SRM INSTITUE OF SCIENCE AND TECHNOLOGY

Kattankulathur, Chennai- 603203

FACULTY OF MANAGEMENT

MBF22307T- NPA MANAGEMENT

ASSIGNMENT

Academic year 2023-2024

STUDENT NAME KRISHNA PRIYA K

REGISTER NUMBER RA2352006010094

NAME OF THE PROGRAM MBA (BANKING AND FINANCIAL SERVICE)

YEAR & SEMESTER I YEAR & III TRIMESTER

SECTION AA2

1
TABLE OF CONTENT:

[Link] TITLE PAGE NO

1 Abstract 3

2 Introduction of the study 4

3 Research methodology 5
[Link] of study
[Link]
[Link] of the study
[Link] design

4 Review of literature 6

5 Data analysis, interpretation and presentation 30

6 Findings, conclusion, suggestions 31

7 Bibliography 34

2
ABSTRACT

After the evolution of banking system, the development and growth has
become very prompt as banks provides a great deal for the better and speedy
capital formation in the economy. Banking systems has provided a greater
amount of facility for the financial adjustments of the economic activity which
is an important tool for the development and growth.

But there are some difficulties too, in the smooth running of the banking
system. One of the biggest difficulties is the non-performing assets of a bank.
To grant loan is not a big challenge but the recovery of that loan is one of the
biggest issues. In the present paper, the detail causes and suggestions of the NPA
are provided.

3
INTRODUCTION TO THE STUDY

India being a developing country has been progressing since

independence with the great support of banking system in the country. The role
of commercial bank in the progress of the country is considered as a benchmark.
For the high rate of capital formation of the role of commercial bank has no any
other alternative. But yet Indian needs a great amount of development and
growth for the time to come where again the banking system will become a
milestone but the banking system has only one big issue that is NPA.

The study of Non-Performing Assets (NPA) of DBS bank involves

examining the bank's loans and advances that are in default or are close to being
in default. NPAs are assets that do not generate any income for the bank because
the borrowers fail to pay either principal or interest for a certain period.

4
RESEARCH METHODOLOGY

Objectives of the study

• To analyse the types of assets and effect of NPA on it.

• To study the causes of NPA of banks.

• To study the trends of gross and net NPA.

Hypothesis

• NPA effect on financial partition of the bank.

• Credit risk management should be adopted by the bank for minimizing the
NPA.

Limitation

• This study is only restricted to DBS bank only.

• The result of the study may not be applicable to any other bank.

• The conclusion of the study is based on the secondary information. Thus, some
amount of subjectivity might remain.

Research Design:

The research conducted is to analyze the NPA management in DBS bank.

The nature of research is exploratory as well as diagnostic. This study is based
on the secondary data only of DBS bank. The various data provided by them,
the RBI Circulars, journals, magazines , data from internet and interpretation
made thereof.

5
REVIEW OF LITERATURE

The Indian Banking system:

Banks and banking in India have been classified into various groups. In
its activities, each group has its own set of advantages and disadvantages. They
have their own distinct target audience. Some work exclusively in the rural
sector, while others work in both rural and urban settings. The majority of them
only serve cities and major towns. The banking industry is one of the most
essential financial pillars of the financial sector, and it is critical to the
economy’s functioning. It is critical for a country’s economic development that
its trade, industrial, and farm funding needs are handled with greater
commitment and responsibility. As a result, a country’s progress is inextricably
related to the development of banking. In today’s economy, banks should be
viewed as development leaders rather than money merchants. They play a
crucial role in deposit mobilization and credit disbursement to many sectors of
the economy.

The Reserve Bank of India (RBI), commercial banks, cooperative banks,

and development banks comprise India’s banking system (development finance
institutions). The core of India’s financial system is these institutions, which
serve as a meeting point for savers and investors. Banks play a vital role in the
development of poor countries by mobilizing resources and efficiently
allocating them.

The Indian banking system is a vast and dynamic topic, and academic
literature reflects this complexity. Here's a look at some key themes explored in
research:

6
Growth and Transformation:

• Economic Liberalization: Following the 1991 reforms, studies examine

how the entry of private and foreign banks transformed the landscape,
increasing competition and customer focus (e.g., Ashok J. Kumar &
Rajesh. R, "Today's customers are satisfied?").
• Technological Advancements: Research explores the impact of e-
banking on accessibility, affordability, and the range of services offered
(e.g., Anu Kool Manish Hyde, "E-BANKING: REVIEW OF
LITERATURE").

