History Of Banking.docx

Chapter 1 INTRODUCTION CONTENT 1.1 1.2 1.3 1.4 1.5

INTRODUCTION HISTORY OF BANKING HISTORY OF BANKING (INDIA) INDIAN BANKING SYSTEM TOP TEN PUBLIC SECTOR BANKS 1.6 NON PERFORMING ASSETS 1.7PERFORMANCE OF PUBLIC SECTOR BANKS 1.8 RECENT TRENDS IN PUBLIC SECTOR BANKS 1.9 CORPORATE DEFAULTER & NPA

1.1 INTRODUCTION : The banking sector is the lifeline of any modern economy. development of a country is integrally linked with the development of banking."Bank" is utilized as a part of the feeling of a business bank. It is of Germanic starting point however a few people follow its cause to the French word "Banqui" and the Italian word 'Banca'. It alluded to a seat for continuing, loaning, and trading of cash or coins in the commercial center by cash banks and cash changers. Keeping money exercises were adequately imperative in Babylonia in the second thousand years b.c. Comparative managing an account sort courses of action could likewise be found in old Egypt. A STUDY OF NON PERFORMING ASSETS MANAGEMENT WITH REFERENCE TO SELECTED PUBLIC SECTOR BANKS 1

Chapter 1 INTRODUCTION 1.2 HISTORY OF BANKING :  Greek and Roman financiers: from the 4th century BC : Saving money exercises in Greece are more fluctuated and refined than in any past society. Private business visionaries, and also sanctuaries and open bodies, now attempt money related exchanges. They take stores, make credits, change cash starting with one money then onto the next and test coins for weight and virtue. Rome, with its performer for organization, embraces and regularizes the keeping money practices of Greece.  Religion and banking: 12th - 13th century : The Christian restriction on usury in the end gives a chance to brokers of another religion. European prosperity needs back. The gainful business of managing an account moves under the control of more customary Christian society - first among them the Lombard’s. Maybe the most well known of the medieval Italian banks was the Medici bank, set up by Giovanni Medici in 1397. The Medici had a long history as cash changers,  Bankers to Europe's kings: 13th - 14th century : In the middle of the thirteenth century financiers from north Italy, all in all known as Lombards, progressively supplant the Jews in their customary part as cash loan specialists to the rich and intense. The business aptitudes of the Italians are improved by their innovation of twofold passage accounting. By the mid fourteenth century two families in the city, the Bardi and the Peruzzi, have become rich by offering money related administrations and the family has A STUDY OF NON PERFORMING ASSETS MANAGEMENT WITH REFERENCE TO SELECTED PUBLIC SECTOR BANKS 2

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workplaces in Barcelona, Seville and Majorca, in Paris, Avignon, Nice and Marseilles, in London, Bruges, Constantinople, Rhodes, Cyprus and Jerusalem  Banks and cheques: from the 16th century : In 1587 the Banco della Piazza di Rialto is opened in Venice as a state activity.

Its motivation it to complete the vital capacity of holding vendors' assets on safe store, and empowering budgetary exchanges in Venice and somewhere else to be made without the physical exchange of coins.  National banks: 17th - 18th century : Venice, subsequent to being conceivably the principal city to establish a bank for the protecting of cash on store and the clearing of checks, is additionally a pioneer in the association of a save money with state funds. In 1617 the Banco Giro is set up to tackle issues experienced by the before Banco della Piazza di Rialto, which has into inconvenience through the making of unsecured credits.  Bank of England : The bank of England, first sanctioned in 1694, is the model and excellent model of all our cutting edge banks; its history, thusly, will merit the more specific consideration. The first capital of this bank was 1,200,000 sterling. This capital did not comprise in cash, but rather in government stock. The endorsers to the bank had loaned the administration, the above entirety of 1,200,000. at an enthusiasm of eight for each penny, other than an extra annuity of 4,000.

 Scotch Banks : A STUDY OF NON PERFORMING ASSETS MANAGEMENT WITH REFERENCE TO SELECTED PUBLIC SECTOR BANKS 3

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Two banks were set up in Scotland by contract from the ruler; one the Bank of Scotland, in 1695; the other, the Royal Bank of Scotland, in 1727. These two banks have branches in the vast majority of the vital towns of Scotland; however as they never got any restrictive benefits, a huge number of private banks jumped up to question the business with them, and to isolate its benefits.

Paper currency makes its first appearance in Europe in the seventeenth century. Sweden can assert the need In 1656 Johan Palmstruch builds up the Stockholm Banco. It is a private bank however it has solid connections with the state In 1661, in counsel with the administration, Palmstruch issues credit notes which can be traded, on introduction to his bank, for an expressed number of silver coins. Palmstruch's notes (the most punctual to survive dates from a 1666 issue) are noteworthy looking bits of printed paper with eight written by hand marks on each.

1.3 HISTORY OF BANKING ( INDIA ) : A STUDY OF NON PERFORMING ASSETS MANAGEMENT WITH REFERENCE TO SELECTED PUBLIC SECTOR BANKS 4

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Managing an account in India has its cause as right on time as the Vedic period. It is trusted that the move from cash loaning to saving money probably happened even before Manu, the immense Hindu Jurist, who has committed an area of his work to stores and progresses and set down standards identifying with rates of intrigue. Amid the Mogul time frame, the indigenous brokers assumed an essential part in loaning cash and financing outside exchange and business. Amid the times of the East India Company, it was the turn of the organization houses to bear on the managing an account business.  Pre- Independence Period : (Before 1947)

The General Bank of India was the main Joint Stock Bank to be set up in the year 1786. The others which took after were the Bank of Hindustan and the Bengal Bank. The Bank of Hindustan is accounted for to have proceeded till 1806. In the main portion of the nineteenth century the East India Company built up three banks; the Bank of Bengal in 1809, the Bank of Bombay in 1840 and the Bank of Madras in 1843. These three banks otherwise called Presidency Banks were free units and worked well. These three banks were amalgamated in 1920 and another bank, the Imperial Bank of India was set up on 27th January 1921. With the death of the State Bank of India Act in 1955, the endeavor of the Imperial Bank of India was taken over by the recently constituted State Bank of India. The Reserve Bank which is the Central Bank was made in 1935 by passing Hold Bank of India Act 1934. In the wake of the Swadeshi Movement, a number of keeps money with Indian administration were built up in the nation to be specific, Punjab National Bank Ltd, Bank of India Ltd, Canara Bank Ltd, Indian Bank Ltd, the Bank of Baroda Ltd, the Central Bank of India Ltd. A STUDY OF NON PERFORMING ASSETS MANAGEMENT WITH REFERENCE TO SELECTED PUBLIC SECTOR BANKS 5

 Post- Independence Period : ( After 1947 )

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Major changes occurred in the keeping money area as the economy developed and developed amid the decades since freedom. Not long after accomplishing freedom, open responsibility for banks ended up noticeably unavoidable and tuned in to the prerequisites, State Bank of India (SBI) was made in 1955 to lead the extension drive infiltrating rustic India and accelerate the procedure of adaptation. Standards for money acknowledgment, resource order and advance misfortune provisioning were set up and Capital Adequacy Ratio ended up plainly required. In 1969, motivated by a huge social reason, 14 noteworthy banks were nationalized; and 6 more in the year 1980. From that point forward the saving money framework in India has assumed a vital part in the Indian economy, going about as an instrument of social financial change. The justification behind bank nationalization has been briefly advanced by the prominent brokers: "numerous bank disappointment and emergencies regarding two centuries, and the harm they did under free enterprise conditions; the necessities of arranged development and impartial dissemination of credit which is exclusive banks was focused for the most part on the controlling modern houses and persuasive borrowers; the necessities of developing little scale industry and cultivating in regards to back, hardware and contributions; from all these there rose an inflexible interest for managing an account enactment, some administration control and a focal keeping money expert, including up, in the last examination, to social control and nationalization".

