EXECUTIVE SUMMARY

Non-performing Asset is a vital factor in the examination of financial performance of

a bank. Non-Performing Asset is the key term for the banking corporations. Non-
Performing Assets show the competence of the performance of the banks. Non-
Performing Assets means which amount is not received by the bank in return of loans
disbursed. Non-Performing Assets affect not only the finance institution but the total
financial system. Thus a selective study has been done on public sector banks in India
to evaluate the effect of Non-Performing Assets on the profitability of banks. Banks
today are not judged only on the basis of number of branches and volume of deposits
but also on the basis of standard of assets. NPAs negatively effect on the profitability,
liquidity and solvency of the banks. This paper analyses the circumstances of NPAs in
selected banks namely State Bank of India (SBI), Bank of India, IDBI bank, Kotak
Mahindra Bank, ICICI Bank and HDFC Bank. It also highlights the policies followed
by the banks to tackle the NPAs and suggests a multi-pronged strategy for speedy
recovery of NPAs in banking sector. Three Public Sector Banks and three private
sector banks has been selected for the study the relation between NPA and Net Profit
of selected banks. In this paper is applying the regression. The result shows that
except for SBI and PNB all the other banks exhibit a negative correlation between
their gross Non Performing Assets and net profits. Selected banks are paying attention
towards their NPA to recover their pending loans. The study is based upon secondary
data recovered from Report of Progress of banking in India, Websites, Journals and
Articles. The scope of the study is limited to analysis of non-performing assets of
public sector banks& private sector banks covering the period of 2013-2018.

Key Words: NPA, Net NPA, Gross NPA, Loan, etc.

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 CHAPTER:1 a)-Non-performing assets (NPAs)

The three letters “NPAs” strike terror in banking sector and business circle
today. NPA is a short form of “Non-performing asset”.
In banking, NPA are loans given to customers who may or may not repay the
loan on time. There are two types of assets viz. performing and non-performing.
Performing loans are standard loans on which both the principle and interest are
secured and their return is guaranteed.
Non-performing asset means the debt which is given by the bank is unable to
recover it is called NPA. NPA is result of liabilities mismatch, a NPA account in the
books of accounts is an asset as it indicates the amount receivable from the defaulters.
It mean if any bank gives loan to the customer if the interest for that loan is not paid
by the customer till 90 days then that account is called as NPA account.
A loan or lease that is not meeting its stated principal and interest payments,
banks usually classify as NPAs any commercial loans which are more than 90 days
overdue and any consumer loans which are more than 180 days overdue. More
generally, an asset which is not producing income.

Definitions:
An asset, including a leased asset, becomes non-performing when it ceases to
generate income for the bank.
A non-performing asset (NPA) was defined as a credit facility in respect of
which the interest and/or installment of principal has remained ‘past due’ for a
specified period of time. The specified period was reduced in a phased manner as
under:
90 days’ delinquency norms are not applicable to Agriculture segment.
With the effect from March 31, 2004, NPA shall be a loan or an advance where:

1. Term loan: Interest or installment of principal remains over due for a period
of more than 90 days.
2. Cash credit/OD: The account remains ‘out of order’ for a period of more than
90 days.
3. Bills: Bills remain overdue for a period of more than 90 days from due date of
payments.

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4. Other loan: Any amount to be received remains overdue for a period of 90
days
5. Agricultural Accounts: In the case of agriculture advances, where repayment
is based on income from crop. An account will be classified as NPA as under:
 If loan has been granted for short duration crop: interest and/or
installment of Principal remains overdue for two crop seasons beyond the
due date.
 If loan has been granted for long duration crop: Interest and/or
installment of principal remains overdue for one crop seasons beyond due
date.

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Classification of loans

In India bank loans are classified on the following basis:

Performing Assets:

Loans where the interest and/or principal are not overdue beyond 180 days at
the end of the financial year.

Non-Performing assets:

Any loan repayment, which is overdue beyond 180 days or two quarters, is
considered as NPA. According to the securitization and re construction of financial
assets and enforcement of security interest Ordinance, 2002 “non-performing assets”
(NPA) means “an asset or a/c of a borrower, which has been classified by a bank or
financial institution as sub-standard, doubtful or loss asset, in accordance with the
directions or guidelines relating to asset classification issued by the Reserve Bank.

CATEGORIES OF NPA

 Standard assets: Arrears of interest and the principal amount of loan do not
exceed 90 days at the end of financial year.
 Substandard Assets – This has remained NPA for a period less than or equal
to 12 months.
 Doubtful Assets – This has remained in the substandard category for a period
of more than 12 months.
 D1 i.e. up to 1 year: 20 % provision is made by the bank
 D2 i.e. up to 2 year: 30 % provision is made by the bank
 D3 i.e. up to 3 year : 100 % provision is made by the bank
 Loss Assets – where loss has been identified by the bank or internal or
external auditors or the RBI inspection but the amount has not been written off
wholly.

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NPA IDENTIFICATION NORMS

With effect from 31st March’2004, a loan or advance would become NPA where;

i. Interest and/ or installment of principal remain overdue for a period of

more than 90 days in respect of a term loan,
ii. The account remains ‘out of order’ for a period of more than 90 days, in
respect of an Overdraft/Cash Credit (OD/CC),
iii. The bill remains overdue for a period of more than 90 days in the case of
bills purchased and discounted,
iv. With effect from September 2004, loans granted for short duration crops
will be treated as NPA, if the installment of principal or interest thereon
remains overdue for two crop seasons and loans granted for long duration
crops will be treated as NPA, if installment of principal or interest thereon
remains overdue for one crop season, and
v. Any amount to be received remains overdue for a period of more than 90
days in respect of other accounts.

Out of Order: An account should be treated as out of order if the outstanding balance
remains continuously in excess of the sanctioned limit/drawing power. In cases where
the outstanding balance in the principal operating account is less than the sanctioned
limit/drawing power, but there are no credits continuously for 90 days as on the date
of Balance Sheet or credits are not enough to cover the interest debited during the
same period, these accounts should be treated as out of order.
Overdue: Any amount due to the bank under any credit facility is ‘overdue’ if it is
not paid on the due date fixed by the bank.
The date of NPA will be the actual date on which slippage occurred, as
mentioned below:-
For Term Loan/Demand Loan Accounts
The date on which interest and/or installment of principal have remained
overdue for a period of more than 90 days.
For Overdraft/Cash Credit Accounts
The date on which the account completed a period of more than 90 days of
being continuously out of order.

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Causes for an account becoming NPA

Those Attributable to Attributable to Banks Other Causes

Borrower
Failure to bring in Wrong selection of Un helpful attitude of
Required capital borrower Government
Too ambitious project Poor Credit appraisal Fast changing technology

Longer gestation period Unhelpful in supervision Credit policies

Unwanted Expenses Tough stand on issues Lack of Infrastructure
Over trading Too inflexible attitude Increase in material cost
Lack of expertise Systems overloaded Government policies
Improper working Non inspection of Units Changes in consumer
Capital Mgmt. preferences
Mismanagement Lack of motivation Taxation laws
Diversion of Funds Delay in sanction Civil commotion
Poor Quality Lack of trained staff Political hostility
Management
Heavy borrowings Lack of delegation of Sluggish legal system
work
Poor Credit Collection Sudden credit squeeze by Changes related to
banks Banking amendment Act
Lack of Quality Control Lack of commitment to
recovery
Lack of technical,
personnel & zeal to work.