Challenges and Risks:

• Non-Performing Assets (NPAs): A significant concern, studies analyze

the factors contributing to high NPAs, their impact on bank profitability
and financial stability (e.g., A literature review of risk, regulation, and
profitability of banks using a scientometric study).
• Public vs. Private Banks: A longstanding debate compares the
efficiency and effectiveness of public sector banks (PSBs) to private and
foreign banks (e.g., Review on Banking Sector in India).

Emerging Trends:

• Financial Inclusion: Research explores initiatives aimed at bringing

unbanked populations into the formal financial system (e.g., Review on
Banking Sector in India).
• Regulation and Policy: Studies examine the role of the Reserve Bank of
India (RBI) in regulating the banking sector and maintaining financial
stability (e.g., A literature review of risk, regulation, and profitability of
banks using a scient metric study).

7
FEATURES OF INDIAN BANKING SYSTEM:

The Indian banking system features several characteristics that define its
structure, operations, and regulatory framework. Here are some key features:

[Link] Banking Landscape: The Indian banking system comprises various

types of banks, including public sector banks, private sector banks, foreign
banks, regional rural banks, and cooperative banks. This diversity contributes to
competition and innovation within the sector.

[Link] Framework: The Reserve Bank of India (RBI) is the central

regulatory authority that oversees the functioning of banks in India. It
formulates and implements monetary policy, issues licenses to banks, regulates
foreign exchange, and supervises the banking sector to maintain financial
stability.

[Link] Sector Dominance: Historically, public sector banks (PSBs) have

played a significant role in the Indian banking system, accounting for a
substantial portion of banking assets and serving as key instruments of
government policy for financial inclusion and economic development.

[Link] Sector Participation: Over the years, private sector banks have
gained prominence, offering greater efficiency, innovation, and customer
service compared to PSBs. They have introduced modern banking practices and
technologies, leading to increased competition and improved service quality.

[Link] Advancements: Indian banks have embraced technological

advancements to enhance efficiency and customer experience. Services such as
internet banking, mobile banking, digital payments, and electronic fund
transfers have become widespread, fostering financial inclusion and
convenience.

8
[Link] Inclusion Initiatives: The Indian banking system has undertaken
various initiatives to promote financial inclusion, including the Jan Dhan Yojana
(Pradhan Mantri Jan Dhan Yojana), which aims to provide access to banking
services, insurance, and pension schemes to unbanked and underbanked
populations.

[Link] Sector Lending: Banks in India are required to allocate a certain

percentage of their lending to priority sectors such as agriculture, small-scale
industries, micro, small, and medium enterprises (MSMEs), and other sectors
deemed critical for socio-economic development. This promotes inclusive
growth and supports vulnerable segments of society.

[Link] Quality Challenges: Indian banks have faced challenges related to

non-performing assets (NPAs) or bad loans, particularly in the wake of
economic slowdowns and policy changes. Addressing NPAs has been a priority
for regulators and banks to ensure the stability of the financial system.

[Link] Presence: Several Indian banks have expanded their operations

globally, establishing branches and subsidiaries in other countries. This
international presence facilitates trade, remittances, and financial services for
non-resident Indians (NRIs) and contributes to India's integration into the global
financial system.

These features collectively shape the functioning and evolution of the

Indian banking system, influencing its role in fostering economic growth,
stability, and financial inclusion.

9
IMPORTANCE OF BANKING SYSTEM IN INDIA

The banking system plays a crucial role in the economic development and
stability of India. Here's why it's important:

[Link] Intermediation: Banks act as intermediaries between savers and

borrowers, channelling funds from surplus units to deficit units. This
intermediation process facilitates investment, consumption, and economic
growth by efficiently allocating resources.

[Link] Creation: Banks create credit by extending loans and advances to

individuals, businesses, and governments. This credit creation fuels investment,
entrepreneurship, and consumption, stimulating economic activity and
employment generation.

