SLIDE 1: My topic for presentation is A STUDY OF PRE & POST COVID SITUATION

ON NON - PERFORMING ASSETS OF THE BANKS

SLIDE 2:
First we start with What is Non-Performing Assets?
A non-performing asset (NPA) is a classification used by financial institutions for loans and
advances on which the principal is past due and on which no interest payments have been
made for 90 days or more.
Non-performing assets are one of the main concerns for banks in India. As its reflect overall
performance of the banks. It affects the liquidity and profitability, in addition to posing threat
on quality of assets and survival of banks.
Classifications of Non-Performing Assets:
Banks are required to classify NPAs further into Substandard, Doubtful and Loss assets.
1. Substandard Assets:
A substandard asset would be one, which has remained NPA for a period less than or equal
to 12 months.
2. Doubtful Assets:
An asset would be classified as doubtful if it has remained in the substandard category for a
period of 12 months. Banks generally have serious uncertainties that the borrower will ever
repay the full loan amount. This class of NPA seriously affects the bank’s own risk profile.
3. Loss Assets
As per RBI, “Loss asset is considered uncollectible and of such little value that its
continuance as a bankable asset is not warranted, although there may be some salvage or
recovery value.”

SLIDE 3
OBJECTIVES of the study
So first is
 To make a comparative study of the magnitude and dimensions of NPA’s in the
Public and private sector banks.
 To understand the performance of the public and private sector banks during the last 5
years.
 To examine the causes for incidence and trends of NPA’s in the public and private
sector banks.
  To examine the recovery measures and strategies followed for reducing the burden of
NPAs by the public and private sector banks.
 To make suitable suggestions for the public and private sector banks to effectively
handle the challenge posed by the NPAs.

SLIDE 4
In Literature Review:
Radhika and Jaya Sree in their research paper “Non-performing Assets: A study of
scheduled commercial banks in India” observed that NPAs cease to generate any income for
the bank and hence become the major concern of banks in India. NPAs have direct impact on
net profit and also on the performance of the banks.
Rajini Saluja and Roshan Lal in their research paper “Comparative analysis on Non-
performing Assets (NPAs) of Public Sector, Private Sector and Foreign Sector Banks in
India” observed that the burgeoning NPAs in banking industry are a matter of deep concern.
It is just not a problem for banks but also proves fatal to the economic growth of the country.
They observed that there is huge difference in NPAs of public and Private sector banks.
Public sector banks are highly pressurized by the NPAs. Gross and Net NPAs of Public sector
banks have improved over the years because of rigorous policy initiatives and enforcement of
various legal and non-legal measures.

Kaur and Singh in their study on Non-performing assets of public and private sector banks
studied that NPAs are considered as an important parameter to judge the performance and
financial health of banks. The level of NPAs is one of the drivers of financial stability and
growth of the banking sector. The financial companies and institutions are nowadays facing a
major problem of managing the Non-performing assets as these assets are proving to become
a major setback for the growth of the economy.

SLIDE 5

Roopak Kumar Gupta and Ekta Sikarwar observed that the Commercial banks, especially
the dominant public sector banks, have been facing competition from the banks in the private
sector. They stated that Asset Quality is one of the components of performance of banks
which can be assessed by Net NPA to Net Advance. Asset Quality determines the existing
and potential credit risk associated with loan and investment portfolios and other off Balance
Sheet transactions. Higher the ratio, lower is the asset quality of the bank.

Shalu Rani (2011) examined the existing position of banks in Scheduled Commercial Banks
of India in respect of NPAs, the causes and remedial measures thereof and concluded that the
level of NPA has increased. She observed that total elimination of NPAs is not possible in
banking business so it is wise to follow the proper policy for appraisal, supervision and
follow up of advances to avoid NPAs.
Rajendran and Karthikeyan (2008) stated that high level of Non-performing assets will
also affect the productivity of the banks by increasing the cost of funds and by reducing the
efficiency of the bank employees.

SLIDE 6

DATA COLLECTION & RESEARCH METHODOLOGY

 The study is based on secondary data available from RBI website, websites of
concerned banks and other published materials.
 The sample consists of three public sector Bank of Baroda, Canara Bank, Bank of
India and three private sector banks HDFC Bank, IndusInd Bank, ICICI Bank. The
study is done on the basis of data for the period of 5 years from the financial year
2016-2020.
 Conferences, Articles and papers relating to NPA published in different journals,
magazines, newspaper, periodicals on banking have been studied and data have been
taken from the year 2001 to 2016.

SLIDE 7

IN DATA ANALYSIS

Here we can see that NPA (%) of Private sector banks & Public sector banks for the
period 2016 to 2020

The table shows NPAs in percentage of total Gross Advances by banks. This table shows that
the NPAs in private sector banks are lower than that of public sector banks. Average NPAs
from 2016 to 2020 of private sector banks is less than 5% while that of all the public sector
banks is more than 5% which shows that assets quality of private sector banks is better than
public sector banks. Among private sector banks ICICI bank has maximum average NPAs
and HDFC bank has the lowest. While, among the public sector banks Bank of India has the
highest average NPA and Bank of Baroda has the lowest average NPAs.

SLIDE 8
Correlation coefficient between Gross NPA and Net Profit of private sector banks:
From the above table it has been seen that the Pearson’s Correlation Coefficients are 0.97683,
0.82751 and (-)0.97695 in case of HDFC Bank, INDUSIND Bank and ICICI Bank
respectively. The negative correlation coefficient between net profit and gross NPAs means
an increase in Gross NPAs will decrease net profit of the bank. It is a logical conclusion
because profitability of a bank depends upon the recovery of loans and existence of bad loan
will jeopardize it. But in case of HDFC Bank and INDUSIND Bank, the correlation
coefficients are positive. Does it mean more NPAs lead to more profit? The answer is
certainly not. The magnitude of gross advance is increased year after year and so the interest
income and consequently profit of the bank also. Most of the borrower pays their installments
timely. Only a small portion failed to discharge their liability. If the NPAs were big enough
the profit will decrease. So it is seen that net profit as well as NPAs both are increased
simultaneously and a positive correlation exist between them. But it is the fact that absence of
the NPAs will boost up the profit of the banks.

SLIDE 9
LEARNINGS
Following are the learnings from the study
 In comparison to public sectors banks, private sector banks registered lower NPAs.
 Average NPAs of all the selected private sectors banks taken for the study is less than
5%.
& for all the selected Public sectors banks is more than 5%.
 The negative correlation coefficient between net profit and gross NPAs means an
increase in Gross NPAs will decrease net profit of the bank.
 ICICI bank spotted higher average NPAs among all private sector banks and Bank of
India registered higher average NPAs among all public sector banks.
 The problem of NPAs needs lots of serious efforts otherwise NPAs will keep killing
the profitability of banks which is not good for the growing Indian economy at all.

SLIDE 10
HERE ARE CONCLUSIONS & RECOMMENDATIONS
 Banks should reformulate their credit appraisal techniques.
 Proper evaluation of loan application helps in detecting the unviable projects.
 The Information about industry, its financial position, management and other
information like financial stake, annual accounts, stock reports, etc. should be
collected prior to sanction of a loan.
 Proper credit monitoring to restrict any misuse and diversion of fund.
 Circulation of information of defaulters among banks.
 Treating willful default as criminal offence and time bound strong penal measures
against them.
 Post sanction follow up.
  The elimination of political interference in disbursement of loans to farmers, priority
sector as well as industrialists.
 Complete ban on loan waivers to farmers and subsidized loan holders.

SLIDE 11
Following are the references

SLIDE 12
Thank you all….