Professional Documents
Culture Documents
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Definition of Bank:
Banking means “Accepting deposits for the purpose of lending or investing of deposits of
money from the public, repayable on demand or otherwise and withdraw by cheque, draft
or otherwise”.
Banking in India has its origin as early as Vedic period. It is believed that the transitions
from many lending to banking must have occurred even before Manu, the great Hindu
furriest, who has devoted a section of his work to deposit and advances and laid down
rules relating to the rate of interest. During the mogul period, the indigenous banker played
a very important role in lending money and financing foreign trade and commerce.
During the days of the East India Company it was the turn of agency house to carry on the
banking business. The General Bank of India was the first joint stock bank to be
established in the year 1786. The other which followed was the Bank of Hindustan and
Bengal Bank. The Bank of Hindustan is reported to have continued till 1906. While other
two failed in the meantime. In the first half of the 19th century the East India Company
established there banks, the bank of Bengal in 1809, the Bank of Bombay in 1840 and the
Bank of Bombay in1843. These three banks also known as the Presidency banks were the
independent units and functioned well. These three banks were amalgamated in 1920 and
new bank, The Imperial Bank of India was established on 27th January, 1921.
With the passing of the State Bank of India Act in 1955 the undertaking of the Imperial
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Bank of India was taken over by the newly constituted SBI. The Reserve Bank of India
(RBI) which is the Central bank was established in April, 1935 by passing Reserve bank of
India act 1935. The Central office of RBI is in Mumbai and it controls all the other banks
in the country.
In the wake of Swedishi Movement, number of banks with the Indian management were
established in the country namely, Punjab National Bank Ltd., Bank of India Ltd., Bank of
Baroda Ltd., Canara Bank. Ltd. on 19th July 1969, 14 major banks of the country were
nationalized and on 15th April 1980, 6 more commercial private sector banks were taken
The first bank in India, though conservative, was established in 1786. From 1786 till
today, the journey of Indian Banking System can be segregated into three distinct phases.
Reforms.
New phase of Indian Banking System with the advent of Indian Financial &
To make this write-up more explanatory, I prefix the scenario as Phase I, Phase II
Phase I
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The General Bank of India was set up in the year 1786. Next came Bank of
Hindustan and Bengal Bank. The East India Company established Bank of Bengal
(1809), Bank of Bombay (1840) and Bank of Madras (1843) as independent units
These three banks were amalgamated in 1920 and Imperial Bank of India was
shareholders.
During those day’s public has lesser confidence in the banks. As an aftermath
deposit mobilization was slow. Abreast of it the savings bank facility provided by
the Postal department was comparatively safer. Moreover, funds were largely given
to traders
Phase II
Government took major steps in this Indian Banking Sector Reform after
banking facilities on a large scale especially in rural and semi-urban areas. It formed
State Bank of India to act as the principal agent of RBI and to handle banking
transactions of the Union and State Governments all over the country.
Seven banks forming subsidiary of State Bank of India was nationalized in 1960 on
19th July,1969, major process of nationalization was carried out. It was the effort of
the then Prime Minister of India, Mrs. Indira Gandhi. 14 major commercial banks in
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Second phase of nationalization Indian Banking Sector Reform was carried out in
Phase III
This phase has introduced many more products and facilities in the banking sector
committee was set up by his name which worked for the liberalization of banking
practices.
The country is flooded with foreign banks and their ATM stations. Efforts are being
put to give a satisfactory service to customers. Phone banking and net banking is
introduced. The entire system became more convenient and swift. Time is given
CO-OPERATION COMMERCIAL
REGIONAL BANKS
BANK BANKS
STATE CO-
NATIONALISED
OPERATIVE FOREIGN BANKS INDIAN BANKS STATE BANKS
BANKS
BANKS
CENTRAL DISTT.
SUBSIDIARY
CO-OPERATIVE SBI
BANKS
BANKS
PRIMARY CREDIT
SOCIETIES
In India the banks are being segregated in different groups. Each group has their
own benefits and limitations in operating in India. Each has their own dedicated
target market. Few of them only work in rural sector while others in both rural as
well as urban. Many even are only catering in cities. Some are of Indian origin and
All these details and many more is discussed over here. The banks and its relation
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with the customers, their mode of operation, the names of banks under different
One more section has been taken note of is the upcoming foreign banks in India.
The RBI has shown certain interest to involve more of foreign banks than the
existing one recently. This step has paved a way for few more foreign banks to start
business in India.
