ANALYSIS ON NON

PERFORMING ASSETS OF
PUNJAB AND SIND BANK
Submitted by:Shivli Chhabra
MBA Sem-III
(finance)

Objectives of the report

To study the recovery procedures of Punjab and

Sind bank .
To examine how far the bank has been
successful in reducing the NPA level.
To suggest measures for efficient management
of NPAs.
To bring out an explorative & descriptive report
on Analysis of NPA in banks, with special
reference to Punjab and Sind bank , Lucknow.
To analyze the NPA level of Punjab and Sind bank.

Brief introduction to bank

It was in the year 1908,The bank was
founded on the principle of social
commitment to help the weaker section of
the society in their economic endeavours
to raise their standard of life by Bhai Vir
Singh, Sir Sunder Singh Majitha and Sardar
Tarlochan Singh.

MISSION & VISION

CORPORATE VISION
We envision to emerge as a strong vibrant Bank through

synchronization of the human, financial and

technological resources.
CORPORATE MISSION
To put in place the effective risk management and
internal control system.
To adopt and operationalize high-level technology
standards.
To strive to achieve excellence in customer service.
To achieve the highest standards of transparency and
accountability in the conduct of banking business.

THREATS
INCREASED COMPETITION FROM
INNOVATIVE SERVICE PROFILE OF
PRIVATE SECTOR BANKS LIKE ICICI,HDFC
ETC,COMPETITION IN CORE SECTORS
LIKE RURAL DVANCES ,SSI LOANS FROM
UCBs AND OTHER PUBLIC SECTOR
BANKS

OPPORTUNITIES
INTRODUCTION OF NEW AND
INNOVATIVE LOAN SCHEMES LIKE
DAIRY LOAN SCHEME FOR PURCHASE
OF COW ,ADVANCES TO SALARY
EARNERS

SWOT
WEAKNESSES
NO PROVISION OF NEW AGE
SERVICES,LACK OF ATM DEBIT CARD
FACILITIES, LIMITED BRANCH
NETWORK,PARTIAL COMPUTERIZATION
OF OPERATIONS

STRENGHTHS
DIVERSIFIED PORTFOLIO WITH
INOVATIVE SCHEMES,WELL-LAID
ORG.STRUCTURE,WELL QUALIFIED
STAFF,EFFECTIVE LEADERSHIP

REVIEW OF LITERATURE
Caprio & Klingebiel (1996), studied the Bank insolvency is more costly in the

developing world, where losses represent a greater share of income.

Lawrence Sez (2001), analyzes the important process about financial reform
in the area of bank illiquidity in low-income emerging markets.
Milind Sathye(2001), measured the productive efficiency of banks in a
developing country, that is, India. The measurement of efficiency is done using
data envelopment analysis.
Reddy Prashanth K. (2002), studied financial sector reform in India has
progressed rapidly on aspects like interest rate deregulation, reduction in reserve
requirements, barriers to entry, prudential norms and risk-based supervision.
Reddy, Mohan (2003, 2004),examined that several studies have underscored
the role of banks lending policy and terms of credit, which include cost, maturity
and collateral in influencing the movement of non-performing assets of banks.
Satish Kumar B. (2005), analyzed that in liberalizing economy, banking and
financial sector get high priority.
Dhanuskodi R. (2006), studied the Non-Performing Assets (NPAs) in Commercial
Bank of Ethiopia.
He, Dong (2008), reviewed the nature of NPAs in the Indian banking system and
discusses the key design features that would be important for the (asset
reconstruction company) ARCs to play an effective role in resolving NPAs.

Methodology and analysis

RESEARCH METHODOLOGY
Research Design is considered as blueprint for
research purpose, therefore I opted for the
objective research design that is through direct
interviews . The main aim of my research was to
explore the short coming of the present services
provided by the bank and these questionnaires
helped me a lot to know about the real picture and
to understand the perception of our customers.

METHODOLOGY OF
STUDY
The research methodology adopted
for carrying out the study were:
In this project Descriptive research

methodologies were use.

