SVKM’S NMIMS

MUKESH PATEL SCHOOL OF TECHNOLOGY MANAGEMENT AND

ENGINEERING

A STUDY ON MANAGEMENT OF NON-PERFORMING ASSETS

IN CONTEXT OF BANKING SYSTEM IN INDIA

Capstone Project-I submitted in partial fulfilment

of the requirements for the degree of

MBA (Tech.)

By

Raj Kothari M (K222)

Priyank Patel (K225)

Yashraj Sharma (K230)

Sarthak Zaveri (K239)

Aditya Chhajed (K242)

Vidit Shah (K248)

Under Supervision

of

Dr. Anuja Agarwal

 DECLARATION

I hereby declare that the Capstone Project titled, “A STUDY ON MANAGEMENT OF

NON-PERFORMING ASSETS IN CONTEXT OF BANKING SYSTEM IN INDIA”
submitted by me is based on original work carried out by me. I certify that it has not been
submitted anywhere else. I further declare that Mukesh Patel School of Technology
Management and Engineering NMIMS (deemed-to-be- University) will have the copyright
on the project report submitted by me to the college (MPSTME).

Thanking You

Raj Kothari M (K222)

Priyank Patel (K225)

Yashraj Sharma (K230)

Sarthak Zaveri (K239)

Aditya Chhajed (K242)

Vidit Shah (K248)

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 ACKNOWLEDGEMENT

In performing our research project, we had to take the help and guideline of some respected
people, who deserve our greatest gratitude. The completion of this assignment gives us much
Pleasure. In future we will also be interviewing experts and experienced people in the
industry.
Many people, especially our classmates and team members itself, have made valuable
comment suggestions on this proposal which gave us an inspiration to improve our research.
We would like to show our gratitude to Dr. Anuja Agarwal for giving us a good guideline for
the project throughout numerous consultations. We would also like to expand our deepest
gratitude to all those who have directly and indirectly guided us in doing this research.

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 Table of Contents

INTRODUCTION
1.1 Introduction To Project …………………...………………………………. 5
1.2 NPAs………………………………………………………………………. 5
1.2.1 Types of NPAs ………………………………………………....6
1.2.2 Impact of NPAs over banks ……………………………………6
1.2.3 Government initiative ………………………………………….7
1.2.4 Impact of Covid-19 on the NPAs………………………………8
1.3 Problem Statement………………………………………………………………. 8
1.4 Research Framework……………………………………….9
1.4.1 Concepts and Constructs
1.4.2 Proposed Framework
1.4.3 Variables
1.5 Research Objectives……………………………………………………………10
1.6 Hypothesis of the study…………………………………………………………10

LITERATURE REVIEW………………………………………………………………. 11

RESEARCH METHODOLOGY
2.1 Description of Research Design………………………………19
2.2 Sources of data……………………………………………….19
2.3 Sample Size………………………………………………….20
2.4 Methods and instruments of data gathering………………….20
2.5 Methods of data analysis…………………………………….20

REFERENCES………………………………………………………….21

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 INTRODUCTION

1.1 INTRODUCTION TO PROJECT

The main factor affecting the financial health of the banks is Non-Performing Assets (NPAs).
NPAs are loans that have been defaulted or not paid back by the borrower for more than 90
days of the due date. NPAs or bad loans are created by big corporates who go bankrupt and
MSMEs and individuals to some extent. In such cases, banks need to carry huge losses, and it
becomes challenging to operate. Cash strapped banks cannot function correctly and, at the
same time, need to meet the strict regulations set up by RBI.

Since NPAs being so important part to be looked upon for, we have took this topic to explore
more about NPAs and how can we reduce it. The project aims to find out what are the
significant factors for the accumulation of bad debts. The recent trends in the NPAs in public
and private sector banks for the last five years and interpret them. We were doing various
analyses to figure out the relationship between NPAs and critical performance ratios that are
important parameters to check the health of such financial institutions. The research will
include some hypotheses, and we will apply various tools and techniques to understand the
viability of the hypothesis.
In the project, we will also cover the different types of NPAs, which sector has a significant
contribution to NPAs. What measures have been taken in the past to reduce the bad debts?
The vast impact of the Covid-19 pandemic has affected the bank's asset quality, their
accumulation of debts, sectors affected most, and what challenges are banks facing.
Additionally, what measures can be taken to decrease the chances of NPAs.

