Non performing assets and its impact on performance of karnataka state co-ope

International Journal of Advanced Research in Management (IJARM), ISSN 0976 – 6324
(Print), ISSN 0976 – 6332 (Online), Volume 4, Issue 2, May - August 2013 © IAEME
11
NON- PERFORMING ASSETS AND ITS IMPACT ON PERFORMANCE
OF KARNATAKA STATE CO-OPERATIVE APEX LIMITED
S.POORNIMA
M.COM, MBA, PGDBA, NET,
Associate Professor, Jss College for Women, P. G. Center, Mysore
INTRODUCTION
A strong banking sector is important for a flourishing economy. The failure of the
banking sector may have an adverse impact on other sectors. The Indian banking system,
which was operating in a closed economy, now faces the challenge of an open economy. The
main business of a banking company is to receive deposits and lend money. Receiving
deposit involves no risk, since it is the banker who owes a duty to repay the deposit,
whenever it is demanded. On the other hand, lending always involves much risk because
there is no certainty of repayment. A banker shall be very cautious in lending, because he is
not lending money out of his own capital. A major portion of the money lent comes from the
deposits received from the public. These deposits are mostly repayable on demand. Hence,
while lending money, a banker should follow a very cautious policy. The risk involved in
lending business makes it very important as it involves making prominent decisions.
Therefore while sanctioning credit the banker should appraise the project reasonably or else it
leads to the non-repayment of loans and advances. Most of the banks today in India are
facing the default risk wherein some part of the profit is reserved for covering the non-
performing assets.
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 nosedived 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
reconstruction had trebled during the same period. India’s biggest lender, State Bank of India,
is experiencing an NPA level of 4.99% of total loans. According to a recently 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.
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Meaning of NPA
Loan /lease that is not meeting its stated principal and interest payments. Banks
usually classify as nonperforming assets any commercial loans which are more than 90 days
overdue and any consumer loans which are more than 180 days overdue. More generally, and
is not producing income.
In India, an asset is classified as a Non-Performing Asset (NPA) if interest or instalments of
principal due remain unpaid for more than 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 a bank to a borrower become non-performing, then the bank will
have to treat all the advances/credit facilities granted to that borrower as non-performing
without having any regard to the fact that there may still exist certain advances/credit
facilities having performing status.
Definition of NPA
A non-performing asset (NPA) was defined as a credit facility in respect of which the
interest and or installment of principle has remained past due for a specific period of time.
An amount due under any credit facility is treated as past due, when it has not been paid
within 30 days from the due date. Due to improvement in the payment and settlement
systems, recovery climate, up gradation of technology in the banking system, etc. it was
decided to dispense with past due concept, with effect from March 31, 2001. Accordingly as
from that date a non-performing asset (NPA) shall be an advance where:
1. Interest and or installment of principal remain over due for a period of more than 180 days
in respect of a term loan.
2. The account remains out of order for a period of more than 180 days, in respect of an
overdraft/cash credit.
3. The bill remains overdue for a period of more than 180 days in the case of bills purchased
and discounted.
4. Interest and or installment or principal remains over due for harvest seasons but for a
Period not exceeding two half years in the case of an advance granted for agricultural
purpose.
Definition given by the Narasimham Committee
The Committee has defined Non-performing assets as an advance where as on the
date of Balance e sheet:
1. In respect of terms loans, interest remains past due for s period of more than 90 days.
2. Overdrafts and cash credits accounts remain out of order for more than 90 days.
3. Bills purchased and discounted remain over due and unpaid for period of more than 90
Days.
An amount is considered past due when it remains outstanding for 30 days and beyond the
due date.
RESEARCH METHODOLOGY
Statement of the Problem
The main motto of co-operative banks is to serve the weaker section of the people by
providing loans and advances for the upliftment of the weaker section of the society now
days the borrowers are not repaying the amount to the co-operative banks regularly as per the
due dates; it is affecting the performance of the banks. As per the new banking regulation if

