International Journal of Accounting and

Financial Management Research (IJAFMR)

ISSN 2249-6882
Vol. 3, Issue 1, Mar 2013, 193-200
TJPRC Pvt. Ltd.

A CASE STUDY OF RECOVERY POSITION OF NON PERFORMING ASSETS OF PUNJAB

NATIONAL BANK OF INDIA AND HDFC BANK LIMITED
REKHA GUPTA1 & NITIN S. SIKARWAR2
1

Sr. Assistant Professor, Department of Management, Haryana College of Technology and Management,
Kaithal, Haryana, India
2

Associate Professor, Department of Management, Haryana College of Technology and Management,

Kaithal, Haryana, India

ABSTRACT
Banking system plays a vital role in the economic system of a country by mobilizing the nations savings and
directing them into high investment priorities for better utilization of available resources. Schumpeter, the first modern
economist considered banks to be the most important of all the financial intermediaries in the financial system of a country.
But in recent times the banks have become very cautious in providing loans, the reason behind is the non performing
assets. Non Performing Assets are defined as the loans which have ceased to generate any income for a bank whether in the
form of interest or principal amount.
To bring down the level of NPAs, a number of strategies have been initiated in the past and are being initiated at
present by the Government and the banks. In view of the vital role of non performing assets on the profitability, Punjab
National Bank and HDFC Bank have been selected for the purpose of present research because both are the giant banks in
public and private sector, so a comparative study is made.
In the present study, the researcher proposes to make an analytical study in respect of Non Performing Assets and
their recovery management, so that it may be useful at all banking levels regarding the efficient utilization of resources
which may lead to better working of the banking sector.

KEYWORDS: Bank, Non Performing Assets, Recovery

INTRODUCTION
Banking system plays a vital role in the economic system of a country by mobilizing the nations savings and
directing them into high investment priorities for better utilization of available resources. 1Kapila Uma in her work Indian
Economy (2008) has stated that the banking system has capacity to add to the total supply of money by means of credit
creation. It is because of an ability to manipulate credit that banks are used extensively as a tool of monetary policy. But in
recent times the banks have become very cautious in providing loans, the reason behind is the non performing assets. Non
1

2
3

Kapila Uma Indian Economy, performance and policies Academic Foundation New Delhi ed. Eighth, 2008-09.
Bidani, S.N., Managing Non Performing Assets in Banks, Vision Books Pvt. Ltd., New Delhi,
Bhole, L. M., Financial Institution & Markets, Tata Mcgraw Hill Publications Ltd., New Delhi, 2000.

2003.

194

Rekha Gupta & Nitin S. Sikarwar

Performing Assets are defined as the loans which have ceased to generate any income for a bank whether in the form of
interest or principal amount. 2Bidani, S.N. (2003) has found that the main causes of accumulation of NPAs in banks are
diversion of working capital funds by promoters for taking up new projects, inadequate project planning, Non performing
assets adversely affect the profitability of the banks. 3Bhole L.M, (2005) in his book Financial Institutions and Markets
discussed about the concept of liquidity and profitability with special reference to banks. He described that it is necessary
for the efficient working of the banks to maintain balance between liquidity and profitability.
In view of the vital role of non performing assets and their recovery, Punjab National Bank and HDFC Bank have
been selected for the purpose of present research because both are the giant banks in public and private sector, so a
comparative study is made. In the present study, the researcher proposes to make an analytical study in respect of Non
Performing Assets, so that it may be useful at all banking levels regarding the efficient utilization of resources which may
lead to better working of the banking sector.

OBJECTIVES OF THE STUDY

The main objectives of the study are to know;

The level of NPAs in the banks under study;

The Measures taken for recovering NPAs;

The Recovery position of NPAs.

RESEARCH METHODOLOGY
The necessary information on the subject has been collected from the diverse sources. Necessary data and
information have been mainly collected from the head offices of Punjab National Bank and HDFC Bank in the form of
annual reports. The data so collected has been classified and analyzed and tabulated in such a manner that by using
percentage and other appropriated techniques of statistical analysis, fruitful and scientific inferences regarding recovery
position of Non Performing Assets in Punjab National Bank and HDFC Bank could be derived. Besides this, personal
interviews and discussions with the various authorities of the banks has also been made so as to enrich the conclusions and
make inferences useful to all the concerned be they, the management, the owners, the policy makers, customers or the
employees. Mainly three techniques for financial analysis (i) Arithmetic technique, which consists of percentage change
over a particular period, (ii) Accounting techniques, which consists of Ratio Analysis and (iii) Statistical techniques, such
as Arithmetic Mean, are used for analyses. The study covers a period of eleven years i.e. from 2000-01 to 2010-11.

