Volume-3, Issue-6, December-2013, ISSN No.: 2250-0758 International Journal of Engineering and Management Research Available at: www.ijemr.

net Page Number: 116-121

A Study on Composition of NPAs of Public Sector Banks in India

Srinivas K T Associate Professor, CIMS-B School, Jayanagar, Bangalore, INDIA

ABSTRACT
The present study made an attempt to study the composition of NPAs of Public Sector Banks in India and to determine the reasons for the higher NPAs in public sector banks. To achieve the aforesaid objectives data is gathered from secondary sources. From the present study it is found that Priority sector share is more in amount of NPAs of Nationalized banks in India as compared to Non-priority sector share and public sector share and also priority sector share not only in the Nationalized banks even the SBI Groups banks also its share was high. And also from the present study it is found that during 2004 Non-priority sector contribution is more for NPAs as compared to priority and public sector. From 2005 to till 2011 priority sector share was high in the NPAs as compared to Non-priority and public sector. During 2011 priority and non-priority sector share was almost equal in the creation of NPAs for public sector banks as compared to public sector. During 2013 Nonpriority share was high in creation of NPAs in public sector banks as compared to priority and public sector in composition of NPAs of Public sector banks.

NPA is defined as an advance, where payment of interest or repayment of installment of principal (in case of term loans) or both remains unpaid for a certain period. In India, the definition of NPAs has changed over time. According to the Narasimham Committee Report (1991), those assets (advances, bills discounted, overdrafts, cash credit etc.) for which the interest remains due for a period of four quarters (180 days) should be considered as NPAs. Subsequently, this period was reduced, and from March 1995 onwards the assets for which the interest has remained unpaid for 90 days were considered as NPAs. An NPA is defined as a loan asset, which has ceased to generate any income for a bank whether in the form of interest or principal repayment

II. STATEMENT OF THE PROBLEM

The main motto of Public sector banks is to serve the people by providing loans and advances for needy people for their upliftment, even for the industry growth and for the growth of the economy to achieve the balanced regional development. At present, several studies have been done on NPA of Public sectors banks, but very tiny studies on composition of NPAs of the public sector banks by the different sectors. The research gaps and relevant questions which strike the mind during observation of various studies on Non- performing assets that, which sectors creating more NPAs for the public sectors banks and what are the reasons for it. Hence there arises a need to address the aforesaid questions.

Keywords: NPA, Public Sector banks, Priority Sector, Non-Priority Sector etc. I.

INTRODUCTION

Banking system plays a very significant position in the economic life of the country. The strength of the economy is closely related to the soundness of its banking system and a well-built banking sector is significant for a prosperous economy. Indian banking industry has undergone several changes during the liberalization process. However, one troublesome crisis affecting the banking sector that of Non- performing assets. Nonperforming assets, which are not generate any new income to banks. And also non-performing assets affect the profitability and effectiveness of banks. At present for all the public sector banks and for the Reserve bank of India these NPAs become trouble assets. At this context present study made an attempt to study the composition of NPAs of public sector banks in India.

III.
1. 2. 3.

OBJECTIVES OF THE STUDY

To understand the concept of Non-performing assets (NPA). To identify the Non-performing assets at public sector banks. To study the sector wise Non-performing assets of Public sector banks

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4.

To offer suggestions based on findings of the study.

IV.

SCOPE OF THE STUDY AND DATA COLLECTION

The present study confined to NPAs of Public sector banks only. For this study secondary data have been collected. The data are collected from annual report of RBI publications including Statistical Tables relating to Banks in India, Articles and Papers relating to NPAs published in different journal and magazines were studied and data available on internet and other sources have also been used. And Data is analyzed from as on March 2002 to 2013

very high percentage, increased by 24.06% and 58.26% respectively. During 2013 also the trend of NPAs was 1558.90billion as against 1124.89 billion of 2012. From the above table it can inferred that the percentage of NPAs at Public sector banks are high, this is the need of the hour to take appropriate step to reduce the NPAs.

V.