[Link] Payments: The banking system provides payment and settlement

services, enabling individuals and businesses to carry out transactions smoothly.
Electronic fund transfers, checks, debit cards, credit cards, and digital payment
platforms facilitate commerce, trade, and financial transactions.

[Link] Inclusion: Banks play a vital role in promoting financial inclusion

by providing access to banking services, credit, and insurance to underserved
and marginalized populations. Initiatives like the Jan Dhan Yojana have
expanded banking outreach, reducing financial exclusion and empowering
vulnerable segments of society.

[Link] Small and Medium Enterprises (SMEs): Banks extend credit to

SMEs, which constitute a significant portion of India's economy. Access to
finance enables SMEs to invest in technology, infrastructure, and capacity
building, fostering entrepreneurship, innovation, and job creation.

[Link] Savings and Investment: Banks offer various savings and

investment products, such as savings accounts, fixed deposits, mutual funds,

10
and insurance products. These instruments encourage individuals and
households to save and invest, mobilizing funds for productive purposes and
long-term financial security.

[Link] the Financial System: Banks play a crucial role in maintaining

financial stability by managing risks, ensuring liquidity, and safeguarding
depositors' funds. Prudential regulations, supervision, and risk management
practices help mitigate systemic risks and prevent financial crises.

[Link] Government Operations: Banks assist the government in

mobilizing funds through treasury operations, bond issuance, and public sector
borrowing. They also facilitate government transactions, payments, and
disbursements, supporting public finance management and fiscal policy
implementation.

[Link] Trade and Finance: Banks facilitate international trade and

finance by offering trade finance services, foreign exchange transactions, and
cross-border payment solutions. They support export-import activities, facilitate
remittances, and contribute to India's integration into the global economy.

Overall, the banking system is the backbone of India's financial

infrastructure, playing a central role in fostering economic growth, stability, and
inclusive development.

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INTRODUCTION

A detailed study of DBS Bank involves understanding its history,

business model, financial performance, challenges faced, and strategies adopted
to overcome those challenges. Here's an overview:

HISTORY OF DBS BANK:

DBS Bank, which originally stood for the Development Bank of Singapore,
has a rich history dating back to 1968. Here's a glimpse into its evolution:

• 1968: Birth of DBS

o Established by the Singaporean government to take over industrial
financing responsibilities from the Economic Development Board.
o Aim was to assist Singapore's manufacturing sector and bolster
existing industries.
• 1970s: Branching Out
o Opened its first branch in Jurong, Singapore in 1972, catering to a
diverse clientele.
o Took its first international step in 1976 by setting up a
representative office in Tokyo, which became a full-fledged branch
in 1977.
• 1990s: Embracing Innovation

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 o Pioneered comprehensive internet banking in 1997, becoming a
regional frontrunner in online banking.
o Established a presence in India in 1994, becoming the first
Singaporean bank with a representative office there.
• 2000s: Global Expansion
o Made significant strides in Hong Kong through acquisitions like
Kwong on Bank (1999) and Dao Heng Bank (2001).
o Continued to expand its footprint in India, becoming the first
foreign bank to operate as a wholly-owned subsidiary.
• Present Day: A Leading Light
o DBS Bank today is Southeast Asia's largest bank by total assets
and a prominent player in Asia.
o Remains committed to innovation and social responsibility, with
initiatives like the Social Enterprise Banking Package launched in
2009.

BUSINESS MODEL OF DBS BANK:

DBS Bank's business model revolves around a few key pillars:

Focus on Asian growth: DBS recognizes the potential of Asia's rising middle
class, growing trade, rapid urbanization, and tech adoption. They position
themselves to capitalize on these trends.

Three Core Business Segments:

• Institutional Banking: Caters to large corporates, SMEs, and

institutional investors. Services include financing business activities,

13
 managing financial risks, offering credit facilities, transaction services,
and advisory solutions.
• Consumer Banking/Wealth Management: Serves individuals across
segments (all segments in Singapore, specific segments elsewhere) and
offers wealth management solutions. They aim to provide a seamless and
joyful banking experience through digital technologies.
• Treasury Markets: Deals with structuring products for clients and acting
as market makers for various financial instruments like foreign exchange,
interest rates, and derivatives.