NEED OF THE STUDY

The banks have been set to grant loans and advances to the needy people for
their upliftment and for industrial growth. But today the problem is that the people are
not repaying their debts which are affecting their performance and leading to non-
performing assets of the company. To study what kind of role of NPAs are playing
upon the operations of the bank. The need also has been felt to study the financial
performance of the selected public and private banks.
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RECOMMENDATION FOR REDUCING NPA
1. Effective and regular follow-up of the end use of the funds sanctioned is
required to ascertain any embezzlement or diversion of funds. This process
can be undertaken every quarter so that any account converting to NPA
can be properly accounted for.
2. Combining traditional wisdom with modern statistical tools like Value-at-
risk analysis and Markov Chain Analysis should be employed to assess the
borrowers. This is to be supplemented by information sharing among the
bankers about the credit history of the borrower. 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. Assisting the borrowers in developing his entrepreneurial skills will not
only establish a good relation between the borrowers but also help the
bankers to keep a track of their funds.
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.

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IMPACT OF NPAs ON BANKS

The efficiency of a bank is not reflected only by the size of its balance sheet but also
by the level of return on its assets. So, NPAs impact banks in the following manner:
1. Reduces earning capacity of the assets, NPAs reduces the earning capacity of
the assets and as a result of this return on assets get affected.
2. Adversely affects capital adequacy ratio: NPAs carry risk weight of 100% (to
the extent it is uncovered). Therefore they block capital for maintaining
Capital adequacy. As NPAs do not earn any income, they are adversely
affecting “Capital Adequacy Ratio” of the bank.
3. Incurrence of additional cost: Carrying of NPAs requires incurrence of Cost of
Capital Adequacy, Cost of funds in NPAs and Operating cost for monitoring
and recovering NPAs.
4. Low yield on advances: Due to NPAs, yield on advances shows a lower figure
than actual yield on “standard Advances”. The reasons that yield are
calculated on weekly average total advances including NPAs.
5. Affect bank’s profitability: Banks profitability is affected adversely because of
the providing of doubtful debts and consequent to writing it off as bad debts.

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REASONS BEHIND RISE IN NPA
 Lack of proper pre-enquiry by the bank for sanctioning a loan to a
customer.
 Non-performance of the business or the purpose for which the customer
has taken the loan.
 Willful defaulter.
 Loans sanctioned for agriculture purposes.
 Change in government policies leads to NPA.

FACTORS IMPACTING RISE IN NPAs

 INTERNAL FACTORS:
 Defective lending process
 Inappropriate/no use of technology like MIS. Computerization
 Improper SWOT analysis
 Inadequate credit appraisal system
 Managerial deficiencies
 Absence of regular industrial visits & monitoring
 Deficiencies in re-loaning process
 Alleged corruption
 Inadequate networking & linkages of the banks

 EXTERNAL FACTORS:
 Ineffective legal framework & weak recovery tribunals
 Lack of demand / economic recession of slowdown
 Change in Govt. policies
 Willful defaults by customers
 Alleged political interferences

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 CHAPTER: 1b)-RATIONAL FOR CHOOSING THE TOPIC

 The reason behind choosing this topic was to know about the impact of NPA
on selected public and private banks.

 To analyze the impact of the Non-performing Asset on selected Public and

Private Banks.

 To discuss with the help of financial ratios and evaluate the performance of
the selected public and private bank.

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 CHAPTER: 1.2-OBJECTIVE OF THE STUDY

1. To understand the conceptual framework of NPA management

NPAs do not generate interest income. Hence Profit comes down. High levels of
NPAs affect the image and prestige of banks and financial institutions, weak
management, which is not able to recover the loan dues.
E.g. A gives money to B as loan of Rs. 100(for 3 months), for that B do the provision
of Rs. 10. After 3 months B gives Rs. 85/- only
So here we conclude that,
Gross NPA = Rs. 15
Net NPA = Rs. 5 (Rs.15 – Rs.10) indirectly,
Net NPA = Gross NPA- Provision

2. To study the trends of NPA in selected Public & Private banks:

(5 year data trending AVERAGE of all years 2013-14 to 2017-18)In this study to
analyze the whole trend of NPA of selected public and private banks. With the
calculation of all ratios, also take the averages of that and combine the results of
selected banks performance.

3. To conduct a detailed financial analysis of selected banks:

Here, for the calculation of effect of Non-Performing Asset on selected Public
sector banks and Private sector banks use some ratio as following:
 Gross NPA ratio,
 Net Non-Performing asset ratio,
 Total Provision ratio,
 Problem Asset Ratio,
 Capital Adequacy Ratio,
 Shareholder’s Risk Ratio, etc.

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 4. To find out effect of NPA on Financial position of selected Public &
Private banks:
The effect of Coefficient null hypothesis is accepted and alternate hypothesis
is rejected which means there is no significance impact of NPA on overall
financial position of selected banks.

5. To find out if there is a significant difference in NPA management of

selected public and Private Banks

For determining whether there is any significant difference between the one way
ANOVA test has been applied on the data. The results of ANOVA test highlighted the
calculated significance valued of F test (P values) is less than (critical value) 0.05.

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 CHAPTER: 1.3-SCOPE OF THE STUDY

This study is limited to analysis NPA of selected banks and their effects on Net Profit.

 Data of last 5 years

 This study is based on the data of last 5 years only.
 The study is based on secondary data only.

The data collected from selected websites, research paper and reports of the
respectedbanks.

The study include 6 banks that is

 Bank of India
 State Bank of India
 IDBI Bank
 HDFC Bank
 ICICI Bank
 Kotak Mahindra Bank

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 INTRODUCTION

1.4 Introduction of Sector:

A strong banking sector is important for flourishing economy. One of the most
important and major roles played by banking sector is that of lending business. It is
generally encouraged because it has the effect of funds being transferred from the
system to productive purposes, which also results into economic growth. As there are
pros and cons of everything, the same is with lending business that carrier’s credit
risk, which arises from failure of borrowers to fulfill its contractual obligation either
during the course of a transaction or future obligation. The failure of the banking
sector may have an adverse impact on other sector. Non-performing asset one of the
major concerns for banks in India. NPAs reflect the performance of the banks. A high
level of NPAs suggests high profitability of a large number of credit defaults that
affect the profitability and net-worth of banks and also erodes the value of the asset.
The NPA growth involves the necessity of provisions, which reduces the overall
profits and shareholders’ value. The issue of NPA has been discussed at length for
financial system all over the world. The problem of NPA is not affecting only the
banks but also the economy. In fact high level of NPAs in Indian banks is nothing but
a reflection of state of health of the Industry and trade. This project deals with
understanding the concept of NPAs, its magnitude and major causes for an account
becoming non-performing, projection of NPAs over next years in banks and
concluding remarks.
The magnitude of NPAs have a direct impact on banks profitability legally
they are not allowed to book income on such accounts and at the same time banks are
force to make provisions on such assets as per RBI guidelines. The RBI has advised
all state co-operative banks as well as the Central Co-operative banks in the country to
adopt prudential norms from the year ending 31-03-1997. These have been amended a
number of time since 1997. As per there guidelines the meaning of NPAs, the norms
regarding assets classifications and provisioning, it’s now very known that banks and
financial institution in India face the problem of amplification of non-performing
assets (NPAs) and the issue is becoming more and more unmanageable. In order to
bring the situation under control, various steps have been taken.
An asset is classified as non-performing asset (NPAs) if dues in the form of
principal and interest are not paid by the borrower for a period of 180days, however

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with the effect from March 2004, defaults status would be given to a borrower if dues
are not paid for 90 days. If any advance or credit facility granted by bank to a
borrower becomes non-performing, then banks will have to treat all the advance/credit
facilities granted to that borrower as non-performing without having any regard to the
fact that there may still exist creation advances/credit facilities having performing
status. The NPA level of our banks is way high than international standards. One
can’t ignore the fact that a part of the reduction in NPAs is due to the writing off bad
loans by banks. Indian banks should take care to ensure that they give loans to credit
worthy customers. In this context the dictum “prevention is always better than cure”
acts as the golden rule to reduce NPAs.