13
the borrower not paid the principle and interest amount within 90 days it is to be considered
as Non Performing Assets.
The research gaps and relevant questions which strike the mind during observation of
various studies on non- performing assets that, what are the reasons for the assets becoming
non- Performing assets and what is its impact on performance of Karnataka State co-
operative Apex Limited. Hence there arises a need to address the aforesaid questions.
Objectives of the Study
The objectives of the study are to,
1) Understand the concept of Non-performing assets (NPA) of Apex bank
2) Study the general reasons for assets to become Non-performing assets.
3) Study the impact of Non-performing assets on Apex bank Ltd.
4) Study the measures taken by Apex bank to reduce Non-performing assets.
5) Offer suggestions based on findings of the study in Apex Bank.
Scope of the Study
The present study of Non-performing assets is confined and restricted to the boundary of
Karnataka State Co-operative Apex bank Ltd. And data will be analyzed as provided by Apex
bank Ltd.
Data Collection:
The data collected from the study is divided as
Primary data: The primary data will be obtained through interaction with the officers of the
Karnataka State Co-operative Apex bank Ltd, documents and records of Apex Bank about the
reasons becoming Non- performing.
Secondary data: secondary data will be collected from Annual reports and audited reports
of Apex bank, financial magazines, Journals, text books and websites, RBI/ IBA bulletins etc.
Tools of Data Analysis:
The data collected from the primary and secondary sources relating to NPAs has been
analyzed and tabulated and drawn the appropriate tables. Interpretations were made based on
tables. The collected data were classified and tabulated and analyzed with some of the
statistical tools used as per the requirement of the study like
• Graphical representation and
• Ratio analysis
Limitations of the Study:
1) The study is based on the data given by the officials and reports of the bank.
2) The study is based only on NPA section of the bank.
3) The solutions are not applicable to every bank.
4) Due to time constraint depth analysis could not be made.
DATA ANALYSIS AND INTERPRETATION
1. Sub-standard assets
The following table shows the percentage change in sub-standard assets to Gross NPA at
KSCAB Ltd.
Sub-standard assets
Sub-standard assets (%) = *100
Gross NPA

International Journal of Advanced Research in Management (IJARM), ISSN 0976
(Print), ISSN 0976 – 6332 (Online), Volume 4, Issue 2, May
Sl.No Year Sub
1 2007-08
2 2008-09
3 2009-10
4 2010-2011
5 2011-2012
Analysis
The above table depicts that, there was noticeably diminishing sub
from 2007 -08 to 2009-10, whereas in 2010
further to 60.73% in 2011-12.
Graph showing percentage change in sub
Interpretation
The above graph reveals the sub
that, in 2007-08 sub standard assets was 43.43%, progressively it was decreased in 2008
with percentage of 33.52 , with good recovery policy of co
standard assets condensed to 25.81%. But bank unable to continue the recovery policy in
efficient manner with result of that we can view that sub standard assets
and 60.73% in 2011-12 and 2012
0
20
40
60
80
2007
43.43
6332 (Online), Volume 4, Issue 2, May - August 2013 © IAEME
14
TABLE NO. 1
(Rs In lakhs)
Sub-Standard
Assets
Gross NPA Sub-Standard
Assets (In %)
9074.82 20895.3 43.43
6438.28 19202 33.52
3823.42 14808.1 25.81
9670.49 17512.4 55.22
16057.5 26437.3 60.73
depicts that, there was noticeably diminishing sub-standard assets
10, whereas in 2010 -11 it raised to 55.22%. Again it amplified
Graph showing percentage change in sub-standard assets to Gross NPA given at KSCAB Ltd.
GRAPH NO.1
The above graph reveals the sub-standard assets in percentage wise. We can observe
08 sub standard assets was 43.43%, progressively it was decreased in 2008
of 33.52 , with good recovery policy of co-operative bank, 2009
efficient manner with result of that we can view that sub standard assets increased to 55.52%
12 and 2012-13 respectively.
2007-082008-09 2009-10 2010-11
2011-12
43.43
33.52
25.81
55.52 60.73
SUB-STANDARD ASSETS
SUB-STANDARD ASSETS
August 2013 © IAEME
(Rs In lakhs)
Standard
Assets (In %)
43.43
33.52
25.81
55.22
60.73
standard assets
11 it raised to 55.22%. Again it amplified
given at KSCAB Ltd.
standard assets in percentage wise. We can observe
08 sub standard assets was 43.43%, progressively it was decreased in 2008-09
operative bank, 2009-10 sub-
increased to 55.52%