1.2 NPAs

Table 1: Causes for NPAs

There are many reasons for NPAs. This can be at any level. Either the borrower, bank or any other
miscelleaneous levels. There are specific credit ratings assigned to firms by the Credit Rating agencies
like CRISIL, ICRA, India Ratings, etc. The above table describes various reasons for the formation of
NPAs.

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 Data Source: https://bit.ly/3xuENUa

1.2.1 TYPES OF NPAs

Sub-Standard Assets: Credits and advances which are non-performing resources for a time
of a year, fall under the class of Sub-Standard Assets.
Doubtful Assets: Credits and advances which are non-performing resources for more than 1
year, fall under the class of doubtful Assets.
Loss Assets:  Assets which cannot be recovered by the institutions are known as Loss Assets.

1.2.2 IMPACT OF NPA OVER BANKS

The issue of NPAs in the Indian financial framework is one of the premier and the most
difficult issues that have affected the whole financial framework. A higher NPA proportion
shudders the certainty of financial backers, investors, moneylenders and so on. It further leads
to accessibility of credit and the monetary sufficiency of the banks. So the motivations to
screen the NPA are:

Profitability: NPAs have a negative effect on productivity as banks stop to procure pay on
the one hand and draw in higher provisioning contrasted with standard resources then again.
On a normal, banks are giving around 25% to 30% extra arrangement on steady NPAs, which
has a direct bearing on the productivity of the banks.

Capital Adequacy: According to standards, banks must keep up with sufficient capital on
hazard weighted resources on a continuous premise. Each expansion in NPA level adds to
chance weighted resources, which warrant the banks to support their capital base further.
Capital has a cost ranging from 12% to 18%.

Liquidity: Cash is being hindered; diminished benefits bring about an absence of adequate
money close by, which powers the organization to acquire some cash for the most limited
conceivable timeframe, causing extra expenses. One more reason for NPA is trouble in
working the bank's capacities because of an absence of cash, periodic instalments, and levy.

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 1.2.3 GOVERNMENT INITIATIVES
Banks are an essential piece of the economy of any country and are the drivers of economic
growth, especially in developing economies. Banks show the health of the economy whether
it is deteriorating, or it is good. Banks provide loans for various reasons. It could be for
building a home, personal finance, MSMEs to run a business or corporates to function, and
the government. Banks play a central role in the progress of any country. So, keeping the
banks and their assets healthy is very critical. Some banks in the past, like Yes Bank,
Lakshmi Vilas Bank, have been unable to manage their NPAs and created a massive loss to
the economy. Shareholders, lenders, and customers have faced many difficulties due to their
mismanagement. Banks are classified into public sector banks are those entities in which the
majority stake (>=51%) is with the government.

11.9%

9.8%

9.6%

8.7%

7.7% 6.0%
5.3%

4.4% 4.4%
3.3% 3.9% 3.7%
2.8%
2.4% 2.8%
2.3% 2.4%
2.1%
1.7%
1.1% 1.0% 1.3%

Data Source: https://dbie.rbi.org.in

The government took new initiatives, i.e., setting up a NARCL (National Asset
Reconstruction Company Limited) shortly named Bad Bank and an AMC for helping banks
to manage their Non-Performing Assets and help them focus on their primary business rather
than handling the NPAs. This involves banks selling their loan portfolios at a discount to the
wrong bank. This step has been both welcomed and has been criticized by experts while
detailing its advantages and disadvantages.

1.2.4 EFFECT OF COVID-19 ON NPA

Due to pandemic a lot of people were unable to pay their loans on time in this scenario if we
the stats published by RBI is as follows gross non-performing asset (NPA) ratio of all
commercial banks is likely to increase from 8.5 per cent in March 2020 to 12.5 per cent by
March 2021 under the baseline scenario in the wake of the disruption caused by the Covid-
19 pandemic, the Reserve Bank of India (RBI) said.

