PROJECT PRESENTATION NON-PERFOMING ASSET

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PROJECT PRESENTATION
NON PERFORMING ASSETS AND FINANCIAL
PERFORMANCE - A CASE STUDY OF KERALA
GRAMIN BANK, A R NAGAR BRANCH
UNDER THE GUIDANCE OF , PRESENTED BY,
Dr. P. MOHAN DHANYA KP
PROFESSOR CUANCOM008

2.  Non- performing assets are one of the major concerns for banks in India.
NPAs reflect the performance of banks. A high level of NPAs suggests high
probability of a large number of credit defaults that affect the profitability
and net-worth of banks and also erodes the value of the asset. The NPA
growth involves the necessity of provisions, which reduces the overall
profits and shareholders’ value. This project deals with understanding the
concept of NPAs, its magnitude and major causes for an account becoming
non-performing, projection of NPAs over next years in banks and
concluding remarks.
INTRODUCTION

3. STATEMENT OF THE PROBLEM
 Providing Credit facility to the borrower is one of the
important factors as far as banking sector is concerned.The
borrowers are not repaying the amount to the banks regularly
as per the due dates; it is affecting the performance of the
banks. As per the new banking regulation if the borrower not
paid the principle and interest amount within 90 days it is to be
considered as Non- Performing Assets.
 Here the study is carried out to understand the management of
NPAs in KGB and to find out how NPA related to the
profitability and financial performance of KGB.

4.  To study the extent of NPA and its effect on profitability of the
bank
 To study the trend in NPA and the reasons for such changes
 To evaluate the process of loan appraisal, disbursal and
recovery and its effect on NPA .
 To offer suggestions based on findings of the study.
 To analyze financial performance of banks at different level of
NPA
OBJECTIVES

5.  This can also be applicable to know the reasons of increase in NPAs.
 This project also gives light upon Impact of NPAs.
 Concept of NPAs can be made clear.
 To study what kind of role NPAs are playing upon the operations of the
Bank.
 To know the variables available to control NPAs.
 The need also has been felt to study the financial performance of KGB
bank
SCOPE AND SIGNIFICANCE OF STUDY

6. Research design is simply the specific
presentation of the various steps in the process
of research. In this project the research design
adopted is descriptive research.
RESEARCH DESIGN

7.  Gross advances
 Total deposits
 Gross NPA
 Net NPA
 Additions to NPA
 Reductions to NPA
 Provisions towards NPA
 Asset quality
 Recovery channels
STUDY VARIABLES

8.  Primary data
 The primary data were collected with interview schedule from the
managers and other officers of the Bank and in-depth interview was also
be conducted to collect qualitative data.
 Secondary data
The secondary data will be compiled from:
 Bank records
 Publications
 Website information
 Journals
Sources of data

9. DATA COLLECTION TOOLS
 A structured interview
 Documents

10. DATA ANALYSIS TOOLS
A. Accounting tool:
 Ratio analysis
 Percentage analysis
B. Statistical tool:
 Correlation
C. Presenting tool:
 Table
 Diagram
 Chart

11. COMPANY PROFILE
Kerala Grameen Bank (KGB) is a Regional Rural Bank (RRB)
formed on 08.07.2013, under the Sub-Section (1) of Section 3 of
the RRB Act 1976 (27 of 1976). The bank was formed by
amalgamating the two RRBs of Kerala namely South Malabar
Grameen Bank and North Malabar Grameen Bank through a
notification by the government of India. The head office of
Kerala Grameen Bank is at Malappuram and the sponsor bank
is Canara Bank. Kerala Grameen Bank is the largest Regional
Rural Bank in the country with a total business of
above 20,000 Crore and a network of 565 branches spread all
over Kerala. The Bank has a well dedicated team of 3400 odd
staff members. It is having dominant presence in all the 14
districts of Kerala State and is the only RRB in the State.

12.  Total advances of the bank is increasing which show the total
business of the bank is increasing in a good rate last 3 years
with an average growth rate of 30%.It means the credit
business of the firm is increasing a good rate.
 The Gross NPA of the bank is increasing in couple of years.
Last year it was 17.38%. It a negative indication to the
management of NPA of the firm.
 During the period 2011-2012 to 2012- 2013 the Net NPA
of the bank was on a declining stage this is a good
indicator to the performance of the firm. Decline in NPA
refers to the better performance of the firm. But in the
last financial year the Net NPA of the firm increased by
27.47% it shows on an increased proportion of NPA in
the performance of the bank.
FINDINGS

13.  The movement of provision towards NPA is on a declining
trend. In the last years it was 10.41%. In absolute terms it is
increasing as the total advances .
 The additions to NPA are increasing in the last year. In the year
2012-2013 it showed a steep decline of -38.8% but in the last
year increased by 61.02%. It creates a negative impact to the
performance of the firm.
 Reductions to NPA increased in the last year by 54.46%. It is a
good movement as concerned to the performance of the bank.
 The NPA write off ratio of the bank is declining over the years.
In the last year its only 1.15%. the declining ratio is a good
indicator of the asset quality of the concern. The growth rate
writes off shows a negative growth rate.

