...designated lender for an extended period of time. The nonperforming asset is therefore not yielding any income to the lender in the form of principal and interest payments. Investopedia explains 'Nonperforming Asset' For example, a mortgage in default would be considered non-performing. After a prolonged period of non-payment, the lender will force the borrower to liquidate any assets that were pledged as part of the debt agreement. If no assets were pledged, the lenders might write-off the asset as a bad debt and then sell it at a discount to a collections agency. http://www.investopedia.com/terms/n/nonperformingasset.asp#axzz1nV1MDFFm Definition A loan or lease that is not meeting its stated principal and interest payments. Banks usually classify as nonperforming assets any commercial loans which are more than 90 days overdue and any consumer loans which are more than 180 days overdue. More generally, an asset which is not producing income. http://www.investorwords.com/3329/nonperforming_asset.html Definition of 'Non-Performing Asset - NPA ' of banks A classification used by financial institutions that refer to loans that are in jeopardy of default. Once the borrower has failed to make interest or principal payments for 90 days the loan is considered to be a non-performing asset. Also known as “non-performing loan”. Investopedia explains 'Non-Performing Asset - NPA ' Non-performing assets are problematic for financial institutions since they depend on interest...
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...Debt Recovery Guru India -Non-performing assets of banks are set to cross the Rs one-lakh crore mark Written by Administrator Tuesday, 07 June 2011 07:08 Non-performing assets (NPAs) of banks are set to cross the Rs one-lakh crore mark in the current fiscal as the weakened asset quality of the banking sector is likely to spill over to the year 2011-12. After the 25 per cent rise in gross NPAs of bank to Rs 77,048 crore in 2009-10, bad loans of banks shot up by another 20.97 per cent in 2010-11. “The current fiscal will be slightly better for banks as most banks including SBI had made higher provisioning to clean up their balance sheets. The impact of this measure will be witnessed in the coming quarters. If they tighten up the recovery process, whatever they had provided will add to the profits,” said the former chief of a nationalised bank. “The earnings growth in the Indian banking sector in Q4 of FY11 grew by only 8 per cent y-o-y. This is attributable to the dismal performance by SBI, whose net profits for Q4 declined by 99 per cent to Rs 20.9 crore for the period. The reason for this decline in performance by SBI is being ascribed to decline in the Net interest margins; deterioration in the asset quality (and the consequent rise in NPAs); and the rise in the pension provisions for the employees,” said a note by Kotak Mutual Fund. “The RBI has initiated a slew of policy measures including aggressive rate hikes to rein in Inflation. The banking sector has responded by raising...
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...RECOVERY OF NPA STATUS AND CHALLENGES IN THE INDIAN BANKING SYSTEM EXECUTIVE SUMMARY: Non-performing Assets means a loan which has been classified by a bank or financial institution as substandard or loss assets. According to this default status would be given to borrower if the dues are not paid for 90 days. Asset Classification: * Standard: are the ones in which the bank is receiving interest as well as the principal amount of the loan regularly from the customer. If asset fails to be in this category i.e. amount due more than 90 days then it is NPA and NPAs are further need to be classified in sub categories. i) Sub-standard: the account holder comes in this category when they don’t pay three instalments continuously after 90 days and up to 1 year; ii) doubtful NPA; iii) Loss Assets: under this 100% provision is made. When account holder comes in this category their account can be written off by the banks. Types of NPA: * Gross NPA: reflects the quality of the loan made by the banks. * Net NPA: reflects the actual burden of the banks. The main reason behind NPA would be lack of proper enquiry by the bank, wilful defaulter, change in government policies etc. which could affect the bank by restriction on flow of cash by the bank for sanctioning a loan, drain of profit, bad affects on goodwill, etc. There are different acts and institution for the NPA recovery like SARFAESI ACT, 2002; SARC; ARC; DRT; Lokadalats; etc. Current...
