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 CHAPTER -1
INTRODUCTION
“A Study on Non-performing Asset at State Bank of India Devanahalli”

CHAPTER-01

INTRODUCTION

1.1 INTRODUCTION OF NON-PERFORMING ASSET

An Action for enforcement of security interest can be imitated only if the secured asset is
classified as Non-performing asset. It means an asset 0r account of borrowers, which has
been classified by the bank or financial intuition as sub-standard, doubtful asset, in
accordance with the directions or guidelines relating to asset classification issued by RBI.
An amount due under any credit facility is treated as “past due” when it has not been paid
within 30days from the due date. Due to the improvement in the payment and settlement
systems, recovery climate, up gradation of technology in the banking system it was
decided to dispense with „past due‟ concept, with effect from March 31, 2001.
Accordingly, as from that date, a Non performing asset (NPA) shell be an advance where
interest and installment of principal remain „out of order‟ for a period of more than
180days in respect of an overdraft/cash credit, the bill remains overdue for a period of
more than 180days in the case of bills purchased and discounted, interest and or
installment of principal remains overdue for two harvest seasons but for a period not
exceeding two half years in the case of an advance granted for agriculture purpose, and
any amount to be received remains overdue for a period of more than 180days in respect
of the other accounts.

It‟s a known fact that the bank and financial institutions in India face the problem of
swelling non- performing asset (NPA) and the issue is becoming more and more
unmanageable. In order to bring the situation under control, some steps have been taken
recently. The securitization and reconstruction of financial assets and enforcement of
security interest Act, 2002 was passed by parliament, which is an important step towards
elimination or reduction of NPA.

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NPAs reflect the performance of banks. A high of NPAs suggests high probability of a
large number of credit defaults that affects 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 values. The issue of non-performing
Assets has been discussed at length for financial system all over the world. The problem
of NPAs is not only affecting the banks but also the whole economy. In fact, high level of
NPAs in India banks is nothing but a reflection of the state of heath of the industry and
trade. for financial systems all over the world. The problem of NPAs is not only affecting
the banks but also the whole economy. In fact, high level of NPAs in Indian banks is
nothing but a reflection of the state of health of the industry and trade.

1.2 MEANING OF NPA

An asset is classified as non-performing asset (NPA) if dues in the form principal and
interest are not paid by the borrower for a period of 180 days. However, with effects from
March 2004, defaults status would be given to a borrower if dues are not paid for 90
days. If any advance or credit facilities granted by bank to a borrower become non-
performing, then the bank will have to treat all the advances/credit facilities granted to
that borrower as non-performing without having any regard to the fact that there may still
exist certain advances/credit facility.

Nonperforming Asset means an asset or account of borrower, which has been

classified by a bank or financial institution as sub-standard, loss asset, in accordance
with the directions or guidelines relating to asset classification issued by the Reserve
bank of India. Banks usually classified as non-performing assets any commercial loans
which are more than 90 days overdue and any consumer loans which are more than
180days overdue. More generally, an asset which is not producing income is calling as
non-performing asset.

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1.3 DEFINATION OF NPA

A non-performing asset (NPA) is defined as a credit facility in respect of which the

interest and or installment of principal has remained „past due‟ for specified period of
time. In simple terms, an asset tagged as non-performing when it ceases to generate
income for the lender.

Asset is an item of property owned by a person or company, regarded as having value

and available to meet debts, commitments, or legacies. Any item of economic value
owned by an individual or corporation, especially that which could be converted to cash.
NPA surfaced suddenly in the Indian banking scenario, around the Eighties, in the midst
of turbulent structural changes overtaking the international banking institutions, and
when the global financial markets were undergoing sweeping changes. In fact, after it had
emerged, the problem of NPA kept hidden and gradually swelling unnoticed and
unperceived, in the maze of defective accounting standards that still continued with
Indian Banks.

1.4 MEANING OF ASSET

Asset is an item of property owned by a person or company, regarded as having value

and available to meet debts, commitments, or legacies. Any item of economic value
owned by an individual or corporation, especially that which could be converted to cash.

1.5 TYPES OF ASSETS

1. Fixed Asset
2. Current Asset
3. Fictitious Asset
4. Tangible Asset
5. Intangible Asset

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1.6 ASSET CLASSIFICATION

Assets are classified into four classes- Standard, Doubtful, and Loss assets. NPA consist
of assets fewer than three categories: sub-standard, doubtful and loss. RBI for these
classes of assets should evolve clear, uniform, and consistent definitions. The banks
should classify their assets based on weakness and dependency on collateral securities
into four categories:

1.6.1 Standard Asset: It carries not more than the normal risk attached to the business
and is not an NPA. Standard assets are the ones in which the banks are receiving interest
as well as the principal amount of the loan regularly from the customer. Here it is also
very important that in this case the arrears of interest and the principal amount of loan do
not exceed 90days at the end of financial year. If asset fails to be category of standard
asset that is amount due more than 90days then it is NPA and NPAs are further need to
classify in sub categories.

1.6.2 Sub-Standard Asset: A sub-standard asset is one which has remained NPA for a
period less than or equal to 12 months from 31/3/2005. In such case the current net worth
of the borrower/guaranteed or the current market value of the security charged is not
enough to ensure recovery of the dues to the banks in full.

1.6.3 Doubtful Asset: with effect from 31/03/2005, an asset is to be classified as

doubtful, if it has remained NPA for a period exceeding 12 months. A loan classified as
doubtful has all the weakness inherent in asset that was classified as sub-standard, with
the added characteristics that the weakness makes collection.

1.6.4 Loss Assets: An asset identified by the bank or internal/ external auditors or RBI
inspection as loss asset, but the amount has not yet been written off wholly or partly. The
banking industry has significant market inefficiencies caused by the large amounts of
Non-Performing Assets (NPA) in bank portfolios, accumulated over several years.
Discussions on non-performing assets have been going on for several years now. One of
the earliest writings on NPA defined them as “assets which cannot be recycled or
disposed of immediately, and which do not yield returns to the bank, examples of which
are Overdue and stagnant accounts, suit filed accounts, suspense accounts and

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miscellaneous assets, cash and bank balances with other banks, and amounts locked up in
frauds"

1.7 ASSET CLASSIFICATION

Provision requirements

1. Standard assets 0.25% of the outstanding dues in all Standard Assets under
Agricultural sector.

2. 1.00% of the outstanding dues in all Standard Assets of the Account to Capital market
exposure, personal loan, commercial real estate and residential houses Beyond Rs.
20lakhs.

3. 0.40% of the outstanding dues in all standard assets belonging to all other categories.

4. 10% of the sum of the net investment in the lease and the unrealized portion of finance

5. Income net of finance charge component. The terms, net investment in the lease‟, ‟
finance income‟ and finance charge are as defined in„AS19 – Leases‟ issued by the
ICAI.

6. Doubtful assets 20% - 50% of the secured portion depending on the age of NPA, and
100%of the unsecured portion. Loss assets It may be either written off or fully provided
by the bank. The entire asset should be written off if the assets are permitted to remain in
the books for any reason, 100 % of the outstanding should be provided for.

1.8 CONCEPT AND BACKGROUND OF NON-PERFORMING ASSETS

NPA surfaced suddenly in the Indian banking scenario, around the Eighties, in the midst
of turbulent structural changes overtaking the international banking institutions, and
when the global financial markets were undergoing sweeping changes. In fact, after it had
emerged, the problem of NPA kept hidden and gradually swelling unnoticed and
unperceived, in the maze of defective accounting standards that still continued with
Indian banks.

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In a dynamic world, it is true that new ideas and new concepts that emerge through such
changes caused by social evolution bring beneficial effects, but only after levying a heavy
initial toll. The process of quickly integrating new innovations in the existing set-up leads
to an immediate disorder and unsettled conditions. People are not accustomed to the new
models. These new formations take time to configure, and work smoothly. The old is cast
away and the new formations take time to configure, and work smoothly. Marginal and
sub-marginal operators are swept away by these convulsions. Banks being sensitive
institutions entrenched deeply in traditional beliefs and conventions were unable to adjust
themselves to the changes they suffered easy victims to this upheaval in the initial phase.

1.9 SIGNIFICANCE OF THE TOPIC

A strong banking sector is important for flourishing economy. The failure of the banking
sector may have an adverse impact on other sectors. 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 NPAs growth involves the necessity of
provisions, which reduces the overall profits and shareholders‟ value.

The issue of Non-Performing Assets has been discussed at length for financial systems all
over the world. The problem of NPAs is not only affecting the banks but also the whole
economy. In fact, high level of NPAs in Indian banks is nothing but a reflection of the
state of health of the industry and trade.

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1.10 NON PERMORMING ASSETS AS A MAJOR ISSUE AND CHALLENGE

FOR BANKING INDUSTRY

Non-performing Assets are threatening the stability and demolishing banks profitability
through a loss of interest income, write-off of the principal loan amount itself. RBI issued
guidelines in 1993 based on recommendations of Narasimham committee that mandated
identification and reduction of NPAs be treated as a national priority‟ because the level of
NPA act as an indicator showing the bankers credit risks and efficiency of allocation of
resource. The financial reforms in Indian bank industry have helped largely to clean NPA
which was around RS 52000 crores in the year 2004. The earning capacity and
profitability of the bank are highly affected due to this NPA.

1.11 GROSS NPA AND NET NPA

Gross NPA is an advance which is considered irrecoverable, for bank has made
provisions, and which is still held in banks books of account‟s Net NPA is obtained by
deducting items like interest due but not recovered, part payment received and kept in
suspense, account from gross NPA. The Reserve bank of India states that, compared to
other Asian countries and the US, the gross non-performing asset figures in India seem
more alarming that the net NPA figure. The problem of high gross NPAs is simply one of
inheritance. Historically, Indian public sector banks have been poor on credit recovery,
mainly because of very little legal provision governing foreclosure and bankruptcy,
lengthy legal battles sticky loans made to government public sector undertaking, loan
waivers and priority sector lending.