14.  The Net NPA ratio of the bank is declining over the periods. In the last
year it was only .29%. The ratio is reached its highest in 2010-2011. From
the 2011-2012 onwards the ratio is declining in a continuous manner. It is
a best indication of good management of NPA in the Bank . The Net NPA
in the Net NPA Ratio of the bank increased in the year 2010-2011 due to
the high addition of NPA during the year.
 Gross NPA ratio of the bank is declining over the period by the last year it
reached its lowest level .97%. This indicates that the bank shows
following a good NPA management system.
 The problem asset ratio of the bank shows a declining trend over the last 3
years. It indicates that the asset quality of the bank is good and its
get strengthen over the years. The ratio reaches its lowest in the last
year 2013-2014. It shows that the bank is in a good position.
 The shareholders risk ratio was increased slightly in the last year to 3.52%.
The ratio indicates that the risk of shareholders is very low in relation to
the NPA. The bank maintains a good shareholders risk ratio.

15.  The ratio of provision for NPA of the bank is declining
continuously from 2009-2010 onwards. The provision ratio
reached its minimum point in the year 2013-2014 by .46% the
ratio is calculated in proportion to the total assets of the bank.
The ratio indicates that the bank having a good NPA
management system. The asset quality of the bank indicates to be
very good.
 The NPA reduction ratio showed an increase of nearly 30% over the last
year. It is good indicator to asset management. The ratio indicates that
on an average 50% of the Gross NPA is redeemed in the coming year.
 The sub-standard assets ratio of the bank indicates an increase nearly
30% increase over the last year. The last year it was increased as the
total Gross NPA of the bank increased. The increase in substandard asset
will affect the asset quality of the bank.
 The loss asset ratio of the bank is declined during the last year as
compared to previous year to 44.86% the loss assets of the bank
declined in absolute terms also. It indicates asset quality is good.

16.  The Acceleration ratio of the bank in the last year was 127.33%. It is not a good
indication towards the asset quality of the concern. The ratio indicates that as
compared to reduction in NPA the proportion of addition is higher.
 The Depositors Safety ratio indicates how far the customers are safe. The
table and chart shows the increasing Trend of this ratio. In last year the
ratio was 96.016% means the safety ratio of the bank is increasing as well
as the depositors safety is also improving
 The slippage ratio of the bank indicates the additions to NPA during the
year as compared to standard assets of previous year. Means the amount
of assets slipped into NPA. The slippage ratio was declining till 2012-13.
By the last year it showed an increase in ratio. There is a 20% increase in
slippage ratio in 2012-13.
 Debt recovery tribunal is an important way of recovering NPA of the
banks. As the recovery from the last 3 years of the bank is compared to
amount involved. But the fact to be noted that the ratio is showing an
increasing trend. In the last year 32.63% amount is recovered as
compared to the amount involved. The DRT is also shows an increase in
the number of cases referred.

17.  Recovery through suit files as compared to the target for the
period shows a recovery percentage of more than 50%. In the last
year it showed a recovery of 61.3%.The recovery through suit files
is an important medium of recovery.
 The value of NNPA and Advances move in opposite direction so
that an increase in the value of Advances, result in to a decrease
in the value of NNPA. The correlation between two variables has
been negative.
 The values of two variables move in the same direction. An
increase in the value of NNPA results in to increase in to the value
of GNPA. If decrease in the value of one NNPA, results in to a
decrease in the value of GNPA. The relationship between two
variables has been positive.
 The value of total amount of advances and total amount of
deposits move on the same direction. The correlation between
two variables is to be positive. It shows positive relationship
between total amount of advances and the total amount of
deposits

18.  During the course of interview, number of defaulter
borrowers informed that they could not pay banks dues
because of personal problems. At the same time, they
informed that they had not communicated their
problems/difficulties to the bank. Few of them who
approached the bank got satisfactory solution to their
problems.
 Awareness & Training Camps for Borrowers.
 Improvement in Recovery Act.
 The bank should send the continuous notices to
defaulters regarding the dues and should conduct the
meeting with account holders whose accounts are in the
way of becoming NPAs.
SUGGETIONS

19.  The bank should have to adopt an independent credit rating
agency for assessing the credit worthiness of the corporate
borrowers.
 Position of overdue accounts is reviewed on a weekly basis to
arrest slippage of fresh account to NPA.
 Half yearly balance conformation certificates should be
obtained from the borrowers.
 Due to lower credit risk and consequent higher profitability,
greater encouragement should be given to small borrowers.
 Adopting market intelligence for deciding the credibility of the
borrowers.
 Prepare good recovery policy & strategies for reducing
NPA have and identify critical branches for recovery

20. CONCLUSION
 Finally it can conclude that the banks can avoid sanctioning loans to the
non-creditworthy borrowers by adopting certain measures. Banker can
constantly monitor the borrower in order to ensure that the amount
sanctioned is utilized properly for the purpose to which it has been
sanctioned. The banker should get both the formal and informal reports
about the goodwill of the customer. If he had already proven as a
defaulter then there is no question of sanctioning loan to him. The
banker also has to educate the borrowers regarding the effects and
consequences of defaulting. By considering all the above factors the
banker can reduce the non-performing assets in a bank.

21. THANK YOU