CONCEPT OF NON-PERFORMING ASSETS

4

According to RBI an asset (loans) or (advance by a bank) becomes non-performing when it ceases to generate

income for the bank. It means an asset should be treated as NPA if interest or installments of principal remains overdue and
unpaid for a period of more than 90 days. The NPAs can be further divided into two categories; (i) Gross NPAs and (ii)
Net NPAs.

GROSS NON PERFORMING ASSETS

Gross Non Performing assets are the total outstanding of all the borrowers classified as substandard, doubtful and
loss asset. As regards Gross NPAs of Punjab National Bank and HDFC Banks, these have been worked out by taking the
closing balances, i.e. on 31st March and shown in Table1

195

A Case Study of Recovery Position of Non Performing Assets of Punjab National Bank of India and HDFC Bank Limited

Table 1: Gross Non Performing Assets

Punjab National Bank
HDFC Bank
Total
Gross
% of Gross
Total
% of Gross
Year
Gross NPAs
Advances
NPAs
NPAs to Total Advances
NPAs to Total
` in lac
` in lac
` in lac
Advances
` in lac
Advances
2000-01 2804316
346010
12.34
463666
14679
3.17
2001-02 3436942
413986
12.05
681372
22286
3.27
2002-03 4022812
498006
12.38
1175486
26545
2.26
2003-04 4722472
467013
9.89
1774451
33561
1.89
2004-05 6041275
374134
6.19
2556630
43917
1.72
2005-06 7462737
313829
4.21
3506126
50889
1.45
2006-07 9659652
339072
3.51
4694478
65776
1.4
2007-08 11950156 331929
2.78
6342689
90697
1.43
2008-09 15470298 250690
1.62
9888305
198807
2.01
2009-10 18660121 321441
1.72
12583059
181676
1.44
2010-11 24210700 437939
1.8
15998267
169848
1.06
(Source: Punjab National Bank and HDFC Bank; Annual Report- Various Issues)

CONCLUSIONS
Table 1 reveals that the Percentage of Gross Non Performing Assets to Total Advances of Punjab National Bank
fluctuated between a range of 1.80 percent to 12.34 percent whereas that of HDFC Bank fluctuated between a range of 1.06
percent to 3.17 percent over a period of eleven years under study. On the whole, the Percentage of Gross Non Performing
Assets to Total Advances of Punjab National Bank declines with a more rapid rate than that of HDFC Bank. The entire
situation can be shown at a glance with the help of the Figure 1
14

In Percentage

12
10
8
6
PNB
4
HDFC
2

20
00
-0
20 1
01
-0
20 2
02
-0
20 3
03
-0
20 4
04
-0
20 5
05
-0
20 6
06
-0
20 7
07
-0
20 8
08
-0
20 9
09
-1
20 0
10
-1
1

Years

Figure 1: Gross Non Performing Assets

NET NON PERFORMING ASSETS

Net Non Performing assets are computed by deducting the provisions from Gross Non Performing Assets. Net
NPAs are calculated as; Gross NPA-(Balance in interest suspense account+ claims received from DICGC/ECGC and
pending for adjustment + Part payment received and kept in suspense account + Total provisions held). As regards NPAs
of Punjab National Bank and HDFC Banks, these have been worked out and shown in Table 2

196

Rekha Gupta & Nitin S. Sikarwar

Table 2: Net Non Performing Assets

Year
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09

Total
Advances
` in lac
2804316
3436942
4022812
4722472
6041275
7462737
9659652
11950156
15470298

Punjab National Bank

% Age of Net
Net NPAs
NPAs to Total
` in lac
Advances
187111
6.67
181001
5.27
152691
3.8
44896
0.95
11944
0.2
21017
0.28
72562
0.75
75378
0.63
26385
0.17

Total
Advances
` in lac
463666
681372
1175486
1774451
2556630
3506126
4694478
6342689
9888305

HDFC Bank
% Age of Net
Net NPAs
Npas to Total
` in lac
Advances
2070
0.45
3436
0.5
4292
0.37
2795
0.16
6063
0.24
15518
0.44
20289
0.43
29852
0.47
62762
0.63

2009-10 18660121
98169
0.53
12583059
39205
2010-11 24210700
203863
0.84
15998267
29862
(Source: Punjab National Bank and HDFC Bank; Annual Report- Various Issues)

0.31
0.18

CONCLUSIONS
Table 2 reveals that Net Non Performing Assets of Punjab National Bank shows a continuous decreasing trend
from 6.67 percent in 2000-01 to 0.84 percent in 2010-11, whereas that of HDFC Bank fluctuated between a range of 0.45
percent to 0.18 percent over a period of eleven years under study. On the whole the Net Non Performing Assets of Punjab
National Bank registered more variability as compare to that of HDFC Bank. The entire situation can be shown at a glance
with the help of the Figure 2
8
7
In Percentage