2. Doubtful Assets
The following table shows the percentage change in doubtful assets to gross NPA.
Doubtful assets (%) =
SL.NO Year
1 2007-08
2 2008-09
3 2009-10
4 2010-11
5 2011-12
ANALYSIS
The above table exhibits that the doubtful assets increased noticeably from 2007
2008-09 and 2009-10 with percentage of
of good management recovery policy, doubtful assets decreased in 2010
with 42.70% and 35.83% respectively
Graph showing percentage change in doubtful assets to gross NPA.
Interpretation
The above graph shows that doubtful assets are increasing noticeably from 2007
2008-09 and 2009-10 with 53.95%, 64.36%, and 71.91% respectively. And bank took
appropriate measures to reduce doubtful assets; as a result we can also see t
assets are decreased to 42.70% in 2010
53.95%
64.36%
0.00%
20.00%
40.00%
60.00%
80.00%
2007-08 2008
DOUBTFUL ASSETS
15
doubtful assets
Doubtful assets (%) = *100
Gross NPA
TABLE NO -2
(Rs. In lakhs)
Doubtful
Assets
Gross
NPA
Doubtful Assets
(In %)
11273.7 20895.3 53.95
12358.9 19202 64.36
10648.2 14808.1 71.91
7478.44 17512.4 42.7
9474.95 26437.3 35.83
The above table exhibits that the doubtful assets increased noticeably from 2007
10 with percentage of 53.95%, 64.36%, and 71.91% respectively. Because
of good management recovery policy, doubtful assets decreased in 2010-11 and 20011
with 42.70% and 35.83% respectively.
Graph showing percentage change in doubtful assets to gross NPA.
GRAPH NO – 2
The above graph shows that doubtful assets are increasing noticeably from 2007
10 with 53.95%, 64.36%, and 71.91% respectively. And bank took
appropriate measures to reduce doubtful assets; as a result we can also see t
assets are decreased to 42.70% in 2010-11 and 35.83% in 2011-12.
64.36% 71.91%
42.70% 35.83%
2008-09 2009-10 2010-11 2011-12
DOUBTFUL ASSETS
DOUBTFUL ASSETS
Doubtful Assets
The above table exhibits that the doubtful assets increased noticeably from 2007-08,
53.95%, 64.36%, and 71.91% respectively. Because
11 and 20011-12
The above graph shows that doubtful assets are increasing noticeably from 2007-08,
10 with 53.95%, 64.36%, and 71.91% respectively. And bank took
appropriate measures to reduce doubtful assets; as a result we can also see that doubtful

3. LOSS OF ASSETS
The following table shows the percentage change in loss assets to gross NPA.
loss assets
Loss assets (%) =
Gross NPA
SL.NO Year
1 2007
2 2008
3 2009
4 2010
5 2011
Analysis
The above table reveals that the loss assets of Apex bank was decreasing considerably
from 2007-08 with percentage of 2.61, 2008
11 with 2.07% but the loss of assets was increased in 2011
because bank management fail to take appropriate decisions at a right time to reduce the loss
of assets.
Graph shows the percentage change in loss assets to gross NPA
Interpretation
The above graph reveals the loss assets to Apex bank. In 2007
apex bank was 2.61%. In 2008
marginally to 2.27% because bank fails to take proper decisions at right t
the loss of assets the bank have taken appropriate decision i.e. bank adopted SARFAESI act
to reduce the loss in assets as a result it is reduced to 2.07% in 2010
taken by Bank did not serve the purpose in 2011
increased to 3.42%.
2.61%
0.00%
2.00%
4.00%
2007
16
The following table shows the percentage change in loss assets to gross NPA.
loss assets
* 100
Gross NPA
TABLE NO -3
Year Loss
Assets
Gross NPA Loss
Assets (In
%)
2007-08 546.77 20895.3 2.61
2008-09 404.82 19202 2.1
2009-10 336.52 14808.1 2.27
2010-11 363.47 17512.4 2.07
2011-12 904.88 26437.3 3.42
08 with percentage of 2.61, 2008-09 with 2.10%, 2009-10 with 2.27% and 2010
of assets was increased in 2011-12 with percentage of 3.42%,
Graph shows the percentage change in loss assets to gross NPA
GRAPH NO.3
The above graph reveals the loss assets to Apex bank. In 2007-08 the loss assets of
apex bank was 2.61%. In 2008-09 it decreased to 2.10% and in 2009-10 it increased
marginally to 2.27% because bank fails to take proper decisions at right time. In order reduce
to reduce the loss in assets as a result it is reduced to 2.07% in 2010-11 But the decisions
taken by Bank did not serve the purpose in 2011-12 because of which loss of assets
2.61% 2.10% 2.27% 2.07%
3.42%
2007-08 2008-09 2009-10 2010-11 2011-12
LOSS ASSETS
LOSS ASSETS
Assets (In
10 with 2.27% and 2010-
12 with percentage of 3.42%,
08 the loss assets of
10 it increased
ime. In order reduce
11 But the decisions
because of which loss of assets

