NPA arises due to bad lenders

1. Prepare by: Jyoti Ranjan Sahoo
Abinash Ghadai
Dipankar Manna

2. Contents:
 Introduction of NPA.
 Categories of NPA.
 Types of NPA.
 Causes of NPA.
 Effects of NPA on banks.
 Factors impacting rise in NPAs.
 Bank-wise details of Gross NPA as of FY 2017-2018.
 Bank defaulters.
 NPA management strategies.

3. Introduction of NPA:
A Non-Performing Asset (NPA) is define as a
credit facility in respect of which the interest or
instalment of principal has remained ‘past due’ for a
specified period of time. In simple term, an asset is
tagged as non performing when it ceases to generate
income for the lender.

4. Categories of NPA:
Standard Assets
Sub-standard Assets
Doubtful Assets
Loss Assets

5. Types of NPA:
a) Gross NPA:
 Gross NPA= Gross NPA/Gross Advance
b) Net NPA:
 Net NPA= (Gross NPA-Provision)/(Gross
Advance-Provision)*100

6. Causes of NPA:
 Lack of proper pre-inquiry by the bank for
sanctioning a loan to a customer.
 Speculation.
 Default.
 Fraudulent practices.
 Diversion of funds.
 Internal reasons.
 External reasons.
 Changes in Govt. policies leads to NPA.

7. Effects of NPA on Banks:
 Restriction of flow of cash done by bank due to the
provisions of fund made against NPA.
 Drain of profit.
 Bad effect on goodwill.
 Bad effect on equity value.

8. Factors impacting rise in NPAs:
Internal factors:
 Non use of technology like MIS.
 Improper SWOT analysis.
 Managerial deficiencies.
 Absence of regular industrial visits & monitoring.
 Alleged corruption.
 Inadequate networking & linkage b/w banks.

9. External factors:
 Ineffective legal framework & weak recovery tribunals.
 Lack of demand/economic recession or slowdown.
 Change in Govt. policies.
 Alleged political interferences.

10. Bank-wise details of GNPA as of FY 2017-18
(Amount in crore)
Sl.
No.
Bank Gross NPA
ratio (%)
Operating
profit
Provisioni
ng done
Net
profit/loss
1 Allahabad Bank 16.0 3438 8113 -4674
2 Andhra Bank 17.1 5361 8774 -3413
3 Bank of Baroda 12.3 12006 14437 -2432
4 Bank of India 16.6 7139 13183 -6044
5 Bank of
Maharashtra
19.5 2191 3337 -1146
6 Canara Bank 11.8 9548 13770 -4222
7 Central Bank of
India
21.5 2733 7838 -5105
8 Corporation Bank 17.4 3950 8004 -4054
9 Dena Bank 22.0 1171 3094 -1923

11. 10 IDBI Bank 28.0 7905 16142 -8238
11 Indian Bank 7.4 5001 3742 1259
12 Indian Overseas
Bank
25.3 3629 9929 -6299
13 Oriental Bank of
Commerce
17.6 3703 9575 -5872
14 Punjab & Sind Bank 11.2 1145 1889 -744
15 Punjab National
Bank
18.4 10294 22577 -12283
16 State Bank of India 10.9 59511 66058 -6547
17 Syndicate Bank 11.5 3864 7087 -3223
18 UCO Bank 24.6 1334 5771 -4436
19 Union Bank of India 15.7 7540 12787 -5247
20 United Bank of India 24.1 1025 2479 -1454
21 Vijaya Bank 6.3 3098 2371 727

12. Bank Defaulter:
RS. 9000 Croce RS. 13000 Crore

13. NPA management strategies:
a) Preventive Management:
 Developing ‘Know Your Client’ (KYC) profile.
 Monitoring early warning signals.
 Installing proper credit assessment and risk
management mechanism.
b) Curative Management:
 Re-phasement of loans.
 Encouraging acquisition of sick units by healthy units.
 Entering compromise schemes with borrowers/Entering
one time settlement.

14. NPA management strategies:
Using Lok Adalats for compromise settlement for smaller
loans in “doubtful” & “loss” category.
Using SARFAESI Act 2000 (The Securitisation and
Reconstruction of Financial Assets and Enforcement of
Security Interest) Act.
Approaching Debt Recovery Tribunals (DRTs).
Recovery action against large NPAs.
Circulation of information of defaulters strengthening
database of defaulters.