At the first stage theoretical study is attempted.
At the second stage Historical study is
attempted.
At the Third stage Comparative study of NPA is
undertaken.

SAMPLING & DATA

COLLECTION
SAMPLING TECHNIQUE
Sampling refers to selecting a part of the population to represent the
characteristics of the population. . However, in this study, Finance
Manager of the bank is the source of data and therefore, since he is the
only one source of information, there is no question of any sampling.
Both primary and secondary data were collected & used for drawing
conclusions for the study:Primary data:- were collected using Inventory schedule & also
through interview, held with the Finance Manager in presence of the
other officials of Punjab and Sind bank .
Secondary data:- were collected from the published annual reports
of the Bank and other sources. Such data collected were analyzed for
some kind of a trend and its impact on the profit of the bank.

Tools used for the study

The data collected were analyzed with the
help of statistical tools like frequency,
percentage and trend analysis. Tables are
used to represent the consolidated data.
Graphical representation is also used for
better comprehension & presentation.

SCOPE OF THE STUDY

The study was conducted in the Punjab and Sind bank ,
Lucknow . The following are the main scope of the study:
Scope of this study is limited to the organization selected.
Present a picture of the movement of NPA in Punjab and

Sind bank.
This study will help to know the drawbacks of the present
recovery strategies.
This study will help them to think about new innovative
recovery strategy.
For this purpose I have covered officials of the bank from
various department

Limitations of the study

The major limitation of the study was the paucity of time.

Even then, maximum care has been taken to arrive at

appropriate conclusion. Following are the limitations of
the study:
For the purpose of collecting vital information, Finance
Manager of the bank is only contacted & interviewed.
Since he is an individual, his biases may have crept into
the data given.
Data pertains to NPA from 2008-09 to 2013 14 only.
Due to time constraint depth analysis could not be made.
Some of the information is considered confidential and
not available for the study.

NPA AND
PROVISIONING
Definitions:
An asset, including a leased asset,
becomes non-performing when it ceases to
generate income for the bank.
A non-performing asset (NPA) was
defined as a credit facility in respect of
which the interest and/ or instalment of
principal has remained past due for a
specified period of time.

IDENTIFICATION OF NPAs

Identification of an account as NPA depends upon the nature of borrowable

account whether it is:a) Operative-A cash credit / over draft account will have to be treated as NPA
if account remains out of order for more than 180 days.
b) Non operative-If interest / installment of principal remain overdue for a
period of more than 180 days .
c) Bills-A bill purchased / discounted / negotiated becomes NPA, if it remains
overdue and unpaid for two quarters or more
d) Agricultural advances-Agricultural advances where interest and or
installments of principal remains unpaid after it has become past due for two
harvest season but for a period exceeding to half years should be treated as
NPA.

e) or any other miscellaneous accounts-Any other credit facility or account

should be treated as NPA if any amount to be received in respect of that
facility or amount remains unrealized / uncovered for a period of two
quarters..

TYPES OF NPA
A]

Gross NPA: Gross NPAs are the sum total of

all loan assets that are classified as NPAs as per RBI
guidelines as on Balance Sheet date. Gross NPA
reflects the quality of the loans made by
banks. It consists of all the non standard assets
like as sub-standard, doubtful, and loss assets.
B] Net NPA:Net NPAs are those type of NPAs in
which the bank has deducted the provision
regarding NPAs. Net NPA shows the actual
burden of banks

IMPACT OF NPA
Profitability:-NPA doesnt 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 ROI (return on investment),
which adversely affect current earning of bank.
Liquidity:-decreased profit lead to lack of enough cash
at hand which lead to borrowing money for shorter period
of time which lead to additional cost to the company.
Difficulty in operating the functions of bank is another
cause of NPA due to lack of money, Routine payments and
dues

Contd.
Involvement of management:-Time and

efforts of management is another indirect cost

which bank has to bear due to NPA,would have
diverted to some fruitful activities, which would
have given good returns. Now days banks have
special employees to deal and handle NPAs,
which is additional cost to the bank.
Credit loss:-It will lose its goodwill and brand
image and credit which have negative impact to
the people who are putting their money in the
banks.