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As on other side people were going jobless and loans carried by such people have increase a
lot causing in sharp increase in bad loans all over India in such case government have taken
various steps in which both the lender and borrower are not affected much such as RBI has
announced moratorium on debts repayment and assert classification norms were made. Also,
the threshold limit of insolvency process was increased from 1 lakh inr to 1 crore inr for
MSMEs. One time loan restructuring was formed in the scenario NPAs will remain on a hold
till the moratorium gets over.

Data Source: Biggest drops in Bad loans graph: https://bit.ly/3rdZ8fx

1.3 PROBLEM STATEMENT

In India, where we are yet developing, banks play a critical role in building the nation as the
responsibility of banks increases the risks also. In India, banks are growing rapidly and hence
the chances of defaults also. Many MSMEs and corporates take loans either secured or
unsecured they all carry a certain number of risks.
In the project, we will focus on the major causes of NPAs and suggest some of the measure’s
banks can take to avoid NPAs. We will also look at how NPAs can affect the bank's
performance and interpret the data with different variables and try to analyse how it affects
them. Also, due to covid-19, there has been a significant effect of NPAs, so we will also try
to highlight the impact and what steps were taken by the government to reduce this effect on
NPAs.

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1.4 RESEARCH FRAMEWORK
1.4.1 CONCEPTS AND CONSTRUCTS
Constructs: Non-Performing Assets

Concepts: Servicing Period- Any borrower who does not pay back his debt in 90 days of due
………….period is termed as NPAs.
Asset Quality- Banks with high NPAs and poor clients are termed to have bad
….asset quality
Defaults
Management- The kind of management running the bank really matters. Banks
………….like Yes Bank had poor management which led to such crisis.

1.4.2 PROPOSED FRAMEWORK

NPA’s
Gross 1. Return on Assets Net
NPA 2. Return on equity NPA
3. Capital adequacy
ratio

1.4.3 VARIABLES

Independent Variables
1. Gross NPA
2. Net NPA
Dependent Variables
1. Capital Adequacy Ratio
2. Return on equity
3. Return on Assets

We have taken Gross NPA and Net NPA as the independent variable. Gross NPA are the
total amount of default the bank has till date. Net NPA is determined by reducing Gross NPA
by provisions kept for the bank.

Net NPA (NNPA) = Gross NPA (GNPA) - Provisions

Dependent variables here are Capital Adequacy Ratio, Return on Assets & Return on Equity.

Capital Adequacy Ratio (CAR): Capital adequacy ratio is computed by dividing the capital
available by the bank by its risk weighted assets.

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CAR= Tier 1 Capital + Tier 2 Capital… ………………………………………………
………….Risk Weighted Assets
Return on Assets (ROA): It is a measure of profitability of the bank w.r.t its assets. It shows
how well the bank is able to utilize its assets.
ROA= Net Profit (PAT)
…………Total Assets

Return on Equity (ROE): It is also a measure of profitability but w.r.t the total equity.
ROE= Net Profit (PAT) ……
………Total shareholder’s equity

1.5 RESEARCH OBJECTIVES

The various objectives of this research are:

1. To identify the causes of NPAs in the Indian banking system.
2. Analysing the trend of NPAs in Indian banks
3. To analyse the impact of NPAs on the performance of banks
4. Covid-19 Pandemic-After effects on NPAs
5. To track down measures for the banks to stay away from future NPAs and to decrease …
existing NPAs
6. To make appropriate suggestions to avoid future NPAs and to manage existing NPAs in …
Banks

1.6 HYPOTHESES OF THE STUDY

For the following study the NULL hypothesis created based on which will get the
relationship between independent and dependent variables.

H01- There is no significant correlation between Net NPA and Return on Assets.
H02- There is no significant correlation between Gross NPA and Return on Assets
H03- There is no significant correlation between Net NPA and Return on Equity
H04- There is no significant correlation between Gross NPA and Return on Equity
H05- There is no significant correlation between Net NPA and capital Adequacy Ratio
H06- There is no significant correlation between Gross NPA and capital Adequacy Ratio