Digital Domination: DBS heavily invests in digital technologies to create a

frictionless and efficient banking experience. They leverage data analytics to
personalize offerings and make data-driven decisions.

Building Ecosystems: DBS partners with other companies to create financial

ecosystems that provide a wider range of financial and lifestyle services to their
customers.

Sustainability: DBS integrates sustainability practices into their operations and

actively supports initiatives for a sustainable future.

Overall, DBS Bank strives to be a leading Asian bank by combining a

strategic focus on the region's growth with a strong digital core, a diversified
business approach, and a commitment to creating value for all stakeholders.

FINANCIAL PERFORMANCE OF DBS BANK:

To get the latest picture of DBS Bank's financial performance, we can't rely
on memory. Luckily, DBS Bank itself publishes financial information readily
available online. Here's how to find it:
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 1. Go to the DBS Investor Relations website: [DBS Investor Relations ON
DBS Group [Link]]
2. Under the "Financials" tab, you'll find various resources:
o Summarised Financial Information: This provides a quick
overview of key financial metrics.
o Quarterly Financials: This section offers detailed financial results
for the latest quarter and full year, including press releases,
presentations, and financial data. You can access results for 2023
and previous years here.
o Group Annual Reports: DBS publishes comprehensive annual
reports that provide a deep dive into their financial performance,
strategy, and future outlook.

By exploring these resources, you can get a solid understanding of DBS

Bank's recent financial health, including profitability, revenue streams, asset
growth, and more.

PRODUCTS AND SERVICES OFFERED BY DBS BANK:

DBS Bank offers a wide range of products and services across its core
segments. Here's a breakdown:

Retail Banking

• Savings Accounts: They have various options like Digi bank Savings
Account, Growth Savings Account, offering tiered interest rates and
features.
• Current Accounts: cater to business owners and individuals who require
frequent transactions.

15
 • Term Deposits: Fixed Deposits and Recurring Deposits for parking your
money for a fixed period and earning interest.
• Loans: Personal Loans, Gold Loans, Loan Against Property to meet your
borrowing needs.
• Bank Cards: Debit cards like Digi bank Debit Card, MakeMyTrip Debit
Card and Credit Cards with reward programs.
• Investment Products: Mutual Funds and investment tools like Digi
Portfolio to help you grow your wealth.
• Remittance: Services for sending and receiving money internationally.
• Online Banking: DBS Digi bank, a mobile and internet banking platform
for managing your finances conveniently.
• Other Services: Safe deposit lockers, bill payments, travel services, and
special programs like DBS Delights (offers).

Wealth Management

• DBS caters to high-net-worth individuals with personalized wealth

management solutions, including investment products, portfolio
management, and advisory services.

Business Banking

• DBS offers a comprehensive suite of services for businesses of all sizes,

including:
o Financing solutions (working capital, trade finance)
o Transaction banking services (cash management, collections)
o Cash management solutions
o Trade finance solutions
o Foreign exchange services
o Treasury products

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Additional Services

• DBS also provides treasury markets services for structuring products and
acting as market makers for financial instruments.

By exploring DBS Bank's website or visiting their branches, you can get a more
detailed understanding of the specific products and services available in your
region.

CHALLENGES FACED BY DBS BANK:

DBS Bank, like most banks, faces challenges with Non-Performing Assets
(NPAs). Here's a specific look at their NPA woes:

• Economic Slowdowns: As with any bank, economic downturns can lead

to borrowers struggling to repay loans, increasing NPAs for DBS. This
can be particularly relevant in some of their emerging Asian markets that
are more susceptible to economic fluctuations.
• Industry-Specific Issues: DBS may have historically provided credit to
sectors that went through rough times, leading to a higher default rate on
loans. For instance, DBS was cautious about lending to specific sectors in
India like mid-cap infrastructure and power, but challenges in other
sectors they lent to could still impact them.
• Loan Assessment Challenges: Accurately assessing a borrower's
creditworthiness is crucial to prevent NPAs. Even with robust processes,
there can be unforeseen circumstances that lead to loan defaults.
• Competition for Growth: In their drive for business growth, DBS might
be pressured to relax lending norms or enter new markets with higher
NPA risks. Striking a balance between growth and prudent lending
practices is crucial.