4. RATIO OF GROSS NPA TO TATAL ADVANCES
The table shows the percentage change in Gross NPA to total advances at the KSCAB
Limited
Gross NPA Ratio (%) =
SL.NO Year
1 2007-08
2 2008-09
3 2009-10
4 2010-11
5 2011-12
Analysis
The above table reveals the gross NPA of Apex bank. Gross NPA reduced step by
step from 7.44% in 2007-08 to 4.31% in 2010
4.91% in 2011-12
Graph shows the percentage change in Gross NPA to total advances at the KSCAB ltd..,
Interpretation
The above graph reveals the total gross NPA in total advances from 2007
12. The total gross NPA gradually reduced because of good credit appraisal policy. In 2007
08 the gross NPA was 7.44% over its
2009-10 it further reduced to 4.70% and in 2010
2011-12 it increased marginally to 4.91% over its total advances.
7.44%
0.00%
2.00%
4.00%
6.00%
8.00%
2007-08
Gross NPA in total advances
17
RATIO OF GROSS NPA TO TATAL ADVANCES
Gross NPA
Gross NPA Ratio (%) = *100
Total advances
TABLE NO. 4
Gross NPA Total Advances Gross
NPA (In
%)
08 20895.3 280484 7.44
09 19202 349255 5.49
10 14808.1 314628 4.7
11 17512.4 406284 4.31
12 26437.3 538151 4.91
08 to 4.31% in 2010-11 progressively, but slightly increased to
GRAPH NO.4
reveals the total gross NPA in total advances from 2007
12. The total gross NPA gradually reduced because of good credit appraisal policy. In 2007
08 the gross NPA was 7.44% over its total advances. In 2008-09 it reduced to 5.49%, in
further reduced to 4.70% and in 2010-11 it got further reduced to 4.31% but in
12 it increased marginally to 4.91% over its total advances.
7.44%
5.49%
4.70% 4.31%
4.91%
08 2008-09 2009-10 2010-11 2011-12
Gross NPA in total advances
Gross NPA
Gross
NPA (In
%)
7.44
5.49
4.7
4.31
4.91
11 progressively, but slightly increased to
reveals the total gross NPA in total advances from 2007-08 to 2011-
12. The total gross NPA gradually reduced because of good credit appraisal policy. In 2007-
educed to 5.49%, in
11 it got further reduced to 4.31% but in

5. NPA IN AGRICULTURE SECTOR
The percentage change in NPA in Agriculture sector to total advances
sector at KSCAB Ltd is given in the following table
SL.NO Year
1 2007-
2 2008-
3 2009-
4 2010-
5 2011-
Analysis
The percentage of NPA to total advance in Agriculture sector is showing as increasing
trend only during the financial year 2007
year 2009-10, 2010-11 and 2011
noticed that all farmers who took the advances, paid very promptly to the bank within due
date. The above results reveal the effort has been taken to control NPA in agriculture sector
advances.
Interpretation
The above chart reveals the NPA in agriculture sector to total advances from 2007
to 2011-12. The NPA control in agriculture is good, it reduced year by year. The specific
findings of the study are that, the bank took proper measure t
sector.
0
1
2
3
2007-08 2008-09
2007-08
NPA (in %) 2.44
NPA IN AGRICULTURE SECTOR
18
The percentage change in NPA in Agriculture sector to total advances in Agriculture
sector at KSCAB Ltd is given in the following table
TABLE NO – 5
Year NPA (Rs in
lakhs)
Total
advance (Rs
in lakhs)
NPA (in
%)
08 5117.88 209012 2.44
09 4765.47 272614 1.74
10 0 226798 0
11 0 269925 0
12 0 380227 0
trend only during the financial year 2007-08 and 2008-09 and there is no NPA in the financial
11 and 2011-2012. It was completely recovered by the bank and it is
GRAPH NO – 5
The above chart reveals the NPA in agriculture sector to total advances from 2007
12. The NPA control in agriculture is good, it reduced year by year. The specific
findings of the study are that, the bank took proper measure to monitor NPA in agriculture
NPA (in %)
2009-10
2010-11
2011-12
2008-09 2009-10 2010-11 2011-12
1.74 0 0 0
in Agriculture
NPA (in
2.44
1.74
09 and there is no NPA in the financial
was completely recovered by the bank and it is
The above chart reveals the NPA in agriculture sector to total advances from 2007-08
12. The NPA control in agriculture is good, it reduced year by year. The specific
o monitor NPA in agriculture
12

