Axis Bank, formerly UTI Bank, is a financial services firm that had begun operations in 1994, after the Government of India allowed new private banks to be established. The Bank was promoted jointly by the Administrator of the Specified Undertaking of the Unit Trust of India (UTI-I), Life Insurance Corporation of India (LIC), General Insurance Corporation Ltd., National Insurance Company Ltd., The New India Assurance Company, The Oriental Insurance Corporation and United India Insurance Company UTI-I holds a special position in the Indian capital markets and has promoted many leading financial institutions in the country. The bank changed its name to Axis Bank in April 2007 to avoid confusion with other unrelated entities with similar name. After the Retirement of Mr. P. J. Nayak, Shikha Sharma was named as the bank's managing director and CEO on 20 April 2009.
As on the year ended 31 March 2009 the Bank had a total income of 13,745.04 crore (US$3.09 billion) and a net profit of 1,812.93 crore (US$407.91 million).
INTERPRETATION OF PERFORMANCE of FY09
Rapid Growth in the Bank's core businesses
- Total Net Advances grow 55% yoy to Rs. 75,328 crores
- Total Investments grow 50% yoy to Rs. 43,677 crores
- Total Assets register a 52% yoy growth, rising to Rs. 1,37,471 crores
- Share of demand deposits in total deposits at 38%
-Net NPAs at 0.39%, compared to 0.42% as at end December'07
Definitions of Non-Performing Assets NPA is a loan or an advance where:
1. interest and/or instalment of principal remains overdue for a period of more than 90 days in respect of a term loan;
2. the account remains "out-of-order'' in respect of an Overdraft or Cash Credit (OD/CC);
3. the bill remains overdue for a period of more than 90 days in case of bills purchased and discounted;
4. A loan granted for short duration crops will be treated as an NPA if the installments of principal or interest thereon remain overdue for two crop seasons; and
5. a loan granted for long duration crops will be treated as an NPA if the installments of principal or interest thereon remain overdue for one crop season.
6. The regular/ad hoc credit limits have not been reviewed/ renewed within 180 days from the due date/date of ad hoc sanction.
Recovery using Recovery Certificate
‡ Recovery Officer proceeds to recover the amount in any
of the following ways :
a) attachment and sale of the movable and immovable property
b) arrest and detention of the defendant
c) appointing a receiver for the management of the movable oimmovable properties
d) issue Garnishee Order against third parties.
‡
Provision for NPAs
Asset Classification
Provision Requirements
Standard Assets 0.25%
Sub-standard Assets 10%
Doubtful Assets (Doubtful I) 20%
Doubtful Assets (Doubtful II) 30%
Doubtful Assets (Doubtful
III) 100%
Loss Asset Should be written off
Credit Rating System
Internal reporting and oversight of assets is principally differentiated by the credit ratings applied. The Bank has developed rating tools specific to market segment such as large corporates, mid-corporates, SME, financial companies and microfinance companies to objectively assess underlying risk associated with such exposures.
Credit Sanction and related processes
Know your Customer‟ is a leading principle for all activities.
The acceptability of credit exposure is primarily based on the sustainability and adequacy of borrower‟s normal business operations and not based solely on the availability of security.
Portfolio level risk analytics and reporting to ensure optimal spread of risk across various rating classes prevent undue risk concentration across any particular industry segments and monitor credit risk quality migration.
Sector specific studies are periodically undertaken to highlight risk and opportunities in those sectors.
Separate risk limits are set up for credit portfolios like advances to NBFC and unsecured loans that require special monitoring.
Review and Monitoring
All credit exposures, once approved, are monitored and reviewed periodically against the approved limits. Borrowers with lower credit rating are subject to more frequent reviews.
Customers with emerging credit problems are identified early and classified accordingly. Remedial action is initiated promptly to minimize the potential loss to the Bank.
FOR THE YEAR ENDED 31 MARCH 2010
FOR THE YEAR ENDED 31 MARCH 2009
FOR THE YEAR ENDED 31 MARCH 2008
Amount of NPAs (Gross)
- Substandard
643.57
- Doubtful 1
67.37
- Doubtful 2
26.09
- Doubtful 3
15.04
- Loss
565.93
B.
Net NPAs
419.00
C.
NPA Ratios
- Gross NPAs to gross advances (%)
1.25%
- Net NPAs to net advances (%)
0.40%
D.
Movement of NPAs (Gross)
- Opening balance as on 1.4
897.77
- Additions
1,800.70
- Reductions
(1,380.47)
- Closing balance
1,318.00
E.
Movement of Provision for NPAs
- Opening balance as on 1.4.
570.64
- Provision made of previous year
1,373.21
- Write - offs / Write - back of excess provision
(1,041.60)
- Reclassification of floating provision
(3.25)
- Closing balance
899.00
465.16
122.50
17.50
9.64
282.97
Net NPAs
327.13
NPA Ratios
1.09%
0.40%
Movement of NPAs (Gross)
494.61
892.62
(489.46)
897.77
Movement of Provision for NPAs
246.32
690.32
(344.27)
(21.73)
570.64
494.61
309.681
75.77
56.22
5.72
47.22
248.29
0.83%
0.42%
418.67
384.21
(308.27)
494.61
152.34
248.43
(154.45)
246.32
RATING
Rating Date
Security Type
Amount
Rating
Rating Type
14-10-2010
Debt Progamme
45.62
P1+
Very Strong With Relatively Higher Standing
14-10-2010
25-01-2010
Debt Progamme
Pass Through Certificates
500
100
P1+
P1+
Very Strong With Relatively Higher Standing
Highest credit quality. `AA+(ind)' ratings indicate a low expectation of credit risk. They indicate strong capacity for timely payment of financial commitments. This capacity may vary slightly from time to time because of economic conditions.