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 LITERATURE REVIEW

Paper 1 Paper 2
Title A Study of Non-Performing Assets of Impact of Non-Performing Assets on Banking
Public Sector Banks in India Industry: The Indian Perspective
Introduction Presentation about the creating economies, their
About NPAs their sorts, circumstances, and banks, and dangers to the development of the
end results Banking Industry and Economy
Aims of Research This paper examines NPA issues, about its In this paper, an undertaking has been made to
size and reasons for NPA issues throughout find the various components responsible for the
the most recent couple of years and talks monstrous NPAs.
about its impact on the economy.
Methodology Studies significant Public Sector Banks. Explored the information of major recorded
Also, recorded 3 years of information for business banks. Arranged banks based on the
pattern investigation. Determined Net NPA terrible advances.
for different banks.
Usefulness Give smart portrayal about current status of Assists with understanding the dangers the
NPAs and what are the significant causes creating economy faces. Gives a few
and its large-scale consequences for suggestions to determine the NPA issues.
economy.
Limitations 1) Only the PSUs were thought of. Ought
to have considered private banks for better
investigation and how private banks deal
with the NPAs 2) The information was
simply restricted to 3 Years. Might have
thought about more information
Conclusions NPAs have consistently been a major issue Contest among banks and with the remainder of
for the banks in India. To work on the issue the monetary area will increment. There is a
of the economy the NPAs ought to be requirement for conclusive changes in the
planned. The NPA level of the financial financial design to empower it to fill in size,
framework is currently at an undeniable assets effectiveness and inclusivity. Reduction
level contrasted with the global principles. in the degree of NPAs is an essential
The Indian financial framework should undertaking for the banks working in India. At
deal with the credit value of the clients as the same time credit recuperation strategies
counteraction is superior to mind. must be refined and fortified

Paper 3
Title A Study on Analysis of Non -Performing
Assets and its Impact on Profitability
Introduction Stresses the basic job of the financial
business in an economy. Presents the
circumstances and end results of
crumbling resource nature of banks.
Aims of Research The goal of this review is to comprehend
the degree of Non-performing Assets
(NPA), and how it impacts
Methodology Gathers optional information from
different sources and applies different
factual equations to come to an end result
about the presentation of banks.
Usefulness
In Depth examination of Bad Loans and
Paper 4
Performance of Non-Performing Assets (NPAS)
in Indian Commercial Banks
Examination of NPA in private and public area
manages an account with its effect and
preventive measures
Point of this paper is to see the impacts of NPA
on private and public area banks and to examine
the actions to lessen or discredit it
Examination of Review gross and net NPA for a
considerable length of time among private and
public area banks
gives an understanding in the impacts and
remedial measures to control NPA