Net NPAs are comparatively better on a global basis because of the stringent
provisioning norms prescribed for banks in 1991 by Narasimham committee. In India,
even on security taken against loans, provision has to be created. Further, Indian banks
have to make a 100 per cent provision on the amount not covered by the realizable value
of securities in case of “doubtful” advance, while in some countries; it is 75 per cent.
THE ASSOCHAM study titled solvency analysis of the Indian banking sector reveals
that on

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An average 24per cent rise in net non-performing assets have been registered by 25
public sector and commercial banks during the second quarter of the 2009 as against
2008. According to the RBI, “Reduction of NPAs in the banking sector should be treated
as national priority item to make the system stronger, resilient and geared to meet the
challenges of globalization. It is necessary that a public debate is started soon on the
problem of NPAs and resolution.‟‟

1.12 REASONS FOR THE EXISTENCE OF HUGE LEVEL OF NPA’S IN THE

INDIAN BANKING SYSTEM (IBS):

The origin of the problem of burgeoning NPA‟s lies in the quality of managing credit risk
by the banks concerned. What is needed is having adequate preventive measures in place
namely, fixing pre-sanctioning appraisal responsibility and having an effective post-
disbursement supervision. Banks concerned should continuously monitor loans to
identify accounts that have potential to become nonperforming.

To start with, performance in terms of profitability is a benchmark for any business

enterprise including the banking industry. However, increasing NPA‟s have a direct
impact on banks profitability as legally banks are not allowed to book income on such
accounts and at the same time banks are forced to make provision on such assets as per
the Reserve Bank of India (RBI) guidelines.

Also, with increasing deposits made by the public in the banking system, the banking
industry cannot afford defaults by borrowers since NPA‟s affects the repayment capacity
of banks. Further, Reserve Bank of India (RBI) successfully creates excess liquidity in
the system through various rate cuts and banks fail to utilize this benefit to its advantage
due to the fear of burgeoning non-performing assets.

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1.13 NPA NORMS

Provisional Norms: Banks will be required to make provisions for bad and doubtful
debts on a uniform and consistent basis so that the balance sheets reflect a true picture
of the financial status of the bank. The Narasimhan Committee has recommended the
following provisioning norms

(I) 100 per cent of loss assets or 100 per cent of out- standings for loss assets;

(II) 100 per cent of security shortfall for doubtful assets and 20 percent to 50 per cent of
these cured Portion; and

(III) 10 per cent of the total out standings for substandard assets. A provision of 1% on
standard assets is required as suggested by Narasimhan Committee II, 1998. Banks need
to have better credit appraisal systems so as to prevent NPA from occurring. The most
important relaxation is that the banks have been allowed to make provisions for only30
per cent of the "provisioning requirements" as calculated using the Narasimhan
Committee recommendations on provisioning. The encouraging profits recently declared
by several banks have to be seen in the light of provisions made by them. To the extent
that provisions have not been made, the profits would be fictitious.

1.13.1 Disclosure Norms:

Banks should disclose in balance sheets maturity pattern of advances, deposits, and
investments and borrowings. Apart from this, banks are also required to give details of
their exposure to foreign currency assets and liabilities and movement of bad loans.
These disclosures were to be made for the year ending March 2000. In fact, the banks
must be forced to make public the nature of NPA being written off.

This should be done to ensure that the tax payer‟s money given to the banks, as capital
is not used to write off private loans without adequate efforts and punishment of
defaulters.

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1.14 INTROUCTION BASEL III

Basel III has been criticized by banks, organized in the Institute of International
Finance in Washington D.C. (large American and European banks, including Goldman
Sachs, Morgan Stanley, Deutsche Bank) with the argument it would hurt them and
economic growth. OECD estimated that implementation of Basel III would decrease
annual GDP growth by 0.05–0.15% blaming regulation as responsible for slow
recovery from the late-2000s financial crisis. Basel III was also criticized to negatively
affect the stability of the financial system by increasing incentives of banks to game
the regulatory framework.
The American Bankers Association, the community banks, organized in the
Independent Community Bankers of America, and some of the most liberal Democrats
in the U.S. Congress. including the entire Maryland congressional delegation with
Democratic Sens. Cardin and Mikulski and Reps. Van Hollen and Cummings voiced
opposition to Basel III in their comments submitted to FDIC as hurting small banks,
by increasing "their capital holdings dramatically on mortgage and small business
loans.", a theme repeated at H.R. hearings on 11/29/12. Others have argued that Basel
III did not go far enough to regulate banks as inadequate regulation was a cause of the
financial crisis. On January 6, 2013 the global banking sector won a significant easing
of Basel III Rules, when the Basel Committee on Banking Supervision extended not
only the implementation schedule to 2019, but broadened the definition of liquid
assets.

1.14.1 BASEL III MEASURES AIM TO:

 Improve the banking sector‟s ability to absorb shocks arising from financial and
economic stress, whatever the source.
 Improve risk management and governance.
 Strengthen banks transparency and disclosure.

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1.15 CREDIT RISK AND NPA’s

Quite often credit risk management (CRM) is confused with managing non- performing
assets (NPA‟s). However there is an appreciable difference between the two. NPA‟s are a
result of past action whose effects are realized in the present i.e. they represent credit risk
that has already materialized and default has already taken place.

On the other hand managing credit risk is a much more forward-looking approach and is
mainly concerned with managing the quality of credit portfolio before default takes place.
In other words, an attempt is made to avoid possible default by properly managing credit
risk. Considering the current global recession and unreliable information in financial
statements, there is high credit risk in the banking and lending business. To create a
defense against such uncertainty, bankers are expected to develop an effective internal
credit risk models for the purpose of credit risk management.

1.16 FACTORS TO RISE IN NPA

The banking sector has been facing the serious problems of the rising NPAs. But the
problem of NPAs is more in public sector banks when compared to private sector banks
and foreign banks. The NPAs in public sector banks are growing due to external as well
as internal factors.

1.16.1 EXTERNAL FACTORS:

1. Ineffective recovery tribunal: The Government has set of numbers of recovery

tribunals, which works for recovery of loans and advances. Due to their negligence and
ineffectiveness in their work the bank suffers the consequence of non-recover, thereby
reducing their profitability and liquidity.

2. Willful Defaults: There are borrowers who are able to pay back loans but are
intentionally withdrawing it. These types of people should be identified and proper
measures should be taken in order to get back the money extended to them as advances
and loans.

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3. Natural calamities: This is the measure factor, which is creating and rise in NPAs of
the Public sector banks. India is hit by major natural calamities thus making the
borrowers unable to pay back their loans. The bank has to make large amount of
provisions in order to compensate those loans, hence end up the fiscal with a reduced
profit. Mainly our framers depend on rain fall for cropping. Due to irregularities of rain
fall the framers are not to achieve the production level thus they are not repaying the
loans.

4. Industrial sickness: Improper project handling, ineffective management, lack of

adequate resources, lack of advance technology, daily changes in government. Policies
give birth to industrial sickness. Hence the banks that finance those industries ultimately
end up with a low recovery of their loans reducing their profit and liquidity.

5. Lack of demand: Entrepreneurs in India could not predict their product demand and
starts production which ultimately piles up their product and making them unable to pay
back the money they borrow to operate these activities. The banks recover the amount by
selling of their assets, which covers a minimum label. Thus, the banks record the none
recovered part as NPAs and has to make provision for it.

6. Change on Government policies: With every new government banking sector gets
new policies for its operation. it has to manage with the changing principles and policies
for the regulation of the rising of NPAs. The fallout of handloom sector is continuing as
most of the weaver‟s Co-operative societies have become large due to withdrawal of
funding. The rehabilitation plan worked out by the Central government to revive the
handloom sector has not yet been implemented. So, the over dues due to the handloom
sectors are becoming NPAs.

1.16.2 INTERNAL FACTORS

1. Defective Lending process: - There are three cardinal principles of bank lending that
have been followed by the commercial banks.

I. Principles of safety

II. Principle of liquidity

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III. Principles of profitability

I. Principles of safety: - By safety it means that the borrower is in a position to repay the
loan and interest. The repayment of loan depends upon the borrowers.

A. Capacity to pay

B. Willingness to pay

A. Capacity to pay depends upon:

1. Tangible assets

2. Success in business

B. Willingness to pay depends on:

1. Character

2. Honest

3. Reputation of borrower

The banker should, therefore take almost care in ensuring that the enterprise or business
for which a loan is sought and by the borrower is capable of carrying it out successfully
he should be a person of integrity and good character.

Inappropriate technology:

Due to inappropriate technology and management information system, market decisions

on real time basis cannot be taken. Proper financial accounting system is not
implemented in the banks, which leads to poor credit collection, on NPA. All the
branches of the banks should be computerized.

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1.17 Why NPA have become an issue for banks and financial institutions in India?

To start with, performance in terms of profitability is a benchmark for any business

enterprise including the banking industry. However, increasing NPA have a direct impact
on banks profitability as legally banks are not allowed to book income on such accounts
and at the same time banks are forced to make provision on such assets as per the
Reserve Bank of India (RBI) guidelines. Also, with increasing deposits made by the
public in the banking system, the banking industry cannot afford defaults by borrowers
since NPA affects the repayment capacity of banks. Further, Reserve Bank of India (RBI)
successfully creates excess liquidity in the system through various rate and banks fail to
utilize this benefit to its advantage due to the increase of non-performing assets.

1.18 The following primary causes for turning accounts into NPA:

1. Diversion of funds, mostly for the expansion or diversification of business for

promoting associate concern.

2. Internal factor to businesslike marketing failure, inefficient management, inappropriate

technology.

3. Changes in the Macro-environment like recession in the economy.

4. Inadequate control or supervision, leading the time / cost over-runs during project.

5. Changes in Government policies.

E.g. Import duties.

6. Deficiencies like delay in the release of limits or funds by banks

Secondary causes are as follows: -

1. Selection of the project.

2. Implementation of the project- time over-run, cost over-run, under-financing

technology involved.

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3. Intention of the borrower.

4. Industrial / Economic trend.

5. Absence of up gradation of the unit / plugging back of the profit.

1.19 REASONS FOR AN ACCOUNT BECOMING NPA

1. Internal factors

2. External factors

1.19.1 INTERNAL FACTORS :

 Poor recovery of receivables.

 Excess capacities created on non-economic costs.
 Business failures.
 Diversion of funds for expansion\modernization\setting up new projects\
helping or promoting concerns.

 Willful defaults, siphoning of funds, fraud, disputes, management disputes,

mis-appropriation etc.

 Deficiencies on the part of the banks viz. in credit appraisal, monitoring and
follow-ups, delaying settlement of payments\ subsidiaries by government etc.,

1.19.2EXTERNAL FACTORS:

1) Sluggish legal system:

 Long legal tangles
 Changes that had taken place in labor laws
 Lack of sincere effort.
2) Scarcity of raw material, power and other resources.
3) Industrial recession.