6. NPA IN SUGAR SECTOR
The percentage change in NPA in sugar sector to total advance given in sugar sector
at KSCAB ltd.
SL.NO Year
1 2007-08
2 2008-09
3 2009-10
4 2010-11
5 2011-12
Analysis
The percentage of NPA to total advance in Sugar sector is shows increasing trend in
the financial years 2007-08, 2008
2010-11 and 2011-12. The above results reveal the efforts taken to control NPA in Sugar
sector advances were more effective in the first three years.
The percentage change in NPA in sugar sector to total advance given in sugar sector at
KSCAB ltd is represented in the following graph.
Interpretation
The above graph reveals decreasing trend in NPA in Sugar sector to total advances
from 2007-08 to 2010-11 and marginal increase in 2011
sector shows that is more than 30% of the total credit given,
Hence the bank has to take proper measure to monitor NPA in Sugar sector in time.
0
20
40
60
80
2007-08 2008
64.76 61.52
2007
NPA (in %) 64.76
NPA IN SUGAR SECTOR
19
TABLE NO: 6
Year NPA (Rs in
lakhs)
Total advance
(Rs in lakhs)
NPA (in
%)
08 12711.8 19627.1 64.76
09 11501 18693.5 61.52
10 10755.5 20039.5 53.67
11 7511.39 23489.1 31.97
12 7392.35 21936.8 33.09
08, 2008-09 and 2009-10. But slightly decreased during the years
12. The above results reveal the efforts taken to control NPA in Sugar
sector advances were more effective in the first three years.
ge in NPA in sugar sector to total advance given in sugar sector at
KSCAB ltd is represented in the following graph.
GRAPH NO – 6
11 and marginal increase in 2011-12. However, the NPA in Sugar
sector shows that is more than 30% of the total credit given, it indicates dangerous signal.
NPA (in %)
2008-09 2009-10
2010-11
2011-12
61.52
53.67
31.97 33.09
2007-08 2008-09 2009-10 2010-11 2011-12
64.76 61.52 53.67 31.97 33.09
NPA IN SUGAR SECTOR
NPA (in
%)
64.76
61.52
53.67
31.97
33.09
10. But slightly decreased during the years
12. The above results reveal the efforts taken to control NPA in Sugar
ge in NPA in sugar sector to total advance given in sugar sector at
12. However, the NPA in Sugar
indicates dangerous signal.

7. NPA IN OTHER SECTORS
The percentage change in NPA in other sector (other than Agriculture and sugar) to
total advance given by KSCAB ltd.
SL.NO Year
1 2007-08
2 2008-09
3 2009-10
4 2010-11
5 2011-12
Analysis
The percentage of the total NPA in other sector to total credit given shows the
decreasing trend during the financial year 2007
increasing trend during the years 2009
The percentage change in NPA in other sector to total ad
KSCAB ltd
Interpretation
The above graph reveals the NPA in other sector to total advances is decreasing from
2007-08 to 2008-09. And thereafter, there is
indicates unsafe/ dangerous signal. Hence bank has to take proper measure to monitor NPA
in other sector.
2007
NPA (in %)
0
2
4
6
8
10
12
14
16
20
PA IN OTHER SECTORS
total advance given by KSCAB ltd.
TABLE NO – 7
Year NPA (Rs in
lakhs)
Total
advance (Rs
in lakhs)
NPA (in
%)
08 3065.61 51844.1 5.91
09 2935.5 57946.8 5.06
10 3847.08 67790.8 5.67
11 10001 112869 8.86
12 19044.9 135684 14.03
decreasing trend during the financial year 2007-08, 2008-09 and thereafter ,it shows
increasing trend during the years 2009-10, 2010-11 and 2011-12.
in NPA in other sector to total advances given in other sector at
GRAPH NO - 7
09. And thereafter, there is step increase in the following four years
2007-08 2008-09 2009-10 2010-11 2011-12
5.91 5.06 5.67 8.86 14.03
NPA IN OTHER SECTOR
NPA (in
5.91
5.06
5.67
8.86
14.03
09 and thereafter ,it shows
vances given in other sector at
step increase in the following four years