17
 • Operational Inefficiencies: Inefficiencies in loan collection processes or
cumbersome procedures for dealing with NPAs can lead to delays in
resolving bad loans and impact their financial health.

DBS TACKLES THESE NPA CHALLENGES:

• Stringent Credit Assessment: They likely have rigorous credit assessment

processes to evaluate borrowers' financial health and risk profiles before
approving loans.

• Proactive Risk Management: DBS likely employs proactive risk

management strategies to identify potential problems early and take corrective
measures.

• Loan Restructuring and Recovery: They might work with borrowers who
are struggling to repay by offering loan restructuring options or implementing
efficient debt recovery mechanisms.

• Strategic Acquisitions and Divestitures: As seen with their cautious

approach to lending in certain sectors in India, DBS might strategically avoid
lending to high-risk sectors or even sell off existing NPA portfolios to
specialized asset reconstruction companies.

CURRENT STATUS OF DBS BANK:

DBS Bank appears to be in a strong position overall, based on recent

information:

• Financials: DBS Bank hasn't released their most recent financial results
yet (it's April 27, 2024), but their FY22-23 results for India show positive
growth in profits, net revenues, and customer assets [DBS Bank India
reports strong profit and balance sheet growth for FY22-23, [Link]].

18
 You can find their latest financial information on their Investor Relations
website [DBS Investor Relations ON DBS Group [Link]] once it's
available.
• Market Position: DBS remains the largest bank in Southeast Asia by
total assets and a prominent player in Asia [DBS Bank - Wikipedia,
[Link]].
• Innovation: They continue to invest in digital technologies and were
recently recognized for their partnership to accelerate the greening of a
bus fleet [Recent Press Release, Press Room | DBS Bank, [Link]].
• Awards and Recognition: DBS was recently ranked #1 on the Forbes
'World's Best Banks' list in India [Live more, Bank less | DBS Bank India
Limited, [Link]].

SHAREHOLINGS OF DBS BANK:

DBS Bank, technically DBS Group Holdings Ltd., is a publicly traded

company. Here's what we can find about its shareholders:

• Largest Shareholder: Temasek Holdings, a Singaporean sovereign

wealth fund, is the largest shareholder with approximately 29% direct
ownership of DBS shares as of February 10, 2023 (the most recent data
publicly available). [Shareholding statistics - Singapore - DBS Bank,
[Link]]
• Public Ownership: The remaining 70.70% of the issued ordinary shares
are held by the public, according to the same source. This means a large
number of individual and institutional investors hold shares in DBS Bank.

19
SHAREHOLDERS OF DBS BANK:

THE LATEST SHAREHOLDING INFORMATION:

It's important to note that shareholdings can change over time. While the
2023 data provides a good snapshot, to get the most up-to-date information on
DBS Bank's shareholdings, you can refer to their Investor Relations website:
[DBS Investor Relations ON DBS Group [Link]]

Specifically, you can look under the following sections:

• Annual Reports: These reports typically include a breakdown of

shareholdings as of the reporting date.
• Shareholding Changes: DBS might also issue press releases or
announcements if there are any significant changes in the shareholding
structure.

20
By checking these resources, you can obtain the latest information on who owns
shares in DBS Bank.

NON-PERFORMING ASSETS (NPA):

NPA expands to Non-Performing Assets (NPA). Reserve bank of India defines

non-performing assets in India as any advance or loan that is overdue for more
than 90 days. “An asset becomes non-performing when it ceases to generate
income for the bank,” said rbi in a circular form 2007. To be more attuned to
international practises, rbi implemented the 90 days overdue norm for
identifying NPAs has been made applicable from the year ended march 31,
2004. Depending on how long the assets have been an NPA, there are different
types of non-performing assets as well.

WHAT IS AN ASSET AND NON-PERFORMING ASSETS FOR A BANK?

Asset means anything that is owned. For banks, a loan is an asset because
the interest we pay on these loans is one of the most significant sources of
income for the bank. When customers, retail or corporates, are not able to pay
the interest, the asset becomes ‘non performing’ for the bank because it is not
earning anything for the bank. Therefore, RBI has defined NPAs as assets that
stop generating income for them.

HOW NON-PERFORMING ASSETS (NPA) WORK?

