A Project Report on NPA Management in J & K Bank
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A Project Report on NPA Management in J & K Bank

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    A Project Report on NPA Management in J & K Bank A Project Report on NPA Management in J & K Bank Document Transcript

    • A SUMMER TRAINING PROJECT REPORT ON “NPA MANAGEMENT IN J & K BANK” Submitted to Punjabi University, Patiala In partial fulfillment of the requirement for the award of degree of Master of Business Administration By: Ab. Raouf Naikoo Class Roll No: 81 Registration No: 512-11-155 Under the guidance of: Mr. Tariq Ahmad Deputy Branch Head J & K Bank Kulgam DESH BHAGAT INSTITUTE OF MANAGEMENT AND COMPUTER SCIENCES MANDI GOBINDGARH 2013 1
    • DECLARATION I declare that the Project entitled (“Non Performance Assets Management”) is a record of independent work carried out by me under the supervision and guidance of (Mr. Tariq Ahmad Deputy Branch Head in J & K Bank). This has not been previously submitted for the award of any other diploma, degree or other similar title. AB. RAOUF NAIKOO Class Roll No. 81 2
    • ACKNOWLEDGEMENTS I owe a great many thanks to a great many people who helped and supported me during the preparation of this project report. My deepest thanks to (Mr. Tariq Ahmad Deputy Branch Head in J & K Bank) the Guide of the project for guiding and correcting various documents of mine with attention and care. He has taken pain to go through the project and make necessary corrections as and when needed. I express my thanks to the Dr. Nidhi Gupta, Director, Desh Bhagat Institute of Management and Computer Sciences, Mandi Gobindgarh for extending her support. Thanks and appreciation to the helpful people at [JAMMU AND KASHMIR BANK], for their support. I would also thank my Institution and my faculty members without whom this project would have been a distant reality. I also extend my heartfelt thanks to my family, friends and well wishers. AB. RAOUF NAIKOO Class Roll No. 81 3
    • 1. INTRODUCTION 1.1 Industry profile…….............................................................................................. 1-8 1.1.1 Introduction…….……………………………………………………............. 2 1.1.2 History of Banking in India…………………….............................................3-5 1.1.3 Composition of Banking system in India…………….................................... 6-7 1.1.4 Sarfaesi Act……………...……...………………………………….…….… 8 1.2 Company profile……………………………………………………………..… 9-20 1.2.1 Brief profile of J&K Bank………………..………………………..………. 9 1.2.2 Vision………………………………..…………………………….……….. 9 1.2.3 Mission………………………………..………..…………………………... 9 1.2.4 Awards and Recognitions …. …………………………………………..…. 10-12 1.2.5 Services provided by J&K Bank……………………...……………………. 13-14 1.2.6 Loan facilities provided by JKB……………………………………………. 15 1.2.7 Risk Management…………………………………………………………… 16-17 1.2.8 JKB‟s performance in 2009……….…………………………………………. 18-20 1.3 Background…………………………………….................................................... 21-44 1.3.1 Story of an NPA………………………………………................................... 21-24 1.3.2 Non Performing Assets…………………………………………..................... 25 1.3.3 Problems due to NPAs……………………………………………………….. 26 1.3.4 Management of NPAs (Securitization)………………………………………. 27 1.3.5 Securitization- relevance to the banking sector…………………………….... 28-30 1.3.6 Preventing NPAs……………………………………………………………... 31-33 1.3.7 Reducing NPAs………………………………………………………………. 34 1.3.8 How to manage NPAs better…………………………………………………. 35-39 1.3.9 Management of NPAs in JKB………………………………………………... 40 1.3.10 Asset quality of J&k Bank…………………………………………………… 41 1.3.11 Methods used in JKB for controlling NPAs…………………………….…… 42 1.3.12 Techniques used in JKB for managing NPAs……………………………..…. 43 1.3.13 Comparison of NPAs of JKB and other banks…........................................… 44 4
    • 2. REVIEW OF LITERATURE 2.1 Review of literature………………………………………………………………. 45-48 3. RESEARCH METHODOLOGY/DESIGN ………………………………….. …..49-53 3.1 Objectives of the study…………………………………………............................. 50 3.2 Research design………………………………………………………………….... 51 3.3 Data collection ……………………………………………………………..…... 51 3.4 Sampling plan……………………………………………………………...……… 52 3.5 Limitations of the study………………………………………………………...… 53 4. DATA ANALYSES AND INTERPRETATION …………………………………..54- 65 4.1 Questionnaire…………………………………………………………….……. ….55- 65 5. FINDINGS/SUGGESTIONS ……………………………………………………….66- 69 5.1 Findings………………………………………………………………………...….. 67 5.2 Suggestions…………………………………………………………...……………. 68 5.3 Conclusion………………………………………………………………...……….. 69 6. BIBLIOGRAPHY …………………………………………………………………….. 70 5
    • INTRODUCTION 6
    • INTRODUCTION The most calamitous problem facing commercial banks all over the world in recent times is spiraling non-performing assets (NPAs) which are affecting their viability and solvency and thus posing challenge to their ultimate survival. NPAs adversely affect lending activity of banks as non-recovery of loan installment as also interest on the loan portfolio negates the effectiveness of credit-dispensation process. Non-recovery of Loans also hurt the profitability of banks. Besides, banks with high level of NPAs have to carry more owned funds by way of capital and create reserves and provision and to provide cushion for the loan losses. Banks have to make provisions on NPAs from out of the income earned by them on performing assets. Presently, high level of NPAs in loan portfolio of banks make them fragile leading ultimately to their failure. This will shake confidence both of domestic and global investors in the banking system which will have multiplier effect in bringing disaster in the economy. Thus, managing bad loans and keeping them at the lowest possible level is critical for banks. It may be noted at this juncture that world class banks do not have NPAs of over 2% of total portfolio. An NPA level of over 5% is indicator of poor quality of loan portfolio. With growing competition and Shrinking spreads banks should strive to keep NPAs much below the level of 10% to make net earnings necessary for their survival and growth. It merely affected by various factors such as originating factors. Internal and External factors RBI has to take the necessary steps for lowering down the NPAs. 7
    • HISTORY OF BANKING IN INDIA Without a sound and effective banking system in India, it cannot have a healthy economy. The banking system of India should not only be hassle free but it should be able to meet new challenges posed by the technology and any other external and internal factors. For the past three decades, India‟s banking system has several outstanding achievements to its credit. The most striking is its extensive reach. It is no longer confined to only metropolitan or cosmopolitan in India. Infact Indian banking system has reached even to the remote corner of the country. This is one of the main reasons of the India‟s growth process. The government regular policy for Indian bank since 1969 has paid rich dividends with the nationalization of fourteen major private banks of India. Not long ago, an account holder had to wait for hours at the bank counters for getting a draft or for withdrawing his/her money. Today he/she has various options available in front of him that are easiest and consume very little time. Gone are the days when the most efficient bank transfer money from one branch to another in two days. Now it is as simple as instant messaging or dial a pizza. Money has become the order of the day. The first bank in India though conservative, was established in 1786. From 1786 till today, the journey of Indian banking can be segregated into three distinct phases which are mentioned as follows: Phase-I (from 1786 to1969 of Indian banks). Phase-II (From Nationalization of Indian banks to 1991 i.e. prior to Indian banking sector reforms). Phase-III (with the advent of Indian financial and banking sector reforms after 1991). To make this clear, all the phases have been discussed one by one very briefly as under: 8
    • Phase-I The General Bank of India was set up in the year 1786. Next came Bank of Hindustan and Bengal Bank. The East India Company established Bank of Bengal (1809), Bank of Bombay (1840) and Bank of Madras (1843) as independent units and called it Presidency Banks. These three banks were amalgamated in 1920 and Imperial Bank of India was established which started as private shareholders banks, mostly Europeans shareholders. In 1865 Allahabad Bank was established and first time exclusively by Indian, Punjab National Bank Ltd. was set up in 1894 with headquarters at Lahore. Between 1906 and 1913, Bank of India, Central Bank of India, Bank of Baroda, Canara Bank, Indian Bank, and Bank of Mysore were set up. Reserve Bank of India came in 1935. During the first phase the growth was very slow and banks also experienced periodic failures between 1913 and 1948. There were approximately 1100 banks, mostly small. To streamline the functioning and activities of commercial banks, the Government of India came up with The Banking Companies Act, 1949 which was later changed to Banking Regulation Act 1949 as per Amending Act of 1965 (Act No. 23 of 1965). Reserve Bank of India was vested with extensive powers for the supervision of banking in India as the Central Banking Authority. During those day‟s public has lesser confidence in the banks. As an aftermath deposit mobilization was slow. Abreast of it the savings bank facility provided by the Postal department was comparatively safer. Moreover, funds were largely given to traders. Phase-II Government took major step in this Indian banking sector reform after independence. Seven banks forming subsidiary of State Bank of India was nationalized in 1960‟s on 19th July 1969, major process of nationalization was carried out. It was the effort made by the then prime minister of India, Mrs. Indra Gandhi. Fourteen major commercial banks in the country were nationalized. Second phase of nationalization Indian banking sector reform was carried out in 1980 with seven more banks. This step brought 80% of the banking segment in India under government ownership. The following were the steps taken by the government of India to regulate banking institution in the country: 1949: Enactment of banking regulating act. 1955: Nationalization of State Bank of India. 1959: Nationalization of SBI subsidiaries. 9
    • 1961: Insurance cover extended to deposits. 1969: Nationalization of 14 major banks. 1971: Creation of credit Guarantee Corporation. 1975: Creation of regional rural banks. 1980: Nationalization of seven banks with deposits over 200 crore. After the nationalization of banks, the branches of the public sector bank in India rose to approximately 800% in deposits and advances took a huge jump by 11000%. Banking in the sunshine of government ownership gave the public implicit faith and immense confidence about the sustainability of these institutions. Phase-III This phase has introduced many more products and facilities in the banking sector in its reforms measure. In 1991, under the chairmanship of M Narasimham, a committee was set up by his name, which worked for the liberalization of banking practices. The country was flooded with foreign banks and their ATM stations. Efforts were being put to give a satisfactory service to customers. Phone banking and net banking was introduced. The entire system became more convenient and swift. Time was given more importance than money. The financial system of India showed a great deal of resilience. It was sheltered from any crisis triggered by any external macroeconomics shock as other East Asian Countries suffered. This was all due to a flexible exchange rate regime, the foreign reserves were high, the capital account was not yet fully convertible, banks and their customers were having limited foreign exchange exposure. 10
