You are on page 1of 4

IOSR Journal of Business and Management (IOSR-JBM)

e-ISSN: 2278-487X, p-ISSN: 2319-7668. Volume 17, Issue 7.Ver. I (July 2015), PP 01-04
www.iosrjournals.org

A Study on Non Performing Assets of Canara Bank


1

M. Michael Raj, 2Dr. T.R. Gurumoorthy


1

Research Scholar Alagappa University, Karaikudi.


Professor International Business and Commerce Alagappa University, Karaikudi.

Abstract: The trend analysis of Gross Non Performing Assets of Canara bank (GNPA) shows a declining trend
from the year of 2003-04 to the year of 2007-08 and further it shows an increasing trend from the year of 200809 to the year of 2012-13. The trend analysis of Net Non Performing Assets of Canara bank indicates a
declining trend from the year 2003-04 to the year 2005-06 and it increases in the year 2006-07 and it decreases
in the year 2007-08 year and it further shows an increasing trend from the year of 2008-09 to the year of 201213.The trend analysis of the Non Performing Assets (NPA) in priority sector advances of Canara Bank shows a
declining trend from the year 2003-04 to the year 2007-08 and further it shows an increasing trend from the
year 2008-09 to the year 2012-13. The trend analysis of the Non Performing Assets (NPA) in non priority sector
advances of Canara Bank shows a declining trend from the year 2003-04 to the year 2007-08 and further it
shows a fluctuating trend between the year 2008-09 and 2012-13. The correlation coefficient between NPA in
priority sector, NPA in non priority sector and profitability of Canara bank is negatively and moderately
associated with each other at one per cent level of significance.
Key Words: Gross Non Performing Assets, Priority Sector, Net Non Performing Assets, Non Priority Sector.

I.

Introduction

The banking industry in India is one of the most important industries for economic development and its
crucial roles provide sources of funds for individual, private firms and governments in order to support their
operations. It is expected that the Indian banking and finance system will be globally competitive. For this the
market players will have to be financially strong and operationally efficient. Capital would be a key factor in
building a successful institution. The banking and finance system will improve competitiveness through a
process of consolidation, either through mergers and acquisitions through strategic alliances.
The activities of banks can be broadly categorized in terms of a range of products and services,
including lending services, bank accounts, such as time deposit accounts and internet banking. Competition
among banks and the volatility economy have forced banks at all levels, including branches, to strive to achieve
their goals, from survival to continuous growth. In addition, the focus on resources for operations at the branch
level is a key to success for all banks.
The level of NPAs is recognized as a critical indicator for assessing banks credit risk, asset quality and
efficiency in the allocation of resources to productive sectors. The magnitude of NPAs has a direct impact on the
banks profitability as legally they are not allowed to book income on such account and at the same time, banks
are forced to make provision on such assets as per RBI guidelines. Banks should not recognize interest income
on NPAs until they are actually realized.
An NPA account not only reduces profitability of banks by provisioning in the profit and loss account,
but their carrying cost is also increased which results in excess and avoidable management attention. Apart from
this, a high level of NPA also puts strain on a banks net worth because banks are under pressure to maintain a
desired level of Capital Adequacy and in the absence of comfortable profit level, banks eventually look towards
their internal financial strength to fulfill the norms thereby slowly eroding the net worth. With this back ground,
the present research is made to study the non performance assets of Canara bank.

II.

Methodology

The data on non performing assets of Canara bank for the last 10 years from 2003-2004 to 2012-13
have been collected from the annual reports of Canara bank. In order to study the Gross Non-Performing Assets,
Net Non-Performing Assets, Non Performing Assets in Priority Sector Advances and Non Performing Assets in
Non Priority Sector Advances, the percentage analysis have been carried out. In order to examine the
relationship between non-performing assets in priority and non priority sector advances and profitability of
Canara banks, the correlation analysis has been employed.

DOI: 10.9790/487X-17710104

www.iosrjournals.org

1 | Page

A Study on Non Performing Assets of Canara Bank


III.

Results And Discussion

3.1. Gross Non Performing Assets of Canara Bank


The size and trend in Gross Non Performing Assets (GNPA) for the year from 2003-2004 to 2012-13 of Canara
bank were analyzed and the results are presented in Table-1.
Table-1. Gross Non Performing Assets of Canara Bank
S. No.
1
2
3
4
5
6
7
8
9
10

Year
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13

GROSS NPA( Rs. in Lakhs)


28346
23706
17926
14934
12726
21680
25903
31374
40318
62602

Source: Annual Reports, Canara Bank.


The Gross Non Performing Assets of Canara bank (GNPA) is Rs. 28346 Lakhs in the year 2003-04 and
it has decreased in to Rs. 23706 Lakhs in 2004-05, Rs. 17926 Lakhs in 2005-06, Rs. 14934 Lakhs in 2006-07
and Rs. 12726 Lakhs in 2007-08. The Gross Non Performing Assets of Canara bank (GNPA) has increased in
to Rs. 21680 Lakhs in 2008-09, Rs. 25903 Lakhs in 2009-10, Rs. 31374 Lakhs in 2010-11, Rs. 40318 Lakhs in
2011-12 and Rs. 62602 Lakhs in 2012-13.
3.2. Net Non Performing Assets of Canara Bank
The size and trend in Net Non Performing Assets (NNPA) for the year from 2003-2004 to 2012-13 of
Canara bank were analyzed and the results are presented in Table-2.
Table-2. Net Non Performing Assets of Canara Bank
S. No.
1
2
3
4
5
6
7
8
9
10

Year
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13

NET NPA( Rs. in Lakhs)


13526
11253
8792
9270
8990
15073
17997
23299
33863
52781

Source: Annual Reports, Canara Bank.


