Non Performing Assets

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1. a. EXECUTIVE SUMMARY

The project is entitled “A study on The Management of Non-Performing Assets in the Canara Bank’s Loan Portfolio” is done at the Canara Bank, Donimalai Township, Sandur (TQ), Bellary (Dist), Karnataka State.

INTRODUCTION:

An efficient financial management is becoming inevitable for every manager in today’s corporate world. From a traditional aspect of raising funds whenever needed the importance has shifted to day to day financial decision making and problem solving. When initially the stress was on the internal analysis of the firm, procurement of funds, management of assets and allocation of capital, the present importance has shifted to decision making within the firm. With the modern aspect of finance function the responsibilities of the finance manager has also increased. In the process of making optional decision, he makes use of certain analytical tools in the analysis, planning and control activities of the firm. Financial analysis is an essential prerequisite for making sound financial decisions. This study is intended to probe into the management of non performing assets in the Canara Bank’s Loan Portfolio, for the period of 2002-2003 to 2005-2006. The study is completely based on the analysis and interpretation of the published accounts of the bank and personal interview of the senior officials of the bank.

OBJECTIVES OF THE STUDY:

➢ To evaluate the Canara Bank’s asset quality.
➢ To identify the effectiveness of the risk management system, undertaken by the bank.

SCOPE OF THE STUDY:

➢ The scope of the study here was confined to the organization only. ➢ The study covers to find out the strategy required to reduce the NPAs.

METHODOLOGY OF THE STUDY:

➢ Primary data.
➢ Secondary data.

DATA ANALYSIS AND INTERPRETATION:

When the data collected is completed the data is processed and the relevant information is obtained. The data collected is analyzed using various statistical tools like frequency distribution, charts and percentage analysis.

DURATION OF THE STUDY:

This study is intended to probe into the management of non performing assets in the Canara Bank’s Loan Portfolio, for the period of 2003-2004 to 2005-2006.

FINDINGS:

➢ The Net NPA ratio of the Canara Bank declined from 1.88% as at March 31st 2005 to 1.12% as at March 31st 2006. ➢ Canara Bank has recovered its NPA which is amounted to Rs.865 crore during 2005-2006. ➢ The Net NPA of the Canara Bank declined from Rs.1454 crore as on 31st March 2006. ➢ The Net NPA percentage of Canara Bank has reduced by over 19% during 2005-2006.

RECOMMENDATIONS:

➢ Canara Bank should concentrate more on credit appraisal, monitoring, credit risk management and recoveries. ➢ Settlement is a better option for the banks wrestling with the problem of non-performing assets. ➢ Credit scoring allows lenders to determine whether or not you fit the profile of the type of customers they are looking for. ➢ Banks concerned should continuously monitor loans to identify accounts that have potential to become non-performing.

CONCLUSION:

➢ Securitization Act will surely help banks in reduction of NPA to a great extent. ➢ Preventing fresh flow of NPAs to a great extent.
➢ Exchange of credit information among banks would be of immense help to avoid possible NPAs.

1. b. GENERAL INTRODUCTION:

INDUSTRY PROFILE

Banking in one form or another was in existence even in ancient times. The writings of Manu (the maker of old Hindu Law) and Kautilya (the Minister of Chandragupta Maurya) contained references to banking.

However, banking as a kind of business i.e., modern banking is of recent origin. It came into existence only after the industrial revolution. After the industrial revolution, with the increase in the size of industrial and business units, joint stock company people with small means to...
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