TOOLS OF DATA ANALYSIS

The data collected from the secondary sources relating to NPAs has been analyzed and tabulated and drawn the appropriate tables and used percentage also. Interpretations were made based on table, Data Analysis: Interpretation: The above table depicts the total amount of NPAs at Nationalized banks in India as on 31st march from 2004 to 2013. And also the above table depicts the composition of NPAs of different sector at nationalized banks. During 2004 Non-priority sector share was 51.14%, Priority sector share was 47.74% and public sector was 1.11% in NPAs of Nationalized banks. During 2005 priority sector share was 51.17%, Non-priority sector share was 47.94% and public sector share was 0.88%. During 2006 Priority sector, Non priority sector and public sector share in NPAs of Nationalized banks was 53.66%, 43.48% and 2.87% respectively. In the year 2007 priority sector share was 61.28%, Non-priority sector share was 37.55% and public sector share was 1.17%. During 2008, priority sector share was 67.21%, Non-priority sector 31.96% and public sector share was 0.83%. In the year 2009 priority sector, Nonpriority sector and public sector share was 60.10%, 38.76% and 1.13% respectively in the NPAs. In the year 2010 priority sector share was 56.13%, Non-priority sector share was 43.08 and public sector share was 0.97% in NPAs, during year 2011 priority sector, Non-priority sector and public sector share was 59.90%, 39.47% and 0.64% respectively. In the year 2012 priority sector share was 48.34%, Non-priority sector share was 51.37% and public sector share was 0.29%. and in the year 2013 priority sector was 42.21%, Non-priority sector share was 57.71% and public sector share was 0.08% in the amount of NPAs of Nationalized banks in India.

Interpretation: The above table depicts the NPAs at public sectors banks in India as on 31st march from 2004 to 2013. From the above table it can also observe that the percentage of increase or decrease in NPAs of public sector banks for last 9 years. From the above table it can see that there was reduction of NPAs from 2005 to 2006 the NPAs of the nationalized banks was 501.48 billion, during 2005 the amount of NPAs was decreased by 6.64%, during 2006 it was decreased by 11.62%, during 2007 the NPAs reduction by 7.43% but from 2008 onwards NPAs are increasing at public sector banks, during 2008 NPAs are increased by 3.38%, and during 2009 NPAs are increased by 11.19% as against 3.38% of the previous year. During 2010 it is increased by 30.12% as compared to its last year. During 2011 and 2012 the NPAs touches

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Inference: The above graph depicts the total amount of NPAs at Nationalized banks in India as on 31st march from 2004 to 2013. And also the above graph depicts the composition of NPAs of different sector at nationalized banks. From the above graph it can be inferred that during 2004, 2012, and 2013 Non-priority sector share in the amount of NPAs of Nationalized banks is more as compared to priority and public sector and during 2005, 2006,2007,2008,2009, and 2010 Priority sector share in the amount of NPAs of Nationalized banks is more as compared to public sector share and non-priority sector. At last from the above graph it can be inferred that Priority sector is troubling sector in the generation of NPAs at Nationalized banks.

above table it is observed that, in the year 2004 priority sector share was 47.07%, Non-priority sector share was 51.48% and public sector share was 1.45% in the amount of NPAs of SBI Group banks. During 2005, priority sector, Non-priority sector and public sector share was 47.39%, 51.48% and 1.13% respectively. In the year 2006 priority sector share was 54.95%, Non-priority sector share was 44.10% and public sector was 0.95% in the amount of NPAs. During 2007 priority sector share was 57.15%, Non-priority sector share was 41.36% and public sector share was 1, 50%. In the year 2008 priority sector, Nonpriority sector and public sector share was 58.49%, 40.88% and 0.63% respectively. In the year 2009 priority sector, Non-priority sector and public sector share was 47.26%, 51.75% and 0.99% respectively. During 2010 priority sector share was 50.11%, Non-priority sector share was 48.77% and public sector share was 1.12% in the amount of NPAs of SBI Group banks. In the year 2011 priority sector, Non-priority sector and public sector share was 55.32%, 44.66% and 0.02% respectively. During the year 2012 priority sector, Non-priority sector and public sector share was 52.33%, 47.62% and 0.05% respectively. During 2013 priority sector share in the amount of NPAs of SBI Group banks was 44.09%, Non-priority sector share was 55.85% and Public sector share was 0.05% only.

Interpretation: The above table depicts total amount of NPAs at SBI Group banks in India as on 31st March from 2004 to 2013. The above table also depicts the sector wise share in the amount of NPAs of SBI Group in India. From the

Inference: The above graph depicts the total amount of NPAs at SBI Group Banks in India as on 31st march from 2004 to 2013. And also the above graph depicts the composition of NPAs of different sector at SBI Group Banks. From the above graph it can be inferred that during 2004 and 2005 non-priority sector share was high in creation of amount of NPAs in the SBI Group banks. From 2006 to 2012 Priority sector share was high in generation of amount of NPAs in the SBI Group banks, during the

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year 2013 Non-priority share was high in the creation of amount of NPAs in the SBI Group banks. At last from the above graph it can be inferred that Priority sector is the troubling sector for SBI Group banks in the amount of NPAs.

