NPA is defined as an progress for which involvement or refund of principal or both remain outstanding for a period of more than two quarters. An plus which ceases to bring forth income for the bank. Interest debited to the borrower history has to be realized by the bank.Refers to the amount of non-performing loans ( NPL ) and existent and other belongingss owned and acquired ( ROPOA ) .
An NPA or non-performing plus is a categorization used by fiscal establishments that refers to loans that are in hazard of being in default. NPA is defined as an progress for which involvement or refund of principal or both remain outstanding for a period of more than two quarters. The degree of NPA act as an index demoing the bankers recognition hazards and efficiency of A allotment of resource.
Asset Categorization: –
A
The RBI has issued guidelines to Bankss for categorization of assets into four classs: –
A
Standard NPA: –
These are loans which do non hold any job are less hazard
A
Substandard NPA ; –
The history holder comes in this class when they dont pay three installment continuously after 90 yearss and up to 1year.
For this class bank has made 10 % proviso of financess from their net income to run into the losingss generated NPA.
A
Loss Assetss: –
iˆˆ Identified as undependable by internal inspector of bank or hearers or by RBI.
iˆˆFor these 100 % proviso is made.
iˆˆWhen history holder comes in this class their history can be written off by the Bankss.
iˆˆAfter this the assets are handed over to recovery agents for sale.
Doubtful Assetss:
All those assets which are considered as non-performing for period of more than 12 months are called as Doubtful Assets.
Provision on types of assets: –
Provision is apportioning money every twelvemonth to run into possible future loss.
types of assets
Causes of NPA: –
NPA arises due to a figure of factors or causes like: –
Guess: Investing in high hazard assets to gain high income.
Default: Willful default by the borrowers.
Deceitful patterns: Deceitful Practices like progressing loans to ineligible individuals, progresss without security or mentions, etc.
Diversion of financess: Most of the financess are diverted for unneeded enlargement and recreation of concern.
Internal grounds: Many internal grounds like inefficient direction, inappropriate engineering, labor jobs, selling failure, etc. ensuing in hapless public presentation of the companies.
External grounds: External grounds like a recession in the economic system, infrastructural jobs, monetary value rise, hold in release of sanctioned bounds by Bankss, holds in colonies of payments by authorities, natural catastrophes, etc.
Factors taking to NPAs
Lack of proper pre-enquiry by the bank for approving a loan to a client.
Non public presentation of the concern or the intent for which the client has taken the loan.
Willful defaulter.
Loans sanctioned for agribusiness intents.
Change in authorities policies leads to NPA
Compare the information of Non Performing Assets of ICICI bank and PNB for the past five old ages ; –
A A
PNB
Punjab National Bank ( PNB ) is the 3rd largest banking entity in the state with 6.6 % portion of the entire non-food recognition expenses at the terminal of FY11. Strong growing and stellar borders has pegged the bank amongst the frontrunners in the PSU banking infinite. This has helped it maintain its cervix above its equals and increase its market portion.
ICICI BANK
With 7.2 % portion of India ‘s entire non-food recognition expenses and 9 % of the banking system ‘s sedimentations in FY11, ICICI Bank is the 2nd largest bank in the state after SBI in footings of plus size. The bank has lost its portion of the banking sector ‘s progresss from 10.2 % in FY07 to 6.8 % in FY11. At the terminal of March 2011, the bank had assets of over US $ 104 bn ( Rs 4.7 trillion ) and a franchise of over 5,700 ATMs and 1,800 subdivisions spread across the state. Retail assets constituted 33 % of progresss in FY11 as against 65 % in FY07. The bank is concentrating on loan inception in the big corporate, SME and agribusiness sections and on non-fund based merchandises and services. Besides the bank itself being the market leader across retail loan portfolios, its subordinates ICICI Life Insurance, ICICI General Insurance and ICICI AMC are leaders in their several concerns.
