1. NPA
Management

2. Fig 1: Asset Classification
Assets
Performing
Assets
Standard
Assets
Non Performing Assets
(NPA)
Sub -Standard
Assets
Doubtful
Assets
Loss
Assets

3. Performing Asset
• An account does not disclose any
problems and carry more than normal risk
attached to the business
• All loan facilities which are regular !

4. non Performing Assets
• Non Performing Asset means a loan or an
account of borrower, which has been
classified by a bank or financial institution
as sub-standard, doubtful or loss asset, in
accordance with the directions or
guidelines relating to asset classification
issued by RBI.

5. introduction
• Earlier assets were declared as NPA after
completion of the period for the payment
of total amount of loan and 30 days grace.
• In present scenario assets are declared as
NPA if none of the installment is paid till
180 days i.e. six months in respect of a
term loan.

6. introduction
With effect form March 31, 2004 a non-performing asset
(NPA) shell be a loan or an advance where;
interest and /or installment of principal remain overdue for a
period of more than 90 days in respect of a Term Loan,
the account remains 'out of order' for a period of more than 90
days, in respect of an overdraft/ cash Credit(OD/CC),
the bill remains overdue for a period of more than 90 days in
the case of bills purchased and discounted,

7. cAtegories of nPA
 Standard Assets : Arrears of interest and the principal
amount of loan does not exceed 90 days at the end of financial
year
 Substandard Assets : Which has remained NPA for a period
less than or equal to 12 months.
 Doubtful Assets : Which has remained in the sub-standard
category for a period of more than 12 months
• D1 i.e. up to 1 year : 20% provision is made by the bank
• D2 i.e. up to 2 year : 30% provision is made by the bank
• D3 i.e. up to 3 year : 100% provision is made by the bank
 Loss Assets : where loss has been identified by the bank or
internal or external auditors or the RBI inspection but the
amount has not been written off wholly.

8. reAsons behind rise in nPA
• Lack of proper pre-enquiry by the bank for
sanctioning a loan to a customer.
• Non performance of the business or the purpose
for which the customer has taken the loan.
• Willful defaulter.
• Loans sanctioned for agriculture purposes.
• Change in govt. policies leads to NPA.

9. EffEcts of NPA oN bANks & fI
• Restriction on flow of cash done by bank due
to the provisions of fund made against NPA.
• Drain of profit.
• Bad effect on goodwill.
• Bad effect on equity value.

10. fActors ImPActINg rIsE IN NPAs
External factors :
• Ineffective legal framework & weak
recovery tribunals
• Lack of demand / economic recession or
slowdown
• Change in Govt. policies
• Wilful defaults by customers
• Alleged political interferences

11. fActors ImPActINg rIsE IN NPAs
Internal factors :
• Defective Lending process
• Inappropriate / non –use of technology like
MIS , Computerization
• Improper SWOT analysis
• Inadequate credit appraisal system
• Managerial deficiencies
• Absence of regular industrial visits & monitoring
• Deficiencies in re-loaning process
• Alleged corruption
• Inadequate networking & linkages b/w banks

12. Why LoAN AccouNts go bAd ?
BORROWER-SIDE
Lack of Planning
Diversion of Funds
Disputes within
No contribution
No modernization
Improper monitoring
Industrial Relations
Natural Calamities
BANKER – SIDE
Defective Sanction
No post-sanction
supervision, etc
Delay in releases
Directed lending
Slow decision
making process

13. tyPEs of NPA
• 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.
• Gross NPAs Gross NPAs

14. • 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.
Net NPAs Gross = __NPAs – Provisions__
Gross Advances - Provisions

15. Causes
•
•
•
•
•
•
•
NPA arises due to a number of factors or causes like:Speculation : Investing in high risk assets to earn high income.
Default : Willful default by the borrowers.
Fraudulent practices : Fraudulent Practices like advancing loans to
ineligible persons, advances without security or references, etc.
Diversion of funds : Most of the funds are diverted for unnecessary
expansion and diversion of business.
Internal reasons : Many internal reasons like inefficient management,
inappropriate technology, labour problems, marketing failure, etc. resulting
in poor performance of the companies.
External reasons : External reasons like a recession in the economy,
infrastructural problems, price rise, delay in release of sanctioned limits by
banks, delays in settlements of payments by government, natural
calamities, etc.

16. sbI
• State Bank of India
Net NPAs : Rs 12,347.90 crore
Gross NPAs : Rs 25,326.29 crore
• The gross non-performing assets (NPAs) of public sector
banks increased by 20 per cent during June-September 2011.
• Standard & Poor's, which had in September downgraded
standalone ratings of State Bank of India, said high credit
risks in the Indian banking sector reflects that the country has
a weak payment culture and legal system that often result in
low recoveries and delayed settlement of foreclosures.