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1.20 IMPACT OF NPA ON BANK PERFORMANCE:

The efficiency of a bank is not reflected only by the size of its balance sheet but also
the level of return on its assets The NPAs do not generate interest income for banks but
a the same time banks are required to provide provisions for NPAs from their current
profits.

1.20.1 The NPAs have deleterious impact on the return on assets in the following
ways.
 The interest income of banks will fall and it is to be accounted only on receipt
basis.
 Banks profitability is affected adversely because of the providing of doubtful
debts and consequent to writing it off as bad debts.
 Return on investments (ROI) is reduced.
 The capital adequacy ratio is disturbed as NPAs are entering in to its calculation.
 The cost of capital will go up. .
 The assets and liability mismatch will widen.
 The economic value addition (EVA) by banks gets upset because EVA is equal
to then to the operating profit minus cost of capital.
 It limits recycling of the funds.

1.20.1.1 Profitability:

NPA means booking of money in terms of bad asset, which occurred due to wrong
choice of client. Because of the money getting blocked the prodigality of bank
decreases not only by the amount of NPA but NPA lead to opportunity cost also as that
much of profit invested in some return earning project/ asset. So NPA doesn‟t affect
current profit but also future stream of profit, which may lead to loss of some long-
term beneficial opportunity. Another impact of reduction in profitability is low return
on investment, which adversely affect current earning of bank.

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1.20.1.2 Liquidity:

Difficulty in operating the functions of bank is another cause of NPA due to lack of m
Difficulty in operating the functions of bank is another cause of NPA due to lack of
money.

1.20.1.3 Involvement of management:

Time and efforts of management is another r indirect cost which bank has to be due to
NPA. Time and efforts of management in handling and managing NPA would have
diverted to some fruitful activities, which would have given good returns. Now day‟s
banks have special employees to deal and handle NPAs, which is additional cost to the
bank.

1.20.1.4 Credit loss :

Bank is facing problem of NPA then it adversely affect the value of bank in terms of
mark credit its good will and brand image and credit which have negative impact to the
people who are putting their money in the banks.

1.21 EARLY SYMPTOMS:

By which one can recognize a performing asset turning in to non-performing asset
Four categories of early symptoms:-

1) Financial:

 Bouncing of cheque due to insufficient balance in the accounts.

 Irregularity in installment.

 Irregularity of operations in the accounts.

 Unpaid overdue bills.

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 Declining Current Ratio.

 Payment which does not cover the interest and principal amount of that installment.

 While monitoring the accounts it is found that partial amount is diverted to

concern or parent company.

2) Operational and physical

If information is received that the borrower has either initiated the process of winding
up or not doing the business.

 Overdue receivables.

 Stock statement not submitted on time.

 External non-controllable factor like natural calamities in the city where

borrower conduct his Frequent changes in plan.

 Nonpayment of wages.

3) Attitudinal changes:

 Use for personal comfort, stocks and shares by borrower.

 Avoidance of contact with bank.
 Problem between partners.
Others:
 Changes in Government policies.
 Death of borrower.
 Competition in the market

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 CHAPTER-2
REVIEW OF
LITERATURE AND
RESEARCH DESIGN
“A Study on Non-performing Asset at State Bank of India Devanahalli”

CHAPTER-02

REVIEW OF LITERATURE AND RESEARCH DESIGN

2.1 INTRODUCTION:

This study have been conducted by researchers on NPA‟s in banking industry The
researcher has made attempts to present a brief about review of literature available,
which are published in the form of research articles and technical papers published in
journals. Magazines and websites in related area. The review of the literature issued to
formulate theatrical analysis of non-performing loans undertaken in the present study.
This study is designed for analyzing NPA and its impact on profitability and to compare
the loans and NPA‟s in SBI bank.

This study collected different literature review based on loans and NPA‟s of different
authors and find the research gap. It is the plan, structure and strategy of investigation
conceived so as to obtain answers to research questions and to control variance.

Vighneswara Swamy (2013) this study on “Determinants of bank Asset Quality and
profitability” has established the private banks and foreign banks have advantages in
terms of their efficiencies in better credit management in containing NPAs, which
indicates bank privatization can lead to better management of default risk. These findings
will infer the better credit risk management practices need to be taken up for bank
lending. Adequate attention should paid to those banks with low operating efficiency and
low capitalization as also macroeconomic cycles appear to playing some role in NPA
management. The state-owned banks need to important in view of the significance. It
summarized that private banks (both old and new) and foreign banks appear to manage in
their NPAs efficiency.

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Dr. Ramachandran. A,SivaShanmugam (2012):This study on “An Empirical Study

on Performance of selected scheduled urban cooperative banks in India” Analyses
that urban co-operative banks exhibited a greater emphasis on product diversification,
customer orientation thrust towards retail banking, adoption for improved service, better
MIS and management and strategic mergers and acquisition across bank groups. Pointed
out the NPAs constitute a real economic cause to the nation they reflected application of
laking capital and credit finance to inefficient uses. The author concluded that high NPAs
in the banks have efforts not only on the banks but also on the economy as a whole.

Sirisha.S, Pacha Malyadri (2011): This study on “A Comparative study of

Nonperforming Assets in Indian Banking Industry” observed banking sector in India
has responded positively in field of enhancing role of market forces regarding measures
of prudential regulations of accounting, income recognition, provisioning and exposure,
introduction of Supervisory rating system and reduction of NPAs and up gradation of
technology. It suggested the government should formulate bank specific policies and
implement these policies through Reserve Bank of India for upliftment of public sector
banks. Public sector banks should try to upgrade their technology and formulate customer
friendly policies to face competition at national and international level.

Mayilsamy.R (2007): This study on “Non -performing Assets in short-term co-

operative credit structure “The researcher observed the banks have to evolve recovery
strategies and plan for recovery management. Concluded that if they fail to improve the
recovery, the huge burden of NPAs is really breaking backbone of the short-term co-
operative credit structure in India

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Raikar, Avinash.v (2006) This Study on “Co-operative credit institutions in India”

analyze the issues, problems and prospects of co-operative credit institution in India. The
researcher was founded major problems of co-operative credit institution are dual control,
high overdue and low resource base. The researcher concludes the future survival of these
institutions by determining the ability of technology and modernizes themselves,
innovation of new products and its reach among the agrarian society.

Sachin Agrawal and Kavita Agrawal, (2006) This study on “NPAs, A challenge for
co-operative banks-A comparative study of peoples’ bank ltd’’ held that the proper
policies adopted by banks regarding disbursement of the loan, and good chain recovery,
and also continuous and systematic way of working has also made by the NPAs to
diminishing the rate.

Fulbag Singh and Bal winder Singh (2006) this study on “profitability of the central
co-operative banks in Punjab-A comparative study of peoples’ co-operative bank
ltd” examined the funds management in central co-operative banks in Punjab. The
author observed the higher proportion of own funds in working funds of bank and
concerned shown by bank in timely recovery of loans resulted in increased monetary
boundary of central co-operative banks in Punjab. Author concludes the less dependence
on the new outside resources helped by these banks in increasing their financial margin.

Rama Chandra Reddy. Vijayulu Reedy .S (2003): his Study on “Banking sector
reforms in India” View of new challenges faced by the banks are forcing to attempt all
new things with same old rigid structure and system. What required is more managerial
and administrative freedom to the management with commensurate and result oriented
accountabilities. They stressed the banks should move towards professional banking with
requisite freedom to operate freely in market within regularly and prudential framework
prescribed by Reserve Bank of India.

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Sambasiva Rao.S(2002), This study on “ A primer for NPA management suggest that
the declaring default on bank loans as criminal offence and punishment to be awarded
along with financial recovery, authorizing seizure agencies and giving them a legal status
to recover loans.

Samal (2002),This study on “NPA overhang: magnitude, solution and legal reforms”
Suggested the declaration of default of bank loans as criminal offence and punishment to
be awarded along with financial recovery, authorizing seizure agencies and giving them a
legal status to recover the loans.

Ranachandriaiah and Namasivayam (2000), This study on “End use of credit and
repayment performance of the intuitional borrowers: Concluded the productive loan
as proportion of total loan was higher for marginal farmers among non-defaulter and
control groups who were utilizing the loans predominantly for digging and deepening
wells. The crop loan tended to be more often misused that the term loans. This may be
partly due to untimely issue of loans.

RBI Study (1999), This Study on “Some aspects and issues relating to NPAs in
commercial banks” Non Performing Assets considered write-off, compromise, one-time
settlement for recovery of NPAs. It recommended compromise model for the recovery of
NPAs as most effective mechanism. However, both the write-off and compromise are the
steps to be taken with caution and due monitoring.

Gopalakrishnan (1996), this study on “Credit and recovery performance of

industrial finance under agricultural sector” suggested that the bad effect of debt
relief schemes should be erased from the mind of borrowers.

Rosengren Eric.s Joe Peek (2000), this study on “Effects of the Japanese bank crisis
on real activity in united states” Japanese banking crisis provides a natural experiment
to test whether a loan supply shock can affect real economic activity. Because the shock
was external to U.S. credit markets, yet connected through Japanese bank penetration of
U.S. markets, this event allows us to identify an exogenous loan supply shock and

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ultimately link that shock to construction activity in U.S. commercial real estate markets.
This study exploit the variation across geographically distinct commercial real estate
markets to establish conclusively that loan supply shocks emanating from Japan had real
effects on economic activity in the United States.

Helen Louri and Dimitrios Anastasiou (2016),this study on “Determinants of non-

performing loans’’ objective of this paper is to identify the main determinants of non-
performing loans in the euro-area banking system for the period 1990-2015 using GMM
estimations. On top of the bank- and country-specific variables proposed by the literature
the roles of income tax and output gap are the first time examined and found to be
significant. Our results could be helpful when designing macro-prudential and fiscal
policies.

2.2 RESEARCH DESIGN:

A Research design is a basic plan that guides the data collection and analysis phases of
the research project. It provides the framework that specifies the type of information to be
collected, it is the blueprint that is followed to complete the study and it ensure that while
conducting the present study, care has been taken to incorporate these concepts in the
research design.

2.3 TITLE OF THE STUDY

“A STUDY ON NON-PERFORMING ASSET AT STATE BANK OF INDIA”

2.4 STATEMENT OF THE PROBLEM: -

Non- performing assets are one of the major concerns for scheduled commercial banks in
India. 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. NPAs reflect

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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. NPAs affect the liquidity and profitability, in addition to
posing threat on quality of asset and survival of banks. The problem of NPAs is not only
affecting the banks but also the whole economy. Devanahalli. SBI is one of the important
commercial banks in the Devanahalli. So, the study on non-performing assets in SBI,
Devanahalli is important to do.