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 assists with understanding the information
in a superior manner by incorporating the
crude information and. synthesising the
raw data.
Limitations 1) Only 10 banks were considered for the
review.
Conclusions Closes by contrasting the Public Banks
and Private elements. NPAs for Public
area banks have risen and are hazardous
organizations. Though Private area banks
like ICICI has likewise expanded NPAs
yet others stay in great condition.
Paper 5
Title A Study On Management Of Non-
performing Assets In Context Of Indian
Banking System
Introduction A meta investigation on administration
NPA in banking and conversation of give
and take settlement plans
Aims of Research 1) To comprehend the idea of NPA.
2) To distinguish the reasons for NPAs in
the Indian financial framework.
3) To concentrate on the job of NPA in the
financial area.
4) To read the preventive instrument for
NPA and the Compromise settlement
conspire."
Methodology To achieve the expressed destinations, the
specialist will use a consolidated
methodology that accepts highlights of
both illustrative and insightful exploration
plans
Usefulness it gives a hypothetical understanding in gives a comprehension of models utilized for
how to distinguish a NPA and anticipation Evaluating NPA with assistance of factual
and a profound knowledge in compromise instruments
settlement plans
Limitations
Conclusions The issue of NPA impacts productivity,
Liquidity, and results in credit misfortune.
Except if and in any case legitimate
medicinal measures are taken the quantum
of non-performing resources can't be
decreased and the bank will cause
misfortunes generally
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the Data is obsolete from 2001-2012 new
information ought to be thought of
The degree of NPAs has been similarly higher in
open area banks. To work on the proficiency and
productivity, the NPAs must be planned. It is
profoundly difficult to have zero percent NPAs.
However, essentially Indian banks should take
care to guarantee that they give advances to
financially sound clients
Paper 6
A Study on the Composition of Non-Performing
Assets (NPAs) of Scheduled Commercial Banks
in India
the current review has zeroed in on the patterns
in different parts of non-performing resources of
Indian business
(a) to survey the credit resources of the
Scheduled Commercial Banks in India.
(b) to break down the different organization of
the non-performing resources of public, private
and unfamiliar banks in India and
(c) to survey the pattern of Gross NPAs of
public, private and unfamiliar banks of
Scheduled Commercial Banks in India.
(d) To propose measures to control the threat of
NPAs
Direct Regression and ANOVA Single Factor
have been finished utilizing EXCEL and SPSS
Software. The review is bound to a time of six
years i.e., from 2007 to 2012. for understanding
the effect.
study is of obsolete information
It additionally impacted benefit, liquidity, and
dissolvability of the Indian financial area. The
procuring limit and benefit of banks have been
unfavourably impacted by the significant degree
of NPAs. The decrease of NPAs in banks is
representing the greatest difficulties in the Indian
economy.
 Paper 7 Paper 8
Title A Comparative Study of Non-Performing
Assets of SBI & Associates & Other NON-PERFORMING ASSETS-A STUDY OF
Public PUNJAB NATIONAL BANK
Sector Banks
Introduction Expanding NPAs straightforwardly affect The degree of NPAs is the best mark of the
banks productivity as legitimately banks sound situation of a banking framework. NPAs
are not permitted to book pay on such antagonistically influence the productivity,
records and at the at some point are liquidity and validity of a bank.
compelled to make arrangement on such Higher NPAs demonstrate the failure of the
resources according to the Reserve Bank executives of banks while the lower level of
of India (RBI) rules. Likewise, with NPAs demonstrates the best presentation of the
expanding stores made by the general executives in a bank. This paper examinations
population in the financial framework, the the situation of NPAs in PNB and give a few
financial business can't bear the cost of ideas on the best way to conquer the NPA
defaults by borrower s since NPAs position in banks. The paper likewise features
influences the reimbursement limit of the effect of NPA.
banks.
Aims of Research The current review has the accompanying
Discover patterns in NPA Level. targets:
1. Examine the NPAs position in Public 1) To concentrate on the sources and venture of
Sector Banks assets of PNB.
2. Evaluate the similar situation of NPA in 2) To look at the gross NPAs and net NPAs of
State Bank of India and Associates and PNB.
other public area banks 3) To look at the absolute advances, net benefits,
3. Evaluate the variety of NPA proportion gross NPA and net NPA.
in SBI and Associates and other Public 4) To concentrate on the connection between
Sector Banks Nets benefit and Net NPA of PNB.
5) To propose measures to oversee NPAs in
PNB.
Methodology For the review, auxiliary information has
been gathered utilizing yearly report of
Reserve Bank of India distribution
including Trend and Progress of banking
in India, factual tables identified with
banks in India and report on cash and
money. different factual instruments
proportion, Averages, rates, proportion
examination, Measure of focal inclination,
recurrence circulation, Standard
Deviations, coefficient of variety and
ANOVA tests have been utilized to
examine and decipher the information.
Conclusions The review is confined to public area It doesn't show the sound situation of bank
banks and the time of study is restricted to because of low level of relationship between
a long time from. Further the investigation these factors.
is obliged by the nature of information,
changing definition and organization as
respect to Gross NPA and Net NPA and is
concerned.