The Net Non Performing Assets of Canara bank (GNPA) is Rs. 13526 Lakhs in the year 2003-04 and it
has decreased in to Rs. 11253 Lakhs in 2004-05 and Rs. 8792 Lakhs in 2005-06 and it has slightly increased in
to Rs. 9270 in 2006-07 and it has further slightly decreased in to Rs. 8990 in 2007-08. The GNPA has further
increased in to Rs. 15073 Lakhs in 2008-09, Rs. 17997 in 2009-10, Rs. 23299 in 2010-11, Rs. 33863 Lakhs in
2011-12 and Rs. 52781 Lakhs in 2012-13.
3.3. Non Performing Assets in Priority Sector Advances of Canara Bank
The Non Performing Assets (NPA) in priority sector advances of Canara Bank for the year from 20032004 to 2012-13 were analyzed and the results are presented in Table-3.
Table-3. Non Performing Assets in Priority Sector Advances of Canara Bank
S. No.

Year

1
2
3
4
5
6
7
8

2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11

DOI: 10.9790/487X-17710104

NPA in Priority Sector ( Rs. in


Lakhs)
26166
21668
16098
13362
11646
19450
23770
28958

Per cent Contribution of NPA in


Priority Sector to Gross NPA
92.31
91.40
89.80
89.47
91.51
89.71
91.77
92.30

www.iosrjournals.org

2 | Page

A Study on Non Performing Assets of Canara Bank


9
10

2011-12
2012-13

39643
58062

98.33
92.75

Source: Annual Reports, Canara Bank.


The Non Performing Assets (NPA) in priority sector advances of Canara Bank is Rs. 26166 Lakhs in
the year 2003-04 and it has declined in to Rs. 21668 Lakhs in 2004-05, Rs. 16098 Lakhs in 2005-06, Rs. 13362
Lakhs in 2006-07 and Rs. 11646 Lakhs in 2007-08. Further, it has increased in to Rs. 19450 Lakhs in 2008-09,
Rs. 23770 Lakhs in 2009-10, Rs. 28958 Lakhs in 2010-11, Rs. 39643 Lakhs in 2011-12 and Rs. 58062 Lakhs
in 2012-13.
The per cent contribution of NPA in priority sector to Gross NPA of Canara Bank is 92.31 per cent in
the year 2003-04 and it has declined in to 91.40 per cent in 2004-05, 89.80 per cent in 2005-06 and 89.47 per
cent in 2006-07. Further it has increased in to 91.51 per cent in 2007-08 and it has slightly declined in to 89.71
per cent in 2008-09 and it has increased in to 91.77 per cent in 2009-10, 92.30 per cent in 2010-11, 98.33 per
cent in 2011-12 and it has considerably decreased in to 92.75 per cent in 2012-13.
3.4. Non Performing Assets in Non Priority Sector Advances of Canara Bank
The Non Performing Assets (NPA) in non priority sector advances of Canara Bank for the year from
2003-2004 to 2012-13 were analyzed and the results are presented in Table-4.
Table-4. Non Performing Assets in Non Priority Sector Advances of Canara Bank
S. No.

Year

1
2
3
4
5
6
7
8
9
10

2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13

NPA in Non Priority Sector ( Rs. in


Lakhs)
2180
2038
1828
1572
1080
2230
2133
2416
3225
4540

Per cent Contribution of NPA in Non


Priority Sector to Gross NPA
7.69
8.60
10.20
10.53
8.49
10.29
8.23
7.70
7.52
7.25

Source: Annual Reports, Canara Bank.


The Non Performing Assets (NPA) in non priority sector advances of Canara Bank is Rs. 2180 Lakhs
in the year 2003-04 and it has declined in to Rs. 2038 Lakhs in 2004-05, Rs. 1828 Lakhs in 2005-06, Rs. 1572
Lakhs in 2006-07 and Rs. 1080 Lakhs in 2007-08. Further, it has increased in to Rs. 2230 Lakhs in 2008-09 and
it has slightly declined in to Rs. 2133 Lakhs in 2009-10 and it has increased in to Rs. 2416 Lakhs in 201011and it has increased in to Rs. 3225 Lakhs in 2011-12 and it has significantly increased in to Rs. 4540 in 201213.
The per cent contribution of NPA in non priority sector to Gross NPA of Canara Bank is 7.69 per cent
in the year 2003-04 and it has declined in to 8.60 per cent in 2004-05, 10.20 per cent in 2005-06, 10.53 per cent
in 2006-07. Further it has decreased in to 8.49 per cent in 2007-08 and it has slightly increased in to 10.29 per
cent in 2008-09 and it has decreased in to 8.23 per cent in 2009-10, 7.70 per cent in 2010-11, 7.52 per cent in
2011-12 and it has considerably increased in to 7.25 per cent in 2012-13.
3.5. Relationship between Non-Performing Assets in Priority and Non Priority Sector Advances and
Profitability of Canara Bank
The relationship between non-performing assets in priority and non priority sector advances and profitability of
Canara banks by employing correlation analysis and the results are presented in Table-5.
Table-5. Relationship between Non-Performing Assets in Priority and Non Priority Sector Advances and
Profitability of Canara Bank
NPA in Priority Sector
NPA in Non Priority Sector
Profitability

