PROJECT REPORT

on
NPA and its impact on JK Bank.

NPA and its impact on JK Bank.

With special reference to J&K Bank Ltd (Rawalpora)

In partial fulfillment of the award for

Masters Degree in Business Administration (MBA)

Submitted by:

HUZAIF YOUNUS
EnrollNo:17036113002

Submitted to
SOUTH CAMPUS KASHMIR UNIVERSITY, ANANTNAG J&K

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 ACKNOWLEDGEMENT

First of all I would like to express my gratitude to Almighty Allah, who bestowed His blessings
upon me and gave me courage and right type of environment for completion of my project.

I am grateful to BUSINESS SCHOOL,KASHMIR UNIVERSITY for giving me the opportunity

to work on this project which may turn into a milestone for my bright future.

I have taken strenuous efforts to make this project a success. However, it would not have been
possible without the kind support and help of many individuals and the organization of J&K Bank.
I am thankful to the staff of the JK Bank for providing information all over the company and also
to Business unit RAWALPORA, Srinagar who constantly kept me directing all the time. I am
thankful to my family, friends and other people for helping in the completion of the Project Report.

This project was a great source of learning and value addition for me.

HUZAIF YOUNUS

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CONTENTS
CHAPTER-I
INTRODUCTION 5-6
CHAPTER-II
BANKING IN INDIA 7
NATIONALISATION 7-8
LIBERALIZATION 9
CHAPTER-III
J&K BANK LTD 10-11
CHAPTER-IV
MEANING OF NPA 12-13
NPA CONCEPT AND PRUDENTIAL NORMS 13-16
TYPES OF NPA 16-17
GUIDELINES FOR CLASSIFICATION
OF ASSETS 17-21
NPA SOME ASPECTS AND ISSUES 21
CHAPTER –V
LITERATURE REVIEW 22-24
CHAPTER-VI
RESEARCH METHODOLOGY 25
RESEARCH DESIGN 25
RESEARCH OBJECTIVES 25
NEED OF THE STUDY 25

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 SAMPLING AREA 26
SAMPLING SIZE 26
SAMPLING TECHNIQUE 26
DATA COLLECTION 26
STATISTICAL TOOLS 26
CHAPTER-VII
RESULTS AND DISCUSSION 27-45
CHAPTER-VIII
REASONS FOR RISE OF
NPA IN JK BANK LTD. 46-48
CHAPTER-IX
IMPACT OF NPA ON PERFORMANCE
OF BANKS 48-50
PROBLEMS IN LOAN RECOVERY 50-51
CHAPTER-X
FINDINGS 52
CHAPTER-XI
SUGGESTION, CONCLUSIONS AND LIMITATIONS 52-55
BIBLIOGRAPHY 56
ANNEXURE 57-59

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INTRODUCTION
Since the introduction of economic liberalization and financial sector reforms, banks are
under growing pressure to bring down their non-performing assets (NPA) so as to improve
their performance and viability. What is bothering the bankers today is the management of
non-performing assets. Over the period this problem has aggravated alarmingly and therefore
needs urgent remedial actions, so in this context a good number of circular
instruction/guidelines have been issued by bank/Reserve Bank of India. Reserve Bank of India
(RBI), in the year 1991, appointed a committee under the chairmanship of Sh. M.Narasimham
to examine and give recommendation for income recognition, asset classification and
provisioning of loan assets of banks and financial institutions. The committee examined the
issues and recommended that a policy of income recognition should be objective and based on
record of recovery rather than on subjective considerations. On the basis of the
recommendations of the Narsimhan committee, had issued guidelines to all scheduled
commercial banks on income recognition, assets classification and provisioning in April, 1992
which have been modified from time to time by the RBI on the basis of experience gained and
suggestions received from various quarters. The prudential norms for income recognition asset
classification and provisioning have come into effect from the accounting year 03-03-
1993.Similarly, guidelines were issued by the Reserve Bank of India in March, 1994 to All
India financial institutions viz. Industries development bank of India (IDBI),Industrial credit
and Investment corporation of India (ICICI),Industrial finance corporation of India(IFCI), Axis
Bank and Industrial Investment bank of India(IIBI). Separate guidelines were also issued by
the RBI on prudential norms to non-banking financial companies in June,1994 and to regional
rural banks in march, 1996. They have adopted these guidelines for the purpose of income
recognition and assets classification from the accounting year 1995-96. However, guidelines
relating to provisioning for regional rural banks RRBs have been made effective from the
financial year ended 31.03.1997. The definition of NPAs is also gradually becoming tough for
regional rural banks(RRBs) to cover all advances like commercial banks. Although most of-
the guidelines relating to RRBs are similar to that of commercial banks, they have been made
applicable in a phased manner for RRBs. Indian banks functionally diverse and geographically
widespread, have played a crucial role in the socio- economic progress of the country. Banks
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extend credit to different types of borrowers for many different purposes. For most customers,
bank credit is the primary source of available debt financing. For banks good loans are the
most profitable assets. Return comes in the form of loan interest, fee income and investment
and the most prominent assumed risk is credit risk. Credit risk involves inability or
unwillingness of customer or counterpart to meet commitments in relation to lending once a
loan is overdue and ceases to yield income it would become a Non Performing Asset. Proper
management and speedy disposal of NPAs is one of the most critical tasks of banks today. The
problem of Non- Performing Assets [NPAs] in banks and financial institutions has been a
matter of grave concern not only for the banks but also the real economy in general, as NPAs
can choke further expansion of credit which would impede the economic growth of the country.
Any bottleneck in the smooth flow of credit is bound to create adverse repercussions in the
economy. NPAs are not therefore the concern of only lenders but also the public at large
granting of credit for economic activities is the prime duty of banking. Apart from raising
resources through fresh deposits, borrowings and recycling of funds received back from
borrowers constitute a major part of funding credit dispensation activity. Lending is generally
encouraged because it has the effect of funds being transferred from the system to productive
purposes, which results into economic growth. However lending also carries a risk called credit
risk, which arises from the failure of borrower. Non-recovery of loans along with interest forms
a major hurdle in the process of credit cycle. Thus, these loan losses affect the bank’s
profitability on a large scale. Though complete elimination of such losses is not possible, but
banks can always aim to keep the losses at a low level. Non-performing asset (NPA) has
emerged since over a decade as an alarming threat to the banking industry in our country
sending distressing signals on the sustainability and insurability of the affected banks. The
positive results of the chain of measures affected under banking reforms by the Government
of India and RBI in terms of the two Narasimhan committee reports in this contemporary
period have been neutralized by the ill effects of this surging threat. Despite various
correctional steps administered to solve and end this problem, concrete results are eluding. It
is a sweeping and all pervasive virus confronted universally on banking and financial
institutions. The severity of the problem is however acutely suffered by nationalized banks,
followed by the SBI group, and the all India financial institutions.

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BANKING IN INDIA In the modern sense

originated in the last decades of the 18th century. Among the first banks were the Bank of
Hindustan, which was established in 1770 and liquidated in 1829-32; and the General Bank of
India, established in 1786 but failed in 1791.The largest bank, and the oldest still in existence, is
the SBI. It originated as the Calcutta Bank (Bank of Calcutta) in June 1806. In 1809, it was
renamed as the Bank of Bengal. This was one of the three banks funded by a presidency
government; the other two were the Bank of Bombay and the Bank of Madras. The three banks
were merged in 1921 to form the Imperial Bank of India, which upon India's independence, became
the State Bank of India in 1955. For many years the presidency banks had acted as quasi-central
banks, as did their successors, until the Reserve Bank of India was established in 1935, under the
Reserve Bank of India Act, 1934.In 1960, the State Banks of India was given control of eight state-
associated banks under the State Bank of India (Subsidiary Banks) Act, 1959. These are now called
its associate banks. In 1969 the Indian Govt. Nationalized 14 major private banks. In 1980, 6 more
private banks were nationalized. These nationalized banks are the majority of lenders in the Indian
economy. They dominate the banking sector because of their large size and widespread networks
.The Indian banking sector is broadly classified into scheduled banks and non-scheduled banks.
The scheduled banks are those which are included under the 2nd Schedule of the Reserve Bank of
India Act, 1934. The scheduled banks are further classified into: nationalized banks; State Bank of
India and its associates; Regional rural banks (RRBs); foreign banks; and other Indian private
sector banks. The term commercial bank refers to both scheduled and non-scheduled commercial
banks which are regulated under the Banking Regulation Act, 1949.Generally banking in India is
fairly mature in terms of supply, product range and reach-even though reach in rural India and to
the poor still remains a challenge. The government has developed initiatives to address this through
the State bank of India expanding its branch network and through the national bank for agriculture
and rural development with facilities like microfinance.

