Sector

113

FY 2003-04 FY 2004-05Up gradation Of NPAs (Number Of Accounts) to Standard Assets

1. Priority Sector

2. Non-Priority Sector

Amount Involved Under Above

1. Priority Sector

2. Non-Priority Sector

Number Of NPAs Written off As Bad debts

1. Priority Sector

2. Non-priority Sector

Amount Involved In Above

1. Priority Sector

2. Non-Priority Sector

Number Of NPAs holders Issued Notice

1. Priority Sector

2. Non-Priority Sector

Amount Involved Of Above

1. Priority Sector

2. Non-Priority Sector

Assets Sized Of NPAs Holders (Number Of Accounts)

1. Priority Sector

2. Non-Priority Sector

114

FY 2003-04 FY 2004-05Amount Recovered From Above

1. Priority Sector

2. Non-Priority Sector

Number Of NPAs Under One-Time Settlements

1. Priority Sector

2. Non-Priority Sector

Amount Involved In Above

1. Priority Sector

2. Non-Priority Sector

115

AGRICULTURE FY 2003 – 2004 FY 2004 – 20051. Total Number Of Accounts

2. Total Advances

3. Total Number Of NPAs

4. Total Amount Of NPAs

5. Total Amount Of Provision

SMALL SCALE INDUSTRIES (SSI)1. Total Number Of Accounts

2. Total Advances

3. Total Number Of NPAs

4. Total Amount Of NPAs

5. Total Amount Of Provisions

SMALL ROAD AND TRANSPORT1. Total Number Of Accounts

2. Total Advances

3. Total Number Of NPAs

4. Total Amount Of NPAs

5. Total Amount Of Provision

RETAIL TRADE1. Total Number Of Accounts

2. Total Advances

3. Total Number Of NPAs

4. Total Amount Of NPAs

5. Total Amount Of Provision

SMALL BUSINESS FY 2003-04 FY 2004-05

116

1. Total Number Of Accounts

2. Total Advances

3. Total Number Of NPAs

4. Total Amount Of NPAs

5. Total Amount Of Provision PROFESSIONAL AND SELF EMPLOYED

1. Total Number Of Accounts

2. Total Advances

3. Total Number Of NPAs

4. Total Amount Of NPAs

5. Total Amount Of Provisions

EDUCATION1. Total Number Of Accounts

2. Total Advances

3. Total Number Of NPAs

4. Total Amount Of NPAs

5. Total Amount Of Provision

HOUSING LOANS UNDER PRIORITY SECTOR

1. Total Number Of Accounts

2. Total Advances

3. Total Number Of NPAs

4. Total Amount Of NPAs

5. Total Amount Of Provision

OTHER PRIORITY SECTOR FY 2003 – 2004 FY 2004 – 2005

1. Total Number Of Accounts

117

2. Total Advances

3. Total Number Of NPAs

4. Total Amount Of NPAs

5. Total Amount Of Provision

WHOLE SALE1. Total Number Of Accounts

2. Total Advances

3. Total Number Of NPAs

4. Total Amount Of NPAs

5. Total Amount Of Provision

LOANS FOR CONSUMER DURABLES

1. Total Number Of Accounts

2. Total Advances

3. Total Number Of NPAs

4. Total Amount of NPAs

5. Total Amount Of ProvisionsOTHER PERSONAL LOANS UNDER PERSONAL BANKING SCHEMS

1. Total Number Of Accounts

2. Total Advances

3. Total Number Of NPAs

4. Total Amount of NPAs

5. Total Amount of Provisions

OTHER LOANS UNDER NON-PERSONAL SCHEMES

FY 2003-04 FY2004-05

1. Total Number Of Accounts

2. Total Advances

118

3. Total Number Of NPAs

4. Total Amount of NPAs

5. Total Amount Of Provisions

GOVERNMENT SPONCERED SCHEMES

1. Total Number Of Accounts

2. Total Advances

3. Total Number Of NPAs

4. Total Amount Of NPAs

5. Total Amount Of Provisions

LOANS FORWARDED TO THE WEAKER SECTION

1. Total Number Of Accounts

2. Total Advances

3. Total Number Of NPAs

4. Total Amount Of NPAs

5. Total Amount Of Provisions

SYNDICATE BANK Appendix- B HEAD OFFICE, MANIPAL - 576104, KARNATAKAAUDITED FINANCIAL RESULTS FOR THE YEAR ENDED MARCH 31, 2005(Rs. in Lakh)

119

Sl No Particulars

Quarter ended 31.03.2005 (Audited)

Quarter ended 31.03.2004 (Audited)

Year ended 31.03.2005 (Audited)

Year ended 31.03.2004 (Audited)