6
5
4
3

PNB

HDFC

20
00
-0
20 1
01
-0
20 2
02
-0
20 3
03
-0
20 4
04
-0
20 5
05
-0
20 6
06
-0
20 7
07
-0
20 8
08
-0
20 9
09
-1
20 0
10
-1
1

Years

Figure 2: Net NPAs to Total Advances

STANDARD ASSETS AND PROVISIONING NORMS

Standard Asset is one which is not NPA. It means an asset on which interest is regularly received and it is not due
for a period of more than 90 days is a standard asset. As regards provisions on standard assets, 5A general provision of a
minimum of 0.25% of total standard assets is made. The Reserve Bank of India has increased the rate of general provision
on Standard Assets to 0.40 % per annum. As regards Standard Assets of Punjab National Bank and HDFC Bank, these
have been worked out and shown in Table 3

A Case Study of Recovery Position of Non Performing Assets of Punjab National Bank of India and HDFC Bank Limited

197

Table 3: Standard Assets

Punjab National Bank
HDFC Bank
Total
Standard
%
of
Std.
Total
Standard
% of Std.
Year
Advances
Assets
Assets to
Advances
Assets
Assets to
` in lac
` in lac
Total adv.
` in lac
` in lac
Total adv.
2000-01
2804316
2458306
87.66
463666
448987
96.83
2001-02
3436942
3022956
87.95
681372
659086
96.73
2002-03
4022812
3524806
87.62
1175486
1148941
97.74
2003-04
4722472
4255459
90.11
1774451
1740890
98.11
2004-05
6041275
5667141
93.81
2556630
2512713
98.28
2005-06
7462737
7148908
95.79
3506126
3455237
98.55
2006-07
9659652
9320580
96.49
4694478
4628702
98.6
2007-08 11950156 11618227
97.22
6342689
6251992
98.57
2008-09 15470298 15193552
98.21
9888305
9689498
97.99
2009-10 18660121 18338680
98.28
12583059
12401383
98.56
2010-11 24210700 23772761
98.19
15998267
15828419
98.93
(Source: Punjab National Bank and HDFC Bank; Annual Report- Various Issues)

CONCLUSIONS
Table 3.3 reveals that Standard Assets of Punjab National Bank is reflecting an increasing trend as it increased
from 87.66% in 2000-01 to 98.19% in 2010-11 whereas that of HDFC Bank fluctuated between 96.83% in 2000-2001 to
98.93% in 2010-2011 over a period of eleven years under study. The entire situation can be shown at a glance with the help
Figure 3
100
98
96
94
92
90
88
86
84
82
80

PNB
HDFC

20
00
-0
20 1
01
-0
20 2
02
-0
20 3
03
-0
20 4
04
-0
20 5
05
-0
20 6
06
-0
20 7
07
-0
20 8
08
-0
20 9
09
-1
20 0
10
-1
1

In Percentage

of the following

Years

Figure 3: Standard Assets

SUB-STANDARD ASSET AND PROVISIONING NORMS

With effect from March, 31 2005 an asset which has been classified as NPA for a period not more than 12
months is considered as sub standard asset. 6As per the latest changes announced by RBI on 18th May 2011 the new
provisioning norms on sub standard assets will be 15% as against existing 10%.

198

Rekha Gupta & Nitin S. Sikarwar

DOUBTFUL ASSETS AND PROVISIONING NORMS

7

With effect from March 31, 2005, an asset would be classified as doubtful if it has remained as an NPA for more

than 12 months. As per new changes by RBI w.e.f. May 2011 for the advance considered as doubtful from one to three
years the provisioning requirement is 40%;

LOSS ASSETS AND PROVISIONING NORMS

8

Loss Asset is one where loss has been identified by the bank or its internal or external auditors, or by the RBI

inspection, though the amount has not been written off wholly. As regards provisions on loss assets, the entire amount
should be written off. If the assets are permitted to remain in the books for any reason, 100 percent of the outstanding
should be provided for Committee etc.
Recovery of Non Performing Assets
As regards Recovery of Non Performing Assets of Punjab National Bank and HDFC Banks, these have been
worked out and compared with Gross Non Performing Assets which has been computed by taking opening balances of
Gross Non Performing Assets + additions during the year and shown in Table 4
Table 4: Recovery of Assets
Punjab National Bank

HDFC Bank

Year

Gross NPAs
(during the
Year) ` in lac

Recovery
` in lac

% of
Recovery to
Gross NPAs

Gross NPAs
(during the
Year)` in lac

Recovery
` in lac

% of
Recovery to
Gross NPAs

2000-01
2001-02
2002-03
2003-04
2004-05
2005-06

399133
463976
516949
602451
538877
464416

53123
49990
70621
135438
164723
150587

13.31
10.77
13.66
22.48
30.57
32.43

16145
23798
32927
37274
59392
100817

1466
1512
6382
3713
15475
49928

9.08
6.35
19.38
9.96
26.06
49.52

2006-07
519955
180883
34.79
128749
62973
2007-08
534391
202461
37.89
186052
95355
2008-09
475259
224569
47.25
432027
233220
2009-10
534504
213063
39.86
456240
274564
2010-11
755111
317172
42
325964
156116
(Source: Punjab National Bank and HDFC Bank; Annual Report- Various Issues)