NATIONALIZATION IN THE 1960s

Despite the provisions, control and regulations of the Reserve bank of India, banks in India
except the state bank of India (SBI), continued to be owned and operated by private persons. By
the 1960s, the Indian banking industry had become an important tool to facilitate the development
of the Indian economy. At the same time, it had emerged as a large employer, and a debate had

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ensued about the nationalization of the banking industry. Indira Gandhi, the then Prime Minister
of India, expressed the intention of the government of India in the annual conference of the All
India congress meeting in a paper entitled "Stray thoughts on Bank Nationalization. Thereafter,
her move was swift and sudden. The government of India issued an ordinance ('banking companies
(acquisition and transfer of undertakings) ordinance, 1969') and nationalized the 14 largest
commercial banks with effect from the midnight of 19 July 1969. These banks contained 85 percent
of bank deposits in the country. Jayaprakash Narayan, a national leader of India, described the step
as a "masterstroke of political sagacity." within two weeks of the issue of the ordinance, the
parliament passed the banking companies (acquisition and transfer of undertaking) bill, and it
received the presidential approval on 9 August 1969.A second dose of nationalization of 6 more
commercial banks followed in 1980. The stated reason for the nationalization was to give the
government more control of credit delivery. With the second dose of nationalization, the
government of India controlled around 91% of the banking business of India. Later on, in the year
1993, the government merged new bank of India with Punjab national bank. It was the only merger
between nationalized banks and resulted in the reduction of the number of nationalized banks from
20 to 19. After this, until the 1990s, the nationalized banks grew at a pace of around 4%, closer to
the average growth rate of the Indian economy. The 14 largest commercial banks with effect from
the midnight of 19 July 1969. These banks contained 85 percent of bank deposits in the country of
Jaya Prakash Narayan, a national leader of India, described the step as a "masterstroke of political
sagacity." within two weeks of the issue of the ordinance, the parliament passed the banking
companies (acquisition and transfer of undertaking) bill, and it received the presidential approval
on 9 August 1969.A second dose of nationalization of 6 more commercial banks followed in 1980.
The stated reason for the nationalization was to give the government more control of credit
delivery. With the second dose of nationalization, the government of India controlled around 91%
of the banking business of India. Later on, in the year 1993, the government merged new bank of
India with Punjab bank of India. It was the only merger between nationalized banks and resulted
in the reduction of the number of nationalized banks from 20 to 19. After this, until the 1990s, the
nationalized banks grew at a pace of around 4%, closer to the average growth rate of the Indian
economy.

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LIBERALIZATION IN THE 1990s

In the early 1990s, the then government embarked on a policy of liberalization, licensing a
small number of private banks. These came to be known as New Generation tech-savvy banks, and
included Global Trust Bank (the first of such new generation banks to be set up), which later
amalgamated with Oriental Bank of Commerce , Unit Trust of India(UTI) BANK (since renamed
Axis Bank),Industrial Credit and Investment Corporation of India (ICICI) BANK and Housing
Development Finance Corporation (HDFC) BANK .This move, along with the rapid growth in the
Economy of India, revitalized the banking sector in India, which has seen rapid growth with strong
contribution from all the three sectors of banks, namely, government banks, private banks and
foreign banks. The next stage for the Indian banking has been set up with the proposed relaxation
in the norms for foreign direct investment, where all foreign investors in banks may be given voting
rights which could exceed the present cap of 10% at present. It has gone up to 74% with some
restrictions. The new policy shook the banking sector in India completely. Bankers, till this time,
were used to the 4–6–4 method (borrow at 4%; lend at 6%; go home at 4) of functioning. The new
wave ushered in a modern outlook and tech-savvy methods of working for traditional banks. All
this led to the retail boom in India. People demanded more from their banks and received more.

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J&K BANK LIMITED
Jammu & Kashmir Bank is the only bank in the country with majority ownership vested with a
state government – the government of Jammu & Kashmir. It is the sole banker to the Government
of Jammu & Kashmir. J&K Bank functions as a universal bank in Jammu & Kashmir and as a
specialized bank in the rest of the country. It is also the only private sector bank designated as
RBI‟s agent for banking business, and carries out the banking business of the Central government,
besides collecting central taxes for central board of direct taxes (CBDT).J&K Bank follows a two-
legged business model whereby it seeks to increase lending in its home state which results in higher
margins despite modest volumes, and at the same time, seeks to capture niche lending
opportunities on a Pan-India basis to build volumes and improve margins J&K Bank operates on
the principle of „socially empowering banking‟ and seeks to deliver innovative financial solutions
for household, small and medium enterprises. The bank, is incorporated in 1938, and is listed on
the NSE and the BSE. It has a track record of uninterrupted profits and dividends for four decades.
The J&K Bank is rated P1+, indicating the highest degree of safety by Credit Rating Information
Services of India Limited(CRISIL).
VISION
“To catalyze economic transformation and capitalize on growth.” J&K BANK‟S vision is to
engender and catalyze economic transformation of Jammu and Kashmir and capitalize from the
growth induced financial prosperity thus engineered. The Bank aspires to make Jammu and
Kashmir state the most prosperous state in the country, by helping create a new financial
architecture for the J&K economy, at the center of which will be the J&K Bank.
MISSION
The mission of J&K bank is two-fold:

● To provide the people of J&K international quality financial service and solutions and
● To be a super-specialist bank in the rest of the country.

PERFORMANCE AT A GLANCE

* The aggregate business of the bank stood at Rs.136919 Crore at the end of the financial year
2017-18.

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* The total deposits of the Bank grew by Rs.7543 Crore from Rs.72463 Crore as on 31st March,
2017 to Rs.80006 Crore as on 31st March,2018, a growth of 10.41 percent. CASA deposits of the
bank at Rs.40715 Crore constituted 50.89 percent of total deposits of the bank.

* Cost of deposits for current FY stood at 5.01 percent.

* The net advances of the Bank stood at Rs.56913 Crore as on 31st March, 2018.

* Yield on advances for the current FY stood at 8.77 percent.

* Priority sector advances (Gross) stood at Rs.21621.43 Crore as on 31st March, 2018.

* The bank effected cumulative cash recovery, up-gradation of NPA’s and technical write-off of
Rs3098.00 Crore during FY 2017-18.

* Investment portfolio of the bank stood at Rs.18880 Crore as on 31st March, 2018.

* The Gross Profit for the financial year 2017-18 stood at Rs.1381.87 Crore.

* The bank registered a Net Profit of Rs.202.72 Crore for the financial year 2017-18.

* The Net Worth of the bank stood at Rs.6161.21 Crore on 31st March 2018..

BRANCH/ATM NETWORK:

Areas Branches
Metro 170

Urban 106

Semi-Urban 152

Rural 476

Total 904 (as per annual report 2017-18)

During the financial year 2017-2018, 103 ATM’S were commissioned their by taking the number
of ATM’s to 1199 as on 31.03.2018.

FUTURE PLANNING AND TURNOVER

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To build a global brand we need to do two things- go global physically and second more
importantly, have a unique business model product offering and services standards, all of which
are globally recognized. We have taken initial step to achieve the first. As of today, after the state
government. Our second largest shareholders are foreign institutional investors with a combined
stake of almost 36%.

MEANING OF NPA

Commercial Banks’ assets are of various types. All those assets which generate periodical
income are called as Performing Assets (PA) while all those assets which do not generate
periodical income are called as Non-Performing Assets (NPA). If the customers do not repay
principal amount and interest for a certain period of time then such loans become Non-performing
assets(NPA). Thus non-performing assets are basically non-performing loans. For a bank, a Non-
Performing Asset (NPA) or bad debt is usually a loan that is not producing income. Earlier it was
largely applicable to businesses. But things have changed with banks widely extending consumer
loans (home, car, personal and education, among others) and strict asset classification norms. If a
borrower misses paying his Equated Monthly Installment (EMI) for 90 days, the loan is considered
as bad or NPA. High NPAs are a sign of bad financial health. This has wide-ranging ramifications
for a bank, especially in the stock market and money market. So, as soon as a debt goes bad, the
banks want it either made better or taken out of their books. An asset is classified as non-
performing asset (NPAs) if dues in the form of principal and interest are not paid by the borrower
for a period of 180 days. However with effect from March 2004, default status would be given to
a borrower if dues are not paid for 90 days. If any advance or credit facilities granted by bank to a
borrower become non-performing, then the bank will have to treat all the advances or credit
facilities granted to that borrower as non-performing without having any regard to the fact that
there may still exist certain advances or credit facilities having performing status.

DEFINITION 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 ‘an asset should
be classified as non-performing , if the interest and/or principal amount have not been received or
remained outstanding for one quarter from the day such income/installments has fallen due. With

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a view to moving towards international best practices and to ensure greater transparency, it has
been decided to adopt the ‘90 days’ overdue’ norm for identification of NPAs, from the year ending
March 31, 2004. Accordingly, with effect from March 31, 2004, a Nonperforming asset (NPA)
shall 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 90days, 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,
➢ Interest and/or installment of principal remains overdue for two harvest seasons but for a
period not exceeding two half years in the case of an advance granted for agricultural
purposes and
➢ Any amount to be received remains overdue for a period of more than 90days in respect
of other accounts.
As a facilitating measure for smooth transition to 90 days’ norm, banks have been advised to move
over to charging of interest at monthly rests, by April 1,2002. However, the date of classification
of an advance as NPA should not be changed on account of charging of interest at monthly rests.
Banks should, therefore, continue to classify an account as NPA only if the interest charged during
any quarter is not serviced fully within 180 days from the end of the quarter with effect from April
1, 2002 and 90 days from the end of the quarter with effect from March 31, 2004.
NPA represent bad loans, the borrowers of which failed to satisfy their repayment obligations.
Michael et al (2006)15 emphasized that NPA in loan portfolio affect operational efficiency which
in turn affects profitability, liquidity and solvency position of banks. Batra, S (2003)16 noted that
in addition to the influence on profitability, liquidity and competitive functioning, NPA also affect
the psychology of bankers in respect of their disposition of funds towards credit delivery and credit
expansion. NPA generate a vicious effect on banking survival and growth, and if not managed
properly leads to banking failures. Many researches including Chijoriga M.M. (2000)17 and Dash
et al (2010)18 showed the relationship bank failures and higher NPA worldwide.
NPA CONCEPT AND PRUDENTIAL NORMS