1 Interest earned (a+b+c+d) 98527 87815 375763 308485

aInterest/discount on advances/bills 58182 47150 204210 159160

b Income on investments 39215 36239 156893 136881

c

Interest on balances with Reserve Bank of India and other inter bank funds 1106 3713 14444 10201

d Others 24 713 216 2243

2 Other Income 13735 24351 56455 77640

A TOTAL INCOME (1+2) 112262 112166 432218 386125

3 Interest Expended 45032 43088 206380 165563

4 Operating Expenses (e+ f) 41411 30220 126420 118637

ePayments to and provisions for employees 32290 19467 96133 90662

f Other operating expenses 9121 10753 30287 27975

B TOTAL EXPENDITURE (3+4) 86443 73308 332800 284200(Excluding Provision and Contingencies)

C OPERATING PROFIT (A - B) 25819 38858 99418 101925(Profit before Provisions and Contingencies)

D Provisions and Contingencies 768 17362 56081 31458(of which NPAs) 3321 13117 13321 27590

E Provision for Taxes -2968 8628 3047 27054

F Net Profit (C-D-E) 28019 12868 40290 43413

5

Paid-up equity share capital (Face value of the share Rs.10/- each) 47197 47195 47197 47195

6 Reserves excluding revaluation reserves (As per balance sheet of previous accounting year 152789 128496 152789 123171

7Analytical Ratios

i)Percentage of share held by Govt. of India 73.52% 73.52% 73.52% 73.52%

ii) Capital Adequacy Ratio 10.70% 11.49% 10.70% 11.49%

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iii) Earning per share (Rs.) 5.94 2.73 8.54 9.20

iv)(a) Amount of gross non-performing assets 143278 158992 143278 158992(b)Amount of net non-performing assets 42589 53222 42589 53222(c) % of gross NPAs 5.17% 7.33 5.17% 7.33(d) % of net NPAs 1.59% 2.58 1.59% 2.58

v) Return on Assets (Annualized) 0.82 1.67 0.82 1.67

8Aggregate of non Promoter Shareholding

-No. of shares

12,50,00,000

12,50,00,000

12,50,00,000

12,50,00,000

- Percentage of share holding 26.48% 26.48% 26.48% 26.48%

Segment Report( Rs. in crore)BUSINESS SEGMENT

TREASURY OTHER BUSINESS TOTAL

PARTICULARSYear ended 31.03.2005 (Audited)

Year ended 31.03.2004 (Audited)

Year ended 31.03.2005 (Audited)

Year ended 31.03.2004 (Audited)

Year ended 31.03.2005 (Audited)

Year ended 31.03.2004 (Audited)

Revenue 1933 1863 2389 1998 4322 3861Result (Operating 341 529 653 525 994 1054

121

profit)Unallocated Expenses     561 350Income Taxes 30 270Net profit     403 434Segment Assets 20371 17917 31357 28942 51728 46859Unallocated Assets     381 364Total Assets     52109 47223Segment Liabilities 22730 20513 27181 24752 49911 45265Unallocated Liabilities     2199 1958Total Liabilities     52109 47223 

1VRS expenses, being an extra-ordinary item, to the extent of Rs.159.86 crore has been charged during the period.

2There has been no material change in the Accounting Policies adopted during the year ended 31st March 2005, to those followed in the immediate preceding financial year 2003-04.

3

The financial results for the year ended 31st March 2005 have been arrived at after considering provision for NPAs / Non Performing Investments / Standard Assets, Taxation, Pension / Gratuity / Encashment of Leave, Depreciation on fixed assets and other necessary provisions.

4Payments to and Provisions for employee include and amount of Rs.92 crore towards arrears for the proposed wage revision.

5All mandatory Accounting Standards relevant for the financial results attached to the extent applicable have been adopted.

6 The reconciliation / balancing / clearance of outstanding items is in progress.

7Figures of previous period / year have been reclassified / regrouped wherever necessary.

8The above results have been taken on record by the Board of Directors at its meeting held on 09.05.2005.

9The Board has declared a final dividend of 14% in addition to the interim dividend of 6% for the year, thus taking the total dividend to 20%.

122

Place: Bangalore K M SHET N KANTHA KUMAR

Date: 09.05.2005 EXECUTIVE DIRECTORCHAIRMAN & MANAGING DIRECTOR

123

BIBLIOGRAPHY

BIBLIOGRAPHY

Reference

1. NPA management circular Reserve Bank of India

2. Marketing Research by Naresh K Malhotra

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Websites:

1. www.syndicatebank.com

2. www.rbi.org.in

3. www.hindustantimes.com

4. www.expressindia.com

5. www.yahoo.com

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