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Post nationalization, the Indian saving money framework enlisted colossal development in volume. In spite of the verifiable and multifold increases of bank nationalization, it might be noticed that the essential money related foundations were all state possessed and were liable to focal course and control. Banks delighted in little self-rule as both loaning and store rates were controlled until the finish of the 1980s. Despite the fact that nationalization of banks helped in the spread of managing an account to the rustic and until now revealed territories, the imposing business model allowed to general society part and absence of rivalry prompted general wastefulness and low efficiency.  Post-Liberalization Period (1991-till date) The shortcomings of the saving money framework was broadly examined by the board of trustees (1991) on budgetary division changes, headed by Narasimham. The board of trustees found that managing an account framework was both over-directed and under-controlled. The Banking Sector Reforms in India were started in 1992. The goals of changes were to fortify the Indian banks, make them universally focused and urge them to assume a viable part in quickening the procedure of development. The changes procedure additionally started measures . Banks were likewise coordinated to recognize issue advances on their accounting reports and make arrangements for terrible advances and cut down the thriving issue of non-performing resources. The period 1992-97 established the frameworks for change in the keeping money framework (Rangarajan, 1998). The second Narasimham Committee Report (1998) focussed on issues like

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fortifying of the saving money framework, updating of innovation and human asset improvement.  Narasimham Committee's Recommendations:

Against this scenery, a Committee under the chairmanship of M. Narasimham was set up by the Government of India to analyze the nation's money related framework and its different segments and to make proposals for transforming and enhancing the nation's monetary area. The report was put before the Parliament in December 1991.  Decrease in Statutory Liquidity Ratio (SLR) from 39% to 25% and Cash Reserve Ratio (CRR) from 15% to 4.5% in 2003 to provide more lending to the industries and boost the economic development in India.  Deregulation of loan costs and aligning them on government borrowing with the market-decided rates  Expulsion of branch authorizing framework so Banks themselves would be permitted to open or close branches.  Expelling the restrictions on remote banks and stop on advance nationalization of banks with the goal that private banks can likewise develop.  Fixing of prudential standards and fortifying of keeping money supervision.  Legitimate grouping of benefits and full revelation and straightforwardness of records of banks and other budgetary establishments.  Accomplishment of a base 4 p.c. capital ampleness proportion in connection to hazard weighted resources inside three years.  Expanded rivalry in loaning between 'improvement money related institutions' and banks.

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 Setting up of a foundation to be called Asset Reconstruction Fund with a view to assuming control over a segment of the credit arrangement of banks which has turned bad and doubtful and whose collection is difficult.

1.4 INTRODUCTION TO INDIAN BANKING SYSTEM : In a present day economy, banks are to be viewed as not as merchants in cash however as the pioneers of improvement. They assume an essential part in the preparation of stores and payment of credit to different segments of the economy. The managing an account framework mirrors the monetary soundness of the nation. The quality of an economy relies upon the quality and proficiency of the budgetary framework, which thus relies upon a sound and dissolvable managing an account framework. A sound managing an account framework productively prepared investment funds in profitable parts and a dissolvable saving money A STUDY OF NON PERFORMING ASSETS MANAGEMENT WITH REFERENCE TO SELECTED PUBLIC SECTOR BANKS 9

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framework guarantees that the bank is equipped for meeting its commitment to the investors. The present procedure of change ought to be seen as a chance to change over

Indian keeping money into a sound, solid and lively framework fit for assuming its part proficiently and successfully all alone without forcing any weight on government  Structure of Indian Banking System The Indian financial framework includes an extensive number of business and co-operative banks, Development banks,

specialized banks for industry &

agriculture, import – export banks , government disability establishments, aggregate venture foundations, and soBank on. Reserve Reserve of IndiaBank of India is the central bank of the country and apex body which regulates the business of banking in India.

Scheduled Banks

Non-Scheduled

Banks

A Sound Banking system is important for any country. The Indian banking system consists of 21 public sector banks, 26 private sector banks, 43 foreign Commercial Scheduled Cooperative banks, 57Scheduled regional rural banks, 1,589 urban cooperative banks and 93,550 rural Banks

Banks

cooperative banks, in addition to cooperative credit institutions.

Public sector banks

Private Sector Banks

Foreign Banks

Regional Rural Banks

Scheduled Urban Cooperative Banks

Scheduled State Cooperative Banks

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Nationalized Banks

SBI & its Associates

Old Private Sector Banks

New Private Sector Banks

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1. Reserve Bank of India (RBI) Reserve Bank of India is central bank of our country, which was established in 1935 under the Reserve Bank of India Act, 1934. Initially it started as a private shareholders institution till January 1949, after which it became a state-owned institution under the Reserve Bank of India Act, 1948. It is the one of oldest central bank among the developing countries. As the apex bank of country , it has been guiding, monitoring, regulating and promoting the destiny of Banking business in country. A STUDY OF NON PERFORMING ASSETS MANAGEMENT WITH REFERENCE TO SELECTED PUBLIC SECTOR BANKS 11

 Objectives of RBI

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RBI plays a more positive and dynamic role in the upliftment of a country. The central bank of the country is financial muscle of a nation. The objectives of the central banking system are presented below: 1.

The central bank should work for the national interest of the country.

2.

The central bank must aim for the stabilization of the mixed economy.

3.

It aims at the stabilization of the price level at average prices.

4.

Stabilization of the exchange rate is also essential.

5.

It should aim for the promotion of economic activities.  Functions of RBI

The RBI functions are based on the situation of Indian economy. The RBI should have to maintain a continuous and direct relationship with the Central Government while implementing the programmes and policies .The major functions of the RBI are as below : 1.

Welfare of the public

2.

To maintain the financial stability of the country.

3.

To make the financial transactions safely and effectively.

4.

To develop & grow the financial infrastructure of the country.

5.

To distribute the funds effectively without any partiality.

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6.

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To regularize the overall credit volume for price stability.  Authorities

1.

Currency issuing authority

2.

Monitoring & Surveillance authority

3.

Banker to the Central & State Government

4.

Foreign exchange control authority

5.

Promoting & Development authority.

 Scheduled Banks and Non-Scheduled Banks The scheduled banks are those which are as per the second schedule of the RBI Act, 1934. These banks have a paid-up capital and reserves of an aggregate value of not less than Rs. 5 lakhs, They have to fulfill the rules of RBI that their affairs are carried out in the interest of their depositors. All commercial banks (Indian and foreign), regional rural banks, and state cooperative banks are scheduled banks in India . Non- scheduled banks are those which are not as per the second schedule of the RBI Act, 1934. A. Commercial Banks Commercial banks collect large amount of saving funds form overall population and make them accessible to industries and businesses for their basic requirement of working capital. A STUDY OF NON PERFORMING ASSETS MANAGEMENT WITH REFERENCE TO SELECTED PUBLIC SECTOR BANKS 13

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Commercial banks in India are generally divided into three division namely Indianpublic sector banks and private sector banks and some foreign sector banks.