REASONS FOR NPA

Reasons can be divided in to two broad
categories:[ A ] Internal Factors:Internal Factors are those, which are internal to
the bank and are controllable by banks
Poor lending decision
Non-Compliance to lending norms
Lack of post credit supervision
Failure to appreciate good payers
Excessive overdraft lending
Non Transparent accounting policy

[ B ] External Factors:External factors are those, which are external to banks they are not
controllable by banks.
Socio political pressure
Change in industry environment:
Natural calamities
Industrial sickness
Diversion of funds and wilful defaults
Time/ cost overrun in project implementation
Labor problems of borrowed firm
Endangers macroeconomic disturbances
Business failure
Inefficient management
Obsolete technology
Product obsolete

Early symptoms to
recognize a performing
asset turning in to NPA

Four categories of early symptoms:(1) Financial:

Non-payment of the very first instalment in case of term
loan.
Bouncing of cheque due to insufficient balance in the
accounts.
Irregularity in instalment
Irregularity of operations in the accounts.
Unpaid overdue bills.
Declining Current Ratio.
Payment which does not cover the interest and principal
amount of that instalment
While monitoring the accounts it is found that partial
amount is diverted to sister concern or parent company.

2) Operational and Physical:

If information is received that the borrower has either initiated the process of winding
up or are 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 business.
Frequent changes in plan.
Non payment of wages.
( 3 ) Attitudinal Changes:
Use for personal comfort, stocks and shares by borrower.
Avoidance of contact with bank.
Problem between partners.
(4) Others:
Changes in Government policies.
Death of borrower.
Competition in the market.
(

PREVENTIVE MEASURES
FOR NPA
Early Recognition of the Problem
Identifying Borrowers with Genuine Intent
Timeliness and Adequacy of response
Focus on Cash Flows
Management Effectiveness

MEASURES INITIATED BY
RBI AND GOI FOR
REDUCTION OF NPAs
Compromise settlement schemes
Lok Adalats
Debt Recovery Tribunals
Circulation of information on defaulters
Recovery action against large NPAs
Asset Reconstruction Company:
Legal Reforms
Corporate Debt Restructuring (CDR)
Credit Information Bureau
Corporate Governance

DATA ANALYSIS AND

INTERPRETATION

NET NPA FIGURES OF PUNJAB AND

SIND BANK
(FROM 2008-09 TO 2013-14)
In crores

Year

NET NPA

993.3
890.84
781.94
727.70
984.69
799.85
2008-09 2009-10 2010-11
2011-12
2012-13 2013-14

PARTICULARS:

NET NPA

993.3

890.84

781.94

727.70

984.69

799.85

ANALYSIS &INTERPRETATION
ANALYSES
The aggregate net non-performing asset of the bank is at decreasing trend. But
taking on a yearly basis, not much trend could be identified out of the six years
of data considered for analysis, net non-performing asset, has decreased from
year 2009 to 2012 but has increased in year 2013 .
INTERPRETATION
It can be seen from the trend that net NPA is decreasing from year 2009 to 2012. So
from data analyzed above, it can be assumed that the bank has taken stringent
steps to reduce the NPA or it might not have given more advances during that year.

NET ADVANCES OF PSB

(FROM 2008-09 TO 2013-14)

In crores
Year

2008-09

2009-10

2010-11

2011-12

2012-13

2013-14

48271.60

56810.81

84868.22

66648.85

PARTICULARS:

Net
Advances

39567.33

40834.71

ANALYSIS & INTERPRETATION

ANALYSIS
The advances of the bank show an upward trend through the period 2008-09

to 20012-13 but has decreased during year 2014. This can be seen from the
data regarding the advances of the bank during this period .The decrease in
advances in the year 2014 due to increase in NPAs as compared to last
year as NPA is directly related to amount of loan advanced.
INTERPRETATION
Non-performing assets being a direct result of advances, it may have
resulted from increase in the net advances. While increasing advances may
be necessary for the survival & progress of the bank itself, it should not
mean increase justification for the higher incidence of non-performing assets.
If recovery were good, perhaps, NPA could have been reduced. In other
words, increased NPA can be directly attributed to non-recovery advances
made to borrowers, in time.