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 The banks, in their books, have different kind of assets, such as cash in hand, balances with
other banks, investment, loans and advances, fixed assets and other assets. The non-performing
asset or NPA concept is restricted to loans, advances, and investments. As long as an asset
generates the income expected from it and does not disclose any unusual risk other than normal
commercial risk, it is treated as a ‘Performing Asset’, and when it fails to generate the expected
income, it becomes a ‘Non-Performing asset’. In other words, a loan asset becomes a non-
performing asset (NPA) when it ceases to generate income, i.e. interest, fees, commission, or any
other dues for the bank for more than 90 days. In line with international practices and as per the
recommendations of Narsimham committee, The Reserve Bank of India (RBI) for the first time
issue certain guidelines for treating a credit facility as a non-performing asset to be followed from
the accounting year 1992-93. These guidelines though, greatly welcome, could not fully address
the problems of non-performance. RBI has subsequently been issuing number of circulars from
time to time containing instructions or guidelines to banks on matters relating to prudential norms
of income recognition, asset classification and provisioning so as to move towards greater
consistency and transparency in the published accounts. With the introduction of prudential norms,
the health-code-based system for classification of advances and all related reporting requirements
has ceased to be the subject of supervisory interest.
The attempt of RBI is to frame a policy for income recognition that is objective and based on
record or recovery rather than on any subjective consideration. Likewise, the classification of the
assets of banks has to be done on the basis of objective criterion, which would ensure a uniform
and consistent application of the norms. In addition, the provisioning has to be made on the basis
of classification of the assets, which should further be ceased on the period for which the asset has
the realizable value thereof. An attempt has been made to consolidate the various circulars issued
by RBI as of 17th July, 2004 on the above subject matter.
PRUDENTIAL ACCOUNTING NORMS
Prior to the financial sector reforms in the year 1992-93, banks used to debit interest to the
loan account on accrual basis and recognized the same as income even in accounts with poor record
of recovery. Recognizing income on accrual basis in accounts where the realization is in doubt is
not a prudential practice. As per the recommendation of the Narsimham committee, as stated
earlier, the Reserve Bank of India introduced prudential accounting norms applicable from the
financial year 1992-93, interest is not to be debited on the accrual basis but on the cash basis. The

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prudential accounting norms are based on the NPA concept, N for No income, P for provisioning
and A for asset classification. The prudential accounting norms comprise of the following:
1. Income recognition
2. Asset classification
3. Provisioning
1. Income recognition
For the purpose of income recognition, banks are required to classify their loan account into two
categories:
a. Performing Assets (PA)
b. Non-performing Assets (NPA)
If the asset is ‘performing’, income is recognized on an accrual basis. If the asset is ‘non-
performing’, interest thereon is to be recognized only on cash basis, i.e., when it is actually
realized. Banks may book dividend income on shares of corporate bodies on accrual basis,
provided dividends on the shares have been declared in the Annual General Meetings and the
owners’ right to receive the payment is established. Hence if dividend is not declared before
finalizing the accounts, it cannot be taken to income account. In respect of income from
Government securities and bonds and debenture of corporate bodies where interest rates are
predetermined, income could be booked on accrual basis, provided interest is serviced regularly
and is not in arrears.
As per the RBI guidelines, applicable from 1992-93 onwards, once a loan account is identified as
NPA, the bank should do the following:
➢ Not to charge/debit interest to the account on accrual basis.
➢ To charge interest to the account only when it’s actually received.
To reverse the amount of interest already charged on accrual basis in the accounting period to the
extent it remains un-recovered on the date of the classification it as NPA. If any performing asset
of the previous period has become NPA in the current period, all interest income relating to that
NPA credited to the Profit and Loss Account of the previous period, to the extent unrealized
interest. The unrealized interest is to be transferred from income account to interest suspense
account, where maintained, or credited to party’s account. This applies to unrealized interest on
Government guaranteed accounts too. Other items of income such as fees, commission, locker
rent, etc. are transaction-oriented and hence may be recognized as income only on realization. If

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income such as fees, commission, etc. is booked, on accrual basis, in the case of an account that
has turned NPA, the same should be reversed.
In case of NPA where interest income has ceased to accrue, the fees, commission and similar
receipts should neither be debited to the account nor credited as income and even if credited, should
be reversed or provided for to the extent to which it is uncollected.
Any amount recovered even partially towards interest in case of an account can be recognized as
income, provided such credits in the account towards interest are not out of fresh/additional
facilities sanctioned.
In case of rescheduling or negotiation of loan, the fees, interest, commission, etc., should be
recognized on accrual basis over the period of time covered by the renegotiated or rescheduled
extension of credit. Thus the income would be recognized on accrual basis from the date of
rescheduling, as in a fresh account.
2. Asset Classification
Taking into accounts the degree of well-defined credit weaknesses and the extent of dependence
on collateral security for realization, the MGCs should classify assets into standard, substandard,
doubtful and loss assets.
3. Provisioning
Based on the asset classification banks are required to make provision against the NPAs at 100%
for loss assets; 100% percent of the unsecured portion plus 20% to 50 % of the secured portion,
depending on the period for which the account has remained in doubtful category; and 10% etc.
Banks have constituted recovery cells, recovery branches, NPA management departments and fix
recovery targets.
Policies evolved and steps taken in this regard are critically examined during the annual on-site
inspection of banks. The off-site returns also provide RBI an insight in to the quality of credit
portfolio and quarterly intervals.
Introduction of prudential norms on income recognition, asset classification and provisioning
during 1992 - 93 and other steps initiated apart from brining in transparency in the loan portfolio
of the banking industry have significantly contributed towards improvement of the pre-sanction
appraisal and post-sanction supervision which is reflected in lowering of the levels of fresh
accretion of nonperforming advances of banks after 1992.
TYPES OF NPAS
NPAs are broadly divided into: a) Gross NPAs, and b) Net NPAs
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a) Gross NPAs: 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.
It can be calculated with the help of following ratio:
Gross NPAs Ratio = Gross NPAs / Gross Advances
b) Net NPAs: 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. Since in India, bank balance sheets
contain a huge amount of NPAs and the process of recovery and write off of loans is very time
consuming, the provisions the banks have to make against the NPAs according to the central bank
guidelines, are quite significant. That is why the difference between gross and net NPA is quite
high.
It can be calculated as:
Net NPAs = Gross NPAs – Provisions / Gross Advances - Provisions
The Reserve Bank of India states that, compared to other Asian countries and the US, the gross
non-performing asset figures in India seem more alarming than the net NPA figure. The problem
of high gross NPAs is simply one of inheritance. Historically, Indian public sector banks have been
poor on credit recovery, mainly because of very little legal provision governing foreclosure and
bankruptcy, lengthy legal battles, sticky loans made to government public sector undertakings,
loan waivers and priority sector lending. Net NPAs are comparatively better on a global basis
because of the stringent provisioning norms prescribed for banks in 1991 by Narasimham
committee.
NPAs have also been divided or classified into four types basing on the type of asset.
● Standard Assets: A standard asset is a performing asset. Standard assets generate continuous
income and repayments as and when they fall due. Such assets carry a normal risk and are not
NPA in the real sense. So, no special provisions are required for standard assets.
● Sub-Standard Assets: All those assets (loans and advances) which are considered as non-
performing for a period of 12 months are called as sub- standard assets.
● Doubtful Assets: All those assets which are considered as non-performing for period of more
than 12 months are called as doubtful assets.
● Loss Assets: All those assets which cannot be recovered are called as Loss Assets. These assets
can be identified by the Central bank or by the auditors.

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GUIDELINES FOR THE CLASSIFICATION OF ASSETS AS NPA
Broadly speaking, classification of assets should be done taking into account the degree of
well-defined weakness and the extent of time lag of dues.
● Banks should establish appropriate internal system to eliminate the tendency of delay or
postpone the identification of NPAs, especially in respect of high value accounts. The banks
should fix a minimum cut-off point to decide what would constitute a high value account
depending upon their business levels. Responsibility and validation levels for ensuring proper
asset classification may be fixed by the banks. The system should ensure that doubts in asset
classification due to any reason are settled through specified internal channels within one
month from the date on which the account would have been classified as NPA as per
guidelines.
● Accounts with temporary deficiencies: The Classification of an asset asNPA should be based
on record of recovery. Banks should not classify an advance account as NPA merely due to
the existence of some deficiencies which are temporary in nature such as non-availability of
adequate drawing power based on the latest available stock statement, balance outstanding
exceeding the limit temporarily, non-submission of stock statements and non-renewal of limits
on the due date, etc. In the matter of classification of accounts with such deficiencies bank may
follow guidelines.
● Banks should ensure that the drawing in the working capital accounts are covered by adequacy
of current assets, since current assets are first appropriated in times of distress. Drawing power
is required to be arrived as based on the stock statement, which is current. However,
considering the difficulties of large borrowers, stock statement relied upon the banks for
determining drawing power should not be older than the three months. The outstanding in the
account based on the drawing power calculated from the stock statement older than three
months, would be deemed as irregular. A working capital account will become NPA if such
irregular drawings are permitted in the account for a continuous period of 90 days even though
the unit may be working or borrowers’ financial position is satisfactory. In case of constraints
such as non-availability of financial statements and other data from the borrowers, the branch
should furnish evidence to show that renewal/review of credit limits is already on and would
be completed soon.In any case, delay beyond three months is not considered desirable as a
general discipline. Hence, accounts where the regular/ad hoc credit limits have not been

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 reviewed/ renewed within 90 days from the due date/date of ad hoc sanction will be treated as
NPA.
● Accounts regularized near balance sheet date: The asset classification of accounts where a
solitary or few credits are recorded before the balance sheet date should be handled with care
and without the scope of subjectivity. Where the accounts show the inherent weakness on the
basis of data available, the account should be deemed as NPA. In other genuine cases, the bank
must submit satisfactory evidence to the statutory auditors and inspecting officers about the
manner of regularization of the account to eliminate doubts on their performing status.
● Asset classification to be borrower-wise and not facility wise:
a) It is difficult to envisage the situation when only one facility to the borrower becomes
the problem credit and not others. Therefore, all the facilities granted by the bank to a
borrower will have to be treated as NPA and not the particular facility or part thereof
which has become irregular.
b) If the debits arising out of development of letter of credit or invoked guarantees are
parked in a separate account, the balance outstanding in the borrower’s principle
operating account for the purpose of application of prudential norms.
● Advances under consortium arrangement: Asset classification of accounts under consortium
should be based on the record of recovery of the individual member bank. Where the
remittances from the borrower under consortium lending arrangement are pooled with one
bank and/or where the bank receiving remittances is not parting with the share of other member
banks, the account will be treated as not serviced in the books of other member banks, and
therefore be treated as NPA. The participating banks is the consortium should, therefore,
arrange to get their share of recovery transferred from the lead bank or get an express consent
from the lead bank for the transfer of their share of recovery, to ensure proper asset
classification in their respective books.
● Accounts where there is erosion in the value of security:
a) A NPA need not go through the various stages of classification in case of serious credit
impairments and such assets should be straightway classified as doubtful or loss assets. Erosion
in the value of securities can be significant when the realizable value of the security is less
than 50 per cent of the value assessed by the bank or accepted by RBI at the time of last
inspection, as the case may be.