Indian public sector banks a very dominant role in whole banking system by capturing more than 92 percent share. Commercial banks are those institutions that accept deposit, make business loans and other related services to different customers and businesses & Industries. These institutions carried out their operations to make profit. They fulfill the financial requirements of industries and various other sectors includes agriculture, rural development, etc. Commercial bank includes public sector, private sector, foreign banks and regional rural banks. 1. Public Sector Banks Public sector banks in Indian banking industry has emerged as three different stages . First, the Transformation of the Imperial Bank of India into the State Bank of India in 1955, which is followed by the taking over of the 7 state associated banks as its subsidiary banks, secondly the nationalization of 14 main commercial banks on July 19, 1969 and last but not the least the nationalization of 6 more commercial banks on April 15, 1980. There are 27 Public Sector Banks in India including State Bank of India and its 5 Associate Banks, together called State Bank Group (The names of the 5 Associate Banks are: State Bank of Travancore (SBT), State Bank of Patiala (SBP), State Bank of Hyderabad (SBH), State Bank of Mysore (SBM) and State Bank of Bikaner and Jaipur (SBBJ). The Union Cabinet approved the merger of the five subsidiaries; and Bharatiya Mahila Bank Ltd with SBI on June 15, 2016. As on from April 1, 2017 all the 5 associate banks of SBI and Bhartiya Mahila Bank are merged A STUDY OF NON PERFORMING ASSETS MANAGEMENT WITH REFERENCE TO SELECTED PUBLIC SECTOR BANKS 14

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with State Bank of India. After this merger now SBI is counted among the top 50

largest banks of the world. Today there are total 21 Nationalized banks in India. The public sector accounts for 75 percent of total banking business in India.  List of Public sector Banks. 1. State bank of India. 2. Andhra Bank 3. Bank of India 4. Bank of Baroda 5. Bank of Maharashtra 6. Canara Bank 7. Central Bank of India 8. Corporation Bank 9. Dena Bank 10.Indian Bank 11.Indian Overseas Bank

12.IDBI Bank 13.Oriental Bank of Commerce 14.Punjab & Sindh Bank 15.Punjab National Bank 16.State Bank of India 17.Syndicate Bank 18.UCO Bank 19.Union Bank of India 20.United Bank of India 21.Vijaya Bank

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2. Private Sector Banks

These are banks which major share capital is held by private individuals and not by Government . These banks are registered as companies with limited liability. The private sector banks is divided into two parts like New Private banks which is incorporated after 1993 and old Private banks which is incorporated before 1993. There are total 26 private sector banks . Examples of private sector banks are: ICICI Bank, Axis bank, HDFC, etc.  List of Private sector Banks. 1. 2.

Axis bank Catholic Syrian Bank

City Union Bank 4. DCB Bank 5. Dhanlaxmi Bank 6. Federal Bank 7. HDFC Bank 8. ICICI Bank 9. IndusInd Bank 10. Jammu and Kashmir Bank 11. Karnataka Bank 12. Karur Vysya Bank [2] 13. Kotak Mahindra Bank 14. Lakshmi Vilas Bank 15. Nainital Bank 16. RBL Bank 3.

South Indian Bank 18. Tamilnad Mercantile 17.

Bank

Limited 19. Yes Bank 20.Bandhan Bank 21. Capital small finance Bank Ltd 22. Costal local area Bank Ltd 23. Krishna Bhima Samruddhi Local Area Bank Ltd 24. Subhadra Local Area Bank Ltd. 25. IDFC Bank Limited 26.Equitas Small Finance Bank Ltd

3. Foreign Banks

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These banks are those banks which registered headquarters in foreign country but

operate or work in India through their branches. As on 31 st December 2015 total 44 foreign banks working in India. Like Standard Chartered Bank, Citi Bank, HSBC, Deutsche Bank, etc. 4. Regional Rural Banks (RRBs): there were 196 Regional Rural Banks which includes 27 State Cooperative Banks. But as on 31st March, 2013 due to mergers the number of Regional Rural Banks has come down from 196 to 64. The numbers of branches of RRBs are 17856 as on 31 March 2013 covering 635 districts throughout the India. B. Co-Operative Banks : The co-operative bank is a financial institute which belongs to its members, who are at the same time the owners and the customers of the bank. Co-operative banks are created by persons belonging to the local or professional community or sharing a common interest. Co-operative banks generally provide their members with a wide range of banking and financial services (loans, deposits, banking accounts, etc). It provide limited banking service. Cooperative banks are the primary financiers of agricultural activities, some small-scale industries and selfemployed workers. The functions of bank is carried out on the basis of “no-profit no-loss”. The Co-operative Banking structure in India is Subdivided into Five Category namely , Primary Urban Co-Operative bank, Primary Agricultural Credit Society, District Central Co-operative banks, State Co-operatives banks, Land Development A STUDY OF NON PERFORMING ASSETS MANAGEMENT WITH REFERENCE TO SELECTED PUBLIC SECTOR BANKS 17

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Banks. Currently total 19 schedule state co-operative banks are working in India. 14 Non – Schedule state Co-operative banks are also working in India.

1.5 TOP TEN PUBLIC SECTOR BANKS PROFILE :

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Public sector Units are those in which government holds majority stake, i.e,. more than 50 % stake of an enterprise. It is also known as Public Sector Unit (PSU). Government is the owner of the PSU, and is responsible for the managerial

control of the enterprise. Similarly, if the majority share of a bank is held by the government (generally, central government, then it is known as Public Sector Bank (PSB). The Top Ten public sector banks are as per their market capitalization on BSE. 1.

State Bank of India SBI started with the establishment of the Bank of Calcutta (which later

changed to the Bank of Bengal) is 1806. Later in 1921,the other two banks, the Bank of Bombay and the Bank of Madras, merged with the Bank of Bengal to form the Imperial Bank of India. State Bank of India (SBI) is the largest commercial bank of India. The government-controlled bank through nearly 60 percent stake in SBI. State Bank of India also has the world's largest branch network, with more than 13,500 branch offices all over India, staffed by nearly 2,20,000 employees. SBI is also present worldwide, with seven international subsidiaries in the United States, Canada, Nepal, Bhutan, Nigeria, Mauritius, and the United Kingdom, and more than 50 branch offices in 30 countries. It has capture 29th position in most reputed company in world by Forbes in 2009. It is also awarded the Best Public sector bank in 2013. Until 7 th October 2013, SBI never had a woman chairperson, but Arundhati Bhattacharya now A STUDY OF NON PERFORMING ASSETS MANAGEMENT WITH REFERENCE TO SELECTED PUBLIC SECTOR BANKS 19

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serves the State Bank of India and was listed the 36th most powerful woman in

the world by Forbes. Even after facing strong competition from several multinational banks, SBI is the leading Indian banker and has largest yearly total assets and turnover.

2. Bank of Baroda Bank of Baroda (BoB) was founded by Maharaja Sayajirao Gaekwad in July 1908. It started with a paid up capital of Rs 10 lakh. Bank of Baroda is a pioneer in various customer centric initiatives in the Indian banking sector. It is the second largest bank in India, after State Bank Of India. Its headquarters is in Vadodara, Based on 2017 data, it is ranked 1145 on Forbes Global 2000 list. BoB has total assets in excess of ₹ 3.58 trillion, a network of 5538 branches in India and abroad, and 10441 ATMs as of July, 2017.

