NPA, New Innovation in Banking Sector

1. &
Insurance &

2. Non Performing Asset means a loan or an account
of borrower, which has been classified by a bank
or financial institution as sub-standard, doubtful
or loss asset, in accordance with the directions or
guidelines relating to asset classification issued
by RBI.
NON-PERFORMING ASSET

3. INTRODUCTION
 Earlier assets were declared as NPA
after completion of the period for
the payment of total amount of loan
and 30 days grace.
 In present scenario assets are
declared as NPA if none of the
installment is paid till 180 days i.e. six
months in respect of a term loan.

4. CONTINUE...
• 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)
• The bill remains overdue for a period of more than 90 days in the
case of bills purchased and discounted
With effect form March 31, 2004 a non-performing
asset (NPA) shell be a loan or an advance where:-

5. IN SIMPLE WAY
1. Businessmen take loans
from banks & use in
business operation 2. Banks earn
interest on these
loans after business
operate
3. Companies would
have to repay loan
with interest in
timely installment
weather profit or
loss
4. If companies not repay
it on time by intentionally
or due to loss, after 3
months it will be
considered as NPA for
banks.
NPA

6. CATEGORIES OF NPA
 Standard Assets:
 Substandard Assets:
 Doubtful Assets:
 D1 i.e. up to 1 year : 20% provision is made by the bank
 D2 i.e. up to 2 year : 30% provision is made by the bank
 D3 i.e. up to 3 year : 100% provision is made by the bank
 Loss Assets:
Arrears of interest and the principal amount of loan does not exceed 90
days at the end of financial year.
Which has remained NPA for a period less than or equal to 12 months.
Which has remained in the sub-standard category for a period of more than
12 months
Where loss has been identified by the bank or internal or external auditors
or the RBI inspection but the amount has not been written off wholly.

7. REASON BEHIND RISE IN NPA
• Lack of proper pre-enquiry by the bank for sanctioning a loan to a
customer
• Non performance of the business or the purpose for which the
customer has taken the loan
• Willful defaulter
• Loans sanctioned for agriculture purposes
• Change in govt. policies leads to NPA

8. EFFECTS OF NPA ON BANKS & FI
Restriction on flow of cash done by
bank
Drain of profit
Bad effect on goodwill
Bad effect on equity value

9. FACTORS IMPACTING RISE IN NPA
• Ineffective legal framework & weak recovery tribunals
• Lack of demand / economic recession or slowdown
• Change in Govt. policies
• Wilful defaults by customers
External Factors:

10. CONTINUE...
Internal Factors:
 Defective Lending process
 Inappropriate / non –use of technology like MIS , Computerization
 Improper SWOT analysis
 Inadequate credit appraisal system
 Managerial deficiencies
 Absence of regular industrial visits & monitoring

11. NPA MANAGEMENT STRATEGIES
Indian Banks are pursuing variety of strategies to control
NPAs, which can be studied under two broad categories as
under:
Preventive Management
Curative Management

12. CONTINUE...
Preventive Management: It is rightly said that prevention
is better than cure.
Developing ‘Know Your Client’ profile (KYC)
Monitoring Early Warning Signals
Installing Proper Credit Assessment and Risk Management
Mechanism
Timeliness & Adequsey of Response
Generating Watch-list/Special Mention Category

13. CONTINUE...
Curative Management:
 Re-Phasement of loans
 Pursuing Corporate Debt Restructuring (CDR)
 Encouraging rehabilitation of potentially viable units
 Encouraging acquisition of sick units by healthy units
 Entering compromise schemes with borrowers / Entering one
time settlement
 Using Lok Adalats for compromise settlement for smaller loans
in “doubtful” and “loss” category.

14. CONTINUE...
Curative Management Continue...
 Using Securitization & SARFAESI Act
 Using Asset Reconstruction Company (ARC)
 Approaching Debt Recovery Tribunals (DRTs)
 Recovery Action against Large NPAs
 Circulation of Information of Defaulters- Strengthening
Database of Defaulters

15. EFFECTIVENESS OF NPA MANAGEMENT IN INDIAN BANKS
 While on the whole NPAs have shown declining trend during last
decade, many analysts suspect that some banks might have
fraudulently and in nexus with auditors have concealed some bad
assets and NPAs in the name of reformation.
 NPAs position remains worrisome in government banks mainly due
to alleged widespread corruption, ill-motivated decisions on lending
taken by some corrupt officials , due to inaction of such corrupt
officials and alleged political interferences.

16. CONTINUE...
 Implementation of SARFAESI Act 2002, setting up of credit information
bureaus, internal improvements such as upgrade of technology
infrastructure, tightening of the appraisal and monitoring processes, and
strengthening of the risk management platform have contributed to the
improvement.
 Even with an assumption of a 20% delinquency in restructured loans, along
with the current forecasts for a rise in gross NPAs, the overall asset quality
of public sector banks would stabilize within two years. It would also stay
superior to the current status of European banks.
 BCG expects that by 2025 the Indian banking sector will be the third
largest in the world in terms of assets, behind China and the US.

17. IMPROVEMENT MEASURES
 There is need to strengthen sharing of credit information.
 Sharing of credit information must occur in both ways between
lending institutions & CICs.
 There is need to strengthen Unique Customer Identification (UCI)
across the banking system.
 The Reserve Bank of India is planning to introduce a
comprehensive dynamic provisioning NPA framework for banks in
India with dynamic and countercyclical elements.