    • COMPOSITION OF BANKING SYATEM IN INDIA At present, the number of nationalized banks is twenty. Several foreign banks were allowed to operate as per the guidelines of the RBI. At present the banking system can be classified in following categories: PUBLIC SECTOR BANKS Reserve Bank of India (RBI) State Bank of India and its associate Banks Nationalized Banks (20 in number) Regional Rural Banks sponsored by Public sector Banks. PRIVATESECTOR BANKS Old Generation Private Banks New Generation Private Banks Foreign Banks in India Scheduled co-operative Banks Non Scheduled Banks CO-OPERATIVE SECTOR BANKS State co-operative Banks Central co-operative Banks Primary agriculture credit societies Land Development Banks Urban co-operative banks State Land development banks DEVELOPMENT BANKS Industrial Financial corporation of India (IFCI) Industrial Development Bank of India (IDBI) Industrial Credit and Investment Corporation of India (ICICI) 11
    • Industrial Investment Bank of India (IIBI) Small Industrial Development Bank of India (SIDBI) National Bank For Agriculture And Rural Development (NABARD) Export-Import Bank of India(EXIM) 12
    • SARFAESI ACT The policy makers and legislators realized the need for measures for the quick recovery of NPAs, and to empower Banks and Financial Institutions to recover the NPAs without intervention of judicial process. In that process guidance was found from Section 69A of Transfer of Property Act and State Finance Corporation Acts, where there is provision for the sale of secured assets without the intervention of Courts. In that process Securitization And Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 (SARFAESI) was enacted. The Preamble of the Act states that ”Narasimham Committee I and II and Andhyarujina Committee constituted by the Central Government for the purpose of examining banking sector reforms have considered the need for changes in the legal system in respect of these areas. These Committees have suggested enactment of a new legislation for securitization and empowering banks and financial institutions to take possession of these securities and to sell them without the intervention of the Court. Acting on these suggestions the SARFAESI Ordinance 2002 was promulgated on the 21st June 2002 to regulate securitization 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 realize long term assets, manage problem of liquidity, asset liability. 13
    • J& K BANK PRIVATE LIMITED BRIEF PROFILE Jammu & Kashmir Bank is the only Bank in the country with majority ownership vested with a state government – the Government of Jammu & Kashmir. It is the sole banker to the Government of Jammu & Kashmir. J&K Bank functions as a universal bank in Jammu & Kashmir and as a specialized bank in the rest of the country. It is also the only private sector bank designated as RBI‟s agent for banking business, and carries out the banking business of the Central Government, besides collecting central taxes for CBDT.J&K Bank follows a two-legged business model whereby it seeks to increase lending in its home state which results in higher margins despite modest volumes, and at the same time, seeks to capture niche lending opportunities on a pan-India basis to build volumes and improve margins J&K Bank operates on the principle of „socially empowering banking‟ and seeks to deliver innovative financial solutions for household, small and medium enterprises. The Bank, is incorporated in 1938, and is listed on the NSE and the BSE. It has a track record of uninterrupted profits and dividends for four decades. The J&K Bank is rated P1+, indicating the highest degree of safety by Standard & Poor and CRISIL. VISION “To catalyze economic transformation and capitalize on growth.” J&K BANK‟S vision is to engender and catalyze economic transformation of Jammu and Kashmir and capitalize from the growth induced financial prosperity thus engineered. The Bank aspires to make Jammu and Kashmir state the most prosperous state in the country, by helping create a new financial architecture for the J&K economy, at the center of which will be the J&K Bank. MISSION The mission of J&k bank is two-fold: To provide the people of J&K international quality financial service and solutions and to be a super-specialist bank in the rest of the country. 14
    • Awards and recognitions 2011 Business Today - KPMG Study The Bank was ranked one of the best banks in the Best Bank Study 2011 done by Business Today and global Consulting firm KPMG (BT-KPMG). The study ranked the Bank No. 1 on the basis of NPA coverage ratio which stood best in the industry as at the end of March 2011. The Bank was ranked 15th in large banks category in the country based on the last year's growth, quality of assets, productivity and efficiency parameters, leaving state bank of India, federal bank, HSBC Bank, Standard Chartered bank and other major banks far behind. FE India's best banks Award The Bank won the prestigious Financial Express Best Banks Award in the Old Private Sector Banks Category for Scaling up its business and strengthening the balance sheet for the year ended March 2011. The Award is the recognition of the Bank's innovative approach towards the business, both within and outside J&K. Dun & Bradstreet Banking Awards J&K Bank was awarded the Best Bank in the prestigious 'Dun & Bradstreet (D&B) - Polaris software Banking Awards 2011 in the category for "Rural Reach - Private Sector". 2012 Business Today - KPMG Study The bank was ranked one of the best banks in the Best Bank Study 2012 done by Business Today and KPMG. The Study ranked the Bank No. 1 on the basis of NPA 15
    • coverage ratio and the bank was also ranked No. 1 in terms of Cost to income ratio which stood best in the industry at the end of the March 2012. The Bank was ranked 4th in Mid sized banks category in the country based on the previous year's growth, quality of assets, quality of earnings, productivity and efficiency and capital adequacy parameters. Sunday Standard FINWIZ-2012 Best Bankers Award The Bank was awarded „Best Banker in Financial Inclusion and Customer Friendliness‟ and declared runner up for „Best Banker in Priority Sector Growth and Agricultural Credit‟. IPE HRM Congress Awards The Bank has been conferred with the prestigious HR Leadership Award at IPE HRM Congress Awards organized under the aegis of APHC Asia Pacific HRM Congress 2012. The criteria adopted to choose the awardees included internal (within the organization) perception, external perception (based on credibility, achievement and value contribution to the business), track record of performance and achievements, values, integrity and work life balance. CNBC TV18 India Best Bank and Financial Institution Awards. The Bank was awarded as the “Best Bank” in the “Old Private Sector Bank” category at the CNBC TV18 India Best Bank and Financial Institution Awards for FY12. The distinction of being the “Best Bank” in the “Old Private Sector Bank” category has been accorded to J&K Bank by a panel of distinguished jurors consisting of Mr. Jagdish Capoor, former Deputy Governor Reserve Bank of India, former Chairman of HDFC Bank and former Chairman of BSE, Mr. A. K. Purwar, Chairman of India Venture Advisors Pvt. Ltd & former Chairman of State Bank of India, Mr. H. N. Sinor, CEO, Association of Mutual Funds of India, former CEO, Indian Banks Association and former Managing Director of ICICI and Mr. M. V. Nair, former Chairman, Union Bank of India. 16
    • India Human Capital Awards 2012 For its leadership role in the human resource management practices, J&K Bank was conferred with HR Leadership Award in the second India Human Capital Awards 2012. The award is the recognition of Bank‟s strategic and iconic position as a role model for professionalism and management excellence in the banking industry. 2013 FE India‟s Best Banks Award-2012-13 The Bank was ranked as No. 1 in „Best Old Private Sector Bank‟ category in the survey conducted across the banking industry. In terms of „Profitability‟, the Bank stands 3rd in the overall banking industry while as 1ST in the category of „Old private sector banks. The Award is the recognition of the Bank's strong fundamentals and dynamic growth model. Europe Business Assembly Awards, London The Bank bagged the prestigious „Best Enterprise‟ award from Europe Business Assembly (EBA) in London. The Socrates Committee of EBA also awarded the Chairman and CEO Mr. Mushtaq Ahmad with „Manager of the Year‟ medal and a special statue. 17
    • SERVICES PROVIDED BY J&K BANK The J&K Bank is the organization that is serving the people over the decades. This is the only organization in the valley, which has a major contribution towards the economy of J&K state. It is the J&K Bank who had lifted the people of J&K for the extreme poverty to the leading business of the valley. Examples are Kanwal Spices. The J&K Bank has always tried to provide efficient and better service to the customers. The J&K bank is trying to provide the qualitative services to its customers. The bank has installed a network of about 200 ATMs both Off & On site at various centers across the country. Besides, Anywhere Banking and Tele-Banking services are available at various locations. The Central DATA centre of the bank has been set up with Finacle - as core banking solution. J&K Bank is the only bank in the country that has taken an initiative by establishing Khidmat Centers all over the state where all e-services are provided to the people. The rollover of bank on the data center has already begun. With the commencing of the said Data Centre, the Bank is also offering Internet Banking to its customers. Anywhere banking is presently available almost at all centers and with the completion of interconnectivity; the said facility will be made available from all its computerized branches. Tele banking is available at most of the centers. Though, with the increase in the number of customers the bank is going to facilitate its customers with Tele-banking facilities with ease. The bank introduced new value added floating rate deposit schemes viz., „Super Earner Deposit Scheme‟ and „Super Reinvestment Deposit Scheme‟ to add to the options/choices available to the customers. Bank also introduced another new deposit product under the name and style of „Mehendi Deposit Scheme‟ targeted for girl child. The scheme has also value-added features and a free accidental insurance cover. The bank continued its emphasis on maintaining high standards of service to its customers. In this direction, the bank introduced various hi-tech and customer friendly products providing value added services to achieve customer satisfaction. Customer complaints received are dealt promptly and expeditiously. The bank is a member of the Banking Codes and Standards Board of India and has adopted „Code of Bank‟s Commitment to Customers‟, a voluntary code providing protection and „Right to Know‟ to the customers. The bank has established a 24 X 7 help desk to address customer queries and the desk is slated to be converted into a full fledged call centre in 2007-08. The bank is also keenly pursuing for ISO 9000 certification for its customer service. 18