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 Paper 9
Title A Correlation of Non-Performing Assets, Increasing Non-Performing Assets– A Study
Profitability and Lending Rates of Public With Reference to Public Sector Banks
Sector Banks in India
Introduction The security and reasonability of business
banking is equivalent for feasible
financial improvement. Banking trouble
prompts monetary emergency. Since the
economy is changing, level of NPA is
influencing the exhibition of the financial
area. To handle the present circumstance
banking area needs to define suitable
systems
Aims of Research
To concentrate on the situation with
NPAs to concentrate on the relationship
of NPA, Lending rates and productivity.
To concentrate on the amount one
variable, influence the other.
Methodology Etymologically, philosophy implies the
way how the exploration is to be done,
how the information will be gathered,
investigated and how the ends will be
drawn.
Limitations
Conclusions The consequence of the review shows
that the information isn't typical in nature.
The aftereffect of the Jarque-Bera
likelihood test additionally affirms
something similar. The likelihood for the
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Paper 10
A solid financial area is significant for thriving
economy. The disappointment of the banking area
might antagonistically affect other areas. In this
manner, the financial framework requires the
smooth work process in its monetary activities.
However, this framework is conveying the solid
base by giving money to practically all the areas
yet it is enduring with a significant issue which is
known as a non-performing resource. It is the
central issue of Indian financial framework since
it is influencing the monetary presentation of
banks. It is influencing to the entire banking
framework overall and public area banks in
specifically. The expansion in non-performing
resources is straightforwardly making its effect on
the monetary execution of the banks. The high
level of non-performing resources demonstrates
that the defaults are expanding in huge number
and influencing the benefit and total assets of the
banks. The development of non-performing
resources is not just the issue of Indian financial
framework however, it is likewise one of the
central point in the worldwide market.
To break down the Gross and Net NPAs of PSBs.
To survey the patterns of NPAs of select PSBs.
To break down the effect of NPAs on the
exhibition of PSBs.
The current review is done on the monetary
exhibition of the select public area banks. The
chose banks are Andhra bank, Bank of India,
Central Bank of India, Indian Bank, Indian
Overseas Bank, IDBI, Punjab National Bank,
State Bank of India (Including its partners),
Syndicate Bank and UCO Bank. The information
is gathered from RBI distributions, yearly reports
of banks, diaries, official records and other
distributed sources. The gathered information is
altered, grouped, organized, broke down and
deciphered. At long last end is drawn dependent
on the review and ideas are advertised
The review is restricted to the select public area
banks the information is identified with the most
recent 10 years as it were. As the example is
immaterial to the financial area, in this manner
discoveries can't be summed up.
The general idea says that non-performing
resources are truly influencing the financial
framework, which coming about the lower
benefit, misfortune and irregularity in monetary
execution of Indian financial framework overall
 test isn't huge (Less than 0.05).
Paper 11
Title
Galloping Non-Performing Assets
Bringing a Stress on India’s Banking
Sector: An Empirical Study of an Asian
Country
Introduction An efficient and productive financial
framework is a fundamental pre-
imperative for the monetary development
of each country. Jogging levels of non-
performing resources (NPAs) is probably
the most concerning issue looked by the
Indian financial industry. The focused on
monetary record and terrible credit
accounts that have been concealed till
now, would keep the NPA levels rising
spread more than 3-5 years. As of March
2015, gross NPAs remained at 4.6% and
5.17% of advances, while the focused-on
resources (NPAs + rebuilt advances)
were 13.2%. It is assessed that the
absolute quantum of focused on resources
is about Rs. 10,000 billion
Aims of Research To concentrate on the idea of Non-
Performing Assets and its primary effect
on the Indian Banking Industry. To
concentrate on the pattern of NPA in
different areas. To recommend different
measures for the bank to lessen the
degree of NPA.
To read the overall explanations behind
resources for become non-performing
resources.
To present a few ideas dependent on
discoveries of the review.
Methodology As a component of this examination
study, we have gathered the applicable
information and investigated the NPAs in
Scheduled Commercial Banks. The
review depends on time-series
information for the examined banks in
India for a time of a long time The
current review is basically subjective,
scientific and expressive in nature and it
depends on optional wellsprings of
information.
Limitations
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and public area banks specifically.
Paper 12
A Study of Non-Performing Assets of
Commercial Banks and it’s recovery in India
Non-performing resources are one of the central
issues for booked business banks in India. As per
the proposals of the Narasimha board of trustees
and Verma advisory group, a few stages have
been taken to take care of the issue of old NPAs
yet to be determined sheets of the banks. It keeps
on being communicated from each corner that
there has once in a while been any methodical
assessment of the most ideal method of handling
the issue. A significant degree of NPAs proposes
high likelihood of an enormous number of credit
defaults that influence the productivity and total
assets of banks and furthermore disintegrates the
worth of the resource.
To concentrate on the situation with Non-
Performing Assets of Indian Scheduled
Commercial Banks in India
To concentrate on the effect of NPAs on Banks.
To know the recuperation of NPAS through
different channels.
To make proper ideas to keep away from future
NPAs and to oversee existing NPAs in Banks.
The review depends on auxiliary information. The
paper examines the theoretical system of NPA
and it additionally features the patterns, status and
effect of NPA on planned business banks during
the time of 14 years for example from 2000 to
2014. A few rumoured research diaries including
research papers and articles have been utilized by
the scientists. Additionally, the RBI Report on
Trend and Progress of Banking in India for
different years, sites and a book on banking has
been alluded to during the review.
The study of non-performing assets of SCBs is
limited to the Indian Bank and till the end of the

