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A PROJECT REPORT SUBMITTED IN PARTIAL FULFILLMENT OF THE
REQUIREMENTS FOR THE DEGREE OF MASTER OF BUSINESS
ADMINISTRATION
SUBMITTED BY
Shivangi Singh
PRN-15020441239
Roll no.D-51
(Batch 2015-2017)
Under the Guidance of
Project Guide Project Mentor
Prof.RahulDhaigude Miss JyotiAgarwal
(Legal Officer)
JULY 2016
SYMBIOSIS INSTITUTE OF MANAGEMENT STUDIES
(A constituent of Symbiosis International University)
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COMPLETION CERTIFICATE
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“Recovery of loans(Non Performing Assets
Management) and Debt Recovery Tribunal”
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DECLARATION
I hereby declare that the project entitled “Recovery of loans(NPA Management) and Debt
Recovery Tribunal” submitted for the MBA Degree is my original work and the project has
not formed the basis for the award of any degree, associateship, fellowship or any other
similar titles.
Name of the student: Shivangi Singh
Signature of the Student:
Place: Pune
Date: 29th July 2016
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CERTIFICATE
This is to certify that Miss Shivangi Singh, PRN No. 15020441239 has completed her
project report on the topic “Recovery of loans(NPA Management) and Debt Recovery
Tribunal” under my guidance.
Name of the Faculty: Prof. Rahul Dhaigude
Signature:
Date:
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ACKNOWLEDGEMENT
I would like to thank Prof. Rahul Dhaigude for all the help and support extended by him at
every stage during my CPS as my faculty guide.
I would also like to express my gratitude to Bank of Baroda, Miss JyotiAgarwal (Legal
Officer) my project mentor, for giving me the opportunity to do this research project, for
guiding me through this project and for teaching me the functioning of the recovery
department .
I would also like to extend my sincere gratitude towards Symbiosis Institute of Management
Studies for giving me the opportunity to do the CPS project with Bank of Baroda which
added value by being a great learning experience.
Shivangi Singh
PRN-15020441239
D-51
Finance with International Business
Symbiosis Institute of Management Studies,Pune
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TABLE OF CONTENTS
Sr.no. Topic Page no.
1. Executive Summary 9
2. Company Profile 10
3. Company Products and logo 11
4. Bank of Baroda Pune 13
region’s performance
5. Objectives 14
6. Introduction 15
7. Significance of NPA 16
management
8. Methodology 17
9. Increasing NPAs 19
10. Asset classification and 20
provisioning
11. Measures of recovery 23
12. Performance 24
13. Technology used 34
14. My learning 35
15. Bibliography 36
16. Turnitin report 37
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EXECUTIVE SUMMARY
Project Title-Recovery of loans(NPA Management) and Debt Recovery Tribunal
Increasing bad loans negatively impacts the ability of banks to continue their business as
usual. The problem is particularly severe with public sector banks. Results for the December
quarter show their financial position in poor light. Not only this almost all public banks have
been reporting higher level of non -performing assets as result of which banks have to make
larger provisions against possible loan losses this results in not only profits of banks getting
affected but also increased provisioning ties up their capital.
In Bank of Baroda recovery of loans( NPA management) is one of the key policies.Bank aims
at maximizing recovery of loans through effective monitoring and follow up and taking
various legal and other actions for the same. Recovery of loans (NPA management) in Bank
of Baroda is a broad topic and there is a systematic process to deal with the same.
This organization uses Debt recovery tribunals, compromise ,SARFAESI act ,follow up etc
as its tools for recovery of loans.Also apart from that greater importance is given to
preventing an account becoming NPA rather than using remedial measures once that account
turns NPA.The basic approach for recovery is pragmatic and unbiased.
The project assigned to me was recovery of loans(NPA management) and DRT.As the name
suggests during my internship I was required to understand the functioning of recovery
department and help bank in recovery of loans.Also I worked in regional office where nature
of work is different from branch office.Regional of Bank of Baroda was involved more in
controlling and monitoring branch.
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COMPANY PROFILE
COMPANY OVERVIEW
Bank of Baroda has earned name and fame in banking industry not only in India but also
abroad.It has its presence in over 20 countries across the globe.and it is also considered as
India’s international bank.I worked in regional office where nature of work is different from
branch office.Regional Office of Bank of Baroda was involved more in controlling and
monitoring branches.It controls over 120 branches in Pune.Also it is considered as the second
best bank in India after State Bank of India(SBI) on the basis of market capitalization.The
bank comes in the list of all those banks which are more than 100 years old in India.
VISION AND MISSION
Long term aspiration of the organization is to be a best ranking national bank ofglobal
standards.Also being committed to its stakeholders and having concern and care for
shareholders,employees and customer’s needs.Apart from that bank wants to play vital role in
increasing trade, commerce, art and industries.