19. BANKING INNOVATION
 Stands for making something new in banking operations by using
electronic devices & internet.
 To strengthen the operations by putting the services faster,
easy, cheaper and accurate.
 These are rightly called as “Electronic Banking”

20. ADVANTAGES OF BANKING INNOVATION
• Faster & convenient transactions
• No longer required to wait in long queues
• Opening of a/c simple & easy
• Larger customer coverage
• Promoting banking services & products internationally
• Increase customer satisfaction
• Abolishing the use of paper in transactions
• Fund transfer become faster &convenient

21. DISADVANTAGE / LIMITATION
Lack of customer knowledge & skill
on computers & browsing
Security risk
 Increased no. of fraudulent bank website
 Fake emails
 Use of Trojan horse programmes to capture user ID &
passwords
Viruses & worms
1.
2.
3.

22. • On- Demand Insurance
• New Insurance Policies
• Insurance Through App
• Surveillance Through Drone
• AI & Health Insurance
NEW INNOVATION IN INSURANCE

23. ELECTRONIC BANKING SERVICES
• Internet Banking
• Mobile Banking
• Debit Cards
• Automated Teller machine(ATM) Banking
• Electronic Fund Transfer
• Mail Transfer / Mail Order
• Magnetic Ink Character Reader (MICR) Technology

24. “The performance of banking activities
via the internet. online banking also known
as ‘internet banking’ or ‘web banking’.
INTERNET BANKING

25. ADVANTAGES & NEEDS
• convenience banking for customers
• 24/7*365
• low cost, unlimited access
• customer –banker relationship
• wider reach to public
• competitive edge
• an effective marketing tool for promotion

26. Is a system that allows customers of a financial
institution to conduct a no. Of financial
transactions through a mobile device such as
mobile phone or personal digital assistant.
MOBILE BANKING

27. SERVICES OFFERED
Mini statements &checking of a/c history
Alerts on a/c activity or passing of thresholds
Access to loan statement
Insurance policy management
Pension plan management
Blocking of cards
Balance checking in the a/c
Mobile recharging

28. ADVANTAGES & LIMITATIONS
Mobile connectivity
User friendly
Cost effective
Reduces the risk of fraud
Improves customer services
 Smart mobile users- less than 20%. Mobile banking not possible in
basic model. So, they have to depend on SMS.
 One mobile banking a/c for one customer(says RBI)

29. An electronic card issued by a
bank which allows bank clients,
access to their a/c to withdraw
cash or pay for goods and services
DEBIT CARDS

30. TYPES OF DEBIT CARDS
• ONLINE DEBT CARDS
• OFFLINE DEBIT CARDS
• ELECTRONIC PURSE CARDS
• PREPAID DEBIT CADRDS

31. ADVANTAGES
24 hours access to cash per day50,000 upto 2L
View a/c balances & mini statements
Transfer funds between a/c’s
Refill your prepaid mobile
Request a cheque book & a/c statement

32. ATM banking is a banking operation
through a machine at a bank branch or
other location which enables a customer to
perform basic banking activities (checking
balance, withdrawing or transferring
funds) even when the bank is closed.
ATM BANKING

33. BENEFITS
Benefits to customers
Benefits to banks
Benefits to others

34. ELECTRONIC FUND TRANSFER (EFT)
 “Moving funds between different account in the same or different bank
,through the use of wire transfer, automatic teller machines, or computers
but without the use of paper documents.”
 For ex. When you use your debit cards to make a purchase at a store or
online the transaction is processed using an EFT system. The transaction is
very similar to an ATM withdrawal ,with near instantaneous payment to the
merchant and deduction from your checking account.
 Direct deposit is another form of an electronic funds transfer .In this
case ,funds from your employer’s bank account are transferred
electronically to your bank account ,with no need for paper based payment
systems.

35. MAIL TRANSFER / MAIL ORDER
 This is the mode used when you wish to transfer money from your account in
Center 'A' to either your own account in Center 'B' or to somebody else's
account.
 In this mode of transfer, you are required to fill in an application form
similar to the one for DD, sign a charge slip or give a cheque for the amount
to be transferred plus exchange and collect a receipt.
 The Bank will, on its own, send an order to its branch at center 'B' to
deposit the said amount in the account number designated by you.
 This is, however, a dying product and many banks like State Bank of India
have since withdrawn this.

36. SEND Transfer
Online Banking RECEIVE notice in
your email inbox
Bank Release
Money DEPOSIT money
In online banking
E-mail money
transfer
EXPLAINATION

37. MAGNETIC INK CHARACTER READER
It’s a character recognition technology used primarily by the banking
industry to facilitate the processing and clearance of cheques and other
documents.
The MICR encoding called the MICR line is located at the bottom of the
cheque or other voucher.
The technology allows MICR reader to scan and read the information
directly into a data collection device. Unlike barcodes or similar
technologies ,MICR characters can be easily read by humans.

38.  Can quickly identify the banks that issued them. It also eliminates
the need to manually verify or validate the checks.
 Even if the MICR is covered with signature or cancellation marks,
still it can be read.
 Before MICR system was used ,it took weeks for banks to clear
cheques, but now this technology rapidly process high volume of
cheques per day
IMPORTANCE OF MICR

40. NPA Current Legislation & it’s Management Related Issue
Debt Recovery Tribunal
SARFESI Act
Asset Reconstruction Company
Economic Survey Bad Banks 2017

41. BANKING SECTOR INNOVATION COMMITIES REFORMS
NARSHIMAN COMMITEE
NARSHIMAN COMMITTEE-2
NACHIKET MORE COMMITEE

42. Sneha Jain -44 Rajan Kumar -51
Subrata Kr Dey -45 Abhishek Roy -52
Kumar Abhishek -46 Sujeet Guria -53
Kumar Avnish -47 Ishank Kishan -54
Kumar Kushal -49 Shivangi -55
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