17. ICICI Bank
• 2. ICICI Bank
• Net NPAs: Rs 2,407.36 crore
Gross NPAs: Rs 10,034.26 crore
• ICICI Bank has the highest NPAs among private
sector banks. ICICI Bank has slightly improved its
net bad debts to 0.90 per cent from 0.91 per cent in
the earlier quarter.
• Indian banks face challenges like increase in
interest rates on saving deposits, a tighter monetary
policy, restructured loan accounts and increasing
infrastructure loans.

18. NET NON PERFORMING
ASSETS
YEARS
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
SBI
7.31
7.30
6.07
7.33
6.65
5.33
5.63
4.5
3.48
2.65
1.87
1.32
PNB
10.21
10.38
9.57
8.96
8.52
6.69
5.32
3.86
0.98
0.2
0.29
0.28
ICICI
3.69
3.22
1.14
2.88
1.53
3.36
5.48
5.21
2.21
1.65
0.72
0.78
UTI
5.33
3.66
5.63
6.32
4.71
2.39
3.46
2.39
1.29
1.39
0.98
0.72
SCB
3.30
2.88
2.42
NA
2.04
1.53
3.46
2.39
1.29
1.39
0.98
0.87

19. GROSS & NET NPA OF COMMERCIAL
BANKS (in Rs. Crores)

20. GROSS &NET NPA (as
percentage of total assets)

21. Non Performing
Assets
Substandard Assets
Doubtful Assets
Loss Assets

22.  Sub-Standard Assets: An asset which has remained
NPA for a period less than or equal to 12 months.
 Doubtful Assets: An asset that has remained in the
substandard category for a period of 12 months.
 Loss Assets: An asset where loss has been identified by
the bank or internal or external auditors or the RBI
inspection but the amount has not been written off
wholly.

23. •
•
•
•
•
•
Standard Assets
Direct advances to agriculture and SME at 0.25%,
CRE at 1%
Other loans and advances at 0.40%
Substandard Asset
A general provision of 15% on total outstanding
The ‘unsecured exposures’ which are
‘substandard’ to attract additional provision of
10%, i.e., a total of 25% on the outstanding
balance.

24. • Doubtful Assets
• 100% of the extent to which the advance
is not covered by the realisable value of
the security
• For the secured portion, provision to be
made as follows, depending upon the
period for which the asset has remained
doubtful

25. • Loss Assets
• Write Off or provision of 100% of
outstanding

26. NPA MANAgeMeNt StrAtegieS
• Indian Banks are pursuing variety of
strategies to control NPAs, which can be
studied under two broad categories as
under :
– a. Preventive Management
– b. Curative Management

27. NPA MANAgeMeNt StrAtegieS
a. Preventive Management - It is rightly
said that prevention is better than cure.
• Developing ‘Know Your Client’ profile
(KYC
• Monitoring Early Warning Signals
• Installing Proper Credit Assessment and
Risk Management Mechanism
• Reduced Dependence on Interest
• Generating Watch-list/Special Mention
Category

28. NPA MANAgeMeNt StrAtegieS
b. Curative Management
• Re-phasement of loans
• Pursuing Corporate Debt Restructuring (CDR
• Encouraging rehabilitation of potentially viable
units
• Encouraging acquisition of sick units by healthy
units
• Entering compromise schemes with borrowers /
Entering one time settlement

29. NPA MANAgeMeNt StrAtegieS
• Using Lok Adalats for compromise
settlement for smaller loans in “doubtful”
and “loss” category.
• Using Securitization & SARFAESI Act
• Using Asset Reconstruction Company
(ARC)
• Approaching Debt Recovery Tribunals
(DRTs).
• Recovery Action against Large NPAs
• Circulation of Information of DefaultersStrengthening Database of Defaulters

30. S
No
SCBs
FY
2006-07
2007-08 2008-09 2009-10 2010-11
1
Gross NPAs
(%)
2.5
2.3
2.3
2.4
2.3
2
Net NPAs
(%)
1.0
1.0
1.1
1.1
0.9
3
Fresh NPA
Generation
Rate (%)
1.7
1.8
2.1
2.2
2.0
4
Net
NPAs/Net
Worth (%)
9.2
7.8
8.6
9.1
10.0

31. S
No
Private
Banks
FY
2007-08 2008-09 2009-10 2010-11
2006-07
1
Gross
NPAs (%)
2.1
2.4
2.9
2.7
2.3
2
Net NPAs
(%)
0.9
1.1
1.3
1.0
0.6
3
Net
NPAs/Net
Worth (%)
7.8
6.1
7.5
5.3
3.2

32. S
No
PSBs
FY
2006-07
2007-08 2008-09 2009-10 2010-11
1
Gross NPAs
(%)
2.7
2.2
2.0
2.2
2.3
2
Net NPAs
(%)
1.1
1.0
0.9
1.1
1.1
3
Net
NPAs/Net
Worth (%)
12.1
11.2
11.4
13.5
13.4