HISTORY
Bank was established in the year 1908.It was founded by late Maharaja of Baroda Sir
SatajiRao Gaikwad-3 .he gave silver plate with gold coins as first deposit for Bank of
Baroda.Bank’s first overseas branch was opened in Kenya in the year 1953.After that a
committee in the year 1955 advised that 10 state run banks, which included Bank of Baroda,
should go for amalgamationwith State Bank of India. But Bank of Baroda denied since it
had already expanded not only in India but abroad.Also bank was nationalized in the year
1969.
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LOGO
The logo is unique in itself .It signifies the bank as rising sun.Its rays lightens and illumnates
everything and everywhere it reaches.It consists of dual “B” letter form which has sunrays.It
also indicates that bank’s reach is far.
PRODUCTS
Banks like Bank of Baroda have a very significant personalised service capability.Apart
from conventional products services offered by this bank like All General Banking Services
it also offers unique products and services like Baroda-e trade .
This is basically a 3 in 1 account which is a prerequirement for trading or investing .These
three accounts are trading account,sving account/current account and a demat account some
of the main features of Baroda e trade are :-Attractive brokerage,place orders online as well
as you can call and trade etc.
Other services provided by bank include NRI Services
Foreign Currency Loans in India (FCNR 'B' Loans)
Export Finance / Services
Import Finance / services
Correspondence Banking Services in India
Treasury
Bank has also launched card to card fund transfer in association with National Payments
Corporation of India(NPCI).It is basically a instant fund transfer facility using “debit card
number “of the beneficiary .It is a simple ,convenient ,secured and safe method of
transferring funds 24 x 7.
ServicesBranches outside India
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The international banking services of Bank of Baroda at its branches in abroad are provided
for to serve its Indian customers, customers who are localite, NRI's, subsidiaries and joint
ventures of Indian corporations operating outside India, foreign companies, multinational
corporations, financial institutions banks as well as customers around the world.
Services that target these group of customers are listed as following:
a)All general Banking Services including Retail lending as well as corporations
b)International Treasury Services
c)Trade Finance (Bills Discounting)
d)Foreign currency credits to the Indian corporations
e)It also arranges/ participates in the syndicated loans of Indian corporations as well as rated
multinational corporations.
f)Correspondent Banking services to the Indian Bank and other organizations
g)NRI Services
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B.O.B PUNE REGION’S PERFORMANCE(COMPARISON)(Amount in crores)
BASIS FOR Average of Average of % YOY growth % YOY growth
COMPARISON March 2015 March 2016 of Pune region of B.O.B
Current Deposits 414 499 20.53 6.31
Saving Deposits 1907 2155 13 12.70
CASA Deposits 2321 2654 14.35 11.83
Total Deposits 7860 9532 21.27 11.21
Total Advances 3411 3749 9.91 6.20
From the above table it can be observed that ,that Pune region of B.O.B has shown year
YOY% growth higher than that of the Bank on major parameters,which is noteworthy.
Pie chart for the year
2016,Amount in crores
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OBJECTIVES
The main objectives of my project were:
1. To study the types ,concepts and causes of NPAs
2. To determine how debt collection strategies(DRT,SARFAESI
act,compromiseetc) affect loan recovery.
3.To understand the whole processofloanrecovery.
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INTRODUCTION
RECOVERY OF LOANS(NPA MANAGEMENT)
An asset including leased asset becomes a non performing asset once it stops to generate any
kind of income for bank.
A NPA for a bank is loan or advance where installment of principal or interest remain
overdue for a period of more than 90 days in case of term loan.
In case of an overdraft or cash credit(CC) facility ,if the account remains out of order
as on date of balance sheet for reasons as following: If the outstanding balance
remains continuously in excess of the sanctioned limit/drawing power for 90 days.
Or If the outstanding balance remains continuously in excess of the sanctioned
limit/drawing power for 90 days but there are no credits continuously for 90 days as
on the date of balance sheet.
Credits are not enough to recover the interest debited during that period.
A NPA for a bank is loan or In case of an overdraft or cash
advance where installment of credit(CC) facility , If the
principal or interest remain outstanding balance remains
overdue for a period of more continuously in excess of the
than 90 days in case of term sanctioned limit/drawing
loan. power for 90 days.
If the outstanding balance
Or Credits are not enough to remains continuously in excess
recover the interest debited of the sanctioned
during that period. limit/drawing power for 90
days.
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SIGNIFICANCE OF NPA MANAGEMENT
Non-performing assets (NPAs) have become the new scare term for the Indian capital
markets and for the economy. A global and domestic slowdown has resulted in decreasing
demand across many industries like construction,power,steel . As a result, cash inflows have
slowed down too. Banks are lenders to most of these businesses and when cash flows slow
down, the interest payments to banks can suffer. As a result, bank profitability suffers.