    • The bank has revamped its delivery channels and added „Business Development and Promotion Centre‟s‟ (BDPCs) with an aim to get closer to and provide hassle-free service to the customers. Marketing managers and business promotion officers have been placed in all the zones for execution of the marketing initiatives. 19
    • LOAN FACILITIES GIVEN BY THE BANK The different types of loans provided by the bank to its customers as per their requirement are:  Educational Loan  House Loan  Car Loan  Consumer Loan  Dastkar Finance Scheme  Craft Development Scheme  Khatamband Finance Scheme  Roshni Financing Scheme Personal Loan Scheme: In addition to above products JK bank also extend “Personal Loan Facility” for general public, which covers the following segments.  Housing Loan Scheme.  Consumption Loan Scheme.  Car Loan Scheme.  Education Loan Scheme.  Consumer Loan Scheme.  Loan for financing of School buses. 20
    • Risk Management The bank continued to focus on risk management on an enterprise wide basis and developing Integrated Risk Management Systems for efficient management of various risks viz. Credit, Market and Operational. The bank has taken the following initiatives for strengthening risk management practices in line with business strategies as also to achieve compliance with industry best practices and regulatory requirements. I) Credit Risk: The bank has focused on improving the credit appraisal and approval processes. New standardized appraisal formats have been introduced in the Corporate and SME segments. Centralized processing of credit proposals has been introduced to separate the business development and credit appraisal system. To bring objectivity to the credit risk assessment, eligible borrowers in corporate and SME segments are proposed to be brought under the internal credit rating system, which is in the final phase of customization and was operational during 2007-08. Credit Audit / Loan Review Mechanism have been Introduced for standard accounts of Rs. 5 Crore and above and identified weak accounts of Rs. 1 Crore and above with elevated risk characteristics. It would help to improve the credit quality and manage credit risk proactively. The bank is also doing periodic parallel runs of Standardized Approach for credit risk measurement as per regulatory guidelines. ii) Market Risk: The bank is implementing the recommendations of the consultants engaged by the bank for developing a cohesive integrated risk management system particularly in relation to interest rate risk quantification techniques, liquidity management and reporting systems. With an endeavor to further improve our Asset Liability management and thereby the market risk management, the bank has switched over to Duration Gap Analysis instead of the Traditional Gap Analysis. With these systems in place, the bank has contained market risk particularly on investment portfolio by reducing the non-SLR bonds and debentures portfolio and the duration of overall investment portfolio. iii) Operational Risk: The bank has constituted an Operational Risk Management Committee (ORMC) at the apex level to monitor progress on operational risk management. A comprehensive policy for Disaster Management and Business Continuity Plan (BCP) has been formulated. The bank has already initiated identification of operational risk areas of business units, capturing various operational risk events and analyzing their causative factors. 21
    • iv) Migration to Basel II: The bank has geared up „Revised Capital Adequacy Norms‟ in March 2009 that was time schedule set out in RBI guidelines on the subject. Defining and restructuring the management information system for this purpose has already been initiated. 22
    • J&K BANK‟S PERFORMANCE IN THE YEAR 2009 J&K Bank has emerged as one of the fastest growing banks in the country. Some of the glimpses of its performance in the year 2009 are described as follows. The Bank has put in place a well articulated frame work of 3 Ps (People, Process, Products) to identify and execute new initiatives to accelerate business growth on sound and sustainable lines. This framework is also designed to improve customer engagement at all customer touch points. Innovation is actively encouraged. People initiatives include new programmes for leadership development, succession planning, incentives for high performers, performance enhancement programmes etc. Process initiatives include centralization of back office functions, separation of credit marketing and approval process and feed forward MIS to Branches. Product initiatives include offering timely, affordable, customer-centric and noncommoditized products to the customers. The Bank is actively chalking out strategies to take the Bank to higher growth trajectory. Performance at a glance The aggregate business of the Bank crossed yet another psychological mark and stood at Rs. 53,934.51 crore at the end of the financial year 2008-09. The total business of the Bank increased by Rs. 6,458.64 crore from the previous year‟s figure of Rs. 47,475.87 crore, registering a growth of 13.60%. The total deposits of the Bank have grown by Rs. 4,410.84 crore from Rs. 28,593.26 crore as on 31st March, 2008 to Rs. 33,004.10 crore as on 31st March, 2009, registering growth of 15.43%. During the same period CASA deposits of the Bank have grown by more than 12% contrary to the declining trend in the industry. The Bank continued its prudent approach in expanding quality credit assets in line with its policy on Credit Risk Management. The net advances of the Bank increased by Rs. 2,047.80 crore from Rs. 18,882.61 crore as on 31st March, 2008 to Rs. 20,930.41 crore as on 31st March, 2009, registering growth of 10.84%.During the year, focused attention was given for accelerated lending under the agriculture sector which recorded a growth of 269%. The overall priority sector credit portfolio showed a growth of 40% during the same period. The Bank, in line with its policy stance, has recorded higher credit growth in J & K State than in rest of India. However, due to tumultuous situation in the state for some time as also the global economic turmoil, the overall credit growth has remained moderate. Moreover, with a 23
    • view to maintain immunity against the financial sector meltdown, the Bank has reduced its exposure to Financial Markets by 54% and to the Real Estate sector by about 32%. The performance of the Bank in recovery of NPA,s during the year continued to be good. During the year, the Bank effected cash recovery, up-gradation of NPAs and technical write-off of Rs. 327.85 crore compared to Rs. 244.53 crore in the previous year. Investment portfolio of the Bank increased by 22.59% from Rs. 8,757.66 crore as on 31st March 2008 to Rs. 10,736.33 crore as on 31st March, 2009. Insurance Business The Bank earned an income of Rs. 26.80 crore from the Insurance Business, registering a growth of 25.2% over the last year‟s income of Rs. 21.41 crore. In life insurance, the Bank mobilized a business of Rs. 101.10crore, recording a growth of 28.33% over the last year‟s business of Rs. 78.78 crore. In non-life business, the Bank mobilized a business of Rs. 40.53 crore as against Rs. 36.72 crore mobilized during the preceding year. Income Analysis Interest income of the Bank recorded a growth of Rs. 553.89 crore from Rs. 2,434.23 crore in the year 2007- 08 to Rs. 2,988.12 crore [+22.75%] in the year 2008-09, as against the interest expenses which grew by 22.42% from Rs. 1,623.79 crore during the year 2007-08 to Rs.1,987.86 crore during the year 2008-09. The Net Interest Income recorded a growth of Rs. 189.82 crore [+23.42%] during the same period. The Net Income from operations [Interest Spread plus Non-interest Income] increased to Rs. 1,245.31 crore in the financial year 200809 from Rs. 1,055.45 crore in the financial year 2007-08 recording a growth of 17.99%.The Operating Expenses showed an increase of 16.66% during the financial year 2008-09 and stood at Rs. 470.86 crore as compared to Rs.403.61 crore in 2007-08.The Cost to Income ratio [operating expenses to Net Operating Income] improved marginally from 38.24% in the financial year 2007-08 to 37.81% in the financial year 2008-09. 24
    • Gross Profit The Gross Profit for the financial year 2008-09 stood at Rs. 774.45 crore as compared to Rs. 651.84 crore in the financial year 2007-08 registering an increase of Rs. 122.61 crore [+18.81%]. The Asset Utilization Ratio [percentage of Gross Profit to Average Working Funds] stood at 2.27% in the financial year 2008-09 [previous year 2.23%]. Provisions The Provision for Loan Losses, Provision on Standard Assets, Taxation and others aggregated to Rs. 364.62 crore in the financial year 2008-09 as compared to Rs. 291.83 crore in the financial year 2007-08. Net Profit and Dividend The Bank registered a Net Profit of Rs. 409.84 crore for the financial year 2008-09 compared to Rs. 360 crore in the financial year 2007-08 recording growth of 14%. The Board of Directors have recommended dividend of 169% for the financial year 2008-09. In terms of extant guidelines, the Bank will pay the dividend distribution tax for the financial year 200809. Accordingly the total outflow on account of Dividend for the year 2008-09 will be Rs. 95.90 crore including the dividend distribution tax. Net Worth and CRAR The Net Worth of the Bank improved to Rs. 2,622.86 crore as on 31st March 2009 from Rs. 2,308.92 crore as on 31st March, 2008. The Capital to Risk Adjusted Assets Ratio [CRAR] stood at 13.46% as on 31st March, 2009 as against 12.80% as on 31st March, 2008 which is well above the norm of 9% stipulated by the Reserve Bank of India. The Tier I component of CRAR is 12.77% as on 31st March, 2009 compared to 12.14% as on 31st March, 2008. The Bank has implemented new capital adequacy framework w.e.f. 31st March 2009. Under new norms, Bank‟s CRAR works out to 14.48%, which is higher than the CRAR as computed under BASEL I norms. The advantage has stemmed mainly from higher rated Investment / Credit portfolios. The Tier I component of CRAR under new norms is 13.80% as against 12.77% under BASEL I. Tier I leverage ratio of the Bank stands at 6.96% as on 31 March, 2009 against 7.05% as on 31 March, 2008. 25
    • STORY OF AN NPA (NON-PERFORMING ASSET) Once upon a time, there was a bright young engineer full of patriotic zeal. He had graduated from the country's most prestigious institute and while his classmates were preparing for migrating to USA, he had decided to serve his country. Twenty years later, he has been converted to an NPA (Non-Performing Asset) and he spends his time reading law books to save his skin in the court case that will haunt him for the rest of his life. He had started as an employee in a blue-chip company but gave up job to be an entrepreneur. After spending five years to gather some initial capital, he started a small industry with a loan from the largest Bank of India. This was 1987 and the beginning of the tragedy. He had planned the unit based on commitment from a large scale industry who it turned out had given written commitments without being serious about what it committed. The baby was born sick and it was clear to the engineer-entrepreneur that there was no hope. There was just no exit route and he was forced to keep the new-born alive. As soon as the production started in 1988, he thought of various ways of saving the baby and discussed the same with the Bank with who asked him to write it all out in hundred different ways. He did that and also followed it up with personal visits to officers of the Bank. Every day he would spend half the day shunting from one office of the Bank to the other where more often than not he was treated as a dignified beggar. On the rarest of rare occasions when he displayed some sense of self-respect, he was insulted beyond imagination. Reports of such bad behaviour to higher officers were answered with sermons on learning to behave like a businessman. Bank refused to help him out by giving additional finance. Bank also refused to take over his unit or to help him find a buyer for the unit. In fact they pleaded that they had no such provision. Bank can only take over a unit after Court orders it to and that may take a few years if not decades. Bank froze his account and insisted that he keep running the unit with a frozen account. He committed his first illegal act by opening an account in another bank. This started a witch-hunt with the Bank using all means at its disposal to pressurize the other bank to close his account. All this while he kept pleading with the Bank to settle the matter amicably, but they were not interested. In 1993, the Bank filed a court case. Seven years later he is still pleading with the Bank to take over his unit on as-is-where-is basis and recover the best value possible. But the Bank believes that a dead horse is more valuable than a live one 26