Interpretation: The above table depicts the total amount of NPAs at Nationalized banks and SBI Groups Banks in India from 2004 to till as on 31st March 2013. During 2004 total amount of NPAs at Nationalized banks was 349.90 billion and SBI Groups banks were 151.59 billion. In the year 2005 as on 31st march it was 320 billion at nationalized banks and 148.08 billion at SBI Groups banks. During 2006 NPAs at Nationalized banks and SBI Groups banks were 281.85 billion and 131.93 billion respectively. In the year 2007 NPAs at Nationalized banks and SBI Groups banks were 257.49 billion and 125.56 billion respectively. During 2008 NPAs at Nationalized banks and SBI Groups banks were 243.80 billion and 152.20 billion respectively. In the year 2009 NPAs at Nationalized banks and SBI Groups banks were 261.58 billion and 178.74 billion respectively. During 2010 NPAs at Nationalized banks and SBI Groups banks were 354.62 billion and 218.31 billion respectively. In the year 2011 NPAs at Nationalized banks and SBI Groups banks were 429.40 billion and 281.40 billion respectively. During 2012 NPAs at Nationalized banks and SBI Groups banks were 667.95 billion and 456.94 billion respectively. During 2013 NPAs at Nationalized banks and SBI Groups banks were 959.22 billion and 599.67 billion respectively.

Inference: The above table depicts the Total amount of NPAs at Nationalized Sector Banks and SBI Groups Banks in India from 2004 to 2013. From the above graph it can easily inferred that in the amount of public sector banks NPAs, Nationalized banks share is very high, it can observed in the above graph, if we look at the graph from 2004 to 2013 the NPAs at Nationalized banks only high as compared to NPAs at SBI Groups banks.

Interpretation: The above table depicts the total amount of NPAs at Public sector banks in India. And different sectors contribution to the total NPAs. In the year 2004 priority sector share was 47.54%, Non-priority sector share was 51.24% and Public sector share was 1.22 %for the total NPAs of 501.46 billion. During the year 2005 priority sector share was 49.98%, Non-priority sector share was 49.06% and Public sector share was 0.96% for the total NPAs of 468.17 billion. In the year 2006 priority sector

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share was 54.07%, Non-priority sector share was 43.68% and Public sector share was 2.25% for the total NPAs of 413.78 billion. In the year 2007 priority sector share was 59.92%, Non-priority sector share was 38.80% and Public sector share was 1.28%for the total NPAs of 383.05 billion. During the year 2008 priority sector share was 63.85%, Non-priority sector share was 35.39% and Public sector share 0.75 for the total NPAs of 396.05 billion. In the year 2009 priority sector, Non-priority sector and public sector share was 54.89%, 44.04% and 1.08% respectively. During the year 2010 priority sector, Nonpriority sector and public sector share was 53.84%, 45.25% and 0.91% respectively. In the year 2011 priority sector, Non-priority sector and public sector share was 58.09%, 41.52% and 0.39% for the total amount of NPAs of 710.80 billion. During the year 2012 priority sector, Non-priority sector and public sector share was 49.96%, 49.85% and 0.19% for the total amount of NPAs of 1124.89 billion. In the year 2013 priority sector, Nonpriority sector and public sector share was 42.93%, 57.00% and 0.07% for the total amount of NPAs of 1558.90 billion.

priority share was high in creation of NPAs in public sector banks as compared to priority and public sector. VI. 1. 2.

FINDINGS OF THE STUDY

3.

4.

From table No.1 it is found that from 2010 onwards there is more amount of NPAs in the public sector banks in India From the present study it is found that from table No.2 of the study that Priority sector share was more in NPAs of Nationalized banks as compared to Non-priority sector and public sector in India from as on 31st March 2004 to 2013. From the table No. 3, it is found that in SBI Groups banks also Priority sector is the troubling sector in the amount of NPAs. From the present study it is found that during 2004 Nonpriority sector contribution is more for NPAs as compared to priority and public sector. From 2005 to till 2011 priority sector share was high in the NPAs as compared to Non-priority and public sector. During 2011 priority and non-priority sector share was almost equal in the creation of NPAs for public sector banks as compared to public sector. During 2013 Non-priority share was high in creation of NPAs in public sector banks as compared to priority and public sector.