NPA Management
The Net NPA's after 2008 have come down by 0.02% till 31st Mar 2010.The loss assets have increased by 91.87 in comparison to 2009.
Even the closing balance of banks have also increased in recent years.
The Bank has identified 6,042 borrowers eligible under the Agriculture Debt waiver and debt relief scheme announced in the Union Budget 2008- 09 and relief amounting to Rs. 43.07 crores was credited to their loan accounts. Pursuant to the implementation of the debt relief scheme, there has been a reduction in Gross NPAs of Rs. 45.20 crores and a write-back of provision of Rs. 8.27 crores during the quarter.
Even the the rating is Very Strong With Relatively Higher Standing for Debt Progamme securities. Instruments carrying this rating are considered to be of the best quality, carrying negligible investment risk. Debt service payments are protected by stable cash flow, with good margin. While the underlying assumptions may change, such changes as can be visualised are more unlikely to impair the strong position of such instruments.
So, we can conclude that overall position of the bank is good.
NEWS PAPER QUOTES
15-Oct 2007
Net NPAs declined to 0.55% from 0.74% in the year-ago period, while the capital adequacy ratio (CAR) of the bank improved substantially at 17.59% against 11.50% at end-June 2007 and 11.52% as of end-September 2006.
Source-Business Line
15 -Oct-2010
The bank's asset quality has also improved. Net non-performing assets (NPAs) formed 0.3% of net advances. The bank has shown exemplary performance in this area as its net NPAs have been hovering around 0.4% in the last nine quarters.
The bank also improved its net interest margin (NIM) - the spread between the bank's borrowing and lending rates - to 3.7%, up by about 16 basis points y-o-y. Among its peers, only HDFC Bank and Punjab National Bank have reported better NIMs.
Source-Economic Times
Oriental Bank of Commerce
Oriental Bank of Commerce, established on 19 February, 1943, in Lahore (then a city of British India, and currently in Pakistan), is one of the public sector banks in India.
On 14 August 2004, Global Trust Bank Limited (GTB) was amalgamated into OBC. GTB was a leading private sector bank in India that was associated with various financial discrepancies leading to a moratorium being imposed by RBI shortly before being merged into OBC.
Oriental Bank of Commerce was nationalised on 15th April in 1980. Then OBC bank had 307 branches with Rs. 282.61 crores as deposits and as advance Rs. 152.69.
On closing Mar 2010 its reserves stood at 15,639.44 whereas in 2009 it were 9,855.79
Oriental Bank of Commerce Fact File
Amongst the strongest banks in India
High Capital Adequacy Ratio
Consistent Profit-making Bank
One of the Lowest Spreads in Banking Industry
Total Working crosses the 35700 crore mark
CRISIL Ratings
The Highest Productivity per Employee
NPA - One of the lowest
BANK
Net NPA as % Net Advance
Oriental Bank of Commerce
2008
0.99
2009
0.65
2010
0.87
OBC's NPA's in 2010 have come down from 0.65% to 0.87% reduced by 0.22% though it was more in 2008 in comparison to 2009 which shows good sign of Maintenance of NPA's.
Amount of non-performing loans (NPL) (September 30, 2009)
Movement of NPA (figure in (Rs.) crores)
NPA Classification Gross NPA Net NPA
Sub- standard 421.28 374.24
Doubtful 697.83 240.08
Doubtful-1 298.12 148.98
Doubtful- 2 215.69 91.10
Doubtful-3 184.02 0.00
Loss 59.70 0.00
total 1178.81 614.32*
NPA ratios 1.54% 0.66%
Movement of provisions for NPAs(figure in (Rs.) crores)
Opening Balance as on
01.04.09
1058.12 442.43
Addition during the year 344.24 56.80
Deduction during the year 223.55 -
Closing balance 1178.81 499.23
NOTE-OBC did not showed proper management of NPA's so it was hard to interpret it.It did not show all the necessary accounts.
Merger of Global Trust Bank with OBC lead to rise in NPA's in 2004
Recommendations for reducing NPAs
1. Effective and regular follow-up of the end use of the funds sanctioned is required to ascertain any embezzlement or diversion of funds
2. In case of new borrowers, especially corporate borrowers, proper analysis of the cash flow statement of last five years is to be done carefully.
3. A healthy Banker-Borrower relationship should be developed. Many instances have been reported about forceful recovery by the banks, which is against corporate ethics. Debt recovery will be much easier in a congenial environment.
4. Countries such as Korea, China, Japan, Taiwan have a well functioning Asset Reconstruction/
Recovery mechanism wherein the bad assets are sold to an Asset Reconstruction Company (ARC) at an agreed upon price. In India, there is an absence of such mechanism and whatever exists, it is still in nascent stage.
5. So far the Public Sector Banks have done well as far as lending to the priority sector is concerned.
However, it is not enough to make lending to this sector mandatory; it must be made profitable by sharply reducing the transaction costs. This entails faster embracing of technology and minimizing documentation.
6s. Another way to manage the NPAs by the banks is Compromise Settlement Schemes or One Time Settlement Schemes. However, under such schemes the banks keep the actual amount recovered secret. Under these circumstances, it is necessary to bring more transparency in such deals so that anyflaw could be removed.