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...substantive cases on the DRT Auction Sale, Bank & Customer, Banking Frauds, Cheating, Banking relating to Companies, Partner-ship, Proprietorship, Central & Financial Corporation Act, Dishonour of Cheques, Debt Laws, Embezzle-ment, Hypo-thecation. Interest Act, Selected cases under Banking Regulation Act, Negotiable Instruments Act, BIFR, AAIFR, MRTP Commissions, SEBI, SICA, State Recoveries of Dues Act and several Allied Act making this an essential reading for Practitioners, Financial Institutions, Banks, Corporate Sector wth an invaluable reference source of developments in matters related to the above topics. • Fast access to information. • Each issue contains up to 20 decisions with full text every Judgment. • Almost all reportable / non-reportable judgements, decisions delivered by Debt Recovery Appellate Tribunals and DRT’s. • Cases are clearly presented ith catch words and concise head notes summarizing the judgments clearly and accurately. • Cross – references are given to other major legal decisions delivered by the Supreme Court & various High Courts. Accurate Case Reporting of land mark case, with topical Index, Subject Index & Important Law Point and the background of the case, the judgement given and a list of case referred to in the Judgement. • A News & Reviews section – provides an in-depth access to the latest on matters relating to Debt Recovery Laws. • Articles and Questions & Answers written by leading practioners of this field provide a bird eye view of...
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...Opportunities and threats to banking sector STUDY OF NON PERFORMING ASSETS WITH SPECIAL REFERENCE TO NAGPUR NAGRIK SAHAKARI BANK INTRODUCTION The accumulation of huge non-performing assets in the banks has assumed great importance. The depth of the problem of bad debts was first realized in early 1990s. Since then, the focus has shifted towards improving the quality of assets and better risk management. Non-performing assets are problematic for financial institutions since they depend on interest payments for income. It is generally felt that NPAs reduce the profitability of banks, weaken its financial health and erode its solvency. Troublesome pressure from the economy can lead to a sharp increase in non-performing loans and often in massive write-downs. A classification used by financial institutions that refer to loans that are in jeopardy of default. Once the borrower has failed to make interest or principal payments for 90 days the loan is considered to be a non-performing asset. In India, the time frame given for classifying the asset as NPA is 180 days as compared to 45 to 90 days of international norms. Types of NPA: There are two types of NPA namely Gross NPA and Net NPA. Gross NPA reflects the quality of loans made by banks, while net NPA shows the actual burden of banks. 1) Gross NPA: An advance which is considered irrecoverable for banks, for which it has made provisions, but which is still held in banks books of account. An improvement in the gross...
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...been given so much importance. The banks have to overcome these difficulties properly in order to effectively counter the competition faced by the foreign banks. With the framing of laws as per international standards and setting up of Debt recovery tribunal we can say that steps have been taken in this direction. Banks in India have traditionally been saddled with very high Non-Performing Assets. Banks burdened with huge NPA’s faced uphill tasks in recovering then due to archaic laws and procedures. Realizing the gravity of the situation the government was quick to implement the recommendations of the Narsimham Committee leading to the enactment of the SARFAESI ACT 2002. (Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act). This Act gave the banks the much needed teeth to curb the menace of NPA’s. The non performing assets (NPAs) of banks have at last begun shrinking. As reported from surveys, it is understood that there has been substantial improvements in non performing assets and this has been because of several measures such as formation of asset reconstruction companies, debt restructuring norms, securitization, provisioning norms and prudential norms for income recognition. We also give our suggestions as to how NPA retrieval can be made easy and in what way the NPA scenario is headed. The problem is no doubt about recovery management where the objective is to find out about the reasons behind NPAs and to create...
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...NPA NORMS: 1. An asset, including a leased asset, becomes non¬ performing when it ceases to generate income for the bank. 2. A non ¬performing asset (NPA) is a loan or an advance where; i. interest and/ or installment of principal remain overdue for a period of more than 90 days in respect of a term loan, ii. the account remains ‘out of order’ as indicated at paragraph 2.2 below, in respect of an Overdraft/Cash Credit (OD/CC), iii. the bill remains overdue for a period of more than 90 days in the case of bills purchased and discounted iv. the installment of principal or interest thereon remains overdue for two crop seasons for short duration crops, v. the installment of principal or interest thereon remains overdue for one crop season for long duration crops, vi. the amount of liquidity facility remains outstanding for more than 90 days, in respect of a securitization transaction vii. in respect of derivative transactions, the overdue receivables representing positive mark-to-market value of a derivative contract, if these remain unpaid for a period of 90 days from the specified due date for payment. 3. Banks should, classify an account as NPA only if the interest due and charged during any quarter is not serviced fully within 90 days from the end of the quarter. Out of Order: An account should be treated as 'out of order' if the outstanding balance remains continuously in excess of the sanctioned limit/drawing power. In cases where the outstanding...