A
A
A
A
PNB
ICICI BANK
PNB/
A
A
31/3/2012
31/3/2012
ICICI BANK
High
Roentgen
1,234
1,128
109.4 %
Low
Roentgen
751
652
115.2 %
Gross saless per portion
Roentgen
1,104.1
329.6
334.9 %
Net incomes per portion
Roentgen
40.5
54.1
74.8 %
Cash flow per portion
Roentgen
250.5
310.5
80.7 %
Dividends per portion
Roentgen
22.00
16.50
133.3 %
Dividend output ( eoy )
%
2.2
1.9
119.6 %
Book value per portion
Roentgen
861.0
531.6
162.0 %
Shares outstanding ( eoy )
m
339.18
1,152.59
29.4 %
Bonus/Rights/Conversions
Pi
ESOS
–
Price / Gross saless ratio
ten
0.9
2.7
33.3 %
Avg P/E ratio
ten
24.5
16.4
149.0 %
P/CF ratio ( eoy )
ten
4.0
2.9
138.3 %
Price / Book Value ratio
ten
1.2
1.7
68.9 %
Dividend payout
%
54.3
30.5
178.2 %
Avg Mkt Cap
Rs m
336,636
1,025,805
32.8 %
No. of employees
`000
62
58
106.6 %
Entire wages/salary
Rs m
47,751
51,049
93.5 %
Avg. sales/employee
Rs Th
6,027.5
6,519.8
92.4 %
Avg. wages/employee
Rs Th
768.6
876.0
87.7 %
Avg. cyberspace profit/employee
Rs Th
808.9
1,311.5
61.7 %
A
INCOME DATA
A
Net Gross saless
Rs m
374,473
379,949
98.6 %
Other income
Rs m
42,395
286,634
14.8 %
Entire grosss
Rs m
416,868
666,583
62.5 %
Gross net income
Rs m
338,728
365,884
92.6 %
Depreciation
Rs m
71,219
295,520
24.1 %
Interest
Rs m
237,414
250,132
94.9 %
Net income before revenue enhancement
Rs m
72,490
106,866
67.8 %
Minority Interest
Rs m
-270
-2,947
9.2 %
Anterior Period Items
Rs m
0
0
–
Extraordinary Inc ( Exp )
Rs m
0
0
–
Tax
Rs m
21,965
27,490
79.9 %
Net income after revenue enhancement
Rs m
50,255
76,429
65.8 %
A
Current assets
Rs m
3,013,465
2,921,254
103.2 %
Current liabilities
Rs m
0
0
–
Net working cap to gross revenues
%
804.7
768.9
104.7 %
Current ratio
ten
43.0
43.0
100.0 %
Inventory Employee turnover
Dayss
0
0
–
Debtors Turnover
Dayss
0
0
–
Net fixed assets
Rs m
32,171
54,320
59.2 %
Share capital
Rs m
3,392
11,528
29.4 %
“ Free ” militias
Rs m
182,077
438,127
41.6 %
Net worth
Rs m
292,038
612,765
47.7 %
Long term debt
Rs m
426,454
1,612,966
26.4 %
Entire assets
Rs m
4,704,454
6,041,914
77.9 %
Interest coverage
ten
1.3
1.4
91.5 %
Debt to equity ratio
ten
1.5
2.6
55.5 %
Gross saless to assets ratio
ten
0.1
0.1
126.6 %
Tax return on assets
%
6.1
5.4
113.1 %
Tax return on equity
%
17.2
12.5
138.0 %
Tax return on capital
%
43.1
15.9
270.9 %
Exports to gross revenues
%
0.0
0.0
–
Imports to gross revenues
%
0.0
0.0
–
Net fx
Rs m
0
0
–
Gross net income border
%
90.5
96.3
93.9 %
Effective revenue enhancement rate
%
30.3
25.7
117.8 %
Net net income border
%
13.4
20.1
66.7 %
Measures to Solve Problems of NPA: –
The jobs of NPA have been having greater attending since 1991 in India. The Narasimham Committee recommended a figure of stairss to cut down NPA. In the 1990 ‘s the Government of India ( GOI ) introduced a figure of reforms to trades with the jobs of NPA.
Major stairss taken to work out the jobs of Non-Performing Assets in India: –
Debt Recovery Tribunals ( DRTs )
Narasimham Committee Report I ( 1991 ) recommended the puting up of Particular Courts to cut down the clip required for settling instances. Accepting the recommendations, Debt Recovery Tribunals ( DRTs ) were established. There are 22 DRTs and 5 Debt Recovery Appellate Tribunals. This is deficient to work out the job all over the state ( India ) .
2. Securitization Act 2002
Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 is popularly known as Securitizations Act. This act enables the Bankss to publish notices to defaulters who have to pay the debts within 60 yearss. Once the notice is issued the borrower can non sell or dispose the assets without the consent of the loaner. The Securitizations Act farther empowers the Bankss to take over the ownership of the assets and direction of the company. The loaners can retrieve the dues by selling the assets or altering the direction of the house. The Act besides enables the constitution of Asset Reconstruction Companies for geting NPA. Harmonizing to the commissariats of the Act, Asset Reconstruction Company of India Ltd. with eight stockholders and an initial capital of Rs. 10 crores has been set up. The eight stockholders are HDFC, HDFC Bank, IDBI, IDBI Bank, SBI, ICICI, Federal Bank and South Indian Bank.
3. Lok Adalats
Lok Adalats have been found suited for the recovery of little loans. Harmonizing to RBI guidelines issued in 2001. They cover NPA up to Rs. 5 hundred thousand, both suit filed and non-suit filed are covered. Lok Adalats avoid the legal procedure. The Public Sector Banks had recovered Rs. 40 Crores by September 2001.
4. Compromise Colony
Compromise Settlement Scheme provides a simple mechanism for recovery of NPA. Compromise Settlement Scheme is applied to progresss below Rs. 10 Crores. It covers suit filed instances and instances pending with tribunals and DRTs ( Debt Recovery Tribunals ) . Cases of Willful default and fraud were excluded.
5. Credit Information Bureau
A good information system is required to forestall loans from turning into a NPA. If a borrower is a defaulter to one bank, this information should be available to all Bankss so that they may avoid imparting to him. A Credit Information Bureau can assist by keeping a information bank which can be assessed by all loaning establishments.