Conclusions An undeniable result of low resource
quality is the development in Non-
Performing Assets (NPAs). NPA
development should be upheld with a
more significant level of provisioning,
which thusly straightforwardly affects the
primary concern
Paper 13
Title
Non-Performing Assets: A Comparative
Study of Public, Private and Foreign
Banks
Introduction
Nonperforming assets have been a
perennial source of trouble for the troika,
Indian banking system regulator RBI,
Government of India and banking
industry. The presence of Nonperforming
asset in the balance sheets of the bank
forces to wipe out some of the capital
base to remain afloat. Nonperforming
assets are a dire problem in the primary
and secondary sector since few years.
The guidelines, policies and efforts of
Reserve bank of India, Banks and
Government have proved to be of little
use in curbing this financial mess.
Aims of Research
The present study has been pursued with To study the key determinants of NPAs of Indian
the under mentioned objectives:
To find out the trends of Non-Performing exhibited relationship with NPAs.
Assets.
To highlight and compare the Non
Performing Assets level of scheduled
commercial banks.
Methodology
As part of this research study, In order to For our study, we have considered doing analysis
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year 2014.
The basis for identifying non-performing assets is
taken from the Reserve Bank of India
Publications.
NPAs are changing with the time. The study is
done in the present environment without
foreseeing future developments.
This review shows that the degree of NPA is
relatively extremely high in open area banks. The
NPAs level of our banks is still high when
contrasted with the unfamiliar banks. It isn't at all
imaginable to have zero NPAs. So the issue of
NPA needs heaps of genuine endeavors if not
NPAs will continue to kill the benefit of banks
which isn't useful for the developing Indian
economy by any means.
Paper 14
Macro-economic determinants of non-performing
assets in the Indian banking system: A panel data
analysis
Over the last few years, India's Banking Sector
has been grappling with a huge and exponentially
increasing pile up of non-performing assets
(NPAs), also known as bad loans.
In particular, gross NPAs for all SCBs have risen
exponentially from being at around INR 2.41
trillion as of Mar'14, to a record high of nearly
INR 10.23 trillion (1 trillion = 1 lakh crore) as of
Mar'18, suggesting a more than a four-time
increase in a period of merely 4 years
To study the NPAs of Indian SCBs across space
and time dimensions
SCBs and empirically examine the nature of their
To study the heterogeneity across different
individual banks in terms of their NPAs.
To suggest some policy implications and
recommen- dations to tackle rising NPAs in the
Indian Banking Sector.
 compare the non-performing assets
public, private and foreign banks, the
data has been collected from the various
secondary sources like annual report of
banks and Reserve Bank of India,
magazines, journals and newspapers etc.
The collected data has been analysed and
conclusions have been drawn out.
Conclusion
The high rate of industrial loans and
problems with credit appraisal system are
two main reasons of soaring Non-
Performing Assets of public sector banks.
Many also relate the problem of high
level of NPAs with the economic
slowdown but if this was the reason how
come the private banks brought them to
the down level in similar period? The
answer lies in the fact that they took
tough call by writing off the bad loans
and tightening of their credit appraisal
system. It is to mention that the Non
Performing Assets of public sector banks
are due to deficiencies in their credit
appraisal and loan recovery system
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using different models, starting from the most
basic ones, we can apply many different models,
each of which are appropriate under their own
restrictive sets of assumptions. The models used
for this study have been described below along
with their assumptions.
Pooled OLS Regression: As suggested by Gujarati
and Porter (2009), this regression model can be
used under the assumption wherein we ignore the
dual nature of the panel data which actually
consists of two dimensions – space and time.
Panel Data Regression: As part of panel data
estimation, we use the fixed Effects (FE) and
random effects (RE) models as discussed by
Wooldridge (2013).
Based on the results and their subsequent
interpretation, there are three key takeaways.
Firstly, from the chosen set of explanatory
variables, based on Model (6) in Table 3, all the
independent variables are found to be sta-
tistically significant determinants of NPAs,
however, with different respective lags. Secondly,
there appears to be significant difference between
public sector banks and private sector banks in
terms of their NPAs and relative efficiency.
2
RESEARCH METHODOLOGY