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 Such NPAs may be straightaway classified under doubtful category and provisioning
should be made as applicable to doubtful assets.
b) If the realizable value of the security, as assessed by the bank /approved values /RBI is
less than 10 percent of the outstanding in the borrower account, the existence of the
security should be ignored and the asset should be straight away classified as a loss asset.
It may be either written off or fully provided for the bank.

ASSET QUALITY, NPAS AND DIRECTED CREDIT

The stability of financial institution is determined mainly based on its quality of assets and
performance indicators. Quality of assets determines the survival and existence of business.
Performance is judged on the basis of profitability. The financial institutions were considered
stable during crisis period if the profitability and quality of assets is not affected. The stability of
banking sector is vital for economic growth. The commercial banks dominate the sector,
comprising more than three-fifths of the financial system assets. The financial intermediation by
banks in India has played a central role in supporting the growth process, by mobilizing savings”.
So any issues in banking sector directly impact the wellbeing of the economy. The emphasis during
post-liberalization era in Indian banking sector is focused on improving the transparency and to
integrate best practices in banking sector.
● An Asset is classified as doubtful, if in substandard category for 18 months, from the present
norm of 24 months in the first instance and eventually for 12 months.
● For the purpose of evaluating the quality of asset portfolio Government guaranteed advances
that have turned sticky should be treated as NPAs.
● To reduce the average level of net NPAs for all banks to below 5 percent by the year 2000 and
to 3 per cent by 2002. For those banks with international presence the objective should be to
reduce the gross NPAs to 5 per cent and 3 per cent by the year 2000 and 2002 respectively and
net NPAs to 3 per cent and 0 percent by these dates.
● All loan assets in the doubtful and loss categories which represent bulk of the hard core NPAs
in most banks should be identified and their realizable value determined. These assets could
be transferred to an Asset Reconstruction Company (ARC), which would, in turn, issue bonds,
equal to the realizable value of the assets transferred.
● Alternatively the banks in difficulty could issue bonds that form part of Tier II capital. This
will help the banks to blaster capital adequacy, which has been eroded because of the
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 provisioning requirements for NPAs. As the banks in difficulty may find it difficult to attract
subscribers to bonds, Government will need to guarantee these instruments, which would then
make them eligible for Statutory Liquidity Ratio(SLR) investment by banks and approved
instruments for Guaranteed Investment Certificate(GIC) and Provident Fund(PF) .
● The interest subsidy element in credit for the priority sector should be totally eliminated and
even interest rates on loans under Rs.2 Lakhs should be deregulated for scheduled commercial
banks as has been done in the case of Regional Rural Banks and Cooperative Credit
Institutions.
NPA SOME ASPECTS AND ISSUES

1. The NPAs of banks in India are considered to be at higher levels than those in other countries.
This issue has attracted attention of public as also of international financial institutions and has
gained further prominence in the wake of transparency and disclosure measures initiated by
RBI during recent years.
2. The NPA Management Policy document of SBI lays down to contain net NPAs to less than
5% of banks total loan assets in conformity with the international standard. It is, therefore
necessary that as per guidelines provided in NPA Management Policy document, every effort
be made at all levels to cut down the NPAs. All this requires greater efforts and teamwork.
3. It is essential to keep a constant watch over the non-performing assets not just to keep it
performing but also that once they become non-performing, effective measures are initiated to
get full recovery and where this is not possible, the various means are to be initiated to get rid
off the NPAs from the branch books.
4. NPAs adversely affect the wealth condition of the branch advances as also the profitability of
the branch. Some of the reasons for this are as under:
(a) Interest cannot be applied on the loan accounts classified as NPAs.
(b) The Branch has to pay interest to central office on outstanding classified as NPA.
(c) The Branch has to incur cost in supervision and follow up of such advances.
(d) Provision has to be made on NPAs at Bank level.
5. Under Income Recognition, Assets Classification and provisioning, NPA may be Sub
Standard, Doubtful or loss assets.
6. Once the assets are classified as NPA, the Branch Manager has to take all the necessary steps
to get the dues recovered there-under to maintain the good health of advances and the higher

Page | 21
 profitability at the-Branch. This requires management of NPAs in such a Planned and scientific
manner that the percentage of NPAs to the total advances will be minimum.

LITERATURE REVIEW
According to a study by Brownbridge (1998), most of the bank failures were caused by
nonperforming loans. Arrears affecting more than half the loan portfolios were typical of the failed
banks. Many of the bad debts were attributable to moral hazard: the adverse incentives on bank
owners to adopt imprudent lending strategies, in particular insider lending and lending at high
interest rates to borrowers in the most risky segments of the credit markets.
Bloem and Gorter (2001) suggested that a more or less predictable level of non-performing
loans, though it may vary slightly from year to year, is caused by an inevitable number of
‘wrongeconomic decisions by individuals and plain bad luck (inclement weather, unexpected
price changes for certain products, etc.). Under such circumstances, the holders of loans can make
an allowance for a normal share of non-performance in the form of bad loan provisions, or they
may spread the risk by taking out insurance. Enterprises may well be able to pass a large portion
of these costs to customers in the form of higher prices. For instance, the interest margin applied
by financial institutions will include a premium for the risk of nonperformance on granted loans.
At this time, banks’ non-performing loans increase, profits decline and substantial losses to capital
may become apparent. Eventually, the economy reaches a trough and turns towards a new
expansionary phase, as a result the risk of future losses reaches a low point, even though banks
may still appear relatively unhealthy at this stage in the cycle.
According to Gorter and Bloem (2002) non-performing loans are mainly caused by an
inevitable number of wrong economic decisions by individuals and plain bad luck (inclement
weather, unexpected price changes for certain products, etc.). Under such circumstances, the
holders of loans can make an allowance for a normal share of nonperformance in the form of bad
loan provisions, or they may spread the risk by taking out insurance.
PetyaKoeva (2003), his study on the Performance of Indian Banks. During Financial
Liberalization states that new empirical evidence on the impact of financial liberalization on the
Page | 22
performance of Indian commercial banks. The analysis focuses on examining the behavior and
determinants of bank intermediation costs and profitability during the liberalization period. The
empirical results suggest that ownership type has a significant effect on some performance
indicators and that the observed increase in competition during financial liberalization has been
associated with lower intermediation costs and profitability of the Indian banks.
Das and Ghosh (2003) empirically examined non-performing loans of India’s public sector
banks in terms of various indicators such ascredit growth and macroeconomic condition, and
operating efficiency indicators. Sergio (1996) in a study of non-performing loans in Italy found
evidence that, an increase in the riskiness of loan assets is rooted in a bank’s lending policy
adducing to relatively unselective and inadequate assessment of sectoral prospects.
Vradi et.al (2006), his study on´ Measurement of efficiency of bank in India concluded
that in modern world performance of banking is more important to stable the economy .In order to
see the efficiency of Indian banks we have to see the fore indicators i.e. profitability, productivity,
assets, quality and financial management for all banks includes public sector, private sector banks
in India for the period 2000 and 1999 to 2002-2003. For measuring efficiency of banks we have
adopted development envelopment analysis and found that public sectors banks are more efficient
than other banks in India
Brijesh K. Saho et.al (2007), this paper attempts to examine, the performance trends of the
Indian commercial banks for the period: 1997-98 - 2004-05. Our broad empirical findings are
indicative in many ways. First, the increasing average annual trends in technical efficiency for all
ownership groups indicate an affirmative gesture about the effect of the reform process on the
performance of the Indian banking sector. Second, the higher cost efficiency accrual of
privatebanks over nationalized banks indicate that nationalized banks, though old, do not reflect
their learning experience in their cost minimizing behavior due to X-inefficiency factors arising
fromgovernment ownership. This finding also highlights the possible stronger disciplining role
played by the capital market indicating a strong link between market for corporate control and
efficiency of private enterprise assumed by property right hypothesis. And, finally, concerning the
scale elasticity behavior, the technology and market-based results differ significantly supporting
the empirical distinction between returns to scale and economies of scale
Roma Mitra et.al (2008), A stable and efficient banking sector is an essential precondition
to increase the economic level of a country. This paper tries to model and evaluate the efficiency
of 50 Indian banks. The Inefficiency can be analyzed and quantified for every evaluated unit. The