Banking arena has changed a lot, compared to simple acceptance and deposit of cash,
thanks to the evolution of technology. Some of the recent developments in the field of
a) Core Banking
Through this package the accounts of all the branches of a bank are connected by a
technology called Wide Area Network. This facilitates the customer to get faster
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serviced mainly for collection of outstation cheques to the credit of their account.
In this, the funds are transferred from one place to another place; from one account
c) Tele-Banking
From anywhere at any time, one can access the accounts 24 hours and 365 days a
year. A customer number and pass number will be given to the customer so that
d) Mobile Banking
It helps the customer to access his account and conduct a host of banking
transactions and inquire through mobile banking services. It gives the real time
convenience.
e) Anywhere Banking
The account holder will be in a position to access his account from anywhere in the
country and get the services without any delay. This brings around transparency,
accessibility and more than all freedom to operate the account 24/7.
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Finance is that business activity which is concerned with the acquisition and conversation
of capital funds in meeting financial needs and overall objectives of a business enterprise.
Finance in a business is what blood to human body. While in the human system, automatic
regulation of quantity and quality of blood is available no such automation is available for
business..
A well-knit finance system directly contributes to the growth of the economy an efficient
financial system calls for the effective performance of financial institutions, financial
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DEFNITION:
Finance is that business activity which is concern with the acquisition and conversation of
capital funds in meeting financial needs and overall objective of a business enterprise” –
Wheeler.
Finance may be defined as the provision of money at the time when it is required
(ii) Finance
Thus, it is essential to understand the meaning of the two words; business and
finance, which is the starting point of develop the whole concept and meaning of the
The word ‘Business’ literally means a ‘state of being busy’. All creative human
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activities relating to e production and distribution of goods and services for satisfying
human wants are known as business. It also includes all those activities which indirectly
help in production and exchange of good, such as, transport, insurance, banking and
warehousing, etc. broadly speaking, the term ‘Business’ includes industry, trade and
commerce.
Finance may be defined as the provision of money at the time when it s required. Finance
refers to the management of flows of money through an organization. It concerns with the
application of skills in the manipulation, use and control of money. Different authorities
The main objective of finance is to arrange as much as funds for the business enterprise, as
required, from time to time. The other objectives of finance are as follows:
1. Acquiring sufficient funds.
2. Increasing profitability.
3. Proper utilization of funds.
4. Maximizing concern’s value.
“A Man without money is like a bird without wings”, the Rumanian proverb insists the
importance of the money. A bank is an establishment, which deals with money. The basic
functions of Commercial banks are the accepting of all kinds of deposits and lending of
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money. In general there are several challenges confronting the commercial banks in its day
to day operations. The main challenge facing the commercial banks is the disbursement of
assets.
In late 80s, the concept of classification of bank advances in several health codes
categories took place through the terminology non-performing advances did not exist at
that time. This is followed by earlier 90s Anglo-American model of categorization of bank
advances.
creating assets reconstruction fund for cleaning the balance sheets of the banks of non-
In simple words, an asset, which cases to yield income, is a non-performing asset. Non-
performing assets are those loans in a Bank or Financial Institution (FI), where borrowers
Non-performing assets refers to a loan or lease that is not meeting its stated principal and
interest payments.
1. Term Loans: Interest and/or installment of principal remain overdue for a period of
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2. Bills: The bill remains overdue for a period of more than 90 days
3. Other Accounts: Any account to be received remains overdue for a period of more
than 90 days
4. Cash Credit / Over draft Account: The account remains out of order for a period
of more than 90 days. Out of Order means an account where the balance is more
than sanctioned limit or drawing power. OR Where as on the date of balance sheet,
there is no credit in the account for a period of 90 days or credit is less than interest
debited or where stock report has not been received for three months or more.
5. Agriculture Account: A loan granted for short duration crops will be treated as an
NPA if the installment of principal or interest thereon remains unpaid for two crop
seasons beyond the due date. For a loan for long duration crops the above period
There are three category of non-performing assets, which are classified on the basis of
Sub-Standard Assets.
Loss Assets.
a) Sub-Standard Assets
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A sub-standard asset was classified as NPA for a period not exceeding two years.
With effect from 31-march-2001, a sub standard assets is one, which has remained NPA
for a period less than or equal to 18 months. In such cases, the current net worth of the
borrower/guarantor or the current market value of the security is charged is not enough to
ensure recovery of the dues to the bank in full. In other words, such as asset will have well
defined credit weaknesses that jeopardize the liquidation of the debts and are characterized
by the distinct possibility that the bank will sustain some loss, if deficiencies are not
corrected.