These are the same banks in which public hold their savings accounts or a fixed deposits. So
what happens when a bank doesn’t receive money from its assets.It directly or indirectly
impacts bank’s ability to pay for its liabilities (money from depositors).
The main problem
The rise in NPA levels is a cause for worry because unless a bank has good assets (loans and
advances), which pay up on time, it might face trouble in paying its lenders or deposit
holders. The focus is largely on public sector banks because traditionally they have had heavy
corporate loan books. However, large private sector banks with exposure to corporate loans
are also affected. Stock prices of private and PSU banks in this category have corrected 30-
60% in the last one year. Hence, it’s not ownership that matters, rather it is asset quality.
B.O.B Maharashtra and Goa Zone(Amount inCrores)
NPA Outstanding March 14 March 15 March 16
NPA 793 1059 1321
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METHODOLOGY
• Understanding the functioning of recovery department
of a bank
PART -A
• Shadowing the team members to gain the essence of
loan recovery.
PART-B
• Understanding the application of various measures of
recovery of loans like SARFAESI act,DRT(Debt
Recovery Tribunal ) etc
PART-C
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INCREASING NPAs of BANKS
The banking scenario in India presents a scary picture because of rising NPAs of banks.The
rise in NPA is because of few specific problem caseswhich include a steel manufacturer, a
large power company, a textiles manufacturer and others in the commodity business .
GROSS DROP IN SHARE PRICE IN GROSS NPA in
BANK NPA% 2016(%) crores
INDIAN OVERSEAS
BANK 12.6 30 22,672
UCO BANK 11 26 14932
DENA BANK 9.9 13 7916
BANK OF BARODA 9.7 12 38934
UNITED BANK 9.6 22 6,722
BANK OF INDIA 9.2 33 36,519
CENTRAL BANK
OF INDIA 9 36 17,564
IDBI BANK 8.9 45 19,615
PUNJAB
NATIONAL BANK 8.5 21 34,338
BANK OF
MAHARASHTRA 8 16 8,302
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As we can see from the graph above increasing NPAs are not only affecting the profitability
of the banks because they have to create provisions for the same but it also results in drop in
share prices of bank.
ASSET CLASSIFICATION AND PROVISIONING
Once an asset seizes to generate income for a certain duration it is classified into various
categories and accordingly provisioning is done.Here it should be noted that provisioning is
done to meet the known liability. It is a charge against profit and as such reduces the profits
of the year in which it is created.
NPA Category Where the account Secured portion of Unsecured portion
has remained NPA loan outstanding of loan outstanding
upto
Sub standard Less than 1 year 15% 25%
Doubtful:
DB1 Up to one year 25% 100%
DB2 One to three yrs 40% 100%
DB3 More than three 100% 100%
years
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Loss Assets Where security value 100% 100%
is less than 50% of
loan amount or as
decided by bank
SMA(SPECIAL MENTION ACCOUNT)
As per RBI before an account becomes NPA it is compulsory for banks to identify incipient
stress by creating a category of accounts called SMA(SPECIAL MENTION ACCOUNTS)
SMA SUB CATEGORIES BASIS FOR CLASSIFICATION
SMA0 Interest or principal payment not overdue for
more than 30 days but account showing signs
of incipient stress
SMA 1 Interest or principal payment overdue
between 31-60 days
SMA 2 Principal or interest payment over due
between 61-90 days.
All this is considered after due payment date.
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MEASURES OF RECOVERY
The measures for recovery of loans are divided into two broad categories:-
1.Recovery through legal measures
2.Recovery through non legal measures
Recovery through legal measures Recovery through non legal
measures
Debt Recovery Tribunal Recovery agent
SARFAESI ACT Compromise Settlement
Write –off/Prudential write off
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PERFORMANCE AND LEARNING
As informed above about the measures of recovery of loans.I was a part of recovery task
force of Bank of Baroda .Recovery taskforce is a team of employees who are expected to
reduce NPA by using measures of recovery upto a particular target.
DEBT RECOVERY TRIBUNAL
It is a tribunal established by Indian government .The main purpose of DRT is to help banks
in speedy recovery of their debts.Thus banks and other financial institutions approach DRT
for recovery of debts.It should be noted that only those cases which involves Rs 10 lakhs or
above can be filled in DRT.
The task given to me was to form a list of all the DRT cases Bank of Baroda has filed against
its customers from whom it has to recover money as the bank gave loan to the same.This list
was created with the help DRT website as it contains the list of all the cases which any bank
has filed against its customers.
Specimen of the DRT cases list formed my me is given below:
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Once this is done I was supposed to match it with the list of cases which bank has and update
it accordingly.