Page | 23
aim of this paper is to estimate and compare efficiency of the banking sector in India. The analysis
is supposed to verify or reject the hypothesis whether the banking sector fulfills its intermediation
function sufficiently to compete with the global players. The results are insightful to the financial
policy planner as it identifies priority areas for different banks, which can improve the
performance. This paper evaluates the performance of Banking Sectors in India.
B.Satish Kumar (2008), in his article on an evaluation of the financial performance of
Indian private sector banks wrote Private sector banks play an important role in development of
Indian economy. After liberalization the banking industry underwent major changes. The
economic reforms totally have changed the banking sector. RBI permitted new banks to be started
in the private sector as per the recommendation of Narashiman committee. The Indian banking
industry was dominated by public sector banks. But now the situations have changed new
generation banks with used of technology and professional management has gained a reasonable
position in the banking industry.
M. Karunakar et.al (2008), Study the important aspect of norms and guidelines for making
the whole sector vibrant and competitive. The problem of losses and lower profitability of Non-
Performing Assets (NPA) and liability mismatch in Banks and financial sector depend on how
various risks are managed in their business. Besides capital to risk Weightage assets ratio of public
sector banks, management of credit risk and measures to control the menace of NPAs are also
discussed. The lasting solution to the problem of NPAs can be achieved only with proper credit
assessment and risk management mechanism. It is better to avoid NPAs at the market stage of
credit consolidation by putting in place of rigorous and appropriate credit appraisal mechanisms.
Nelson M. Waweru et.al (2009), Study that many financial institutions that collapsed in
Kenya since 1986 failed due to non-performing loans, this study investigated the causes of non-
performing loans, the actions that bank managers have taken to mitigate that problem and the level
of success of such actions. Using a sample of 30 managers selected from the ten largest banks the
study found that national economic downturn was perceived as the most important external factor.
Customer failure to disclose vital information during the loan application process was considered
to be the main customer specific factor. The study further found that Lack of an aggressive debt
collection policy was perceived as the main bank specific factor, contributing to the non
performing debt problem in Kenya.
Kevin Greenidge et.al (2010), study the evaluation of non-performing loans is of great
importance given its association with bank failure and financial crises, and it should therefore be

Page | 24
of interest to developing countries. The purpose of this paper is to build a multivariate model,
incorporating macroeconomic and bank-specific variables, to forecast non-performing loans in the
banking sector of Barbados. On an aggregate level, our model outperforms a simple random walk
model on all forecast horizons, while for individual banks; these forecasts tend to be more accurate
for longer prediction periods only.

RESEARCH METHODOLOGY
RESEARCH DESIGN
The study is exploratory in nature. Exploratory research refers to the that type of research where
the researcher aims at getting new insights into the phenomenon.

RESEARCH OBJECTIVE
Indian banking industry, which was in glory phase once upon a time, has been facing a lots of
challenges on non- performing assets at present scenario. Many banks have kept their NPA sunder
the control but some banks are not able to control their NPA levels. They are facing lots of
problems. There can be various reasons behind this NPA. Non-performing assets has been hitting
the profitability of the banks or it can be said that due to NPA, the profitability of the banks are
going down day by day. The subsidiary for this is the functioning of Debt Recovery Tribunal(DRT)
which is a judiciary for the bank for recovery amount from the default customers. Under this
consideration the present study focus on studying NPA and banking sector. For this the following
objectives were formulated:
➢ To analyze the impact of non- performing assets on banking sector.
➢ To study the position of non-performing assets in JK bank Ltd
➢ To study the reason for an asset becoming NPA
➢ To analyze the volume of NPA of JK bank ltd.

NEED OF THE STUDY

The non-performing assets that are not able to generate income for the bank are the great threat for
the banking institution. Rather than generating profit for the bank, NPA drains off the income
earned by the other performing asset by the way of paying interest to the real owner of there
sources. It affects the overall profitability of the bank adversely by affecting the return on equity

Page | 25
and return on asset. There are certain ways through which it affects the financial institutions are as
follows:
Thus, the need of the study of the NPA is must necessary due to these reasons. These reasons are
the crucial for any bank at present. One has to realize these matters and has to take corrective
action against NPA reasons, as for as possible one has to convert all the NPA accounts into PA
accounts. As far as the importance of the study is concern, without the study, one can’t identifythe
whole gamut of the NPA. To know, how the account is becoming NPA is must necessary.
After identifying the reason behind the particular NPA account, one can go for a step ahead.
Thatmeans for the step of how to convert into PA and how to prevent other account from becoming
NPA.
SAMPLING AREA: Srinagar District
SAMPLING SIZE: During the study 75 respondents were targeted for the data collection. Out
of the 75 questionnaires the data of 40 respondents was found accurate and complete for the data
analysis.

SAMPLING TECHNIQUE: Random Sampling

DATA COLLECTION: The primary data was collected through well-structured

questionnaire distributed among the respondents as well as the personal interview was carried out
with the managers of various levels across the various branches of the Jammu and Kashmir Bank
Ltd.

The data was collected from the respondents on 25 statements. Each respondent was asked
to rate the response on five-point liker scale (5 = strongly agree, 4 =agree, 3= neutral, 2= disagree,
1= strongly disagree). The reliability of the scale was checked using SPSS software. The value of
the Cronbach alpha was found to be 0.725.

Besides primary survey data the study also incorporated secondary data in form of various
reports on banking industry in India and annual reports of Jammu and Kashmir bank.

STATISTICAL-TOOLS: The data collected through survey was tabulated and analyzed
using various descriptive tools like percentage analysis.

Page | 26
RESULTS AND DISCUSSION
The data collected through the questionnaire was tabulated and analyzed using the
descriptive statistical tools like percentage. The results were represented through pie charts. The
brief description of each question along with its interpretation is given below

Q1. Do you agree that NPA affect the current profits?

Options Count Percentage (%)

Agree 24 60%
Strongly agree 8 20%
Disagree 4 10%
Strongly disagree 4 10%

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INTERPRETATION: As per above analysis it has been found that 60 per cent of respondents
agree while 20 per cent strongly agree , 10 per cent disagree and 10 per cent strongly disagree to
the fact that NPA current profits.

Q2. NPA also affect the future stream of profits?

Options Count Percentage (%)

Agree 20 50%
Strongly agree 14 35%
Disagree 4 10%
Strongly disagree 2 5%

INTERPRETATION: As per above analysis it has been found that 50per cent of the respondents
agree while 35 per cent strongly agree, 10per cent disagree and 5per cent strongly disagree to the
above fact that NPA affects future stream of profits.

Q3. NPA leads to liquidity problems for a bank?

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 Options Count Percentage (%)
Agree 20 50%
Strongly agree 8 20%
Disagree 8 20%
Strongly disagree 4 10%

INTERPRETATION: As per above analysis, it has been found that 50per cent of the respondents
agree, 20per cent strongly agree, 20per cent disagree and 19per cent strongly disagree to the above
fact that NPA leads to liquidity problems for a bank.

Q4. NPA leads to the increase in the indirect expenses?

Options Count Percentage (%)
Agree 17 42.5%
Strongly agree 10 25%
Disagree 10 25%
Strongly disagree 3 7.5%

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INTERPRETATION: As per above analysis, it has been found that 42.5per cent agree while
25per centstrongly agree, 25per cent disagree and 7.5per cent strongly disagree to the above fact
that NPA leads to the increase in direct expenses.

Q5. NPA leads to the wastage of resources?

Options Count Percentage (%)
Agree 19 47.5%
Strongly Agree 8 20%
Disagree 10 25%
Strongly Disagree 3 7.5%

INTERPRETATION: As per above analysis, it has been found that 47.5per centagree while
20per cent strongly agree, 25per cent disagree and 7.5 per cent strongly disagree to the above fact
that NPA leads to wastage of resources.

Q6. NPA damages the brand image?

Page | 30
 Options Count Percentage (%)
Agree 18 45%
Strongly Agree 12 30%
Disagree 7 17.5%
Strongly Disagree 3 7.5%

Interpretation:As per the above analysis it has been found that 45per cent of the respondents
agree while 30per cent strongly agree, 17.5per cent of the respondents disagree and 7.5per cent
strongly disagree to the statement that NPA affects Brand image.

Q7. NPA impedes the operations of the business?

Options Count Percentage (%)

Agree 17 43%
Strongly agree 14 35%
Disagree 6 15%
Strongly disagree 3 7%

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 INTERPRETATION: As per above analysis, it has been found that 43per cent agree while
35per centstrongly agree, 15per cent disagree and 7per cent strongly disagree to the above fact that
NPA impedes operations of the bank.

8. Low NPA leads can help the Banks in devising the customer oriented schemes?
Options Count Percentage (%)
Agree 9 22%
Strongly Agree 15 38%
Disagree 12 30%
Strongly Disagree 4 10%

INTERPRETATION:As per above analysis, it has been found that 38per cent strongly agree
while 30per cent disagree, 22per cent agree and 10per cent strongly disagree to the above fact that
low NPA can help banks in devising customer oriented schemes

Q9. NPA affects the budgetary policy of the bank?

options Count Percentage (%)

Agree 19 47
Strongly agree 10 25
Disagree 8 20
Strongly Disagree 3 8

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INTERPRETATION: As per above analysis, it has been found that 47per cent agree while 25per
centstrongly agree, 20per cent disagree and 8per centstrongly disagree to the above fact that NPA
affects the budgetary policy of the bank

Q10. NPA hinders the growth of the bank?

Options Count Percentage (%)

Agree 17 43%
Strongly Agree 12 30%
Disagree 5 12%
Strongly Disagree 6 15%

INTERPRETATION: As per above analysis, it has been found that 43per cent agree while 30per
cent strongly agree, 12per cent disagree and 15per cent strongly disagree to the above fact that
NPA hinders the growth of the bank.

Page | 33
Q11. NPA leads the banks to distribute losses to other borrowers by sharing by interest
rates?

Options Count Percentage (%)

Agree 8 20%
Strongly Agree 6 15%
Disagree 21 53%
Strongly Disagree 5 12%

INTERPRETATION: As per above analysis, it has been found that 15per cent strongly agree
while 53per cent disagree, 12per cent strongly disagree and 20per cent agree to the above fact that
NPA leads the banks to distribute losses to other borrowers by sharing high interest rates.

Q12. NPA loans epitomize Bad investment?

