Presentation on

A Study Of Non Preforming Assets At State Bank Of India.

Presented By
Name of Student - Safiya Rafik Shaikh.
MBA -2nd year
Guide of Name - Dr.Yogesh Bhowte
RMD SINHGAD SCHOOL OF MANAGEMENT KONDHAPURI
Introduction

With the growing competition in the market and globalization coming into role it has become essential for any
Bank/organization to keep in touch with the recent technology. My subject of project mainly targets the NPAs in bank
and the recovery process thus adopted. Thus, for a bank to survive in a market it is very essential to stick to rules and a
regulation of RBI, as it is the governing body of every nationalized bank.

In present economic scenario, we here many things of banks getting close due to high percentage of NPA. So the
question comes in mind, that, what is NPA? NPA is an asset, which ceases to generate income to the bank. It is basically
a loan for which the interest or installment or both remains unpaid for the period of 90 days. Thus to keep track of
increasing amount of NPAs, banks have set up recovery Departments

The Indian banking segments is generally divided into scheduled and unscheduled banks. All banks include is the 2nd
schedule to the Reserve bank of India act, 1934 are scheduled banks. These banks comprise scheduled commercial banks
and co-operative banks. scheduled co-operative Banks and urban cooperative banks. Scheduled commercial Banks
OBJECTIVES OF THE STUDY

•To study Non Performing Assets of State Bank of India.

•To study type of Non-Performing Assets and causes as well as Impact of NPA on Bank.

•To study guidelines of RBI on Income reorganization.

•To study the recovery process of bank.

•To study the trends of gross and net NPA during 2016 – 2019.
Scope of the study

• This Study pertains the NPA in SBI and it overall impact on the banks performance.

• This study can also be applicable to know the reasons of increase in NPAs.

• The study takes deep into classification of NPA and their Provision norm.

Limitation of the study

• This study is restricted to State Bank of India only.

• The banks confidential information could not be shared by the manager, while studying this project.

• Due to COVID- 19 lockdown I could not get much information so I have to depend on secondary data.

• As per the guidelines of RBI regarding the NPAs, it will keep changing every year.
Organisation Profile

The roots of the State Bank of India rest in the first decade of 19th century, when the Bank of Calcutta, later renamed the Bank of
Bengal, was established on 2nd June1806. The Bank of Bengal and two other Presidency banks, namely, the Bank of Bombay
(incorporated on 15 April 1840) and the Bank of Madras (incorporated on 1st July 1843). Pursuant to the provisions of the State Bank
of India Act (1955), the Reserve Bank of India, which is India's central bank, acquired a controlling interest in the Imperial Bank of
India. On 30th April 1955 the Imperial Bank of India became the State Bank of India.
In 1959 the Government passed the State Bank of India (Subsidiary Banks) Act, enabling the State Bank of India to take over eight
former State-associated banks as its subsidiaries. On Sept 13, 2008, State Bank of Saurashtra, one of its Associate Banks, merged with
State Bank of India.

AIM-
• To help to RBI to achieve its goal.
• To fulfill needs of common people .
RESEARCH METHODOLOGY

Data collection –
• To collect journals and magazines form the library of the bank.
• To collect annual report of bank.
 
Secondary data -
This refers to data already existing or published in order to carry out the study data has been collected
from various source like:
• Norms and condition of NPA defined by RBI.
• Research paper and journals.
• SBI’s own site.
• Annual reports
conceptual Background-

• CONCEPT OF NPA

NPA means Non Performing Assets. As per RBI Guidelines a Non Performing Asset is a loan or advance where:
• . Accordingly with effect from march 31, 2004, a non-performing asset (NPA) shell be a loan or an
advance where; 
• Interest and/ or installment of principal remains overdue for a period of more than 90 days in respect of
term loan.
• The account remains ‘out of order’ in respect of an Overdraft/ Cash Credit (OD/CC).
• The bill remains overdue for the period of more than 90 days in the case of bills purchased and discounted.

ASSET CLASSIFICATION:
• Standard assets
• Sub- standard assets
• Doubtful assets
• Loss assets
 Chart-4.1 Classification of NPA
Non-performing Assets

Standard Sub - standard Doubtfull Loss assets

assets assets assets

Standard Assets:- Standard assets are the ones in which the bank is receiving interest as well as the principal amount of the loan
regularly from the customer.
Sub-standard Assets:-- With effect from 31 March 2005, a sub standard asset would be one, which has remained NPA for a
period less than or equal to 12 month.
Doubtful Assets:-- A loan classified as doubtful has all the weaknesses inherent in assets that were classified as sub-standard,
with the added characteristic that the weaknesses make collection or liquidation in full, – on the basis of currently known facts,
conditions and values highly questionable and improbable.
Loss Assets:- A loss asset is one which considered uncollectible and of such little value that its continuance as a bankable
asset is not warranted- although there may be some salvage or recovery value.
REASONS FOR AN ACCOUNT BECOMING NPA:

EXTERNAL FACTORS
1· Ineffective recovery tribunal
2. Willful Defaults
3·Natural calamities
4·Industrial sickness

INTERNAL FACTORS:-
 
1.Defective Lending process
2· Inappropriate technology
3· Improper SWOT analysis

IMAPCT OF NPA ON BANK :-

 
1.Impact on profitability
2.Impact on liquidity
3.Impact on Productivity
4.Impact on other Variables
 Personal Visit to the Borrower

Legal Process of Recovery Notice to Guarantors

Authority Letter to lawyer

Demanding amount through notice

Receiving amount from client Not receiving amount

Debit note for expenses File case in court

Recovery expenses Completion of verification

Lawyers argue before

Stopped recovery process issuing
after receiving all payment

Argument in court if court

satisfied, issue the summons

Police station serving the

summons to defaulter
Chart 4.2 Legal process of recovery.
Data Analysis and Interpretation-

TOTAL ASSETS : TOTAL ASSETS

40000
36809.14
34547.52
35000
YEARS 2016 2017 2018 2019
30000
27059.67
        25000
TOTAL ASSET 22590.63
TOTAL ASSETS
22590.63 27059.67 34547.52 36809.14
20000
(RS.
In billions) 15000

10000

5000

0
2016 2017 2018 2019

INTERPRETATION

Above graph show that total assets of SBI is increased in 2017 by 4469.04 billion, in 2019 increased by 2261.62 billion. So

assets of the SBI bank increased from last four year .