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 1.5 INTRODUCTION TO THE BANKS

PUBLIC BANKS

1. Bank of India
2. State Bank of India
3. IDBI bank

PRIVATE BANKS

1. HDFC Bank
2. ICICI Bank
3. Kotak Mahindra Bank

1. Bank of India
Bank of India was initially a private owned bank, when in it was established in the
year 1906 on 7th September. After almost 63 years from its establishment, in the
month of July, 1969, this Indian bank was transformed into a nationalized bank.
Starting its operation with just 50 employees in a Mumbai based office, this bank has
grown rapidly over these years. Presently, it has got a strong national as well as
sizable international presence and is considered to be one of the premier nationalized
banks in India. Apart from 3, 752 branches with more than 800,000 machines
worldwide, ATMs have made hard cash just seconds away all throughout the day at
every corner of the globe. Bank in India has even got one joint venture and three
subsidiaries abroad.

VISION
1. To become a bank of choice for Corporate
2. Medium business and up market retail customers
3. Development banking for small business, mass market and rural market.
MISSION
1. To provide superior, proactive banking service to niche markets globally
2. Providing cost effective
3. Responsive service to others in our role as a development bank, and a doing
so, meet the requirements of our stakeholders.

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 2. State Bank of India
State Bank of India (SBI) is the largest state-owned banking and financial services
company in India. The bank provides banking services to the customer. In addition to
the banking services, the bank through its subsidiaries, provides a range of financial
services, which include life insurance, merchant banking, mutual funds, credit card,
factoring, security trading, pension fund management and primary dealership in the
money market. The Bank operates in four business segments, namely Treasury,
Corporate/ Wholesale Banking, Retail Banking and Other Banking Business. The
Treasury segment includes the investment portfolio and trading in foreign exchange
contracts and derivative contracts. The Corporate/ Wholesale Banking segment
comprises the lending activities of Corporate Accounts Group, Mid Corporate
Accounts Group and Stressed Assets Management Group. The Retail Banking
segment consists of branches in National Banking Group, which primarily includes
personal banking activities, including lending activities to corporate customers having
banking relations with branches in the National Banking Group. SBI provides a range
of banking products through their vast network of branches in India and overseas,
including products aimed at NRIs.
Product range:
SBI provides a range of banking products through its network of branches in
India and overseas, including products aimed at non-resident Indians (NRIs). SBI has
16 regional hubs and 57 zonal offices that are located at important cities throughout
India.
Market share and position
It is the largest bank in India with a 23% market share in assets, besides a
share of one-fourth of the total loan and deposits market.

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 3. IDBI bank

DBI Bank Ltd., today, is operating as a full service universal bank that serves the
customers from all segments.

IDBI Bank Ltd. has inherited a rich legacy from its predecessor entity - Industrial
Development Bank of India – which was an apex Development Financial Institution
(DFI) in the realm of industry from July 1, 1964 to September 30, 2004. As a DFI, the
erstwhile IDBI stretched its canvas beyond mere project financing to cover an array of
services that contributed towards balanced geographical spread of industries,
development of identified backward areas, emergence of a new spirit of enterprise and
evolution of a deep and vibrant capital market.

VISION
1. To be the most preferred and trusted bank enhancing value for all
stakeholders.

MISSION

1. Delighting customers with our excellent service and comprehensive suite of

best-in-class financial solutions
2. Touching more people's lives with our expanding retail footprint while
maintaining our excellence on corporate and infrastructure financing
3. Continuing to act in an ethical, transparent and responsible manner, becoming
the role model for corporate governance
4. Deploying world class technology, systems and processes to improve business
efficiency and exceed customer’s expectations
5. Encouraging a positive, dynamic and performance-driven work culture to
nurture employees grow them and build a passionate and committed work
force

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 4. HDFC BANK

HDFC Bank Ltd is one of India’s premier banks. Headquartered in Mumbai,

HDFC Bank is a new generation private sector bank providing a wide range of
banking services covering commercial and investment banking on the wholesale side
and transactional/branch banking on the retail side. As of 30 September 2017, the
banks distribution network was at 4,729 branches and 12,259 ATMs across 2,669
cities and towns. HDFC Bank also has one overseas wholesale banking branch in
Bahrain, a branch in Hong Kong and two representative offices in UAE and Kenya.
The Bank has two subsidiary companies, namely HDFC Securities Ltd and HDB
Financial Services Ltd. The Bank has three primary business segments, namely
banking, wholesale banking and treasury. The retail banking segment serves retail
customers through a branch network and other delivery channels. This segment raises
deposits from customers and makes loans and provides other services with the help of
specialist product groups to such customers. The wholesale banking segment provides
loans, non-fund facilities and transaction services to corporate, public sector units,
government bodies, financial institutions and medium-scale enterprises. The treasury
segment includes net interest earnings on investments portfolio of the Bank.

VISION
1. A youthful and enthusiastic team determined to accomplish the vision of
becoming a world-class Indian bank.

MISSION

1. To be a World Class Indian Bank.

2. To build sound customer franchises across distinct businesses so as to be the
preferred provider of banking services for target retail and wholesale customer
segments, and to achieve healthy growth in profitability.
3. The bank is committed to maintain the highest level of ethical standards,
professional integrity, corporate governance and regulatory compliance.
4. HDFC Bank’s business philosophy is based on five core values: Operational
Excellence, Customer Focus, Product Leadership, People and Sustainability.

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 5. ICICI BANK
ICICI Bank is one of the Big Four banks of India, along with State Bank of
India, Bank of Baroda and Punjab National Bank.The bank has subsidiaries in the
United Kingdom and Canada; branches in United States, Singapore, Bahrain, Hong
Kong, Sri Lanka, Qatar, Oman, Dubai International Finance Centre, Chinaand South
Africa and representative offices in United Arab Emirates, Bangladesh, Malaysia and
Indonesia. The company's UK subsidiary has also established branches in Belgium
and Germany.

VISION
1. To be the leading provider of financial services in India and a major global
bank.

MISSION
We will leverage our people, technology, speed and financial capital to:
1. Be the banker of first choice for our customers by delivering high quality,
world-class products and services.
2. Expand the frontiers of our business globally.
3. Play a proactive role in the full realization of India's potential.
4. Maintain a healthy financial profile and diversify our earnings across
businesses and geographies.
5. Maintain high standards of governance and ethics.

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 6. Kotak Mahindra Bank

The company was incorporated on 21st November 1985 under the name Kotak
Capital Management Finance Ltd. The Company has been promoted by Mr.Uday S
Kotak, Mr. S.A.A Pinto and Kotak & Company. The company obtained the certificate
of commencement of business on 11th February 1986 and the Existing promoters
were joined by Mr. Harish Mahindra and Mr.Anand Mahindra. The company's name
was changed on 8th April 1986 to its present name Kotak Mahindra Finance Ltd.
The Company deals in Bill discounting, leasing and hire purchase, corporate finance,
management of fixed deposit mobilization, financing against securities, money market
operations, consumer finance, investment banking and clients' money management.