Non-Performing Assets (NPAs) are loans or advances issued by banks or

financial institutions that no longer bring in money for the lender since the

21
borrower has failed to make payments on the principal and interest of the loan
for at least 90 days.

A debt that has been past due and unpaid for a predetermined period is
known as a non performing asset (NPA).

When the ratio of NPAs in a bank's loan portfolio rises, its income and
profitability fall, its capacity to lend falls, and the possibility of loan defaults
and write-offs rise.

To address this issue, the government and the Reserve Bank of India have
introduced various policies and methods to manage and reduce the amount of
non-performing assets (NPAs) in the banking sector.

TYPES OF NON-PERFORMING ASSETS (NPA)

Different types of non-performing assets depend on how long they remain

in the NPA category.

a) Sub-Standard Assets

An asset is classified as a sub-standard asset if it remains as an NPA for a

period less than or equal to 12 months.

b) Doubtful Assets

An asset is classified as a doubtful asset if it remains as an NPA for more than

12 months.

c) Loss Assets

An asset is considered a loss asset when it is “uncollectible” or has such little

value that its continuance as a bankable asset is not suggested. However, some

22
recovery value may be left in it as the asset has not been written off wholly or in
parts.

NPA PROVISIONING

Keeping aside the technical definition, provisioning means an amount

that the banks set aside from their profits or income in a particular quarter for
non-performing assets, such as assets that may turn into losses in the future. It is
a method by which banks provide for bad assets and maintain a healthy book of
accounts.

Provisioning is done according to which category the asset belongs. The

categories have been mentioned in the above section. Not only the type of asset
but provisioning also depends on the type of bank. Like, Tier-I banks and Tier-II
banks have different provisioning norms.

GNPA AND NNPA

Banks are required to make their NPAs numbers public and to the RBI
from time to time. There are primarily two metrics that help us understand any
bank's NPA situation.

NPA numbers for a bank will be mentioned in the standalone financial

statements of a bank.

GNPA: GNPA stands for gross non-performing assets. GNPA is an absolute

amount. It tells you the total value of gross non-performing assets for the bank
in a particular quarter or financial year, as the case may be.

NNPA: NNPA stands for net non-performing assets. NNPA subtracts the
provisions made by the bank from the gross NPA. Therefore, net NPA gives you
23
the exact value of non-performing assets after the bank has made specific
provisions.

NPA RATIOS

NPAs can also be expressed as a percentage of total advances. It gives us

an idea of how much of the total advances are not recoverable. The calculation
is pretty simple:

GNPA ratio is the ratio of the total GNPA of the total advances.

NNPA ratio uses net NPA to determine the ratio to the total advances.

Example of NPA

Let us have a look at State Bank of India’s quarterly results for two
quarters for determining non-performing assets examples through the results.
NPA ratios are mentioned in standalone quarterly results.

Banks are supposed to publish their financial results on the exchanges

every quarter of a fiscal year.

INCREASING IN NPA OF DBS BANK:

You're right, while DBS Bank is showing positive signs overall, there are
concerns about Non-Performing Assets (NPAs). Let's delve deeper into this:

Recent Improvement, But Not Out of the Woods:

24
 • DBS India has shown progress in reducing NPAs. Their FY22-23 results
reflect a decrease in both gross NPA and net NPA ratios compared to the
previous year [DBS Bank India reports strong profit and balance sheet
growth for FY22-23, [Link]].

Factors Contributing to Increasing NPAs:

• Macroeconomic Slowdowns: Economic downturns can be a major

culprit. Borrowers facing financial hardship might struggle to repay
loans, leading to an increase in NPAs.
• Industry-Specific Issues: If DBS has a higher exposure to sectors
experiencing difficulties, defaults on loans in those sectors can contribute
to rising NPAs.
• Loan Assessment Challenges: Even with robust processes, unforeseen
circumstances or inaccurate assessments of creditworthiness can lead to
loan defaults.
• Integration Challenges: The recent acquisition of Lakshmi Vilas Bank
(LVB) might pose integration challenges, impacting NPA management in
the short term.