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...Public sectorBank | Private sectorBank | | | Allahabad Bank | Axis Bank | Andhra Bank | DCB | Bank of India | Dhanlaxmi Bank | BOB | Federal Bank | Bank of Maharashtra | HDFC Bank | Central Bank | ICICI Bank | Corporation Bank | Induslnd Bank | Dena Bank | ING Vysya Bank | IDBI Bank | Karnataka Bank | Indian Bank | Yes Bank | Oriental Bank | J&K Bank | PNB | Lakshmi Vilas Bank | Punjab & Sind Bank | South Indian Bank | Syndicate Bank | | UCO Bank | | United Bank | | Union Bank | | Vijaya Bank | | SBI | | State Bank Bikaner & Jaipur | | State Bank Mysore | | State Bank Travancore | | Listed Banks in BSE 50 WEAK SECTOR Weak Sectors | No of Live Cases (2013) | No of Live Cases (2014) | Infrastructure | 20 | 25 | Iron & Steel | 59 | 53 | Power | 18 | 15 | Textiles | 74 | 45 | Ship-Breaking/Ship Building | 3 | 4 | Telecom | 11 | 5 | Weak Sectors | Aggregate Loan Amt (2013) | Aggregate Loan Amt (2014) | Infrastructure | 21912 | 57233 | Iron & Steel | 52682 | 43539 | Power | 18640 | 19138 | Textiles | 17677 | 20138 | Ship-Breaking/Ship Building | 6213 | 16792 | Telecom | 11681 | 10785 | Major Players Company | Loan Amount | Kingfisher Airlines | 2673 | Winsome Diamond | 2660 | Electrotherm India | 2210 | Zoom Developers | 1810 | Sterling Biotech | 1732 | S Kumars Nationwide | 1692 | Source: AIBEA, media report Rank:...
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...Integrated Publishing association Review Article ISSN 2229 – 3795 Non performing assets: Issues, Causes and remedial Solution Poongavanam.S H.O.D., Department of Management studies, Ranippettai Engineering College, Thenkaddapanthangal, Walaja Taluk, Vellore District. -632513 Tamil Nadu. s.poongavanam@gmailo.com ABSTRACT The banking industry has undergone a sea change after the first phase of economic liberalization in 1991 and hence credit management. While the primary function of banks is to lend funds as loans to various sectors such as agriculture, industry, personal loans, housing loans etc., in recent times the banks have become very cautious in extending loans, this is due to mounting nonperforming assets (NPAs). Therefore, an NPA account not only reduces profitability of banks by provisioning in the profit and loss account, but their carrying cost is also increased which results in excess & avoidable management attention. Apart from this, a high level of NPA also puts strain on a banks net worth because banks are under pressure to maintain a desired level of Capital Adequacy and in the absence of comfortable profit level, banks eventually look towards their internal financial strength to fulfill the norms thereby slowly eroding the net worth. Considering all the above facts banking industry has to give more importance to NPA and to structure proper remedial solutions. Key words: Assets restructuring company, Global competition, Rate of return, Repayment schedule...
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...download the Asset and Liability reports and the Income and Expense reports for Nebraska Bank of Commerce (NBC) from the FDIC web page. a. Go to the FDIC website, go to Industry Analysis, Bank data and statistics, then use the Institutional directory and find banks. b. Once you find NBC, notice the ID report selection box on the web page. Use this drop down menu to generate Asset & Liability reports for 12/31/10, 12/31/11, 12/31/12 & 12/31/13 and the Income and Expense report for years 2010, 2011, 2012 and 2013 2. Use financial ratio analysis to compare and contrast each year to see what happened to the banks financial performance. Be sure to comment on both its historical and current financial condition. Also, what accounts for the improved profitability of the bank? 3. Identify the five key reasons why the bank turned around based on your analysis. For question 2 - consider calculating the following: Profitability measures such as ROE and ROA Burden/Total Assets NIM Net Credit Loss/Total Loans Non-performing Loans/Total Loans % Growth in Total Loans Consider other ratios you may feel are appropriate to adequately address the questions. Due November 19th at the beginning of class. 2) 2010 2009 Return on assets (ROA) -4.62% -2.68% Return on equity (ROE) -46.63% -24.32% Burden Ratio 4.02% 2.89% Net interest margin 2.41% 3.05% Non-Performing Loans/ Total...