2.5 SCOPE OF THE STUDY:

This analysis has been emphasized to measure the NPAs impact on SBI equity prices for
the period of 5 years. Based on the volume weighted average price the equity price of
SBI was 3days prior to declaration of quarterly results and 3days after the day of
declaration of quarterly results has been taken.

2.6 OBJECTIVES OF THE STUDY:

 To know about the loans provided by SBI to agriculture and its allied activities,
relating to Industry, service, and personal sectors in Devanahalli.
 To understand about the NPA‟s in agriculture and allied activities, industry,
service, and personal sectors.
 To compare the loans and NPA‟s in the above mentioned sectors SBI.
 To suggest the ways and means to reduce the NPA‟s.

2.7 METHODOLOGY OF THE STUDY

This study is descriptive in nature based on secondary data using the balance sheet of the
company. The study considered other research reports, published articles of news reports
and conference proceeding available in both national levels related to the NPA. This
study has taken the annual reports, management reports, magazines, RBI circulars,
sources used for critical evolution of subject and identify research gap in the area of
study.

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2.8 RESEARCH GAP

The above literature review as given about the brief reviews of literature available, which
are published in the journals, magazines and websites in the related area. Non-performing
assets and loans undertaken in present study now in this study the researcher going to fill
the gap exisisting. The study deals the NPA‟s in State bank of India

2.9 LIMITATIONS OF THE STUDY

The study is mainly based on the secondary data provided by the state bank of India.
Such it is the subject to limitations of secondary data.
 The study is based only on NPA section of the bank.
 The study is based on the data given by the officials and reports of the bank.
 The non-availability of relevant information is one of the limitations.
 The researcher‟s inadequacy of experience is also a limitation.
 The study on management of non-performing assets is limited to the State Bank
of India.

2.10 SIGNIFICANCE OF THE STUDY

The banks and financial institutions have been burdened with ever increasing
nonperforming assets. Till 2002 neither there were any legal provisions for facilitating
securitization of financial assets of banks nor was there any legal framework to take
possession of securities and sell them without the intervention of the court. The
securitization and reconstruction of financial assets Act 2002 was a step in this direction.
The Act was bound to create ripple in the corporate sector and at the same time provide a
balm to the banks and financial institutions.

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CHAPTER SCHEME

CHAPTER 1 – INTRODUCTION

This chapter deals with theoretical overview of the introduction to Financial

Management, Banking Industry.

CHAPTER 2 – REVIEW OF LITERATURE AND RESEARCH

METHODOLOGY

This chapter explains the review of literature, statement of the problem, scope of the
study, Objectives of the Study, methodology, Data collection and Limitations of the
Study and chapter scheme.

CHAPTER 3 – COMPANY PROFILE

This chapter explains about the company profile of the State Bank of India at
Devanahalli. It explains the vision mission statement of the company.

CHAPTER 4 – DATA ANALYSIS AND INTERPRETATION

This chapter analyzes and interprets the data collected with the help of different tools and
techniques.

CHAPTER 5 -- SUMMARY OF FINDINGS, CONCLUSION AND

SUGGESTIONS

It presents the summary of all findings conclusions and suggestions

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COMPANY PROFILE
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CHAPTER-03

COMPANY PROFILE

3.1 INTRODUCTION

The roots of the State Bank of India are lie in the first decade of the 19th century, when
the Bank of Calcutta renamed the Bank of Bengal, was established on 2 June 1806. The
Bank of Bengal was one of three Presidency banks; the other two are Bank of
Bombay (incorporated on 15 April 1840) and the Bank of Madras (incorporated on 1 July
1843). All three Presidency banks were incorporated as joint stock companies and were
the result of royal charters. These three banks received the exclusive right to issue paper
currency till 1861 when, with the Paper Currency Act, the right was taken over by the
Government of India. The Presidency banks amalgamated on 27 January 1921, and the
re-organised banking entity took as its name Imperial Bank of India. The Imperial Bank
of India remained as a joint stock company but without Government participation.

Pursuant to the provisions of the State Bank of India Act of 1955, the Reserve Bank of
India, which is India's central bank, acquired to controlling interest in the Imperial Bank
of India. On 1 July 1955, the Imperial Bank of India became the State Bank of India. In
2008, the Government of India acquired the Reserve Bank of India's stake in SBI so as to
remove any conflict of interest because the RBI is the country banking authority.

In 1959, the government passed the State Bank of India Subsidiary Banks Act. This made
eight banks that had belonged to princely states into subsidiaries of SBI. This was at the
time of the first Five Year Plan, which prioritised the development of rural India. The
government integrated these banks into the State Bank of India system to expand its rural
outreach. In 1963 SBI merged the State Bank of Jaipur established in 1943 and State
Bank of Bikaner established in 1944.

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The State Bank of India was formed by the nationalization of the Imperial Bank of India
in July 1955. This was the culmination of IBI role in independent India - the debate on its

Bias towards European businesses and against indigenous entrepreneurs, and the slow
pace of Indenisation of its staff and management. The Rural Credit Survey Committee
saw the proposed the State Bank of India as a key part of its integrated system of rural
credit. Consequently, the plan to be nationalize the Imperial Bank became part of a wider
effort to direct the funds of the banking system into certain neglected, but important,
sectors of the economy such as agriculture, and spread banking facilities in rural areas.

State bank of India is the largest state-owned banking and financial services company in
India. The bank provides banking and financial services company in India. The bank
provides banking services to the customers; in addition to the banking services the bank
through its subsidiaries provides a range of financial services which include life insurance
merchant banking mutual funds credit card factoring security trading pension fund
management and primary dealership in the money market. Bank operates in four business
segments namely Treasury corporate/wholesale banking retail banking and other banking
business. The treasury segment includes the investment portfolio and trading in foreign
exchange contracts and derivative contracts. The corporate/wholesale banking segment
comprises the lending activities of corporate accounts group mid corporate accounts
group and stressed assets management group.

The retail banking segment consists of branches in national group which primarily
includes personal banking activities including lending activities to corporate customers
having banking relations with branches in national banking group SBI provides a range
of banking products through their vast network of branches in India and over as including
products aimed at NRIs. The state bank group with over 16000 branches has the largest
banking branch network in India. The state bank of India is the 10th most reputed
company in the world according to Forbes. The bank has 190 offices spread over 36
countries. They have branches of the parent in Colombo Dhaka Frankfurt Hong Kong
Johannesburg London and environs Los Angeles male in the Maldives Muscat New York

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Osaka Sydney and Tokyo. They have offshore banking units in the Bahamas Bahram and
Singapore and representative offices in Bhutan and cape Town. The state bank of India
incorporated in the year 1955 it was nationalized and there is only branch in Devanahalli.

SBI owned commercial bank and financial series company, nationalized by the India
government in 1955. SBI maintains thousands of branches throughout India and offices
in dozens of countries throughout the world. The bank‟s headquarters are in Mumbai.
The old commercial bank in India, SBI originated in 1806 as the bank of Calcutta. Three
years later the bank of Bengal. Along with the bank of Bombay (founded 1840) and the
bank of Madras (founded 1843), it was one of three so-called presidency banks, each of
which was jointly owned by the provincial government and private subscribers. In 1921
the presidency banks were merged to form the Imperial bank of India (IBI), which banks
were merged to form the Imperial bank of India (IBI), which then became the largest
commercial enterprise in the country. In 1955 the government of India and the country‟s
central bank, the Reserve bank of India (founded 1935), assumed joint ownership of IBI,
which was renamed the State bank of India (subsidiary banks) Act, and banks earlier
operated by individual princely states became subsidiaries of SBI. The Reserve bank‟s
share of SBI was transferred to the government in2007. Since nationalization, SBI has
served the needs of Indian economic development initiatives and microcredit programs
and by financing major agricultural and industrial projects and raising loans for the
government.

SBI bank in 2017 which was touted to boost the bank‟s profitability hurt its earnings.
Infect, it ended up ballooning loss and NPAs for the parent bank during 2017. SBI an
integrated application across all banking functions. Considering improved credit growth
and the need for more capital in the future The Narasimham committee has recommended
prudential norms on income recognition, asset classification and provisioning. In a
change from the past, income recognition is now not on an accrual basis but when it is
actually received. Past problems faced by banks were to a great extent attributable to this.
Classification of asset is non-performing if interest or installments of principal due

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remain unpaid for more than 180 days. for financial systems all over the world. The
problem of NPAs is not only affecting the banks but also the whole economy. In fact,

high level of NPAs in Indian banks is nothing but a reflection of the state of health of the
industry and trade.

Imperial bank of India Emblem

Imperial Bank of India Cheque

The Imperial Bank was formed as a joint-stock bank in January 1921 by amalgamating
the Presidency Banks of Bombay, Calcutta, and Madras. This amalgamation was a
response of both to be felt need for a bank which would hold by government balances and

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use them to deepen the country‟s financial structure, and to the threat which the
Presidency Banks felt was likely to emanate from the inroads the London clearing banks
were planning to make in India. Almost from its inception, the Imperial Bank had the
status of a quasi-central bank, undertaking until the formation of the Reserve Bank of
India in 1935, banking functions for the Government of India and other banking
institutions and managing the rupee debt of the government.

SBI has acquired local banks in rescues. The first was the Bank of Bihar established in
1911, which SBI acquired in 1969, together with its 28 branches. The next year SBI
acquired National Bank of Lahore established in 1942, which had 24 branches. Five years
later, in 1975, SBI acquired Krishnaram Baldeo Bank, which had been established in
1916 in Gwalior State, under the patronage of Maharaja Macho. The bank had been
the Dukan Pichadi, a small moneylender, owned by the Maharaja. The new bank's first
manager was Jall N. Broacha, a Parsi. In 1985, SBI acquired the Bank of Cochin
in Kerala, which had 120 branches. SBI was the acquirer as its affiliate, the State Bank of
Travancore, already had an extensive network in Kerala.

There has been a proposal to merge all the associate banks into SBI to create a single and
very large bank and streamline operations.

The first step towards unification occurred on 13 August 2008 when State Bank of
Saurashtra merged with SBI, reducing the number of associate state banks from seven to
six. On 19 June 2009, the SBI board approved the absorption of State Bank of Indore.
SBI holds 98.3% in State Bank of Indore. The Individuals who held the shares prior to its
takeover by the government hold the balance of 1.7%.