    • and they would take over the assets (or what remains of the assets) a few years down the line after being ordered so by Debt Recovery Tribunal. He has offered to pay some money based on his paying capacity and settle the matter out-of-court. Bank is not even interested in talking. The case drags on and he keeps cursing the day he decided to serve the country. A long story that is boring because everyone likes to read about success and forget about failures. Yet, there is no denying that failure is an essential part of entrepreneurship. Accepting failures gracefully is the key to success and a society that cannot accept failures is doomed. For a long time, India tried to follow socialism treating all businessmen as crooks and looking at entrepreneurs with suspicion. All talk of liberalization and economic reforms has not changed the mindset of Indian bankers and powers that control the bankers. The legacy of the British Raj has survived and flourished in the form of India's gigantic cancerous bureaucracy. The tentacles of this cancer have spread to almost all fields in India including banking. Indian banks and financial institutions (FI's) are crying hoarse about their large Non-Performing Assets portfolio and are blaming the entrepreneurs, businessmen, Government, judicial system, courts - practically everybody except themselves for the mess that has been created primarily by them. Any lending involves the following three stages where discretion needs to be exercised (a) Evaluation and assessment of the proposal (b) Continuing Support during the currency of the loan by additional loan or by non-fund based activities (c) Exit decision and modality. Indian Banks and FI's exhibit extremes of behavior at each of the above stages. A rule-based approach precludes reasonable application of mind. Evaluation of project idea and the management is something that most Indian banks and FI's are least equipped for. This leads to the banker acting too liberal on all projects that are related to the flavor-of-the-month as well as to insisting on collaterals from everyone without taking into consideration any other competencies of the entrepreneur. For example if wind is blowing in favour of software, all projects involving software will be supported. On the other hand if foods is not being favored, a genuinely good proposal in foods will be rejected by all banks. This naturally encourages crooks to keep smelling for the flavor-of-the-month. As soon as they smell it out, the next step is to get a readymix 'bankable' project report from a con-man (also called consultant). Banks and FI's are too willing to finance against such reports to shady businessmen who may also sometimes grease their palms instead of looking for genuine project ideas backed by competent men of integrity. Herd mentality of the bankers and FI's 27
    • creates excess capacity in any industry that they choose to finance thereby laying the seeds of sickness of that industry. Coupled with the incompetency of the entrepreneurs and the shady intentions with which the projects were set up, the sickness spreads like wild fire. After a loan has been disbursed, it is an accepted norm that the Bank and FI's have a duty to keep smelling for and to act promptly on key signals that indicate the health of the recipient of the loan. Rule-bound bankers in India do collect all the necessary information and pile it up in neat reports and files. It is not unusual for bankers to even advise their clients to cook up their accounts to either satisfy the Banker's Health Code requirements or to get their unit classified as sick under the relevant laws. This having been done, the banker can sleep peacefully. Acting on the signals that emanate from these reports is none of his business. It is the entrepreneur who has to exercise to convince a long chain of stubborn bank and FI officers to rise from their slumber. This long chain operates on a veto system. Each and every member of the chain has a right to delay and veto and no one, howsoever senior, has a right to over-ride a veto or to ask someone to expedite. So the entrepreneur is now caught in a game where almost every petty Bank and FI officer satisfies his ego by kicking him where it hurts most before obliging him by moving the file to the next officer. Bank's and FI's key decisions about nursing versus exit get influenced by this merry-go-round ego trip of the officers. The attitude that the Bank will lose more than the entrepreneur by a delay in such key decisions is completely missing in Indian bankers and FI's who see themselves as demigods waiting for the right 'puja' (rites of worship) to be performed by the faithful before granting the boons. Honourable exit is something that is an alien concept to the Indian bankers and FI's. The only exit route known to banks and FI's in India is to issue a Recall of Loan letter. The letter is just a stepping stone to filing a suit and has no other practical utility. As soon as a Recall letter is issued, the banker is relaxed because his headaches are now over. He will pass the necessary entries in his books classifying the loan as Non-Performing Asset (NPA). He can now blame everybody else for all his omissions and commissions with the entrepreneur being the key accused. In any other part of the world, the first option that a banker is supposed to exercise with the support and consent of the entrepreneur is a change in ownership. It always makes more sense to sell a business as a going concern rather than sell it as a dead horse. In any business there are intangibles like goodwill, key customers, key employees who may be lost as soon as a court case is filed. Sometimes such intangible assets may be more valuable than tangibles like land, building, plant & machinery etc. Indian banks and financial institutions live in a fool's paradise thinking that a court or tribunal can get them 28
    • all that they need. What they do not realize is that no judicial body can help them get possession of a running unit without sacrificing its vitality. The bureaucratic attitude of Indian banks and FI's has had two negative effects. On one hand it has fed and strengthened a generation of shady businessmen and con-men who know how to fool the banks for a multitude of projects - some of which even turn profitable. On the other hand it has killed a new generation of capable entrepreneurs. Indian Banks and FI's have looked at balance sheets and financial statements for too often. It is time that they learn to look at human capabilities. It is time that they learn to evaluate ideas rather than run in herd-like manner. Tribunals and Courts are like surgeons who can cut and operate but cannot give life and good health. Unless Indian banks and FI's learn to build their health as well as the health of their clients, they will keep converting useful assets of the country into NPA's. 29
    • NON PERFORMING ASSETS (NPA) Action for enforcement of security interest can be initiated only if the secured asset is classified as Nonperforming asset. Non-performing asset means an asset or account of borrower, which has been classified by bank or financial institution as sub –standard, doubtful or loss asset, in accordance with the direction or guidelines relating to assets classification issued by RBI. An amount due under any credit facility is treated as “past due “when it is not been paid within 30 days from the due date. Due to the improvement in the payment and settlement system, recovery climate, up gradation of technology in the banking system etc, it was decided to dispense with “past due “concept, with effect from March 31, 2001. Accordingly as from that date, a Non performing asset shell be an advance where;  Interest and/or installment of principal remain overdue for a period of more than 180 days in respect of a term loan.  The bill remains overdue for a period of more than 180 days in case of bill purchased or discounted.  Interest and/or principal remains overdue for two harvest season but for a period not exceeding two half years in case of an advance granted for agricultural purpose, and  Any amount to be received remains overdue for a period of more than 180 days in respect of other accounts. With a view to moving towards international best practices and to ensure greater transparency, it has been decided to adopt ‟90 days overdue „norms for identification of NPA s, from the year ending March 31, 2004, a non performing asset shell be a loan or an advance where;  Interest and/or installment of principal remain overdue for a period of more than 90 days in respect of a term loan.  The account remains „out of order „for a period of more than 90 days in respect of an overdraft/cash credit (OD/CC).  Interest and/or principal remains overdue for two harvest season but for a period not exceeding two half years in case of an advance granted for agricultural purpose, and  Any amount to be received remains overdue for a period of more than 90 days in respect of other accounts. 30
    • PROBLEMS DUE TO NPA 1) Owners do not receive a market return on their capital in the worst case, if the banks fails, owners lose their assets. In modern times this may affect a broad pool of shareholders. 2) Depositors do not receive a market return on saving. In the worst case if the bank fails, depositors lose their assets or uninsured balance. 3) Banks redistribute losses to other borrowers by charging higher interest rates, lower deposit rates and higher lending rates repress saving and financial market, which hamper economic growth. 4) Nonperforming loans epitomize bad investment. They misallocate credit from good projects, which do not receive funding, to failed projects. Bad investment ends up in misallocation of capital, and by extension, labour and natural resources. 5) Nonperforming asset may spill over the banking system and contract the money stock, which may lead to economic contraction. This spillover effect can channelize through liquidity or bank insolvency: a) When many borrowers fail to pay interest, banks may experience liquidity shortage. This can jam payment across the country. b) Illiquidity constraints bank in paying depositors. 31