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...n Management of Non Performing Assets σ Abstract - In India the magnitude of the problem of bad debts was not taken seriously. Subsequently, following the recommendations of Narasimham committee and Verma committee, some steps have been taken to solve the problem of old NPAs in the balance sheets of the banks. It continues to be expressed from every corner that there has rarely been any systematic evaluation of the best way of tackling the problem. There seems to be no unanimity in the proper policies to be followed in resolving this problem. There is also no consistency in the application of NPA norms, ever since these have been recognized. Non Performing Assets are also called as Non Performing Loans. It is made by a bank or finance company on which repayments or interest payments are not being made on time. A loan is an asset for a bank as the interest payments and the repayment of the principal create a stream of cash flows. It is from the interest payments that a bank makes its profits. The problem of NPA is not limited to only Indian public sector banks, but it prevails in the entire banking industry. Major portion of bad debts in Indian Banks arose out of lending to the priority sector at the dictates of politicians and bureaucrats. If only banks had monitored their loans effectively, the bad debt problem could have been contained if not eliminated. The top management of the banks was forced by politicians and bureaucrats to throw good money...
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... Deep Majumder | Apeksha Shriyan | Non-performing Asset is an important parameter in the analysis of financial performance of a bank as it results in decreasing margin and higher provisioning requirements for doubtful debts. It affects the liquidity and profitability of the bank. The main objective of the present study is to find out the loop holes in the mechanism of controlling NPA. The data has been analysed by using tables and pie charts. The important point to be noted that if the level of NPA declines the profitability of the banks will increase. | INTRODUCTION The banking industry has undergone remarkable changes after the first phase of economic liberalization in 1991 and hence credit management. The primary function of the banks is to lend loans to various sectors such as agriculture, housing, personal and industry and to take deposits. Now the lending of the loans involves higher risk as there is always a risk of default involved. Now the present scenario of lending has changed as banks become more cautious about lending loans, the reason being the rising amount of non-performing assets. Earlier the Narasimham committee-I clearly pointed out that the reduced profitability of the banks are due to the NPA and thus recommended that it should be phased out. NON PERFORMING ASSET An asset, including a leased asset, becomes non- performing when it ceases to generate income for the bank. A Non-performing asset (NPA) is a loan or an advance where ;( RBI report) ...
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...licensing and the removal of monopolies. That allowed the entry of private sectors, which of course increased competition for DFI such as IFCI. The Industrial Corporation of India was then restructured and incorporated as a company in July 1, 1993. Hence, that move allowed them to make debut in the capital market in December 1993 with an IPO of US$ 0.80$. Following the IPO, the company started a rapid expansion program, which included borrowing from the debt market at high interest rate and the leverage of high yielding loan assets to cover up the cost of borrowing. On the other hand, employee knowledge was not being updated and they lacked the managerial skills to keep up with fast growing environment. As a result, they broken down under pressure and cleared applicant’s file without proper due diligence. The lack of due diligence when clearing up file contributed to bad loans, or in other words non-performing assets (NPA). IFCI’s non-performing assets rose to 8.26% in 1997 to 20.7% in 2000. In addition, they ended up lending money to 396 “sick” units with outstanding debts totaling over $300 million. Following the...
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...whenever it is demanded. On the other hand lending always involves much risk because there is no certainty of repayment. In recent times the banks have become very cautious in extending loans, the reason being mounting nonperforming assets. Non-performing assets had been the single largest cause of irritation of the banking sector of Philippines. Earlier the Narasimha committee-I had broadly concluded that the main reason for the reduced profitability of the commercial banks in India was given importance to priority sector lending. The committee had highlighted that priority sector lending was leading to the building up of non-performing assets of the banks and thus it recommended it to be phased out. Subsequently, the Narasimha committee-II also highlighted the need the zero non-performing assets for all Indian banks with international presence. A major portion of the money lent comes from the deposits received from the public. These deposits are mostly repayable on demand. Therefore while sanctioning credit the banker should appraise the project reasonably or else it leads to the non-repayment of loans and advances. Most of the banks today in India are facing the default risk wherein some part of the profit is reserved for covering the non-performing...
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...[pic] http://mbanetbook.blogspot.com/ Project on Non Performing Assets in Banks CONTENTS |Chapter no. | Title |Page no. | | |Executive Summary |2 | |1 |General Introduction | | | |Introduction to the Topic |4 | | |Company Profile |6 | | |Non performing assets |10 | |2 | Research Methodology |32 | |3 | Data Analysis & Interpretation |38 | |4 | Findings, Suggestions & Conclusions |64 | |5 | Annexure: | | | |a) Bibliography ...
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