A STUDY ON NON PERFORMING ASSETS IN STATE BANK OF MYSORE

Project Guide:
Mrs. Neena Prasad Asst. Professor DSCE DOMS

External Guide
Mr. Dinesh Ubar Branch manager SBM By: Abhijna.P Reg No. 1DSO7MBA03

COMPANY PROFILE
Founded Head office Key people : Mysore, 1913 (as Mysore bank) : Bangalore : Managing Director P.P.Pattanayak

Products
Slogan

: loans, credit cards, savings.

: working for better tomorrow

Industry

: banking, insurance and allied industries

NPA : NON-PERFORMING ASSET

Meaning: An asset, including a leased asset, becomes nonperforming when it ceases to generate income for the bank. A NPA is 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.

INTRODUCTION
OBJECTIVE OF THE STUDY:

To analyze the NPA and its relation with operating profit of the bank. To study the general reasons for assets become NPAs. To point out the amount of NPAs in SBM. What is the criteria to recover the advances from the bank. What are the methods adopted by the bank to look after NPA management.

Scope of this study:

To present a picture of movement of NPA in SBM. To know how NPA level will affect the profit of the bank.

RESEARCH DESIGN
Statement of problem:
The bank will always face the problem of NPA because of poor recovery of advances granted by the bank and several other reasons like adopting a poor recovery strategies so when the loan is not recovered from the bank effectively and efficiently that balance amount will become the NPA to the bank it may create some huge problem to the banks net profit. The study completely depends on the secondary data.

The secondary data collected from

SBMs annual reports. RBIs Annual reports. SBMs quarterly bulletins. SBMs website.

ANALYSIS
Gross NPA v/s Operating profit

Items Gross NPA level Operating profit

2005-06 398.13 438

2006-07 383.76 471.58

2007-08 376 515

2008-09 projected 336 721

Inference:

From the chart, it is understood that as the gross NPA level started decreasing in recent year, operating profit started increasing drastically.

CORRELATION TEST
HYPOTHESIS
H0: There is no significant relationship between gross NPA of a bank to its operating profit. H1: There is a significant relationship between gross NPA of a bank to its operating profit.
Operating Gross NPA Gross NPA Pearson Correlation Sig. (2-tailed) N Operating Profit Pearson Correlation Sig. (2-tailed) N
** Correlation is significant at the 0.01 level (2-tailed).

profit -.992(**) .008

4 -.992(**) .008 4

4 1

INFERENCE:
There is a negative correlation exists between gross NPA of a bank with operating profit at a 0.01 level significance. So H1 is accepted, which states there is a significant relationship between gross NPA of a bank to its operating profit.

RECENT YEAR NPA PERFORMANCE CHART

All Group banks average average 2003- 2004- 2005- 2006- 2007- 2007- 200704 05 06 07 08 08 08 2.96 0.92 0.74 0.45 0.43 1.43 1

State bank of Mysore Net NPA ratio

Inference:

In recent years Net NPA ratio has come down drastically, which is very much below the standard level of 1, which is very favorable for the bank.

COMPARISON WITH OTHER GROUP BANKS

SBM Net NPA Ratio 0.43

SBI & nationalised its associates banks 1.43 0.77

Foreign banks 0.78

All banks 1

Inference: Compared to all other group banks SBM is in good position with 0.43 NPA ratio.

SEGMENT WISE POSITION OF NPAS

Segment Position as 2007 Industry 141.38 Trade SSI SBF AGR 22.79 45.08 47.61 38.23

Reductio ns during the year 124.78 13.02 15.87 20.20 19.67 36.74 4.15 234.43

Addition Position s during as 2008 the year 95.54 112.14 14.33 8.28 18.14 11.68 61.70 209.67 24.10 37.49 45.55 30.24 109.48 359.00

Personal 84.52 Misc TOTAL 4.15 383.76

FINDINGS

The bank has achieved its target because the net profit is also increased and there is a decrease in NPAs. So it is in better position compared to last year. The total NPA is 376 crore, last year it was 383.76 crore. The loans and advances have been increased from 2006-07 to 2007-08 There is decrease in doubtful assets compared to last year. There is a slight decrease in ROA but there is a slight increase in ROE.

SUGGESTIONS AND RECOMMENDATIONS

Effective inspection system should be implemented.

Operating staff should scrutinize the level of inventories/receivables regularly.

Large exposure on big corporate or single project should be avoided. Uneven scale of repayment schedule with higher repayment in the initial years normally is preferred.

CONCLUSION

It is not possible to eliminate totally the NPAs in the banking business but can only be minimized. It is always wise it 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 precaution should also be taken to avoid future NPAs. But in the case of SBM it is one of the good sign that the amount of NPA is decreased from last financial year and it should be move like this in future.

REFERENCE
State Bank of Mysore Annual reports Other circulars Reserve Bank of India Annual reports NPA circulars

Books and articles:

Bank Management: Timothy W. Koch Banking theory and practice: K.C.Shekhar

SBM: Policy guidelines 2008-09

Business world magazine News paper articles

Internet sources:

www.rbi.org.in www.eeaecon.org www.thehindubusinessline.com www.icai.org www.statebankofmysore.co.in

Thank You.!