The acquisition of State Bank of Indore added 470 branches to SBI's existing network of
branches. Also, following the acquisition, SBI's total assets will approach ₹ 10 trillion.
The total assets of SBI and the State Bank of Indore were ₹ 9,981,190 million as of
March 2009. The process of merging of State Bank of Indore was completed by April
2010, and the SBI Indore branches started functioning as SBI branches on 26 August
2010.

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On 7 October 2013, Arundhati Bhattacharya became the first woman to be appointed as

Chairperson of the bank.Mrs. Bhattacharya received an extension of two years of service
to merge into SBI the five remaining associated banks.

OPERATION

SBI provides a range of banking products through its network of branches in India and
overseas, including products aimed at non-resident Indians (NRIs). SBI has 16 regional
hubs and 57 zonal offices that are located at important cities throughout India.

Domestic presence

Samriddhi Bhavan, Kolkata

SBI has 18,354 branches in India. In the financial year 2012–13, its revenue was ₹ 2.005
trillion (US$28 billion), out of which domestic operations contributed to 95.35% of
revenue. Similarly, domestic operations contributed to 88.37% of total profits for the
same financial year.

Under the Pradhan Mantri Jan Dhan Yojana of financial inclusion launched by
Government in August 2014, SBI held 11,300 camps and opened over 3 million accounts
by September, which included 2.1 million accounts in rural areas and 1.57 million
accounts in urban areas.

International presence

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The State Bank of India branch located in Ramat Gan, Israel

As of 2014–15, the bank had 191 overseas offices spread over 36 countries having the
largest presence in foreign markets among Indian banks.

SBI operates several foreign subsidiaries.

In 1989, SBI established an offshore bank, State Bank of India International (Mauritius)
Ltd. This then amalgamated with The Indian Ocean International Bank which had been
doing retail banking in Mauritius since 1979. Form SBI Mauritius Ltd. Today, SBI
Mauritius Ltd has 14 branches – 13 retail branches and 1 global business branch at Ebene
in Mauritius. SBI in SriLanka now has three branches located
in Colombo, Kandy and Jaffna. The Jaffna branch was opened on 9 September 2013. SBI
in Sri Lanka is the oldest bank in Sri Lankait was founded in 1864.

State Bank of India branch at Southall, United Kingdom

In 1982, the bank established as a subsidiary, State Bank of India, which now has ten
branches-nine branches in the state of California and one in Washington, D.C. The 10th
branch was opened in Fremont, California on 28 March 2011. The other eight branches in
California are located in Los Angeles, Artesia, San Jose, Canoga Park, Fresno, San
Diego, Tustin and Bakersfield.

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In Nigeria, SBI operates as INMB Bank. This bank began in 1981 as the Indo–Nigerian
Merchant Bank and received permission in 2002 to commence retail banking. It now has
five branches in Nigeria.

In Nepal, SBI owns 55% of "SBI Nepal". The state-owned Employees Provident Fund of
Nepal owns 15% and the general public owns the remaining 30%. SBI Nepal has
branches throughout the country.

In Moscow, SBI owns 60% of Commercial Bank of India, with Canara Bank owning the
rest.

In Indonesia, it owns 76% of PT Bank Indo Monex.

The State Bank of India already has a branch in Shanghai and plans to open another one
in Tianjin.

In Kenya, State Bank of India owns 76% of Giro Commercial Bank, which it acquired
for US$8 million in October 2005.

In January 2016, SBI opened its first branch in Seoul, South Korea following the
continuous and significant increase in trade due to the Comprehensive Economic
Partnership Agreement signed between New Delhi and Seoul in 2009.

Former Associate Banks

Main Branch of SBI in Mumbai

SBI acquired the control of seven banks in 1960. They were the seven regional banks of
former Indian princely states. They were renamed, prefixing them with 'State Bank of'.
These seven banks were State Bank of Bikaner and Jaipur (SBBJ), State Bank of
Hyderabad(SBH), State Bank of Indore (SBN), State Bank of Mysore (SBM), State Bank

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of Patiala (SBP), State Bank of Saurashtra (SBS) and State Bank of Travancore (SBT).
All these banks were given the same logo as the parent bank, SBI.

The plans for making SBI is a single and very large bank by merging the associate banks
started in 2008, and in September the same year, SBS merged with SBI. And the next
year, State Bank of Indore (SBN) also merged. In the same year, a subsidiary
named Bharatiya Mahila Bank was formed. The negotiations for merging of the 6
associate banks (State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank
of Mysore, State Bank of Patiala, State Bank of Travancore and Bharatiya Manilas Bank)
by acquiring their businesses including assets and liabilities with SBI started in 2016.The
merger was approved by the Union Cabinet on 15 June 2016. The State Bank of India
and all its associate banks used the same blue keyhole logo. The State Bank of
India wordmark usually had one standard typeface, but also utilized other typefaces.

On 15 February 2017, the Union Cabinet approved that the merger of five associate
banks with SBI. What was overlooked, however, were different pension liability
provisions and accounting policies for bad loans, based on regional risks.

State Bank of India Mumbai LHO

The State Bank of Bikaner & Jaipur, State Bank of Hyderabad, State Bank of
Mysore, State Bank of Patiala and State Bank of Travancore, and Bharatiya Mahila
Bank were merged with State Bank of India with the effect from 1st April 2017.

 An integrated solution for all financial challenges faced by the corporate

universe.
 The primary delivery channels are the corporate banking group and the national
banking group.

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 The corporate banking group consists of dedicated strategic business units that
cater exclusively to the specific client groups or specialize in particular product
clusters.
 The corporate banking group consists of dedicated strategic business units viz.
 Corporate accounts group (cag),
 Project finance unit and
 Leasing unit.
The national banking group also delivers the entire spectrum of corporate
banking products to the other corporate clients, on a nationwide platform.

3.2 COMPLETE RANGE OF PRODUCTS AND SERVICES

 The SBI offers an exhaustive range of financial products and services that
answers any business or market circumstance, backed by an assublack expertise
in customizing the product to meet the most sensitive specificities of each client
and each business context.
 It is committed to understanding the finest nuances of your business objectives
and engineering black it and non-black it solutions to suit them.
 Its team of highly skilled and experienced product specialists can help you
forecast your black it patterns and structure complex transaction requirements.

3.3 THE SBI EDGE

 Commanding bi is committed to offering you a financial solution that
cunsurpassed respect and legacy in the Indian financial expanse, the san extract
maximum value from business and market situations.
 While the bank is strongly positioned to the structure of financial packages that
anticipate the changing business environment, its vast network --the world's
largest--ensures delivery channels of unmatched reach, both in india and abroad.

3.4 COMPANY PROFILE:

NON-BANKING SUBCIDIARIES

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Apart from the five of its associate banks (merged with SBI since 1 April 2017), SBI's
non-banking subsidiaries include:

 SBI Capital Markets Ltd

 SBI Cards & Payments Services Pvt. Ltd. (SBICPSL)
 SBI Life Insurance Company Limited

In March 2001, SBI with 74% of the total capital, joined with BNP Paribas with 26% of
the remaining capital, to form a joint venture life insurance company named SBI Life
Insurance Company Ltd.

3.5 Other SBI service points

As of 31 March 2017, SBI group including associate banks has 59,291 ATMs. Since
November 2017; SBI also offers an integrated digital banking platform named YONO.

3.6 Listings and shareholding

As on 31 March 2017, of India held around 61.23% equity shares in SBI. The Life
Insurance Corporation of India, itself state-owned, is the largest non-promoter
shareholder in the company with 8.82% shareholding.

Shareholders Shareholding

Promoters: Government of India 54.23%

FIIs/GDRs/OCBs/NRIs 18.17%

Banks & Insurance Companies 10.00%

Mutual Funds & UTI 8.29%

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Others 9.31%

Total 100.0%

The equity shares of SBI are listed on the Bombay Stock Exchange, where it is a
constituent of the BSE SENSEX index, and the National Stock Exchange of India, where
it is a constituent of the CNX Nifty. Its Global Depository Receipts (GDRs) are listed on
the London Stock Exchange Employees

FY 2016–17. Each employee contributed a net profit of ₹ 511,000 (US$7,100) during FY

2016–17.

State Bank Institute of Credit, Risk and Management, Gorgon

SBI is one of the largest employers in the country with 209,567 employees as on 31
March 2017, out of which there were 23% female employees and 3,179 (1.5%)
employees with disabilities. On the same date, SBI had 37,875 Scheduled Castes (18%),

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17,069 Scheduled Tribes (8.1%) and 39,709 Other Backward Classes (18.9%)
employees. The percentage of Officers, Associates and Sub-staff was 38.6%, 44.3% and
16.9% respectively on the same date. Around 13,000 employees have joined the Bank in

FY 2016–17. Each employee contributed a net profit of ₹ 511,000 (US$7,100) during FY

2016–17.

3.7 RECENT AWARDS AND RECOGNITION

 SBI was ranked 232nd in the Fortune Global 500 rankings of the world's biggest
corporations for the year 2016.SBI was the 50th most trusted brand in India as per
the Brand Trust Report 2013, an annual study conducted by Trust Research Advisory,
a brand analytics company and subsequently, in the Brand Trust Report 2014, SBI
finished as India's 19th most trusted brand in India.

3.8 BRIEF HISTORY OF SBI:

 It originated as the Bank of Calcutta in June 1806.

 In 1809, it was renamed as the Bank of Bengal. This was one of the three banks
funded by a presidency government (British Government), the other two were the
Bank of Bombay1840and the Bank of Madras1843.
 The three banks were merged in 1921 to form the Imperial Bank of India; it acts
as central bank of India or quasi central bank till establishment of RBI in 1935.
 After India‟s independence, Imperial Bank of India became the State Bank of
India in 1955.
 SBI acquired the control of seven banks in 1960. These are called as subsidiaries
of SBI. They are
1. State Bank of Bikaner and Jaipur (SBBJ)
2. State Bank of Hyderabad (SBH)
3. State Bank of Mysore (SBM)
4. State Bank of Saurashtra (SBS)

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5. State Bank of Indore (SBN)

6. State Bank of Patiala (SBP)
7. State Bank of Travancore (SBT)
8. To make SBI as a mega bank with trillion-dollar business and its associate
banks were started to merge with it. In 2008 SBS merged with SBI. The next
year, State Bank of Indore (SBN) also merged.
9. Other five associate banks besides Bharatiya Mahila Bank (BMB), merged
with SBI with effect from 1 April, 2017. With this merger, the bank joins the
league of top 50 banks globally in terms of assets.