Strategies to Mitigate Increasing NPAs:

• Stringent Credit Assessment: Robust credit assessment processes are

crucial to identify potential risks before approving loans.
• Proactive Risk Management: DBS likely employs strategies to identify
potential problems early and take corrective measures to prevent defaults.
• Loan Restructuring and Recovery: Working with struggling borrowers
through loan restructuring or efficient debt recovery mechanisms can help
improve repayment rates.

25
 • Strategic Acquisitions and Divestitures: DBS might avoid lending to
high-risk sectors or sell off existing NPA portfolios to specialized asset
reconstruction companies.

What to Look for in the Future:

• DBS Investor Relations: Keep an eye on their Investor Relations

website [DBS Investor Relations ON DBS Group [Link]] for the latest
financial reports. These reports will detail the bank's NPA situation and
any strategies they're implementing to address it.
• Industry News: Stay updated on economic conditions and challenges in
the Asian markets DBS operates in. This can provide context for their
NPA situation.

By monitoring these factors, you can get a clearer picture of how DBS Bank
is managing its NPAs and its future outlook.

IMPACT OF INCREASING NPA IN DBS BANK:

An increase in Non-Performing Assets (NPAs) can have several negative

consequences for DBS Bank. Here's a breakdown of the potential impacts:

Reduced Profitability:

• NPAs are essentially loans that are not generating any income for the
bank. This means DBS loses out on the interest payments they would
typically receive on healthy loans. As NPAs rise, the bank's overall
profitability can decline.

Weakened Capital Adequacy:

• Banks are required to maintain a minimum capital adequacy ratio (CAR)

to ensure they have enough buffer to absorb potential losses. High NPAs
26
 can tie up a significant portion of a bank's capital, making it difficult to
meet CAR requirements. This can restrict the bank's ability to lend and
grow its business.

Decreased Liquidity:

• NPAs represent illiquid assets, meaning they cannot be easily converted

into cash. This can strain DBS's liquidity, making it difficult to meet its
short-term financial obligations.

Damaged Reputation:

• High NPAs can damage DBS's reputation as a financially sound

institution. This can lead to a loss of investor confidence and make it
more expensive for the bank to raise funds. It can also make it less
attractive to potential customers.

Reduced Ability to Lend:

• With a significant portion of capital tied up in NPAs, DBS might have

less money available for new loans. This can hinder economic growth, as
businesses and individuals rely on access to credit for investment and
activities.

Increased Regulatory Scrutiny:

• Regulators may take a closer look at DBS's NPA situation and impose
stricter regulations if they deem the bank's financial health at risk.

Strained Customer Relationships:

• If defaults are due to wider economic hardship, it can lead to strained

relationships with borrowers struggling to repay loans.

27
MEASURES TAKEN TO ADDRESS NPA IN DBS BANK:

DBS Bank acknowledges the challenge of Non-Performing Assets

(NPAs) and implements various strategies to address them. Here's a breakdown
of the measures they likely take:

Proactive Measures:

• Stringent Credit Assessment: DBS employs rigorous processes to

assess a borrower's creditworthiness before approving loans. This helps
identify potential risks and avoid defaults.
• Credit Risk Management: They likely have a dedicated credit risk
management team that monitors loan portfolios, identifies early warning
signs of potential defaults, and takes corrective actions.
• Industry Analysis: DBS might analyse industry trends and avoid lending
heavily to sectors with a high risk of financial distress. For example, their
cautious approach to lending to specific sectors in India like mid-cap
infrastructure and power highlights this [DBS Bank India's post-
integration journey and growth plans, [Link]].

Reactive Measures for Existing NPAs:

• Loan Restructuring: DBS might work with borrowers in financial

hardship by offering loan restructuring options. This could involve
extending the loan term, reducing interest rates, or restructuring the
repayment schedule.
• Debt Recovery Mechanisms: They likely have efficient debt recovery
mechanisms in place to collect outstanding loans. This may involve legal
action as a last resort.
• Strategic Acquisitions and Divestitures: As seen with their cautious
lending approach in certain sectors, DBS might strategically avoid

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 lending to high-risk sectors altogether. They might also consider selling
off existing NPA portfolios to specialized asset reconstruction companies
that can handle the recovery process more effectively.

Focus on Operational Efficiency:

• Streamlining loan collection processes and implementing efficient

procedures for dealing with NPAs can help resolve bad loans faster and
improve financial health.