Options Count Percentage (%)

Agree 14 35%
Strongly agree 11 28%
Disagree 13 32%
Strongly disagree 2 5%

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INTERPRETATION: As per above analysis, it has been found that 35per cent agree while 28per
cent strongly agree, 32per cent disagree and 5per cent strongly disagree to the above fact that NPA
loans epitomize bad investment.

Q.13 Liquidity constraints for banks in paying depositors?

Options Count Percentage (%)
Agree 14 35%
Strongly Agree 8 20%
Disagree 14 35%
Strongly Agree 4 10%

INTERPRETATION: As per above analysis, it has been found that 35per cent agree while 20per
cent strongly agree, 35per cent disagree and 10per cent strongly disagree to the above fact that
NPA constraints banks in paying depositors.

Q14. NPA leads to credit risk management?

options Count Percentage (%)

Agree 19 48%
Page | 35
 Strongly Agree 11 27%
Disagree 6 15%
Strongly disagree 4 10%

INTERPRETATION: As per above analysis, it has been found that 48per cent agree while
27per cent strongly agree, 15per cent disagree and 10per cent strongly disagree to the above fact
that NPA leads to credit risk management.

Q15. Banks get preoccupied with recovery procedures rather than concentrating on
expanding business?

Options count Percentage (%)

Agree 17 43%
Strongly agree 16 40%
Disagree 4 10%
Strongly disagree 3 7%

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INTERPRETATION: As per above analysis, it has been found that 43per cent agree while 40per
cent strongly agree, 10per cent disagree and 7per cent strongly disagree to the above fact that banks
get pre-occupied with recovery procedures rather than concentrating on expanding.

Q16. NPA leads to change in banking sentiments which may hinder credit expansion in
productive purposes?
Options Count Percentage (%)
Agree 13 33%
Strongly agree 15 37%
Disagree 9 23%
Strongly disagree 3 7%

INTERPRETATION: As per above analysis, it has been found that 33per cent agree while 37per
cent strongly agree, 23per cent disagreeand 7per cent strongly disagree to the above fact that NPA
leads to change in banking sentiments which may hinder credit expansion in productive purposes.

Q17. NPA leads banks to incline towards risk-free investment leading to fewer Profits?

Options Count Percentage (%)

Agree 14 35%
Strongly agree 10 25%
Disagree 16 40%
Strongly disagree 0 0%

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INTERPRETATION: As per above analysis, it has been found that 35per cent agree while 25per
cent strongly agree, 40per cent disagree and 0per cent strongly disagree to the above fact that NPA
leads banks to incline towards risk free investment leading to fewer profits.

Q18. Higher NPA leads banks to frame strict norms for governing loan?
Options Count Percentage (%)
Agree 9 23%
Strongly Agree 19 47%
Disagree 11 28%
Strongly Disagree 01 02%

INTERPRETATION: As per above analysis, it has been found that 23per cent agree
while 47per cent strongly agree, 28per cent disagree and 2per cent strongly disagree to the above
fact that higher NPA leads banks to frame strict norms for governing loans.

Q19. NPA is so dangerous that it may lead to Bankruptcy?

Options Count Percentage (%)
Agree 17 43%
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 Strongly Agree 8 20%
Disagree 11 27%
Strongly disagree 4 10%

INTERPRETATION: As per above analysis, it has been found that43% agree while 20%
strongly agree, 27% disagree and 10% strongly disagree to the above fact that NPA is so dangerous
that it may lead to bankruptcy.

Q20. NPA lead owners to receive lessmarket return on their capital?

Options Count Percentage
Agree 17 43%
Strongly Agree 10 25%
Disagree 13 32%
Strongly Disagree 0 0%

INTERPRETATION: As per above analysis, it has been found that 43per cent agree while 25per
cent strongly agree, 32per cent disagree and 0per cent strongly disagree to the above fact that NPA
leads owners to receive less market return on their capital.
Page | 39
Q21. If the BANK fails, owners lose their Assets?

Options Count Percentage (%)

Agree 8 20%
Strongly agree 11 28%
Disagree 19 47%
Strongly Disagree 2 05%

INTERPRETATION: As per above analysis it has been found that 20per cent of the respondents
agree while 28per cent strongly agree, 40per cent disagree and 5 per cent strongly disagree to the
above statement that if the bank fails owners lose their assets

Q22. NPA lead depositors not to receive market return on their capital?
Options Count Percentages (%)
Agree 16 40%
Strongly Agree 12 30%
Disagree 09 23%
Strongly Disagree 03 07%

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INTERPRETATION: As per above analysis, it has been found that 40per cent agree while 30per
cent strongly agree, 23per cent disagree and 7per cent strongly disagree to the above fact that NPA
leads depositors not to receive market return on their capital.

Q23. If the bank fails, depositors lose their savings?

Options Count Percentage (%)

Agree 11 31%
Strongly agree 8 19%
Disagree 20 49%
Strongly Disagree 01 01%

INTERPRETATION: As per above analysis, it has been found that 31per cent agree while 19per
cent strongly agree, 49per cent disagree and 1per cent strongly disagree to the above fact that if
the bank fails, depositors lose their savings.

Q24. NPA leads to slowdown in the growth of GDP?

Options Count Percentage (%)
Agree 17 43%
Strongly agree 12 30%
Disagree 11 27%
Strongly Disagree 00 00%

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 INTERPRETATION: As per above analysis, it has been found that 43per cent agree while
30per cent strongly agree, 27per cent disagree and 0per cent strongly disagree to the above fact
that NPA leads to slow down in the growth of economy.

Q25. NPA leads to market depression?

Options Count Percentage (%)
Agree 13 33%
Strongly Agree 09 22%
Disagree 11 28%
Strongly Disagree 07 17%

INTERPRETATION: As per above analysis, it has been found that 33per cent agree while
22per cent strongly agree, 28per cent disagree and 17per cent strongly disagree to the above fact
that NPA leads to market depression.

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Table I showing Deposits and Advances of JK bank

Year Deposits Advances

2011-2012 53,346.90 cr 33,077.42 cr
2012-2013 64,220.62 cr 39,200.41 cr
2013-2014 69,335.86 cr 46,384.60 cr
2014-2015 65,756.18 cr 44,585.81 cr
2015-2016 69,390.12 cr 50,193.21 cr
2016-2017 72,463.09 cr 49,816.11 cr

Table II showing gross NPA to gross Advances Ratio

YEAR NPA
2012-2013 1.62%
2013-2014 1.66%
2014-2015 5.97%
2015-2016 8.32%
2016-2017 12.53%

Chart II depicting Gross NPA to Gross Advances Ratio of JK bank over the last 5 financial years

INTERPRETATION: There is more than seven-fold increase in gross NPAs betwe

en 2012
and 2017. It is significant to note that during 2013-14 the ratio of gross NPAs to gross advances
was only 1.66 per cent, steep change by 5.97 per cent in 2014-15, 8.32 per cent in 2015-16 but
worsened to 12.53 per cent during 2016-17. This is mainly attributed to deterioration in asset
quality of the bank in the form of rising substandard/doubtful assets.
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Table III showingNet NPA TO Net Advances Ratio

YEAR NPA
2012-13 0.14%
2013-14 0.22%
2014-15 2.77%
2015-16 4.31%
2016-17 8.26%

Chart III depicting Net NPA to Net Advances Ratio over the last 5 financial years

INTERPRETATION: As per the above analysis it has been found that the net NPA to net
advances ratio, which was 0.14 per cent in 2012-13, 2.77 per cent in 2014-15, 4.31 per cent in
2015-16 and the same worsened to 8.26 per cent in 2016-17.

Table IV showing Dividend paid to shareholders from the last six years

Years %age of dividend Price per share

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 2010-11 260% 2.60
2011-12 335% 3.35
2012-13 500% 5.00
2013-14 500% 5.00
2014-15 210% 2.10
2015-16 175% 1.75

INTERPRETATION: The above analysis depicts that The dividend paid for 2010-11, 2011-12,
2012-13 and 2013-14 was 260 per cent (that is, Rs 2.60 per share), 335 per cent (that is Rs 3.35
per share), 500 per cent (that is, Rs 5.00 per share), 500 per cent(that is, Rs 5.00 per share).The
dividend paid for 2014-15 is 210 percent compared to 2013-14 indicates a net decrease of 58 per
cent over the previous year. While as dividend paid for 2015-16 is 175 percent , when compared
to 2013-14 indicates a net decrease of 65 percent.

Table V showing mounting Gross NPA level of JK Bank (in crores)

Year Amount
2010-2011 519
2011-2012 517
2012-2013 644
2013-2014 783
2014-2015 2764

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Chart V depicting the position of NPAs in Crores of J&K over the last 5 years

INTERPRETATION :The above analysis reveals that the bank is saddled with mounting gross
NPAs which were recorded at a whopping amount of Rs 2,764 Crores in 2014-15 as against Rs
783 Crores during 2013-14, indicating more than two and a half-fold increase over the relevant
previous year. This state of affairs has put the bank in a tight spot. It is for the first time in the
history of the bank to witness such soaring bad assets. A peep into the previous Annual Reports of
the bank reveals that during the FYs 202012-13, 2011-12 and 2010-11 gross NPAs level remained
only at Rs 644 Crores, Rs 517 Crores and Rs 519 Crores respectively.

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REASONS FOR RISE IN NPAs OF J&K BANK LTD
The banking sector has been facing the serious problems of the rising NPAs. But the
problem of NPAs is more in public sector banks when compared to private sector banks and foreign
banks. The NPAs in PSB are growing due to external as well as internal factors.

External factors
Ineffective recovery tribunal: The Govt. has set of numbers of recovery tribunals, which works
for recovery of loans and advances. Due to their negligence and ineffectiveness in their work the
bank suffers the consequence of non-recover, their by reducing their profitability and liquidity.