COMPROMISE SETTLEMENT
One of the main measures for recovery of loans followed by Bank of Baroda is compromise
settlement. It basically refers to an agreement which bank and borrower enters into .In this
borrower agrees to pay amount of loan and bank agrees to accepts the repayment from
borrower by receiving a little lesser amount.
WHEN TO GO FOR WHEN NOT TO GO
COMPROMISE FOR COMPROMISE
SETTLEMENT SETTLEMENT
When the borrower is ready to pay When there are enough
the dues and sacrifice made by bank securities available for
is less compared to other measures of recovery of loan.
recovery and legal costs.
When an organization is suffering from genuine When current net worth of
problems like sales, production etc and it has borrower is more than
become almost impossible to continue with the enough for recovery of loan
operations and borrowers sources of funds and
securities are not enough for loan repayment.
When a borrower himself is interested in payment of dues
outside the purview of court and also there are cases when
there is no security available or realization of the same is
difficult or the business unit itself is closed.
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Here my job was verification of compromise proposal .Branches of Bank of Baroda sends all
compromise proposal to regional office for it to get sanction and approval from higher
officials and that is why first compromise proposal are verified and then approved.
Main contents of compromise proposal which I was supposed to verify were as following:-
Total Contractual dues-This amount includes interest, legal expenses and other charges
Total notional dues-This amount includes outstanding balance as per books of accounts
including interest unapplied .Unapplied interest refers to interest which should have been
ideally applied but since account has turned NPA its not applied.It should be noted that once
an account turns NPA no interest is applicable on that.
Total compromise amount-This refers to amount which is offered for compromise.
Sacrifice-This amount refers to amount which bank has sacrificed.It includes write off
amount and waiver.It should be noted that only interest is waived by bank. And write off is
calculated by deducting compromise amount from total notional dues.
SACRIFICE AMOUNT
WRITE OFF AMOUNT WAIVER AMOUNT
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SARFAESI ACT 2002
SARFAESI stands for Securitisation and Reconstruction of financial assets and
enforecement of security interest.This act is basically meant for banks and financial
institutions to recover money which was given as a loan.By using this act bank can seize the
securities (except agricultural land) without court coming into picture.It should be note that
act is effective only for secured loans.
Task given to me was to call all the branches ask them whether SARFESI notices which have
to be issued to borrowers have been issued or not and if its issued all those branches have to
send copy of those notices to regional offices and at the same time maintaining the data base
of the same.and also asking branches to provide our office copies of all action taken under
SARFAESI and information about all accounts eligible under SARFAESI.It should be noted
that SARFAESI act is applicable to cases above Rs 1lakh.
UPDATING CRITICAL AMOUNT DUE
A list of NPA accounts was given to me where I was suppose to use Finacle and check in
those accounts if any amount is credited so that account will no more be considered as NPA
and then I have to update it manually in the sheet provided to me.
Specimen of the same is shown as below:
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EXCESS OVERDRAWN REPORT
This is a report generated by finacle which shows list of accounts to which loan is given
beyond a particular limit . My task was to generate this report using finacle and write letters
to those branches of bank of baroda asking why loan is given beyond sanction limit with that
report being attached.
Specimen of that report is :
ACCOUNT NAME SCHE SANCT DRAWI BALA EXCE DRAWI
NO. ME ION NG NCE SS NG
LIMIT POWE POWE
R R
GRAN GRAN
TED T
DATE
3742040000 RathiMeenaJuga OD00 400000 400000 - -3643 31.3.20
0002 lKishor 2 403643 16
3742050000 ShivajiTatyabay CC003 150000 150000 - -8023 30.4.20
003 e 158023 16
3742040000 AjitRawat CC003 200000 200000 - -1635 28.3.20
00013 201635 16
3742040000 Nandini CC001 300000 300000 - -2593 30.4.20
00015 Readymade 302593 16
PREPARATION OF PROGRESS REPORT ON NPA RECOVERY
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Daily a report is prepared which determines how much amount is recovered everyday with
regard to NPA and on the basis of this report monthly report is prepared. I was supposed to
prepare daily report.
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TECHNOLOGY USED IN BANK OF BARODA
Bank of Baroda uses finacle for all generating reports and also for enquiry of accounts
Apart from that bank also has separate message box which can accessed only by its
employees.
Also it has separate mail box other than gmail which can be accessed by employees of
bank only.
Use of ASCROM Software.
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MY LEARNINGS
From this internship I got to learn lot of things.I learnt not only about how loan recovery
process is executed but also about the significance of NPA management.I also got to
understand the implications of increasing NPAs on banks as health of bank deteriorates
because of increase in NPA.Apart from that one of the important thing to mention is that I got
to know that If top borrowers of bank default it increases chances of banking capital getting
wiped out.
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BIBLIOGRAPHY
Recovery policy of Bank of Baroda book
www.economictimes.com
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TURNITIN REPORT