A Doubt full Asset is one which remained NPA for a period exceeding18 months.
c) LOSS ASSETS:
A loss asset is one where the bank or internal or external auditors or the RBI
inspection has identified loss but the amount has not been written off. In other
words such an asset is considered uncorrectable and of such little value that its
recovery value.
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NPA doesn’t earn any income, it adversely affects the capital adequacy ratio, and the
adequacy ratio reveals the health condition of the bank. The capital adequacy ratio is
defined as the ratio between a bank’s total capital and its risk-weighted assets
Compromise
Legal remedies
Recovery Camps
Write offs
Spot Visit
2. Media announcements
Other Methods
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Internal factors
External factors
Internal factors:
1. Funds borrowed for a particular purpose but not use for the said purpose.
5. In-ability of the corporate to raise capital through the issue of equity or other debt
6. Business failures.
External factors:
1. Sluggish legal system - Long legal tangles Changes that had taken place in labour laws
3. Industrial recession.
4. Shortage of raw material, raw material\input price escalation, power shortage, industrial
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5. Failures, non -payment over dues in other countries, recession in other countries.
The most important issue missed in the entire processes of events has been to analyze the
reasons as to why such a disproportionate amount of the bank advances has degenerated
into category, the reasons there of can be classify under five broad lories.
1. Failure of business unit either resulting from lack of its own competitive advantage or
2. Lack of adequate risk assessment and monitoring system within the bank:
By the time, we have come to know that how serious is the issue and where our Indian
banks stand, better late than never, banks have realized that NPA in the hazard for their
growth. Due to this several steps have been taken not only by the affected banks but also
by the government of India, RBI, and several other machineries to control and as far as
The kinds of scientific norms adopted in the banking industry, the world over in
general and India in particular, have not evolved over night, but over several decades, with
serious thinking. Earlier an asset, which could be recovered, was off in one straight
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c) Whether the bank has got adequate capital to handle the business.
periodical provisioning, periodical review of advances and the capacity to write off
5. Periodical Provisioning.
7. BIFR.
10.Securities of Debt.
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It is the minimum capital, which the bank should have to handle the particular level of
advances. Higher the capital, greater is the lending capacity of the bank.
Reserve Bank of India (RBI) has issued capital adequacy norms for the Indian banks. The
minimum CAR, which the Indian banks are required to meet all the times, is set at 9%. It
should be taken into consideration that the bank’s capital refers to the ability of banks to
To be more precise, capital charge is a sort of regulatory cost of keeping loans (perceived
as risky) on the balance sheet of the banks. The quality of the assets of the bank and its
capital are often closely related. Quality of assets is reflected in the quantum of NPA` s.
By this, implies that if the asset qualities were poor, and then higher would be the quantum
Market risk is the arising due to the fluctuations in value of a portfolio due to the volatile
of market prices.
Assets for the banks are the advantages given to different borrowers. Each advance is
differentiating by the element of risk involved in it. So, have to weigh the risk while
lending to the borrowers. Because risk is based on the purpose for which the borrower has
E.g.: a loan given for buying a consumer durable item has got the possibility of the item
being retrieved and sold to recover the loan, in case of default. On the other hand, a loan
given for, say consumption purpose has nothing to fall back upon. In the latter case, the
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3. INCOME RECOGNITION:
Before income recognition was introduced. Whatever the interest was due from the
borrower the banks used to treat it as income and banks were recording in the profit and
loss account on the accrual basis even if the bank get it or not. As a result the bank` s
profits were showing huge amount due to this share holders were benefited and were
getting good amount of dividends. Due to this income recognition norms came into
existence.
4. PERIODICAL PROVISIONING:
It is a known fact that all the borrowers are not 100% true in repaying loan,
which they have taken from the banks. So, there is always a chance that the banks can
face the eventuality of write off of the debts. Before the banks adopted provisioning, banks
used to write off the entire amount when the borrower failed to repay.
5. INSURANCE AGENT:
Lending operations are no more restricted only to the banks; there are other entities which
support the lending activities of the banks by taking care of the risk involved in lending.
Essentially, these organs are like insurance companies and they indemnify a bank on
behalf of the customers who have suffered a loss for no fault of theirs. If an exporter
suffers a loss, caused by a development in importer’s country, then passing on that loss to
the exporter is unfair because, he has no say in that. Such eventualities are taken care of by
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In order to protect the exporters as well as banks and credit institutions from
commercial and political risks and resultant loss and in the interest of expansion and
growth of export, the export credit guarantee corporation of India ltd. (ECGCI) was set
Banks had a tendency to arbitrarily decide whether to extend credit support or not.