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

Natural calamities: This is the measure factor, which is creating alarming rise in NPAs of the
PSBs. every now and then India is hit by major natural calamities thus making the borrowers
unable to payback there loans. Thus the bank has to make large amount of provisions in order to
compensate those loans, hence end up the fiscal with a reduced profit. Mainly ours farmers depends
on rain fall for cropping. Due to irregularities of rain fall the farmers are not to achieve the
production level thus they are not repaying the loans. It could be well witnessed by the fact that
one of the strong reasons for poor performance in NPAs of jk bank was Kashmir hit by floods

Industrial sickness: Improper project handling , ineffective management , lack of adequate

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

Lack of demand: Entrepreneurs in India could not foresee their product demand and starts
production which ultimately piles up their product thus making them unable to pay back the money
they borrow to operate these activities. The banks recover the amount by selling of their assets,
which covers a minimum label. Thus the banks record the non recovered part as NPAs and has to
make provision for it.

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 Change in Govt. policies: With every new govt. banking sector gets new policies for its
operation. Thus it has to cope with the changing principles and policies for the regulation of the
rising of NPAs. e.g. The fallout of handloom sector is continuing as most of the weavers Co-
operative societies have become defunct largely due to withdrawal of state patronage. The
rehabilitation plan worked out by the Central govt. to revive the handloom sector has not yet been
implemented. So the over dues due to the handloom sectors are becoming NPAs.

Internal factors
Defective Lending process: There are three cardinal principles of bank lending that have been
followed by the commercial banks since long. i) Principles of safety ii) Principle of liquidity iii)
Principles of profitability. Principlesof safety means that the borrower is in a position to repay the
loan both principal and interest. The repayment of loan depends upon the borrowers:

a. Capacity to pay
b. Willingness to pay.
Capacity to pay depends upon:
1. Tangible assets. 2. Success in business
Willingness to pay depends on:
1. Character 2. Honest 3. Reputation of borrower
The banker should, therefore take utmost care in ensuring that the enterprise or business for which a loan
is sought is a sound one and the borrower is capable of carrying it out successfully. He should be
a person of integrity and good character.

Inappropriate technology: Due to inappropriate technology and management information

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

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

• Banks should consider the borrowers own capital investment.

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• It should collect credit information of the borrowers from bankers, Enquiry from market/segment
of trade, industry, business, From external credit rating agencies.

• Analyze the balance sheet True picture of business will be revealed on analysis of profit/loss a/c
and balance sheet.

• Purpose of the loan when bankers give loan, he should analyze the purpose of the loan. To ensure
safety and liquidity, banks should grant loan for productive purpose only. Bank should analyze the
profitability, viability, long term acceptability of the project while financing.

Poor credit appraisal system: Poor credit appraisal is another factor for the rise in NPAs. Due
to poor credit appraisal the bank gives advances to those who are not able to repay it back. They
should use good credit appraisal to decrease the NPAs.

Managerial deficiencies: The banker should always select the borrower very carefully and should
take tangible assets as security to safe guard its interests. When accepting securities banks should
consider the 1.Marketability 2. Acceptability3. Safety4. Transferability. The banker should follow
the principle of diversification of risk based on the famous maxim “do not keep all the eggs in one
basket”; it means that the banker should not grant advances to a few big farms only or to
concentrate them in few industries or in a few cities. If a new big customer meets misfortune or
certain traders or industries affected adversely, the overall position of the bank will not be affected.
Like OSCB suffered loss due to the OTM Cuttack, and Orissa hand loom industries. The biggest
defaulters of OSCB are the OTM(117.77lakhs), and the handloom sector Orissa hand loom WCS
ltd (2439.60lakhs).

Absence of regular industrial visits the irregularities in spot visit also increases the NPAs.
Absence of regularly visit of bank officials to the customer point decreases the collection of interest
and principals on the loan. The NPAs due to willful defaulters can be collected by regular visits.

IMPACT OF NPAs ON PERFORMANCE OF BANKS : The

three letters “NPA” strike terror in banking sector and business circle today. NPA is short form of
“Non-Performing Asset”. The dreaded NPA rule says simply this: when interest or other due to a
bank remains unpaid for more than 90 days, the entire bank loan automatically turns a non-
performing asset. The recovery of loan has always been problem for banks and financial
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institution. To come out of these, the banks first needs to think is it possible to avoid NPA, if not
be then it is to look at the factor responsible for it and managing those Factors. In the globalization
era, banking and financial sectors get high priority. Indian banking sector is having a serious
problem due to Non-performing assets. The earning capacity and profitability of the bank are
highly affected. While the primary function of banks is to lend funds as loans to various sectors
such as agriculture, trade, personal loans, housing loans etc., In recent times the banks have become
very careful in increasing loans because of the main reason of increasing non-performing assets
(NPAs). NPA is cleared as an advance for which interest or repayment of principal or both remain
outstanding for a period of more than 90 days. The level of NPA act as an indicator viewing the
bankers credit risks and competence of allocation of resource. Non-performing Asset is an
important factor in the analysis of financial performance of a bank as it results in decreasing
boundary and higher provisioning requirement for doubtful debts. Various banks from different
groups mutually provide advances to different sectors like agricultural, priority sector, public
sector and others. The accumulation of huge non-performing assets in banks has assumed great
importance. The depth of the problem of bad debts was assumed great importance, which was first
realized only in early 1990s. The magnitude of NPAs in banks and financial institutions is over
Rs.1,50,000/- crores. While gross NPA reflects the quality of the loans made by banks, net NPA
shows the actual burden of banks. Now it is increasingly evident that the major defaulters are the
big borrowers coming from the non-priority sector. The banks and financial institutions have to
take the initiative to reduce NPAs in a time bound strategic approach. Public sector banks figure
prominently in the debate not only because they dominate the banking industries, but also since
they have much larger NPAs compared with the private sector banks. This raises a concern in the
industry and academics because it is generally felt that NPAs reduce the profitability of a bank,
weaken its financial health and erode its solvency. For the recovery of NPAs abroad framework
has evolved for the management of NPAs under which several options are provided for debt
recovery and restructuring. Banks and Financial Institutions have the freedom to design and
implement their own policies for recovery and write-off incorporating compromise and negotiated
settlements. The impact of NPAs on banks is significantly visible on the following areas:

PROFITABILITY
NPA means booking of money in terms of bad asset, which occurred due to wrong choice of client.
Because of the money getting blocked the prodigality of bank decreases not only by the amount

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of NPA but NPA lead to opportunity cost also as that much of profit invested in some return
earning project/asset. So, NPA doesn’t affect current profit but also future stream of profit, which
may lead to loss of some long-term beneficial opportunity. Another impact of reduction in
profitability is low Return on Investment (ROI), which adversely affect current earning of bank.
LIQUIDITY
Money is getting blocked, decreased profit lead to lack of enough cash and which lead to
borrowing money for shortest period of time which leads to additional cost to the company.
Difficulty in operating the functions of bank such as routine payments and dues is another cause
of NPA due to lack of money.
INVOLVEMENT OF MANAGEMENT
Time and efforts of management is another indirect cost which bank has to bear due to NPA. Time
and efforts of management in handling and managing NPA would have diverted to some fruitful
activities, which would have given good returns. Now a day’s banks have special employees to
deal and handle NPAs, which is additional cost to the bank.
CREDIT LOSS
Bank is facing problem of NPA then it adversely affects the value of bank in terms of market
credit. 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.

PROBLEMS IN LOAN RECOVERY

1. Inadequate security and Erosion in value of security: Generally, banks tend to find that there is
a major gap in the valuation of the security, as carried out at the time of providing the loan and at
the time of loan recovery. The value of the security has generally deteriorated over the period
and according to experts, it may further deteriorate by almost 10-50% if quick action is not taken
for its immediate sale.

2. Political interferences: Political interference in the day -to-day functioning of public sector
banks created a number of problems for them. The populist policies of the national level
politicians, such as waiver in repayment only added to these problems.

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3. Slow legal procedure: Before the establishment of DRTs in 1993, the banks had to approach the
normal courts to recover their dues. There were provisions under various acts which hampered the
smooth takeover and sale of secured assets. The legal process could take years to be completed,
with the borrower having ample scope for delaying the takeover of assets. A number of loopholes
provided the borrower with opportunities to delay or ignore repayment of loans. During this period,
it was said by some unscrupulous businessmen that - "there is no difference between equity and
debt - you never have to repay either of them ".

4. Swamping of Debt Recovery Tribunals(DRTs) with cases: Once DRTs were established to
quicken the pace of recovery procedures, the pace of recovery improved quite a bit. However, the
DRTs were soon drowned in the ever increasing number of cases. The pending number of cases
with the DRTs increased manifold during the period 1993-2002.

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FINDINGS

➢ J&K bank has witnessed highest ratio of Non-Performing Assets (NPA) to net advances
stood as 8.26% on 31st march 2017. Compared with 4.31% as on 31st March 2016 and
2.77% as on 31st march 2015.
➢ J&K bank has witnessed highest ratio of Non-Performing Assets (NPA) to net gross
advances stood at 12.53% as on 31st march 2017. Compared with 8.32% as on 31st
December 2016 and 5.97% as on 31st march 2015.
➢ The Jammu and Kashmir Bank has recorded a conspicuous growth in deposits from
2012(53,349.90 cr) to 2014(69,335.86 cr) which is the back bone of any bank but has got
decrease in deposits in the year ending 2015 March 31st (65,756.18 cr) and afterwards it
has increased again in 2016 and 2017 with amount (69390.12 cr) and (72,463.09 cr)
respectively.
➢ The net NPA was maximum in 2016-2017 that is 8.26% and it was minimum in 2012-
2013 that is 0.14%.
➢ The Gross NPA ratio was minimum in 2012-2013 that is 1.62% and it was maximum in
2016-2017 that is 12.53%.
➢ JK Bank has paid lowest dividend to its shareholders from the last 5 years in the year 2015-
16 at 175% (1.75 Rs. Per share) pertaining to other relevant previous years as: 2014-15 at
210% (2.10 Rs. Per share), 2013-2014 at 500% (5.Rs per share), in 2012-2013 at 500% (5
Rs. Per share) and in 2011-2012 at 335% (3.35 Rs. Per share).
➢ Political instability is more affected to become an account NPA as respondents strongly
agree that they are affected by the shutdown of their business.
➢ Natural calamities is more affected to become an account as NPAs which could be clearly
seen in the previous year ending 31st March 2015 from deposits to Net NPA level.