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 Introduction

Problem Statement

Research Objectives Secondary Data

RBI
Annual Reports
Setting up hypothesis &
assumptions Journal Papers
Articles, Blogs
Collection of Data

Primary Data
1. Interviews
Analysis of data 2. Google Surveys

Key findings and

conclusion

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3.1 DESCRIPTION OF RESEARCH DESIGN
The research design used to carry out this study is both descriptive and empirical in nature.
Because it deals with statistical data wherein correlation of different variables and the impact
on the bank's performance is studied using various statistical tools. Also, through the
hypothesis we will be able to find the relationship between variables. We will analyse the
data and come out with conclusion that is there a relationship between them and reject
hypotheses.

Qualitative
Primary
Quantitative
Data

Secondary Quantitative
The research design will be done through primary and secondary data. We will first go
through the secondary data of the banks by their annual reports and by RBI website.
The secondary data will be purely quantitative in nature. The data will be for the last five
years and for all the four banks. Here we will also see the trends in these years and derive
insights about it.

The primary data will be mostly qualitative in nature. And will be collected by various
industry experts, experienced people working in this domain for many years and current
employees of the banks to understand how their bank is performing and on the ground level
what are the things growing wrong which creates such NPAs

3.2 SOURCES OF DATA

There are generally two types of data sources. The first is primary, and the other is secondary
data sources, as the name suggests primary sources of data, which are fresh and original data
collected for the study. To get primary data researcher uses methods like surveys,
interviewing people, observations. The secondary data are the data that is already contained
in the past by someone else. We use that data to carry out our research. The methods used to
collect this data are using journals, government websites, research papers, etc.

So as per the research, we are conducting, our data sources will only be focused on using
secondary data sources.

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3.3 SAMPLE SIZE

For the research work, the sample includes two public sector banks and the top 2 private
sector banks having the highest market capital, respectively. These banks are the State Bank
of India (SBI), Bank of Baroda (BOB), HDFC Bank, ICICI Bank. In the sample, the last five
years of data is going to be used for the study.

3.4 METHODS AND INSTRUMENTS OF DATA GATHERING

Generally, all the data collected is secondary data. Therefore, we have used archival
documents and government sources which include annual reports of banks, reports published
by RBI on trends and progress of the banking industry in India, published research papers and
authentic articles related to NPAs are collected to carry out the research.

3.5 METHODS OF DATA ANALYSIS

While carrying out some research, data analysis is the key to supporting it. So, to carry such
analysis, various graphical and mathematical methods and techniques are used using Excel to
support the research and draw conclusions based on the results. The methods which we are
using to interpret the data and make a relation out of it are as follows:

1. T-test (Pearson Correlation): T-Test is a statistic measure to find any difference among
the average of 2 data sets. It is used to check if the hypothesis assumed is valid or invalid. It
is also helpful to know if their relationship is significant or not. For significance, the p-value
should be less than alpha, or the t-value of the metric is more than the standard value. There
are two types of t-tests for sample data- Single tail and two tail. Single tail is used when we
have to check only one side of normal distribution. At the same time, the two-tail test is used
for knowing both sides of a bell curve.

2. Graphical Interpretation: Graphical representation will be done for inferring the relation
between the two variables. Whether they are positively correlated or negatively correlated or
is there no relation. It can also help us to know that if they are linearly or non-linearly
correlated. In this research project, we will use tools like Excel and Tableau for data
interpretation.

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[15] https://www.rbi.org.in/
[16] https://bit.ly/3liDW4h

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