Therefore, government of India thought it fit to establish an arbitrator who could decide
about the desirability of extending further credit or to deny further lending. This institution
is called BIFR.
The slow movement of legal machinery in India is no secret. Banks, which were seeking
legal remedy, were getting involved in protracted legal proceedings. Dart` s were
established as a way out from this. DRT` s are meant exclusively for the banks to ensure
If the other of the DRT aggrieves a person, he can file an appeal to the appellate tribunal
If the DRT or appellate tribunal holds that possession of assets by the secured creditor was
wrongful and directs the secured creditor to return assets to concerned borrowers, the
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appellate tribunal.
The tribunal can also direct return of assets, if the secured creditor had already sold
In cases where the Bank is not having any security to fall back upon and or not in a
WINDING UP OF COMPANY:
Resorting to winding up is another important tool for the recovery of advances granted to
limited companies when the company is unable to pay its debts or has neglected to pay its
debts. Section 433 of the companies Act, 1956 provide for various circumstances under
The Non-Performing Assets (NPAs) of the Indian banking sector have been incessantly
rising in the past six months. Historically, in 1997, NPAs were 15.8% of loans for the
banking sector, which nose-dived to 2.4% in 2008. This figure stands at 2.94% of loans in
2012. In absolute figures, NPAs have doubled from 2009 to 2012 and assets under
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reconstruction had trebled during the same period. India’s biggest lender, State Bank of
published Credit Suisse Group AG report, 10 large industrial houses account for 13% of
total assets financed by the Banking system, which means that bank lending is getting
increasingly skewed. Further, of the total reconstructed assets, 8.24% belong to the large
manufacturing sector, 3.99% are from the services sector while 1.45% are from the
agricultural sector.
1. Economic Slowdown
The global economy is still in the throes of an economic crisis that is looming large
activity in India both in manufacturing and the services sectors. A sluggish economy
will have a direct impact on the balance sheets and profitability of many firms who
have availed of loans from the banking industry. Over a period of time, some of the
hard hit firms will be compelled to default on their loans. There is a groundswell of
expert opinion in India that NPAs are more an outcome of economic factors rather
It is a known fact that interest rates have been revised upwards, 10 times in the past
two years with a view to curb inflation. High interest rate increases the cost of funds
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to the credit users and has a debilitating effect especially on the repayment capacity
of small and medium enterprises. Banks need to maintain their Net Interest Margin
and hence pass on any interest rate hike to the borrowers. A high rate of inflation
dilutes the quality of assets of the banking sector. Weak supply demand scenario,
Indian banks are to report NPAs from April 2012 in a computer recognized /
identified format. It is stated that almost 90% of all banks' loan portfolio is under the
NPAs a machine driven objective activity. However, credit risk analysis does have a
4. Aviation Sector
The Indian banking system has a total exposure of around Rs. 40,000 crores to the
ailing aviation sector. SBI alone has an exposure of 5,000 crores to the aviation
industry. It is common knowledge that many airlines are either in the red or
Banks’ loans to the aviation sector are either impaired or restructured. Kingfisher
airlines and Air India have been the significant aviation borrowers whose
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The net NPA of the J&K Bank as on 31.03.2012 stood at Rs. 49.34 Crores constituting
0.15% of advance. The net NPAs of the Bank, as on 31st March, 2013, stood at Rs. 55.27
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. The main functions of banks are mobilization of funds and lending of funds. The
difference between both the interest rates is the profit for the bank. Bank will be playing
safe till all the borrowers pay their dues within the stipulated time. But we all know that no
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man is perfect, like wise if the borrowers fail to repay the loans and advances then the
banks will face unstable position. So, the main problem that banks are facing is whatever
the loan and advances that have been lend to the individuals, industries and business world
are not recovered with in a stipulated time. Due to this their NPA level is raising
ongoing process where refunds continuously recycled for the benefit of all the segments of
the society. The redeployment of funds gets stagnated indirect proportion to the quantum
of NPA`s.
5. To understand the extent to which J&K BANK has been successful in cutting down
6. To give suggestion and recommendations this would help J&K Bank in controlling
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This study confines to J&K bank, the reference period of the study covers the year 2009-
2013. The study is based on the regulation of reserve bank of India and recommendations
This study is based on the various data provided by bank officials, the RBI circulars,
journals, magazines and data from internet were thoroughly studied and interpretation
made thereof.
Primary Sources:
Primary source data is collected from officials and staff members through
discussions.