VISION

1. Our customers will enjoy the benefits of dealing with a global Indian brand
that best understands their needs and delivers customized pragmatic solutions
across multiple platforms.
2. We are a world class Indian financial services group. Our technology and best
practices are bench-marked along international lines while our understanding
of customers will be uniquely Indian.
3. We are more than a repository of our customers' savings. We, the group, are a
single window to every financial service in a customer's universe.
4. Value creation rather than size alone will be our business driver.

MISSION

1. To equip and empower the company with the best legal expertise, by evolving
effective strategies with the optimum utilization of legal tools to safeguard the
interest of the company.

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 CHAPTER: 2-REVIEW OF LITERATURE

1. Topic: -“A Study on Non-Performing Assets of Selected Public and

Private Sector Banks of India”-

The earning capacity and profitability of the banks are highly affected because of
the existence of NPAs. Hence, parameters for evaluating the performance of banks
have also changed. This paper provides an empirical approach to the analysis of
profitability indicators with a focal point on non-performing assets (NPAs) of public
and private sector banks. Non-performing assets are one of the major concerns for
banks in India. NPAs reflect the performance of banks. A high level of NPAs suggests
that large number of credit defaults that affect the profitability and net-worth of banks.
Private and public Sector banks are highly affected by this three letter virus NPA.

Author’s Name: -Nitin Gupta, Research Scholar and Dr. (Ms) Kesari, Associate
Professor, FMSLA

Issued: - September 2016, Volume 4, Issue 9, ISSN 2349-4476

Objective: -

The research paper was carried out to find the study and compare the trends in
NPAs in public and private sector banks. Also study the sector wise distribution of
NPAs in public and private sector banks.

Scope:-The study of NPAs over a period of 10 years.

Tools:-Gross NPAs to Gross Advances Ratio

Outcome:-

This paper, an effort has been made to evaluate the operational performance of the
selected PSBs & Private banks in India and also analyze how efficiently Public and
Private sector banks can manage NPA. The magnitude of NPA was comparatively
higher in public sectors banks as compared to private banks in the beginning years
under study and now also, they have not managed the number at lower end. Only
HDFC bank has managed to control the NPAs at the end in comparison to the starting
years of study. HDFC bank is most effective in managing the NPAs over years under
study.
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 2. Topic:- “NPA Management in Banks: An Indian Perspective”

Assisting the borrowers in developing his entrepreneurial skills will not only
establish a good relation between the borrowers but also help the bankers to keep a
track of their funds.

Author’s Name: -Anuja Barge, G.H. Raisoni Institute of Engineering and

Technology for Women, Nagpur

Issued: - IBMRD's Journal of Management and Research, ISSN: 2277-7830

Objective: -

Assisting the borrowers in developing his entrepreneurial skills will not only
establish a good relation between the borrowers but also help the bankers to keep a
track of their funds.

Outcome: -

Non-performing Asset (NPA) has emerged since over a decade as an alarming

threat to the banking industry in our country sending distressing signals on the
sustainability and in durability of the affected banks. A high level of NPAs suggests
high probability of a large number of credit defaults that affect the profitability and
net-worth of banks and also erodes the value of the asset. The problem of NPAs is not
only affecting the banks but also the whole economy. The paper deals with
understanding the concept of NPAs, its magnitude and major causes for an account
becoming non-performing and also strategies for reducing NPAs.

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 3. Topic: -“EFFECT OF NON-PERFORMING ASSETS ON THE
PROFITABILITY OF BANKS – A SELECTIVE STUDY”–

Non-performing asset is the key term for the banking corporations. Non-
Performing Assets show the efficiency of the performance of the banks. Non-
Performing Assets is the amount which is not received by the bank in return of loans
disbursed. The amount of Non-Performing Assets affects not only the banking
industry but the total financial system and there by the economy of the country. Thus
a selective study has been done on public sector banks in India to evaluate the effect
of Non-Performing Assets on the profitability of banks. SBI and 5 nationalized banks
were selected for the study and the relation between their gross Non Performing
Assets and net profit was measured. The result shows that except for SBI all the other
banks exhibit a negative correlation between their gross Non Performing Assets and
net profits. But for SBI the net profit is not at all affected by Gross Non Performing
Assets and it is in continuous profits only.

Author’s Name:-K. PRASANTH KIRAN, Associate Professor,& T. MARY JONES,

Associate Professor

Issued: - Impact Factor (JCC): 3.9876

Objective: -

The present study is examining the relationship between the non-performing

assets and the profitability of banks. Also the compare the performance of the Top
bank in the industry with the least of five banks in terms of managing NPA. The study
establishes the correlation between NPAs and Net Profits of Banks.

Scope: - Calculation period of selected banks within the period of 10 years.

Tools: - Gross NPA, correlation, regression

Outcome: -

All the banks are having non-performing assets in their balance sheets. The
NPAs are going on increasing for all the banks. The large banks are able to maintain
the losses by NPAs but small banks are not able to recover. SBI is also having huge

Page | 24
losses but it is also earning high profits. Public sector banks are facing more issues by
NPAs.

4. Topic: -“A STUDY ON NON PERFORMING ASSETS OF SELECT

PUBLIC AND PRIVATE SECTOR BANKS IN INDIA”–

A strong banking sector is important for flourishing economy. The failure of

the banking Sector may have an adverse impact on other sector. Non-Performing
Assets (NPA) is one of the major concerns for banks in India. NPAs reflect the
performance of banks. The earning capacity and profitability of the banks are highly
affected because of the existence of NPAs. A high level of NPAs suggests that large
number of credit defaults that affect the profitability and Net worth of banks. The
public sector banks have shown very good performance over the private sector banks
as far as the financial operations are concerned. However the position of public sector
banks is not so good in the area of Non-Performing Assets (NPAs) as compared to
private sector banks. In this paper made an attempt to analyze how efficiently the
selected public and private sector banks managed their NPAs.

Author’s Name:- D. JAYAKKODI, Research Scholar& Dr. P.RENGARAJAN,

Assistant Professor

Issued: - INTERCONTINENTAL JOURNAL OF FINANCE RESEARCH REVIEW

ISSN:2321-0354 - ONLINE ISSN: 2347-1654 - PRINT - IMPACT FACTOR: 1.552

VOLUME 4, ISSUE 9, SEPTEMBER 2016

Objective: -

This Research paper was carried out to examine the Gross NPAs and Net
NPAs of select Public and Private Sector Banks. In addition, to make a comparative
study of NPAs in select Public and Private Sector Banks.

Scope: -Four Public Sector Banks and four Private Sector Banks

Tools: - Mean, standard deviation, Co-efficient of variation

Outcome: - Public Sector Banks have higher NPA ratio as compared to Private
Sector Banks over the period of the study. Gross and Net NPAs ratio has shown an
increasing trend in selected Public Sector Banks over the period of study. It is

Page | 25
observed that the Gross NPA ratio has shown a declining trend in Private Sector
Banks. It is observed that Net NPA ratio has shown an increasing trend in selected
private sector banks over the period of study.

Page | 26
 CHAPTER:3-RESEARCH METHODOLOGY

Research design

The research design tells about the mode with which the entire project is
prepared. My research design for this study is basically analytical. Because I have
utilized the large number of data of the banking sector. The preset study is a
descriptive study which tries to establish the relationship between non-performing
asset of selected banks and its respective net profit.