The roots of the State Bank of India lie in the first decade of the 19th century, when
the Bank of Calcutta, later renamed the Bank of Bengal, was established on 2 June 1806.
The Bank of Bengal was one of three Presidency banks, the other two being the Bank of
Bombay incorporated on 15 April 1840 and the Bank of Madras incorporated on 1 July
1843. All three Presidency banks were as joint stock companies and were the result of
royal charters. These three banks received the exclusive right to issue paper currency till
1861 when, with the Paper Currency Act, the right was taken over by the Government of
India. The Presidency banks amalgamated on 27 January 1921, and the re-organised
banking entity took as its name Imperial Bank of India. The Imperial Bank of India
remained a joint stock company but without Government participation.

In 1959, the government passed the State Bank of India (Subsidiary Banks) Act. This
made SBI subsidiaries of eight that had belonged to princely states prior to their
nationalization and operational take-over between September 1959 and October 1960,
which made eight state banks associates of SBI. This acquisition was in tune with the first
Five Year Plan, which prioritised the development of rural India. The government
integrated these banks into the State Bank of India system to expand its rural outreach. In
1963 SBI merged State Bank of Jaipur established in 1943 and State Bank of Bikaner
established in 1944.

SBI has acquired local banks in rescues. The first was the Bank of Bihar
establishedin1911, which SBI acquired in 1969, together with its 28 branches. The next

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year SBI acquired National Bank of Lahore established in 1942, which had 24 branches.
Five years later, in 1975, SBI acquired Krishnaram Baldeo Bank, which had been
established in 1916 in Gwalior State, under the patronage of Maharaja Madho Rao
Scindia. The bank had been the Dukan Pichadi, a small moneylender, owned by the
Maharaja. The new bank's first manager was Jall N. Broacha, a Parsi. In 1985, SBI
acquired the Bank of Cochin in Kerala, which had 120 branches. SBI was the acquirer as
its affiliate, the State Bank of Travancore, already had an extensive network in Kerala.

There has been a proposal to merge all the associate banks into SBI to create a "mega
bank" and streamline the group's operations.

The first step towards unification occurred on 13 August 2008 when State Bank of
Saurashtra merged with SBI, reducing the number of associate state banks are seven to
six. Then on 19 June 2009 the SBI board approved the absorption of State Bank of
Indore. SBI holds 98.3% in State Bank of Indore. Individuals who held the shares prior to
its takeover by the government hold the balance of 1.7%.

3.9 RESPECTIVE COMPANY DETAILS:

The acquisition of State Bank of Indore added 470 branches to SBI's existing network of
branches. Also, following the acquisition, SBI's total assets will be close to the ₹ 10
trillion marks (10 billion long scales). The total assets of SBI and the State Bank of
Indorestood at ₹ 9,981,190 million as of March 2009. The process of merging of State
Bank of Indore was completed by April 2010, and the SBI Indore branches started
functioning as SBI branches on 26 August 2010.

3.10 THE FOUNDER OF SBI BANK

The process of merging of State Bank of Indore was completed by April 2010, and the
SBI Indore branches started functioning as SBI branches on 26 August 2010. On 7

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October 2013, Arundhati Bhattacharya became the first woman to be appointed as

Chairperson of the bank.

3.11 CEO OF SBI BANK

Banking professional Arijit Basu has taken over as a new Managing Director of State
Bank of India (SBI), an official said on Monday. A deputy MD of the SBI and a
former MD and CEO of SBI Life Insurance Company, Basu will be in the post till
October 2020 or further orders.
3.12 THE CHAIRMAN OF SBI NOW
Kumar will replace Arundhati Bhattacharya, the bank's first woman chairman. During
her Bhattacharya oversaw the merger of five associate banks and the Bharatiya Mahila
Bank with SBI for which she was handed a one-year extension in 2016.

3.13 BRANCHES OF SBI

A total 85,356 branches of all public sector banks were running from rented buildings. As
of December 19, 2014, as many as 15,570 branches of SBI were running from rented
accommodations, followed by Punjab National Bank with 6,596 such branches.

3.14 STATE BANK OF INDIA (HEAD OFFICE) IN BANDRA KURLA

COMPLEX-BANDRA EAST, MUMBAI.

A multinational banking and financial services company, State Bank of India is a

government owned organisation with its headquarters in Mumbai, Maharashtra. Going by
its assets of US$ 388 billion spread across 17,000 branches including 190 foreign offices,
it is largest banking and financial service institution in India. Founded more than two
centuries ago in 1806, it is the oldest commercial bank in the Indian subcontinent. SBI is
home to a wide range of banking products and services through its 14 regional hubs and
57 Zonal offices that are located in important cities across the length and breadth of the
country. SBI has a huge rural penetration with about 66% of its offices situated in the
rural areas. SBI has five associate banks namely State Bank of Bikaner and Jaipur, State

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Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala and State Bank of
Travancore. Its non-banking subsidiaries include SBI Capital Markets Ltd, SBI Funds
Management Pvt Ltd, SBI Factors & Commercial Services Pvt Ltd, SBI Cards &
Payments Services Pvt. Ltd. (SBICPSL), SBI DFHI Ltd, SBI Life Insurance Company
Limited and SBI General Insurance. It also is home to a gigantic ATM network with over
43,515 ATM's installed in various parts of the country. It is also the first bank to install
an ATM in Drass, in the Jammu & Kashmir Kargil region. SBI also the largest employer
of the company with more than 2, 22, 000 employees working under it. Due to its
fantastic services in the field of banking it has been home to numerous awards and
accolades which includes winning the Best Bank award in the 'ASAMONEY FX POLL
OF POLLS 2014‟ for best overall performance as domestic provider of Forex services
over the last 10 years. SBI head office Mumbai is set in one of the most posh areas of
the city.

3.15 SWOT ANALYSIS

The improper strength, weakness, opportunities and threat analysis is another reason for
rise in NPAs. While providing unsecured advances the banks depend more on the
honesty, integrity, and financial soundness and credit worthiness of the borrower.

 Banks should consider the borrowers own capital investment.

 It should collect credit information of the borrowers from bankers Enquiry from
market/segment of trade, industry, business. From external credit rating agencies.
 Analyze the balance sheet.
 True picture of business will be revealed on analysis of profit/loss at and balance
sheet. Purpose of the loan when bankers give loan, he should analyses the purpose
of the loan. To ensure safety and liquidity, banks should grant loan for productive
purpose only. Bank should analyses the profitability, viability, long term
acceptability of the project while financing.
 Poor credit appraisal is another factor for the rise in NPAs. Due to poor credit
appraisal the bank gives advances to those who are not able to repay it back. They
should use good credit appraisal to decrease the NPAs.

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DATA ANALYSIS AND
INTERPRETATIONS
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CHAPTER-4

DATA ANALYSIS AND INTERPRETATION

4.1 Introduction

A non-performing asset has been made on study of loans and NPA‟s towards state bank
of India. Analysis by collecting data from the bank. The data has been collected by way
of secondary data through the bank while preparing the secondary data was taken to see
that questions were being framed relevant to the objectives of the study, secondary data
were designed to evaluate the loans and NPA‟s towards State bank of India were drawn
to arrive at a final conclusion.

Data analysis has multiple facts of agricultural loans and allied activities, loans and
NPA‟s for industry sectors, loans. And NPA‟s for service sector, loans and NPA;s for
personal sector. To suggest the ways and means to reduce the NPA‟

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4.2.1 Loans for agricultural and allied activities.

This study collected the data to know about the loans provided to agriculture and its
allied activity is shown in 4.2 table.

Table: 4.2

Loans for Agricultural and allied activities.

Amount of loans (In Crores)

Years Total Amount

2013-2014 5751.62

2014-2015 7018.49

2015-2016 7861.08

2016-2017 8206.15

Source: Data collected from secondary data.

From the above table 4.2 The Agricultural loans and Allied Activities has been Rs
5751.62 Crores in 2013-2014. This has gradually increased Year after year and reached
Rs 8206.15 Crores in 2016-2017.

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Loans for Agricultural and allied activities.

Figure No: 4.2

9000

8000

7000

6000

5000

Total Amount
4000

3000

2000

1000

0
2013-2014 2014-2015 2015-2016 2016-2017

From the above figure 4.2 the Advances to Agriculture and Allied activities have
witnessed rising trend Year after year which is a good sign from the view point of Bank.

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4.2.2 NPA for agricultural loans and allied activities.

This study collected the data to know about the NPA relating to agricultural loans and
allied activities are shown in 4.2 table.

Table 4.3

NPA for Agricultural loans and allied Activities.

Amount of NPA (In Crores)

Years NPA

2013-2014 587.67

2014-2015
531.11

2015-2016 397.13

2016-2017
377.14

Source: Data collected from secondary data.

From the above table 4.3 the NPA is relating to Agricultural Loans has marginally
declined from Rs587.67Crores in 2013-2014 to Rs 531.11Crs in 2014-2015 and
thereafter it has drastically declined to Rs397.13 Crores in 2015-2016 and to Rs 377.14
Crores in 2016-2017.

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NPA for Agricultural loans and allied Activities.

Figure No: 4.3

700

600

500

400

300 NPA

200

100

0
2013- 2014- 2015- 2016-
2014 2015 2016 2017

From the above figure 4.3 the amount of NPA relating to Agricultural Loans has
witnessed a slight decline in 2014-2015 and thereafter it has drastically decline which
indicates the increased efficiency in Bank‟s Recovery of Loans.

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4.2.3 Comparison of agricultural and allied activities

This study collected the data to know about the comparison of allied activities and NPA
are shown in 4.4 table.

Table: 4.4

Loans for Comparison of Agricultural and allied Activities and NPA

Amount of NPA on Loans (In Crores)

Year NPA Amount Loan Amount

2013-2014 587.67 5751.62

2014-2015 531.11 7018.49

2015-2016 397.13 7861.08

S2016-2017 377.14 8206.15

Source: Data collected from secondary data.

From the above table 4.4 shows the amount of NPA to Agricultural Loans stood at Rs
5751.62 crores in 2013-2014 and it is declined to Rs 7018.49 in 2014-2015 and in 2015-
2016 finally stood at Rs8206.15 crores in 2016-2017.

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Loans for Comparison of Agricultural and allied Activities and NPA

Figure No: 4.4

9000

8000

7000

6000

5000
NPA Amount
4000 Loan Amount

3000

2000

1000

0
2013- 2014- 2015- 2016-
2014 2015 2016 2017

From the above figure 4.4 the Amount of NPA to Agricultural loans has marginally
decreased in 2014-2015 and thereafter it has witnessed decline a sharp. These indicate
increased deficiency on part of bank on recovery of loans.