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Secondary Source:
Annual reports
Management reports
Magazines
1. NPA is very vast field having a wide coverage in measuring and managing it.
3. In India banks are legally not bound to declare their NPA`s. hence banks have tendency
4. Scientific assessment of risk itself is a recent phenomenon. This aspect is yet to sink
6. The data taken for interpretation is for a limited period. The time period was limited and
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The origin of Jammu and Kashmir Bank Limited, more commonly referred to as J&K
Bank, can be traced back to the year 1938, when it was established as the first state-owned
bank in India. The bank was incorporated on 1st October 1938 and it was in the following
year (more precisely on 4th July 1939) that it commenced its business, in Kashmir. It was
initially set up as a semi-State Bank, with its capital being contributed by State as well as
Jammu and Kashmir Bank had to face serious problems in 1947 i.e. at the time of
independence. With the partition of Pakistan, two out of the total ten branches of the bank,
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namely the ones in Muzaffarabad and Mirpur, fell to the other side of the line of control
(now Pak Occupied Kashmir), along with cash and other assets. At that point of time, in
keeping with the extended Central laws of the state, J&K Bank was categorized as a
It was in the year 1971 that Jammu and Kashmir Bank was granted the status of a
'Scheduled Bank'. Five years later, it was declared as "A" Class Bank, by the Reserve
Bank of India (RBI). As the years passed on, the bank started achieving more and more
success. Today, it boasts of more than 685 branches across the country. It was only
recently that Jammu and Kashmir Bank became a billion dollar company. Governed by the
Companies Act and Banking Regulation Act of India, it is regulated by RBI and SEBI. It
finds a listing on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE)
as well.
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The new identity for J&K Bank is a visual representation of the Bank philosophy and
business strategy. The three coloured squares represent the regions of Jammu, Kashmir
and Ladakh. The counter- form created by the interaction of the squares is a falcon with
outstretched wings a symbol of power and empowerment. The synergy between the three
regions propels the bank towards new horizons. Green signifies growth and renewal, blue
signifies stability and unity and red signifies energy and power. All these attributes are
The company’s mission 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.
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The two together will make it the most profitable bank in the country.
The Bank's vision is “To catalyse economic transformation and capitalize on growth”. The
bank aspires to make Jammu and Kashmir the most prosperous state in the country, by
helping create a new financial architecture for the J&K economy, at the centre of which
will be the J&K Bank. The Bank is committed to achieve healthy growth in profitability
and simultaneously to remain consistent with the Bank's risk appetite and at the same time
ensuring the highest levels of ethical standards, professional integrity and regulatory
compliance.
The term SWOT is the acronym made up of four words viz, Strengths, Weaknesses,
opportunities and Threats. The first two variables are internal to an organization whereas
the last two are external. The value of SWOT analysis cannot be over emphasized. It is
rightly said “winners recognize their limitations but focus on their strengths; losers
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a) Internal factors
Strength:
Strength is defined as something which is positive, good or such other characteristics that
give to the company an edge in the competitive market. The Bank has one unique source
of strength which if cultivated carefully, can be virtually impregnable – its roots are in the
state, and as such it shares with the people of Jammu and Kashmir a kinship and empathy
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for the cause of the state’s progress, which no outside bank ever can. The J&K Bank also
performs the leader’s role in the J&K. As a leader the Bank continued to discharge its
Weaknesses:
move forward. While doing my summer training in the J&K Bank I found the following
weaknesses are:
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(iii) Labour problems because of militancy in the state which results in strikes
b) External factors
Opportunities:
not come very frequently and therefore, the management must exploit them to the
maximum extent without any delay. Each opportunity should be analyzed in terms of its
1) There is agriculture market which is still fully not trapped by the J& K Bank
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Threats:
With every opportunity, there also goes alongside certain threats which may adversely
affect the profitability and competitive capability of an enterprise. The threats analysed
are;
(i) Competitors like HDFC Bank, Central Co-operative Bank, ICICI Bank etc. may
forcing treat.
Internet Banking
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Board of Directors:
The Board of Directors of the Bank consists of 12 members. The Board sits more than a
dozen times in a year to review the business activities of the Bank. It also plans and
regulates the future activities of the Bank through policy decisions and administrative
guidelines. All the important decisions of the Bank have to be endorsed by the Board of
BOARD OF DIRECTORS
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Coporate
Head Quaters
Area/District
Zonal Office
offices
Branch Office
CORPORATE HEADQUARTER:
The corporate Headquarter of the Bank is located at Srinagar and is headed by Chairman
cum Chief Executive officer (CEO), who is appointed by the J&K Government for a
Bankers or the Administrators of the state. The Chairman is guided by the Board of
ZONAL OFFICE:
Under Corporate Headquarters there are 4 Zonal Offices spread all over India. A
Manager of senior Management cadre, heads Zonal Offices and is assisted by the
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Under Zonal Offices, there are Area/District Offices. The District Office is headed by the
concerned District Manager. The Branch Managers report to their respective District
Manager. Presently the Bank has 11 District Offices and 3 Area Offices.