Problem definition

A strong banking sector is important for flourishing economy. The failure of

the banking sector may have an adverse impact on other sectors. Non-performing
assets are one of the major concerns for banks in India. . A high level of NPA
suggests high probability of a large number of credit defaults that affect the
profitability and net-worth of banks and also erodes the value of the asset with the
help of ANOVA calculation.

Data type

In order to achieve the research objectives, the study is based on secondary

source of data. The data has been collected from various journals, research papers,
reports on trend and progress of banking in India, etc. With the help of this data, the
study of nonperforming assets of commercial banks of India has been undertaken.

Sample size

The banks selected for the study are prominent banks among all banks in their
respective sector.

Public Sector:

1. Bank of India
2. State Bank of India
3. IDBI bank

Page | 27
Private Sector:

1. HDFC Bank
2. ICICI Bank
3. Kotak Mahindra Bank

Analytical tools-

The data collected were analyzed with the help of statistical tools like
regression, co-relation. Tables are used to represent the consolidated data. In the light
of the objectives mentioned above, the present study is confirmed to examine the
various aspects of NPAs in PSBs & Private banks of India (selected banks). The study
covers the period from 2013-14 to 2017-18.
 ANOVA
 Regression
 Co-relation
Hypotheses Formulation:

H0: There is no significant impact of NPA on overall Financial Position of

Selected banks.

H1: There is significant impact of NPA on overall Financial Position of Selected

banks.

Page | 28
 CHAPTER: 3.1-DATA ANALYSIS AND INTERPRETATION

Ratio analysis

The relationship between two related items of financial statement is known as

ratio. A ratio is just one number expressed in terms of another. The ratio is
customarily expressed in three different ways. It may be expressed as a proportion
between the two figures. Second it may be expressed in terms of percentage. Third, it
may be expressed in terms of rates.

The use of ratio has become increasingly popular during the last three years
only. Originally, the bankers used the current ratio to judge the capacity of the
borrowing business enterprises to repay the loan and make regular interest payments.
Today it has assume to be important tool that anybody connected with the business
turns to ratio for measuring the financial strength and earning capacity of the business.

Uses of Ratio Analysis:

 For simplify financial statements: Ratio analysis simply information given in

banks financial statements and the performance of the selected banks.
 To help detect the problematic trend: the analysis can also predict the future
performance of a company in a particular aspect of the selected banks.

Page | 29
 1. Gross NPA ratio :

Gross NPA ratio is the ratio of Gross NPA to gross advances of the bank. Gross
NPA is the sum of all loan assets that are classified as NPA as per RBI guidelines, the
ratio is to be counted in terms of percentage and the formula for GNPA is as follows:

Name 2017-18 2016-17 2015-16 2014-15 2013-14

BANK OF INDIA 18.26 14.2 13.89 5.52 3.20
SBI 11.55 7.15 6.71 4.36 5.09
IDBI BANK 32.37 23.45 11.52 6.09 5.04
HDFC BANK 1.31 1.06 0.95 0.94 0.99
ICICI BANK 10.39 9.08 6.02 3.9 3.1
KOTAK MAHINDRA
BANK 2.25 2.63 2.39 1.87 2

Interpretation:

 The above table and graph makes it very clear that the averagegross NPA of
all the selected public banks and private banks. It is seen that Bank of India’s
gross NPA which was 3.20 in 2013-14 increased every year and finally
reached 18.26 in 2017-18, which is much higher than the average gross NPA
(11.01%).
 It is seen that HDFC bank’s gross NPA which was 0.99 in 2013-14 increased
every year and finally reached 1.31 in 2017-18, which is higher than the
average gross NPA (1.05%).
 It is seen that ICICI bank’s gross NPA which was 3.10 in 2013-14 increased
every year and finally reached 10.39 in 2017-18, which is higher than the
average gross NPA (6.50%).
 It is seen that IDBI bank’s gross NPA which was 5.04 in 2013-14 increased
every year and finally reached 32.37 in 2017-18, which is double higher than
the average gross NPA (15.69%).

Page | 30
  It is seen that KOTAK MAHINDRA bank’s gross NPA which was 2.00 in
2013-14 increased every year and finally reached 2.25 in 2017-18, which is
little higher than the average gross NPA (2.23%).
 It is seen that State bank of India’s gross NPA which was 5.09 in 2013-14
increased every year and finally reached 11.55 in 2017-18, which is higher
than the average gross NPA (6.97%).

Graphical representation:

AVERAGES

BANK KOTAK
OF HDFC ICICI MAHINDRA
INDIA BANK BANK IDBI BANK BANK SBI

11.01 6.97 15.69 1.05 6.5 2.23

Average
15.69
16
14 11.01
12 6.97 6.50
10 BANK OF INDIA
8 2.23
6 1.05 SBI
4
2 IDBI BANK
0
HDFC BANK
ICICI BANK
KOTAK MAHINDRA BANK

 The averages shows the Public Banks have more gross Non-performing assets.
 Performance of Gross Non-performing asset of selected PrivateBanksis less
then Public banks.

Page | 31
 ANOVA
Sum of Df Mean F Sig.
Squares Square
Between
38.087 2 19.044 . .
Groups
Within Groups .000 0 .
Total 38.087 2

For determining whether there is any significant difference between the one way
ANOVA test has been applied on the data. The results of ANOVA test highlighted the
calculated significance valued of F test (P values) is less than (critical value) 0.05. It
means there is statistically significant difference between the Public Gross NPA and,
thus the alternative hypothesis (H1) is accepted. It’s indicates that there is significant
difference between the public Gross NPA and Private Gross NPA.

Correlations
PUB_GNP PVT_GNP
A A
Pearson
1 -.716
PUB_GNP Correlation
A Sig. (2-tailed) .492
N 3 3
Pearson
-.716 1
PVT_GNP Correlation
A Sig. (2-tailed) .492
N 3 3

Page | 32
 ANOVAa

Model Sum of Df Mean F Sig.

Squares Square
Regression 1 19.508 1.050 .492b
1 Residual 18.579 1 18.579
Total 38.087 2
a. Dependent Variable: PUB_GNPA
b. Predictors: (Constant), PVT_GNPA

Page | 33
 Coefficientsa
Model Unstandardized Standardized t Sig.
Coefficients Coefficients
B Std. Error Beta
(Constant) 14.774 4.266 3.463 .179
1 PVT_GNP
-1.089 1.063 -.716 -1.025 .492
A
a. Dependent Variable: PUB_GNPA
Y=14.774+(-0.716*PUB_GNPA

As a significance difference in the above table is 0.492 at 0.05 level of significance,

the null hypothesis is accepted and alternate hypothesis is rejected which means there
is no significance impact of NPA on overall financial position of selected banks.