    • MANAGEMENT OF NPAs: SECURITIZATION Securitization: Securitization is the process of conversion of existing assets or future cash flows into marketable securities. For the purpose of distinction, the conversion of existing assets into marketable securities is known as asset-backed securitization and the conversion of future cash flows into marketable securities is known as future-flows securitization. A typical securitization transaction consists of the following steps: Creation of a special purpose vehicle (SPV) to hold the financial assets underlying the securities; Sale of the financial assets by the originator or holder of the assets to the SPV, which will hold the assets and realize the assets; Issuance of securities by the SPV, to investors, against the financial assets held by it. The purpose of the Securitization Act is to promote the setting up of asset reconstruction / securitization companies to take over the Non Performing Assets (NPA) accumulated with the banks and public financial institutions. The Act provides special powers to lenders and securitization / asset reconstruction companies, to enable them to take over of assets of borrowers without first resorting to courts. The Act was welcomed by the banking community, but resisted by the borrower community. The validity was challenged in various courts on the ground that it was predominantly in favor of lenders. Hence, lenders were unable to enforce the provisions in full. But the crux of the issue was whether the Act would be an effective tool to make a drastic difference to the NPA menace. 32
    • SECURITIZATION- RELEVANCE TO THE BANKING SECTOR Other than freeing up the blocked assets of banks, securitization can transform banking in other ways as well. The growth in credit off take of banks has been the second highest in the last 55 years. But at the same time the incremental credit deposit ratio for the past one-year has been greater than one. Thus, for every Rs 100 worth of deposit coming into the system more than Rs 100 is being disbursed as credit. The growth of credit off take though has not been matched with a growth in deposits. So, the mismatch between the credit given and the funds received creates an issue of proper management of increased credit off-take. One of the measures adopted by the banks to cater to this credit boom is by selling their investments in government securities and giving the amount raised as loans. But there is a limit to such credit funding due to minimum SLR requirements of 25% in government and semi government securities. As a result of selling government paper to fund credit off take their investment in government paper has been declining. Once the banks reach this level of 25 per cent, they cannot sell any more government securities to generate liquidity. And given the pace of credit off take, some banks could reach this level very fast. So banks, in order to keep giving credit, need to ensure that more deposits keep coming in. One option is to increase interest rates. Another alternative is Securitization. Banks can securitize the loans they have given out and use the money brought in by this to give out more credit. A. K. Purwar, Chairman of State Bank of India, in a recent interview to a business daily remarked that bank might securitize some of its loans to generate funds to keep supporting the high credit off take instead of raising interest rates. Securitization also helps banks to sell off their NPAs to asset reconstruction companies (ARCs). ARCs, which are typically publicly / government owned, act as debt aggregators and are engaged in acquiring bad loans from the banks at a discounted price, thereby helping banks to focus on core activities. On acquiring bad loans ARCs restructure them and sell them to other investors as 'Pass through Certificates' (PTCs), thereby freeing the banking system to focus on normal banking activities. 33
    • MANAGING NPAs THROUGH SECURITIZATION-FACILITATING BANKS An interesting shift is noticed in the case of private sector banks. It is common knowledge that these banks have been notably driving the retail banking revolution in the country in the last few years. The Supreme Court verdict would help these banks in a limited manner in respect of their corporate NPAs. However, in case of defaults by retail borrowers, the banks would have to weigh the costs and benefits of tracing each delinquent retail borrower, seizing his assets and trying to sell them off to realize the dues. The lenders may prefer to create homogeneous pools of these assets and securitize them with an asset reconstruction company (ARC) instead. The salient provisions of the Securitization Act state that the lender can take possession of the asset in case the borrower does not discharge his liabilities within 60 days of the demand notice from the lender. The lender can then manage the assets with a right to transfer them by way of lease, assignment or sale. Are banks today equipped for this? Imagine banks having thousands of such seized assets of various descriptions and values in their physical possession. The sheer cost of maintaining such assets in marketable form could be formidable. The assets which form security for bank loans and advances have to be valued / revalued on a periodical basis to determine the security shortfall. The provisions made by banks depend on this valuation. In a period when interest rates are headed downwards, and asset values are on a steady ascent due to increased consumer spending, there is a possibility that the `security' could be overvalued on paper. But when the asset has to be liquidated or sold, reality may crack paper valuations. Then the Act may seem futile for the time being. On the one hand, borrowers whose assets have been seized could be spurred to legal recourse by the striking down of the 75% down payment provision. On the other, existing assets may not yield the desired salvage values to the lenders. The third dimension would be the escalating NPA levels due to the implementation of the 90-day norm. In the medium and long term, the Securitization Act would ensure that both lenders and borrowers learn their lessons. Lenders would fine-tune their appraisal and monitoring 34
    • Mechanisms to prevent future NPAs, and feel comfortable in the knowledge that securities can be liquidated without much bother. This is the short-term picture. Borrowers would know that their assets are in jeopardy if they do not deliver on their promises or take the lenders into confidence in respect of their business risks. The change would be in the attitude. And this change would go a long way in enhancing the quality of the banking system's assets. 35
    • PREVENTING NPAs At the pre-disbursement stage, appraisal techniques of bank need to be sharpened. All technical, economic, commercial, organizational and financial aspects of the project need to be assessed realistically. Bankers should satisfy themselves that the project is technically feasible with reference to technical knowhow, scale of production etc. The project should be commercially feasible in that all background linkages by way of availability of raw materials at competitive rates and that all forward linkages by way of assured market are available. It should be ensured assumptions on which the project report is based are realistic. Some projects are born sick because of unrealistic planning, inadequate appraisal and faulty implementation. As the initiative to sanction or reject the project proposal lies with the banker, he can exercise his judgment judiciously. The banker should at the pre-sanction stage not only appraise the project but also the promoter – his character and his capacity. It is said that it is more prudent to sanction a 'B' class project with an 'A' class entrepreneur than viceversa. He has to ensure that the borrower complies with all the terms of sanction before disbursement. A major cause for NPA is fixation of unrealistic repayment schedule. Repayment schedule may be fixed taking into account gestation or moratorium period, harvesting season, income generation, surplus available etc. If the repayment schedule is defective both with reference to quantum of installment and period of recovery, assets have a tendency to become NPA. At the post-disbursement stage, bankers should ensure that the advance does not become and NPA by proper follow-up and supervision to ensure both assets creation and asset utilization. Bankers can do either off-site surveillance or on site inspection to detect whether the unit / project is likely to become NPA. Instead of waiting for the mandatory period before classifying an asset as NPA, the banker should look for early warning signals of NPA. The following are the sources from which the banker can detect signals, which need quick remedial action: a) Scrutiny of accounts and ledger cards – During a scrutiny of these, banker can be on alert if there is persistent regularity in the account, or if there is any default in payment of interest and installment or when there is a 36
    • Downward trend in credit summations and frequent return of cheques or bills, b) Scrutiny of statements – If the scrutiny of the statements submitted by the borrower reveal a sharp decline in production and sales, rising level of inventories, diversion of funds, the banker should realize that all is not well with the unit. c) External sources – The banker may know the state of the unit through external sources. Recession in the industry, unsatisfactory market reports, unfavorable changes in government policy and complaints from suppliers of raw material, may indicate that the unit is not working as per schedule. d) Computerization of loan monitoring – In computerized branches, it is possible to computerize the loan monitoring system so that accounts, which show signs of sickness or weakness can be monitored more closely than other accounts. Personal visit and face-to-face discussion – By inspecting the unit the banker is able to see himself where the problem lies - either production bottlenecks or income leakage or whether it is a case of willful default. During discussion with the borrower, the banker may come to know details relating to breakdown in plant and machinery, labour strike, change in management, death of a key person, reconstitution of the firm, dispute among the partners etc. „Special Mention‟ category of accounts – Based on warning signals obtained through both off-site and on-site monitoring, banks may classify accounts with irregularities persisting for more than 30 days under „Special Mention‟ or „Potential NPA‟ category. This will help the bank to initiate proactive remedial measures for early regularization. The measures include timely release of additional funds to borrowers with temporary liquidity problems and restructuring of accounts of sincere and honest borrowers after considering cases on merit. On-going classification – Although classification of assets is a yearly exercise, banks would do well to have a system of on-going classification of assets and quarterly provisioning. This helps in assessing provisioning requirements well in advance. All doubts regarding classification should be settled internally and a system of fixing accountability for failure to comply with the regulatory guidelines should be introduced. Strategy for reducing provision – The extent of provision for doubtful asset is with reference to secured and unsecured portion. Cent percent provision needs to be made for the 37