BRANCH OFFICE:
The various branches of the Bank in Jammu and Kashmir State are divided into 5
different categories whereas in Delhi Zone they are divided into 2 categories,
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Banking Operations
a) Audit:
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Audit is responsible for conducting the independent and objective appraisals that will
b) Banking Operations:
Key players in three of the Bank’s core functions: currency, financial system, and funds
management.
c) Communications:
Helps the Bank to meet its commitment, openness, transparency and build public relations.
d) Corporate Services:
The Corporate Services helps to comprise the following service areas: Human Resources,
e) Debt Administration:
Ensures the delivery of cost-effective back-office operations and provides policy advice.
g) Financial Markets:
Functions include implementing monetary policy, managing the federal government's cash
h) Financial Services:
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j) Research:
Research provides the Bank to manage with high-quality analysis of the economy and
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Management of Non-Performing Assets
S.No Particulars FY FY FY FY FY
. 2008-09 2009-10 2010-11 2011-12 2012-13
1. Gross NPAs (Opening 485.23 559.27 462.31 518.83 516.60
Balance)
2. Additions (Fresh NPAs) 401.89 188.78 289.14 314.68 455.00
during the Year
3. Sub Total (1&2) 887.12 748.05 751.45 833.51 971.6
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Management of Non-Performing Assets
Less:
4. Up gradation 103.67 127.78 44.61 57.57 104.70
5. Recoveries(excludin
g recoveries made 151.94 126.58 113.57 145.07 136.10
from up graded
accounts)
6. Write-offs 72.24 31.38 74.45 114.27 87.03
7. Sub Total(4,5&6) 327.85 285.74 232.63 316.91 327.83
8. Gross NPA (3-7) 559.27 462.31 518.83 516.60 643.77
(Source: Financial Statements)
Analysis of table 1:
The above table shows movement in Gross NPA. The amount of gross NPA of the bank in
the year 2008-09 amounts to Rs.559.27 Crores which is due to the fact that during this FY
political instability on account of Amarnath imbroglio erupted in whole J&K state that
disrupted by and large , small, medium and large business enterprises , valley was under
siege months together, banks witnessed least number of clients, sociopolitical system
collapsed which severely hindered follow-ups and recovery process and resulted in greater
improvement politically, which helps in registering good amount of recoveries and less
slippages. Since FY 2009-10 onwards Gross NPA shows an increasing trend which can be
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Management of Non-Performing Assets
700
643.77
600 559.27
518.83 516.6
500
426.31
Gross NPA
400
300
Gross NPA
200
100
0
2008-09 2009-10 2010-11 2011-12 2012-13
YEARS
(Source: table 1)
FY FY FY FY FY
S.No. Particulars 2008-09 2009-10 2010-11 2011-12 2012-13
1 Net NPAs
(Opening Balance) 203.55 287.51 64.33 53.24 49.34
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Less
Analysis of Table 2:
The above table shows movement in net NPA. The amount of net NPA of the bank shows
2008-09 net NPA shows exorbitant amount of 287.51 Crores (Reasons mentioned in
previous graph analysis) which shows a decreasing trend 78% (approx.) decrease during
FY 2009-10, which can be attributed to the aggressive policy of bank for write-offs /OTS
(one time settlement) on one hand and increasing follow-ups and recoveries on the other
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Management of Non-Performing Assets
350
300
287.51
250
200
150
100 62.33
53.24 55.27
49.34
50
0
2008-09 2009-10 2010-11 2011-12 2012-13
(Source: table 2)
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FY 2008-09 20,930.4113
FY 2009-10 23,057.2250
FY 2010-11 26,193.6350
FY 2011-12 33,077.4215
FY 2012-13 39,199.8104
Analysis of Table 3:
The above table shows the advances of the bank. In the year 2008-09 the total advances of
the bank were Rs.20, 930.4113 crores and shows an increasing trend from 2008-09 .
