ANALYSIS & INTERPRETATION

a. ANALYSIS OF TREND AND ASSET QUALITY OF GROSS ADVANCES AND GROSS

NON PERFORMING ASSETS:

GROSS ADVANCES AND GROSS NPAS OF PUBLIC SECTOR BANKS

Gross NPAs
Percent to Percent to
Years Gross Advances(cr.)
Gross Total Assets
Amount(cr.) Advances
2000-01 4.42,134 54672 12.4 5.3
2001-02 5,09,368 56473 11.1 4.9
2002-03 5,77,813 54090 9.4 4.2
2003-04 6,61,975 51537 7.8 3.5
2004-05 8,77,825 48,399 5.5 2.7
2005-06 11,34,724 41,358 3.6 2.1
2006-07 14,64,493 38,968 2.7 1.6
2007-08 18,19,074 40,595 2.2 1.3
2008-09 22,83,473 45,156 2 1.2

The following table helps in examining trends of gross advances, gross NPAs, ratio of gross
NPAs to gross advances and ratio of gross NPAs to total assets. It is clearly viewed from the
above table that the gross advances of the public sector banks have shown a rising trend since
2000-01. Gross advances of public sector banks have increased from merely Rs 4,42,134 crore in
2000-01 to Rs 22,83,473 crore in 2008-09 i.e. in a 9 year span of time the increase in gross
advances is 416.47 percent. The gross NPAs shows a mix trend over a study period of 9 years i.e.
the amount of gross NPAs shows both an increasing as well as decreasing trend. Public sector
banks shows a decreasing pattern till 2006-07 and in year 2001-02 and in the last two years there
was an increase in gross NPAs. There is a decrease of over 21 percent of gross NPA in a 9 year
time period which is a great sign for any bank. If we compare the ratios of gross NPAs to gross
advances and gross NPAs to total assets we can see that the ratio is continuously decreasing over
a period which means the gross NPAs is continuously decreasing relatively to total assets and
gross advances which is a much much positive sign for the public sector banks. This also shows
the improvement in efficiency of banks and the improvement in the quality of the asset. As
number of gross NPAs decreases relatively, this shows that the profitability is continuously
increasing and improving every year by overcoming the amount of gross NPAs.
 GROSS ADVANCES AND GROSS NPAS OF PRIVATE SECTOR BANKS
Gross NPAs
Gross
Years Percent to Gross Percent to Total
Advances(cr.) Amount(cr.
Advances Assets
)
2000-01 71237 5963 8.4 3.4
2001-02 120958 11662 9.6 4.4
2002-03 146047 11782 8.1 4
2003-04 177419 10381 5.9 2.8
2004-05 197832 8782 4.4 2.1
2005-06 317690 7811 2.5 1.4
2006-07 420745 9256 2.2 1.2
2007-08 525845 12983 2.5 1.4
2008-09 585065 16983 2.9 1.7

Similarly, we can also visualize the trend of private sector banks by using gross advances, gross
NPAs and ratios of gross NPAs w.r.t. to gross advances and total assets. We can clearly see from
the above table that the gross advances are increasing continuously and there is an increase of
over 721 percent as compared to 2000-01 and 2008-09. This clearly shows that apart from the
presence of public sector banks, private sector banks also get a great opportunity to prove them.
The amount of gross NPAs shows a mix kind of trend over a period- as till 2002-03 and from
2005-06 to 2008-09 there is a continuous increase in gross NPA amount while there is a decrease
in it from a period ranging from 2003-04 to 2005-06. NPA ratios related to gross NPA also
shows a mix trend over a period. But if we see the last three years data, we can clearly see that
there is an increase in gross NPA to total assets and gross NPA to gross advances which means
that the asset quality is diminishing instead of improving.