3. Punjab National Bank Punjab National Bank, India's first Swadeshi Bank, initiated its operations on April 12, 1895 from Lahore, with an approved capital of Rs 2 lac and working capital of Rs 20,000. The far-located visionaries and nationalists like Lala Lajpat Rai, Mr. E C Jessawala, Babu Kali Prasono Roy, Lala Harkishan Lal and Sardar Dyal Singh Majithia showed boldness in offering articulation to the soul of patriotism by setting up the main bank simply overseen by the Indians with Indian Capital. A STUDY OF NON PERFORMING ASSETS MANAGEMENT WITH REFERENCE TO SELECTED PUBLIC SECTOR BANKS 20

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In the long history of more than 122 years of the Bank, 7 banks have converged with PNB and it has turned out to be more grounded and more grounded with a system of 6937 Domestic branches and 10681 ATMs as on 31st March 2017.

4. Canara Bank It is Founded as 'Canara Bank Hindu Permanent Fund' in 1906, by late Shri Ammembal Subba Rao Pai, an altruist, this little seed bloomed into a restricted organization as 'Canara Bank Ltd.' in 1910 and progressed toward becoming Canara Bank in 1969 after nationalization On 31 March 2017, the bank had a system of 6085 branches and more than 10569 ATMs spread crosswise over India. The bank likewise has workplaces abroad in London, Hong Kong, Moscow, Shanghai, Doha, Bahrain, South Africa, Dubai, Tanzania and New York.

5.Central Bank of India Set up in 1911, Central Bank of India was the principal Indian business bank which was entirely possessed and overseen by Indians. The foundation of the Bank was a definitive acknowledgment of the fantasy of Sir Sorabji Pochkhanawala, organizer of the Bank. Sir Pherozesha Mehta was the principal Chairman of a genuinely 'Swadeshi Bank'. Truth be told, such was the degree of A STUDY OF NON PERFORMING ASSETS MANAGEMENT WITH REFERENCE TO SELECTED PUBLIC SECTOR BANKS 21

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pride felt by Sir Sorabji Pochkhanawala that he announced Central Bank of India as the 'property of the country and the nation's advantage'. He additionally included that 'National Bank of India lives on individuals' confidence and views itself as the general population's own bank'.

The bank has 4730 branches, 5319 ATM's and 4 expansion counters crosswise over 27 Indian states and three Union Territories. At present, Central Bank of India has abroad office at Nairobi, Hong Kong As on 31 March 2015, the bank's stores and surplus remained at ₹ 283030 million. Its aggregate business toward the finish of the last financial added up to ₹ 45,05,390(approx) million.

6.Bank of India Bank of India was established on seventh September, 1906 by a gathering of famous businesspeople from Mumbai. The Bank was under private possession and control till July 1969 when it was nationalized alongside 13 different banks. Starting with one office in Mumbai, with a paid-up capital of Rs.50 lakh and 50 representatives, the Bank has made a quick development throughout the years and bloomed into a forceful establishment with a solid national nearness and sizable worldwide operations. In business volume, the Bank possesses a chief position among the nationalized banks.

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The Bank has more than 5000 branches in India spread over all states/union domains including specific branches. These branches are controlled through 54 Zonal Offices and 8 NBG Offices. There are 60 branches/workplaces and 5 Subsidaries and 1 joint wander abroad.

7.Indian Bank Indian Bank is an government owned bank set up in 1907 and headquartered in Chennai, India. It has 20,661 representatives, 2594 branches and is one of the best performing open area banks in India. It has abroad branches in Colombo and Jaffna in Sri Lanka, and in Singapore, and 223 journalist banks in 71 nations. Since 1969 the Government of India has claimed the bank. As of April 2009, the bank has Core Banking Solution (CBS) actualized in its 1642 branches and 66 expansion counters. The bank has 755 associated Automatic Teller Machines (ATMs) introduced in 225 areas across the nation.

8.IDBI Bank Industrial Development bank of India (IDBI) was constituted under Industrial Development bank of India Act, 1964 as a Development Financial Institution and appeared as on July 01, 1964 by the notification of government of India dated on June 22, 1964. It was viewed as a Public Financial Institution as far

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as the arrangements of Section 4A of the Companies Act, 1956. It kept on filling in as a DFI for a long time till the year 2004 when it was changed into a Bank.

It is right now tenth biggest advancement bank on the planet as far as reach, with 3700 ATMs, 1995 branches, including one abroad branch at Dubai, and 1382 focuses. It is one of 21 business banks possessed by the Government of India. The Bank has a total accounting report size of INR 3.74 trillion as on 31 March 2016

9.Union Bank of India Union Bank of India (UBI) was enlisted on 11 November 1919 as a restricted organization in Mumbai and was introduced by Mahatma Gandhi. At the season of India's Independence in 1947, UBI just had four branches – three in Mumbai and one in Saurashtra, all moved in key exchange focuses. After Independence UBI quickened its development and when the legislature nationalized it in 1969, it had developed to 240 branches in 28 states. Not long after nationalization, UBI converge in Belgaum Bank, a private segment bank set up in 1930 that had itself converge in a bank in 1964, the Shri Jadeya Shankarling Bank. At that point in 1985 UBI converged in Miraj State Bank, which had been built up in 1929. In 1999 the Reserve Bank of India asked for that UBI secure Sikkim Bank in a protect after broad anomalies had been found at the non–scheduled bank. Sikkim Bank had eight branches situated in the North–east, which was appealing to UBI.

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UBI started its universal development in 2007 with the opening of agent workplaces in Abu Dhabi, United Arab Emirates, and Shanghai, Peoples Republic of China. The following year, UBI set up a branch in Hong Kong, its initially branch outside India. In 2009, UBI opened a delegate office in Sydney, Australia.

10.Vijaya Bank Vijaya Bank, was established on 23rd October 1931 by late Shri A.B.Shetty and other ambitious agriculturists in Mangalore, Karnataka. The goal of the organizers was basically to advance keeping money propensity, thrift and business among the cultivating group of Dakshina Kannada area in Karnataka State. The bank turned into a planned bank in 1958. Vijaya Bank consistently developed into an expansive All India bank, with nine littler banks converging with it amid the 1963-68. The acknowledge for this merger and also development goes to late Shri Mulki Sunder Ram Shetty, the then the Chief Executive of the bank. The bank was nationalized on fifteenth April 1980. The bank has manufactured a system of 2030 branches, 13 Extension Counters and 1865 ATMs as on 31.12.2016, that traverse all States and Union Territories in the nation.

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Chapter 1 INTRODUCTION 1.6 NON PERFORMING ASSETS : The word NPA is not something new to the bankers. It is regular but disguised loan asset. As everyone knows, a portion of assets may become NPA .An asset becomes non-performing when it ceases to generate income for the bank. All loan advances of banks are assets. The loan or lease, which is not meeting its stated interest or principal repayment of the secured debt to the designated lender, is called as a Non-Performing Asset. “A Non Performing Asset means an asset or account of a borrower, which has been classified by a bank or financial institution as substandard, doubtful or loan asset. The borrower has not paid any previously-agreed payments or the Principal amount, making the loan account non-performing”. - By KHAN AND JAIN

A non-performing asset (NPA) is a classification used by financial institutions that refer to loans that are in jeopardy of default. Once the borrower has failed to make interest or principal payments for 90 days the loan is considered to be a non-performing asset. Non Performing Asset means an asset or 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 guidance relating to asset classification issued by The Reserve Banks of India.