Rs. 39, 199.8104 crores, thereby registering a growth rate of 87% approx. in loans and
advances since FY 2008-09, by penetrating into every house hold and aggressive loaning
Total Advanses
45,000.00
40,000.00 39,199.81
35,000.00
33,077.42
30,000.00
23,057.23
25,000.00 26,193.63
(Source: table 3)
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FY 2008-09 774.45
FY 2009-10 958.21
FY 2010-11 1,149.49
FY 2011-12 1,370.33
FY 2012-13 1,810.76
(Source: Financial Statements)
Analysis of Table 4:
The above table indicates the Gross profit of the bank. In the year 2008 the Gross profit
amounts to Rs.774.45 Cr. The above table shows an increasing trend of Gross profit and in
the FY 2012-13 it stood at Rs.1, 810.76 crores which is 32.14% more than the previous FY
2011-12.
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Management of Non-Performing Assets
2000
1,810.76
1500
1,149.49 1,370.33
774.45 958.21
1000
500
0
2008-09
2009-10
2010-11
2011-12
2012-13
(Source: table 4)
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NIMS INSTITUTE OF MANAGEMENT & COMPUTER SCIENCE
Management of Non-Performing Assets
FY 2009-10 512.38
FY 2010-11 615.20
FY 2011-12 803.25
FY 2012-13 1055.10
Analysis of Table 5:
The above table indicates the net profit of the bank. In the year 2008 the net profit amounts
to Rs.409.84 Cr. The above table also shows that bank registered highest ever Net Profit of
Rs.1055.10 Crores for FY 2012-13, as compared to Rs. 803.25 Crores for FY 2011-12
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Management of Non-Performing Assets
Net Profit
1200
1055.1
1000
803.25
800
615.2
600 512.38 Net Profit
409.84
400
200
0
2008-09 2009-10 2010-11 2011-12 2012-13
(Source: table 5)
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ANALYSIS OF TABLE 6:
The net NPA/advances i.e. level of NPA shows a decreasing trend since FY 2008-09
which is due to aggressive loaning to various sectors particularly to priority sector i.e.
horticulture, agriculture, manufacturing, SMEs etc on one hand and emphasize on write-
offs, OTS, interest remission on other hand in addition to regular follow-ups and vigorous
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(Source: table
LEVEL OF NPA (%) 6)
1.6
1.4 1.37
1.2
0.8
LEVEL OF NPA (%)
0.6
0.4 0.28
0.2 0.15
0.2
0.14
0
2008-09 2009-10 2010-11 2011-12 2012-13
FY FY FY FY FY
Particulars 2008-09 2009-10 2010-11 2011-12 2012-13
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(Sour
Total Assets ce:
37,693.2618 42,546.7948 50,508.1534 60,269.2203 71,743.3151 Fina
(Rs. Cr)
ncial
State
Non-performing ment
Assets to Total 0.0076 0.0015 0.0011 0.0008 0.0007 s)
Assets
Analysis of table 7:
Since J&K bank is a growing organization, it has achieved a good market share in Indian
banking sector. From above table which indicates the proportion of non-performing assets
to total capital. The ratio calculated for J&K bank indicates that in the year 2008-09 the
proportion of NPA to total assets was 0.0076, which reflects a decreasing trend onwards. It
also conveys that the bank has been successful in reducing level of non-performing assets.
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NIMS INSTITUTE OF MANAGEMENT & COMPUTER SCIENCE
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0.007
0.006
0.005
0.004
NPA to Total Assets
0.003
0.002 0.0015
0.0011
0.0008 0.0007
0.001
0
YEAR YEAR YEAR YEAR YEAR
(Source: table
7)
Non-performing Assets to Total capital ratio, indicates how much proportion of the total
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(Sour
ce:
Fina
FY FY FY FY FY ncial
Particulars 2008-09 2009-10 2010-11 2011-12 2012-13 State
ment
Non-performing s)
287.51 64.33 53.24 49.34 55.27
Assets( Rs. Cr)
Ana
Total capital. (Rs. 484,922 484,922 484,922 484,922 484,922
Cr.) lysis
Non-performing
assets to of
0.000593 0.000133 0.00011 0.000102 0.000114
Total capital
tabl
e 8:
Since the tier-I capital of J&K bank is Rs.484,922 crores, due to decreasing trend of net
NPA the portion of capital under threat is continuously decreasing which is almost
negligible during the FY 2012-13. The ratio reflects the strong fundamentals of the bank
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Management of Non-Performing Assets
0.0006
0.0005
0.0004
0.0003
NPA to total Capital
0.0002 0.000133 0.00011
0.000102
0.0001
0.000114
0
YEAR
YEAR
YEAR
YEAR
YEAR
(Source: table
8)
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Following are the findings of our study of NPA of the five financial years viz., 2008-09,
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NIMS INSTITUTE OF MANAGEMENT & COMPUTER SCIENCE
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1. The current non-performing assets ratio is decreasing year by year and it is less
than standard ratio. It shows it is sufficient from working capital point of view.