VII.
1.

SUGGESTIONS

2.

3. 4.

Existing credit appraisals and monitoring systems are also a responsible for NPAs; RBI should revise existing credit appraisals and monitoring systems. It is advisable for the Banks; banks should avoid NPAs at the budding stage of credit consideration by putting in place of meticulous and appropriate credit appraisal mechanisms. Banks should improved upon and strengthened the loan recovery methods Credit appraisal and post loan monitoring are crucial steps which need to concentrate by all the public sector banks. VIII.

CONCLUSION

Inference: The above graph depicts the total amount of NPAs at Public Sector Banks in India As on 31st March. It is depicting priority sector, Non-priority sector and public sector share for the amount of NPAs from 2004 to as on 31st march 2013. From the above table it can be inferred that during 2004 Non-priority sector contribution is more for NPAs as compared to priority and public sector. From 2005 to till 2011 priority sector share was high in the NPAs as compared to Non-priority and public sector. During 2011 priority and non-priority sector share was almost equal in the creation of NPAs for public sector banks as compared to public sector. During 2013 Non-

It is a known fact that asset quality of banks is an important indicator of their financial health and also it reflects on the efficacy of their credit risk management and recovery environment. At present NPAs reduction a key issue in the field of banking industry. As it is also know fact that for flourish of any economy banking industry role is very vital or crucial. If banking assets are day by day becoming trouble for banks how bank can enhance its financial services or products at the cheaper rate to the disadvantaged or weaker sections of the society to achieve the aim of financial inclusion. And how it is possible to go for financial literacy, so this is the need of the hour for all

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the banks including public sector banks to take correct measures to reduce the NPAs.

REFERENCES
[1] Rajaraman, I & Vashistha, G (2002): Non-Performing Loans of Indian Public Sector Banks -Some Panel Results, Economic & Political Weekly, February 13, 2002. [2] Sudhakar, V.K. (1998), Managing NPA Menace in Banks, IBA Bulletin, April 1998, PP 27-30. [3] Vallabh, G., Mishra, S. and Bhatia, A. (2007), NonPerforming Assets of Indian Public, Private and Foreign Sector Banks: An Empirical Assessment, ICFAI Journal of Bank Management, Vol. 6, No. 3, pp. 7-28, August 2007. [4] Boudriga, A., Taktak, NB., & Jellouli, S. (2009). Bank specific business and institutional environment determinants of nonperforming loans: Evidence from MENA countries, ERF 16th Annual Conference on Shocks, Vulnerability and Therapy, November 2009. [5] Dash, MK., & Kabra, G. (2010). The Determinants of Non-Performing Assets in Indian Commercial Banks: an Econometric Study, Middle Eastern Finance and Economics, Issue 7 (2010). [6] Ammannaya, K.K. (2004), Indian Banking: 2010, IBA Bulletin, March 2004, P 156 [7] Baiju, S. and Tharril, G.S. (2000), Performance Banks with Non-performing Assets: An Analysis of NPAs, Yojna, March 2000, PP 5-9. [8] Satyanarayana, K. & Subrahmanyam, G. (2000), Anatomy of NPAs of Commercial Banks, Applied Finance, Volume 6, No.3, July, 2000, pp 14-26. [9] Chaitanya V Krishna (2004). Causes of Nonperforming Assets in Public Sector Banks. Economic Research, 17 (1): 16-30. [10] King, R G and R Levine (1993). Finance and Growth: Schumpeter Might Be Right. Quarterly Journal of Economic, 108 (3): 717-37. [11] Mor N and B Sharma (2003). Rooting out Nonperforming Assets. Paper presented at the 5th annual conference on Money and Finance in the Indian Economy, at IGIDR, Mumbai [12] Karunakar, M., Vasuki, K., & Saravanan, S. (2008). Are non - Performing Assets Gloomy or Greedy from Indian Perspective?, Research Journal of Social Sciences, 3: 4-12, 2008 [13] Reserve Bank of India, Report on Trend and Progress of banking in India, Various issues, Bombay, India. Reserve Bank of India (2010), Trend and Progress of Banking in India [14] RBI releases Statistical Tables Relating to Banks in India 2012-13

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