NET NON PERFORMING ASSETS OF PSB AS A PERCENTAGE OF NET

ADVANCES
(FROM 2008-09 TO 2013-14)

Year

2008-09

2009-10

2010-11

2.18

1.62

2011-12

2012-13

2013-14

PARTICULARS:

Net NPA to Net

Advances

2.51

1.28

1.16

1.20

ANALYSIS & INTERPRETATION

ANALYSIS
To understand the real impact of non-performing assets, the chart is drawn

taking the net non-performing assets of the bank as a percentage of the net
advances. From such chart, what can be seen is that the said percentage (the
net non performing assets as percentage of net advances) is nearly constant
from year 2010 to 2014.

INTERPRETATION
Even though there was a sharp increase in the advances given by the bank in

the year 2013, it can be seen that Net NPA has maintained a constant level in
that year. From this we can assume that bank must have taken up fruitful efforts
to recover money from the willful defaulters. During the year 2008-09 to 2013-14,
there has been steady and considerable decrease in percentage of net NPA to
net Advances. The trend line also show that there is a decreasing trend and net
NPAs over subsequent years would decrease consideration.

THE DEPOSITS OF PUNJAB AND

SIND BANK
(FROM 08-09 TO 13-14)
Amount in crores
Deposits of
the bank
(Rs)

Increase / Decrease
over the previous
years figure

2008-09

11844.02

---

2009-10

12591.50

6.31

2010-11

13877.06

10.20

2011-12

15656.46

12.81

Year

2012-13
2013-14

19351.26
22939.56

23.60
18.54

ANALYSIS & INTERPRETION

ANALYSIS
The aggregate deposits of the bank has increased from 11844.02 crores

to 22939.56 crores during the period 2008-09 to 2013-14. On analyzing

the trend of such increase in the deposits over the period we can clearly
see that it is increasing at a increasing rate. The modest growth
especially during the last three years is mainly due to a conscious
decision on to shed the highest cost deposits. With focus on bringing
down the cost of deposit, field function areas have been constantly
exhorted to step up the share of low cost of deposit.
INTERPERTATION
The bank has recognized the up gradation of deposits from year 200809 to 2013-14.The reason behind the upgradtion is the higher rate of
interest as compared to other banks on deposits especially on fixed
deposits .The accounts like saving bank account, recurring deposit
account, current account, term deposit account ,lockers account, also
have the higher interest rate as compared to other banks

NET PROFIT AND PROVISION TOWARDS NONPERFORMING ASSETS OF PUNJAB AND SIND
BANK
(FROM 200809 TO 2013-14)

Year

2008-09

2009-10

2010-11

2011-12

2012-13

2013-14

PARTICULARS:

Provision towards
NPA

N.A

637.24

Net profit during

the year

295.3

262.43

632.58
237.26

642.65
103.65

669.26
117.36

697.01
75.54

ANALYSIS & INTERPRETATION

ANALYSIS
On analyzing profit and loss account of the bank, it could be seen that

provisions and contingencies is one herd, which has a negative impact on

the net profit of the banks, and provisions made towards non-performing
assets, being item contributing to such head.
On going through the figures of the PSCB relating to net profit and provision
made towards non-performing assets, a increase can be seen in the
provision made towards non -performing assets in subsequent years, which
could be explained by the tightening of provision norms which made it
compulsory for banks to keep a provision of .25% even on their standard
assets.
INTERPRETATION
Profit is the most important parameter for evaluating the performance of a
bank. In the present day scenario profit is not just an accounting concept of
excess of income over the expenditure, but is surely more which ensures
survival and growth in the future.