Thus, if we compare both public and private sector banks we can say that public sector banks are
better than private sector banks as the efficiency and asset quality of public sector banks had
shown a continuous improvement if compare relatively to private sector banks.
b. ANALYSIS OF TREND AND ASSET QUALITY OF NET ADVANCES ANNET NON
PERFORMING ASSETS:

NET ADVANCES AND NET NPAS OF PUBLIC SECTOR BANKS

Net NPAs
Percent to Percent to
Net Advances(cr.)
Net Total Assets
Years Amount(cr.) Advances
2000-01 415207 27977 6.7 2.7
2001-02 480681 27958 5.8 2.4
2002-03 549351 24877 4.5 1.9
2003-04 631383 19335 3.1 1.3
2004-05 8,48,912 16,904 2.1 1
2005-06 11,06,288 14,566 1.3 0.7
2006-07 14,40,146 15,145 1.1 0.6
2007-08 17,97,504 17,836 1 0.6
2008-09 22,60,156 21,033 0.9 0.6

After the analysis of gross advances and gross NPA, the study investigates the net advances, net
NPAs, ratio of net NPAs to net advances and net NPAs to total assets.

First of all if we analyze the public sector banks we can see that the net advances are increasing
continuously every year and there is an increase of over 444 percent (i.e. from Rs 4,15,207 crore
to Rs 22,60,156 crore) if we take year 2000-01 and 2008-09 into consideration. Similarly, the net
NPAs shows a mix trend over a period. But, it is observed that despite increase in net non
performing assets (NPAs) in absolute terms during the year, asset quality of public sector banks
improved in the past few years as reflected in the decline in these two ratios i.e. net NPAs as
percentage of net advances, and net NPAs as percentage of total assets. Both of these ratios
shows a continuously decreasing trend which is a sign of improvement in the efficiency,
profitability and asset quality.

NET ADVANCES AND NET NPAS OF PRIVATE SECTOR BANKS

 Net NPAs
Percent to Percent to
Years Net Advances(cr.)
Net Total Assets
Amount(cr.) Advances
2000-01 68059 3700 5.4 2.3
2001-02 116473 6676 5.7 2.5
2002-03 138951 3963 2.8 2.3
2003-04 170754 4128 2.4 1.3
2004-05 191397 4212 2.2 1
2005-06 312962 3171 1 0.6
2006-07 414752 4028 1 0.5
2007-08 518403 5607 1.1 0.6
2008-09 575336 7418 1.3 0.7

If we use the same criteria for private sector banks, we can see despite of continuous increase in
net advances in all years the net NPA ratio w.r.t to net advances and total assets increases in last
2-3 years that is in 2007-08 and 2008-09 while all other years shows a decreasing trend. That
means only in last 2-3 years the efficiency and asset quality of private sector banks is
questionable otherwise in all other previous years the banks hade shown a continuous
improvement. As, if we see overall performance of the private sector banks we can say that there
is a wide improvement as the net NPA ratios changes form 5.4 to 1.3 and from 2.3 to 0.7.

Thus, after comparing both the gross and net NPA ratio, if we compare relatively both of these
public and private sector banks we can say public sector banks are much more efficient than
private sector banks.

ANALYSIS OF NPAs ON THE BASIS OF CLASSIFICATION OF LOAN

Loan assets of banks can be classified into four categories i.e. standard assets, sub-standard
assets, doubtful assets, and loss assets.
Standard assets:
These are loans which do not have any problem are less risk.

Substandard assets:
These are assets which come under the category of NPA for a period of less then 12 months.

Doubtful assets:
These are NPA exceeding 12 months

Loss assets:
These are NPA which are identified as unreliable by internal inspector of bank or auditors or by
RBI.

CLASSIFICATION OF LOAN ASSETS OF NPAS OF PUBLIC SECTOR BANKS

Classification of Loan Assets (Amount in Rs. Crore)
Sub-standard
Years Standard Assets Doubtful Assets Loss Assets
Assets
Amount %age* Amount %age* Amount %age* Amount %age*
2001 387360 87.6 14745 3.3 33485 7.6 6544 1.5
2002 452862 88.9 15788 3.1 33658 6.6 7061 1.4
2003 523724 90.6 14909 2.6 32340 5.6 6840 1.2
2004 610435 92.2 16909 2.6 28756 4.3 5876 0.9
2005 824253 94.6 10838 1.2 29988 3.4 5771 0.7
2006 1092607 96.3 11453 1.0 25028 2.2 5636 0.5
2007 1335175 97.2 14147 1 19945 1.5 4510 0.3
2008 1656585 97.7 16870 1 19167 1.1 3712 0.2
2009 2,237,556 98.0 20630 0.9 21019 0.9 4296 0.2