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“Non-Performing Assets are those assets that cease to generate income for banks.”

Dr.Rajesham and Dr.K.Rajender

 TYPES OF NON-PERFORMING ASSETS 1. Standard: Bank receives the principal and interest repayment, systematically from the borrower.Another important aspect is that the arrears of the principal as well as the interest does not surpass more than 90 days on the closing of the FY (Financial Year). An assets which is generating regular income to the bank called standard assets. 2. Sub-Standard: An asset which is overdue for a period of more than 90 days but less than 12 months are called Sub-Standard 3. Doubtful: A doubtful asset is one which has remained as a NPA for a period exceeding 12 months. A loan classified as doubtful has all the weaknesses inherent in assets that were classified as sub-standard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently-known facts, conditions and values – highly questionable and improbable. 4. Loss: Assets which are doubtful and considered as non-recoverable by bank, internal or external auditor or central bank inspectors called loss. Standard Asset

Sub- standard asset

It does not create any problem while paying interest/ installments of the principal. It usually carries more than normal risk attached to the business. NPA for a period less than or equal to 12 months.

Doubtful Asset

NPA for a period exceeding 12 months.

Loss Asset

An asset where loss has been identified by the bank or internal or external auditors or

A STUDY OF NON PERFORMING ASSETS MANAGEMENT WITH REFERENCE TO SELECTED PUBLIC SECTOR BANKS 27

Chapter 1 INTRODUCTION by the RBI inspection.

1.7 PERFORMANCE OF PUBLIC SECTOR BANKS : The financial changes in India began in right on time nineties, however their result is obvious at this point. Real changes took put in the working of Banks in India simply after Librelization , globalization and privatization. Expanded rivalry, new data advances and consequently declining preparing costs, the disintegration of item and geographic limits, and less prohibitive legislative directions have all assumed a noteworthy part for Public Sector Banks in India to commandingly contend with Private and Foreign Banks. The most recent decade has seen numerous positive improvements in the Indian banking system. The policy makers which involve the Reserve Bank of India (RBI), Ministry of Finance and related government and financial sector regulatory entities have endeavored a few outstanding efforts to enhance performance in the sector . The public sector banks now looks at positively with managing an account divisions in the area on measurements like development, profitability and non-performing resources (NPAs). A couple of banks have set up an extraordinary reputation of advancement, development and esteem creation. The technological revolution has completely changed the Indian banking system. The use of computers and mobile has led to the introduction of online banking in India now a days. India has the most number of bank branches on the planet. As indicated by IMF information for 2015 there are more than 1.2 lakh bank branches in India, followed by China and Colombia with more than 95,680 and 94,074 bank

A STUDY OF NON PERFORMING ASSETS MANAGEMENT WITH REFERENCE TO SELECTED PUBLIC SECTOR BANKS 28

Chapter 1 INTRODUCTION

offices individually. RBI information for the June 2016 quarter demonstrates India now has more than 1.3 lakh bank offices. The net loss of twenty public sector banks is of Rs 16,272.34 crore for the fourth quarter ended March 2016 as bad loans situation very worsened. Public Sector Banks earns net profit of Rs 4,063.58 crore in the last quarter a year ago. Nonperforming assets or bad loans in some cases must requires prompt corrective action otherwise become a major problem. As per RBI directives, a prompt corrective action may be enforced in cases where gross NPA has crossed 10 per cent. all public sector banks had given negative return to investors since the beginning of the ongoing calendar year 2016.

State Bank of India : State bank of Indian register 66% slump in standalone profit to Rs. 1,263.81 crores for the last quarter of 2017. The Bank’s gross nonperforming assets (NPAs) declined to 6.90 per cent of gross advances, down 33 basis points from 7.23 per cent reported on December 2017 . Gross NPAs in the year-ago quarter stood at 6.50 per cent. On a net basis, NPAs fell to 3.71 per cent from 4.24 per cent in December 2017 and 3.71 per cent in the corresponding quarter

last

year.

Bank of Baroda : Bank of Baroda (BoB) on Thursday reported a profit of Rs154.72 crore on March 2017 quarter as provisions for bad loans was decline. The bank had reported a huge loss of Rs3,230.14 crore in the same quarter in last year ago. The provisions of bad loans declined to Rs2,622.97 crore from Rs6,857.66 crore in A STUDY OF NON PERFORMING ASSETS MANAGEMENT WITH REFERENCE TO SELECTED PUBLIC SECTOR BANKS 29

Chapter 1 INTRODUCTION

the year ago period as gross non-performing asset (NPA) ratio moved up

marginally to 10.46% from 9.99%. Its net NPAs also decreased to 4.72% as against 5.06%. Punjab National Bank : Punjab National Bank on 18th may 2017 reported a net loss of Rs 5,367.14 crore on last quarter ended on 31 st March 2016 against net profit of Rs 306.56 crore in the previous year . As far as asset quality is concerned, Gross Non-Performing Assets (NPAs) rose to 12.90 per at the end of March, from 6.55 per cent a year ago. Net NPAs too jumped to 8.61 per cent as against 4.06 per cent. Canara Bank : Canara Bank Ltd has reported the net profit of Rs.214.18 crore, on march 2017 against a Rs3905.49 crore loss recorded a year ago when it made heavy provisions for bad loans. Gross non-performing assets (NPAs) as a ratio of gross advances were at 9.63%, against 9.97% as of 31 December. Net NPA ratio at the end of the fourth quarter was 6.33%, slightly down from 6.72% in the third quarter. Central Bank of India : Central Bank of India recorded the net loss of Rs 592 crore during the last quarter on March 2017 on improved recovery, even though bad loans soared. Gross NPA to gross advances raised up to 17.81% as on March 2017 from 11.95% a year ago. Net non-performing assets increase up to 10.20% of net advances from 7.36% a year ago. Bank of India : Bank of India has reported a net loss of Rs1,045.54 crore for the March 2017. The gross non-performing assets (NPAs) were at 13.22% at the end of the March 2017. Net NPAs came in marginally lower at 6.90% in the quarter A STUDY OF NON PERFORMING ASSETS MANAGEMENT WITH REFERENCE TO SELECTED PUBLIC SECTOR BANKS 30

Chapter 1 INTRODUCTION

compared to 7.09% in the last three months, but comparatively lower than the March 2016 quarter’s 7.79%. Indian Bank : The Net profit of Indian bank raise up to Rs319.7 crore for the last

quarter ended on 31st March 2017 from Rs 93.62 crore in the year earlier. The bank’s gross non-performing assets (NPAs) Increase up to 1.9% to Rs 9,865.13 crore at the end of the quater March 2017 from Rs9,675.1 crore in the quater December. IDBI Bank : IDBI has reported a standalone net loss of Rs 3199 crore on 31 st march 2017, as against a standalone net loss of Rs 1735.81 crore for the same quarter in the previous year. It reported gross NPAs of 21.25% and net NPAs of 13.21% for the quarter ended March 31, 2017. Union Bank of India : Union Bank of India on Monday to report a 12.5% increase in the net profit at Rs108.22 crore for the March quarter. Net NPAs also rose to 6.57% from 5.25% year ago. Vijaya Bank : Vijaya Bank has reported a net profit of Rs 204 crore for the fourth quarter of the financial year 2016-17, registering increase of 187 per cent year-onyear (YoY) jump from Rs 71 crore. Gross non-performing assets (NPAs) reduced up to 23.15% to Rs 6,381.78 crore at the end of the March quarter from Rs 8,304.60 crore in the December quarter. Net NPAs rose to 4.35% in the March quarter from 4.74% in the previous quarter and 4.81% in the same quarter last year.