    • Unsecured portion. If banks can ensure that the loan outstanding is fully secured by realizable security, the quantum of provision to be made would be less. It takes one year for a sub standard asset to slip into doubtful category. Therefore, as soon as an account is classified as substandard, the banker must keep strict vigil over the security during the next one year because in the event of the account being classified as doubtful, the lack of security would be too costly for the bank. 38
    • REDUCING NPAs Cash recovery – Banks, instead of organizing a recovery drive based on over-dues, must short list those accounts, the recovery of which would provide impetus to the system in reducing the pressure on profitability by reduced provisioning burden. Vigorous efforts need to be made for recovery of critical amount (overdue interest and installment) that can save an account from NPA classification: a) In case of a term loan, the banker gets 90 days after the date of default to take appropriate action and to persuade the borrower to pay interest or installment whichever is due. b) In case of a cash credit account, the banker gets 90 days for ensuring that the irregularity in the account is rectified. c) In case of direct agricultural loans, the account is classified NPA only after two crop seasons (from sowing to harvesting) from the due date in case of short duration loans and one crop season from the due date in case of long duration loans. Up gradation of assets – Once accounts become NPA, then bankers should take steps to upgrade them by recovering the entire over-dues. Close follow-up will generally ensure success. Compromise settlements – Wherever feasible, in case of chronic NPAs, banks can consider entering into compromise settlements with the borrowers. Recovery through legal recourse – Since provision amount progressively increases with increase in time, it is necessary to take steps to recover dues either through persuasion or by legal recourse. A strategy of fixing a dead line for recovery may force the bank to either recover or shed the asset off the Balance sheet. Banks may file suits promptly against willful defaulters. Banks can take recourse under either a civil suit or the Special Recovery Acts passed by various states or the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002. The bank should vigorously follow up the legal cases. 39
    • HOW TO PREVENT SLIPPAGE AND MANAGE NPAs BETTER Basic borrower data The job begins with the know-your-customer (KYC) and credit appraisal stage itself. The banks must first get the basic data on the borrower and this includes details such as name and address of the business unit, name and addresses of business partners, directors, guarantor, details of any authorized advance, credit rating score, details of credit facilities, and other relevant documentation. This should be prepared by the credit officer and approved by the branch head. A monthly MIS to be generated for the branch. Daily account activity Details of any unusual transactions or large value transactions in the account, if there is no activity in the account for more than seven days. This should be a daily MIS for the branch management. Unusual transactions would be checks favoring any new customer not already disclosed by the borrower at the time of proposal, checks for round amounts etc. Large value transactions would vary according to the size of the company and the limit or line of credit sanctioned. Continuous surveillance every quarter This would have details such as name of the account. Limits sanctioned, drawing power as at the end of the month and outstanding, details of arrival of Drawing power - should show clearly value of unpaid stocks not reckoned for drawing power, details of debits over a particular amount in the account with purpose, details of insurance held for securities and expiry date, details of production in the quarter vis-à-vis projections. There should also be surveillance of any shortfall, and all pertinent details, such as whether reasons for it were discussed with the borrower, sales and profit during the quarter vis-à-vis projection, how it compares with the same period for the previous year, or whether the unit would achieve the projected sale for the year based on the performance so far. An analysis of quarterly results of the company should be made. The continuous surveillance statement must be seen and verified by the credit officer and the branch head and would be available as a tool for ascertaining staff lapses in case the account goes bad. If the account 40
    • had thrown signals and the statement also reflected the same and despite that if prompt action is not taken to prevent slippage it becomes easier to identify staff lapses in monitoring. Daily statement of check returns both inward and outward This must be verified everyday by the credit officer and the branch manager. It must have a column for their comments where they must record the details of discussion with the borrower about the reasons for the frequent return of check. Overdue term loans A daily statement to be generated, indicating name of the account, limit sanctioned, drawing power, outstanding, date and amount of installment/interest due, date of last inspection of the unit by branch official and name. A weekly and monthly summary of overdue term loans This should indicate in addition to the above the details of out standings in other borrower accounts of the same party and over dues, if any, in such accounts. The monthly statement beyond a cut-off limit should be available to the controlling office simultaneously. The monthly statements should also generate simultaneously a pre programmed politely worded reminder letter to the borrower. Loan concentration statements A monthly statement should be generated to show portfolio concentrations by industry, geography and borrower segments. This would just have under each head the name of the borrower, limits sanctioned and outstanding as at the end of every month. Weekly statement of overdue bills purchased and discounted This must give the bills outstanding beyond due date for since bills and 21 days for demand bills. This must have information on name and address of the drawee, whether demand or since and if since the tenor, whether a satisfactory credit report has been obtained on the drawee and if not who authorized the purchase or discount without the credit report, whether bills purchased on the drawee have been delayed before or returned earlier. 41
    • The system should generate a reminder to the bank for all bills outstanding beyond seven days from the due date with a copy to the customer for his follow up. The system should reject purchase a bill on drawee‟s whose bills have been returned more than once. Monthly statement of overdue bills purchased and discounted should have an additional column for fate of goods covered by the respective consignments and whether this was discussed with the borrower. Similar statements as above have to be generated for foreign bills purchased and discounted weekly and monthly separately for letter of credit (LC) bills and non-LC bills. Monthly statement of insurance for securities due for renewal A letter to the borrower to provide necessary funds for debit and a letter to the insurance company asking for renewal premium should be generated on the first day of every month. This has to be pursued by the credit officer till renewal. Limits due for renewal A monthly statement should be generated for the credit officer. It should also be seen by the branch head. A quarterly statement of lapsed limits should be generated with the above details with an extra column for the date of visit by the credit officer and the branch head to the unit for discussions on renewal of limits. Watch category statement Accounts with funds overdue of Rs1m (approximately US$25,430) and above are to be included on this statement to be generated on the 15th and 30th of every month. From all the above data a watch category statement is to be generated at the end of every fortnight to the branch head who has to add his comments the same day and a monthly statement should be available to the controlling office on the first working day of every month. The fortnightly statement for the branch and the monthly statement for the controlling office should have the following details: name and address of the unit, date of first sanction and by whom, date of renewal, details of limits sanctioned, drawing power, outstanding, extent of irregularity, reasons for irregularity, when the unit was last inspected, whether the unit is working, whether the documents are in order and when the account is expected to be regularized, what the branch proposes to do to regularize the account and the amount of penal interest recovered. If the account remains overdue for more than six months and remains in watch 42
    • Category for more than nine months with persisting over dues the account is to be transferred to assets recovery or reconstruction department for further course of action. Assets classification and downgrade statement This should be generated once every three months - where a downgrade or slippage is likely, but the loans are assessed as acceptable to the bank, the credit officer should send a mitigation report to the branch head as to why the credit is still acceptable to the bank. It should detail the risks and the mitigants for the same. This would be a monthly statement for the credit officer and the branch head. Assets recovery/reconstruction The assets recovery/reconstruction department gets the account for its follow up in the 10th month from the date it fell overdue. Immediately on receipt of the account this department should start the recovery proceedings. The first step would be to visit the unit for a discussion to explore the possibility of resurrecting the unit from its illness and retransfer the account to the branch. The credit officer of the branch or its branch head should also accompany the assets reconstruction department people for the discussion. This branch should actively involve itself in the recovery efforts of the assets reconstruction department because they know the borrower better. The visiting official should record his findings. On the ninth month from the date it became overdue the statement should indicate whether efforts for a one-time settlement with the unit was made. At the end of 12 months the assets reconstruction department should explore the possibility of selling the account to any assets reconstruction corporation for a price. If that is not possible at the end of 18 months they should initiate legal steps if their efforts for an OTS or for revival or for sale to an ARC had failed. If the unit is found to be a willful defaulter then a report should be generated for the RBI. The name and address of the unit and the directors and partners should be blacklisted and any unit in which they are interested which also has received finance from the bank should also be put on the watch category list for an in-depth analysis. 43
    • Statement of recoveries A monthly statement of recoveries made in NPA accounts indicating total NPAs as at the beginning of the month, cash recoveries made during the month, slippage during the month, up gradation during the month, NPA level as at the end of the month to be generated for the branch head. Accounts falling under corporate debt restructuring mechanism should be handled only by the branch and not transferred to the assets reconstruction branch. 44