SUGGESTIONS, CONCLUSIONS AND LIMITATIONS

SUGGESTIONS
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On the basic finding following suggestions has been provided t the concern:

❖ The bank’s Management Committee should thoroughly investigate any investment before
committing money to it. It should learn about the investment, check and verify its legitimacy
and follow-up on the background of the individual or organization;
❖ Appropriate credit appraisal and risk management mechanism is badly needed. The bank’s
Integrated Risk Management Committee should put into operation an early warning system,
appoint a Nodal Office for recovery and monitor recoveries efficiently and effectively. It
should recognize financial distress early, take prompt steps to resolve it and ensure fair
recovery for lenders/investors
❖ The ‘Bank Management’ should pursue a policy that would enable the mobilization of low-
cost deposits and their deployment in highly productive, but credit-starved sectors of the J&K
economy. These sectors, apart from being high-yielding, would accelerate the desired
diversification of the Bank’s Credit Portfolio and also help fulfill the bank’s priority sector
obligations
❖ A separate periodic audit, under the supervision of bank’s Audit Committee, is required for
NPAs and the external auditor should periodically submit a special report
❖ More importantly, the government which is the main stakeholder to the tune of 53 per cent
equity holdings, should concern itself first why bank’s NPAs are mounting and accordingly
should take appropriate measures for the purpose. Unfortunately, bureaucracy is aware of what
is happening in the organization but it does not bother to see the problems in it.
❖ A careful and rigorous appraisal f bank assets quality in relation to financial situations has to
be made regularly
❖ The overall Banking Environment should be improved through reduction of Government
intervention in Credit Management
❖ The Jammu and Kashmir bank ltd should lay strategies to boost doubtful assets as NPA volume
of these assets is increasing year by year
❖ The rate of interest charged should be brought down so the Bank should work only on the
strategies to fix up the competitive interest Rates to satisfy the customers
❖ The bank should validate the financial capability of the customers at present and future before
issuing the loans

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❖ The bank should employ a credit monetary policy that could analyze the reasons for high NPA.
The credit section should carefully watch the warning signals viz. Non Payment of Quarterly
interest, Dishonor of cheque
❖ The Bank should practice loan screening before advancing loans to Beneficiaries to vacillate
the necessity of Loan
❖ Bank should employ the following methods for management of NPA :
● Compromise with customer
● Legal remedies
● Regular training program to Employees
● Recovery Camps
● The Bank should maintain close contact with the borrowers
● Proper weightage should be given to the location, condition and marketing title and
possession of security mortgage
● Bank should maintain a special recovery cell for recovery of Non-Performing Assets
● Conduct persuasive action to customers having the potential to pay their Loan
● Operating staff credit skills should be upgraded
● Bank should prevent diversion of funds by the promoters
● The Bank should strengthen banking supervision, accounting and auditing standards.

CONCLUSIONS

Risk is part of lending, but it can be minimized by taking precautions. NPA’s can be
reduced, if appropriate steps are taken at appropriate time. Hence banks must take appropriate
steps for reducing NPA’s. It is not possible to eliminate totally NPAS in the banking business but
can be minimized. It is always wise to follow the proper policy appraisal, supervision and follow-
up of advances to avoid NPAs. The banks should not only take steps for reducing present NPAs,
but necessary precautions should also be taken to avoid future NPAs. Banks should reduce their
bench marks prime lending rate and encourage credit to the key sectors

For any bank to serve in this competitive world it has to ensure its Non- Performing Assets are
minimizing by improving new strategies on credit collection from the customers

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As per the analysis, Jammu and Kashmir Bank Ltd, Non -Performing Assets average level is 1.18%
which is above the RBI permissible limit. But still it is acceptable while looking in the competition
in the market. A significant progress has been made till now in NPA management in J&K bank
ltd. But still a lot has to be done

LIMITATIONS

1. This being an academic study suffers from time constraints. Thus, time factor was major
limitation.
2. The sample size was 40 only.
3. The study is confined to Srinagar city. Hence, the results might not be applicable for other
districts.

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BIBLIOGRAPHY:
BOOKS
➢ Kothari C.R, Research Methodology: Methods and Techniques, New Age International,
2004.
➢ Malhotra Naresh K, Marketing Research- An Applied Orientation; Edition-Fourth;
Publication-Pearson Education India, 2010

Newspapers and Magazines

➢ Annual Reports of J&K bank ltd

➢ The Economic Times
➢ Business Standard
➢ Deccan Chronicle
➢ The Hindu

WEBSITES
➢ http://rbi.org.in/scripts/AnnualPublications.aspx?head=Trend and Progress of Banking in India
➢ http://rbi.org.in/scripts/AnnualPublications.aspx?head=Statistical Tables Relating to Banks of
India
➢ http://rbi.org.in/scripts/NotificationUser.aspx
➢ http://en.wikipedia.org/wiki/Banking_in_India
➢ http://www.ibef.org/industry/Banking.aspx
➢ http://www.bankingindiaupdate.com/general.html

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 ANNEXURE
QUESTIONNAIRE
I the student of MBA-General. (3rd sem) of the Chandigarh University, Gharuan ,Punjab would
like you to express your opinion about Impact of NPA’s on Banks.

The information sought will be used for the academic purpose only and will be kept confidential

Kindly fill the questionnaire as per the instructions given.

A) Name: _______________________________________________________

B) Designation____________________________________________________

C) Branch Address________________________________________________

D) E-mail Id______________________________________________________

____________________________________________________

1. Do you agree that NPA affect the current profits?

i) Agree ii) Strongly Agree iii) Neutral iv) Disagree v) Strongly Disagree

2. NPA also affect the future stream of profits?

i) Agree ii) Strongly Agree iii) Neutral iv) Disagree v) Strongly Disagree

3. NPA leads to liquidity problems for a bank?

i) Agree ii) Strongly Agree iii) Neutral iv) Disagree v) Strongly Disagree

4. NPA leads to the increase in the indirect expenses?

i) Agree ii) Strongly agree iii) Neutral iv) Disagree v) Strongly disagree

5. NPA leads to the wastage of resources?

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 i) Agree ii) Strongly agree iii) Neutral iv) Disagree v) Strongly disagree

6. NPA damages the brand image?

i) Agree ii) Strongly Agree iii) Neutral iv) Disagree v) Strongly Disagree

7. NPA impedes the operations of the business?

i) Agree ii) Strongly Agree iii) Neutral iv) Disagree v) Strongly Disagree

8. Low NPA leads can help the Banks in devising the customer oriented schemes?

i) Agree ii) Strongly Agree iii) Neutral iv) Disagree v) Strongly Disagree

9. NPA affects the budgetary policy of the bank?

i) Agree ii) Strongly Agree iii) Neutral iv) Disagree v) Strongly Disagree

10. NPA hinders the growth of the bank?

i) Agree ii) Strongly agree iii) Neutral iv) Disagree v) strongly disagree

11. NPA leads to banks to distribute losses to other borrowers by sharing by interest rates?

i) Agree ii) Strongly Agree iii) Neutral iv) Disagree v) Strongly Disagree

12. NPA loans epitomize Bad investment?

i) Agree ii) Strongly Agree iii) Neutral iv) Disagree v) Strongly Disagree

13. Liquidity constraints for banks in paying depositors?

i) Agree ii) Strongly Agree iii) Neutral iv) Disagree v) Strongly Disagree

14. NPA leads to credit risk management?

i) Agree ii) Strongly Agree iii) Neutral iv) Disagree v) Strongly Disagree

15. Banks get preoccupied with recovery procedures rather than concentrating on expanding
business?

i) Agree ii) Strongly Agree iii) Neutral iv) Disagree v) Strongly Disagree

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16. NPA leads to change in banking sentiments which may hinder credit expansion in productive
purposes?

i) Agree ii) Strongly Agree iii) Neutral iv) Disagree v) Strongly Disagree

17. NPA leads banks to incline towards risk-free investment leading to fewer Profits?

i) Agree ii) Strongly agree iii) Neutral iv) Disagree v) Strongly Disagree

18. Higher NPA leads banks to frame strict norms for governing loan?

i) Agree ii) Strongly Agree iii) Neutral iv) Disagree v) Strongly Disagree

19. NPA is so dangerous that it may lead to Bankruptcy?

i) Agree ii) Strongly Agree iii) Neutral iv) Disagree v) Strongly Disagree

20. NPA lead owners to receive a market return on their capital?

i) Agree ii) Strongly Agree iii) Neutral iv) Disagree v) Strongly Disagree

21. If the BANK fails, owners lose their Assets?

i) Agree ii) Strongly Agree iii) Neutral iv) Disagree v) Strongly Disagree

22. NPA lead depositors not to receive market return on their capital?

i) Agree ii) Strongly Agree iii) Neutral iv) Disagree v) Strongly Disagree

23. If the bank fails, depositors lose their savings?

i) Agree ii) Strongly Agree iii) Neutral iv) Disagree v) Strongly Disagree

24. NPA leads to slowdown in the growth of GDP?

i) Agree II) Strongly Agree iii) Neutral iv) Disagree v) Strongly Disagree

25. NPA leads to market depression?

i) Agree ii) Strongly Agree iii) Neutral iv) Disagree v) Strongly Disagree

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Thank you for your time and cooperation.

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