48.91
51.25
53.98
60.18
47.89

CONCLUSIONS
Table 4 reveals that the recovery in NPAs of Punjab National Bank increased from 13.31% in 2000-01 and it was
47.25% in 2008-09, however it reached to 39.86% in 2009-10 and 42.00 in 2010-11. In case of HDFC Bank, there is a
tremendous increase in the recovery of NPAs as it was just 9.08% in 2000-01 and it reached a level of 60.18% in 2009-10
but slightly reduced to 47.89% in 2010-11.
It has increased almost 10 times whereas in case of Punjab National Bank it has increased 3 times so the situation
of recovery of HDFC Bank is much better than Punjab National Bank. The situation can be better described with the help
of a Figure - 4

A Case Study of Recovery Position of Non Performing Assets of Punjab National Bank of India and HDFC Bank Limited

199

70

In Percentage

60
50
40
30
PNB
20
HDFC
10

20
00
-0
20 1
01
-0
20 2
02
-0
20 3
03
-0
20 4
04
-0
20 5
05
-0
20 6
06
-0
20 7
07
-0
20 8
08
-0
20 9
09
-1
20 0
10
-1
1

Years

Figure 4: Recovery of Assets

ANALYSIS AND FINDINGS

Punjab National Bank has been able to reduce its Gross Non Performing Assets as well as Net Non Performing
Assets when compared with total advances with a more rapid rate than HDFC Bank, as the % of Gross Non
Performing Assets to total advances of Punjab National Bank was 12.34% in 2000-01, which reduced to 1.80% in
2010-11 and in case of HDFC Bank it was 3.17% in 2000-01 which reduced to 1.06% in 2010-11.

Standard Assets to Total Advances of Punjab National Banks are reflecting an increasing trend as it increased
from 87.66% in 2000-01 to 98.19% whereas that of HDFC Bank fluctuated between 96.83% to 98.93% over a
period of eleven years under study.

Recovery of NPAs reveals that Punjab National Bank recovered from 13.31% in 2000-01 to 42.00% in 2010-11.
In case of HDFC Bank, there is a tremendous increase in the recovery of NPAs as it was just 9.08% in 2000-01
and it reached a level of 60.18% in 2009-10 but in 2010-11 it reduced to 47.89%. It has increased almost 10 times
whereas in case of Punjab National Bank it has increased 3 times during eleven years. So the situation of recovery
of HDFC Bank is much better than Punjab National Bank.

SUGGESTIONS

In order to avoid non-performing assets it is suggested that names of the defaulters should be sent inter banks.

There should be complete exposure of defaulters in case of both the banks.

Government should define and implement a strong legal structure regarding non-performing accounts.

Willful defaulters should be treated very strongly in case of Punjab National Bank, as the position is worse here.

Recovery of Nonperforming assets is a matter of concern for Punjab National Bank, as the recovery rate is very
slow. It is suggested that more and more account should be sold to recovery agencies by Punjab National Bank.

200

Rekha Gupta & Nitin S. Sikarwar

CONCLUSIONS
On the basis of study of Nonperforming assets and their recovery position it can be concluded very safely that
the study of last eleven years i.e. from 2000 to 2011 HDFC Bank has performed much better than Punjab National Bank.
Punjab National Bank and all other banking sector should refer the suggestions provided in the research paper in order to
improve its working and compete to the global forces of competition.

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1.

Kapila Uma Indian Economy, performance and policies Academic Foundation New

Delhi ed. Eighth, 2008-

09.
2.

Bidani, S.N., Managing Non Performing Assets in Banks, Vision Books Pvt. Ltd., New Delhi, 2003.

3.

Bhole, L. M., Financial Institution & Markets, Tata Mcgraw Hill Publications Ltd., New Delhi, 2000.

4.

Report of Trend and Progress on Banking in India,2011

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RBI Bulletin; April 2011,p.6

6.

Business News, June, 2011

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Gupta, S.P., Statistical Methods (2000), S. Chand and Sons,New Delhi.

8. Gupta, Shashi K., Aggarwal, Nisha and Gupta, Neeti, Financial Institutions and Markets,

Kalyani Publishers,

New Delhi, 2004.

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Horne, James C. Van, Financial Management & Policy, Prentice Hall of India, New Delhi, 2000.

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Delhi ed. Eighth, 2008-

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12. Khan, M. Y., Indian Financial System, Tata McGraw-Hill Publishing Company Ltd., New Delhi, 1996.
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