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COMPARATIVE ANALYSIS ON

NON PERFORMING ASSETS OF


PRIVATE AND PUBLIC SECTOR
BANKS

Presented By
Anindya Sankar Kundu
v OBJECTIVES OF THE STUDY
 Primary Objectives:
• To evaluate Gross NPA and Net NPA in different banks.
• To study the past trends of NPA.
 Secondary Objectives:
• To calculate the weighted of NPA in risk management in Bankin
• To analyze financial performance of banks at different level of

v RESEARCH METHODOLOGY
• In this project Descriptive research methodologies were use.
• At the first stage theoretical study is attempted.
• At the second stage Historical study is attempted.
• At the Third stage Comparative study of NPA is undertaken.


v Sampling Methods
• To prepare this Project we have taken five banks from public
sector as well as five banks from private sector.

v Limitations of the study


• Since the Indian banking sector is so wide so it was not
possible for me to cover all the banks of the Indian
banking sector.

Introduction
• NPA. The three letters Strike terror in
banking sector and business circle
today. NPA is short form of “Non
Performing Asset”..
 A ‘ non - performing asset ’ ( NPA ) was

defined as a
 credit facility in respect of
which the interest and /
 or instalment of principal has
CATEGORIES OF NPAs

• Substandard Assets – Which has remained NPA


for a period less than or equal to 12 months.
• Doubtful Assets – Which has remained in the
sub-standard category for a period of 12
months
• 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.


Provisional Norms :
Asset Classification Provision requirements

Standard assets (a) direct advances to agricultural & SME sectors at 0.25 per cent;
(b) residential housing loans beyond Rs. 20 lakh at 1 per cent;
(c) advances to specific sectors, i.e., personal loans (including credit card
receivables), loans and advances qualifying as Capital Market exposures,
Commercial Real Estate loans etc. at 2 per cent
(d) all other advances not included in (a), (b) and (c) above, at 0.40
percent.

Substandard assets 10 per cent of the total out standings for substandard assets. 

Contd …
Asset Classification Provision requirements

Doubtful assets 20% - 50% of the secured portion depending on the age of NPA, and

100% of the unsecured portion.

Loss assets It may be either written off or fully provided by the bank. The entire

asset should be written off.


FACTORS FOR RISE IN NPAs
v EXTERNAL FACTORS
– Ineffective recovery tribunal
– Natural calamities
– Industrial sickness
v INTERNAL FACTORS
– Inappropriate technology
– Poor credit appraisal system
– Absence of regular industrial visit
Types of NPA
• A] Gross NPA:
• Gross NPA reflects the quality of the loans made by banks.
It consists of all the non-standard assets like as sub-standard,
doubtful, and loss assets. It can be calculated with the help of
following ratio:
• Gross NPAs Ratio  Gross NPAs
 Gross Advances
• B] Net NPA:
• Net NPAs are those type of NPAs in which the bank has deducted
the provision regarding NPAs. It can be calculated by following 
• Net NPAs  Gross NPAs – Provisions
• Gross Advances - Provisions
•  

Impact of NPA
• Profitability
• Liquidity
• Involvement of management
• Credit loss
DATA ANALYSIS
AND
INTERPRETATION
DEPOSIT-INVESTMENT-ADVANCES (RS.CRORE) of both sector banks and
comparison among them, year 2008-09
Gross NPA and Net NPA Of different Public Sector banks in the year 2007-08

BANK GROSS NPA NET NPA

BOB 1.10 0.27

BOI 1.08 0.33

DENA 1.48 0.56

PNB 1.67 0.38


UBI 1.34 0.10
Gross NPA and Net NPA Of different Private Sector banks in the year 2007-08

BANK GROSS NPA NET NPA

AXIS 0.45 0.23


HDFC 0.68 0.22
ICICI 1.90 0.87
KOTAK 1.55 0.98
INDUSIND 1.69 1.25
Comparison of GROSS NPA with Public and Private sectors banks for the year
2007-08

Comparison of GROSS NPA with all banks for the year 2007-08. The growing NPAs
affect the health of banks, profitability and efficiency. In the long run, it eats up the net
worth of the banks. We can say that NPA is not a healthy sign for financial institutions.
Here we take all the ten banks gross NPA together for better understanding. Average
of these ten banks gross NPAs is 1.29 as percentage of total assets. So if we
compare in private sector banks AXIS and HDFC Bank are below average of all banks
and in public sector BOB and BOI. Average of these five private sector banks gross
NPA is 1.25 and average of public sector banks is 1.33. Which is higher in compare of
private sector banks.
COMPARISON OF NET NPA WITH PUBLIC AND PRIVATE SECTORS BANKS FOR
THE YEAR 2007-08

Comparison of NET NPA with all banks for the year 2007-08. Average of these ten
bank’s net NPA is 0.56. And in the public sector banks all these five banks are
below this. But in private sector banks there are three banks are above average.
The difference between private and public banks average is also vast. Private
sector banks net NPA average is 0.71 and in public sector banks it is 0.41 as
percentage of total assets. As we know that net NPA shows actual burden of
banks. IndusInd bank has highest net NPA figure and HDFC Bank has lowest in
comparison.
PRIORITY SECTOR PRIVATE SECTOR BANK
BANK AGRI SMALL OTHERS PRIORITY NON-PRIORITY
(1) (2) (3) SECTOR
( 1+2+3 )

AXIS 109.12 14.76 86.71 210.59 275.06


HDFC 36.12 110.56 47.70 194.41 709.23
ICICI 981.85 23.35 354.13 1359.34 6211.12
KOTAK 10.00 33.84 4.04 47.87 405.20
INDUSIND 30.44 3.18 30.02 63.64 328.67
TOTAL 1167.53 185.69 522.60 1875.85 7929.28
PRIORITY SECTOR IN PUBLIC SECTOR BANK

BANK PRIORITY SECTOR NPA


(ADVANCED RS.CRORE )
BOB 5469 350
BOI 3269 325
DENA 1160 106
PNB 3772 443
UBI 1924 197
compare the all public sector and private sector banks on the basis of priority and
non-priority sector

TOTAL
PRIORITY
PUBLIC
NON PRT PUBLIC SECTOR 39749
2007-08
22954
490
15158
38602 2008-09
25287
299
14163 NEW PRIVATE
2007-08
31468
4800
6271 2008-09
02080
8339
10419
SECTOR

Here, there are huge differences between private and public sector banks NPA.
There is increase in new private sector banks NPA of Rs.4148 crin 2008-09 which
is almost 66% rise than previous year. In public sector banks the numbers are not
increased like private sector banks.
Suggestions
Availability of historical data
Availability of historical data is paramount of important in

preparation of a credit proposal. So banks should have historical


data base to extract past records as and when required.
Market Intelligence system

MIS information should be available for various reasons when

taking credit
decisions. Ex: To rate a customer, to extract performance ratios

Speedy legal actions

When all possible attempts for recovery is failed only option is to

proceed with legal action and this should be speedy otherwise


this will be costly.
Rewarding staff

Introducing a staff rewarding/incentive scheme will also support

in reducing NPAs. It should be noted rewarding staff will be less


costly rather than spending

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