ANALYSIS OF NPA IN BANKING INDUSTRY -
A COMPARATIVE STUDY BETWEEN
PUBLIC SECTOR BANKS AND PRIVATE
SECTOR BANKS
INTRODUCTION
The economic progress of a nation and development of
banking is invariably interrelated.
The Indian Banking sector accounts a major portion of
financial intermediation and acknowledged for formulation
of monetary policy and facilitator for payment systems.
The Banking sector is an indispensable financial service
sector supporting development plans through channelizing
funds for productive purpose, intermediating flow of funds
from surplus to deficit units and supporting financial and
economic policies of government.
Even though bank serves social objective through its priority
sector lending , employment generation, maintaining asset
quality and profitability is critical for them.
A major threat to banking sector is prevalence of Non-
Performing Assets (NPAs). NPA represent bad loans, the
borrowers of which failed to satisfy their repayment
obligations.
This affects operational efficiency which in turn affects
profitability, liquidity and solvency position of banks.
The success of economic growth of a country mainly
depends on the effective performance of banks.
DEFINITION OF NPA
According to RBI, An asset becomes non performing when it
ceases to generate income for bank.
A NPA is a loan or an advance where;
Interest and/ or installment of principal remain overdue for a
period of more than 90 days in respect of a term loan.
The account remains “out of order” in respect of an overdraft/
cash credit.
The bill remains overdue for a period of more than 90 days in
the case of bills purchased and discounted.
The installment or interest remains overdue for two crop
seasons in case of short duration crops and for one crop
season in case of long duration crops.
Types of NPA
Gross Net
NPA NPA
Loss Assets Doubtful Assets Sub Standard Standard Assets
• Which has Assets • Which has no
• where loss has been
identified by the bank remained in the • Which has default in
or internal or external sub standard remained NPA repayment of
auditors or the RBI category for a for a period principal or
inspection but the period of 12 less than or payment of
amount has not been months. equal to 12 interest
written off wholly. months. perceived.
CLASSIFICATION OF LOAN ASSETS
OBJECTIVE OF STUDY
The purpose of this study is to have an in-depth
analysis of NPAs.
The broad objective of the study:
To examine the performance of the NPAs in
public and private sector banks.
To examine the trend of the NPA with the help of
the ratio to the Net Advances.
RESEARCH
METHODOLOGY
Two Public Sector and two Private Sector bank has been
selected. They are:
State Bank of India
Punjab National Bank
HDFC
ICICI
The quantitative and exploratory data has been selected.
The period of the study is for twelve years i.e. 2005-06 to 2016-
17.
The sources for the data are annual reports and balance sheet of
selected banks, RBI reports.
DATA ANALYSIS
SBI Bank
180000
160000
140000
120000
IN CRORES
100000
80000
60000
40000
20000
0
2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
GROSS NPA NET NPA
PNB Bank
100000
90000
80000
70000
60000
IN CRORES
50000
40000
30000
20000
10000
0
2005- 2006- 2007- 2008- 2009- 2010- 2011- 2012- 2013- 2014- 2015- 2016-
06 07 08 09 10 11 12 13 14 15 16 17
YEARS
GROSS NPA NET NPA
HDFC Bank
9000
8000
7000
6000
5000
IN CRORES
4000
3000
2000
1000
0
2005- 2006- 2007- 2008- 2009- 2010- 2011- 2012- 2013- 2014- 2015- 2016-
06 07 08 09 10 11 12 13 14 15 16 17
YEAR
GROSS NPA NET NPA
ICICI Bank
80000
70000
60000
50000
IN CRORES
40000
30000
20000
10000
0
2005- 2006- 2007- 2008- 2009- 2010- 2011- 2012- 2013- 2014- 2015- 2016-
06 07 08 09 10 11 12 13 14 15 16 17
YEARS
GROSS NPA NET NPA
RATIO OF NET NPA TO NET ADVANCES
OF ALL THE FOUR BANKS
10
9
8
7
In Percentages
6
5
4
3
2
1
0
2005- 2006- 2007- 2008- 2009- 2010- 2011- 2012- 2013- 2014- 2015- 2016-
06 07 08 09 10 11 12 13 14 15 16 17
Years
SBI PNB HDFC ICICI
ANALYSIS
The analysis reveals that NPA trends in overall selected
public sector banks more than selected Private sector
banks. The NPA in public and private sector shows the
oscillating trend of the study period.
The comparison of ratio of Net NPA to Net Advances in
percentages it also reveals that the Net NPA of selected
public sector bank is higher than the selected private
sector banks. PNB has the highest the NPA ratio in
comparison of other selected banks.
CONCLUSION
The Study show that extent of NPA is comparatively very high
in public sector banks as compared to private sector banks.
The money which is locked up in NPAs has a direct impact
profitability of the bank as Indian banks are highly dependent
on income from interest on funds lend.
The money which is locked up in NPAs has a direct impact
profitability of the bank as Indian banks are highly dependent
on income from interest on funds lend.
The problem of NPAs needs lots of serious efforts otherwise it
will keep affecting the profitability of the bank and it is not
good for the growing Indian economy.
Presented by:
Jaina Patel
Roll No.: 420048