2. The banks operation for the year 2012-13 revealed significant increase both in
Net Profit and Gross Profit (profit before provision & contingencies) &
3. The net non performing assets decreased from Rs.287.51 Crores to Rs. 55.27
of the company.
4. Gross NPA’s for the year ended 31.03.2013 is Rs 1,810.76 crore as against Rs.
5. Net Profit for the year ended 31.03.2013 is Rs1055.10 as against Rs. 803.25
6. In keeping with its image of a fast Growing Bank, J&K Bank once again
posted excellent business growth during 2012-13 to reach a total business level
7. The Bank continued its prudent approach in expanding quality credit assets in
line with its policy on Credit Risk Management. The net advances of the Bank
increased by Rs.6, 122.99 Crores from Rs.33, 077.42 Crores, as on 31st March,
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8. The Bank’s performance in the recovery of NPAs during the year continued to
9. The gross advances of the Bank, as on 31st March, 2013, stood at Rs.39,
10. The priority sector advances of the Bank, as on 31st March, 2013, stood at Rs.
priority sector accounts for 69.91% of total advances, much above the
benchmark of 60%.
The problem of Non-performing assets has been a headache for the banking industry,
because it causes two fold impacts on the profitability of a bank. On one hand the bank
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Management of Non-Performing Assets
ceases to earn interest on the assets and then is deprived of its legitimate income from the
assets. On the other hand, the bank is required to make provisions for these assets
depending on the classification/category of the assets and value of security, if any; this
further erodes the profitability of the bank. The RBI, which is the apex bank to control the
level of Non-performing assets has been giving regular guidelines and getting norms for
the banks, in order to control the incidence of defaults by introducing the system of assets
classification and provisioning in line with International Practices for the first time in
1993, which under event several changes during last two decades.
This study on management of Non-performing Assets with specific reference to J&K Bank
was conducted to find out the reasons for the increase of Non-Performing Assets and how
public sector banks manage it and its effect on the performance of the bank.
The study reveals that J&K bank has almost been successful in controlling its level
of NPA by making timely provision for NPA. The analysis of the studies indicates that the
current non-performing assets ratio is decreasing year by year and it is less than the
standard ratio. Also less capital is locked in NPA which implies that working capital
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who should exclusively deal with NPA management. They should be exclusively trained
to deal with such assets with strict supervision from higher authorities.
SARFESI Act should be emphasized (executed) with the help of legal discourse through
courts.
4. In case of doubtful-III and loss assets write-offs and OTS should be emphasized.
5. Banks should be very aggressive in recovering the debts. Bankers should keep an
eye on potential (likely) NPAs; timely follow ups can save banks from bigger slippages.
6. Bank should thoroughly check the credit worthiness of the borrowers before
7. Bank should lure defaulters by providing, incentives or other type of benefits e.g;
8. Bank should Act judiciously in dealing with different customers and not blindly
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9. Bank should follow certain principles of lending not only at the pre-sanction stage
but at the post disbursement stage also. These basic principles include the safety of the
advances, purpose for which the loan is granted, liquidity, security and profitability.
10. The staff must be trained to assess the borrower’s efficiency in order to avoid the
11. Bank should monitor NPA accounts on daily basis at branch level which will help
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AS ON AS ON AS ON AS ON AS ON
CAPITAL & 31-03-2009 31-03-2010 31-03-2011 31-03-2012 31-03-2013
(In RS. “000”) (In RS. (In RS. (In RS. (In RS.
LIABILITIES “000”) “000”) “000”) “000”)
Assets
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Management of Non-Performing Assets
AS ON AS ON AS ON AS ON AS ON
Income 31-03-2009 31-03-2010 31-03-2011 31-03-2012 31-03-2013
(InRS.“000”) (In RS. (In RS. (In RS. (In RS.
“000”) “000”) “000”) “000”)
Interest Earned 29,881,197 30,568,791 37,131,322 48,355,773 61,368,010
Expenditure
Apropriations
Transferred To
Statutory Reserve 1,023,389 1,288,947 1,538,005 2,008,126 2,637,746
Capital Reserve _ _ _ – –
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BOOKS REFERED:
WEB SITES:
Sl. No Websites
1 www.jkbank.net
2 www.moneycontrol.com
OTHER REFRENCES:
Sl. No Title
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