Transparency and Reporting:

• DBS Bank is likely transparent about its NPA situation. They regularly
report their NPA ratios and the steps they are taking to address them in
their financial statements and Investor Relations website [DBS Investor
Relations ON DBS Group [Link]].

Innovation and Technology:

• DBS is known for embracing innovation. They might be exploring how

new technologies like Artificial Intelligence or Big Data can be used to
improve credit risk assessment, identify early signs of defaults, and
streamline the NPA resolution process.

By implementing a multi-pronged approach that combines proactive risk

management, efficient NPA resolution strategies, and a focus on operational
excellence, DBS Bank can minimize the burden of bad loans and maintain a
healthy financial portfolio.

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NPA TREND ANALYSIS:

YEAR NET NPA TREND

2015-2016 284.47 100
2016-2017 1072.27 376.9
2017-2018 1312.75 461.4
2018-2019 4484.85 1576.5
2019-2020 8623.78 3031.5

TREND CHART:

INTERPRETATION:

It can be seen that the trend indices of NPA shows that an increasing in
every year compared to the base year 2016. During the year 2017 the trend has
been increased to 376.9. every year the NPA trend is increasing. The last year
2020 the NPA trend has been increased to 3031.5.

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SWOT ANALYSIS:

[Link]

• Biggest private sector bank

• Expanded business

• Management

• Very good quality technology

• Fund raising

• Human capital is effective

• More proficiency and better accommodation

• Awards and recognition

[Link]

• Security over digital media

• Utilization of digital in rural area

• Heterogeneous client

• Change in laws and regulations

[Link]

• Huge assets in one client

• Worldwide markets

31
• Extending service to clients

• Business goals towards middle- and lower-income groups

• Awareness in digital media

[Link]

• Security issues

• High fee

• Worldwide competitors

FINDINGS

• The trend analysis of NPA is not favourable, because in yes bank the NPA
trend has been increasing every year. And the net NPA is also increasing. The
increased NPAs put pressure on recycling of funds and reduces the ability of
bank for lending more and thus it results in lesser interest income.

32
CONCLUSION:

The increasing Non-Performing Assets (NPAs) of DBS Bank has been a

significant concern that has impacted the bank's financial health, profitability,
and reputation. The rise in NPAs was attributed to various factors, including
aggressive lending practices, economic downturns, sector-specific challenges,
poor credit risk assessment, corporate governance issues, and regulatory
challenges. The deteriorating asset quality led to erosion of profitability, capital
constraints, and liquidity issues, thereby affecting the bank's ability to lend,
grow its business, and meet regulatory requirements.

The rising NPAs also raised concerns among investors, leading to a

decline in the bank's stock price, market valuation, and stakeholder confidence.
To address the NPA issue, DBS Bank undertook strategic initiatives, including
asset quality review, restructuring of stressed assets, recovery efforts, improved
risk management practices, and capital infusion. The bank collaborated with
regulatory authorities and financial institutions to stabilize its financial position,
strengthen its balance sheet, and implement governance reforms. While DBS
Bank has made efforts to resolve its NPA challenges and stabilize its operations,
the journey towards recovery and rebuilding stakeholder trust remains ongoing.
Continuous monitoring of the bank's asset quality, provisioning levels, recovery
mechanisms, and regulatory compliance will be essential to assess its progress
in addressing the NPA issue, restoring its financial health, and regaining its
market position. In conclusion, addressing the NPA issue is crucial for DBS
Bank to rebuild its brand, enhance its resilience, and sustainably grow its
business in the competitive banking landscape.

33
BIBLIOGRAGHY:

"Establishment of The Post Office Saving Bank". National Library Board. Retrieved 13 September 2015

"DBS Bank completes Postbank and credit POSB acquisition". DBS Bank. 16 November 1998. Archived
from the original on 18 October 2006. Retrieved 29 September 2019

"DBS Bank Singapore » [Link]". [Link]. 3 November 2019. Retrieved 17 April 2020.

"DBS named World's Best Bank by Euromoney, a first for an Asian bank". The Straits Times. 12 July 2019.

"DBS digital banking services, including Palya!, restored after day-long outage". CNA. Retrieved 4
November 2023

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