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In This study to understand about the loans for industry sector and represents the NPA‟s
relating to industry sector and comparison of loans and NPA‟s in industry sector

4.5.1 Loans for industry sector.

This study collected the data to know about the loans to industrial sectors are shown in 4.

Table: 4.5

Loans for Industry Sector.

Amount of Loans (In Crores)

Years Total Amount

2013-2014 31346.93

2014-2015 33156.78

2015-2016 3128.53

2016-2017 4719.72

Source: Data collected from secondary data

From the above table 4.5 its shows the amount of Loans sanction by the SBI bank to
industry sector has fluctuated from Rs 313346.94 crores which has raised to Rs
33156.78crores, then decline to Rs 3128.53 Crores and again it has raised to 4719.72
crores in 2016-2017. These indicate that there is inconsistency in loan sanction by the
Bank.

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Loans for Industry Sector.

Figure No: 4.5

35000

30000

25000

20000

Total Amount
15000

10000

5000

0
2013- 2014- 2015- 2016-
2014 2015 2016 2017

From the above figure 4.5 the loans to industry sector by the bank although stood at high
level in the years 2013-2014, and 2014-2015 and it has drastically declined in two year.

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4.5.2 NPA for Industry Sector

This study collected the data to know about the NPA for industrial sector in are shown in
4.6 table.

Table: 4.6

NPA for Industry Sector

Amount of NPA (In Crores)

Years NPA

2013-2014 1209.02

2014-2015 1999.56

2015-2016 123.58

2016-2017 288.70

Source: Data collected from secondary data.

From the above table 4.6the NPA relating to industrial loans by the bank was stood
atRs1209.02 crores in 2013-2014 which has considerably raised to Rs 1999.56crores in
the year 2014-2015.But it has drastically declined to Rs123.58crores in 2015-2016 there
after it has slightly increased.

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NPA for Industry Sector

Figure No: 4.6

2000

1500

1000

500
NPA

0
2013-
2014 2014-
2015 2015-
2016 2016-
2017

From the above figure 4.6 the NPA relating to industrial loan has marginally increased in
the year 2013-2014 compare to 2014-2015. This has drastically declined in subsequent
two years.

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4.5.3 Loans for comparison of industry sector and NPA

This study collected the data to know about the loans and its NPAs in industrial sector are
shown in 4.7 table.

Table: 4.7

Loans for Comparisons of industry sector and NPA.

Years NPA Amount Loan Amount

2013-2014 1209.02 31346.93

2014-2015 1999.56 33156.78

2015-2016 3128.53 123.58

2016-2017 4719.72 288.70

Source: Data collected from secondary data.

From the above table 4.7 it shows the NPA on amount of loans to industries has increased
to Rs31346.93crores in 2013-2014, has against Rs 33156.78 crores in 2014-2015. It has
considerably decline to Rs 123.58 crores but again raised to 288.70 crores in 2015-2016.

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Loans for Comparisons of industry sector and NPA.

Figure No: 4.7

35000

30000

25000

20000
NPA Amount
15000
Loan Amount
10000

5000

0
Loan Amount
2013-2014
2014-2015 Years
2015-2016
2016-2017

From the above figure 4.7 the Loan amount of NPA on industrial loan by the bank has
witnessed a considerable fluctuation year after year.

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In This study it represents the loans for service sector and the NPA‟s relating to the same
sector. And comparison of loans and NPA‟s in service sector.

4.8.1 Loans for service sector

This study collected the data to understand about the loans to service sector are shown in
4.8 table

Table: 4.8

Loans for service sector.

Amount of Loan (in Crores)

Year Loan Amount

2013-2014 1431.87

2014-2015 1849.54

2015-2016 2270.90

2016-2017 2707.47

Source: Data collected from secondary data.

From the above table 4.8 it shows the Loan to Service sector have been Rs 1431.87 crores
in 2013-2014.This has gradually increased Year after year to Rs 1849.54Crores, RS
2270.90, crores and finally to Rs 2707.47 crores in next three years.

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Loans for service sector.

Figure No: 4.8

3000

2500

2000
1500
1000
500 Loan Amount
0
2013-2014
2014-2015
2015-2016
2016-2017

From the above figure 4.8 the Advances to Service sector have witnessed rising trend
year after year which is a good sign from the view point of bank.

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4.8.2 NPA for service sector

This study collected the data to know about the NPAs for service sector are shown in 4.9
table.

Table: 4.9

NPA for service sector.

Amount of NPA (in crores)

Years NPA

2013-2014 135.96

2014-2015 128.64

2015-2016 119.81

2016-2017 134.18

Source: Data collected from secondary data.

From the above table 4.9 the NPA relating to service sector stood at Rs 135.96 crs in
2012-13which has gradually declined to 2 years 128.64 crs and 119.81 crs but it again
rise to134.18 crs in 2015-16. This indicates fluctuation in Npa relating to service sector
loans by the Bank.

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NPA for service sector.

Figure No: 4.9

160

140

120

100

80
NPA

60

40

20

0
2013- 2014- 2015- 2016-
2014 2015 2016 2017

From the above figure 4.9 the NPA relating to Bank‟s service sector loans has although
decline in the years 2014-15has against 2013 it has raised in the last year which is not a
good sign.

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4.8.3 Loans for comparison of service sector

This study collected the data to know about the comparison of loans and NPAs in service
sector are shown in 4.10 table.

Table: 4.10

Loans for comparison of service sector.

Years NPA Amount Loan Amount

2013-2014 1431.87
135.96

2014-2015 1849.54
128.64

2015-2016 2270.90
119.81

2016-2017 2707.47

134.18

Source: Data collected from secondary data.

From the above table 4.10 the amount of NPA on service sector loan has witnessed a
decline intends year after year from Rs 135.96 crs in 2014-15to Rs 119.81crs in 2015-16
Rs134.18 crs which is a good sign.

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Loans for comparison of service sector.

Figure No: 4.10

3000

2500

2000

1500 NPA Amount

Loan Amount

1000

500

0
2013-2014 2014-2015 2015-2016 2016-2017

From the above figure 4.10 he percentage on NPA on Service Sector loan has witnesssed
a decline in year after year from 2013-2015 which is a good sign.

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In This study to know the loans relating to the personal sector. and to know the NPA‟s
relating to the personal sector. and comparison of loans and NPA‟s for personal sector.

4.11.1 Loans for personal sector

This study collected the data to know the loans for personal sector are shown in 4.11
table

Table: 4.11

Loans for Personal Loans.

Amount of loans (in crores)

Year Loans

2013-2014 7450.12

2014-2015 8837.34

2015-2016 2270.90

2016-2017 2707.47

Source: Data collected from secondary data.

From the above table 4.11 for the personal loan of the bank has witnessed a rise to 8837.34
crs in2013-14 from Rs 7450.12crs in 2012-13.how ever it has drastically declined
to2270.90 crs in 2014-15 and then marginally increased to 2707.47 crs in 2015-2016

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Loans for Personal Loans.

Figure no: 4.11

9000

8000

7000

6000

5000

4000 Loans

3000

2000

1000

0
2013- 2014- 2015- 2016-
2014 2015 2016 2017

From the above table 4.11 the amount of personal loans of banks has drastically declined
in recent years although it has marginally increased in 2013-14 has against that off 2012-
13.

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4.11.2 NPA for personal loan

This study collected the data to know about the NPA‟s for personal loans are shown in
4.12 table

Table: 4.12

NPA for Personal loan

Amount of NPA in (crores)

NPA
Years

2013-2014 147.9

2014-2015 159.56

2015-2016 83.05

2016-2017 95.03

Source: Data collected from secondary data.

From the above table 4.12 it shows the amount of NPA on personal loans has marginally
increased to150.56 crs in 2o13-against 147.97 crs in 2012-13. It but it has considerably
decline to Rs 83. 05 crs in 2014-15 and again marginally raised to Rs 95.03 crs in2015-
16.

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NPA for Personal loan

Figure No: 4.12

NPA
160

140

120

100

80
NPA
60

40

20

0
Years 2013- 2014- 2015- 2016-
2014 2015 2016 2017

From the above table 4.12 the amount of NPA on percent year personally loans although
initially witnessed a marginally raised and it had considerably decline in the recent years.

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4.11.3 This study collected the data to know about the comparison of loans and NPA‟s
for personal loans are shown in 4.13 table.

Table 4.13

Loans for comparison of personal loans

Year NPA Amount Loan Amount

2013-2014 147.97 7450.12

2014-2015 159.56 8837.34

2015-2016 83.05 3392.08

2016-2017 95.05 3734.59

Source: Data collected from secondary data.

From the above table 4.13 the Loan amount of NPA on personal loans which was at Rs
7450.12 crores in 2014 had considerably increased to Rs 8837.34crs in 2015-16. But it
has marginally decline in subsequent two years by Rs 3392.08 crores and Rs 3734.59
crores.

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Loans for comparison of personal loans

Figure No: 4.13

9000

8000

7000

6000

5000

NPA Amount
4000
Loan Amount
3000

2000

1000

0
2013- 2014- 2015- 2016-
2014 2015 2016 2017

From the above figure 4.13 the NPA on personal loans in terms of percentage has initially
witnessed a marginal declined but there after it has considerably risen in next two years.

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4.14.1 Comparative of NPA’S

In this study to know about the comparison of NPA‟s relating to four sectors are shown in
4.14 table.

Table: 4.14

Comparative NPA’s on Agriculture and allied activities, Industry, Service, Personal

sectors.

Sectors 2013-2014 2014-2015 2015-2016 2016-2017

Agriculture and 587.67 531.11 397.13 377.14

Allied Activities

Industry 1209.02 1999.56 123.58 288.70

Services 135.96 128.64 119.81 134.18

Personal Loans 147.97 159.56 83.05 95.03

TOTAL 2080.62 2818.87 723.57 895.05

Source: Data collected from secondary data.

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From the above table 4.14 it shows the 2013 out of total NPA of Rs 2080.62 crs in the
highest NPA was in respect of Industry Sector with Rs 1209,02 crs and in lowest was in
respect of service sector with Rs 135.96 crs . Out off total NPA of Rs 2818.87 crs in 2014
the highest NPA was in Industry sector was with 1999.56 crs and lowest was of Rs128.64
crs .In 2015 the highest amount of NPA was in Agriculture sector with Rs723.57 crs and
lowest was in Personal loans was Rs 83.05 crs. Out of total NPA of Rs 895.05 crs in 2016
the highest was witnessed by Agriculture sector with Rs377.14 crs and the lowest was in
Personal loan with Rs 95.03 crs.