A STUDY OF NON PERFORMING ASSETS MANAGEMENT WITH REFERENCE TO SELECTED PUBLIC SECTOR BANKS 31

Chapter 1 INTRODUCTION 1.8 RECENT TRENDS IN PUBLIC SECTOR BANKS : In the current year, the banking Industry has been under going fast changes which is reflecting in major important changes. Innovation in information technology is the most noteworthy ranges which have changed quickly. It has quickened the publishing of monetary data which bringing down the expenses of numerous financial activities . In the last few years Banking sector has introduced some new items: Credit Cards, ATM, Tele-Banking, Electronic Fund Transfer (EFT), Real Time Gross Settlement (RTGS), Internet Banking, Mobile Banking and so forth. These new improvements increase the proficiency of banks by diminishing transaction cost.  CORE BANKING SOLUTIONS : Center Banking Solutions (CBS) or Centralized Banking Solutions is the procedure which is finished in a brought together condition i.e. under which the data identifying with the client's record (i.e. money related dealings, calling, wage, relatives and so forth.) is put away in the Central Server of the bank (that is accessible to all the organized branches) rather than the branch server. Contingent on the size and needs of a bank, it could be for the every one of the operations or for constrained operations. This undertaking is helped through cutting edge programming by making utilization of the administrations gave by particular offices. Because of its advantages, a no. of banks in India as of late have found a way to actualize the CBS with a view to assemble association with the client in light of the data caught and offering to the client, the modified money related items as per their need. A STUDY OF NON PERFORMING ASSETS MANAGEMENT WITH REFERENCE TO SELECTED PUBLIC SECTOR BANKS 32

Chapter 1 INTRODUCTION

 Advantages to Customer: 1. Transaction of business can be done from any branch. 2. High accuracy with less error in Transaction. 3. Huge amount of fund available.  Advantages to Banks: 1. Standardize process follow by all branches of banks. 2. Better service to customer that increase customer retention. 3. Better use of available resource. 1.

Demat Account : In India, a demat account, the contraction for

dematerialised account, is a sort of managing an account which dematerializes paper-based physical stock offers. The dematerialised account is utilized to abstain from holding physical offers: the offers are purchased and sold through a stock merchant. The Securities and Exchange Board of India (SEBI) commands a demat represent share exchanging over 500 shares. As of April 2006, it wound up noticeably required that any individual holding a demat record ought to have a Permanent Account Number (PAN),  Advantages 1. A sheltered and helpful approach to hold securities; 2. Immediate exchange of securities; 3. No stamp obligation on exchange of securities; 4. Elimination of dangers related with physical authentications, for example, awful conveyance, fake securities, delays, burglaries and so forth.; 5. Reduction in printed material required in exchange of securities; 6. Reduction in exchange cost; 2. Telebanking : Telebanking provides banking facility on telephone network. A client can use facility of banking through a phone call and by giving the coded A STUDY OF NON PERFORMING ASSETS MANAGEMENT WITH REFERENCE TO SELECTED PUBLIC SECTOR BANKS 33

Chapter 1 INTRODUCTION

Personal Identification Number (PIN) to the bank. Telebanking is widely easy to use and successful in nature.  Following service is provided by Telebanking to customers : 1. Facility to stop payment. 2. Ask information about status of Cheque. 3. Information on the present loan costs. 4. Request for a DD or pay Order. 5. Demat Account related administrations. 3.

Internet Banking : The aggregate number of enlisted clients for Internet

saving money in India is more than two million. India has somewhat less than a million dynamic Internet keeping money clients. In this way showing, the idea of Internet managing an account is without a doubt getting on. India falls behind different nations in Internet saving money. In the US, the quantity of business manages an account with value-based sites is 1,275 or 12 percent of the aggregate number of banks. Of these, seven could be called 'virtual banks.' From the Asian market understanding, obviously Internet keeping money is setting down deep roots and will be a noteworthy channel to obtain and benefit clients. Markets like Korea and Singapore have almost 10 percent of their populace keeping money over the Internet. 

Internet Banking & India : Indian banks have a unimportant Internet

managing an account record. ICICI Bank commenced internet based banking in 1996 and a large group of different banks soon took action accordingly. Be that as it may, notwithstanding for the Internet in general, 1996 to 1998 denoted the selection stage, while utilization expanded just in 1999 because of lower ISP online charges, expanded PC infiltration and a tech-accommodating environment. A STUDY OF NON PERFORMING ASSETS MANAGEMENT WITH REFERENCE TO SELECTED PUBLIC SECTOR BANKS 34

Chapter 1 INTRODUCTION



Internet Banking & Public sector Banks : As in all types of innovation

developments, PSU banks have remained slow in the race for commencing Internet Banking . There are not very many nationalized banks like State Bank of India, Bank of Baroda, Allahabad Bank, Syndicate Bank and Bank of India that offer Internet Banking . Some others like Union Bank of India, Canara Bank and Punjab National Bank are very nearly doing as such. SBI's Internet banking activity, propelled in July 2001, is in actuality doing great and has more than 18,000 enrolled clients crosswise over 150 branches 4.

Automatic Teller Machine : The presentation of ATM's has given the clients

the office of round the Banking Facility . The ATM's are utilized by banks for making the clients managing their account with less efforts . ATM card is a gadget that permits client who has an ATM card to perform routine banking activity with less interfacing with human teller. The ATM’s help client to get money as and when he wants though bank is closed.  Advantages to Customers : To Transfer money from one account to another. To see account related information. To get money . ATM's give 24 hrs. 7 days and 365 days a year benefit. Service is quick and effective Privacy in transaction Wider adaptability set up and time of withdrawals. he exchange is totally secure – you have to enter in Personal Identification Number (Unique number for each client).  Advantages to Banks : Alternative to expand managing an account hours. Crowding at bank counters significantly lessened. Alternative to new branches and to decrease working costs. A STUDY OF NON PERFORMING ASSETS MANAGEMENT WITH REFERENCE TO SELECTED PUBLIC SECTOR BANKS 35

Chapter 1 INTRODUCTION

Relieves bank representatives to concentrate on more explanatory and inventive work. ATM's can be introduced anyplace like Airports, Railway Stations, Petrol Pumps, Big Business arcades, markets, and so forth. Henceforth, it gives simple access to the clients, for getting money. The ATM was given first by the remote banks like Citibank, Grind lays bank and now by numerous private and open segment banks in India like ICICI Bank, HDFC Bank, SBI, UTI Bank and so forth. The ICICI has propelled ATM Services to its clients in all the Metropolitan Cities in India.

5.