2. Net Non-Performing asset ratio :

The net NPA percentage is the ratio of NPA to net advances in which the
provision is to be deducted from the gross advances. The provision is to be made for
NPA account. The formula for that is:

Name 2017-18 2016-17 2015-16 2014-15 2013-14

BANK OF INDIA 8.26 6.9 7.79 3.36 2

SBI 5.73 3.71 3.81 2.12 2.57

IDBI BANK 16.69 13.21 6.78 2.88 2.48

HDFC BANK 0.4 0.33 0.28 0.25 0.27

ICICI BANK 5.43 5.43 2.98 1.61 0.97

KOTAK MAHINDRA
BANK 0.98 1.26 1.06 0.92 1.08

Page | 34
Interpretation:

 The above table and graph makes it very clear that the average gross NPA of
all the selected public banks and private banks.
 It can be noticed that Net NPA ratio has resulted in the first five years of study
i.e. from 2013-14 to 2017-18, though increasing in effect. The Net NPA ratio
during these years can be ascribed to the low Net NPA position of KOTAK
MAHINDRA BANK and some difference HDFC bank also. Other banks had
failed to make sufficient provisions against NPA in these years. However, they
succeeded in making provisions and thus they could bring the Net NPA down
to zero.
 It is to be seen that the position of all other banks has been very bad and they
had higher net NPA ratio.
 The management of kotak Mahindra bank & HDFC bank has taken enough
care in granting advances and they have been very meticulous in recovering
from defaulters.
 Another observation is that the above banks have strictly followed the RBI
guidelines by making provisions against NPAs.

Graphical representation:

BANK KOTAK
OF IDBI HDFC MAHINDRA
INDIA SBI BANK BANK ICICI BANK BANK

5.66 3.59 8.41 0.31 3.29 1.06

Average
8.41
9 BANK OF INDIA
8
7 5.66 SBI
6
5 3.59 3.29
4 1.06 IDBI BANK
3 0.31
2
1 HDFC BANK
0
ICICI BANK

KOTAK MAHINDRA
BANK Page | 35
  The overall performance shows the inverse effect of both selected banks.
 The Public sector banks increase the Net NPA ratio and Private bank have fall
rate of NPA.

ANOVA

Sum of Df Mean F Sig.

Squares Square
Between
11.685 2 5.842 . .
Groups
Within Groups .000 0 .
Total 11.685 2

For determining whether there is any significant difference between the one way
ANOVA test has been applied on the data. The results of ANOVA test highlighted the
calculated significance valued of F test (P values) is less than (critical value) 0.05. It
means there is statistically significant difference between the Public Gross NPA and,
thus the alternative hypothesis (H1) is accepted. It’s indicates that there is significant
difference between the public Gross NPA and Private Gross NPA.

Correlations
PUB_NNP PVT_NNP
A A
Pearson
1 -.662
PUB_NNP Correlation
A Sig. (2-tailed) .540
N 3 3
Pearson
-.662 1
PVT_NNP Correlation
A Sig. (2-tailed) .540
N 3 3

Page | 36
 ANOVAa
Model Sum of df Mean F Sig.
Squares Square
Regression 5.117 1 5.117 .779 .540b
1 Residual 6.568 1 6.568
Total 11.685 2
a. Dependent Variable: PUB_NNPA
b. Predictors: (Constant), PVT_NNPA

Coefficientsa
Model Unstandardized Standardized t Sig.
Coefficients Coefficients
B Std. Error Beta
(Constant) 7.490 2.342 3.198 .193
1 PVT_NNP
-1.032 1.169 -.662 -.883 .540
A
a. Dependent Variable: PUB_NNPA
Y=7.490+(-0.662*PUB_NNPA)

As a significance difference in the above table is 0.540 at 0.05 level of significant, the
null hypothesis is accepted and alternate hypothesis is rejected which means there is
no significance impact of NPA on overall financial position of selected banks.

Page | 37
 3. Total Provision ratio :

Provisions are to be made for to keep safety against the NPA, & it directly affect
on the gross profit of the banks. The provision ratio is nothing but total provision
held for NPA to Gross NPA of the banks. The formula for that is:

TOTAL PROVISION RATIO

2013-
Name 2017-18 2016-17 2015-16 2014-15 14
BANK OF INDIA 21.15 21.69 24.31 26.04 47.97
SBI 29.57 35.93 33.93 45.5 34.44
IDBI BANK 29.04 21.76 36.32 38.27 45.78
HDFC BANK 175.88 190 206.41 209.07 196.76
ICICI BANK 33.74 39.58 53.92 56.61 64.57
KOTAK MAHINDRA
BANK 252.32 236.14 305.8 392.65 314.68

Interpretation:

 The average of Kotak Mahindra bank is 300.2 so as compare to others this is

very high rate of provision for the bank.
 After then the HDFC banks provision is taken place on 195.62.
 Then ICICI bank and after then come the all public sector bank.
 So here we can see the difference between the provision of public and private
banks.
 The compare to all this the performance of the private sector bank is too good
than public sector bank.

Page | 38
Graphical representation:

KOTAK
BANK OF IDBI HDFC ICICI MAHINDRA
INDIA SBI BANK BANK BANK BANK

28.23 35.87 34.23 195.62 49.68 300.32

Average
350 300.32
4.
300
250 195.62
35.8 BANK OF INDIA
200
7
150 SBI
28.23 34.23 49.68
100
IDBI BANK
50
0 HDFC BANK
ICICI BANK
KOTAK MAHINDRA BANK

 In this above diagram shows the good performance of public sector banks
compare to private sector banks.
 The highest total provision ratio is Kotak Mahindra Bank

Page | 39
 ANOVA

Sum of Df Mean F Sig.

Squares Square
Between
32.360 2 16.180 . .
Groups
Within Groups .000 0 .
Total 32.360 2

The results of ANOVA test highlighted the calculated significance valued of F test (P
values) is less than (critical value) 0.05. It means there is statistically significant
difference between the Public total provision ratio and, thus the alternative hypothesis
(H1) is accepted. It’s indicates that there is significant difference between the public
total provision ratio and Private total provision ratio.

Page | 40
 Correlations
PUB_TP PVT_TP
R R
Pearson
1 -.295
PUB_TP Correlation
R Sig. (2-tailed) .809
N 3 3
Pearson
-.295 1
PVT_TP Correlation
R Sig. (2-tailed) .809
N 3 3

ANOVAa
Model Sum of df Mean F Sig.
Squares Square
Regression 2.825 1 2.825 .096 .809b
1 Residual 29.535 1 29.535
Total 32.360 2
a. Dependent Variable: PUB_TPR
b. Predictors: (Constant), PVT_TPR

Coefficientsa
Model Unstandardized Standardized t Sig.
Coefficients Coefficients
B Std. Error Beta
(Constant) 34.497 6.377 5.409 .116
1
PVT_TPR -.009 .031 -.295 -.309 .809
a. Dependent Variable: PUB_TPR
Y=34.497+(-0.295*PUB_TPR)

Page | 41
As a significance difference in the above table is 0.809 at 0.05 level of significance,
the null hypothesis is accepted and alternate hypothesis is rejected which means there
is no significance impact of NPA on overall financial position of selected banks.

Page | 42
 4. Problem Asset Ratio:

It is the ratio of gross NPA to total asset of the bank. The formula for that is:

Interpretation:

 The Problem assets ratio shows the proportion of Gross NPA to total assets
and the table & graph given above shows that the percentage of all selected
public and private banks.
 The percentage shown is, however stable. It was increasing from 2013-14 to
2017-18, except the performance of Kotak Mahindra bank, SBI & HDFC bank
in 2014-15.
 It seems that much attention has been given by the management to the
proportion of Gross NPA and total assets of the bank. The gross NPA is on the
rise due to the increase in advances.