 
 Gross NPA RATIO
Gross NPA Ratio is the ratio of gross advances of the Bank. the ratio is to be counted in terms of percentage and the formula for GNPA is as follows:

Sample Calculation:
GROSS NPA
Gross NPAs Ratio = Gross NPAs *100 12
10.9

10
Gross Advances
= 98172.80*100 8 7.7
6.9
1509500 6.5
6
 
= 6.50 4

0
2016 2017 2018 2019

Interpretation
The above table and graph makes it very clear that the average gross NPA of SBI is not very satisfactory. It has seem that the gross NPA
which was 6.5% in 2016 increased every year and finally reached 7.7% in 2019.
 Net NPA RATIO
The net NPA percentage is the ratio of NPA to net advances in which is to be deducted from the gross advances.

Sample Calculation

 Net NPA Ratio = Net NPAs*100

Net Advances
 
= 55807.02*100
1463700.42
 
= 3.81
 

Interpretation

The above graph presents the NPA ratio of SBI bank. It can be noticed that the NPA ratio was increased in

2018 by 02%. After that it is continuously decreased.

Capital Adequacy Ratio
Capital Adequacy Ratio can be defined as ratio of the capital of the Bank, to its assets, which are weighted/adjusted according
to risk attached to them.
YEAR
CAPITAL ADEQUCEY
RATIO

2016 13.12

2017 13.11

2018 12.74

2019 12.85

Interpretation
Each bank needs to create the capital reserve to compensate the non- performing assets. Here, SBI has shown better
capital adequacy ratio with 13.12% in 2016 as compared to , 13.11% in 2017, 12.74% in 2018 and 12.85% in 2019.
Provision Ratio:
Provisions are to be made for to keep safety against the NPA, & it directly effect on the gross profit of the Banks.

Sample Calculation
 
 
Provision Ratio = Total Provision *100
Gross NPA
 
= 33307 *100
98172.80

= 33.92

Interpretation
The highest provisions ratio is showed by SBI is 38.11% in 2018 as compared to 33.92% in 2016, 36.17% in
2017,and 35.01% in 2019.
Findings

 It show that total assets of SBI is increased in 2017 by 4469.04 billion, in 2019 increased by 2261.62 billion. So assets

of the SBI bank increased from last four year.

 It very clear that the average gross NPA of SBI is not very satisfactory. It has seem that the gross NPA which was 6.5%

in 2016 increased every year and finally reached 7.7% in 2019. It seems that SBI need to take more care and follow

ideal norms of granting advances, so that the recovery is satisfactory leading to lower gross NPA.

 It can be noticed that the NPA ratio was increased in 2018 by 02%. After that it is continuously decreased.

 Each bank needs to create the capital reserve to compensate the non- performing assets. Here, SBI has shown

better capital adequacy ratio with 13.12% in 2016 as compared to , 13.11% in 2017, 12.74% in 2018 and 12.85% in

2019. The capital adequacy ratio is important for them to maintain as per the regulation. Each bank needs to create

the capital reserve to compensate the non- performing assets.

 This ratio indicates the degree of safety measures adopted by the banks. It has direct bearing on the profitability, dividend
and safety of shareholders’ fund, if the provision ratio is less, it indicates that the banks has made under provision. The
highest provisions ratio is showed by SBI is 38.11% in 2018 as compared to 33.92% in 2016, 36.17% in 2017,and
35.01% in 2019.

 
Conclusion
The present study concludes that non- performing assets is a biggest challenge faced by State
Bank of India as it leads to downfall in liquidity balance of the Banks and creates bad debts on it.
Profitability is being affected due to the fluctuations in NPA levels over the years. On comparing the two
Banks based on the effect on its profitability, SBI has higher NPAs as compared to HDFC Bank. Because of
its public nature. Since SBI is a public sector Bank, it is more vulnerable to give up on the returns of the
loans extended to the general public.
To conclude this study, we can say about this report, that
• The NPA is slowly decreasing in SBI
• NPAs represent high level of risk and low level of credit appraisal.
• There are some certain guidelines made by RBI for NPAs which are adopted by banks.
• There are so many preventive measures available those can be adopted to stop Asset or A/C becoming
NPA.
Suggestions

 Before issue of loan bank should do proper credit analysis.

 Bank should proper choice the borrower and should keep good administration which is favors to the borrowers.

 Bank should audit regularly so that it can ensure the fringe which don’t slip to the NPA category.

 RBI or zonal bank should give permission to take actions for recovery process

 RBI should have separate department which must be concentrate on recovery with respect to type of loan at zonal

level.

 
BIBLIOGRAPHY

References Books
 Indian financial system- H R Machiraju
 Management of banking –S.Scott MacDonald/ Timothy W.Koch
 Indian financial system –M Y Khan

Reports and Papers:

 Report on the working group to review the functioning of Debt Recovery
Tribunals –RBI
 
 RBI Guidelines Circulars on Income Recognition and Asset Classification 
 
 
Web Sites
 https://www.onlinesbi.com
 
 https://www.sbi.co.in/corporate/AR1819/download-annual-report.html
 
 https://www.moneycontrol.com
 
Thank You.