The above table helps in the analysis of loan assets. The substandard assets have shown a
decline to 0.9 percent in 2009 from 3.3percent in 2001. Similarly, the doubtful assets have
declined to 0.5 percent from a high 7.6 percent in 2001 while the loss assets have declined to 0.2
percent from 1.5 percent during the same period. The decline in various categories of loan assets
indicates recovering health of public sector banks. All the three categories of NPAs that are sub-
standard assets, doubtful assets and loss assets as percentage of gross non-performing assets have
registered a decline over the period of study. Thus, we can say that the financial health or the
quality of assets of public sector banks is being continuously improving every year.
 CLASSIFICATION OF LOAN ASSETS OF NPAS OF PRIVATE SECTOR BANKS
Classification of Loan Assets (Amount in Rs. Crore)
Sub-standard
Years
Standard Assets Assets Doubtful Assets Loss Assets
Amount %age* Amount %age* Amount %age* Amount %age*
2001 65071 91.5 2585 3.6 3069 4.3 424 0.6
2002 109216 90.3 4738 3.9 6539 5.4 390 0.3
2003 131620 90.8 3703 2.6 8512 5.9 1118 0.8
2004 167076 94.2 3127 1.8 6391 3.6 825 0.5
2005
216448 96.1 2213 1.0 5578 2.5 900 0.4
2006 309051 97.6 2424 0.8 4348 1.4 939 0.3
2007 382628 97.6 4378 1.1 3923 1 941 0.2
2008 459369 97.3 7280 1.5 4452 0.9 1244 0.3
2009 561546 97.1 10553 1.8 4975 0.9 1324 0.2

If we analyze the loan assets of private sector banks, we can say that if we compare the first year
and last year for sub standard assets we can say that there is a decrease in it of health is
improving but overall analysis for sub-standard assets shows that after year 2006 there is a
continuous increase in the amount of sub-standard assets i.e. from 1percent to 1.8 percent. But,
the doubtful assets have declined from 5.9percent in 2003 to 0.9percent in 2009. The loss assets
also have shown a decreasing trend from year 2003. Thus, we can say that except the sub-
standard assets category the other two categories of non performing assets have improved over
the period of study.

SECTOR-WISE CLASSIFICATION OF NPAS OF PUBLIC SECTOR BANKS

Sector-wise the NPAs have been classified into three sectors i.e. priority sector (agriculture,
small scale industries and other industries), public sector and non-priority sector.
 SECTOR-WISE CLASSIFICATION OF NPAS OF PUBLIC SECTOR
Non-Priority Total
Years
Priority Sector Public Sector Sector
Amount %age* Amount %age* Amount %age* Amount
2001 284 34.8 17.82 2.35 476 62.85 758
2002 25139 44.5 1116 1.97 30251 53.54 56506
2003 24938 47.23 1087 2.06 26781 50.72 52807
2004 16705 47.74 390 1.12 17895 51.14 34990
2005 23397 49.05 450 0.94 23849 50 47696
2006 22374 54.07 341 0.82 18664 45.11 41378
2007 22954 59.46 490 1.27 15158 39.27 38602
2008 25287 63.62 299 0.75 14163 35.63 39749
2009 24318 55.2 474 1.1 19251 43.7 19251
2010 30848 53.8 524 0.9 25929 45.3 57301

SECTOR-WISE CLASSIFICATION OF NPAS OF PRIVATE SECTOR BANKS

SECTOR-WISE CLASSIFICATION OF NPAS OF PRIVATE SECTOR

Total
Years Priority Sector Public Sector Non-Priority Sector
Amount %age* Amount %age* Amount %age* Amount
2001 1835 28.62 123 1.92 4452 69.45 6410
2002 2546 21.82 31.18 0.27 9090 77.91 11667
2003 2445 20.61 94.51 0.80 9327 78.6 11866
2004 1802 40.94 8.32 0.19 2591 58.87 4401
2005 2188 24.87 42 0.48 6569 74.65 8800
2006 2284 29.17 4 0.05 5541 70.78 7829
2007 2884 31.22 3 0.03 6353 68.75 9239
2008 3419 26.34 0 - 9558 73.66 12976
2009 3640 21.6 75 0.4 13172 78 16887
2010 4792 27.6 - - 12592 72.4 17384