NPA in Priority Sector


1.00
-0.42**
-0.45**

NPA in Non Priority Sector

Profitability

1.00
-0.43**

1.00

Source: Annual Reports, Canara Bank.


Note: ** Significance at one per cent level
The correlation coefficient between NPA in priority sector and profitability of Canara bank is -0.45
which shows the NPA in priority sector and profitability of Canara bank is negatively and moderately associated
DOI: 10.9790/487X-17710104

www.iosrjournals.org

3 | Page

A Study on Non Performing Assets of Canara Bank


with each other at one per cent level of significance. The correlation coefficient between NPA in non priority
sector and profitability of Canara bank is -0.43 which shows the NPA in non priority sector and profitability of
Canara bank is also negatively and moderately associated with each other at one per cent level of significance.

IV.

Conclusion

The trend analysis of Gross Non Performing Assets of Canara bank (GNPA) shows a declining trend
from the year of 2003-04 to the year of 2007-08 and further it shows an increasing trend from the year of 200809 to the year of 2012-13. The trend analysis of Net Non Performing Assets of Canara bank indicates a
declining trend from the year 2003-04 to the year 2005-06 and it increases in the year 2006-07 and it decreases
in the year 2007-08 year and it further shows an increasing trend from the year of 2008-09 to the year of 201213.
The trend analysis of the Non Performing Assets (NPA) in priority sector advances of Canara Bank
shows a declining trend from the year 2003-04 to the year 2007-08 and further it shows an increasing trend from
the year 2008-09 to the year 2012-13. The trend analysis of the Non Performing Assets (NPA) in non priority
sector advances of Canara Bank shows a declining trend from the year 2003-04 to the year 2007-08 and further
it shows a fluctuating trend between the year 2008-09 and 2012-13. The correlation coefficient between NPA in
priority sector, NPA in non priority sector and profitability of Canara bank is negatively and moderately
associated with each other at one per cent level of significance.
The level of NPAs is high with Canara bank currently and the banks would be expected to bring down
their NPA. This can be achieved by good credit appraisal procedures, effective internal control systems along
with their efforts to improve asset quality in their balance sheets. Canara bank should inspect the progress of the
project or the business. Separate monitoring department should be established in large branches for periodical
review of accounts, comparative risk analysis and compliance of terms and conditions of sanction. Equal
emphasis should be given for monitoring of standard assets also.
Canara bank should be equipped with latest credit risk management techniques to protect the bank
funds and minimize insolvency risks. Banks should develop credit derivatives markets to avoid these risks.
There should be regular outflow of senior bank officers from all public sector banks for specialized training in
training institute to equip them with latest procedures and practices. Canara bank employees need to give more
attention on the activities of the NPAs and slow recovery of overdue loans. If the customer intentionally tries to
become NPA then take serious or legal action. If they do this the other NPAs account which are slow in
payment will be recovered fast. Try to deal softly with NPA customers and motivate them to repay the loan.

References
[1].
[2].
[3].
[4].
[5].
[6].
[7].

Bhavani Prasad, G. and Veena, V.D., (2011), NPAS in Indian Banking Sector- Trends and Issues, Journal of Banking Financial
Services and Insurance Research, 1(9): pp. 67-84.
Chaudhary, S., and Singh, S., (2012), Impact of Reforms on the Asset Quality in Indian Banking, International Journal of
Multidisciplinary Research, 2 (1):pp.13-31.
Das Abhiman, (2002), Risk and Productivity Change of Public Sector Banks, Economic and Political Weekly, 37 (5): pp. 437-48.
Krishnamurthi, C.V. (2000), Non-performing Assets- Banks and Financial Institutions: NPAs Plaguing National Economy,
Southern Economist, 38(5): pp. 19-20.
Rajaraman I, Bhaoumik, S., and Bhatia, N., (1999), NPA Variations across Indian Commercial Banks: Some Findings, Economic
and Political Weekly, 34 (3/4): pp.161-68.
Ramu, N, (2009), Dimensions of Non-performing Assets in Urban Cooperative Banks in Tamil Nadu, Global Business Review,
10(2): pp. 279-297.
Ranjan, R. and Dhal S., (2003), Non-Performing Loans and Terms of Credit of Public Sector Banks in India: An Empirical
Assessment, Occasional Papers, Reserve Bank of India Publication, 24(3): pp. 81-121.

DOI: 10.9790/487X-17710104

www.iosrjournals.org

4 | Page