21
FINDINGS, SUGGESTION AND CONCLUSIONS
FINDINGS
Following are the findings of the study on Karnataka State Co-operative Apex Bank Ltd.
1. The Non-performing Assets of the bank stood at Rs. 26437.29 lakhs as on 31-03-2012
as against Rs.17512.50 lakhs as on 31-03-2011. As on 31-03-2012 NPA is 4.91%.
2. In respect of agriculture loans, the percentage of recovery as on 31-03-2012 was
100%. For the corresponding period of the previous year also recovery percentage
stood at 100%.
3. The total advance given to sugar sector is very less compared to agriculture sector.
But total NPA in sugar sector is very high compared to agriculture sector. Advances
given to the sugar sector in which more than 30% has become NPA.
4. Based on the observation in 2007-08 Sub standard asset was 43.43%, progressively it
was decreased in 2008-09 with percentage of 33.52, with good recovery policy of co-
operative bank, 2009-10 Sub standard assets condensed to 25.81%.
5. The percentage of total NPA in other sector has continuously increasing trend during
the year 2009-2011, and as on 31-03-2012 it was increased at 3.54%.
6. The specific findings from the study are that, there is still a need to have controlling
devices to monitor NPA system in the Karnataka State Co-operative Apex Bank Ltd.
SUGGESTIONS
To control the Non–performing assets in Karnataka State Co-operative Apex Bank
Limited, some remedial measures are suggested as follows:
1. There must be an effective and regular follow-up with the customers and need to
watch is there any diversion of funds. This process can be taken up at regular
intervals.
2. A number of personal visits after sanction and disbursal of credit and close
monitoring of the operations of the accounts of borrowed units.
3. Between the Bankers – borrower a healthy relationship should be developed. Many
instances reported that the banks uses force in recovery of loans, which is unethical.
4. Managers in charge of non-performing assets should have dynamism and seal in their
work.
5. Frequent discussions with the staff in the branch and taking their suggestions for
recovery of NPAs make them feel responsible.
6. Assisting the borrowers in developing his/her entrepreneurial skill will not only
establish a good relation between the borrowers but also help the bankers to keep a
track of their funds.
7. RBI need to take necessary actions against defaulters like, publishing names of
defaulters in News papers, broad-casting media, which is helpful to other banks and
financial institutions.
8. Create awareness among the customers and staff about the effect of Non –performing
assets on the performance of the banks and ultimate on the customers.
9. The bank has to take care of recovery management in sugar and other sector.
10. The bank should avoid the wrong selection of borrowers. The staff must be
additionally trained to assess the borrower efficiency by proper credit appraisal.
11. Quality of advances can be improved by using the tools and techniques of credit
appraisal and applying the same effectively.
12. Establish special task force for the recovery of dues, which have fallen under the
category of Non –performing assets.

22
13. The bank should fully understand the borrowers’ financial position before issuing
loans.
14. The manager must take actions of recovery of loans and advances within a specified
time frame with rational decisions.
CONCLUSION
Finally we can conclude that the Apex bank can avoid sanctioning loans to the non
creditworthy borrowers by adopting certain measures. They are careful appraisal of the
project which involves checking the economic capability of the project.
Apex banker must consider the homecoming on investment on a proposed project. If
the calculated return is sufficiently higher than the credit amount he can sanction the loan.
Secondly, banker can constantly monitor the borrower in order to ensure that the amount
sanctioned is utilized properly for the purpose to which it has been sanctioned. This involves
the post sanction inspection by the Apex bank.
Thirdly, the banker should get both the formal and informal reports about the
goodwill of the customer. If he had already proven as a defaulter then there is no question of
sanctioning loan to him.
Fourthly, the banker also has to educate the borrowers regarding the effects and
consequences of defaulting. By considering all the above factors the banker can reduce the
non-performing assets in a bank. .
The use of technology like Core Banking Solutions in Apex bank should make more
reachable to all borrowers.
At last the problem of NPAs has been a major issue for the banking industry. The RBI
which is the apex body for controlling level of non-performing assets have been giving
guidelines and getting norms for the banks in order to control the incidents of faults.
Reduction of NPAs in banking sector should be treated as national priority item to make the
Indian Banking system more strong, vibrant and geared to meet the challenges of
globalization
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WEBSITES
http://www.karnatakaapex.com
http://www.ebsco.com

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