Mobile Banking : Mobile Banking (otherwise called M-Banking or SMS

Banking) is a term utilized for performing balance checks, account exchanges, installments, and so forth., by means of a cell phone, for example, a cell phone. It was Internet Banking, which introduced another period in keeping money comfort by conveying the whole operations to the PC, and now portable managing an account guarantees to take it to the following level. Mobile Banking tends to this principal restriction of Internet Banking, as it diminishes the client necessity to only a cell phone. Versatile utilization has seen a hazardous development in a large portion of the Asian economies like India, China and Korea. The primary reason that Mobile Banking scores over Internet Banking is that it empowers 'Anyplace Anytime Banking'. Mobile Banking has been at the limit of an unrest for quite a while. While numerous administrators, and in addition banks, had presented versatile managing A STUDY OF NON PERFORMING ASSETS MANAGEMENT WITH REFERENCE TO SELECTED PUBLIC SECTOR BANKS 36

Chapter 1 INTRODUCTION

an account applications, it never wound up noticeably prominent because of security concerns. The quantity of individuals utilizing mobile banking has bounced from under 10,000 to 120,000 of every two years. While the trend is growing, lack of awareness of services, apart from perceived security issues are inhibiting faster take-off. Reserve Bank of India has set-up the Mobile Payments Forum of India (MPFI), a 'Working Group on Mobile Banking' to inspect diverse parts of Mobile Banking (Mmanaging an account).

 Various Mobile Banking Services to the Consumers  Account Information 1. Mini-statements and checking of account history 2. Alerts on account activity or passing of set thresholds 3. Monitoring of term deposits 4. Access to loan statements 5. Access to card statements 6. Mutual funds / equity statements 7. Insurance policy management A STUDY OF NON PERFORMING ASSETS MANAGEMENT WITH REFERENCE TO SELECTED PUBLIC SECTOR BANKS 37

8. Pension plan management

Chapter 1 INTRODUCTION

 Payments & Transfers 1. Domestic and international fund transfers 2. Mobile re-charging 3. Commercial payment processing 4. Bill payment processing  Investments 1. Portfolio management services 2. Real-time stock quotes 3. Personalized alerts and notifications on security prices

 Support 1. Status of requests for credit, including mortgage approval, and insurance coverage 2. Check (cheque) book and card requests 3. Exchange of data messages and e-mail, including complaint submission and tracking A STUDY OF NON PERFORMING ASSETS MANAGEMENT WITH REFERENCE TO SELECTED PUBLIC SECTOR BANKS 38

Chapter 1 INTRODUCTION 6.

Credit card : The credit card can be characterized as a little plastic card that

enables its holder to purchase merchandise and ventures using a loan and to pay at settled interims through card issuing office. The charge card discharges the clients frame botheration of conveying money and guarantees wellbeing. A man who gains a pay of Rs 60,000 for every annum is qualified for card. A reference from a financier and the businesses of the candidate is demanded.

7. Debit card : Debit cards will offer direct withdrawal of fund from a client's financial balance. As far as possible is dictated by the client's bank contingent on accessible adjust in the record of the client. It is a special plastic card connected with electromagnetic identification that one can use to pay for things purchased directly from its bank account. Under the system, cardholder’s accounts are immediately debited against purchase or service to the computer network. Hence, under debit card the card holder must have adequate balance in his account. 8. Multi City Check : "Multi City Check" or MCC is an office wherein the client can issue checks drawn at the base branch and payable at any branch. These checks will be dealt with as nearby checks at the remote branch. There will be no gathering charges and the credit will be given around the same time, as pertinent to neighborhood checks. Regardless of the possibility that the check is dropped at whatever other bank other than the base bank, there won't be any gathering charges. For instance, if Mr. An is paid a Multi city check by Mr. B at SBI branch in Delhi, Mr. A can drop the same at any bank in Mumbai where he holds a record, and there won't be any accumulation charges. A STUDY OF NON PERFORMING ASSETS MANAGEMENT WITH REFERENCE TO SELECTED PUBLIC SECTOR BANKS 39

Chapter 1 INTRODUCTION 

Payment and Settlement Systems

In recent years, money transfer , especially the development of electronic money schemes, have been gaining popularity. While electronic money has the ability to take over from cash for making small-value payments, making such transactions are becoming easier and cheaper for both consumers and banks. The evolution of peerto-peer money transfer mechanisms poses a challenge to current role of banks as gatekeepers to traditional payment systems. Robust payment systems, therefore, are a key requirement in maintaining and promoting financial stability with technology playing both a facilitating and disruptive role in them. Reserve Bank’s initiatives for electronic payments and banking As part of its public policy objective of promoting a safe, secure, sound and efficient payment system, the Reserve Bank has taken several initiatives to develop and promote electronic payments infrastructure. Towards this end, the RBI introduced the following: 1.

Electronic Clearing Service (ECS) : With a view to upgrading payment

system to the international banking standards, the Reserve Bank of India took the initiative and set up Electronic Clearing Service in India, in the mid 1990s, which is the counterpart of the automated clearing house (ACH) system in certain other countries. It has two variants –

A STUDY OF NON PERFORMING ASSETS MANAGEMENT WITH REFERENCE TO SELECTED PUBLIC SECTOR BANKS 40

Chapter 1 INTRODUCTION

ECS - Credit Clearing and ECS - Debit Clearing. : While the Credit Clearing operates on the principle of ‘single debit-multiple credits’ and is used for making payment of salary, pension, dividend and interest, etc. The Debit Clearing functions on the principle of ‘single credit-multiple debits’ and is used for collecting payments by utility service providers like electricity, telephone bills as well by banks for receiving principal / interest repayments for housing and personal loans from the borrowers. At present, about 18 million transactions done through the ECS system every month. This facility is currently available at 70 different centers in the country.

2.

Real Time Gross Settlement System : The payment system in the our country

largely follows the deferred net settlement system, under which the net amount is settled between the banks, on a deferred basis. Such a dispensation entails an element of settlement risk. Hence, as a step towards risk mitigation in the large value payment systems, the RTGS was operationalised by the RBI in March 2004, which enables settlement of transactions in real time, on a gross basis. Almost all the inter-bank transactions in the country and many time-critical customer transactions are now settled through this system. RTGS is fully secured electronic funds transfer system where banks and customers can receive payments on real time basis. The outreach of RTGS transactions has also grown geographically. Out of about 75,000 bank branches in the country, more than 48,300 bank branches now accept requests for remittance A STUDY OF NON PERFORMING ASSETS MANAGEMENT WITH REFERENCE TO SELECTED PUBLIC SECTOR BANKS 41

Chapter 1 INTRODUCTION

through RTGS system for customer transactions as well as inter-bank transactions.The daily average of transactions is over 34,000 by volume and over Rs.2 lakh crore by value. The RBI also provides collateralised Intra-Day-Liquidity (IDL) support to the member banks for the RTGS operations.

3.

National Electronic Fund Transfer: The NEFT was launched by the RBI in

November 2005 as nation-wide retail electronic payment system to facilitate funds transfer by the bank customers, between the networked bank branches in the country. It has, however, been observed that the public sector banks are not active users of NEFT and the majority of NEFT outward transactions are carried by a few new-generation private sector banks and foreign banks. For instance, in June 2008, while these banks, as a segment, accounted for a little over 43 per cent each of the aggregate volume of outward and inward NEFT transactions, the share of public sector banks in total outward NEFT transactions was rather low at a little over 12 per cent, of which half the volume was the contribution of the State Bank of India. The RBI has been pursuing the matter with the PSBs for increasing their participation in the NEFT system in terms of the number of NEFT-enabled branches and the number of NEFT transactions originated by them. .In order to popularize the e-payments in the country, the RBI, on its part, has waived the service charges to be levied on the member banks, till March 31, 2009, in respect of the RTGS and NEFT transactions. The RBI also provides, free of A STUDY OF NON PERFORMING ASSETS MANAGEMENT WITH REFERENCE TO SELECTED PUBLIC SECTOR BANKS 42

Chapter 1 INTRODUCTION

charge, intra-day liquidity to the banks for the RTGS transactions. The service charges to be levied by banks from their customers for RTGS & NEFT have, however, been deregulated and left to discretion of the individual bank.