PROBLEM ASSETS RATIO

Name 2017-18 2016-17 2015-16 2014-15 2013-14

BANK OF INDIA 10.22 8.31 8.18 3.59 2.07

SBI 6.47 4.15 4.35 2.77 3.44

IDBI BANK 15.87 12.37 6.64 3.56 3.03

HDFC BANK 0.81 0.68 0.62 0.58 0.61

ICICI BANK 6.06 5.46 3.64 2.34 1.77

KOTAK MAHINDRA
BANK 1.44 1.67 1.48 1.17 1.21

Page | 43
Graphical representation:

KOTAK
BANK OF IDBI HDFC ICICI MAHINDRA
INDIA SBI BANK BANK BANK BANK
6.47 4.23 8.29 0.66 3.85 1.39

Average
9 8.29
8 6.47
7
6 4.23 3.85
5 BANK OF INDIA
4 1.39 SBI
3 0.66
2 IDBI BANK
1
0 HDFC BANK
ICICI BANK
KOTAK MAHINDRA BANK

 The performance of problem asset ratio of public sector bank is more than
selected private sector bank.
 IDBI bank performs high than overall comparison of both the sector.

Page | 44
 ANOVA

Sum of df Mean F Sig.

Squares Square
Between
8.271 2 4.136 . .
Groups
Within Groups .000 0 .
Total 8.271 2

The results of ANOVA test highlighted the calculated significance valued of F test (P
values) is less than (critical value) 0.05. It means there is statistically significant
difference between the Public Problem Assetratio and, thus the alternative hypothesis
(H1) is accepted. It’s indicates that there is significant difference between the public
Problem Asset ratio and Private Problem Asset ratio.

Correlations
PUB_PA PVT_PA
R R
Pearson
1 -.774
PUB_PA Correlation
R Sig. (2-tailed) .436
N 3 3
Pearson
-.774 1
PVT_PA Correlation
R Sig. (2-tailed) .436
N 3 3
ANOVAa

Page | 45
 Model Sum of df Mean F Sig.
Squares Square
Regression 4.961 1 4.961 1.499 .436b
1 Residual 3.310 1 3.310
Total 8.271 2
a. Dependent Variable: PUB_PAR
b. Predictors: (Constant), PVT_PAR

Coefficientsa
Model Unstandardized Standardized t Sig.
Coefficients Coefficients
B Std. Error Beta
(Constant) 8.184 1.843 4.440 .141
1 PVT_PA
-.942 .769 -.774 -1.224 .436
R
a. Dependent Variable: PUB_PAR
Y=8.184+(-0.774*PUB_PAR)

As a significance difference in the above table is 0.436 at 0.05 level of significance,

the null hypothesis is accepted and alternate hypothesis is rejected which means there
is no significance impact of NPA on overall financial position of selected banks.

Page | 46
 5. Capital Adequacy Ratio :

Capital adequacy ratio can be defined as ratio of the capital of the bank, to its assets,
which are weighted/adjusted to risk attached to them i.e.

CAR

Name 2017-18 2016-17 2015-16 2014-15 2013-14

BANK OF INDIA 13 12 12 11 10
SBI 13 13 13 12 13
IDBI BANK 10 11 12 12 12
HDFC BANK 15 15 16 17 16
ICICI BANK 18 17 17 17 18
KOTAK MAHINDRA
BANK 18 17 16 17 19

Interpretation:

 Kotak Mahindra Bank and ICICI banks performance are same in the average
and in the same period of 2013-2018.
 Performance of the HDFC banks is constant of all the selected year.
 Public sector banks are performing better thenprivate sector banks.

Page | 47
Graphical representation:

KOTAK
BANK OF IDBI HDFC MAHINDRA
INDIA SBI BANK BANK ICICI BANK BANK

11.6 12.8 11.4 15.8 17.4 17.4

Average
15.8 17.4 17.4
20 12.8 11.4
11.6
15 BANK OF INDIA
10 SBI
5 IDBI BANK
0 HDFC BANK
ICICI BANK
KOTAK MAHINDRA BANK

 Compare the all the capital adequacy ratio of public sector is manage by very
efficiently.
 The all the private sector banks performance is likewise same of the respective
selected period.

Page | 48
 Correlations
PUB_CA PVT_CA
R R
Pearson
1 .381
PUB_CA Correlation
R Sig. (2-tailed) .751
N 3 3
Pearson
.381 1
PVT_CA Correlation
R Sig. (2-tailed) .751
N 3 3

ANOVAa
Model Sum of df Mean F Sig.
Squares Square
Regression .167 1 .167 .170 .751b
1 Residual .980 1 .980
Total 1.147 2
a. Dependent Variable: PUB_CAR
b. Predictors: (Constant), PVT_CAR

Coefficientsa
Model Unstandardized Standardized t Sig.
Coefficients Coefficients
B Std. Error Beta
(Constant) 6.662 12.794 .521 .694
1 PVT_CA
.313 .758 .381 .412 .751
R
a. Dependent Variable: PUB_CAR

Page | 49
Y=6.662+(0.381*PUB_CAR)

As a significance difference in the above table is 0.751 at 0.05 level of significance,

the null hypothesis is accepted and alternate hypothesis is rejected which means there
is no significance impact of NPA on overall financial position of selected banks.

Page | 50
6. Shareholder’s Risk Ratio:

The shareholder equity ratio determines how much shareholders would receive in the
event of a company-wide liquidation.

SHAREHOLDER RISK RATIO

Name 2017-18 2016-17 2015-16 2014-15 2013-14

BANK OF INDIA 4.63 4.04 4.59 2.18 1.29

SBI 3.21 2.15 2.47 1.35 1.73
IDBI BANK 8.18 6.97 3.91 1.68 1.49
HDFC BANK 0.24 0.21 0.19 0.15 0.17
ICICI BANK 3.16 3.27 1.8 0.97 0.55
KOTAK MAHINDRA
BANK 0.63 0.8 0.66 0.57 0.65

Interpretation:

 Like depositors, the shareholders are also exposed to great risk if the Net NPA
is positive or more than zero. Hence it is necessary to see that the
shareholdersfunds are safe in view of the NPA. So, this ratio becomes
important from the view point of the shareholders.
 From the table and graph given above, we can see the position of the selected
Public and Private Banks.
 A risk ratio is resulted in the first five year and it is only due to HDFC bank
which had failed in making provisions against NPAs. However, it is a happy
sign that the risk ratio in the last three years is threatening zero.
 This signifies that the shareholders funds in these banks are clearly safe.
 The performance of all banks are well, no any results are negative.

Page | 51
Graphical representation:

KOTAK
BANK OF IDBI HDFC ICICI MAHINDRA
INDIA SBI BANK BANK BANK BANK

3.35 2.18 4.45 0.19 1.95 0.66

Average
4.45
4.5 3.35
4
3.5 2.18
3 1.95
2.5 BANK OF INDIA
2 0.66
0.19 SBI
1.5
1 IDBI BANK
0.5
0 HDFC BANK
ICICI BANK
KOTAK MAHINDRA BANK

 In the above diagram shows the high risk in IDBI bank then bank of India, it
means they are not undertaking any provision for their shareholders.
 HDFC bank performance is too good compare to others.

Page | 52
 ANOVA

Sum of df Mean F Sig.

Squares Square
Between
8.271 2 4.136 . .
Groups
Within Groups .000 0 .
Total 8.271 2

The results of ANOVA test highlighted the calculated significance valued of F test (P
values) is less than (critical value) 0.05. It means there is statistically significant
difference between the Public Shareholder Risk Ratio and, thus the alternative
hypothesis (H1) is accepted. It’s indicates that there is significant difference between
the public Shareholder Risk Ratio and Private Shareholder Risk ratio.