    • MANAGEMENT OF NPAs IN J&K BANK The management of NPAs has been quite outstanding in J&K bank. The low valuation accorded to the bank is largely due to the risk perception of the bank doing its business in the state of J&K. However, on the contrary, the perceived perception weakness is its business strength. The close relationship with the J&K government allows it access to large float funds. It mobilizes deposits in the state at low cost and lends outside the state at competitive rates. Moreover, overstaffing and poor network that dog public sector banks are non-existent in J&K Bank. It is one of the best banks, with its name being the primary perceptible concern. The bank‟s performance on recovery of NPAs has been always appreciable. It is due to effective management policies that the NPA level of J&K bank is decreasing continuously. The bank has also recorded a record profit of more than 512 crores in the financial year 200910. According to the company‟s chairman, despite the state being strife torn, the company has been performing well and he sees no reason why it should affect the operations of the bank in future. The bank has grown to this size in the last five years when the concerns about the state have been the highest. The bank has grown at a scorching pace in the last few years making its presence visible by aggressively following prudent policies and improving its asset quality. It boasts lowest NPAs in the banking industry at 1.4 per cent. The deposits and advances growth has shown remarkable growth, which is above the national average. 45
    • ASSET QUALITY OF J&K BANK The asset quality of J&K Bank is shown with the following table: 2005-06 2006-07 2007-08 2008-09 2009-10 UNAUDITTED GROSS NPAs (IN 370.19 501.83 485.23 559.27 511.32 133.87 193.57 203.55 287.51 159.56 2.52% 2.89% 2.53% 2.64% 2.44% 0.92% 1.13% 1.08% 1.37% 0.77% 63.64% 61.43% 58.05% 48.59% 68.79% 20.57% 24.98% 21.02% 21.32% 18.66% Rs.CR) NET NPAs (IN Rs CR) GROSS NPA RATIO (%) NET NPA RATIO(%) NPA COVERAGE RATIO(%) GROSS NPA TO NET WORTH RATIO (%0 The above table shows that the work of J&K Bank on recovery of NPAs has been excellent. Though there are ups and downs regarding NPA coverage ratio but still the bank has kept the level at a place where chances of business failures are almost nil. 46
    • METHODS USED FOR CONTROLLING NPAs IN J&K BANK The various methods that are used in J&K Bank for controlling NPAs are as follows: Basic borrower data Daily account activity Continuous surveillance every quarter Daily statement of check returns both inward and outward Overdue term loans A weekly and monthly summary of overdue term loans Loan concentration statements Weekly statement of overdue bills purchased and discounted Monthly statement of insurance for securities due for renewal Limits due for renewal Watch category statement Assets classification and downgrade statement Assets recovery/reconstruction Statement of recoveries The above techniques are discussed in detail earlier in this report and all of these are strictly used in J&K Bank. 47
    • TECHNIQUES USED IN J&K BANK FOR MANAGING NPAs The various techniques that are used in recovering NPAs are:  Cash recovery  Up gradation of assets  Compromise settlements  Recovery through legal recourse These techniques have been quite effectively used in J&K Bank for reducing NPAs. During the last year, the Bank effected cash recovery, up-gradation of NPAs and technical write-off of Rs. 327.85 crore compared to Rs. 244.53 crore in the year 2008. Investment portfolio of the Bank increased by 22.59% from Rs. 8,757.66 crore as on 31st March 2008 to Rs. 10,736.33 crore as on 31st March, 2009. These techniques could generate much better results for the Bank if SARFAESI Act is applied in the state which has not been applied till now. The efforts are being made to make this Act applicable in J&K. The chief minister of the state has recently said in his speech that this Act will be applied in the state very soon. J&K Bank is also hoping for the application of this Act so that they can reduce NPAs further and further. The procedure that is followed in J&K for recovering loans is discussed as follows: First the bank officials call the borrower who has take loans from the bank and is not caring to pay back. If the holder does not respond then the bank officials personally visit him and still if he doesn‟t pay back the loan amount then the bank along with police takes legal actions against the defaulter. This is how the J&K Bank has managed its NPAs through decades in the absence of the SARFAESI Act otherwise the story could have been different. This is the only bank in the country that has grown its business in those conditions where scope was very less because situation in J&K state has always been a concern to carry on any business. The level of NPAs in the current year has been one of the lowest in level in the company. The net NPA percentage in 2010 which is unauditted till now is only 0.77% which is excellent regarding the current situation in the state. This percentage could have been zero if SARFAESI Act would have been applied in the state. 48
    • COMPARISON OF NPAs OF J&K BANK AND OTHER BANKS The comparison of gross and net NPA percentage of J&K Bank and some other banks is shown below: GROSS NPA‟S % NAME OF THE NET NPA‟S % BANK 2006-07 2007-08 2008-09 2006-07 2007-08 2008-09 STATE BANK OF 2.9 3.0 2.8 1.6 1.8 1.8 INDIA 3.5 2.7 1.8 0.8 0.6 0.2 PUNJAB NATIONAL 2.I 3.3 4.3 1.0 1.6 2.1 BANK 1.1 0.8 1.1 0.7 0.4 0.4 ICICI BANK 2.9 2.5 2.6 1.1 1.1 1.4 AXIS BANK 1.5 1.2 1.6 0.9 0.8 1.1 J&K BANK 4.8 3.2 2.7 1.7 1.5 1.2 CANARA BANK 1.8 1.4 1.3 0.8 0.6 0.6 CENTRAL BANK OF 2.3 1.6 1.9 0.6 0.6 0.8 INDIA 2.9 2.2 2.0 1.0 0.2 0.3 STATE BANK OF 3.0 2.7 1.9 0.8 1.0 0.8 PATIALA 2.1 1.5 1.1 0.5 0.3 0.3 VIJAYA BANK 1.9 1.2 0.9 0.4 0.2 0.2 UNION BANK OF 4.1 2.4 2.1 2.0 0.9 1.1 INDIA 1.4 1.4 2.0 0.4 0.5 0.6 SYNDICATE BANK 2.5 2.9 4.3 2.0 1.8 2.4 CORPORATION 2.6 2.0 1.8 1.1 0.8 0.7 BANK 1.4 1.1 0.8 0.2 0.2 0.2 INDIAN BANK 2.5 1.8 1.3 0.6 0.5 0.3 49
    • REVIEW OF LITERATURE 50
    • Though many published articles are available in the area of non-performing assets, which are either bank specific or banking sector specific, there are hardly any state specific researches. As situation in J&k has tumultuous from decades, so hardly any research has been done on the topic. A considered view is that banks‟ lending policy could have crucial influence on non-performing loans (Reddy, 2004). He critically examined various issues pertaining to terms of credit of Indian banks. In this context, it was viewed that „the element of power has no bearing on the illegal activity. A default is not entirely an irrational decision. Rather a defaulter takes into account probabilistic assessment of various costs and benefits of his decision‟. Mohan (2003) conceptualized „lazy banking‟ while critically reflecting on banks‟ investment portfolio and lending policy. The Indian viewpoint alluding to the concepts of „credit culture‟ owing to Reddy (2004) and „lazy banking‟ owing to Mohan (2003a) has an international perspective since several studies in the banking literature agree that banks‟ lending policy is a major driver of non-performing loans (McGoven, 1993, Christine 1995, Sergio, 1996, Bloem and Gorters, 2001). Furthermore, in the context of NPAs on account of priority sector lending, it was pointed out that the statistics may or may not confirm this. There may be only a marginal difference in the NPAs of banks‟ lending to priority sector and the banks lending to private corporate sector. Against this background, the study suggests that given the deficiencies in these areas, it is imperative that banks need to be guided by fairness based on economic and financial decisions rather than system of conventions, if reform has to serve the meaningful purpose. Experience shows that policies of liberalization, deregulation and enabling environment of comfortable liquidity at a reasonable price do not automatically translate themselves into enhanced credit flow. 51
    • Rakesh Gupta has conducted a research on relative efficiency of Indian Commercial Banks in which he finds the J&K bank among top eight banks which were considered to be efficient in 2008. The other seven banks include Nainital Bank, SBI Comm. and Intl. Bank, Citibank, Union Bank of India and City Union Bank, IDBI Ltd. and Federal Bank. In this research it the author writes that the performance of these banks was efficient due to proper management of NPAs. The performance of J&K Bank has been quite outstanding in spite of the situation that was prevailing in the valley at that time. The NPA percentage of the bank was 2.6% which is good as per the norms of RBI. The NPA coverage ratio of the bank was at 68% and 58% in 2006 and 2008 respectively. Bhattacharya (2001) rightly points to the fact that in an increasing rate regime, quality borrowers would switch over to other avenues such as capital markets, internal accruals for their requirement of funds. Under such circumstances, banks would have no option but to dilute the quality of borrowers thereby increasing the probability of generation of NPAs. The problem of NPAs is related to several internal and external factors confronting the borrowers (Muniappan, 2002). The internal factors are diversion of funds for expansion/ helping/promoting diversification/ modernization, associate concerns, time/cost taking up overruns during new the projects, project implementation stage, business (product, marketing, etc.) failure, inefficient management, strained labour relations, inappropriate technology/technical problems, product obsolescence, etc.while external factors are recession, non-payment in other countries, inputs/power shortage, price escalation, accidents and natural calamities. In the Indian context, Rajaraman and Vasishtha (2002) in an empirical study provided an evidence of significant bivariate relationship between an operating inefficiency indicator and the problem loans of public sector banks. In a similar manner, largely from lenders‟ perspective, Das and Ghosh (2003) empirically examined non-performing loans of India‟s public sector banks in terms of various indicators such as asset size, credit growth and macroeconomic condition, and operating efficiency indicators. Sergio (1996) in a study of non-performing loans in Italy found evidence that, an increase in the riskness of loan assets is rooted in a bank‟s lending policy adducing to relatively unselective and inadequate assessment of sectoral prospects. Bloem and Gorter (2001) suggested that a more or less predictable level of non-performing loans, though it may vary slightly from year to year, is caused by an inevitable number of „wrong economic decisions by individuals and plain bad luck 52
    • (inclement weather, unexpected price changes for certain products, etc.). Under such circumstances, the holders of loans can make an allowance for a normal share of nonperformance in the form of bad loan provisions, or they may spread the risk by taking out insurance. Enterprises may well be able to pass a large portion of these costs to customers in the form of higher prices. For instance, the interest margin applied by financial institutions will include a premium for the risk of nonperformance on granted loans. 53
    • RESEARCH METHODOLOGY/DESIGN 54
    • OBJECTIVES OF THE STUDY The main objectives of my study were: To know the policies that the J&K Bank follows to cover its NPA,s. To know the relative efficiency of J&K Bank. To know the NPA level of J&K Bank and other Indian Banks. To know the ill effects of NPAs on the performance of the banks. To get aware of the confidence among the customers of the J&K Bank regarding the performance of the bank in recovery of NPAs. To get aware of the services provided by J&k Bank and the level of satisfaction among its customers. To study the NPA coverage of J&k Bank in different financial years and its effect on the overall efficiency of the bank at different points of time. 55