4.

Cheque Truncation System (CTS) : The latest electronic payment product

introduced by the RBI is the Cheque Truncation System, which was launched, on a pilot basis, in the National Capital Region of New Delhi on February 1, 2008, with the participation of 10 banks. At present all the banks are participating in the system through 53 direct member banks. The main objective of the CTS is to improve the efficiency and substantially reduce the cheque processing time in the system. The traditional clearing system requiring the physical presentation of cheques in the clearing house for payment and settlement, inevitably entails consequential inefficiencies in terms of clearing time and infrastructure required. In contrast, the main advantage of cheque truncation is that it eliminates the physical presentation of the cheque to the clearing house; instead, the electronic image of the cheque would be sent to the clearing house. The CTS would enable the realisation of cheques on the same day, and provide a more cost-effective mode of settlement than manual and MICR clearing. Smaller banks, which may find it unviable to set up the infrastructure, could utilise the services of service bureaus set up for this purpose by a few larger banks.

A STUDY OF NON PERFORMING ASSETS MANAGEMENT WITH REFERENCE TO SELECTED PUBLIC SECTOR BANKS 43

Chapter 1 INTRODUCTION

5.

National Electronic Clearing Service (NECS) ; The National ECS is a product

being developed by the RBI to enable centralised processing of the ECS transactions, in contrast to the existing ECS system that has decentralised operations at 70 locations, spread all over the country. Under the National ECS, the processing of all the ECS transactions would be centralised at the National Clearing Cell at Nariman Point, Mumbai and sponsor banks would need to only upload the relative files to a web server, with online data validation facility. Destination banks would receive their inward clearing data / file at a central location, through the web server. The National ECS would leverage the Core Banking platform of the commercial banks, to enable around 50,000 core-banking-enabled branches of the various banks, to avail of this service. The system would facilitate end-to-end seamless posting of the NECS transactions in a straight-through-processing (STP) environment. This would help the users and member banks to send, receive and process the data files at one centralised place, thereby improving the efficiency of the payment system.

6. during

Negotiated Dealing System : The system which became operational Feb

2002

facilitates

the

submission

of

bids/applications

for

auctions/floatation of govt. securities through pooled terminal facility located at Regional Offices of Public Debt Offices across the country and through member

A STUDY OF NON PERFORMING ASSETS MANAGEMENT WITH REFERENCE TO SELECTED PUBLIC SECTOR BANKS 44

Chapter 1 INTRODUCTION

terminals. The system can be used for daily Repo and Reverse Repo auctions under Liquidity Adjustment Facility.

1.9 CORPORATE DEFAULTERS & NON PERFORMING ASSETS : Indian banks have started a big steps towards bad loans armed with the Insolvency and bankruptcy code (IBC). The attack on the non-performing assets (NPAs) began in 2015 when the Reserve Bank of India (RBI) stipulated norms for early recognition of stressed assets in the banking sector. Subsequently, in March 2017 the RBI came with a new deadline for banks to clean-up their balance sheets by disclosing all the hidden NPAs. While this exercise pushed banks to account for a big chunk of impaired assets, the recovery of money still remained a major concern for the sector and the policymakers. Under the insolvency & Bankruptcy code, the majority lenders agree, banks can take companies to National Company Law Tribunal (NCLT) with a request for time bound resolution plan. If the resolution process fails within a maximum of 270 days, insolvency process is initiated against the concerned company. Under a mutually agreed framework between banks and other stakeholders in the firm, the proceeds from the liquidation process will be shared. After the NDA government’s demonetisation move in November 8 many small & medium sectors struggling to repay the loan . The gross non-performing assets A STUDY OF NON PERFORMING ASSETS MANAGEMENT WITH REFERENCE TO SELECTED PUBLIC SECTOR BANKS 45

Chapter 1 INTRODUCTION (NPA) surged to Rs 6, 14,872cr as on march 2017. Despite the Reserve Bank of India (RBI) announcing numerous restructuring schemes, the bad loans have increase up to Rs 261,843cr by 135 per cent in last two years.

The Reserve Bank of India (RBI) is doing to resolve the bad loan crisis with an Internal Advisory Committee (IAC) of the RBI having identified 12 accounts of corporate loan borrowers who owe over Rs 5,000 crore each — and overall involve an amount of close to Rs 175,000 crore — for insolvency proceedings under the newly enacted Insolvency and Bankruptcy Code 2016 (IBC). The RBI committee has recommended for IBC reference all accounts with fund and non-fund based outstanding amounts in excess of Rs 5,000 crore, with 60 per cent or more (Rs 3,000 crore or more) classified as non-performing by banks as on March 31, 2016. Five banks have reported gross NPA ratios of over 15 per cent. Indian Overseas Bank’s (IOB) gross NPA ratio reads 22.42 per cent, which means Rs 22.42 out of Rs 100 lent by the bank will be classified as bad loan. Similarly, UCO bank posted NPA ratio of 17.18 per cent, United Bank of India (UBI) read 15.98 per cent, IDBI bank read 15.16 per cent and Bank of Maharashtra read 15.08 per cent. State Bank of India (SBI) managed to restrict NPAs to Rs 1.08 lakh crore for December quarter compared to Rs 1.06 lakh crore for September quarter.

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Chapter 1 INTRODUCTION

However, they posted a 134 per cent rise in Q3 net profit. While banks like Punjab National Bank (PNB) and Bank of Baroda (BoB) reported a decline in NPA.

A STUDY OF NON PERFORMING ASSETS MANAGEMENT WITH REFERENCE TO SELECTED PUBLIC SECTOR BANKS 47

 Refference :

1. http://economictimes.indiatimes.com/articleshow/52468717.cms? utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst 2. http://www.historyworld.net/wrldhis/PlainTextHistories.asp? groupid=2453&HistoryID=ac19>rack=pthc#ixzz4moDffZbj 3. https://sol.du.ac.in/mod/book/view.php?id=1225&chapterid=856 4. https://data.gov.in/keywords/performance-public-sector-banks 5. http://www.bankexamstoday.com/2017/02/banking-system-in-indiaexplain.html 6. http://www.yourarticlelibrary.com/banking/indian-banking-system-structureand-other-details-with-diagrams/23495/ 7. http://www.jagranjosh.com/general-knowledge/structure-of-banking-sectorin-india-1448530019-1 8. https://rbidocs.rbi.org.in/rdocs/notification/PDFs/45MCIRAC280610.pdf 9. http://www.mca.gov.in/MinistryV2/defaultercompanieslist.html 10.www.sbi.co.in 11.www.pnbindia.in 12.www.bankofbaroda.co.in 13.www.bankofindia.com 14.www.canarabank.in 15.www.centralbankofindia.co.in 16.www.idbi.com 17.www.indianbank.in 18.www.unionbankofindia.co.in 19.www.vijayabank.com