NET RECOVERY OF PUNJAB AND SIND BANK

(FROM
2008-09 TO 2013-14)

Year

2008-09

2009-10

6.25

7.45

2010-11

2011-12

2012-13

2013-14

PARTICULARS:

RECOVERY AS
a% OF GROSS
NPAs

8.1

6.45

5.8

ANALYSIS & INTERPRETATION

ANALYSIS
The net recovery during the year 2008-09 was 6.25% of gross non

performing assets, while it was 7.45% and 8% in the following two

years i.e., in 2009-10 and 2010-11 respectively, i.e., the net
recovery is increasing over time and has declined in year 2013,
serious efforts were taken to set it right.
INTERPRETATION
The above analysis reflects that the Banks recovery strategy is
effective .So we can conclude that banks NPA has decreased
perhaps because of efficient recovery strategy. While the strategy
for recovery may have been good, the banks recovery in-charge
officials may not have taken the necessary Herculean efforts
towards the same in order to save the bank from the declining
trend in year 2009.

COST OF DEPOSIT OF PUNJAB AND SIND BANK

(FROM 08-09 TO 13-14
Amount in crores

Year

Percentage

of Increase / Decrease over the

cost

previous year

2008-09

6.06

---

2009-10

5.67

(0.39)

2010-11

5.68

0.01

2011-12

7.38

1.7

2012-13

7.84

0.46

2013-14

6.95

(0.89)

NET PROFIT OF PUNJAB AND SIND BANK

(FROM 08-09 TO 13-14)
Amount in crores
Year

Net Profit of
the Bank

Increase /
Decrease over
the previous
years figure

% Increase /
decrease over the
previous years
figure

2008-09

295.31

---

---

2009-10

262.43

(33.88)

(11.2)

2010-11

237.26

(24.43)

(9.35)

2011-12

103.65

(134.61)

(56.51)

2012-13

117.36

13.71

13.50

2013-14

75.54

(41.82)

(35.57)

STAFF PRODUCTIVITY OF PUNJAB AND SIND BANK

(FROM 08-09 TO 13-14)

Year

Productivity /
Business per
employee

Increase /
Decrease over the
previous years
figure

% Increase /
decrease over
the previous
years figure

2008-09

571.47

---

---

2009-10

670.18

98.71

17.2

2010-11

723.84

53.66

2011-12

914.25

190.41

26

2012-13

1238.76

324.51

35.4

2013-14

1374.74

135.98

10.97

RECOVERY PROCEDURE
COMPLIANCE ADVICE FOR BRANCH
FUNCTIONARIES
The bank as its recovery policy follows the
measures like ;
Conduct over recovery melas
Offer compromise proposal or
Filing suits

FACTS & FINDINGS

Net advances is increasing at increasing rate over the

period under study. The decrease in advances in the

year 2010 due to increase in NPAs as compared to last
year as NPA is directly related to amount of loan
advanced.
The aggregate net NPAs of the bank are showing
decreasing trend.
Staff productivity of the bank is increasing, which
indicates efficient recovery measures.
The net result, the recovery is showing increasing
trend.

SUGGESTION FOR

MANAGEMENT OF NPAs
PREVENTIVE FRAMEWORK
Maintenance and regular upgradation of client
profile.
Credit rating of clients.
Computerization of loan accounts.
Strong inter-department management information
system among loans, operations and

Contd.
FOLLOW-UP OF DEBT RECOVERY TRIBUNAL (DRT) CASES.
COMPROMISE AND ONE TIME SETTLEMENT
WRITE OFFS
HUMAN RESOURCE DEVOLOPMENT
IDENTIFICATION OF PROBLEM LOAN
RECOVERY CAMP
REHABILITATION
NARROW BANKING
BANK SHOULD REDUCE DEPENDENCE ON INTEREST INCOME
GENERAL STRATEGIES

Limitations of the research

Sample size was considerably small in size.

Sample comprised of existing customers of

Punjab and Sind bank only.

Lack of interaction with Proprietors / Directors
of the various concerns due to non-cooperation of the company management.
Customers of Punjab and Sind bank are
situated in far-flung areas that are why
approach to all was a cumbersome task .

THANK YOU