Correlations
PUB_SHRR PVT_SHRR
Pearson
1 -.719
PUB_SHR Correlation
R Sig. (2-tailed) .489
N 3 3
Pearson
-.719 1
PVT_SHR Correlation
R Sig. (2-tailed) .489
N 3 3

Page | 53
 ANOVAa
Model Sum of df Mean F Sig.
Squares Square
Regression 1.325 1 1.325 1.070 .489b
1 Residual 1.238 1 1.238
Total 2.564 2
a. Dependent Variable: PUB_SHRR
b. Predictors: (Constant), PVT_SHRR

Coefficientsa
Model Unstandardized Standardized t Sig.
Coefficients Coefficients
B Std. Error Beta
(Constant) 4.162 1.033 4.030 .155
1 PVT_SHR
-.894 .865 -.719 -1.034 .489
R
a. Dependent Variable: PUB_SHRR

Y=4.162+(-0.719+PUB_SHRR)

As a significance difference in the above table is 0.489 at 0.05 level of significance,

the null hypothesis is accepted and alternate hypothesis is rejected which means there
is no significance impact of NPA on overall financial position of selected banks.

Page | 54
 7. Net profit

Net profit ratio (NP ratio) is a popular profitability ratio that shows relationship
between net profit after tax and net sales. It is computed by dividing the net profit
(after tax) by net sales.

Correlations

PUB_NP PVY_NP

Pearson Correlation 1 .307

PUB_NP Sig. (2-tailed) .802

N 3 3

Pearson Correlation .307 1

PVY_NP Sig. (2-tailed) .802

N 3 3

Page | 55
 ANOVA

Model Sum of df Mean Square F Sig.

Squares

Regression 6336953.609 1 6336953.609 .104 .802b

1 Residual 61111174.255 1 61111174.255

Total 67448127.864 2

a. Dependent Variable: PUB_NP

b. Predictors: (Constant), PVY_NP

Coefficients

Model Unstandardized Standardized t Sig.

Coefficients Coefficients

B Std. Error Beta

(Constant) -1952.410 9952.736 -.196 .877

1
PVY_NP .348 1.079 .307 .322 .802

Dependent Variable: PUB_NP

Y=(-1952.410)+(0.307*PUB_NP)

As a significance difference in the above table is 0.802 at 0.05 level of significance,

the null hypothesis is accepted and alternate hypothesis is rejected which means there
is no significance impact of NPA on overall financial position of selected banks.

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Overview of all the ratios:

NAME OF THE BANKS

BANK KOTAK
OF IDBI HDFC ICICI MAHINDRA
RATIOS INDIA SBI BANK BANK BANK BANK
Gross NPA
1.05
ratio 11.01 6.97 15.69 6.50 2.23
0.31
NPA ratio 5.66 3.59 8.41 3.29 1.06
Problem
0.66
Asset ratio 6.47 4.23 8.29 3.85 1.39
Shareholder
0.19
's risk 3.35 2.18 4.45 1.95 0.66
Total
195.62
Provision 28.23 35.87 34.23 49.68 300.32
2555.3 3234.2
15358.8
Loss Asset 2204.29 2 1810.68 3 7306.40

Net NPA to
29.02
Gross NPA 54.68 51.49 52.64 46.87 47.87

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 CHAPTER: 3.2-LIMITATIONS

 This study is limited to three public and three private banks in India and based
on information / data available at these banks.

 The study period is fixed for five years only since 2013-2018.

 The condition was laid down by respective bank not to disclose their
permission to undertake the study on the respective bank.

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 CHAPTER: 3.3-FINDINGS/ OUTCOMES

 Comparison of all overall selected Public Sector Banksand Private Sector

Banks.
 The calculation of ANOVA of all the selected banks are alternative hypothesis
is accepted.
 Calculation of Coefficient is null hypothesis is accepted and alternate
hypothesis is rejected which means there is no significance impact of NPA on
overall financial position of selected Public sector bank and private sector
banks.
 As per the analysis the performance of the public sector bank is well
performing and well managing according to the situation and also follows the
all guidelines of the RBI.
 Public sector banks are taking time to time follow up of their regular
transaction regarding to NPA.
 Private sector banks also perform well and try to manage the recover their
debt.
 The objective was to bring out the true picture of a bank’s loan portfolio.
o The fallout of this momentous regulatory measure for the management
of the Central Bank’s was to divert its focus to profitability, which till
then used to be a low priority area for it.
o Asset quality assumed greater importance for the Central Bank’s when
Maintenance of high quality credit portfolio continues to be a major
challenge for the CBs, especially with RBI gradually moving towards
convergence with more stringent global norms for impaired assets.

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 CHAPTER:3.4-SUGGESTIONS/RECOMMENDATIONS

To avoid future NPAs and to manage existing NPAs after doing the whole study,
some suggestions have been recommended so as to avoid future NPAs and to manage
existing NPAs:

 There is need to improve the performance of private sector banks.

 For the improvement banks need to Frame reasonably well documented
loan policy.
 Prepare a loan recovery policy and strategies for reducing NPAs.
 All banks management need to manage the fix targets of recovery and
draw time bound action programmer.
 There is need of Credit appraisal and monitoring.
 This Monitor implementation of the time bound action plan.
 Take corrective steps whenever found necessary while monitoring the
action plan and make changes in the original plan if necessary.
 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.

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 CHAPTER: 4-CONCLUSIONS

1. At last, it can be said that the problem of NPAs has been a major issue
for the banking industry.
2. The RBI which is the apex body for controlling the level of non-
performing assets have been giving guidelines and getting norms for
the banks in order to control the incidents of faults.
3. 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.
4. In the present study, I analyzed the NPAs of selected public and
private sector banks over a period of 5 years and found that Public
sector bank, in that SBI, then Bank of India and then IDBI banks
performance is more efficiently managing its NPAs in comparison to
other banks, then came the private banks.
5. Indian banks are still not comfortable in the area of NPA management.
Therefore, the management of Indian Banks must pay special attention
towards the NPA management and take appropriate steps to arrest the
creation of new NPAs, besides making recoveries in the existing
NPAs. Timely action is essential to ensure future growth of the Bank.

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 CHAPTER: 5-BIBLIOGRAPHY AND REFERENCES

JOURNALS

 Bandyopadhya R. and Sampat Singh, (1987), “Long Range Planning in Banks:

National Institute of Banking management. Basu, S k., (1999), “Theory and
practice of developing Banking”
 Basu, S.k., (1999), “Theory and practice of development banking” economic
and Political Weekly, Vol.XXXIV, No. 45, November 6-12, 1999.
 Selvarajan B. &Dr.VadivalaganG.,A Study on Management of Non-
Performing Assets in Priority Sector reference to Indian Bank and Public
Sector Banks (PSBs), Global Journal of Management and Business
Research,13(1): 101-113
 Srinivas K T, A Study on Non-Performing Assets of Commercial banks in
India, International Monthly Refereed Journal of Research In Management &
Technology, Volume II, December‟13, pp: 61-69.

REPORT

 Reserve Bank of India, Report on Trend and Progress of banking in India,

Various issues, Bombay, India.
 Chaitanya V Krishna (2004). Causes of Non-performing Assets in Public
Sector Banks. Economic Research, 17 (1): 16-30.
 Bakshi, Avijit, ‘NPA Management in Banks’ research paper, Asia- Pacific
Institute of Management, New Delhi.
 Bhatia, U. (1988), “Predicting Corporate Sickness in India”, Studies in
Banking & Finance, 7, 57–71.

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 WEBSITES

www.irjcjournals.org

www.ibmrd.org

www.ijetmas.com

www.iaset.us

ww.icmrr.org

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