    • RESEARCH DESIGN A research design is the framework or plan for a study that guide the collection and analysis of data. In this research report the descriptive research method is applied. DATA COLLECTION Data collection is very important for conducting any research. Success or failure of a research primarily depends on data collection. Data may be collected by any of the following methods:  Primary sources  Secondary sources The primary sources of collecting data in this project include: o Personal interviews o Questionnaire o Telephonic interviews The secondary sources through which data have been collected for this project include the following: o Internet o Newspapers o Information brochures of the bank o Books and magazines 56
    • SAMPLING PLAN The sampling plan in this project is as follows: Population: The customers of the bank. Sampling unit: Any individual residing in district Kulgam of J&K state. Sample size: 100 Sampling procedure: convenience sampling 57
    • LIMITATIONS OF THE STUDY Every research suffers from one or the other limitation. The limitations from which my study suffered are:  Time allowed for the study was short. This limitation narrowed the scope of the study.  Political instability in the region prevented to conduct the research in the manner in which it could have been conducted.  Negative responses from some of the respondents made it difficult to interpret the data easily.  The survey is limited to district Kulgam only. So the respondents were of this district only. This limitation may have brought biasness in the study.  Some of the ambiguous replies which I omitted by taking them as unnecessary could generate wrong results. 58
    • DATA ANALYSES AND INTERPRETATION 59
    • QUESTIONNAIRE Q.1) Are you satisfied with the ways J&K Bank grants loans? a) Yes b) NO With the help of this question an attempt was made to know whether J&K bank grants loans with ease or apply strictness to cover their NPAs. No. of respondents 100 Yes 80 No 20 The data in the table is shown with a chart for more clarification: Chart 1 20.00% YES NO 80.00% 60
    • Analyses The above chart shows that majority of the population is satisfied with the ways J&K Bank offers loans to the public. About 80% of the respondents favoured that J&K Bank offers them loans with ease and with the banks effective policies it covers the risk. Q.2) Is the NPA level of JKB controllable? A. YES B. NO C. CAN'T SAY With the help of this question, the purpose was to get aware whether the people know that J&k Banks NPA level is at a point where they will feel satisfactory. No. of respondents 100 YES 50 NO 25 CAN'T SAY 25 61
    • Analyses After critical interpretation of the data it is clear that though most of the respondents say that the NPA level of J&K Bank is controllable, still there are a good portion of people who either say that NPA level of J&K Bank is not controllable or don‟t have any knowledge. About 25% of respondents were having no knowledge about the subject and the same amount of respondents say that the NPA level of J&K Bank is not controllable. Q.3) Are the profits of J&K Bank effected by NPA's? A. YES B. NO C. CAN'T SAY The main purpose by putting this question in the questionnaire was to get the responses of the people that what they feel about the NPAs. Whether more NPAs reduce the performance of the bank or not. No.of respondents 100 YES 30 NO 15 CAN'T SAY 55 The above data is shown with a chart give on the next page: 62
    • Q.4) Are the NPA reduction techniques of JKB standardized? A. YES B. NO C. CAN'T SAY The purpose by asking this question was to know whether people feel that the techniques for recovery of NPAs applied by J&K Bank are good or they need to be changed. No. of respondents 100 Yes 45 No 20 Can‟t say 35 The data in the above table is shown with the following chart: 63
    • Analyses The analyses of the above data is made in this way that majority of the respondents favoured that the NPA reduction techniques of J&K Bank are standardized. A little percentage of about 20% say that the NPA reduction techniques of J&K Bank need to be changed and about 35% of respondents say that they can‟t say anything whether the techniques of JKB are standardized or not. Q.5) Has NPA coverage of JKB contributed in earning a record profit of 512.38 crores in financial year 2010? A. NO ANSWER B. YES C. NO No. of respondents 100 No answer 55 Yes 30 No 15 For more clarification the data in the table is shown with the chart as follows: 64
    • Analyses The interpretation of the above data shows that more than most of the population was not having any knowledge about the subject. A good percentage of 30% agree that NPA coverage has helped J&K Bank to earn a record profit. Only 15% people don‟t agree that NPA coverage has helped J&K Bank to earn a record profit. Q.10) If SARFAESI Act is applied in J&k state. Will it be useful for J&K bank to reduce NPAs? A. YES B. NO 65
    • 30 % YES NO 70 % Analyses The analysis of the above data shows that most of the respondents that SARFESI Act should be made applicable in the state. About 80% people favoured that it will be beneficial for J&K Bank. Q.3) Comparing with other Indian banks do you think that the asset quality of J&K Bank has been appreciable always? A. YES B. NO No. of respondents 100 YES 75 NO 25 66
    • This has been shown with the chart as follows: Chart 7 75 70 65 60 55 50 45 40 35 30 25 20 15 10 5 0 75 25 YES NO Analyses The analyses of the data shows that more than 75% of the respondents favoured that J&K Bank has improved its asset quality even though the conditions in the state have not been good for business. Q.8) Which bank is the role modal of banking in J&k? A. SBI B. PNB C. JKB D. ICICI No. of respondents 100 SBI 10 PNB 5 JKB 5 ICICI 80 67
    • The data in the above table is shown with the following chart: Chart 8 5.00% 10.00% 5.00% SBI PNB JKB ICICI 80.00% Analyses The analyses of the above data shows that more than 80% people of J&K agree that J&k Bank is the role modal of banking in the state. Q.2) Which bank provides best services in the state? A. SBI B. J&K BANK C. OTHERS No. of respondents 100 SBI 10 Others 5 J&K Bank 85 The above data is shown with the following chart: 68
    • Analyses After interpretation of the data the analyses shows that most of the people of J&K prefer the services of J&K Bank over other banks. Q.9) Do you think that NPA percentage in JKB can be reduced to zero percent? A. YES B. NO No. of respondents 100 Yes 50 No 50 The above data is shown with a chart as follows: 69
    • Chart 10 YES NO Analyses The analysis of above data shows that there is a balance among respondents whether NPA percentage of J&K Bank can be minimized to zero percent. 70
    • FINDINGS AND SUGGESTIONS 71
    • FINDINGS 1) The bank has brought a good improvement in NPA recovery by increasing the NPA Coverage Ratio to 68.79% in 2009-10. 2) People of the state mostly prefer J&K Bank over other banks. 3) The asset quality of J&K Bank is being appreciated by the people as well as by the RBI. 4) Performance of the bank in recovery of NPAs has been appreciated even though it needs further improvement. 5) The NPA reduction techniques of have J&K Bank have been rated well by most of its customers. 6) Most of the people rated the NPA level of J&K Bank as controllable still lot of improvement is needed to lower down the NPA level further and further. 7) The ways through which the bank offers loans to the general public has been appreciated by most of the respondents. This has increased the image of the bank in the eyes of the people. 8) The bank has a great business opportunity in the future as its people friendly policies make the bank quite popular in the state as well as the national market. 72
    • SUGGESTIONS J&k bank is one of the leading private sector banks in the country. The performance of the bank has always been excellent. Its people friendly policies have always been appreciated and it has emerged as a role model of banking in the state as well as at national level. The bank has an important role in the development of the state as its contribution to the J&K‟s economy is most. Though the performance is quite outstanding still lot is to be done in future. Here are some of the suggestions that may help the bank: Special training programmes should be conducted to make the employees more skilled. Before setting up any new branch the bank should make efforts to make it online because online banking will make supervision easy and increase the bank‟s performance. The bank should make efforts to be at top at national level because this bank has a great customer strength and people friendly policies. The bank should adopt reward system for employees so that the confidence among them may be increased and they will put more efforts. One important suggestion is that the bank should not ignore advertising at any point of time because present business is the business of advertising and advertising has an important role in the growth of business. One more suggestion is that the bank should take initiatives to increase the daily working hour‟s time so that it can get maximum amount of working days as Kashmir remains closed most of the times due to strikes. 73
    • CONCLUSION In this report the purpose was to study the management of NPAs in J&K Bank. The overall analyses leads to the conclusion that J&K Bank‟s performance regarding the coverage of NPAs has been good but the performance has not been consistent. Though the bank‟s current performance is better as compared to its past performance still there is a need to improve asset quality and bring consistency in the performance and eliminate NPAs totally because the performance of the Bank has been affected by the NPAs in the past. The performance of the bank in the last year has been one of the best in its life and during this year it has also earned a record profit. The organization is striving hard and has been able to minimize the NPA level below 1% in the year 2010 which is unauditted till now. The bank has taken strong initiatives to build up confidence among its customers. One of these initiatives has been the Khidmat Centers which has been appreciated throughout the country. The people of the J&K state have a great faith on J&K Bank. Most of the people of the state prefer J&K Bank over other banks because this bank has served the Kashmiri Nation through decades. About 80% of the population in the state says that J&K Bank is their banker. They feel that if SARFAESI Act is applied in the state, then the time is not far when J&K bank will be at the top of Indian private sector banks because it is due to the non application of this Act that J&K Bank is having some percentage of NPAs. 74
    • BIBLIOGRAPHY BOOKS Research Methodology Marketing Management Bank Watch Marketing Management Navdeep Aggarwal Philip kotler Sajad Bazaz T.N. Chabra MAGAZINES AND NEWSPAPERS Business world India today Business today Greater Kashmir Times of India Economic Times Rising Kashmir WEBSITES www.rbi.com www.cab.org.in www.jkbank.net www.scribd.com www.livemint.com www.ezinearticles.com www.coolavenues.com www.financialexpress.com www.asiapacificforum.com www.indiastudychannel.com 75