Comparative NPA’s on Agriculture and allied activities, Industry, Service, Personal

sectors.

Figure No: 4.14

3000
2500
2000
1500
1000 2013-2014

500 2014-2015
0 2015-2016

Agriculture and Allied

Industry 2016-2017
Activities Services
Personal Loans

From the above figure 4.14 the amount of loans has well has NPA had increased to a high
level in Industry sector in the year2014 has against to 2013.In the years 2015
&2016although the NPA has declined ,the highest NPA was witnessed by Agriculture.

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“A Study on Non-performing Asset at State Bank of India Devanahalli”

4.15.1 Loans for different categories

In this study to know about the loans relating to agriculture and allied activity, industry,
services, personal loans are shown in 4.15 table.

Table: 4.15

Loans for % of NPA on different categories

Sectors 2013-2014 2014-2015 2015-2016 2016-2017

Agriculture & 10.22 7.57 5.05 4.59

allied activity

Industry 3.86 6.03 3.95 6.12

Services 9.50 6.95 5.28 4.95

Personal loans 1.99 1.81 2.45 2.54

Total 25.57 22.36 16.73 18.2

Source: Data collected from secondary data.

From the above table 4.15 it shows the terms of percentage of NPA to the amount of loan
the Agriculture sector has witnessed higher percentage of NPA in the years in the year
2013.2014,&2015 were as it has shifted to industry sector in 2016 .Similarly the lowest
percentage of NPA was witnessed by Personal loan sector in all the years.

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“A Study on Non-performing Asset at State Bank of India Devanahalli”

Loans for % of NPA on different categories

Figure No: 4.15

30

25

20

15
2013-2014
10
2014-2015
5 2015-2016
0 2016-2017
Agriculture & alliedIndustry
activity Services
Personal loans

From the above figure 4.15 the years 2013, 2014, 2015 in terms of percentage of NPA to
amount of loans to Agriculture sector has witnessed the highest level and in 2016 the
NPA percentage to loans was highest in industry sector. However the lowest percentage
of NPA in all the 4 years in respect of personal loans these indicates the recovery of
personal loan is at a higher level compare to the recovery of Agriculture loans.

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 CHAPTER-5
FINDINGS,
SUGGESTIONS &
CONCLUSION
“A Study on Non-performing Asset at State Bank of India Devanahalli”

Chapter-05

Summary of Findings, Suggestions and Conclusion

5.1 FINDINGS:
This study following the findings are as follows:
 This study to know about the loans provided by SBI Bank. To understand the comparative
loans and NPA‟s in agriculture and allied activities, industry sector, service sector, and
personal sector. To suggest the ways and means to reduce the NPA‟s.

 In this the non-performing assets relating to the loans for agricultural and allied activities were
increased in 8206.15crores in 2016-2017 and its was decreased in 5751.62crores in 2013-
2014. In this study have find this the loans were provided by SBI Bank.

 In this non-performing asset relating to the NPA‟s for agricultural and allied activities were
decreased in 377.14crores in 2016-2017 and it‟s was decreased in 587.67crores in 2013-2014.

 In this non-performing asset relating to the comparison of loans and NPA‟s from 2013-2014
to 2016 - 20 17.

 In this loan to industry have drastically declined during 2014-2015 has against previous two
years. These indicate that there is no consistency in loans sanction by the SBI Bank. There has
been high fluctuation in the NPA relating to Industry loans, there are drastic industry loans.
There is considerable fluctuation in percentage of NPA relating to industry loan in the four
years, which indicates the Industrial loan has not been effective and proper.

 In this loans to Service sector has witnessed in increase in trend year after year. Declined in
previous two years.

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“A Study on Non-performing Asset at State Bank of India Devanahalli”
 In this Personal sector has gradually increased year after year from in 2013-2014 7450.12 and
reached in 2016-2017 2707.47 which is not a good sign. In the year 2013-2014 the highest
NPA was witnessed by Industry Sector lowest NPA was in Service sector. In the later year i.e.
2015-2016 the highest NPA was in Agriculture sector and lowest NPA was in Personal loans.

 However the lowest percentage of NPA in all the four years in respect of Personal loans these
indicates the personal loan is at a higher level compare to Agriculture loans.

To following the suggestions are given to the SBI Bank

5.2 SUGGESTIONS:

 It is the responsibility of the banker to the due-diligence property with respect to the project
and also with respect to the attachment given for guarantee. If any variations it sensed that
must be brought to the notice of higher authority as soon as possible, rather than proposal.
 Increase the credit limit given to the industrial sectors, which in turn helps the country to
become an independent and helps to increase the employment level in the small ways to the
larger extent.
 The NPA‟s was witnessed at highest level in Agriculture sector in first three years and
Industry sector in the last three years. SBI should follow the methods to better recovery of
loans to Agriculture, Industry, and personal sectors.
 SBI should offer rescheduling of loans of those borrowers of who were struggling with high
interest rates in falling interest rate environment.
 Personal visits should be made after sanction and disbursal of credit and further close
monitoring of the operations of the accounts borrowed units should be done periodically.
 There is an urgent need for the bank to implement risk management systems of global repute.
STATE BANK OF INDIA should timely implement effective risk management system.
 State bank of India should concentrate more on credit appraisal, monitoring, and credit risk
management.
 There must be regular follow-up with the customers and it is the duty of banker to ensure that
there is no diversion of funds. This process can be taken up at regular intervals.

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“A Study on Non-performing Asset at State Bank of India Devanahalli”
 Frequent discussions with the staff in the branch and taking their suggestions for recovering of
dues.
 Bank should create a new model of banking business by giving loans to the credit.

5.3 CONCLUSION:

The banks also sanction loans to various sectors. Agriculture, Industry sector, Service sector and
Personal loans. In the process of loans sanctioning there is need keep the non-performing asset at
lowest possible level. The study has disclosed that the recoveries are found to be better in respect of
Personal loans. But, the loan to Agriculture, Industry have witnessed non performing asset. As such,
there is need on the part of bank to improve the recovery of loan by taking sufficient precaution
before sanctioning loans, to avoid unworthy borrowers, to obtain higher securities before sanctioning
the loan and to improve the efficiency on part of the recovery cell another to ensure proper following
of the use of the loan sanctioned by the borrower. With these measures there is chance to bring down
the NPA‟s to lowest possible level.

The non-performing assets have always created a big problem for the banks in India. It is just not
only problem for the banks but for the economy too. The money locked up in NPA‟s has a direct
impact on profitability of the bank as Indian banks are highly dependent on income from interest on
funds lent.

This study has enabled me to understand how the bank sanctions loans and the functioning of the
recovery cell of the bank. It has helped me to gain practical knowledge about the working of loan
sections.

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BIBLIOGRAPHY
Bibliography
Agrawal, K. A. (2006). "A comparative study of peoples". Journal of research in commerce and
management , 26-44.

Anastasiou, H. L. (2016). "Determinants of non-performing loans". Evidence from Euro-area countries ,

116-119.

Avinash, R. (2006). "co-operative credit institution in india:An overview". Indian co-operative review , 1-
20.

Gopalakrishnan. (1996). "Credit and Recovery performance of industrial finance under agricultural
sector". Agricultural Banker , 27-31.

Namasivayam, R. a. (2000). "End use of credit and repayment performance of the institutional
borrowers". Journal of Rural development , 411-424.

Namasivayam, R. a. (2000). "End use of credit and repayment performance of the institutional
borrowers:An integrated Analysis". Journal of Rural development , 411-424.

Pacha, S. M. (2011). "A comparative study of non performing assets in indian banking industry".
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peek, R. E. (2000). "Effects of the Japanese bank crisis on real activity in united states". American
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R.Mayilsamy. (2007). "Non-performing assets in short term co-operative credit structure-An overview".
Tamilnadu Journal of co-operation , 62-66.

Ramachandran.A, S. S. (2012). "An Empirical study on The Financial Performance of selected scheduled
urban co-operative banks in india". Journal of Asian Research consortium , 1-15.

Rao, S. S. (2002). "A Primer for NPA management". IBA bulletin , 24.623-626.

Samal. (2002). "The NPA overhang: Magnitude, solution and legal reforms". Vinimaya , 12-17.

singh, B. s. (2006). "Profitability of the central co-operative bank in punjab A Decomposition Analysis".
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Websites:

www.RBI.CO.in

www.Shodhganga.com
ANNEXURE
Balance sheet of state bank of India (in crores)

Particulars Mar 16 Mar 17 Mar 14 Mar 13 Mar 12

12months 12months 12monhts 12months 12months
Capital and
liabilities:
Total share 48.01 48.01 48.01 46.8 46.8
capital
Equity share 48.01 48.01 48.01 46.8 46.8
capital
Reserves 4,623.00 4,313.58 3,940.86 4,280.05 3,935.97
Net worth 4,671.01 4,361.59 3’988.87 4,326.85 3,982.77
Deposits 70,568.29 66,063.76 61,560.32 56,969.04 50,186.30
Borrowings 4,294.75 5,688.35 5,473.97 3,854.20 4,425.59
Total Debt 74,863.04 71,752.11 64,034.29 60,823.25 54,611.89
Other 2,870.179 2,784.45 2,393.46 2,076.98 1,803.15
liabilities &
provisions
Total 82,404.22 78,898.15 73,416.62 67,227.07 60,370.81
liabilities
12 months 12 months 12 months 12 months 12 months

Assets

Cash and 3,665.58 3,891.92 2,858.84 2,404.67 3,025.85

balances
with RBI
Balance with 34.97 364.27 82.38 1,100.09 336.86
banks,
money at
call
Advances 53,954.18 52,025.86 49,481.95 44,932.57 39,835.31
Investments 20,123.96 20,565.66 19,190.20 16,774.58 14,732.70
Gross block 970.91 936.59 860.32 824.28 749.41
Revaluation 570.78 570.78 559.72 5.68 5.76
Reserves
Net Blocks 400.13 365.81 300.60 818.60 743.65
Other Assets 4,225.40 1,684.62 1,502.66 1,196.67 1,723.44
Total Assets 82,404.22 78,898.14 73,416.63 67,227.08 60,397.81
Contingent 42,984.21 43,035.16 27,880.36 17,781.10 19,162.85
Liabilities
Book 972.86 908.41 830.78 924.55 851.02
value(Rs)
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